Legislature(1995 - 1996)
01/31/1996 01:42 PM House TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE TRANSPORTATION STANDING COMMITTEE
January 31, 1996
1:42 p.m.
MEMBERS PRESENT
Representative Gary Davis, Chairman
Representative Beverly Masek, Vice Chair
Representative Jeanette James
Representative Tom Brice
Representative Jerry Sanders
Representative Bill Williams
Representative Don Long
MEMBERS ABSENT
All members were present
COMMITTEE CALENDAR
HOUSE BILL NO. 362
"An Act extending the motor fuel tax exemption for fuel sold for
use in jet propulsion aircraft to fuel used in those aircraft for
flights that continue from a foreign country."
- MOVED OUT OF COMMITTEE
* HOUSE BILL NO. 352
"An Act giving notice of and approving a lease-purchase agreement
with the City of Palmer for a fire management facility at the
Palmer Airport."
- MOVED OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HB 362
SHORT TITLE: AVIATION FUEL TAX EXEMPTION
SPONSOR(S): REPRESENTATIVE(S) THERRIAULT
JRN-DATE JRN-PG ACTION
12/29/95 2360 (H) PREFILE RELEASED
01/08/96 2361 (H) READ THE FIRST TIME - REFERRAL(S)
01/08/96 2361 (H) TRANSPORTATION, FINANCE
01/24/96 (H) TRA AT 01:00 PM CAPITOL 17
01/24/96 (H) MINUTE(TRA)
01/31/96 (H) TRA AT 01:00 PM CAPITOL 17
BILL: HB 352
SHORT TITLE: APPROVE PALMER AIRPORT FIRE BLDG.
SPONSOR(S): REPRESENTATIVE(S) OGAN
JRN-DATE JRN-PG ACTION
05/16/95 2220 (H) READ THE FIRST TIME - REFERRAL(S)
05/16/95 2220 (H) TRANSPORTATION, FINANCE
01/31/96 (H) TRA AT 01:00 PM CAPITOL 17
ACTION NARRATIVE
TAPE 96-3, SIDE A
Number 000
WITNESS REGISTER
M. CLYDE STOLTZFUS, Special Assistant
Office of the Commissioner
Department of Transportation and Public Facilities
3132 Channel Drive
Juneau, Alaska 99801-7898
Telephone: (907) 465-3906
POSITION STATEMENT: Testified on HB 362
BOB BARTHOLOMEW, Deputy Director
Income and Excise Audit Division
Department of Revenue
P.O. Box 110420
Juneau, Alaska 99811-0420
Eleventh Floor State Office Building
Telephone: (907) 465-2320
POSITION STATEMENT: Testified on HB 362
JEFF COOK, Vice-President
Mapco Alaska Petroleum
1180 H and H Lane
Fairbanks, Alaska 99705
Telephone: (907) 488-2741
POSITION STATEMENT: Testified on HB 362
REPRESENTATIVE SCOTT OGAN
Alaska State Legislature
State Capitol, Room 409
Juneau, Alaska 99801
Telephone: (907) 465-3878
POSITION STATEMENT: Sponsor of HB 352
THOMAS H. BOUTIN, State Forester
Director's Office
Division of Forestry
Department of Natural Resources
400 Willoughby Avenue, Third Floor
Juneau, Alaska 99801-1724
Telephone: (907) 586-3133
POSITION STATEMENT: Supported HB 352
DEAN BROWN, Deputy State Forester, Management
Central Office
Division of Forestry
Department of Natural Resources
3601 C Street, Suite 1034
Anchorage, Alaska 99503-1724
Telephone: (907) 762-2508
POSITION STATEMENT: Supported HB 352
TOM SMITH, City Manager
City of Palmer
231 West Evergreen Street
Palmer, Alaska 99645
Telephone: (907) 745-3271
POSITION STATEMENT: Supported HB 352
LARRY TEAGUE, Building Inspector
City of Palmer
231 West Evergreen Street
Palmer, Alaska 99645
Telephone: (907) 745-3271
POSITION STATEMENT: Supported HB 352
The House Transportation Standing Committee was called to order by
Chairman Gary Davis at 1:42 p.m. Members present at the call to
order were Representatives G. Davis, Masek, Long, Brice and
Williams. A quorum was present. This meeting was teleconferenced
to Anchorage and Palmer.
CHAIRMAN GARY DAVIS said the agenda was HB 362 and HB 352.
HB 362 AVIATION FUEL TAX EXEMPTION
CHAIRMAN GARY DAVIS said HB 362 was a carry over from last week.
He added that there seems to be agreement on the policy issue, a
great deal of concern on the funding issue. He requested that this
committee focus on the policy issue and let the finance committee
be concerned about the funding issue. At the last meeting all
parties presented their case including the Department of Revenue
and the in-state refineries.
Number 304
M. CLYDE STOLTZFUS, Special Assistant, Office of the Commissioner,
Department of Transportation and Public Facilities (DOT/PF) was
first to testify. He said DOT/PF has had discussions with the
municipality of Anchorage within the last week to share
information. Another meeting between DOT/PF and Anchorage is
scheduled this afternoon at 3:00 p.m. to deal with issues around
Foreign Trade Zone (FTZ). He said, to reiterate his point from
last weeks meeting, he would like to share joint management between
the state of Alaska and the municipality of Anchorage of the FTZ
within the International Airport. He said he had information
gathered from Anchorage and the DOT/PF and would share information
regarding the development of the FTZ.
MR. STOLTZFUS said DOT/PF believes the FTZ is a good concept and
one of the tools you want to have in your economic development
arsenal. The issue presented in HB 362 is whether, in terms of
costs and benefits, the FTZ is being properly utilized. The DOT/PF
is able to quantify what the costs have been, but are not sure what
the benefits have been. Anchorage referenced the FTZ as an
economic development issue in the letters Mr. Stoltzfus presented
to the committee.
MR. STOLTZFUS said in 1994, the state relinquished a landing tax at
rural airports and replaced those revenues with an aviation fuel
tax. The proposed elimination of the aviation fuel tax now raises
the problem of how to collect that revenue. He said he would not
know more until after the 3:00 p.m. meeting.
Number 569
REPRESENTATIVE JERRY SANDERS asked if there were any fuel purchases
covered by this currently in Fairbanks. If this is the case, does
the Anchorage FTZ have any affect on those fuel purchases.
Number 602
MR. STOLTZFUS said there are no fuel purchases in Fairbanks that
are affected by this situation. He added that one of the policy
issues of a FTZ is that fuel can't leave the premises of the FTZ
without losing the power of the FTZ. If you were going to have
tax-free aviation fuel bought in Fairbanks, you would have to have
a FTZ corridor.
Number 626
REPRESENTATIVE SANDERS asked and received confirmation that there
was fuel being purchased in Fairbanks under which this aviation
fuel tax was applicable. He then asked if this was the case, why
would you want to give up that tax revenue.
Number 659
MR. STOLTZFUS said the DOT/PF's position was clear, they do not
want to give up that tax.
REPRESENTATIVE SANDERS asked if they could limit HB 362 to the FTZ
or does it have to be applied statewide. He also asked, if HB 362
was applicable to only Anchorage, would jet fuel consumers purchase
all their fuel from Anchorage.
REPRESENTATIVE TOM BRICE said HB 362 represents a large loss of
revenue. He said a tax can not be levied in the FTZ. He said by
limiting HB 362 to the Anchorage International Airport, a
significant amount of revenue would not be gained from other
airports.
Number 692
MR. STOLTZFUS said Fairbanks represents between 5 percent and 10
percent market for AvJet sold, so it is a small amount of revenue.
Number 797
CHAIRMAN GARY DAVIS said there is construction of a fuel tank
facility at the Anchorage airport which is being done to replace an
outdated storage facility.
Number 850
MR. STOLTZFUS confirmed this and added that the storage facility is
not currently part of the FTZ. In response to CHAIRMAN GARY DAVIS
question, he said the state would like to have authority in the
FTZ.
Number 888
BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division,
Department of Revenue (DOR) was next to testify. He said DOR did
another exchange of numbers with representatives of the refineries.
He said he did not wish to go into the details because the
agreement seemed to be that there should be disagreement. The DOR
is continuing to look at it and are comfortable in the position
that it will not be economically sound to import fuel and because
of this large importations will not happen.
Number 963
CHAIRMAN GARY DAVIS asked if the position of the DOR was also
derived from assurances by the consortium of aviation fuel
purchasers.
Number 1033
MR. BARTHOLOMEW said the position was derived by looking at how the
aviation fuel and petroleum industry work. The consortium is going
to buy the most economic product. Alaska's refineries can not meet
the aviation fuel needed in the state of Alaska, based on the last
five year average, so fuel will need to be imported despite
expansions to capacity to refine and expansions for the usage. The
commissioner communicated with the experts in the petroleum issues
from other states and has verified that the numbers he used were
reasonable. They said the numbers were not that far off how the
world market works and what people will be paying for jet fuel.
Number 1057
CHAIRMAN GARY DAVIS referred to the letters from the major air
carriers and suggested that they might not want to go to outside
sources, but that they might depending on prices of jet fuel. He
then said according to the numbers presented last week by DOR, it
appeared that the in-state refineries could remain competitive.
Number 1109
REPRESENTATIVE JEANNETTE JAMES referred to the price differentials
in the refinery costs of in-state refineries as compared to
imported fuel refinery costs. She asked if DOR was still
maintaining that they were the same.
Number 1262
MR. BARTHOLOMEW said DOR did not ask the petroleum experts to
verify the individual components of what it costs to refine in
state rather than out of state. In these discussions, one of the
factors that was verified was that the spot market price is a solid
price on which to base numbers. The spot price does move up and
down, but it is what the market revolves around. The cost of
transportation of imported fuel raises the price of the fuel to a
higher cost than what can be produced by the in-state refineries.
Number 1320
REPRESENTATIVE JAMES wished for clarification that the position DOR
was offering was that in-state refineries could remain competitive
with the fuel tax.
Number 1381
MR. BARTHOLOMEW said that this was the position.
Number 1407
REPRESENTATIVE JAMES said there would be no harm to the in-state
producers if you were to pass HB 362.
MR. BARTHOLOMEW reiterated DOR's position and said that removing
the aviation fuel tax would be additionally helpful.
REPRESENTATIVE JAMES said that is where she agreed to disagree.
Number 1432
JEFF COOK, Vice-President, Mapco Alaska Petroleum, was next to
testify. He said that the jet fuel industry is competitive and
contracts would be lost as a result of tenths of a penny price
differentials. He said Mapco was not able to give detailed costs
in a public forum in front of competitors. He said Mapco, Tesoro,
and PetroStar are in agreement that the FTZ is an unfair situation
that they did not create. He said the aviation fuel tax is paid by
the buyers of the jet fuel not the refineries. Mapco would, of
course, have to absorb the cost of the tax if they wanted their
fuel to remain competitive, but stated on an equity issue, Mapco
should not have to absorb that tax. He mentioned the benefits that
Mapco provides to the state, such as the purchase of North Slope
fuel and employment. He cited high safety standards in the in-
state refineries as well as the wages being paid which limits its
competitive advantage.
MR. COOK said that buyers have already chosen to purchase imported
fuel. The buyers have stated their position in the letters from
FedEx and NorthWest Airlines. He cited the declines in services,
that have occurred at the Anchorage airport which have been lost to
Seattle, as an example of how competitive the market is. He said
he had a letter from Steve Lewis of PetroStar in which he
reiterates his testimony from last week.
Number 1667
MR. COOK said in regards to the Fairbanks issue, eliminating the
jet fuel tax in the FTZ would reroute airline traffic because jet
fuel consumers will look for the 3.2 cents savings. He encouraged
the support of HB 362 and concluded that this issue did not have
the luxury of waiting around to see what will happen. Changing the
status of the FTZ will take some time. The tax revenues lost have
already been lost because it is clear that airline fuel buyers will
purchase the cheapest fuel which will be imported fuel.
Number 1735
REPRESENTATIVE JAMES received confirmation that some imported fuel
had been purchased to meet demand. Prior to the tankers that came
in last year, she asked where that imported fuel had come from.
Number 1765
MR. COOK said it had come from BP, the ARCO Cherry Point refinery,
and other west coast refineries. In most cases, it is jet fuel
derived from North Slope crude.
REPRESENTATIVE JAMES asked if that fuel was subject to tax.
MR. COOK said that fuel, because it was domestic fuel, was taxable.
Number 1780
REPRESENTATIVE JAMES expressed concern over possible lost railroad
revenue.
Number 1802
CHAIRMAN GARY DAVIS said this was a difficult situation in lieu of
the current revenue situation.
Number 1822
REPRESENTATIVE BRICE made a motion to move HB 362 with the
accompanying fiscal note. Hearing no objections, HB 362 was moved
out of the House Standing Committee on Transportation.
CHAIRMAN GARY DAVIS said, despite the decision, the committee is
sensitive to the issue of lost revenues and the position of the
DOR.
HB 352 APPROVE PALMER AIRPORT FIRE BLDG.
Number 1911
REPRESENTATIVE SCOTT OGAN, sponsor of HB 352, said HB 352 is a
consolidation of the Division of Forestry's (DOF) fire fighting
facilities. HB 352 authorizes the state of Alaska to enter into a
lease-purchase agreement with the city of Palmer for a fire
management facility at the Palmer airport. HB 352 cuts costs and
increases efficiency in wild land fire fighting. Currently there
are four facilities in Anchorage, Eagle River, Big Lake and Palmer.
REPRESENTATIVE OGAN referred to a map of south central Alaska, he
said the Anchorage facility houses the management. He said most of
the materials, pumps, hoses, hand tools and fire fighting
implements are stored at the Eagle River location, Big Lake is
where support services are located and Palmer rents out hangar
space at the airport for dispatching and running their air
operations.
Number 2012
REPRESENTATIVE OGAN referred to the Governor's budget summary for
fiscal year 1997 mentioned the consolidation of DOF and estimated
an $8 million savings over the 20 year project life. The DOF
proposed a lease finance approach. He mentioned the city of
Palmer's track record and referred specifically to the courthouse
which was built under budget and ahead of schedule.
REPRESENTATIVE OGAN said Palmer is a good location because the
Palmer airport site has undeveloped land, has a paved runway of
6,000 feet in length which can handle the heavy aircraft used to
transport fire retardant chemicals. The location is centrally
located in the wildland fire protection area and the DOF is
currently operating out of this location. Community services and
commercial support options are available. Palmer is supportive of
HB 352 and has passed a resolution to that effect. He concluded
that HB 352 will save the state money and allow for better public
protection capabilities.
Number 2087
THOMAS H. BOUTIN, State Forester, Director's Office, Division of
Forestry, Department of Natural Resources was next to testify. He
said DNR supports HB 352. He said the DOF proposed the
consolidation because DOF believes that it is cost effective. He
mentioned the costs of having four facilities and the logistical
problems of being spread out. He said interest rates have dropped
dramatically and there would be a net present savings of a little
over $2 million. He referred to Representative Ogan's testimony
about the courthouse.
Number 2148
DEAN BROWN, Deputy State Forester, Management, Central Office,
Division of Forestry, Department of Natural Resources was next to
testify. She stood by the map and discussed the fire situation
from last year. She said last year ground fires had occurred in
alder trees, which was the first time DOF had seen that happen.
Twenty years ago, she said, having four facilities made sense.
Presently the office in Big Lake houses the initial attack. It has
fire fighters ready to go with engines. However, in 1993 the
population base changed so that DOF could no longer cover this
initial attack from Big Lake. At that time, the helicopter attack
operation and one of the initial attack crews moved to Palmer.
This crew is housed in a trailer with no sewer or water facilities.
Number 2230
MS. BROWN said HB 352 is driven by the need to consolidate the fire
fighting resources and also by the services DOF provides to the
public. These services include woodland wood cutting permits, fire
permits, and general forestry information. The DOF location at Big
Lake, that handles these public services, is eight miles on an
unpaved road and away from the population areas of that region.
She said fire needs are served by DOF in a region stretching from
the Canadian border, up through McGrath, all the way down to the
south and down the Aleutian Chain. She pointed to the map and
referred to small warehouse locations which are designed to handle
the initial fire attacks. She said DOF has fire retardant
airplanes out of McGrath and Palmer which cover the whole region.
If the fire situation needs more equipment and personnel then the
warehouse can provide, the request is processed through the
Anchorage location. A total of 73 crews can be called up for
support. Anchorage gets this equipment and personnel through the
Eagle River location.
Number 2331
MS. BROWN said a few years ago they came up with a plan to
consolidate their facilities into one location. This location
would house the dispatch, logistics, public services for any
permitting, as well as airport and warehouse services. This
consolidation will also reduce the amount of time that is needed to
organize equipment and crews which might reduce the size of the
fires if they can be extinguished sooner. She added that smaller
fires are also safer to put out.
Number 2433
MS. BROWN discussed the future for the closed facilities. The
state owns the facility at Big Lake and there is current interest
by other state divisions for that property. The Eagle River
warehouse is portable and can be moved. This warehouse is situated
on state land and there is interest by the Division of Geological
and Geophysical Surveys for this land. The Anchorage space will be
vacated at $2.15 a square foot savings.
Number 2454
REPRESENTATIVE BRICE asked for information on the size of the
Anchorage office.
Number 2464
MS. BROWN said she thought is was around 1200 square feet. Later
in her testimony it was corrected, the correct amount of the
Anchorage office is 4,000 square feet. She said in Palmer, the
lease was recently lost for the trailer which houses the initial
attack forces. A space is rented above an air service for the
logistics, including radio dispatching for both the trucks, crews
and aircraft. That facility would be vacated under HB 352.
REPRESENTATIVE BRICE asked if this proposed facility was being
developed under special design or if it would be just a hangar.
MS. BROWN said this facility would essentially handle the aircraft
hangar, the shop where pumps and equipment are maintained, the
warehouse, and then the administrative offices.
REPRESENTATIVE BRICE stated that it appeared there would be no
special codes or construction needs for the proposed facicility.
This statement was confirmed by Ms. Brown. He asked who might be
contracting for the work.
Number 2482
MR. BOUTIN said the Palmer courthouse was competitively bid.
Number 2480
CHAIRMAN GARY DAVIS said representatives from the city of Palmer
were on teleconference who could answer that question.
TAPE 96-3, SIDE B
Number 000
CHAIRMAN GARY DAVIS asked if some space in the Anchorage office
would be retained.
MR. BOUTIN said that some federally funded programs, urban and
community stewardship, a federally funded entomologist, et cetera
would remain in the Frontier Building, but the fire fighting
logistics would be moved. Other people from the various locations
would also be placed in the new facility.
Number 030
CHAIRMAN GARY DAVIS repeated his question whether some space would
be retained.
MR. BOUTIN said yes, some space would be kept in the Frontier
Building.
CHAIRMAN GARY DAVIS asked if there have been discussions regarding
a lease billed situation.
Number 040
MR. BOUTIN said there has been on going discussion on this issue.
The city of Palmer is aware of DOF's needs especially in regards to
specific needs such as hangar space, shop space, et cetera, as well
as compliance with the Americans with Disabilities Act.
Number 049
CHAIRMAN GARY DAVIS received clarification that there is no water
or sewer services at the initial attack location in Palmer, but
Palmer has full facilities including natural gas at the airport
where the new building will be located.
Number 070
TOM SMITH, City Manager, City of Palmer testified via
teleconference from Palmer. He pointed out the city of Palmer
resolution which supports the proposed project. Palmer will work
with the DOF to obtain authorization from the state for the
certificate of participation to help finance such a project.
Number 120
CHAIRMAN GARY DAVIS asked the proposed timing for the completion of
the facility.
Number 130
MS. BROWN said if HB 352 were approved this session, the next step
would be for the city of Palmer to issue certificates of
participation for the design and construction of the facility. Two
years from this spring would be the date it would be ready for
occupancy.
Number 150
CHAIRMAN GARY DAVIS asked if the fiscal note showing $9 million
savings over the next 20 years was based on expected growth within
the division and whether it allowed for expansion in the DOF.
Number 167
MS. BROWN said that despite increased wild land urban interface and
increased population within these areas, situations would have to
be handled with emergency fire fighters because of the budget
outlook.
Number 179
REPRESENTATIVE BRICE asked if there had been any preliminary
discussions with contractors.
Number 191
MR. SMITH said they haven't as they will go through a competitive
bidding process.
Number 206
LARRY TEAGUE, Building Inspector, City of Palmer testified via
teleconference from Palmer. He explained the courthouse project.
He said initially the court system approved the project. The city
of Palmer then put the project out to bid and oversaw the actual
project construction and documentation agreements. Then the city
turned over the facility to the state for occupancy. The contract
was won by a construction company that is no longer in business.
The facility proposed under HB 352 would be put out for competitive
bid by state rules.
Number 235
REPRESENTATIVE DON LONG asked when the new facility is constructed,
what will happen to the old facilities.
Number 250
MS. BROWN said that in Anchorage and Palmer the lease will not be
renewed. In Eagle River and Big Lake, which are on state land
other state agencies have expressed interest in those land areas.
Number 309
CHAIRMAN GARY DAVIS said it appeared that the amount to lease the
new facilities would be less expensive then leasing the four
facilities.
Number 339
REPRESENTATIVE OGAN made the comment that with today's budget
environment we are looking for more efficient cost-effective plans
and HB 352 does this. He made a note that there are approximately
100 buildings that the state leases out and cited specific
examples.
Number 390
CHAIRMAN GARY DAVIS asked what the proposed footage of the new
lease facility.
Number 400
MS. BROWN said it was 80,000 square feet.
Number 410
REPRESENTATIVE BRICE proposed that in HB 352, on line seven after
the period in Palmer airport, a new sentence be started saying,
"the city of Palmer shall enter into a project labor agreement for
it's construction". He said this is to ensure that, on these types
of state projects, employment opportunities should be geared
towards Alaskans.
REPRESENTATIVE OGAN deferred to the city of Palmer to comment on
this proposed amendment.
Number 520
MR. SMITH said the city of Palmer has a code which gives a 5
percent preference to state and local businesses. He said the
Davis-Bacon regulation would also be in effect.
Number 542
REPRESENTATIVE LONG said he objected to the proposed amendment. He
said it should be under the discretion of the city of Palmer as
they are investing money into the project.
Number 562
REPRESENTATIVE BRICE said the state of Alaska is being asked to
authorize HB 352 which means that the state is ultimately
responsible for this project. He said there are already
stipulations in HB 352 from the state to the city of Palmer.
Number 616
REPRESENTATIVE JAMES objected to the amendment. She then stated
concerns over the purchasing of buildings due to the bad track
record in Alaska of the state maintaining public facilities. She
said leasing a building provides for building maintenance.
Number 660
CHAIRMAN GARY DAVIS said he agreed with both Representative Long
and Representative James in that it is important to give the city
of Palmer flexibility in their procedures to construct this
facility. He supported a lease-purchase agreement and felt the
proposed amendment would restrict that opportunity.
Number 696
REPRESENTATIVE OGAN mentioned the 5 percent bidder option in Palmer
which gives the edge to the local and state contractors. He added
that the cost of maintenance is figured into the 20 year lease-
purchase option for those 20 years.
Number 747
CHAIRMAN GARY DAVIS said he shared Representative James concern
over the lack of maintenance and expressed hope that within 20
years this problem would be addressed.
Number 773
REPRESENTATIVE BRICE proposed the adoption of Amendment 1 to HB
352. Representative Brice voted yea. Representatives Davis,
Masek, Williams, James, and Long voted nay. The motion to adopt
Amendment 1 to HB 352 failed.
Number 825
REPRESENTATIVE MASEK made a motion to pass HB 352 out of committee
with zero fiscal note and individual recommendations. Hearing no
objections HB 352 was moved out of the House Standing Committee on
Transportation.
Number 862
ADJOURNMENT
As there was no further business to come before the House
Transportation Standing Committee, Chairman Gary Davis adjourned
the meeting at 2:48 p.m.
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