Legislature(2017 - 2018)KODIAK

08/16/2018 05:00 PM TRANSPORTATION

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

Audio Topic
05:00:52 PM Start
05:02:58 PM Presentation: Powerpoint on Hb 412: Marine Highway Corporation; the Alaska Marine Highway Reform Project and How It Led to Hb 412 by Robert Venables, Executive Director of Southeast Conference & Susan Bell, Principal, Mcdowell Group
05:53:07 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Location: Fisherman's Hall, 403 W. Marine Way
+ Power Point Presentation on HB 412: MARINE TELECONFERENCED
HIGHWAY CORPORATION, The Alaska Marine Highway
Reform Project and how it led to HB 412.
By Robert Venables, Executive Director of
Southeast Conference & Susan Bell, Principal,
McDowell Group
                    ALASKA STATE LEGISLATURE                                                                                  
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
                        August 16, 2018                                                                                         
                           5:00 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Louise Stutes, Co-Chair                                                                                          
Representative Harriet Drummond                                                                                                 
MEMBERS ABSENT                                                                                                                
Representative Adam Wool, Co-Chair                                                                                              
Representative Matt Claman                                                                                                      
Representative Chuck Kopp                                                                                                       
Representative Mark Neuman                                                                                                      
Representative Colleen Sullivan-Leonard                                                                                         
Representative David Eastman (alternate)                                                                                        
Representative Gabrielle LeDoux (alternate)                                                                                     
OTHER LEGISLATORS PRESENT                                                                                                     
Representative Dan Ortiz                                                                                                        
Representative Bryce Edgmon                                                                                                     
Senator Dennis Egan                                                                                                             
Senator Gary Stevens                                                                                                            
COMMITTEE CALENDAR                                                                                                            
PRESENTATION:     PowerPoint   on   HB  412:     Marine   Highway                                                               
Corporation; The Alaska Marine Highway  Reform Project and how it                                                               
led  to  HB  412  by   Robert  Venables,  Executive  Director  of                                                               
Southeast Conference & Susan Bell, Principal, McDowell Group                                                                    
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to report                                                                                                    
WITNESS REGISTER                                                                                                              
ROBERT VENABLES, Executive Director                                                                                             
Southeast Conference;                                                                                                           
Chair, Marine Transportation Advisory Board                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented a  PowerPoint on the Alaska Marine                                                             
Highway Reform.                                                                                                                 
SUSAN BELL, Principal                                                                                                           
McDowell Group                                                                                                                  
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    Presented   the  second  portion  of  the                                                             
PowerPoint on the Alaska Marine Highway Reform.                                                                                 
SENATOR DENNIS EGAN                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Asked questions  during the  discussion of                                                             
the Alaska Marine Highway Reform.                                                                                               
SENATOR GARY STEVENS                                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Asked questions  during the  discussion of                                                             
the Alaska Marine Highway Reform.                                                                                               
ACTION NARRATIVE                                                                                                              
5:00:52 PM                                                                                                                    
CO-CHAIR LOUISE  STUTES called the House  Transportation Standing                                                             
Committee meeting to  order at 5:00 p.m.   Representatives Stutes                                                               
was  present  at the  call  to  order.   Representative  Drummond                                                               
arrived as the  meeting was in progress.   Representative Edgmon,                                                               
Representative  Ortiz  (by  teleconference),  Senator  Egan  (via                                                               
teleconference) and Stevens were also in attendance.                                                                            
CO-CHAIR  STUTES  recognized   Representative  Bryce  Edgmon  for                                                               
traveling to  Kodiak for this committee  hearing.  Representative                                                               
Edgmon  is not  only the  Speaker  of the  House, but  he as  the                                                               
legislative  representative  for   Bristol  Bay,  Unalaska,  Sand                                                               
Point, King Cove and other  coastal communities, this issue has a                                                               
large impact on his district as well.                                                                                           
^PRESENTATION: PowerPoint on HB  412: Marine Highway Corporation;                                                               
The Alaska  Marine Highway Reform  Project and  how it led  to HB
412  by   Robert  Venables,   Executive  Director   of  Southeast                                                               
Conference & Susan Bell, Principal, McDowell Group                                                                              
PRESENTATION: PowerPoint on HB 412: Marine Highway Corporation;                                                             
 The Alaska Marine Highway Reform Project and how it led to HB                                                              
     412 by Robert Venables, Executive Director of Southeast                                                                
       Conference & Susan Bell, Principal, McDowell Group                                                                   
5:02:58 PM                                                                                                                    
REPRESENTATIVE STUTES  announced that the only  order of business                                                               
would  be  PowerPoint  Presentation  on HB  412:  Marine  Highway                                                               
Corporation; The Alaska Marine Highway  Reform Project and how it                                                               
led  to  HB  412  by   Robert  Venables,  Executive  Director  of                                                               
Southeast Conference & Susan Bell, Principal, McDowell Group.                                                                   
5:03:20 PM                                                                                                                    
CO-CHAIR STUTES offered her opening statement as follows                                                                        
[original punctuation provided]:                                                                                                
     As a  refresher for  the committee  and the  public, HB
     412 is  a piece of  legislation that was  introduced by                                                                    
     this committee  in an effort  to revitalize  our ailing                                                                    
     ferry system.                                                                                                              
     The  concept  of the  bill  is  to convert  the  Alaska                                                                    
     Marine   Highway   System   into   a   publicly   owned                                                                    
     corporation, but  I will leave  the explanation  of how                                                                    
     that  concept  came  about and  the  benefits  it  will                                                                    
     provide to the presenters.                                                                                                 
     I'd  also like  to  thank everyone  from the  community                                                                    
     here  tonight and  everyone  listening  at home.  Aside                                                                    
     from  maintaining healthy  fisheries, revitalizing  our                                                                    
     ferry  system  is  probably the  most  important  issue                                                                    
     facing coastal Alaska.                                                                                                     
5:04:04 PM                                                                                                                    
CO-CHAIR STUTES continued her opening statement, as follows                                                                     
[original punctuation provided]:                                                                                                
     Dependable  ferry  service  is  the  lifeblood  of  the                                                                    
     communities that  myself and other  coastal legislators                                                                    
     represent.   This  is a  huge issue  to us.  This is  a                                                                    
     topic the  Transportation Committee has spent  a lot of                                                                    
     time  on  last year  and  we  have  gathered a  lot  of                                                                    
     support for  the idea  from Interior  legislators. This                                                                    
     committee plans to work in  earnest on a new version of                                                                    
     HB 412  next session with  the intention of  getting it                                                                    
     passed into law.                                                                                                           
     I called  this meeting to further  explore this concept                                                                    
     in a  community-style forum so  that the  most affected                                                                    
     stakeholder,  the public,  can  be  informed and  offer                                                                    
     input on the ground floor.                                                                                                 
     After we adjourn the official  portion of this meeting,                                                                    
     the   presenters   and   committee   will   remain   to                                                                    
     participate  in  a Q&A  session  with  the audience.  I                                                                    
     encourage anyone  with questions  or ideas to  stay and                                                                    
     participate in that forum.                                                                                                 
     Without  further ado,  would the  presenters come  join                                                                    
     us. Please  identify yourself and your  affiliation for                                                                    
     the  record and  proceed with  your presentation.  This                                                                    
     meeting is recorded in audio  only, so I am asking that                                                                    
     committee  members and  presenters identify  themselves                                                                    
     each  time they  speak for  the recording  secretary in                                                                    
     Juneau.   Committee members feel free  to ask questions                                                                    
     as they arise.                                                                                                             
5:05:39 PM                                                                                                                    
CO-CHAIR STUTES continued her opening statement, as follows                                                                     
[original punctuation provided]:                                                                                                
     Aside  from   the  two  presenters,  we   have  Shirley                                                                    
     Marquardt, the Executive Director  of the Alaska Marine                                                                    
     Highway System,  to answer questions  on behalf  of the                                                                    
     Members of  the audience, again, please  stay until the                                                                    
     end if you  are interested in participating  in the Q&A                                                                    
     session. It should be very informative.                                                                                    
5:06:21 PM                                                                                                                    
ROBERT  VENABLES,   Executive  Director,   Southeast  Conference;                                                               
Chair,  Marine Transportation  Advisory  Board,  stated that  the                                                               
Southeast Conference  is a regional development  organization for                                                               
the State  of Alaska that  covers communities from  Metlakatla to                                                               
Yakutat.     He   identified  the   SouthWest  Alaska   Municipal                                                               
Conference  (SWAMC)` as  a strong  supporter and  collaborator in                                                               
this  process.  He characterized  the  process  as one  that  has                                                               
Alaskans at  the helm.   He asked  the Executive Director  of the                                                               
Alaska Marine Highway System (AMHS)  incoming {May 2018], Shirley                                                               
Marquardt to  join him at  the table, noting she  formerly served                                                               
as  the mayor  of Unalaska.   He  applauded the  committee's work                                                               
this   session,  noting   the   remarkable   progress  with   the                                                               
introduction of HB  412.  He acknowledged that  the committee was                                                               
up to speed with many aspects of the AMHS.                                                                                      
5:08:14 PM                                                                                                                    
MR.  VENABLES began  a PowerPoint  on the  Alaska Marine  Highway                                                               
Reform.   He turned  to slide  2, AMHS  Reform Team,  and briefly                                                               
reviewed  how  the  process  began.    Governor  Walker  and  Lt.                                                               
Governor Mallott  challenged the  Southeast Conference to  find a                                                               
statewide  process  and  mechanism  to address  the  failing  and                                                               
ailing AMHS.   The  Southeast Conference  solicited participation                                                               
from across the state creating a statewide steering committee.                                                                  
5:08:45 PM                                                                                                                    
MR. VENABLES recognized participants  who were present, including                                                               
Mayor   Pat   Branson,  Kodiak,   who   serves   on  the   Marine                                                               
Transportation  Advisory Board  (MTAB) and  collaborated on  this                                                               
project  and Mr.  John  Whiddon (Kodiak).    He acknowledged  the                                                               
contractors who provided strong  expertise, including the Elliott                                                               
Bay  Design  Group  (EBDG),  KPFF  Engineering  Consultants,  and                                                               
McDowell  Group  (MG),  noting Susan  Bell,  principal,  McDowell                                                               
Group was also present.   He further recognized the contributions                                                               
by   the  regional   Alaska  Regional   Development  Organization                                                               
(ARDOR), and the Southwest Alaska Municipal Conference (SWAMC).                                                                 
5:09:32 PM                                                                                                                    
MR.  VENABLES turned  to slide  3, Statewide  Steering Committee,                                                               
which read as follows:                                                                                                          
     ? Chair: Dennis Watson - Craig                                                                                             
     ? Dave Kensinger - Petersburg                                                                                              
     ? Greg Wakefield - Anchorage                                                                                               
     ? Elizabeth Bolling - Ketchikan                                                                                            
     ? Shannon Adamson - Juneau                                                                                                 
     ? Josh Howes - Anchorage                                                                                                   
     ? Will Ware - Juneau                                                                                                       
     ? Sharon Hildebrand - Fairbanks                                                                                            
     ? John Whiddon - Kodiak                                                                                                    
     ? Dan Kelly - Ketchikan                                                                                                    
     ? Michael Anderson - Cordova                                                                                               
     ? Dennis Bousson  Skagway                                                                                                  
       Ex-officio  Commissioner Luiken                                                                                          
     ? Staff: Robert Venables                                                                                                   
MR. VENABLES noted that the  steering committee members were from                                                               
many parts of  the state, not just Southeast Alaska.   He said he                                                               
would provide a  similar presentation in Fairbanks  next week and                                                               
that  he recently  presented  in Anchorage  and  to the  Aleutian                                                               
Pribilof communities in order to  provide outreach throughout the                                                               
5:10:14 PM                                                                                                                    
MR.  VENABLES  turned  to  slide   4,  titled  "Urgent  Need  for                                                               
Financial Sustainability," which read in part as follows:                                                                       
     ? Funding affects schedule                                                                                                 
     ? State general funds decreased by                                                                                         
       $38 million from FY13 to FY19                                                                                            
       ? Short-term planning horizon                                                                                            
       ? Service level and revenue decline                                                                                      
     ? AMHS Fund/Budget (AS 19.65.050)                                                                                          
       ? Essential part of state transportation                                                                                 
       ? Provide for predictability and stability                                                                               
       ? Provide stable services to the public                                                                                  
MR. VENABLES pointed out the  need for stabilized funding for the                                                               
Alaska  Marine   Highway  System   (AMHS).    He   applauded  the                                                               
leadership of  the House  Transportation Committee  in addressing                                                               
this issue before the Finance  Transportation subcommittee and in                                                               
committee.   It has been  a two-year process and  Speaker Edgmon,                                                               
Representative  Kito  and Senators  Stevens  and  Egan were  very                                                               
supportive participants  throughout the process.   He stated that                                                               
stabilized funding would allow the  system to operate and capture                                                               
revenue in the highest operating months of July and August.                                                                     
5:12:08 PM                                                                                                                    
MR. VENABLES turned to slide 5,  Aging Fleet, which read, in part                                                               
as follows [original punctuation provided]:                                                                                     
     ? Kennicott - 1998                                                                                                         
     ? Columbia - 1973                                                                                                          
     ? Tustumena - 1964                                                                                                         
     ? Malaspina- 1963                                                                                                          
     ? Matanuska - 1963                                                                                                         
MR. VENABLES stated  that the other "hole" in  the fiscal outlook                                                               
was  increased  maintenance issues.    He  pointed out  that  the                                                               
vessels  are very  old, noting  that the  core of  the fleet  was                                                               
built in  the 60s,  including the M/V  Tustumena.   These vessels                                                               
have been suffering  more and more breakdowns  due to age-related                                                               
issues  with increased  costs  as time  goes on.    The AMHS  has                                                               
continually  needed to  put  funding into  repairs  just to  keep                                                               
going.   The  planning issue  has been  very good  in helping  to                                                               
address longer-range issues and  bring stability and viability to                                                               
the AMHS.                                                                                                                       
5:13:13 PM                                                                                                                    
MR. VENABLES  turned to slide  6, New Leadership, which  read, in                                                               
part as follows [original punctuation provided]:                                                                                
     ? Shirley Marquardt announced as Executive Director in                                                                     
     May 2018                                                                                                                   
     ? Implementing Phase 2 Recommendations                                                                                     
MR. VENABLES  acknowledged Executive Director  Shirley Marquardt,                                                               
who was hired in May 2018. One  of the things to consider about a                                                               
public corporation  is the recognition  that the  AMHS leadership                                                               
and  system needs  to  be  operated more  like  a  business.   He                                                               
acknowledged that  due to  its public  service mission  that some                                                               
level  of funding  support from  the state  will be  necessary to                                                               
achieve  that  public mission;  however,  it  is a  $150  million                                                               
enterprise that needs to be run  more like a business than it has                                                               
in the past.   He suggested that  one day the AMHS  could have an                                                               
executive director surrounded by a  Board of Directors (BOD) with                                                               
the  expertise  in  finance  and  the  maritime  industry.    The                                                               
Department  of  Transportation   &  Public  Facilities'  (DOT&PF)                                                               
Commissioner Luiken has been very  supportive of this process and                                                               
has   implemented  or   is  attempting   to  implement   many  of                                                               
recommendations, including appointing  Ms. Marquardt as Executive                                                               
5:14:16 PM                                                                                                                    
MR. VENABLES turned  to slide 7, Future  Fleet Development, which                                                               
read, in part as follows [original punctuation provided]:                                                                       
     ? M/V Tazlina christened August 11                                                                                         
       at Ketchikan Shipyard                                                                                                    
     ? M/V Hubbard under construction                                                                                           
     ? Tustumena replacement in final                                                                                           
       design phase, construction soon                                                                                          
     ? Phase 4 analysis on future fleet                                                                                         
MR.  VENABLES  acknowledged  some misalignments,  which  will  be                                                               
discussed soon  between management  and labor,  but also  that so                                                               
many different  designs exist  within the  fleet.   The challenge                                                               
has been to try  to find the role of design  in lowering the cost                                                               
and increasing efficiency  of operations.  He stated  that he was                                                               
in  Ketchikan for  the M/V  Tazlina's christening.   He  reported                                                               
that the M/V Tazlina is a  beautiful vessel and will be a welcome                                                               
addition to the fleet.                                                                                                          
MR. VENABLES continued  to review the slide, noting  that the M/V                                                               
Hubbard  is  currently  under  construction.    He  said  it  was                                                               
wonderful to  see a ship being  built in Alaska, noting  the jobs                                                               
the constructed  had created in  Ketchikan.  The  M/V Tustumena's                                                               
replacement  has  moving  forward  with  a  federal  Buy  America                                                               
waiver, which will  be discussed later, but it  is moving towards                                                               
construction  in a  multi-year process.    He noted  the Phase  4                                                               
analysis on future  fleet also spills over to slide  8, since the                                                               
last bullet point addresses fleet and terminal standardization.                                                                 
5:16:04 PM                                                                                                                    
MR. VENABLES turned to slide  8, Multi-Phase Project, which read,                                                               
in part as follows [original punctuation provided]:                                                                             
     checkbld Mission, Goals, and Governance                                                                                    
          Completed May 2017                                                                                                    
     checkbld Strategic Operational and Business Plan                                                                           
          Completed November 2017                                                                                               
     checkbld Legislation                                                                                                       
          HB 412 introduced April 2018                                                                                          
     checkbld Interim Measures Identified                                                                                       
          Implementing now                                                                                                      
     ?Fleet/Terminal Standardization and Continued Outreach                                                                     
MR.  VENABLES explained  that Phase  2 calls  for a  standardized                                                               
fleet,  one with  some feeder  vessels that  will funnel  traffic                                                               
toward the  hubs to allow  the mainline ocean vessels  to provide                                                               
service to ports further afield.   He stated that it would ensure                                                               
a   non-politicized  environment   as   much   as  possible   and                                                               
objectively consider  vessel design  by the marine  architect and                                                               
engineers.   He  acknowledged  that  the AMHS  system  has had  a                                                               
troubled  history of  trying to  design  the right  vessel.   The                                                               
proposed  plan will  take a  fresh  look at  vessel design,  even                                                               
considering the Alaska  class vessels with respect  to the design                                                               
going  forward,  he  said.    It  might  ultimately  mean  making                                                               
recommendations for modifications to the M/V Hubbard.                                                                           
5:17:14 PM                                                                                                                    
MR. VENABLES reviewed  some bullet points on Slide  8, noting the                                                               
Strategic Operational and Business Plan  will outline some of the                                                               
steps needed,  including that  in Phase  3 the  department should                                                               
look at the interim measures.   He noted legislation including HB
412, which is  a significant milestone.  He  appreciated that the                                                               
bill  was introduced  despite its  flaws, which  will need  to be                                                               
addressed.    The bill  provides  a  credible framework  to  show                                                               
Alaskans an  outline of how the  system will be established.   He                                                               
hoped  going into  the  next legislative  session  that the  next                                                               
version of the  bill could be a lot stronger.   He reiterated his                                                               
gratitude to  the committee because  a lot of Alaskans  have been                                                               
involved and injected into the process.                                                                                         
5:18:51 PM                                                                                                                    
MR. VENABLES turned  the presentation to Ms. Susan  Bell to cover                                                               
the next steps.                                                                                                                 
SUSAN BELL,  Principal, McDowell  Group, introduced herself  as a                                                               
life-long Alaskan.   She  said Elliott Bay  Design Group  was the                                                               
prime for  Phase 2,  which was  the most robust  study.   She has                                                               
been  part  of  the  process   throughout  the  project  team  of                                                               
engineers and analysts.                                                                                                         
5:19:24 PM                                                                                                                    
MS.   BELL  reiterated   that  the   group   has  given   several                                                               
presentations to the  committee and the public.   She referred to                                                               
the website  amhsreform.com as the  site to find any  forms being                                                               
referenced today.   She  highlighted Ms.  Marquardt's dedication,                                                               
stating that from  the moment Ms. Marquardt took  her position as                                                               
executive director  she has been  carrying the Phase  2 technical                                                               
operational report with her.                                                                                                    
MS.  BELL turned  to  slide 9,  Phase 1,  which  read as  follows                                                               
[original punctuation provided]:                                                                                                
     ? Examined mission, goals, and governance                                                                                  
     ? Statewide summit                                                                                                         
     ? Stakeholder interviews                                                                                                   
     ? Case studies of other ferry systems                                                                                      
     ? Mission statement refinement                                                                                             
     ? Analysis of alternative governance models                                                                                
    ?   Recommended    further   exploration    of   public                                                                     
MS. BELL  discussed slide  9, noting  Phase 1  set the  stage for                                                               
Phase 2,  which was conducted  a couple  of summers ago,  that it                                                               
was a fairly  high-level view of the project, which  led into the                                                               
Petersburg  Southeast  Conference.     This  phase  consisted  of                                                               
coastal  communities' participation,  including  the private  and                                                               
public  sectors   across  the  state.     Phase  1   had  several                                                               
components,  including  a  statewide  summit  that  was  held  in                                                               
Anchorage  and  included  stakeholder interviews.    Elliott  Bay                                                               
Design Group (EBDG) conducted an  analysis of other ferry systems                                                               
from around  the world.   It helped  people achieve  insight into                                                               
systems  such  as the  British  Columbia  (BC) Ferry  System  and                                                               
Washington State  Ferries as well as  overseas ferries, including                                                               
the  Scottish  [Ferry  Services] since  Scotland's  geography  is                                                               
similar.   It helped  people recognize that  there are  many ways                                                               
ferries  can   be  operated.    It   also  considered  government                                                               
structures of  other systems,  such as  line agencies  or private                                                               
corporations.   No  one model  can be  picked up  to provide  the                                                               
right fit for  Alaska, but examining other  systems provides some                                                               
insight and  flexibility in thinking  about what is  possible for                                                               
Alaska.   The  report also  showed  information on  how much  was                                                               
recovered from  fares for each  of these systems, which  was very                                                               
relevant to the second phase of the study.                                                                                      
5:21:41 PM                                                                                                                    
MS.  BELL related  that a  mission statement  was developed  with                                                               
input from the  public and the steering committee.   There was an                                                               
analysis  of   alternative  governance  models  and   the  report                                                               
concluded with  the recommendation that further  exploration of a                                                               
public corporation was warranted.                                                                                               
5:22:25 PM                                                                                                                    
MS.  BELL turned  to slide  10,  Purpose, which  read as  follows                                                               
[original punctuation provided]:                                                                                                
     Deliver safe, reliable, and sustainable                                                                                    
     marine transportation for Alaska residents,                                                                                
     visitors, and our commercial customers                                                                                     
MS.  BELL read  the revised  mission statement,  noting that  the                                                               
mission  needs  to  be  clear   and  she  believes  this  mission                                                               
statement achieves that goal.                                                                                                   
5:23:17 PM                                                                                                                    
MS. BELL  turned to slide  11, Phase 2,  which read, in  part, as                                                               
follows [original punctuation provided]:                                                                                        
     ? Created long-term operating and business strategy                                                                        
     ? Revenue analysis                                                                                                         
     ? Operations analysis                                                                                                      
     ? Operations financial model                                                                                               
     ? Structure and benefits of public corporation                                                                             
     ? Public and stakeholder engagement                                                                                        
MS. BELL  said that Phase  2 consisted  of a longer  more complex                                                               
project phase  with five main  aspects.  She reiterated  EBDG was                                                               
in the lead position and  the McDowell Group (MG) was responsible                                                               
for  the revenue  analysis, including  onboard  revenues, but  MG                                                               
also examined  new potential  revenue sources.   The  MG analyzed                                                               
the  structure and  benefits of  the proposed  public corporation                                                               
and stakeholder  involvement.   She said  the report  consists of                                                               
approximately  100  pages,  with   an  additional  100  pages  of                                                               
technical appendices.   She highlighted the  revenue analysis and                                                               
the  discussion of  other public  corporations  in Alaska,  which                                                               
helped frame the construction of HB 412.                                                                                        
5:24:32 PM                                                                                                                    
MS.  BELL turned  to slide  12,  Complex System,  which read,  in                                                               
part, as follows [original punctuation provided]:                                                                               
     ? 9 operational vessels                                                                                                    
     ? 33 ports of call (34 terminals)                                                                                          
     ? Variable service schedules                                                                                               
     ? Aging fleet                                                                                                              
     ? Terminal weight restrictions                                                                                             
      ? Personnel and travel account for 69% of operating                                                                       
MS. BELL  added that  the Phase 2  report acknowledged  the broad                                                               
geographic area,  the wide  variations in  the types  of vessels,                                                               
including  33 ports  and 34  terminals  for the  system, plus  an                                                               
aging fleet.   The report recognized  that the AMHS is  a people-                                                               
driven system;  that personnel and  travel account for  nearly 70                                                               
percent  of the  operating budget.   She  said it  is an  area to                                                               
think  of strategically,  and the  importance of  considering the                                                               
employees,   the    management   structure,    and   management's                                                               
relationship with  the union.   She related  that recommendations                                                               
were made to address some of these issues.                                                                                      
5:24:58 PM                                                                                                                    
MS. BELL turned to slide 13, Revenue and Traffic Analysis, which                                                                
read, in part, as follows [original punctuation provided]:                                                                      
     ? AMHS carried Alaskans from 175 communities                                                                               
     ? Fairbanks North Star Borough                                                                                             
     ? 3,316 passengers, 1,409 vehicles                                                                                         
       ? Fairbanks, Ft. Wainwright, North Pole, Eielson,                                                                        
     Salcha, and more                                                                                                           
     ? Bethel Census Area                                                                                                       
     ? 218 passengers, 52 vehicles                                                                                              
     ? Aniak, Kipnuk, Kwethluk, Sleetmute, and more                                                                             
MS.  BELL   reviewed  ridership  as  listed   on  slide  13,                                                                    
recognizing the  AMHS serves 175 communities.   She referred                                                                    
to  a  map on  slide  13  using  yellow dots  that  depicted                                                                    
ridership  destinations throughout  Alaska.   She attributed                                                                    
some travel  in the Fairbanks  North Star Borough  (FNSB) to                                                                    
military  deployment in  and out  of Alaska.   She  said the                                                                    
Bethel Census Area indicated the  AMHS served 218 passengers                                                                    
and  52  vehicles  whose destination  was  the  Bethel  area                                                                    
[traveling  in  part  via  the   AMHS].    She  stated  that                                                                    
understanding  the market  and  how Alaskans  are using  the                                                                    
system was an important piece of the analysis.                                                                                  
5:26:08 PM                                                                                                                    
MS. BELL turned  to slide 14, Revenue  and Traffic Analysis,                                                                    
which  read,  in  part   as  follows  [original  punctuation                                                                    
     ? Visitors using AMHS also travel Alaska's road system                                                                     
     ? 51% visit Anchorage                                                                                                      
     ? 36% visit Denali                                                                                                         
     ? 26% visit Seward                                                                                                         
     ? 25% visit Fairbanks                                                                                                      
       23% visit Homer                                                                                                          
     ? 22% visit Valdez                                                                                                         
MS. BELL  referred to a map  on slide 14 that  showed percentages                                                               
of  ridership for  Fairbanks,  Denali  National Park,  Anchorage,                                                               
Homer,   Seward  and   Valdez,  as   well  as   Southeast  Alaska                                                               
5:26:51 PM                                                                                                                    
MS. BELL turned to slide 15, Revenue and Traffic Analysis, which                                                                
read, in part, as follows                                                                                                       
     ?Maintains existing benefits                                                                                               
        head2right  Inter-departmental coordination                                                                             
        head2right  Public purpose of system                                                                                    
        head2right  Access to federal funding                                                                                   
     ?Addresses limitations                                                                                                     
        head2right Frequent turnover in senior leadership                                                                       
        head2right Indirect labor negotiations                                                                                  
        head2right Short-term planning horizon                                                                                  
     ?Additional benefits                                                                                                       
        head2right  Incorporate board expertise                                                                                 
        head2right  Operate in business-like manner                                                                             
        head2right  Align labor and management interests                                                                        
        head2right  Reduce labor costs strategically                                                                            
5:30:56 PM                                                                                                                    
MS. BELL turned to slide 16, Additional Findings, which read, in                                                                
part, as follows [original punctuation provided]:                                                                               
     ? AMHS will always require public funds to                                                                                 
     provide safe and reliable transportation                                                                                   
     ? Best opportunity for revenue growth is                                                                                   
     through stabilized funding                                                                                                 
     ? Transitioning to a modern and standardized                                                                               
     fleet creates critical cost savings                                                                                        
       Use revenue and market analysis to guide                                                                                 
     ? Bellingham is an essential revenue source (44% of                                                                        
     ? Non-residents account for 42% of revenue                                                                                 
MS. BELL  outlined a  few more  takeaways from  the in-depth                                                                    
phase 2 report, which indicated  that the AMHS's system will                                                                    
always   require  public   funds  due   to  the   geography,                                                                    
population  and the  revenue and  operational expense.   She                                                                    
pointed out  that stabilized funding  allows people  to make                                                                    
business and personal decisions  that affect profits, noting                                                                    
it is not  just the amount of the funding  but the timing of                                                                    
the funding  that matters.  She  said there is still  a need                                                                    
look  at ways  to achieve  an alignment  between the  budget                                                                    
cycle  and the  summer season.   She  stated there  were few                                                                    
efficiencies that come from having  a modern fleet, which is                                                                    
the goal.  Part of what has been looked at in the Phase 4                                                                       
work being implemented is to use a revenue and market                                                                           
analysis to guide decision making, she said.                                                                                    
5:32:18 PM                                                                                                                    
MS. BELL turned to slide 17, Phase 3 which read, in part,                                                                       
as follows [original punctuation provided]:                                                                                     
     ? Building structure and momentum                                                                                          
        • Legislation introduced (HB 412)                                                                                       
        • Sustaining public support                                                                                             
        • Identifying interim measures                                                                                          
MS. BELL  stated that Phase  3 was  small and spanned  the winter                                                               
months  and legislative  session.   She noted  that Mr.  Venables                                                               
performed  outreach by  speaking to  various chamber  of commerce                                                               
and trade organizations, ranging  from the Alaska Travel Industry                                                               
Association  to  the  Alaska  Municipal   League.    Speaking  to                                                               
identifying interim measures, she  suggested that the AMHS Reform                                                               
website has  materials posted, including  a short memo  with nine                                                               
5:33:24 PM                                                                                                                    
MS. BELL  turned to  slide 18, Interim  Measures, which  read, in                                                               
part, as follows:                                                                                                               
     ? Actions that can be taken now                                                                                            
         Work towards more a sustainable, business-like                                                                         
     ? Align with longer-term objectives                                                                                        
     ? 1: Stabilize Funding                                                                                                     
          Increase revenues and align with seasonality                                                                          
       2: Fleet and Terminal Standardization                                                                                    
          Financial and operational efficiencies                                                                                
     ? 3: Robust Market and Revenue Analysis                                                                                    
          Allows AMHS to deploy resources effectively                                                                           
MS.  BELL,  with respect  to  considering  a public  corporation,                                                               
indicated  it would  take legislative  and  public momentum,  and                                                               
support  and time  to  transition  to a  corporate  system.   She                                                               
reviewed   the  bullet   points  with   respect  to   longer-term                                                               
objectives,  including stabilizing  funding  to increase  revenue                                                               
development and  align with seasonality since  the peak operating                                                               
season  is  short.    She recommended  that  the  information  on                                                               
revenue analysis  be shared so  people understand how  the system                                                               
serves the public.                                                                                                              
5:35:37 PM                                                                                                                    
MS. BELL turned to slide  18, Interim Measures cont., which read,                                                               
in part, as follows [original punctuation provided]:                                                                            
     ? 4: Address Labor Relations                                                                                               
     ? Negotiate directly; reduce labor costs strategically                                                                     
       5: Board Development                                                                                                     
     ? Phase 2 recommended 7-member board                                                                                       
     ? 5 with needed business/transportation expertise AND                                                                      
     1 representative of union employees                                                                                        
        ? Seated as soon as possible to assure a smooth                                                                         
     transition to the public corporation                                                                                       
MS.  BELL  said she  touched  on  addressing labor  relations  on                                                               
previous  slides,  noting  that direct  negotiations  could  help                                                               
align labor  and management  interests.   She related  that union                                                               
representatives have been  part of the steering  committee.  Part                                                               
of the Phase  2 outreach included a survey of  employees, as well                                                               
as an  online survey  available to  the public.   She  added that                                                               
reducing   costs  strategically   and   building  some   capacity                                                               
internally  is something  that could  help the  organization move                                                               
MS.  BELL directed  attention to  board development,  noting that                                                               
the  steering   committee  spent  substantial   time  considering                                                               
models.   In the Phase 2  report, the board recommended  a seven-                                                               
member  board, and  suggested that  five members  needed to  have                                                               
expertise in business and transportation,  plus one member needed                                                               
to  represent  union  employees.   She  related  that  the  group                                                               
reviewed other ferries and how  the corporate structure works for                                                               
the Alaska  Railroad Corporation  (ARRC).  She  highlighted board                                                               
member expertise and development as  a key element going forward.                                                               
Finally, she  mentioned that  seating the  board and  not waiting                                                               
for  the  corporation  to  be   formed  would  provide  a  smooth                                                               
5:38:18 PM                                                                                                                    
MS. BELL turned  to slide 19, Interim Measures  cont., which read                                                               
as follows:                                                                                                                     
     ? 6: Corporation Development                                                                                               
     ? Advance preparation needed for smooth transition                                                                         
     ? 7: Employee Communications                                                                                               
     ? Improved, but further face-to-face meetings needed                                                                       
     ? 8: Explore New Revenue Sources                                                                                           
      ? Non-operating revenues, partnerships, concessions,                                                                      
     and shoreside potential                                                                                                    
     ? 9: Maintain Public Support                                                                                               
     ? Continue project momentum                                                                                                
MS.  BELL  suggested  numerous  steps were  needed  in  terms  of                                                               
corporation  development, including  considering  models such  as                                                               
the  ARRC, Alaska  Industrial  Development  and Export  Authority                                                               
(AIDEA)  and  the Alaska  Permanent  Fund  (APF).   For  example,                                                               
reviewing bylaws  and articles of incorporation  in advance could                                                               
help provide  a seamless transition,  she said.   She underscored                                                               
the  importance  of  fostering   employee  communications.    She                                                               
acknowledged improvements  have occurred, but due  to changes and                                                               
uncertainty it  will take time  and communication.  She  said she                                                               
previously  mentioned  analysis done  by  the  McDowell Group  in                                                               
Phase 2 as part of the  broader project, which not only looked at                                                               
the  AMHS's  current  revenue  collections  but  also  considered                                                               
partnerships,  concessions,  and  non-operating  revenue  sources                                                               
such as bonding, capital endowment  and gaming.  She acknowledged                                                               
that  these  new revenue  sources  might  not all  be  practical;                                                               
however, she  felt it was valuable  to have a suite  of things to                                                               
consider  as  possible  fits for  the  organization.    Shoreside                                                               
potential  exists with  land assets  and  terminals, which  could                                                               
provide an array  of tools moving forward that  are yet untapped.                                                               
Finally, maintaining public support is important, she said.                                                                     
5:40:21 PM                                                                                                                    
MR.  VENABLES thanked  the  committee  and particularly  Co-Chair                                                               
Stutes  for the  leadership and  support on  this issue  over the                                                               
past year.   One of the things about the  unique partnership that                                                               
this  project has  had  with the  DOT&PF and  the  AMHS was  this                                                               
process  was a  non-department initiative  led by  Alaskans.   He                                                               
pointed out  ongoing fundraising continues to  serve this effort.                                                               
He thanked  project sponsors, including  the City of Kodiak.   As                                                               
the group embarks  on another year of work  that this fundraising                                                               
effort  will continue.   He  characterized this  as a  project of                                                               
Alaskans and by Alaskans, who  have invested their time and money                                                               
to participate.   He reminded members that  this information will                                                               
be  posted   to  the  Alaska  Marine   Highway  Reform's  website                                                               
[amhsreform.com] so  that Alaskans can continue  to stay informed                                                               
and provide feedback to the group.                                                                                              
5:43:30 PM                                                                                                                    
REPRESENTATIVE   EDGMON  appreciated   the  timeliness   of  this                                                               
meeting.    He emphasized  the  AMHS  importance to  all  coastal                                                               
Alaskans, including a large portion  of his legislative district.                                                               
He thanked Mr. Venables for  the presentation, noting there was a                                                               
lot  to absorb  and it  will  be a  long-term effort.   He  asked                                                               
whether  any  consideration was  given  to  solicit someone  from                                                               
Bellingham  serving  as an  ex-officio  member  and perhaps  from                                                               
Prince Rupert, as well.                                                                                                         
MR.  VENABLES  pointed out  several  members,  including Mr.  Dan                                                               
Kelly  who was  transferred  to the  Alaska  Marine Lines'  (AML)                                                               
Seattle  office; and  Mr.  Dave Water,  Port  of Bellingham,  who                                                               
serves  on the  Southeast Conference's  Transportation Committee.                                                               
He  acknowledged  the suggestions  were  good  ones, noting  that                                                               
currently  only   Alaskans  serve  on  the   steering  committee;                                                               
however, the  group solicits information  but has  not formalized                                                               
lines  of communications.   He  related that  the port  of Prince                                                               
Rupert  has been  somewhat active  in its  interactions with  the                                                               
5:46:07 PM                                                                                                                    
SENATOR  DENNIS EGAN,  Alaska State  Legislature,  asked to  have                                                               
copies of the PowerPoints e-mailed to his office.                                                                               
CHAIR STUTES said Mr. Venables has agreed to do so.                                                                             
SENATOR EGAN appreciated the meeting and hoped to keep involved.                                                                
5:46:59 PM                                                                                                                    
SENATOR  GARY   STEVENS,  Alaska  State   Legislature,  expressed                                                               
concern on whether  the proposed system would be  better than the                                                               
current one.   He  characterized obtaining  funding as  "a fight"                                                               
each  year and  that  legislators who  serve coastal  communities                                                               
were the  ones who really  care [about the  AMHS].  He  asked for                                                               
further clarification  on the level  of state subsidizes  for the                                                               
ferry system,  in terms of every  dollar a passenger spends.   He                                                               
wondered who  would cover the costs  of the AMHS if  it becomes a                                                               
corporation.   He asked  for further  clarification if  the state                                                               
currently covers one-third of the costs of operating the AMHS.                                                                  
MR. VENABLES  related his understanding  that the  ferry collects                                                               
just  under 40  percent of  its costs.   He  emphasized that  the                                                               
department has  committed to  find efficiencies  for the  AMHS to                                                               
improve  those  figures; however,  the  system  will always  need                                                               
public support  to achieve  its mission.   The  corporation would                                                               
not  make   that  separate;  however,   it  would   provide  more                                                               
transparency  and  efficiency,  so  the dollars  will  be  better                                                               
spent.   Further,  a corporation  would provide  a mechanism  for                                                               
partnerships so more  revenue can be generated.   He acknowledged                                                               
that everyone shares that concern,  but he believes that having a                                                               
corporation run  by people who  are passionate about  its mission                                                               
brings in a whole different element than the status quo.                                                                        
5:49:14 PM                                                                                                                    
SENATOR STEVENS wondered how the  system could be changed without                                                               
increasing the prices  dramatically.  He said,  "I'm really tired                                                               
of  hearing  about the  Marine  Highway  System compared  to  the                                                               
Alaska Railroad - it's not the  same thing."  He pointed out that                                                               
the ARRC has land, leases it out  to help fund the railroad.  The                                                               
AMHS  does  not  have  that  capability since  it  does  not  own                                                               
anything  except  for  aging  vessels.   He  did  not  think  the                                                               
comparison made sense.                                                                                                          
MR. VENABLES agreed.                                                                                                            
5:50:46 PM                                                                                                                    
REPRESENTATIVE DRUMMOND  pointed out  that Alaska  Marine Highway                                                               
System collected  roughly 40  percent of  its costs  through user                                                               
fees and asked  whether someone could identify  any paved highway                                                               
in Alaska  that collects  40 percent of  the associated  costs in                                                               
user fees.                                                                                                                      
5:52:00 PM                                                                                                                    
SENATOR EGAN answered "zero."                                                                                                   
5:52:53 PM                                                                                                                    
CHAIR  STUTES thanked  Kodiak Mayor  Branson,  Kodiak and  Kodiak                                                               
Island  Borough  Mayor Rohrer  for  participating.   She  thanked                                                               
members for agreeing unanimously  to introducing HB 412, relating                                                               
that  some members  serving on  the committee  are from  Interior                                                               
Alaska and the Mat-Su Valley.  She expressed her gratitude.                                                                     
5:53:07 PM                                                                                                                    
There being no further business before the committee, the House                                                                 
Transportation Standing Committee meeting was adjourned at 5:53                                                                 

Document Name Date/Time Subjects
HTNS AMHS Reform Update 8.16.18.pdf HTRA 8/16/2018 5:00:00 PM
PowerPoint AMHS Reform Project
HB0412A.PDF HTRA 8/16/2018 5:00:00 PM
HB 412