Legislature(1999 - 2000)
01/27/2000 01:05 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 27, 2000
1:05 p.m.
MEMBERS PRESENT
Representative Andrew Halcro, Chairman
Representative Beverly Masek
Representative Bill Hudson
Representative Allen Kemplen
Representative Albert Kookesh
Representative Vic Kohring
MEMBERS ABSENT
Representative John Cowdery
COMMITTEE CALENDAR
HOUSE BILL NO. 243
"An Act relating to taxes on motor fuel used in or on boats and
watercraft; and providing for an effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 243
SHORT TITLE: MARINE FUEL TAX FOR HARBOR MAINTENANCE
Jrn-Date Jrn-Page Action
5/15/99 1445 (H) READ THE FIRST TIME - REFERRAL(S)
5/15/99 1445 (H) TRA, FIN
1/27/00 (H) TRA AT 1:00 PM CAPITOL 17
WITNESS REGISTER
JEROME GEORGE, Member
Board of Directors
Seward Boat Owners Association, Inc.
PO Box 2411
Seward, Alaska 99664
POSITION STATEMENT: Testified on HB 243.
SCOTT JANKE, City Manager
City of Seward
PO Box 167
Seward, Alaska 99664
POSITION STATEMENT: Testified on HB 243.
JAMES COLLMAN, President
Seward Boat Owners Association, Inc.
PO Box 2411
Seward, Alaska 99664
POSITION STATEMENT: Testified on HB 243.
BRETT FRIED, Economist
Income & Excise Audit Division
Department of Revenue
PO Box 110420
Juneau, Alaska 99811-0420
POSITION STATEMENT: Testified on HB 243.
HAROLD MOESER, State Harbor Engineer
Division of Statewide Design and Engineering Services
Headquarters
Department of Transportation & Public Facilities
3132 Channel Drive
Juneau, Alaska 99801-7898
POSITION STATEMENT: Testified on HB 243.
BRAD PIERCE, Senior Policy Analyst
Office of Management & Budget
Office of the Governor
PO Box 110020
Juneau, Alaska 99811-0020
POSITION STATEMENT: Testified on HB 243.
ACTION NARRATIVE
TAPE 00-5, SIDE A
Number 0001
CHAIRMAN ANDREW HALCRO called the House Transportation Standing
Committee meeting to order at 1:05 p.m. Members present at the
call to order were Representatives Halcro, Masek, Hudson, Kemplen
and Kohring. Representative Kookesh arrived as the meeting was in
progress.
HB 243 - MARINE FUEL TAX FOR HARBOR MAINTENANCE
Number 0040
CHAIRMAN HALCRO announced the first and only order of business as
House Bill 243, "An Act relating to taxes on motor fuel used in or
on boats and watercraft; and providing for an effective date."
CHAIRMAN HALCRO explained that the intent of the bill is to allow
local municipalities, who have assumed responsibility for the care
and maintenance of their harbor, to keep a portion of the existing
marine fuel tax. The intent is not to raise the tax; it is simply
to designate 3 cents out of the 5 cents back to municipalities in
exchange for assuming responsibility of the maintenance and
operation of their harbor.
Number 0125
JEROME GEORGE, Member, Board of Directors, Seward Boat Owners
Association, Inc., testified via teleconference from Anchorage. He
noted that the association supports the bill. They have three
areas of concern, which are as follows:
1) They want to be sure that the money goes back into
the harbor rather than into the local community.
Although that concern is addressed in the intent
language, he has seen the Governor veto intent language.
2) They want to be sure that the communities who have
built their own harbors - not just the communities who
have taken over their harbor from the state - are also
eligible.
3) They want to be sure that the level of funding going
back to the communities is maintained.
MR. GEORGE further stated that the levy to the municipalities
should be 4 out of 5 cents instead of 3 out of 5 cents. He noted
that over the last 13 years 83 percent of the marine fuel tax has
been appropriated by the legislature back into capital improvements
for harbors. The bill would decrease that number to 60 percent.
They are also concerned as to why the state needs to retain 40
percent of those funds for administrative costs, when in the past
it has been able to administer the program at 17 percent.
MR. GEORGE further stated that five years ago the Department of
Transportation & Public Facilities conducted a survey which
indicated that - statewide - people genuinely support a tax rebate
going back to the communities. The survey also indicated a high
level of confidence in raising the tax, if necessary, to dedicate
funds back to the harbors. He encouraged the members to pass the
bill out of the committee.
Number 0467
REPRESENTATIVE BEVERLY MASEK asked Mr. George, How many people are
in the Seward Boat Owners Association?
MR. GEORGE replied there are nearly 200 members. He noted that he
has also talked with other associations concerning the bill. [He
did not indicate which associations.]
REPRESENTATIVE MASEK asked Mr. George whether he knows how many
communities have built their own boat harbor.
MR. GEORGE replied that he doesn't know.
Number 0532
CHAIRMAN HALCRO pointed out to Mr. George that a proposed amendment
would require a community to pass a local ordinance dedicating the
revenues to the harbor. That should take care of one of his
concerns.
MR. GEORGE replied, "Thank you very much."
Number 0605
SCOTT JANKE, City Manager, City of Seward, came before the
committee to testify. He supports requiring local governments to
pass ordinances dedicating funds back to their harbor so that a
future council cannot undo that dedication. The City of Seward
supports HB 243 and is looking at it from a municipal and statewide
direction in terms of responsibility. Municipalities are willing
to take over their harbor because they are more accountable to
their users on a daily basis, and they think that they can do a
better job at managing the harbors in the long run. The harbors
around the state are economic engines that drive huge economies,
and unless they are maintained, they might not work as well in the
future. He cited commercial fishing, charter fishing, tour
operators and recreational users all have different needs that
change over time. Recently, he noted that the Army Corps of
Engineers conducted around 14 feasibility studies on harbor
projects across the state. The studies concluded that an
investment of $190 million returned $5.7 billion over a 30-year
life span - a conservative estimate for a life span of a harbor.
MR. JANKE referred to the fiscal note submitted and pointed out
that the assumptions made by the Department of Revenue are unlikely
to happen in the near future. He specifically referred to the
assumption that "all" communities would take advantage of the
program set out in the bill. He lastly stated that he would like
to see the bill move forward to the House Finance Committee, in the
interest of time, where some of the financial issues can be
addressed.
Number 0870
REPRESENTATIVE ALLEN KEMPLEN asked Mr. Janke, What is the current
cost to operate the harbor in Seward?
MR. JANKE replied in the $3-million range. He did not have his
budget with him.
REPRESENTATIVE KEMPLEN asked Mr. Janke, What does the City of
Seward typically spend on an annual basis for maintenance projects?
MR. JANKE replied the city's entire operating budget goes to
maintenance; it does not have a capital improvement budget. He
explained that the harbor is run like an enterprise fund, which is
like a separate business. He noted that no local tax dollars are
put into the harbor, and unfortunately maintenance has been funded
at a minimum for a long time at the state level.
REPRESENTATIVE KEMPLEN asked Mr. Janke, What are the personnel
costs?
MR. JANKE replied about half of the budget.
REPRESENTATIVE KEMPLEN asked Mr. Janke, What is the anticipated
revenue as the result of this bill?
MR. JANKE replied, as the bill is currently written, he anticipates
about $150,000 a year, which could be utilized for ongoing
maintenance projects or revenue bonds. The most important aspect,
however, is that the money goes back into the harbor. Mr. Janke
noted that the figure is based on the sale of marine fuel in the
harbor at 3 cents per gallon.
Number 0985
REPRESENTATIVE MASEK asked Mr. Janke whether users pay a fee to
utilize the harbor.
MR. JANKE replied users pay slip, moorage and wharfage fees. A
transient user pays fees based on the size of his/her vessel. He
reiterated that no tax dollars are put into the harbor; it is based
on user fees. Similarly, a marine fuel tax is a user fee and so
the users should be the beneficiary of the fee.
Number 1027
REPRESENTATIVE MASEK asked Mr. Janke whether he has seen an
increase of usage in the past few years.
MR. JANKE replied the boat harbor in Seward is extremely busy. He
cited that there are over 600 boat slips and a waiting list of
another 600, which people pay to be on annually. Furthermore, the
majority of the people who utilize the boat harbor in Seward live
in Anchorage, the Mat-Su Valley or Fairbanks. This is not a
coastal issue anymore.
Number 1076
REPRESENTATIVE MASEK asked Mr. Janke whether a boat slip allows a
person to park and return to that same slip.
MR. JANKE replied in the affirmative. He further noted that there
are transient users who use available space for a span of time and
are charged based on the size of their boat.
Number 1113
REPRESENTATIVE KEMPLEN asked Mr. Janke whether there could be a
reduction in slip fees with the anticipated revenues.
MR. JANKE replied the way the bill is currently written that is
possible. It's more important, however, that the money be used for
maintenance. Right now, he explained that slip fees in the state
are relatively low, and they don't cover all of the costs. He
reiterated the reason behind the bill is for the revenues to go
towards maintenance and improvements in order to deal with the
changing needs of the users.
Number 1156
REPRESENTATIVE KEMPLEN asked Mr. Janke whether it's possible, as
the bill is currently written, for a community to use the revenues
to reduce slip fees rather than for operation and maintenance.
MR. JANKE replied the way the bill is currently written, yes.
Number 1187
CHAIRMAN HALCRO asked Mr. Janke whether an equal amount of money
that comes to the state from the tax goes back to the community or
harbor for improvements.
MR. JANKE replied, "No." The entire 5 cents per gallon of the
marine fuel tax goes to the state's general fund. The state does
not have a formula for sending that money back to the communities
or harbors. As a result, it may be a number of years before a
community receives any money from the state as the receipts go
towards another harbor or to build a road, for example. The
purpose of the bill, he reiterated, is to have a known and
continued funding source for the care and maintenance of the
harbors. He noted that the state receives around $6.3 million to
$6.5 million per year and generally puts back less than that into
harbors. On occasion, the state will sell a bond for a big public
project, which skews the numbers, but communities cannot rely on
the state.
Number 1290
CHAIRMAN HALCRO replied then, basically, what a community pays in
is not necessarily what it gets back.
MR. JANKE replied revenues generated from the tax go back to the
department for statewide use; they do not go back to the harbors
where they were collected.
CHAIRMAN HALCRO asked Mr. Janke whether the revenues could be used
to expand the harbor in Seward, since there is a waiting list to
get a slip.
MR. JANKE replied the way the bill is currently written the funds
could be used for any purpose in a harbor, which could include
capital projects and revenue bonds.
Number 1337
CHAIRMAN HALCRO asked Mr. Janke whether he, as a city manger, has
a say in where the money from the Department of Transportation &
Public Facilities goes or how it is used.
MR. JANKE replied, normally, a project is offered by a community
that ultimately ends up on a list at the Department of
Transportation & Public Facilities.
Number 1369
REPRESENTATIVE MASEK asked Mr. Janke, What is the safety record
within the harbor and how does it affect the overall operation of
the harbor?
MR. JANKE replied the boat harbor in Seward was designed for around
600 boat slips and transient space. He noted that during the
summer - at any one period of time - there are more than 900 boats
in the harbor, which results in wear and tear and costs maintenance
dollars. Yes, with that much traffic there are safety concerns,
but the harbor has a good safety record.
Number 1427
REPRESENTATIVE MASEK asked Mr. Janke whether he has any additional
amendments to help fix the bill.
MR. JANKE replied, based on the analysis made by the Department of
Revenue, it appears that the bill needs more tweaking to make it
work properly. He would like to see a requirement for a
municipality to adopt a local ordinance dedicating the funds back
to the harbor, thereby protecting the interest of the user groups
in the future. Similarly, if a future city council undedicated the
funds via an ordinance, then that municipality would no longer
qualify for the funds. He would also like to see the harbors, that
were built by municipalities, qualify for these funds as well, not
just the harbors transferred by the state.
Number 1520
REPRESENTATIVE MASEK stated, according to the state's track record
in relation to deferred maintenance, this type of bill is a
positive measure. She would like to see the amendments adopted and
the bill moved forward as quickly as possible.
Number 1585
REPRESENTATIVE BILL HUDSON stated the bill seems to return the tax
back to its original purpose. He further stated that 3 cents out
of 5 cents is an easy buy off for the state because it would
continue to accrue costs associated with harbors such as, the
approach ways and parking lots. Representative Hudson asked Mr.
Janke whether he sees the funds being used to expand or improve
parking in Seward.
MR. JANKE replied the boat harbor in Seward owns everything below
high water. He explained that the parking lots are owned by a
parking lot enterprise fund, which is maintained by parking fees.
Yes, they are integrated uses, but revenues from the marine fuel
tax could not be used for that.
Number 1710
CHAIRMAN HALCRO asked Mr. Janke, assuming that the bill passes, why
shouldn't the City of Seward get 100 percent of the revenues?
MR. JANKE replied he would take 100 percent, but he is astute
enough to realize that would not be fair to communities who don't
sell or sell enough fuel. He's trying to be a responsible city
manager and in realizing that the state has fiscal constraints as
well.
Number 1766
REPRESENTATIVE KEMPLEN wondered whether there is a reason for a
lack of support statements in the bill packet from a number of
communities such as, Ketchikan, Sitka, Kodiak, Valdez and Unalaska.
MR. JANKE replied, he thinks, the reason is because it's early and
the language in the bill isn't finalized. He noted that there is
support from the Alaska Municipal Managers' Association, the Alaska
Harbormasters' Association, and the Alaska Municipal League.
REPRESENTATIVE KEMPLEN asked Mr. Janke whether they can provide
letters of support.
MR. JANKE replied he believes so.
Number 1827
REPRESENTATIVE ALBERT KOOKESH asked Mr. Janke whether the state
expended money to upgrade the harbor in Seward to the point that
the city would accept it.
MR. JANKE replied, yes, the state gave the City of Seward a grant
for $3 million to take care of deferred maintenance as part of the
transfer. The deferred maintenance costs, however, were closer to
$5 million. The same is true for the cities of Kodiak and Homer.
He explained that this year there is a bill pending with a list of
nine harbors that would do something similar.
Number 1894
REPRESENTATIVE KOOKESH said:
The purpose of doing that and it's a purpose of the
states to say to the municipalities, 'Here's a boat
harbor. Here's how much. Here's some more money to bring
it up to where -- where we think it's a reasonable amount
because the state wanted to get out of having to spend
money to take care of that every year.' So, if you come
back to me and maybe I'm just reading it wrong and say,
'But we want 100 or 80 percent of the money back that
this generates.' I mean someplace along the line some --
you'd make a great politician. I mean -- I -- I the way
you reported it back to me that, 'Yeah, we got money, but
we got money and we bought the -- the -- bought the float
with the state -- the money that the state gave us.' So,
I'm a little bit confused about how that process is.
MR. JANKE replied the City of Seward has asked for 60 percent of
the revenues from the marine fuel tax, not 80 or 100 percent. The
City of Seward doesn't want to see the condition of the harbors
deteriorate as they did under state ownership. Sure, if the
communities don't get the revenues from this tax, then the larger
maintenance projects will not get funded and in ten years he will
be back asking the state for money, which is what he is hoping to
avoid.
Number 1966
REPRESENTATIVE KOOKESH replied the state is hoping to avoid that as
well. People agree that this is a good bill, but it's important to
understand the purpose behind it. It's also important to
understand that the amount of money to be transferred has to be
reasonable; the state is ultimately responsible for the stewardship
of its money.
MR. JANKE noted the reason that 2 cents would go to the state is
because the state needs to take care of the harbors that don't sell
enough fuel or aren't large enough to create an economy.
Number 2006
CHAIRMAN HALCRO asked Mr. Janke whether the slip fees and user fees
were going to the City of Seward before assuming ownership.
MR. JANKE replied the slip fees were [and still are going] to the
harbor enterprise fund. He explained that most communities build
enterprise funds to handle their harbor, sewer and water
[facilities].
CHAIRMAN HALCRO asked Mr. Janke whether the marine fuel tax was the
only revenue the state received from the harbors prior to assuming
ownership. In other words: Did the state use slip fees for
capital projects?
MR. JANKE replied, "No." He explained, prior to assuming
ownership, the state owned the harbor in Seward but the city
operated it. The state did not receive any revenue from the
operation other than what was generated from the tax.
Number 2080
CHAIRMAN HALCRO stated he had some concerns about the bill when he
first read it, but upon further analysis, he now wonders why the
state should continue to collect a tax from a harbor that it is no
longer responsible for.
Number 2107
REPRESENTATIVE KEMPLEN asked Mr. Janke whether a municipality could
use the revenues for landside improvements.
MR. JANKE replied it depends on how the term "harbor" is defined at
the local level. He explained that the City of Seward defines its
harbor as everything within the breakwater; uplands are not
considered part of the harbor.
REPRESENTATIVE KEMPLEN stated it seems that a community could take
the revenues and pay for improvements in tourism and fish
processing facilities next to the water.
MR. JANKE replied the language may need to be tightened in that
regard. He agrees that is a possibility. But those types of
facilities have never been defined as part of a harbor in the areas
that he is familiar with.
Number 2183
CHAIRMAN HALCRO stated, if a city decides one year to shift the
money from repairing the docks to building a hotdog stand within
its harbor and a dock falls into the water, then that city doesn't
have anybody to go to but itself.
MR. JANKE agreed in the affirmative, and stated that is why he
initially discussed the issue of accountability. There is tighter
control by the users at the local level creating a relationship
that demands accountability.
Number 2222
REPRESENTATIVE HUDSON asked Mr. Janke whether the state continues
to own the harbor and its facilities in Seward.
MR. JANKE replied, "No." He personally negotiated a transfer of
the title over to the city in consideration of the $3 million for
deferred maintenance.
REPRESENTATIVE HUDSON stated the 3 cents out of the 5 cents is
really to provide funds to the cities that the state has been
providing over the years through grants and appropriations. It
truly is a transfer of both the responsibility of ownership and the
source of funding, which goes back to the original intent of the
marine fuel tax.
Number 2270
REPRESENTATIVE MASEK asked Mr. Janke when the Department of
Transportation & Public Facilities started initiating the transfer
program.
MR. JANKE replied the first harbors were transferred last year. He
explained that the funding was appropriated in 1998 and the closing
took place in February of 1999 for Seward.
REPRESENTATIVE MASEK asked Mr. Janke whether he has been working
with the Department of Transportation & Public Facilities on the
structure of the bill.
MR. JANKE replied he has met with the commissioner on numerous
occasions. He feels that he is "walking in" with a sense of
responsibility to his own user groups and to the state as a whole.
Number 2325
REPRESENTATIVE VIC KOHRING said he likes the direction of the bill
in that the users are the beneficiaries of the tax. However, there
is a wide spectrum of people who own and operate watercraft that
might not benefit from this. He asked Mr. Janke, What is the
feasibility of eliminating the tax and going directly to a user-fee
arrangement?
MR. JANKE replied he can't answer that question with any
accurateness. It is possible, but it sounds like it would be
difficult given that the state already has a marine fuel tax
program in place.
Number 2388
CHAIRMAN HALCRO said, to Representative Kohring, the marine fuel
tax basically is a user-fee tax. In other words, those who are
fueling their boats are using the harbors and the facilities. The
bill would not increase the tax; it would simply redirect a
percentage of it back to communities who have taken ownership of
their harbor.
MR. JANKE pointed out that, oftentimes, boaters out of Seward may
sail someplace else and utilize a small harbor that doesn't have a
tax. In that way, those users are also benefiting from the 2 cents
that would go to the state.
CHAIRMAN HALCRO pointed out the transient vessels that refuel and
use the facilities in Seward, for example, are contributing as
well.
Number 2448
JAMES COLLMAN, President, Seward Boat Owners Association, Inc.,
testified via teleconference. He called the $3 million provided to
Seward for deferred maintenance a Band-Aid. As a result, he
explained, the city decided to upgrade half of the harbor; the
other half still needs to be looked after. He also stated that
environmental laws continually change and need to be attended to
which takes money. The association has a good working relationship
with the city, and the city has a good program for looking into the
future for these types of things.
TAPE 00-5, SIDE B
Number 0001
MR. COLLMAN continued. A user fee in lieu of the marine fuel tax
would cost the city more money by having to change to a new system.
He further stated that there is a need to upgrade the fish cleaning
facilities as part of the environmental concern he mentioned
earlier. He then stated that the association includes members who
operate commercial, charter and pleasure vessels that travel from
one end of the state to the other; they need the upgrades and
support that comes with the use of transient facilities.
Number 0074
CHAIRMAN HALCRO called on Mr. Brett Fried with the Department of
Revenue and asked him to discuss ways to make the bill work. The
fiscal note from the department indicates that the bill is
administratively unworkable.
BRETT FRIED, Economist, Income & Excise Audit Division, Department
of Revenue, came before the committee to answer Chairman Halcro's
question. He said, unfortunately, the auditor for the motor fuel
tax program is not available today; he is not prepared to answer
that question.
CHAIRMAN HALCRO asked Mr. Fried whether there are forms of taxes
where municipalities keep the rebates and forward the difference to
the state.
MR. FRIED replied, in terms of a shared tax, there is the fisheries
business tax and the fisheries landing tax.
CHAIRMAN HALCRO asked Mr. Fried whether those taxes are collected
by the local governments then forwarded to the Department of
Revenue.
MR. FRIED replied, "Yes."
CHAIRMAN HALCRO asked Mr. Fried how the marine fuel tax is
collected. Is it collected by retailers who then submit a form to
the state?
MR. FRIED replied the marine fuel tax is collected at the wholesale
level, which is the main reason why the department has a problem
with how the tax is structured in the bill. As the bill is
currently written, the tax would be collected at the retail level
creating different points of taxation.
CHAIRMAN HALCRO asked Mr. Fried whether moving the collection from
the retail to the wholesale level would address the concerns of the
department.
MR. FRIED replied it would be better for somebody with technical
knowledge to answer that question.
MR. JANKE stated the intent of the bill is for the wholesaler to
collect 5 cents from the user, of which, 3 cents would be sent to
the cities and 2 cents would be sent to the state. He doesn't see
how that would create legislative problems. The state would keep
the 2 cents and it wouldn't have to refund anything to the cities.
It's not duplicating any tax; it's just distributing it
differently.
MR. FRIED stated that might work well for the City of Seward, but
in other places wholesalers sell to retailers who then distribute
to different outlets; the state does not track it to the endpoints.
Number 0232
REPRESENTATIVE HUDSON stated the only way to resolve the issue is
to have the state collect it entirely then redistribute it back.
MR. FRIED replied that is the way the state handles the fisheries
taxes now.
REPRESENTATIVE HUDSON asked whether the communities collect and
keep their own fish landing tax.
MR. JANKE replied the state collects it then redistributes it back.
He also noted that the Bristol Bay Borough collects a 3 percent
fish landing tax as well that matches the state's.
MR. JANKE further stated that he is concerned about the state
collecting a check because of the constitutional issue of
dedicating funds. The reason the bill is written as such is
because cities are able to dedicate funds, and they want the user
groups to be assured that the money will go back into the harbor.
He suggested, as a possible solution, to change the language so
that the retailer sends 3 cents to the city and 2 cents to the
state.
Number 0309
CHAIRMAN HALCRO asked Mr. Janke whether the retailer or wholesaler
or whoever collects the tax submits a quarterly form to the state
with a remittance.
MR. FRIED replied it's a monthly report.
CHAIRMAN HALCRO asked Mr. Fried, Why couldn't that same retailer or
wholesaler complete a form for the city and for the state and remit
accordingly? The state gives rebates to off-road users for the
motor fuel tax; the paperwork and procedures are already in place.
REPRESENTATIVE HUDSON said he's not sure they would know where to
send a check. For example, people might be fueling their boats in
Anchorage and boating in Prince William Sound. He said:
I understand where the communities are concerned with and
that is that we -- we say we're going to share money back
to them. We did that in the beginning and the reason
they're coming to us now and saying, is there a way to
give it to us direct without going to the general fund
then we can avoid the dedicated problem that the state
has at the present time. But if the state collects it
and puts it into the treasury then it's -- they've got to
trust us. And that's what they're having trouble with.
Number 0394
CHAIRMAN HALCRO indicated that this is becoming more complicated
than it should be. If a wholesaler in Anchorage sells fuel to a
retailer within the harbor limits of Seward, then whoever is
collecting the tax has to realize that they are liable. Similarly,
companies do business with cities that have sales taxes and cities
that don't have sales taxes; the funds go to the main office and
are handled accordingly.
MR. JANKE noted that when a boater pulls up to a fuel dock in
Seward the receipt indicates how much was paid in taxes; the
records are being kept. He suggested working with the Department
of Revenue to find a way to make this work while still maintaining
the intent of the bill.
Number 0440
CHAIRMAN HALCRO stated the city, that assumes responsibility of its
harbor, would be responsible for collecting and auditing the taxes
due, which would create an additional responsibility for the local
community. He said, "If you're willing to accept that, then I
think we should be willing to give it to you."
MR. FRIED suggested sitting down and discussing the issue further
with the experts from the Department of Revenue. He further stated
that a dealer doesn't necessarily track the fuel to the end. For
example, a dealer could sell or transfer to a retailer who sells
fuel all over the state to areas that don't have tax jurisdictions,
and that dealer would be required to track the fuel. It would be
a large burden and he's not sure that it would work.
Number 0507
CHAIRMAN HALCRO commented he doesn't see the marine fuel tax as any
different than any other tax that employers or retailers have to
submit to the state, other than it requires additional bookkeeping.
If a wholesaler in Anchorage wants to sell marine fuel to a
retailer in Seward, then that wholesaler has to understand
additional paperwork is involved. This is definitely a workable
issue, and it's definitely in the state's best interest for a
community to assume responsibility of its harbor.
CHAIRMAN HALCRO further stated that he likes the bill and wants to
see it move forward as soon as possible. In the meantime, he will
work on a committee substitute that reflects the responsibility of
communities to adopt local ordinances designating the funds to
their harbor.
Number 0607
REPRESENTATIVE KEMPLEN asked Mr. Fried whether it's correct to say
that the state currently collects approximately $6 million in
revenues from the marine fuel tax.
MR. FRIED replied, "Yes." The state collected $6.6 million in FY
[fiscal year] 99.
REPRESENTATIVE KEMPLEN asked Mr. Fried whether it varies by
location.
MR. FRIED replied the tax is levied at the wholesale level; it is
not tracked by location.
REPRESENTATIVE KEMPLEN asked Mr. Fried what type of impact would
this bill have on places that sell a lot of marine fuel? He cited
Dutch Harbor as an example. He further asked, How much of the $6.6
million comes from Dutch Harbor? a half? a third? Would the monies
pay the entire cost of operation and maintenance for the harbor, if
the city was to take it over?
MR. FRIED replied he doesn't know. He reiterated the state levies
the marine fuel tax at the wholesale level.
Number 0690
HAROLD MOESER, State Harbor Engineer, Division of Statewide Design
and Engineering Services, Headquarters, Department of
Transportation & Public Facilities, came before the committee to
answer questions. He agrees with Mr. Fried in that the state
really doesn't know what the impact would be on Dutch Harbor. He
believes that they would take a considerable "piece of the puzzle,"
depending on how the term "harbor" is defined. Dutch Harbor, he
explained, has a very small harbor but it has a very large port.
He can't put an exact figure on the impact, but he noted that a big
piece of the $6 million comes from Seward and the communities west
of Seward.
CHAIRMAN HALCRO asked Mr. Moeser how the Department of
Transportation & Public Facilities decides to spend the marine fuel
tax receipts every year, since there is some confusion as to what
defines a harbor.
MR. MOESER replied the original intent of the marine fuel tax was
to support water and harbor facilities, which traditionally
includes small boat harbors, flood control, and erosion. He cited
there are about 98 public harbors in the state, and included in
that number are docks. For example, the state owns the dock in
Bethel. The department recognizes that the definition needs
fine-tuning, but it doesn't want to exclude those harbors that it
specifically wants to transfer.
MR. JANKE explained that he had an amendment at one point to
include the term "port," as well as harbor.
Number 0816
REPRESENTATIVE KEMPLEN asked whether it's possible to get
additional information relating to the costs and revenues
associated with this bill. He feels that there is a lot of
ambiguity in terms of its real impact on the various ports and
harbors around the state. There seems to be a lot of variety, and
what may be appropriate for Seward may have significant
implications for Southwest Alaska.
Number 0851
REPRESENTATIVE HUDSON said:
Do we do separate accounting, or could we do separate
accounting on the 3 [cents] and 5 [cents]? So that if we
were unable to because of the constitutional bar not
dedicate the funds to this purpose we have in the past
indicated by intent to essentially by establishing
separate accounting that the funds be continued to be
collected as they are at the present time, but that 3 out
of the 5 cents with some sort of a definition of a
separate fund, a ports and harbors redistribution fund or
something like that. I wonder if that would be an
avenue. I'm hearing some real difficulty in trying to
figure out how you correlate where the fuel is sold or
transferred and the tax collected and the legitimate
end-recipients in, you know, by the communities. I think
in Seward's case, for the most part, the people would buy
their fuel there because it's kind of like a separate
port. But in areas to where there's several,
particularly here in Southeast, it may be harder to
separate them. I'm -- I'm still in favor of this and I'd
like to see them work this out Mr. Chairman and us move
this timely out of here just as a concept if nothing
else.
Number 0929
BRAD PIERCE, Senior Policy Analyst, Office of Management & Budget
[OMB], Office of the Governor, came before the committee to
testify. He stated that the Governor agrees with many of the
provisions embodied in the bill, especially as they relate to the
upgrade and transfer of the harbors. However, there is concern
because this would reduce general fund revenues up to around $3.8
million, thereby adding to the fiscal gap. In addition, OMB feels
that this would result in an inequitable distribution of the
revenues unrelated to the amount of money that the state has
already invested in the harbors. As indicated by Mr. Moeser's
testimony, there are only a few good gas stations in Western
Alaska, and they sell most of the fuel; a place like Dutch Harbor
would get a huge amount of money.
MR. PIERCE further stated in 1996 the Governor vetoed a motor fuel
tax increase because he felt that the distribution was fatally
flawed. Mr. Pierce further stated that there has been a suggestion
to increase the motor fuel tax by 5 cents per gallon and to share
that increase with municipalities, which could be used to upgrade
all the transferable facilities in the form of a revenue bond
program. He commented that the suggestion is just an idea; he is
not laying that on the table.
Number 1104
CHAIRMAN HALCRO replied he views the marine fuel tax as a user tax,
and if the state doesn't have to maintain a harbor then it
shouldn't have the same corresponding liability to the general
fund. Furthermore, he thinks that the collection of the taxes is
workable even though it may require an additional accounting step.
Furthermore, if a boat owner in Seward or Kodiak is paying a fuel
tax, then those funds should rightfully go back into that facility;
2 cents would still go to the state to be distributed to the
smaller harbors that don't have a revenue source. Furthermore, it
seems like there already is an inequitable distribution because the
communities who are paying-in aren't necessarily getting a
commensurate return on their investment. He called it a win-win
situation in that the state gets out of the business of being
responsible and that the local communities get ownership and assume
liability. As a result, they should be entitled to the revenue
flow. He would like to see OMB and the Department of Revenue sit
down with the local municipalities and come up with a way to make
this work.
CHAIRMAN HALCRO asked Mr. Moeser whether the state wants to get out
of the harbor business in those 17 communities who are on a list
for transfer.
MR. MOESER replied, "Yes." In a perfect world, all organized
communities who have a harbor would assume responsibility; the
harbors belong at the local level. The question is, What is the
state's role after transfer? He doesn't have the answer, but there
still is the issue of the core matching program, which is where
most of the revenues have gone to for the past five to six years.
However, this is not the "carrot" that will bring them to the
table; it's bringing the deferred maintenance up to standard that
will bring them to the table.
MR. PIERCE interjected and stated that the issue is how to
financially bring harbors up to standard in the current fiscal
situation. He further stated the distribution formula that OMB has
discussed is based on the replacement value of the harbors. In
other words, the state would distribute a harbor back based on a
pro rata share of its total replacement value.
CHAIRMAN HALCRO asked Mr. Moeser, How many communities, of the 17
harbors identified, have expressed interest in ownership?
MR. MOESER replied, "Nine." He noted that $35 million is reflected
in HB 282 to deal with the deferred maintenance.
Number 1399
REPRESENTATIVE HUDSON asked Mr. Moeser, What is the approximate
deferred maintenance value to bring all 17 harbors up to speed?
MR. MOESER replied about $44 million, and another million for the
outlying, unorganized areas that are truly used by transients
around the state. The reality is, the state will always have
responsibility for the harbors in the unorganized areas, and there
are a good number of harbors in the second class cities that the
state will always have responsibility for because they are
considered quasi-transient.
Number 1508
CHAIRMAN HALCRO stated he doesn't believe that communities like
Seward or Kodiak, who want to take over the responsibility for
operation and maintenance of their harbor, should be punished by
not benefitting from the tax. The state shouldn't just cut them
off; the state needs to give them something back in order to help
keep their harbor up-to-date.
MR. MOESER replied taxes are never fair. He noted that the
original program was spread across the state because there wasn't
any fuel sold in Dutch Harbor in the early 1960s; it was all sold
in Southeast Alaska and Prince William Sound.
CHAIRMAN HALCRO stated taxes are fair when they go back into what
they are being paid for. This bill gets the state one step closer
to a perfect world - local control and local dispersement of taxes
collected locally.
Number 1618
REPRESENTATIVE MASEK asked Chairman Halcro whether he is going to
put a committee substitute together.
CHAIRMAN HALCRO replied he is going to incorporate the amendments
touched on today, especially the concerns relating to collection
and inequitable distribution.
REPRESENTATIVE MASEK further stated she is appalled that the person
from the Administration who is knowledgeable on this issue is not
here today. The meeting was posted and noted in the House Journal.
She hopes that person will be here on Tuesday [February 01, 2000].
Number 1710
REPRESENTATIVE KOOKESH expressed his appreciation to the state
employees who are here today. He knows it is a thankless job at
times.
CHAIRMAN HALCRO expressed his appreciation to the state employees
and their willingness to craft something that can move forward to
the House Finance Committee where the financial issues can be
discussed.
Number 1770
REPRESENTATIVE KEMPLEN suggested that some attention be given to
the definition of the term "harbor" as the committee substitute is
being considered. He also suggested coming up with language so
that the generated revenues go toward operation and maintenance
rather than reducing user fees, which speaks to the issues of
inequitable distribution and urban-rural divide. Otherwise, the
smaller ports and harbors will be "starved" for monies.
Number 1881
REPRESENTATIVE KOOKESH stated it is important to keep in mind that
these facilities are very valuable pieces of property; they are not
gifts.
CHAIRMAN HALCRO suggested, in response to Representative Kemplen's
comments, a sliding scale concept so that the smaller ports and
harbors aren't starved for monies.
REPRESENTATIVE KEMPLEN replied, "That sounds appropriate."
[HB 243 WAS HELD OVER FOR FURTHER CONSIDERATION]
Number 2001
ADJOURNMENT
There being no further business before the committee, Chairman
Halcro adjourned the House Transportation Standing Committee
meeting at 2:35 p.m.
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