05/03/2001 01:12 PM House TRA
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ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
May 3, 2001
1:12 p.m.
MEMBERS PRESENT
Representative Vic Kohring, Chair
Representative Beverly Masek, Vice Chair
Representative Drew Scalzi
Representative Peggy Wilson
Representative Mary Kapsner
MEMBERS ABSENT
Representative Scott Ogan
Representative Albert Kookesh
COMMITTEE CALENDAR
HOUSE BILL NO. 64
"An Act relating to international airports revenue bonds; and
providing for an effective date."
- MOVED CSHB 64(TRA) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 64
SHORT TITLE:INTERNATIONAL AIRPORTS REVENUE BONDS
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
01/16/01 0097 (H) READ THE FIRST TIME -
REFERRALS
01/16/01 0097 (H) TRA, FIN
01/16/01 0098 (H) FN 1: (REV)
01/16/01 0098 (H) GOVERNOR'S TRANSMITTAL LETTER
05/03/01 (H) TRA AT 1:00 PM CAPITOL 17
05/03/01 (H) Moved Out of Committee
MINUTE(TRA)
05/04/01 1526 (H) TRA RPT CS(TRA) NT 4DP
05/04/01 1526 (H) DP: MASEK, WILSON, SCALZI,
KOHRING
05/04/01 1526 (H) FN2: (REV)
05/04/01 1526 (H) REFERRED TO FINANCE
WITNESS REGISTER
KURT PARKAN, Deputy Commissioner
Office of the Commissioner
Department of Transportation & Public Facilities
3132 Channel Drive
Juneau, Alaska 99801
POSITION STATEMENT: Explained HB 64.
KIP KNUDSON
810 O Place
ANCHORAGE, Alaska 99501
POSITION STATEMENT: Testified in support of HB 64.
DAVID EBERLE, Regional Director
Central Region
Department of Transportation & Public Facilities
PO Box 196900
Anchorage, Alaska 99519
POSITION STATEMENT: Answered question on HB 64.
DEVEN MITCHELL, Debt Manager
Treasury Division
Department of Revenue
PO Box 110405
Juneau, Alaska 99811
POSITION STATEMENT: Answered questions on HB 64.
ACTION NARRATIVE
TAPE 01-34, SIDE A
Number 0001
CHAIR VIC KOHRING called the House Transportation Standing
Committee meeting to order at 1:12 p.m. Members present at the
call to order were Representatives Kohring, Scalzi, Wilson, and
Masek. Representative Kapsner joined the meeting as it was in
progress.
HB 64-INTERNATIONAL AIRPORTS REVENUE BONDS
[Contains discussion of SB 218]
CHAIR KOHRING announced that the committee would consider HOUSE
BILL NO. 64, "An Act relating to international airports revenue
bonds; and providing for an effective date."
Number 0111
REPRESENTATIVE MASEK made a motion to adopt the proposed
committee substitute (CS) for HB 64, version 22-GH1060\C, Cook,
5/2/01, as a work draft. There being no objection, Version C
was before the committee.
KURT PARKAN, Deputy Commissioner, Office of the Commissioner,
Department of Transportation & Public Facilities (DOT&PF), came
forth to explain HB 64. He stated that [HB 64] is an important
bill for the international airport system, and represents a time
when the state, the airport system, and the airlines worked
cooperatively. He explained that the international airport
system is composed of the Fairbanks and Anchorage airports. An
operating agreement is used with the carriers that fly into
those two airports. That operating agreement has been five
years in length and expired last July. He said the department
has been in "holdover" since then, by continuing the existing
operating agreement, and has been in negotiations with the
airlines for about a year and a half to come up with a new
operating agreement.
MR. PARKAN remarked that one of the benefits of the operating
agreement, which is a residual agreement, is that the airlines
are willing to pay the costs of operating, maintaining, and
building the airport system. In exchange, [the airlines] are
able to review and concur with approval projects that [DOT&PF]
brings forward. He added that it is unique in state government
in that those who are essentially paying the bills - the
airlines - have an opportunity to work with [the department] in
developing the capital improvement program and to give [DOT&PF]
the go-ahead to do those projects; [DOT&PF] then brings them
forward to the legislature for authorization. There is a
mechanism in the event that [the airlines] reject a project,
whereby [DOT&PF] can come back the following year and do the
project.
Number 0357
REPRESENTATIVE WILSON asked for clarification on what happens
when a project is rejected.
MR. PARKAN responded that if the airlines don't want [DOT&PF] to
do a project, [DOT&PF] comes back the next year, brings it
forward to [the airlines], and can then bring it to [the
legislature] for its ultimate decision-making.
MR. PARKAN continued, explaining that when [DOT&PF] started
negotiations this time, the airlines want to take a different
approach to how the capital program is funded. They want to use
a model that is used in almost every other major airport in the
country, which is bond financing of their CIP (capital
improvement project).
MR. PARKAN said the reasons are these: They want some certainty
regarding the costs for doing business at the airport system.
Every year there is a CIP, that could go up or down, and [the
airlines] don't really know what to expect in terms of their
rates and fees; therefore, they want something that goes beyond
one year. Furthermore, [the airlines] want [DOT&PF] to come
forward with more than just a year's package of projects. He
said [DOT&PF] agreed to the concept and worked out a five-year
CIP that essentially lasts the length of the operating
agreement.
Number 0589
MR. PARKAN informed members that HB 64 represents the first two
years of those projects. The intent would be to sell the bonds
this fall, and [DOT&PF] would use interim financing to deal with
the construction of some of those projects. He added that there
is a 20-year payback [which he later clarified is 25 years] with
the bonds through the international airport revenue fund.
Essentially, the airlines pay the debt.
REPRESENTATIVE SCALZI asked Mr. Parkan to explain more about the
increase [in the years of the operating agreement].
MR. PARKAN answered that the operating agreement has the five-
year CIP, but the projects themselves are an attachment to the
agreement. Therefore, [DOT&PF] has been locked into those
projects. He said [DOT&PF] feels the two-year bond package
would allow a reasonable amount of time.
REPRESENTATIVE KAPSNER asked Mr. Parkan to explain the
international airport fund and whether it is federal money or
taxes paid by consumers.
Number 0821
MR. PARKAN responded that the international airport revenue fund
is an enterprise fund and is not related to the general fund or
a federal fund. All the costs associated with doing business
and maintaining the airport system are borne by the users of the
system. Passengers contribute by paying the airline tickets.
They also pay passenger facility charges: $3 every time they
leave either Fairbanks or Anchorage and go outside Alaska. All
concessions such as rental-car companies and parking garages
contribute to the operations of the system.
MR. PARKAN noted that there are federal AIP (Airport Improvement
Program) funds through FAA (Federal Aviation Administration) for
construction. That money is based on [DOT&PF's] entitlements,
which are determined by the amount of cargo and number of
passengers. He noted that Anchorage Airport is the number one
cargo airport in the country in terms of landed weight.
CHAIR KOHRING asked whether that is what the governor referred
to in the third paragraph of his letter [provided in the
committee packets], when he wrote that federal capital grants
are a source of money to pay off the bonds.
MR. PARKAN answered in the affirmative.
REPRESENTATIVE WILSON asked Mr. Parkan to explain the added
language [on page 2 of the proposed CS, Version C].
MR. PARKAN responded that the language looks identical to the
language that the Senate Transportation Standing Committee added
to its version [SB 218]. It requires [DOT&PF] to provide
reporting on the projects.
Number 1008
REPRESENTATIVE MASEK asked why the funding is less in the
proposed CS, on page 1, line 8, than what the governor suggested
in his letter.
MR. PARKAN answered that the $5 million reduction in the
proposed CS was at [DOT&PF's] recommendation. There was $5
million that [DOT&PF] had identified as a project for relocation
costs. The airlines preferred that [DOT&PF] not bond funds, but
cash-fund them. He said [DOT&PF] has some residual money in its
account that will be rolled forward in credit to that project.
Number 1088
[There was a motion to move CSHB 64 from committee, but it was
withdrawn in order to take testimony.]
CHAIR KOHRING noted that the Senate has passed legislation and
that there are two major issues: one is the dollar amount
difference, and the other is the accountability issue.
Number 1153
KIP KNUDSON testified via teleconference and stated that the
bill is of great interest to all the airlines at Anchorage and
Fairbanks. He stated that it was a long process to achieve the
agreement between the airlines and the airport; he noted that he
had participated on the negotiating committee.
CHAIR KOHRING stated that it is good to hear from a private
sector company in support of the bill. He asked how the
proposed CS differs from the original bill in its
accountability.
MR. PARKAN responded that the additional language asks the
department to annually give a report to the legislature on its
anticipated needs for the next fiscal year and its expenses from
the previous year.
CHAIR KOHRING asked Mr. Parkan to address the problems with the
current reconstruction of the Anchorage airport. There were
some seismic concerns, which cost the state money.
MR. PARKAN deferred to David Eberle.
DAVID EBERLE, Regional Director, Central Region, Department of
Transportation & Public Facilities, testified via
teleconference. He answered that the project, called Phase One,
is the foundation in structural steel for the new concourse.
That contract was awarded a little over a year ago. At that
time [DOT&PF] was in the process of securing building permits
through the Municipality of Anchorage, and anticipated a 70-day
timeframe. Shortly after the award of the contract, the
municipality, in reviewing the design and the permit
application, discovered some design errors and brought those to
the attention of the designer. The designer then responded and
made appropriate changes. On that basis, he said, [DOT&PF]
procured the steel through the construction contract and began
some of the foundation work. Further into the review, the
municipality's reviewer requested more detail regarding some of
the design assumptions and wanted to see a full-fledged computer
model that simulates the behavior of the building and the
seismic condition.
Number 1438
MR. EBERLE continued, stating that the contractor became engaged
in a lengthy debate over the adequacy of that model. It took
over six months to resolve how the building would behave in a
seismic event. The result of not having permits, he said, was
that [DOT&PF] basically had its contractor in a holding pattern.
After lengthy discussions between the designer and the
municipality, it was agreed that the municipality as well as
[DOT&PF] would hire third-party engineering firms to take up the
reviews. Those two third-party firms made decisions on anything
that had controversy. He stated that they now have all the
foundation permits and should have all the permits for the new
concourse by the end of May or early June.
MR. EBERLE remarked that there are some changes to foundations
previously built that will have to be undertaken; however, those
are relatively minor in nature and will total less than $100,000
worth of work. The biggest impacts are having the contractor on
hold; changes to the foundations that have occurred as this
process went on; and the time delay. The second phase of the
project, he said, is "on the street" now for bids. Bid opening
will be in early June, but not until all the building permits
are secure.
Number 1582
CHAIR KOHRING asked how much money is involved in the
reconstruction.
MR. EBERLE reiterated that redoing the work is not the major
cost. The major cost is the delay time and the changes to
foundations from bid time to what is ultimately constructed. He
added that there are also going to be some changes to the steel,
but those are relatively minor. Mainly, it is an impact cost to
the construction and having the contractor and consultants on
for an extra year.
CHAIR KOHRING asked whether those numbers have been added up.
MR. EBERLE answered that [DOT&PF] does not have a firm handle on
all the costs, but is anticipating that the costs will exceed $5
million and could approach $10 million.
Number 1620
REPRESENTATIVE SCALZI asked whether this is going to impact
other contracts the contractors may have, and whether they are
secure in the delay.
MR. EBERLE responded that [DOT&PF's] intention is to treat the
construction contractors fairly. This delay is not their fault.
MR. PARKAN clarified that there is a 25-year [payback with the
bonds], not a 20-year payback as he'd mentioned earlier.
CHAIR KOHRING noted that the fiscal note in the packet reflects
the original legislation. The proposed CS reflects the Senate's
version of the fiscal note [for SB 218].
Number 1734
REPRESENTATIVE MASEK made a motion to adopt the fiscal note for
[SB 218, the companion bill]. There being no objection, it was
so ordered.
DEVEN MITCHELL, Debt Manager, Treasury Division, Department of
Revenue, came forth and stated that the fiscal note in the
committee packets is for the CS for SB 218. He noted:
Similar to the transaction we entered into in 1999,
the ... bonds for the [terminal] development project,
we would have a similar plan of finance with these
bonds. We would have two years of capitalized
interest, where we would pay our interest expense from
principal that we issue upfront, so there we be no
impact on the revenues of the system during that
period of time. Then debt service would begin in FY
[fiscal year] '04. We'd had half a year's debt
service, approximately $4.7 million, ramping up to a
levelized debt service of $12.25 million per year
through the 25-year term of the bonds.
MR. MITCHELL stated that he used an interest rate assumption
that is relatively conservative. He said he expects the
ultimate debt-service payments to be well below the numbers
indicated in the fiscal note.
Number 1825
CHAIR KOHRING noted that, philosophically, he thinks this is a
good approach as far as the packaging. He asked Mr. Parkan what
assurances there are that DOT&PF will not be coming back to [the
legislature] for more money.
MR. PARKAN responded that before the committee is [DOT&PF's]
annual CIP that [DOT&PF] always comes to the legislature for.
He said [DOT&PF] will be coming back in two years for another
series of projects that will last through the next three years.
He added that there will also be some projects that will
continue to be cash-funded, and [DOT&PF] will be coming back
every year for those.
Number 1915
REPRESENTATIVE MASEK moved to report CSHB 64, version 22-
GH1060\C, Cook, 5/2/01, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHB 64(TRA) was reported from the House
Transportation Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 1:45
p.m.
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