02/08/2005 01:30 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| HB115 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 42 | TELECONFERENCED | |
| *+ | HB 115 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
February 8, 2005
1:36 p.m.
MEMBERS PRESENT
Representative Jim Elkins, Co-Chair
Representative Carl Gatto, Co-Chair
Representative Mark Neuman
Representative Bill Thomas
Representative Woodie Salmon
MEMBERS ABSENT
Representative Vic Kohring
Representative Mary Kapsner
COMMITTEE CALENDAR
HOUSE BILL NO. 42
"An Act naming the Joe Williams, Sr., Coastal Trail."
- MOVED HB 42 OUT OF COMMITTEE
HOUSE BILL NO. 115
"An Act relating to charges paid or collected by users or
occupants of an airport facility owned or controlled by the
state."
- MOVED CSHB 115(TRA) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 42
SHORT TITLE: JOE WILLIAMS, SR., COASTAL TRAIL
SPONSOR(S): REPRESENTATIVE(S) ELKINS
01/10/05 (H) PREFILE RELEASED 12/30/04
01/10/05 (H) READ THE FIRST TIME - REFERRALS
01/10/05 (H) CRA, TRA
01/20/05 (H) CRA AT 8:00 AM CAPITOL 124
01/20/05 (H) Moved Out of Committee
01/20/05 (H) MINUTE(CRA)
01/21/05 (H) CRA RPT 5DP
01/21/05 (H) DP: SALMON, LEDOUX, NEUMAN, OLSON,
THOMAS
01/21/05 (H) FIN REFERRAL ADDED AFTER TRA
02/08/05 (H) TRA AT 1:30 PM CAPITOL 17
BILL: HB 115
SHORT TITLE: AIRPORT CUSTOMER FACILITY CHARGES
SPONSOR(S): LABOR & COMMERCE
01/26/05 (H) READ THE FIRST TIME - REFERRALS
01/26/05 (H) TRA, FIN
02/08/05 (H) TRA AT 1:30 PM CAPITOL 17
WITNESS REGISTER
JOS GOVAARS, Staff
to Representative Jim Elkins
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 42 on behalf of Representative
Elkins, sponsor.
REPRESENTATIVE TOM ANDERSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As chair of the House Labor and Commerce
Standing Committee, sponsor of HB 115, presented the bill.
MARK PFEFFER, Co-Owner
Venture Development Group
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of HB
115 and responded to questions.
JOHN STEINER, Assistant Attorney General
Transportation Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Recommended changes to HB 115.
ACTION NARRATIVE
CO-CHAIR GATTO called the House Transportation Standing
Committee meeting to order at 1:37:09 PM. Representatives
Elkins, Gatto, Thomas, Salmon, and Neuman were present at the
call to order.
HB 42 - JOE WILLIAMS, SR., COASTAL TRAIL
CO-CHAIR GATTO announced that the first order of business would
be HOUSE BILL NO. 42 "An Act naming the Joe Williams, Sr.,
Coastal Trail."
JOS GOVAARS, Staff to Representative Jim Elkins, Alaska State
Legislature, sponsor, said on behalf of Representative Elkins:
[House Bill 42] will name three miles of trail
alongside the South Tongass Highway between Ketchikan
and Saxman, the "Joe Williams Sr., Coastal Trial."
Joe was an advocate for the construction of a trail
because residents for many years, without the means of
transportation, commonly walked the three miles
between Saxman and Ketchikan with often-tragic
results. When the trail was completed, it quickly
became a favorite walking and bicycling path used by
many visitors as well as locals. Set between the
ocean and the highway, the Joe Williams Sr. Coastal
Trail will be a scenic and historically important
trail for the people of Southeast Alaska. This
legislation will honor the memory of a highly
respected person in the Native community in Southeast,
and included in the committee packet are letters of
support from the City of Ketchikan, City of Saxman,
and the Ketchikan Gateway Borough. In addition, a new
zero fiscal note has been introduced because the
Department of Transportation has agreed to eat the
$2,000 it will cost for making and posting the signs.
REPRESENTATIVE NEUMAN stated that he has heard support from
people from the community, and it is a "very fine thing that we
do this."
REPRESENTATIVE THOMAS moved to report HB 42 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 42 was reported from the
House Transportation Standing Committee.
HB 115 - AIRPORT CUSTOMER FACILITY CHARGES
1:41:54 PM
CO-CHAIR GATTO announced that the next order of business would
be HOUSE BILL NO. 115 "An Act relating to charges paid or
collected by users or occupants of an airport facility owned or
controlled by the state."
REPRESENTATIVE TOM ANDERSON, Alaska State Legislature, speaking
as the chair of the House Labor and Commerce Standing Committee,
sponsor of HB 115, said that HB 115 would implement a valuable
private-market tool to construct improvements to Alaska
airports, specifically a new rental car facility at the Ted
Stevens Anchorage International Airport, without the
expenditures of public funds. "It's somewhat of a novel
approach," he added. He said it will improve the amenities
provided to the traveling public. The bill provides a mechanism
called Customer Facility Charge (CFC), to improve airport
facilities without the expenditure of state funds, and the most
common project that CFCs are used for are rental car facilities,
he stated. The bill will also provide a revenue stream to
maintain and operate such a facility, he stated, and this would
not require an increase in the airport operating budget. In
2001 the legislature authorized the imposition of this CFC to
fund improvements on airport properties.
1:45:09 PM
REPRESENTATIVE ANDERSON said a private bond market has developed
that is willing to rely solely on the revenue provided by CFCs
collected from rental car users to issue bonds used to construct
a new rental car facility at the Ted Stevens Anchorage
International Airport. He said it is important that it is a
private bond and not attached to state credit. He noted that
the CFC process has been "really successful" in Dallas and
Denver. He said that a private industry initiated this
legislation, and it is sponsored by the Anchorage rental car
companies. He explained the purpose for HB 115:
During negotiations with the state over the
implementation of the project, the bond council
identified certain issues with the language set forth
by Chapter 99, SLA 2001, which they felt should be
clarified to ensure that the bonds would be
marketable, hence this legislation. Those issues
essentially revolve around clarifying that the new
revenue stream generated by this CFC would not be
considered revenue of the state when the bond is a
private initiative, and ensuring that the bond
trustee, not the state, takes custody of the funds.
Without that clarification, which is in this bill, the
bond council was concerned that the 2001 language did
not adequately clarify that the CFCs were not revenues
of the state. So this just clarifies this so that we
can have a strong bond at a higher rating.
1:47:29 PM
REPRESENTATIVE ANDERSON said that because the facility will
revert to the state at the end of the term, it was also decided
to implement a customer facility maintenance charge to ensure
that the facility is well maintained. He said that will avoid
any impact on the airport's operating budget. He added that he
is making some procedural adjustments so the rental car dealers
can build the facility and then add a fee which is somewhat
dedicated to this facility. "Alamo" and "National Car Rental"
sent the committee a "fairly detailed" analysis of the bill, and
there is a letter of support from Hertz, he said. He noted that
patrons will benefit.
1:50:07 PM
MARK PFEFFER, Co-Owner, Venture Development Group, said that in
2000, his company was approached by the rental car companies
that operated out of the Ted Stevens Anchorage International
Airport. He stated that the airport had a master plan to build
a consolidated rental car facility in designated wetlands three
quarters of a mile away from the airport, and the rental car
industry wanted a facility closer to the airport that was built
with private money to control costs. Mr. Pfeffer said that [the
terrorist attacks of September 11, 2001] put the discussions on
hold, but it is now moving ahead. In the last eight months, he
added, the companies have been working with airport staff and
the Office of the Attorney General to assess how a facility
could be built using the CFC.
MR. PFEFFER mentioned that immediately upon completion of
construction, the facility ownership transfers to the state, and
the lessor will maintain the facility for thirty years. He
added that when the lease is up, the state will have a fully
funded facility in good shape.
1:52:56 PM
MR. PFEFFER stated that the purpose of this legislation is "to
clarify the flow of the CFCs so that the bond holders have a
greater assurance that they are going to continue during the
life of the bonds," and to "allow for the inclusion of the
maintenance and operation costs of the facility over the life of
the bonds." He said the facility will be constructed at the Ted
Stevens Anchorage International Airport between the Alaska
Railroad depot and the Federal Aviation Administration (FAA)
tower, and customers will be able to walk from baggage claim,
through an extended tunnel, and up into a car rental lobby.
There will be a covered, well-lit, safe place to pick up rental
cars, he said. He added that when the cars are returned, they
will be cleaned and put right back into service, whereas now car
rental employees have to take the cars to an offsite facility,
which adds to traffic congestion.
REPRESENTATIVE NEUMAN asked if the facility will be on the
property already used by the rental car companies.
MR. PFEFFER responded in the affirmative.
REPRESENTATIVE NEUMAN asked if other parking areas will be
affected.
MR. PFEFFER said that a few parking spaces will be taken by the
new facility, namely the under-utilized spaces for over-sized
vehicles, like campers. He said there will be 85 spaces left
for over-sized vehicles.
REPRESENTATIVE NEUMAN asked if the fee would be added on to the
daily rental car fee.
MR. PFEFFER said, "Yes, it's a customer facility charge."
REPRESENTATIVE SALMON asked if the legislation affects the
entire state.
MR. PFEFFER said that the legislation would allow other
locations to pursue a similar project, but the only project that
that he is working on is the one at the Ted Stevens Anchorage
International Airport.
CO-CHAIR ELKINS said he was confused because he thought Mr.
Pfeffer said the area was a wetlands, "and now you're saying
it's a parking lot."
MR. PFEFFER said that an earlier airport master plan study
suggested that one possible location for a rental car facility
was three quarters of a mile away, and it would have impacted 25
acres of wetlands. The industry did not like that idea, so they
petitioned the airport to allow them to offer a proposal, he
said, and the proposal is the one that is being discussed today,
which is to put the facility at the airport.
REPRESENTATIVE ANDERSON said the legislation could be applied to
other communities, but he expressed doubt whether rural
communities were large enough to benefit. He said he thinks
this fund would be "sub-sectioned out" to go only to the
Anchorage facility, "but all communities in the state, if they
have enough people to pay the fees, could do the same thing,
which is exciting."
1:58:54 PM
REPRESENTATIVE ANDERSON stated that the project would have to go
through all zoning and established procedures for construction,
and that this language just helps establish the fee system.
MR. PFEFFER added that there will be a standard ground lease
application, and then there will be regular building permit
process.
REPRESENTATIVE ANDERSON said that even if this facility does not
get built, the ability to do it will be in place for any future
efforts.
CO-CHAIR GATTO asked what Mr. Pfeffer's role is.
MR. PFEFFER answered that the Venture Development Group is a
real estate development company that provides financing and
construction expertise to help projects through the necessary
steps to get them built. "The true drivers of this are the
rental car companies," he said. He added that under the terms
of the rental car concession agreement with the airport, if two
thirds of the companies want a CFC imposed on their customers,
the airport can choose to impose it. He said that in this case
a vast majority of the market share of the companies have said
they want to do this. Mr. Pfeffer added that the rental car
companies don't have the expertise to manage the project, so
they hired him. Upon completion of his role, he said, the
building reverts to the ownership of the state, and a single
service entity will step in to maintain the facility, which will
be owned by the state, and the use of it will be under the
airport concession agreement.
CO-CHAIR GATTO asked about the other rental car companies that
operate at the Ted Stevens Anchorage International Airport.
MR. PFEFFER said he has signed agreements with all companies
except Payless. Payless has "been kept in the loop of the
process," but has chosen not to participate in the discussions.
"Dollar, Budget, Thrifty, Avis, National, Alamo, Hertz, and
Enterprise have all signed on in support of this project," he
concluded.
2:02:46 PM
JOHN STEINER, Assistant Attorney General, Transportation
Section, Civil Division (Anchorage), Department of Law (DOL),
said he is the primary council to the Ted Stevens Anchorage
International Airport and the Fairbanks International Airport,
and in that capacity he has "been a participant in discussions
and negotiations concerning this proposed rental car facility,
and helping to set up documentation in a manner that is
consistent with the needs of the [Department of Transportation &
Public Facilities (DOT&PF)], the state law, and our commitments
under various bond resolutions." He said that upon thorough
review of the bill, he has noted a number a things that the DOL
will recommend modifying. He added that the DOL is comfortable
with the concept, but that it needs technical changes, which he
does not want to go through today. He said the DOL's intent is
to make sure the bill is clear regarding the relationship
between the charges and the obligation under existing bond
covenants that support airport projects separate from this.
With regard to the customer facility maintenance charge, he
said, the DOL will suggest clarifying language. He said that
the DOT&PF has been working with the project proponents, and the
DOL has not had a chance to discuss its technical changes with
the two groups, which he said the DOL would like to do before
presenting the changes to the legislature. He added that the
DOL has no objection to the House Transportation Standing
Committee moving the bill forward as is.
2:06:22 PM
CO-CHAIR GATTO asked if the minor issues Mr. Steiner mentioned
would be minor to the members of committee.
MR. STEINER said he thinks the issues are technical and not
substantive. He said he is not requesting that the committee
withhold the bill, because there are time constraints with the
project. He said that the DOL would like a language change to
make sure the bill says what it intends, and the primary concern
is to make a clearer distinction between the CFC and the
customer facility maintenance charge.
2:07:52 PM
REPRESENTATIVE NEUMAN said a recent news article reported that
the fee would be no more than $4 a day, so he asked if it will
stay at $4 even if there are cost overruns.
MR. PFEFFER said, "Yes sir, part of the contract that we will
provide as part of our management of the project will be a
guaranteed maximum price contract with a guaranteed schedule
fully bonded and backed by a reputable contractor and bonding.
In addition to that we've built reserves into the project so
there is plenty of room there. We don't have any hesitation
whatsoever to provide that guarantee that will come in on time
and on budget."
REPRESENTATIVE NEUMAN asked if the CFC might be lower than $4 if
all the reserves are used up.
MR. PFEFFER answered in the affirmative.
REPRESENTATIVE THOMAS asked what would happen in the event of a
default.
MR. PFEFFER responded that the bond insurers would be liable,
and he added that "bond underwriters, according to the language,
the way it's set up, they can look only to that customer
facility charge, and in general those number of rental
transaction days have trended upward over the past ten, twenty
years, three, four percent per year." He said there is a fairly
detailed study of those predictions. But, he said, "At the end
of the day, the bond holders can only look to those customer
facility charges."
2:10:12 PM
REPRESENTATIVE THOMAS expressed that the high tax on rental cars
is a disincentive to rent, and he takes a cab. He asked if
there is an effective date.
MR. PFEFFER said he thought the bill should be amended to add an
immediate effective date, because the industry wants to begin
the project this summer.
REPRESENTATIVE ANDERSON suggested that the committee could
consider a conceptual amendment [to add an immediate effective
date].
CO-CHAIR ELKINS said it sounds like there would be two charges,
customer charges and facility charges, and he asked if the
combined charge would not exceed $4.
MR. PFEFFER said, "Correct."
CO-CHAIR GATTO listed the current taxes imposed on car rentals,
which total 29 percent.
MR. PFEFFER said the $4 would be in addition to those.
CO-CHAIR GATTO stated that if there is a problem like a decrease
in use of the facility, customers would have to pay more than
$4. He asked what the worst-case scenario might be.
MR. PFEFFER said that a terrorist attack that "tanks the
industry," would be the worst-case scenario, but he said the
underwriters have planned for that with the reserves and the way
they structured the insurance. He added that Co-Chair Gatto is
correct that "if people quit using the facility, then there is
less transactions, and that CFC can be adjusted so if the number
of transactions go down but the debt service stays flat the cost
per transaction could go up." He said that there might be some
users who won't want to pay the extra fee, and there are
provisions for customers to use an off-airport rental or take a
cab, and those calculations are figured in. But he said it is
reasonably certain that the $4 charge should cover it, and he
thinks it will decrease as the demand goes up. The industry
fought the local and state taxes, he said, but it supports this
one.
CO-CHAIR GATTO asked if the current taxes have resulted in
decreased rental car use.
MR. PFEFFER said it has not, and that he thinks, "They had a
very strong year this year, so demand has gone up."
REPRESENTATIVE ANDERSON said that he was not supportive of the
rental tax, but this has a benefit and is not just a pure tax.
There has been no default in the other airports that have done
this, and the fees haven't been raised in Dallas and Denver, he
said. He offered his belief that the governor is supportive and
acknowledges the time constraints.
2:15:41 PM
REPRESENTATIVE ANDERSON recommended that the bill be amended to
[add an immediate] effective date and then be moved out of
committee, with the intention of addressing the DOL's concerns
in the Finance Committee.
[Although no formal motion was made to adopt the aforementioned
change as a conceptual amendment, the bill was later treated as
having been amended.]
REPRESENTATIVE ANDERSON asked Mr. Steiner if the DOL could
submit its recommended changes by the end of the week.
MR. STEINER said he thinks that is possible, but it is important
to "bounce it off the underwriters for the project," to make
sure there will be no problems. He added that one of the legal
provisions in the contract between the Ted Stevens Anchorage
International Airport and the rental car companies is that all
on-site concessionaires will be required to use the facility and
to charge the fees. "If one wants to rent at the airport at
all, one would have to go though this facility" and thus pay the
fee, he said.
2:18:23 PM
CO-CHAIR GATTO asked if people could decide to rent elsewhere to
avoid the fee.
MR. STEINER responded that there are other companies with no
relationship with the airport. He said that if travelers rent
from a company that picks them up at the airport, there is an 8
percent fee. He added that many of the downtown rental car
companies are also located at the Ted Stevens Anchorage
International Airport, and they are not permitted to divert
business to downtown. He said savvy people who are willing to
inconvenience themselves have options to avoid the fee.
2:20:23 PM
CO-CHAIR GATTO asked if other Alaska airports can use provisions
in the legislation without further changes.
MR. PFEFFER said that he thinks that is correct.
MR. STEINER stated that the portion of the legislation that
deals with the international airport revenue fund deals only
with Anchorage and Fairbanks. Other parts of the bill deal only
with state-operated airports, which includes all of Alaska's
rural airports. So it "probably would make this concept
available also at rural airports," he said, but municipal
airports, like those in Kenai and Juneau, would be excluded.
REPRESENTATIVE NEUMAN said "as stated earlier, the fee would be
no more than $4," and he asked if there was anywhere in the
legislation that reduces the customer fee if that amount isn't
necessary to cover the costs. He also asked if "that $4 or
$3.50 would defer to other airports around the state that would
want to use this legislation."
MR. PFEFFER responded that the way the customer service charge
will be determined will be by an estimate of the number of
transaction days for the first year. He said the interest rate
is not known until the bonds are sold, so there is no way to
determine the debt service at this time. But when the debt
service is known, it will be divided by the number of estimated
transaction days, and that will set the customer facility
charge, he said. He added, "The $4 was the conceptual limit
that the car rental industry put on themselves." If the
calculation comes out over $4 per transaction day, the rental
car companies will decide whether to go through with the plan or
not, he said. The fee can be adjusted at the end of the year.
There won't be extra funds to go to other locations because the
charge will be specific to what the costs are, he said.
REPRESENTATIVE NEUMAN said "So, there is nothing in this
legislation that says it's going to be under $4?"
MR. PFEFFER said that he doesn't believe so.
REPRESENTATIVE ANDERSON said that fee changes must go through a
notification process with public comment. He asked Mr. Steiner
if that was correct, and if that requirement is already in place
without HB 115 changing it.
2:26:11 PM
MR. STEINER said that is correct with one adjustment: the
commissioner will be required to set the fee at a sufficient
level to pay the obligation. If transaction days go down, the
fee would go up, and it is possible that the commissioner would
be obligated to raise the fee above $4, he added, but it would
go through a public notice and comment process.
REPRESENTATIVE NEUMAN asked if the fee could be more than $4 per
day.
MR. STEINER said that could happen if there were cost overruns
or if there were fewer transaction days than anticipated. But,
he said, "Mr. Pfeffer could address the guaranteed maximum price
contracting procedures that are anticipated and should provide
some reasonable assurance that at least it will not happen
because of cost overruns."
REPRESENTATIVE NEUMAN said, "I believe Mr. Pfeffer testified
that it would not be more than $4."
MR. PFEFFER responded:
I think what my testimony was, is that we're going to
provide a guaranteed maximum price contract so that at
the time the bonds are sold we will be guaranteeing
the development cost of the project, and so if at the
time the bonds are ready to be sold, for instance, the
cost divided by the transaction days into the debt
service worked out to be $4.50 per square foot, that
would be a choice that would be made primarily by the
industry and the commissioner. They would all have to
say, "OK we still want to go forward," but there would
be nothing that we would do subsequent to getting
started that would cause cost increases. So right now
the projection is actually that the CFC would be $3.82
including all facility maintenance and operation
charges based on interest rates of six or seven days
ago. The CFC will be set at whatever it is at the
time the bonds are sold.
2:30:17 PM
REPRESENTATIVE NEUMAN asked if the fee would be "locked in at
the beginning of operations, if you did have cost overruns it
still would have to be locked in."
MR. PFEFFER replied: "Cost overruns are going to be on my side.
I am providing the guarantee that there won't be cost overruns
contractually and backing that up with a fully bonded contract
from a contractor." He added that his company's most recent
project under a similar format was a $35 million project that
finished early without any cost overruns. "We're very good at
this," he stated.
2:31:21 PM
REPRESENTATIVE SALMON asked if construction will go out to a
normal bid.
MR. PFEFFER responded that the general contractor will with a
negotiated contract with (indisc.) construction, and all of the
subcontracts will be bid.
CO-CHAIR GATTO said he disagreed with a comment he read in his
packet that the Ted Stevens Anchorage International Airport had
the worst customer-friendly rental car facility in the country.
MR. PFEFFER said that it wasn't his comment, but he has heard
both neutral and negative comments from people recently.
CO-CHAIR GATTO asked if the facility will be entirely covered.
MR. PFEFFER said it would be. He added that currently the
rental car companies can't offer their "preferred customer"
service, but with the proposed facility they will be able to do
so.
CO-CHAIR GATTO asked what will happen to the existing facility.
MR. PFEFFER said there are just car rental counters, and the
airport will put them to some other use.
2:33:58 PM
REPRESENTATIVE NEUMAN asked what it costs to rent a car in
Anchorage.
MR. PFEFFER said he didn't know but estimated it at $45 plus
fees per day for an economy model.
CO-CHAIR GATTO clarified that the $4 CFC is per day, not per
transaction.
REPRESENTATIVE ANDERSON said he rented a sport utility vehicle
from the Ted Stevens Anchorage International Airport, and with a
discount card he paid $45 per day including fees. He added that
if the airport has this new facility, there will be more public
parking. In conclusion, he said, the modernization will be on
par with some of the largest airports in the county. He also
said "we're looking at job creation, construction ...; there's a
partnership between government and private sector, which I think
all of us believe in." Representative Anderson said that there
is statewide potential, and that the benefits outweigh any
negatives.
2:37:20 PM
CO-CHAIR GATTO closed public testimony.
CO-CHAIR ELKIN moved to report HB 115, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 115(TRA) was moved
out of the House Transportation Standing Committee.
ADJOURNMENT
2:38:11 PM
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 2:38
p.m.
| Document Name | Date/Time | Subjects |
|---|