Legislature(2015 - 2016)CAPITOL 17
02/05/2015 01:00 PM House TRANSPORTATION
| Audio | Topic |
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| Start | |
| Presentation: Knik Arm Crossing Project Detail | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
February 5, 2015
1:02 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Shelley Hughes, Co-Chair
Representative Charisse Millett
Representative Benjamin Nageak
Representative Louise Stutes
Representative Matt Claman
Representative Dan Ortiz
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION: KNIK ARM CROSSING PROJECT DETAIL
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
MARC LUIKEN, Commissioner Designee
Department of Transportation & Public Facilities (DOT&PF)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions on the
Knik Arm Crossing Project (KAC).
JUDY DOUGHERTY, Executive Director
Knik Arm Crossing (KAC)
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint overview on the Knik
Arm Crossing Project (KAC).
PAT PITNEY, Director
Office of the Director
Office of Management & Budget (OMB)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions on the
Knik Arm Crossing Project (KAC).
JANET KINCAID, Acting Chair; Board Member
Knik Arm Bridge and Toll Authority (KABATA)
Palmer, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of the Knik Arm Crossing Project (KAC).
BOB FRENCH, Mechanical Engineer (ME)
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to the Knik Arm
Crossing Project (KAC).
PAUL CAULCARR, Business Manager
Iron Workers Local Union 751; Vice-President
Southcentral Building Trades
Wasilla, Alaska
POSITION STATEMENT: Testified in support of the Knik Arm
Crossing Project (KAC).
LARRY DeVILBISS, Borough Mayor
Matanuska-Susitna Borough
Palmer, Alaska
POSITION STATEMENT: Answered questions and testified in support
of the Knik Arm Crossing Project (KAC).
LOIS EPSTEIN, Professional Engineer (PE)
Anchorage, Alaska
POSITION STATEMENT: Testified against the Knik Arm Crossing
Project (KAC).
STEPHANIE KESLER, President
Government Hill Community Council
Anchorage Alaska
POSITION STATEMENT: Testified on the scheduled right-of-way
demolition during the discussion of the Knik Arm Crossing
Project (KAC).
AVES THOMPSON, Lobbyist; Executive Director
Alaska Trucking Association, Inc. (ATA)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of the Knik Arm
Crossing Project (KAC).
CATHARINE JONES
Palmer, Alaska
POSITION STATEMENT: Testified in support of the Knik Arm
Crossing Project (KAC).
PAUL GROSSI, Lobbyist
Ironworker Management Progressive Action Cooperative Trust
Alaska State Pipe Trades UA Local 375
Juneau, Alaska
POSITION STATEMENT: Testified in support of the Knik Arm
Crossing Project (KAC).
JEFF OTTESEN, Director
Division of Program Development
Department of Transportation & Public Facilities (DOT&PF)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
Knik Arm Crossing Project (KAC).
ACTION NARRATIVE
1:02:47 PM
CO-CHAIR SHELLEY HUGHES called the House Transportation Standing
Committee meeting to order at 1:02 p.m. Representatives Claman,
Millett, Ortiz, Stutes, Foster and Hughes were present at the
call to order. Representative Nageak arrived as the meeting was
in progress.
^PRESENTATION: KNIK ARM CROSSING PROJECT DETAIL
PRESENTATION: KNIK ARM CROSSING PROJECT DETAIL
1:04:30 PM
CO-CHAIR HUGHES announced that the only order of business would
be a briefing on the Knik Arm Crossing Project detail by
Commissioner Luiken Department of Transportation & Public
Facilities (DOT&PF).
1:06:13 PM
MARC LUIKEN, Commissioner Designee, Department of Transportation
& Public Facilities (DOT&PF), introduced himself and said that
Judy Dougherty, the Executive Director for the Knik Arm Crossing
(KAC) will provide an overview of the project. He said he
looked forward to working with the committee.
1:07:13 PM
JUDY DOUGHERTY, Executive Director, Knik Arm Crossing, offered
to brief the committee on the progress made on the Knik Arm
Crossing Project. She referred to a PowerPoint overview of the
Knik Arm Crossing Project that will cover the public finance
plan review and project development activities that have
occurred since the last legislative session [slide 1]. She
reported that the public finance plan uses three sources of
public funds, including $345 million from a federal
Transportation Infrastructure Finance and Innovation Act (TIFIA)
loan; $275 million in state bonds, contingent on approval of the
TIFIA loan; and $300 million in STIP [Statewide Transportation
Improvements Program] federal highway program funds. She
elaborated on the finance plan, indicating TIFIA's goal is to
encourage non-federal investment in infrastructure projects by
providing credit assistance to projects such as the Knik Arm
Crossing Project. The intention of the public finance plan is
to spread the spending out over the STIP in approximately $45
million per year increments, with $75 million of the STIP
funding already appropriated to date.
1:08:40 PM
MS. DOUGHERTY directed attention to the "Waterfall" flow of
funds and reported that the Knik Arm Crossing, a toll facility,
will generate revenue from the first day it opens [slide 3].
The facility would initially pay for maintenance and operation
costs through tolls. Since the TIFIA funding is a revenue-only
pledge, the loan would be repaid solely from tolls and without
any state backstop, she said. After operations and maintenance
costs are met, the TIFIA Debt Service would be paid next,
followed by any reserves that the TIFIA loan might require.
Excess tolls would be used to repay bonds, but in the out years
any surplus of funds will also be available for other eligible
projects, she said.
1:09:38 PM
MS. DOUGHERTY reported on the pre-construction activities in the
project development [slide 4]. In 2010, the Federal Highway
Administration (FHWA) issued its record of decision (ROD), a
final decision and the challenge period is over. The
environmental permit applications have all been submitted, with
three outstanding permits remaining, including the USACE [US
Army Corps of Engineers] 44 Wetlands permit; second, the
National Marine Fisheries Service (NMFS) permit for disturbance
of Beluga whales during construction; and finally the US Coast
Guard Section 9 bridge permit. She reported on the right-of-way
status, such that 86 percent of right-of-way acquisition has
been purchased, including all the privately-owned parcels. The
remaining parcels will be purchased from the Alaska Railroad
Corporation (ARRC), the Joint Base Elmendorf-Richardson (JBER),
the Municipality of Anchorage (MOA), and the University of
Alaska (UA), she said. The Knik Arm Crossing also recently
completed a utility study - available on the KAC website - that
addresses the relocation of water and sewer in the area of the
proposed tunnel.
1:10:43 PM
CO-CHAIR HUGHES understood that a no jeopardy decision from the
National Marine Fisheries Service (NMFS) was issued in 2011, but
the state has not yet received the letter of approval or
authorization. She asked whether the department has sought the
final approval.
MS. DOUGHERTY answered that a no jeopardy biological opinion was
issued by the endangered species branch of NMFS. She elaborated
that the NMFS has two branches, with the regional staff issuing
the biological opinion and the no jeopardy decision, which is
part of the KAC's NEPA process. The KAC must apply for a
construction permit for disturbance of the Beluga whales,
essentially a noise permit for use during construction, from the
Washington D.C NMFS staff who oversee the Marine Mammal
Protection Act. Although this permit has not yet been issued,
she offered her belief that the federal staff has been watching
the KAC project and has put it the "back burner" at this time.
1:12:18 PM
CO-CHAIR HUGHES asked whether the federal agency is waiting to
see if the project moves forward or if the NMFS has given some
other reason why the permit has not yet been issued.
MS. DOUGHERTY answered that the federal agency has indicated
that it plans on issuing a decision early in 2015. She
attributed the delay to the NMFS staff being understaffed so it
must prioritize its actions. Once the project moves forward,
she anticipated the NMFS will act quickly to issue the
construction permit with respect to the disturbance of the
Beluga whales.
1:13:04 PM
CO-CHAIR HUGHES acknowledged the workload and juggling issues.
She asked whether the department has recently asked for the
status of the permit.
MS. DOUGHERTY replied that the NMFS responded to the Alaska
Department of Law's inquiry on the permit status in the fall of
2014, indicating the Beluga whale permit was a difficult case;
however, the agency anticipated it would be arriving at a
decision shortly.
1:13:47 PM
REPRESENTATIVE ORTIZ referred to slide 3, entitled "Waterfall
Flow of Funds." He recalled that toll revenues will initially
pay maintenance and operations (M&O) costs. He asked whether
any studies have been done to project toll revenues and the
ability to "get down the bucket trail" shown on the slide.
MS. DOUGHERTY answered that the studies were updated last year.
For example, in December 2014, the KAC completed a new
socioeconomic study as well as additional traffic and revenue
studies. She relayed that the socioeconomic study provides the
data that is fed into the traffic study so it was important to
update the 2007 socioeconomic study. She highlighted the list
of key considerations include the MSB [Matanuska-Susitna
Borough] 2060 Futures Project, the MSB Density Build Out Study,
and the AMATS [Anchorage Metropolitan Area Transportation
Solutions] Anchorage Transportation System Plan Update, as well
as three key studies performed by the Municipality of Anchorage
to analyze the housing market, residential and commercial land
availability in the Anchorage area [slide 5].
1:15:21 PM
CO-CHAIR HUGHES asked whether the aforementioned new
socioeconomic study was separate from the CDM Smith study
performed in December [to update the traffic and toll revenue
forecasts for the Knik Arm Crossing].
MS. DOUGHERTY answered yes.
1:15:46 PM
CO-CHAIR HUGHES further asked how the studies compared.
MS. DOUGHERTY reported that the initial 2007 socioeconomic study
[, the Knik Arm Toll Bridge Anchorage Alaska MSA Traffic and
Toll Revenue Investment Grade Study,] was performed by a Texas
firm, IRS, [Insight Research Corporation] under contract with
the traffic consultant [Wilbur Smith Associates]. This time,
the KAC used an independent economist [Cardno, Inc.] who teamed
with a local planning consultant [Agnew::Beck] to provide more
of a grassroots effort on projections. She emphasized the
importance for KAC to have direct contracts with the economist
and the traffic consultant. This is really important in moving
forward with this financing plan, she said.
1:06:53 PM
CO-CHAIR HUGHES asked whether the new studies support the prior
reports. She offered that she was surprised at how similar they
were given some reactions that the 2007 report was overly
optimistic. She further asked whether the "overly optimistic
language" was used in the report.
MS. DOUGHERTY said the December 2014 figures are based on new
studies. She offered that the KAC also compared the data and
found the 2007 socioeconomic data was more optimistic than the
current report; however, this is largely because the study was
done in 2007. An economic recession followed in 2008 and 2009,
she said. In addition, economists have different perspectives
on how conservatively to report their forecasts. She
acknowledged that KAC has found the new study to be more
conservative and although traffic will ramp up more slowly, over
time the traffic projections catch up. Although she was unsure
which figures Co-Chair Hughes has reviewed, she reported that
the gross toll revenues are significantly different than the
2007 projections.
1:18:44 PM
REPRESENTATIVE CLAMAN asked whether KAC will present the new
toll projections in today's presentation.
MS. DOUGHERTY answered yes.
1:19:11 PM
MS. DOUGHERTY directed attention to the draft tolling operations
plan prepared this past year that TIFIA will want to review
[slide 6]. She reported that the KAC has made significant
advancements in the FHWA [Federal Highway Administration]
requirements. She explained that any FHWA project over $500
million must undergo a Federal Highway Administration (FHWA)-
conducted cost estimate review, a project management plan, and a
financial plan [slide 7]. The FHWA conducted its review of the
KAC's cost estimate last June and finalized its report in
November. The FHWA estimates were within 1.5 percent of the
KAC's estimate, or $15 million, which was nearly negligible
[given the size of the project]. The KAC has submitted a draft
project management plan - a living document - that will be
updated annually once a contractor is in place, she said. The
financial plan the KAC will submit for the TIFIA loan will also
satisfy the major project requirement so once that plan is
completed, she anticipated the FHWA will accept it.
1:20:40 PM
MS. DOUGHERTY turned to the TIFIA financing and said the KAC
believes that the project will meet the eligibility requirements
for the TIFIA loan [slide 7]. The current interest rate is 2.28
percent, which is very low, she said. In addition, the TIFIA
offers a rural rate and since the KAC is approximately 74
percent rural, the KAC will apply for and hopes to receive a
blended rate for the loan.
1:21:17 PM
CO-CHAIR HUGHES asked whether the blended rate will reduce the
2.28 percent to 1.44 percent under the interest rate for rural
projects.
MS. DOUGHERTY answered yes; and explained that the rural rate is
half of the urban rate so it is significant.
1:21:46 PM
CO-CHAIR FOSTER asked whether other entities have received a
blended rate.
MS. DOUGHERTY was unsure but offered to research and report back
the history. She offered her belief that ten percent is set
aside for rural loans. She did not know if the project must be
100 percent rural in order to qualify for the blended rate.
1:22:17 PM
CO-CHAIR HUGHES asked for clarification on the application
process and whether the KAC has been denied a TIFIA loan.
MS. DOUGHERTY answered that the KAC has not gotten past the
eligibility test, but she offered to cover this later in her
presentation. She indicated the KAC has never been denied a
loan, in fact, the KAC hasn't gotten to the stage in which the
project has been asked to apply.
CO-CHAIR HUGHES asked whether the process has been a normal
process.
MS. DOUGHERTY answered yes. She suggested that a number of
projects are listed on the TIFIA website that indicates the
status and lists pending legislation for the KAC project, she
said.
1:23:21 PM
MS. DOUGHERTY directed attention to the projected toll revenue
and costs from the aforementioned traffic study completed in
December [slide 8]. This projection assumes that design &
construction will start in late 2016; however, if the KAC is
delayed it will shift and some figures will change, but not
significantly, she said. She pointed out that the green wedge
in the background is the expected gross toll revenue from a two-
land roadway without considering any expansions or extensions.
She pointed out the FHWA declared this project operationally
independent. Thus, the project doesn't have to be presented as
a whole so phase 1 of the project is all that needs to be
advanced at this time. Therefore, the toll revenue and cost
projections are based on revenue projections for a two-lane
roadway. The black bars show the bonds and assumes the bonds
are sold up front with a level payment across 20 years. The
blue bars represent the operating costs after the road is
constructed and open. Operating costs include routine bridge
and roadway maintenance and operations (M&O) as well as toll
collection costs. The red bars represent the TIFIA payments.
She emphasized that TIFIA doesn't require loan payments until
five years after the roadway opens to traffic, with interest-
only payments required for the next five years, followed by a
level payment thereafter. However, some opportunity exists to
"sculpt" that once conversations are held with TIFIA, she said.
1:25:32 PM
MS. DOUGHERTY stated that sensitivity testing is important to
the TIFIA loan process, with KAC performing sensitivity tests
using 17 key variables. These are designed to answer questions,
for instance, if the population or economy did not growing as
anticipated or if road network improvements were incomplete.
1:26:15 PM
MS. DOUGHERTY said the socioeconomic forecast is important since
revenue can vary by 20 percent more or less depending on the
conditions. The outcome of the sensitivity tests were overlaid
the previous graph to show the expected toll revenue using a
50:50 case [slide 10]. The blue line indicates a 5 percent
probability line, which means there is a 5 percent chance
revenue may be less or a 95 percent probability that it will
exceed the amount. The point the blue line crosses the red
bars, the KAC can meet the TIFIA loan requirements even at the
low probability, she said, which is really significant to them.
The Department of Labor & Workforce Development (DLWD) recently
issued a new population forecast for the Anchorage area that is
lower than the forecast the KAC is using; however, those figures
came out after the study was prepared. The KAC reexamined the
probability test and the blue line represents a population
projection that is even lower than the DLWD's figures, she
stated, so the KAC is comfortable with the forecast.
1:28:06 PM
MS. DOUGHERTY directed attention to the TIFIA process, which can
be a lengthy one taking up to 18 months to close a loan [slide
11]. She anticipated that the KAC should know within about 18
months whether the TIFIA loan is approved. First, the loan
process requires parties to submit a letter of interest, with an
eligibility review conducted, which is where the KAC has been
sitting for the last several years awaiting legislative
approval. Once eligibility approval occurs, then next phase is
the credit worthiness and risk assessment phase, in which the
KAC will makes an oral presentation in Washington D.C. to obtain
rating opinions, and submit a $100,000 fee for evaluation
purposes. Upon successful completion, the KAC would be invited
to apply. After submitting the application, the TIFIA would
conduct a 30-day completeness review and it would next advance
to the credit council. The credit council has 60 days to
approve or deny the loan. Upon approval, the TIFIA would
obligate the budget authority, which takes approximately eight
months, followed by another eight months to close the loan.
MS. DOUGHERTY explained that during the last legislative
session, the finance plan changed since the Department of
Revenue (DOR) wanted to ensure that the plan would be
successful. Thus, the KAC didn't submit the letter of interest
immediately, but stopped the process, met on several occasions
and reviewed the project requirements from a fresh perspective
under the public finance plan. The KAC now feels really
comfortable that it is ready and once the KAC obtains the
authorization to do so, it will be ready to submit the letter of
interest, she said.
1:30:24 PM
REPRESENTATIVE STUTES indicated that the total length of time
spans 15-16 months and asked how that will affect the interest
rate for the project.
MS. DOUGHERTY agreed that the interest rate is not locked in
until the loan closes, so it will be the interest rate that is
available at the time the loan closes.
1:30:55 PM
REPRESENTATIVE STUTES asked for further clarification on how
volatile the interest rate has been in the past five years.
MS. DOUGHERTY answered that last year the interest rate was over
3 percent, but it has dropped in the last year.
1:31:18 PM
REPRESENTATIVE CLAMAN, in terms of the letter of interest and
eligibility review, pointed out one of the issues that may hold
up the project is the National Marine Fisheries Service (NMFS)
decision on the permit for disturbing Beluga whales in Cook
Inlet. He asked whether the federal agency is waiting to see
what action the legislature takes before making a decision on
whether to issue a permit.
MS. DOUGHERTY answered that the TIFIA office doesn't expect
permits to be in place. The TIFIA considers whether the
National Environmental Policy Act of 1969 (NEPA) document is
complete, but the KAC is awaiting legislative approval. At the
time [KABATA] submitted a letter of interest, it had been
considering a public private partnership (P3) so it will be
necessary to start the process over again.
1:32:29 PM
REPRESENTATIVE CLAMAN asked whether the Beluga whale permitting
issue is separate from the loan eligibility.
MS. DOUGHERTY agreed the Beluga whales represents one of the
major hurdles, but it is not associated with the TIFIA loan.
1:32:58 PM
CO-CHAIR HUGHES, with respect to the sensitivity testing and how
it overlaid the chart, said it looks pretty positive. She asked
whether she felt confident about the risk assessment and whether
the KAC will likely be awarded the TIFIA loan.
MS. DOUGHERTY answered that in terms of the timeline, the KAC
has had an ongoing relationship with the TIFIA office, so staff
is very familiar with the KAC project. She anticipated that the
application would move as quickly as possible through the
federal process. She offered her belief that the loan will be
approved.
1:33:55 PM
MS. DOUGHERTY, to wrap up, said that the KAC is working on other
items to preparing for opening, including toll rate schedules,
fees and fines, commercial accounts, rental car companies, and
customer care issues, such as privacy issues and enforcement.
Although the KAC already has the authority to collect tolls,
some legislation may be needed to "beef up" some items. The KAC
has initiated discussion with Division of Motor Vehicles (DMV)
since that agency collects fees and fines. Thus, the KAC is
hoping to avoid duplication of effort and partner with the DMV
to implement the tolling plan.
1:35:15 PM
CO-CHAIR HUGHES asked what shelving or slowing down of the KAC
might mean in terms of the TIFIA loan process. In addition, she
expressed an interest on any costs that might be incurred if the
project is placed on hold or is shelved.
MS. DOUGHERTY stated that it would really depend on how long the
KAC will be shelved; for example, the traffic and revenue study
would likely be relevant for several years. She indicated that
study cost $1 million. She said that the permit applications
are very mature, for example, the US Army Corps of Engineers
(USACE) is pretty much through its process, but must go through
the National Environmental Policy Act of 1969 (NEPA) and is
awaiting an incidental take statement. She reiterated that the
USACE process is completed and the agency has closed its file.
She suggested that if those things languish too long, it will be
necessary to go through the process again. It's really
difficult to determine the impact. In assessing the pure
federal process, the KAC is currently in the right-of-way phase,
and she believes that the project has 10 years to get to
construction before the Federal Highway Administration (FHWA)
will determine the project isn't moving forward.
1:37:23 PM
CO-CHAIR HUGHES asked whether the record of decision holds for a
certain timeline or if the KAC will need to go through that
process again.
MS. DOUGHERTY answered no; that the ROD is a final decision.
She offered her belief that the project must move into right-of-
way phase within 20 years, but the KAC has already met that
requirement, but must go into construction within the next 10
years.
1:38:44 PM
CO-CHAIR HUGHES stated that all of the documents come to the
Office of Management & Budget so it seems appropriate to hear
from her on the KAC.
1:39:04 PM
PAT PITNEY, Director, Office of the Director, Office of
Management & Budget (OMB), stated that the discussion on the KAC
is ongoing. She focused on two items, the cost to the state and
the near-term cash outflow under the current fiscal environment
and the opportunity cost. First, there are several years of
payment outlays until the toll revenue begins, she said, but
since the ROD has been reached there is some flexibility in
terms of when to start the project. Next, besides the cash
outlay, the state must also consider that if the federal STIP
funding is used for the KAC, the state won't have the
opportunity to use the funding on another project. However, the
highest consideration is the cash outlay in the near term, given
the state's current budget circumstances, she said. She
reported that she is happy to have Commissioner [Designee]
Luiken on board and they are continuing to hold conversations.
She understands that going from a public private partnership
(P3) structure to a fully public project will require some
legislation, as well. She recapped that the project is still in
discussion phase, with a huge outlay for the time period. She
acknowledged that tolls have some opportunity, but the tolls are
in the future, she said.
1:41:18 PM
CO-CHAIR HUGHES understood $5 million from the general fund was
appropriated by the last legislature. She asked whether it is
correct that STIP funds will not be required until 2017.
MS. PITNEY deferred to the DOT&PF to respond.
CO-CHAIR HUGHES viewed [this project] as having the ability to
leverage approximately $90 million in federal funds. Certainly,
it's good to think hard about this project in terms of where the
project is and consider any additional costs for items that
might need to be redone [if the project is halted]; however, she
urged the committee to keep an open mind. Although the state is
facing tough times, these funds were appropriated for the
project and no additional general fund funds will be necessary
to move forward, she said. Further, the proposed project is
located in an area that faces road closures, in fact, the Knik
River Bridge and the Glenn Highway were just closed last night.
Commuters in this area have pointed out that there is only one
route between the Matanuska-Susitna valley and Anchorage.
Therefore, she wondered whether this is the right time to shelve
this project.
1:42:48 PM
CO-CHAIR HUGHES recalled during the American Recovery and
Reinvestment Act of 2009 (ARRA) funding period the legislature
frequently heard the term "shovel ready." She asked Ms. Pitney
to assess the six projects and whether any are more "shovel
ready" than others and if the KAC would be among them.
MS. PITNEY answered the KAC is one of the closest "shovel ready"
projects. In response to a question, she said besides the
Kodiak Launch Complex (Alaska Aerospace Corporation), this would
be the next "shovel ready" project.
CO-CHAIR HUGHES asked whether there is any risk in having to
repay Federal Highway Administration (FHWA) funds.
MS. PITNEY answered yes; but it is long-term risk due to the 20
year timeline.
1:43:44 PM
REPRESENTATIVE ORTIZ asked for an estimate of the outlay that
will be needed in the next few years.
MS. PITNEY answered that based on the graph provided it would be
the net debt service payments since there wouldn't be any other
revenue to cover those until toll revenues start coming in.
1:44:15 PM
REPRESENTATIVE CLAMAN understood the governor has not yet made
any decision on whether to shelve the project. He asked for
further clarification on the timeline for the decision.
MS. PITNEY answered that the governor and the incoming
commissioner will make the decisions over the next two to three
weeks.
1:45:45 PM
JANET KINCAID, Acting Chair; Board Member, Knik Arm Bridge and
Toll Authority (KABATA), stated that she is the acting chair of
the "non-functioning" KABATA Board. She gave a brief personal
history, relaying that she is a 60-year resident of the state
and has lived 50 of those years in the Matanuska-Susitna valley.
She has previously served on the Matanuska-Susitna Borough
Assembly (MSB). She related her understanding that in the mid-
80s, former Governor Cowper didn't fund the capital budget and
Anchorage lost 13 percent of their population and 25 percent of
their value. She said she embraces the theory that when times
are tough it is time for capital project expenditures, in fact,
it is how Franklin D. Roosevelt got us out of the depression.
MS. KINCAID stated that a bridge is infrastructure, the
population in the Matanuska-Susitna valley is growing, and will
continue to grow. As the matriarch of a very large family - her
immediate family is 45 persons with only three offspring living
out of Alaska - she wants a living wage for all of her family.
The KAC will provide opportunities to develop a new community,
new enterprises, and entrepreneurship and provide families with
an opportunity to buy relatively cheap land and a bigger parcel
to raise kids with 4-H projects, which is near and dear to her
heart. She indicated that she is passionate about this project.
She quoted Rick Mystrom, former Anchorage mayor, who wrote in
2010, "The measure of our state economy's health is not the
amount of our savings. It's the growth of the economy, the
prosperity and quality of life for its citizens and the
opportunity of our young people." She emphasized that she would
love to see the KAC happen so the next generation will have this
opportunity to develop new land. Certainly, the traffic is a
"big thing" but more importantly she wants to see the
opportunity for the young people, she said.
1:49:03 PM
CO-CHAIR HUGHES asked for additional information on the traffic
numbers.
MS. KINCAID answered that she visually can see the traffic, plus
she owns businesses in Palmer. She predicted that the truckers
will lessen the impact on the Glenn Highway, which will impact
Palmer in positive ways. She recently heard on the radio that
traffic was backed up past Eklutna, which highlights the traffic
issues
CO-CHAIR HUGHES asked why the KABATA Board is still in
existence.
MS. KINCAID answered that the KABATA Board is the vehicle for
collecting the tolls. The legislature turned the construction
phase to the DOT&PF.
1:50:34 PM
CO-CHAIR HUGHES asked Ms. Dougherty to provide figures when she
testifies again.
1:52:04 PM
BOB FRENCH, Mechanical Engineer (ME), stated that he has been an
Alaska resident for over 30 years. He said that he has been
studying, commenting, and providing testimony and generally
living the proposed Knik Arm Bridge [and Toll Authority] Project
for the past 12 years. In fact, one of the former legislators
pointed out to him that he and his neighbors have institutional
knowledge about the project. He referred to a 20 page "White
Paper on the Knik Arm Bridge Project" in members' packets.
MR. FRENCH referred to the report conclusions of the 2013 audit
report and read a sentence, "The audit concludes that KAC toll
and revenue projections are unreasonably optimistic, and the
projected cash flows to the State are likely overstated as a
result." The financial structure of the KAC has changed since
that audit was completed but the forecast of the traffic and
toll revenues are still key in determining whether the KAC's
plan is feasible and the amount of the real cost to Alaskans.
Following the audit, KABATA planned to hire an independent firm
to review the population and employment forecast; however, the
report that was released in December was done by a consortium of
companies, including the same discredited firm who prepared the
first forecast, and not surprisingly came up with even more
"bloated" figures. He asked whether it made sense that these
outside firms are projecting 60 percent more growth in the
Matanuska-Susitna valley than comparable estimates by the
state's demographer or by the University of Alaska - Institute
of Social and Economic Research (ISER). He asked whether it
makes sense that their forecast uses the same traffic daily
count on the KAC only 15 years after the bridge opens as in 2012
on the new Glenn/Old Glenn Highway interchange of the Knik
River. He referred to pages 5-8 of the aforementioned white
paper as proof that the KAC project figures are off.
1:54:35 PM
MR. FRENCH stated that the public record shows the traffic
estimates for the proposed Highway to Highway project in
Anchorage by DOT&PF shows less than half the traffic that KABATA
is predicting. Traffic estimates done for the Wasilla bypass by
DOT&PF showed less than half the population than KABATA
predicted. The population and employment by KABATA has changed
significantly over the years. He asked if there would be a zero
population but more jobs in 2035 at the Point MacKenzie
industrial dome than the entire City and Borough of Juneau
currently has or will there new study at Point MacKenzie have
more population than the currently Kenai, Kodiak, and Bethel
combined.
1:55:35 PM
MR. FRENCH questioned KABATA's significantly different land use
assumptions from 2007, 2011, and 2014, outlined on pages 6 and 7
of the aforementioned white paper, which have the effect of
raising traffic and toll projections for the bridge beyond the
assumptions made for other DOT&PF projects. These scenarios
suggest that the number of daily trips rather than a realistic
prediction of future land use and population was the goal that
KABATA's outside consultants focused on. He provided three more
reasons why KABATA's traffic revenue forecasts are at least two
times greater than the actual traffic. First, the economic
outlook for the state is significantly different than it was six
months ago and KABATA's current predictions were built on a
highly modified 2009 ISER model. Second, the housing density
that KABATA needs to reach the assumed population and revenue
cannot happen with the well and septic, one dwelling per acre
land use that Janet Kincaid talked about. That level of
population density can only be achieved with high density
planned neighborhoods with water and sewer provided by the
developer for the MSB, although the borough is still struggling
to get upgrades to their existing sewage treatment plants.
However, KABATA ignores that the cost of buying a house in the
planned communities is no longer cheaper than buying in the
Anchorage area. Third, he was told by Scott Goldsmith [ISER]
that the KABATA sensitivity tests do not evaluate whether the
new population they claim will choose to live at Point MacKenzie
and if they would choose to live there if they paid a couple
thousand in tolls.
1:57:40 PM
MR. FRENCH asked what the effect of the unreasonably optimistic
revenue forecast could be, noting that three toll projects have
recently gone bankrupt: The Indiana toll road, the South Bay
Expressway in California and the Southern Connector in South
Carolina, and the Pocahontas Parkway in Virginia went through
two defacto bankruptcies with the creditors in the state finally
taking over the project. In all cases the tolls were one third
to one half of CDM Smith's projections, which is the same firm
KABATA has used for its traffic and toll revenue forecasts. He
said he did not think that the state needs to spend millions
more on a project that doesn't pencil out and that we can't
afford. He asked the legislature to support Governor Walker in
halting the projects and using the funds for other projects. He
said that former DOT&PF Commissioner Kemp wanted the state to
believe there are huge penalties for canceling the project, but
the truth is that possibly 20 years down the line that might
occur; however, the federal government does not want to be
responsible for a big boondoggle any more than the legislature
does. The regulations require the state to study the impact of
the project prior to moving on to construction and if at any
point during the process it becomes clear that the cost or
controversy is too significant and the project doesn't pencil
out the study could be curtailed.
1:59:08 PM
MR. FRENCH said that amendment 13 to the STIP program shows that
ending the project right now would free up $600 million in state
and federal funds, about half of which would be state bonds that
wouldn't need to be issued with the remainder that could be used
to fund other urgent needs.
1:59:49 PM
REPRESENTATIVE CLAMAN recalled Ms. Dougherty stating that the
KAC has new studies on both the toll and traffic projections.
He asked whether Mr. French has reviewed the new studies.
MR. FRENCH answered that he was at the [Knik Arm Crossing]
presentation to the Anchorage Metropolitan Area Transportation
Solutions in December. He said his comments are related to the
current study but did compare the two previous studies done by
KABATA.
2:00:41 PM
CO-CHAIR HUGHES said it sounds like he doesn't agree with some
of what Ms. Dougherty presented in terms of the sensitivity
study that shows the project in a pretty good position. Thus,
she further asked if he disagrees with the department.
MR. FRENCH answered that in reviewing KABATA's studies, the
studies show there is less than a percentage of difference
between a "build option" and a "no build option" and in terms of
how the population might change overall for the region. He said
what the study does change is where the population chooses to
live. He stated that Scott Goldsmith [ISER] pointed out that
one of the sensitivities was missing in KABATA's analysis, which
is whether people would live at Point MacKenzie with that high
of a toll or if they would choose to locate near the core of the
Matanuska-Susitna valley near Palmer and Wasilla with full
access to schools, hospitals, and grocery stores.
2:02:13 PM
CO-CHAIR HUGHES stated that the area is growing by leaps and
bounds around Knik Goose Bay and farther out. In fact, she has
heard that if the area was incorporated, it would be the fourth
largest city in the state. She offered her belief that people
are choosing to be there now and the feedback she receives is
that people will be willing to pay the toll. She acknowledged
that is up for question right now. She hoped the department
will speak to the committee on the Statewide Transportation
Improvements Program (STIP) funds.
2:03:21 PM
PAUL CAULCARR, Business Manager, Iron Workers Local Union 751;
Vice-President, Southcentral Building Trades, stated that
approximately 300 members live and work in Alaska. He stated
that he is currently a resident of Wasilla who commutes daily to
work in Anchorage. He stated that the commute is challenging
enough and minor accidents can close the north - south travel in
the state. Just last night his one hour commute became 2.5
hours, he said, so he considers the KAC a matter of public
safety. He recalled two years ago a trooper shooting on the
road closed the highway for 5-6 hours and he missed a day of
work along with thousands of co-commuters. He passed on
anecdotally that commuters support another north-south highway.
He said the future of the infrastructure challenged state is
badly needing this project. Alaska has overcome many challenges
in the past with a "can do" independent spirit. He can't think
of a reason why this project can't be built - it is one that
Alaska has talked about for 30 years. Construction jobs are
often considered temporary jobs, but his members are paying
mortgages, coaching youth hockey teams, and attending churches
for the long run. In the late 80s people left, but this bridge
will be a bridge to the future of the state and it will open up
opportunities for industrial, housing, schools, and commercial
development. He said he respects the opinions of those not in
favor of this project, but he believes that Alaska needs this to
grow and infrastructure is never a waste of time or capital.
2:06:22 PM
LARRY DeVILBISS, Borough Mayor, Matanuska-Susitna Borough,
stated that he is very supportive of this project. He views the
project in terms of economics and the negative economics of not
doing it. Population figures were discussed, but he recently
visited the Joe Redington Jr. and Sr. High School and the site
of the Dena'ina Elementary School that will open in fall. He
said the Knik Fairview area and the Matanuska-Susitna Borough
center is moving towards Point MacKenzie. The new school will
be filling up with next generation of students in 2016, which is
the first project of that magnitude that has started and
finished in one year. The state demographer has set the
official population at 98,000 as of January 1 so the Matanuska-
Susitna Borough is still growing, and has the only school
district that is growing in the state. He said the
transportation issues really hurt and his phone rings "off the
hook." The Knik-Goose Bay Road and Parks Highways are two of
the three largest safety problems in the state and he predicted
that this will only get worse until traffic is diverted.
Traffic causes congestion problems for the City of Wasilla,
which is why the city is very supportive of this project.
2:09:29 PM
MAYOR DeVILBISS reported that Port MacKenzie is more of an
economic boon to Anchorage due to its proximity, so what is
being decided with the KAC is how fast to develop that economic
unit and give Anchorage an opportunity to expand an industrial
use property. He found the issue of people not wanting to live
at Point MacKenzie a bit laughable. There are two liquefied
natural gas (LNG) projects that are well along in developing
massive projects. One of their biggest concerns is the source
of their labor force. The MSB has laid out a master plan on
borough-owned property for a new town site right at the bridge
landing and the MSB intends to sell that land this summer,
complete with utilities, including gas, septic, and water. This
subdivision is capable of the density of population needed to
supply jobs to the prison and the port, with the rail extension
fitting into that, too.
2:11:32 PM
CO-CHAIR HUGHES asked for a range of projected jobs specifically
related to Port MacKenzie.
MAYOR DeVILBISS responded with respect to the two LNG projects -
WestPac [Logistics] and REI [Resource Energy, Inc.]. The
forecast on one of the projects is 250 [jobs] and the maximum on
the other is 2,500 local jobs. He clarified that these jobs are
not related to bridge construction and the projects are moving
ahead with or without a bridge. He offered that the decisions
being made today will determine how fast development will occur
and the extent to which the economic engine will be nurtured.
2:12:50 PM
LOIS EPSTEIN, Professional Engineer (PE), stated that she lives
in Anchorage and served two terms on AMATS [Anchorage
Metropolitan Area Transportation Solutions] Technical Advisory
Committee. She has since remained involved in transportation
decision-making in Alaska and statewide, including authoring
several editions of a transportation finance report entitled,
Easy to Start, Impossible to Finish. This publication covers
the economics of the state's megaprojects. She offered her
belief that the KAC is a Matanuska-Susitna Borough (MSB)
priority, but shouldn't be a priority for others in the state.
First, Matanuska-Susitna employees only represent about 10
percent of the Anchorage work force. Second, the "so called"
explosive growth in the Knik-Goose Bay area may be high but it
started with a relatively low population base. She cautioned
that statements about the road should not be used in isolation
to justify a bridge for an area with still a small population.
Third, as the MSB grows, it is developing its own business
community so there will be less and less need over time for the
MSB to depend on Anchorage for employment.
MS. EPSTEIN said that the arguments against the proposed KAC are
important for the legislature to consider. First, the proposed
toll is among the highest in the country so commuters and
travelers are likely to take the Glenn Highway alternative to
travel to and from Anchorage. Second, it will be farther and
take more time via the bridge route for people traveling from
Wasilla east so these drivers will likely avoid the toll bridge
and road. Third, as previously stated, there are inadequate
traffic projections. She pointed to projections for the
Whittier tunnel as an example of a project built with overstated
traffic projections, noting the legislature currently provides
an annual subsidy of $2 million for the Whittier tunnel.
Fourth, evidence shows that younger generations are relying on
cars less and less. Finally, it is extremely unlikely the [KAC]
will receive a TIFIA loan, especially since the project has not
been invited to submit further information on numerous
occasions. In addition, the vehicle miles traveled per capita
peaked several years ago in Alaska and elsewhere in the country,
so people are relying on other ways to connect. In response to
[KAC] that alternatives to the bridge could cost more, she
offered three points: 1. A number of organizations proposed a
comprehensive alternative to the bridge, which was not analyzed
since KABATA apparently did not take alternatives seriously
enough 2. The Glenn Highway corridor could carry the needed
traffic with options such as congestion pricing to spread
traffic to non-peak times, or using advanced transportation
solutions 3. The Wasilla bypass could meet the freight
industry's needs and is desirable for reasons not associated
with the bridge.
MS. EPSTEIN directed attention to Amendment 13 to the Statewide
Transportation Improvements Program (STIP), which is currently
out for public comment through February 13, 2015, which wisely
transfers nearly $900 million in federal and state funds from
Knik Arm Bridge to more essential transportation projects. This
funding could be applied to other projects statewide, including
road and bridge upgrades, safety upgrades, public
transportation, or ferries, she said.
2:16:56 PM
MS. EPSTEIN pointed out approximately $250 million of the nearly
$900 million in the current STIP is for state bonds, which will
not need to be issued if the [KAC] is cancelled. She offered
her belief that the bridge is not a wise, fiscally-conservative
investment and will harm the state's transportation
infrastructure by siphoning away dollars that would otherwise be
able to maintain and upgrade existing roads and bridges. She
questioned the need for the bridge given the state's limited
finances and offered that projects with poor justification like
this bridge must be the first to go. She asked the legislature
to take action to ensure that the properties on Government Hill
currently scheduled for demolition by Department of
Transportation & Public Facilities (DOT&PF) this spring be
preserved for the good of the Anchorage and Government Hill
communities.
2:17:45 PM
STEPHANIE KESLER, President, Government Hill Community Council,
asked to testify on the scheduled right-of-way demolition on
Government Hill. She stated in January one of the business
owners received a letter from DOT&PF indicating their property
would enter into eminent domain proceedings. Governor Walker
stopped that because it was contrary to his order prohibiting
additional spending on the large mega-projects. However, three
properties on Government Hill - two homes and one hotel - are
still scheduled for demolition in the spring. She directed
attention to this matter so during discussing expenditures for
the KAC, the legislature will be aware that the DOT&PF has
indicated it is still moving forward with the aforementioned
demolitions. She said the council thinks this is an unwise
expenditure of money, plus it will demolish two fine homes and a
motel in the Government Hill area for a project that may never
happen, leaving the community with destroyed properties. She
concluded by saying, "We will continue to raise this issue as
the legislative session progresses with the hope that cooler
heads will prevail and consider that those houses not be
demolished until construction is actually ready to begin."
2:20:20 PM
AVES THOMPSON, Lobbyist; Executive Director, Alaska Trucking
Association, Inc. (ATA), stated that the ATA has long supported
the Knik Arm Crossing Project. Although the ATA realizes that
serious budget constraints exist this year, the ATA hopes the
state will not abandon the work done on the KAC project. He
offered his belief that this is a once in a generation
opportunity to expand the regional transportation network,
provide alternative ways to move freight in and out of
Anchorage, and generally create a safer and more efficient
transportation system.
2:21:37 PM
CO-CHAIR HUGHES asked for further clarification on any figures
for fuel savings and trip length benefits that might be realized
by the industry.
MR. THOMPSON answered that he has not done so, but it would be a
"serious swag" and he'd rather not get quoted on it at this
juncture.
2:22:21 PM
CATHARINE JONES stated that the Knik Arm Bridge is a necessary
part of Alaska's infrastructure. She said, "It certainly needs
to be built and to move forward sooner than later because it's
only going to get more expensive."
2:23:09 PM
PAUL GROSSI, Lobbyist, Ironworker Management Progressive Action
Cooperative Trust, Alaska State Pipe Trades UA Local 375, stated
he wanted to testify on behalf of the ironworkers, but he wanted
to add to Mr. Caulcarr's testimony. Obviously the organization
supports this project for jobs, including construction jobs for
building the bridge and for potential private-sector development
across the proposed bridge. He said the state will need this
because people can't depend on state dollars as much anymore.
He suggested that the state will need creative thinking to fund
future projects, especially since projects are important for the
economy since they are construction jobs, but also since it
develops infrastructure and allow for further development.
MR. GROSSI said he has listened to potential problems with the
[KAC] project; however, if this is not a viable project, it will
come out through the TIFIA process and the loan will be denied.
It's important for the state to move forward, he said, and he
did not think the TIFIA loan will be denied. Further, the state
can benefit by learning the TIFIA process, which could fund a
number of infrastructure projects. In addition, another similar
program to consider is the WIFIA [Water Infrastructure Finance
and Innovation Act] loan program that can be used for water
infrastructure projects. Thus, that type of expertise will
allow the state access to very low interest loans with long-term
payouts. Although he is not an economist, he offered his belief
that the loans will be beneficial. In addition, the [KAC]
requires very little general fund monies. He encouraged the
state to find ways of building projects without using general
fund monies. He served as a former administrator in hard times
and he understands the need to be creative with funding.
MR. GROSSI recalled that the state had some tough financial
times in the 80s for similar reasons. He further recalled that
the price of oil was at $9 per barrel. He characterized the
TIFIA loans as a creative means of viewing projects.
2:27:41 PM
MR. GROSSI, speaking anecdotally, stated that he resides in
Juneau. First, he recalled the break-even traffic figures for
the KAC was 10,000 vehicles per day, which is about that same
number of daily crossings on the bridge connecting Juneau and
Douglas. He said he finds it hard to believe there won't be at
least 10,000 crossings for the KAC. Secondly, during his
travels on the East Coast he used toll roads and toll bridges.
Although alternative roads were always an option, he paid the
tolls since it typically provided a more direct route. He said
he would pay the toll if the proposed KAC was built and he
believes others would be willing to do so.
2:29:29 PM
CO-CHAIR HUGHES agreed that time is definitely a factor and
people like to save time. She asked whether people [in the
trades, such as the ironworkers] with expertise moved out. She
expressed concern about losing skilled workers as the state
hopes to build a natural gas pipeline. She further asked
whether the state will risk people moving out of state.
MR. GROSSI answered yes. He said he is a plumber and pipefitter
by trade and he nearly left, but found a job working for the
state within days of preparing to leave the state. He stressed
that a lot of plumbers and pipefitters moved out, although some
returned. He cautioned that if there are not any jobs, people
have to go somewhere to work. He pointed out the state has had
a stable working situation during the last 20 years.
2:31:31 PM
REPRESENTATIVE ORTIZ asked how he would prioritize the KAC in
terms of the state's major projects.
MR. GROSSI said he doesn't know the answer to that since the
construction industry would like a pipeline, a dam, and the
other major projects. He agreed that each project must be
judged, but he also believes that all the major projects have
validity. He suggested that what's doable with the least amount
of general fund dollars is one consideration, but it's also
important to consider what is necessary in Alaska. For example,
the proposed natural gas pipeline is necessary for long term
viability of the state in terms of jobs and future revenue. The
KAC does the same thing, not to the same extent as a pipeline,
but this project will provide revenue in the long term that can
be used for infrastructure, he said.
2:33:40 PM
REPRESENTATIVE CLAMAN asked whether he would pick the gas
pipeline if he had to prioritize and select one project.
MR. GROSSI hesitated to say yes, but he agreed that a proposed
natural gas line is extremely important project.
2:34:22 PM
CO-CHAIR HUGHES pointed out that the small diameter natural gas
pipeline is under consideration at this point.
2:34:32 PM
REPRESENTATIVE CLAMAN did not hear any distinction between the
large or small diameter pipelines in Mr. Grossi's response.
MR. GROSSI offered that in 1981, there were three proposed
projects ready to go: the natural gas pipeline, the Susitna
Dam, and the Knik Arm Crossing. He said:
You know, I was a young man then and I thought it was
a great idea and I was promoting that. Now I'm an old
man and the one thing I really don't want to see is my
grandchildren sitting here as old men and asking for
the same three projects - or these same projects. I
think, it's time we start building. In the governor's
words, "We've studied enough." It's time to build
some of these things.
CO-CHAIR HUGHES directed attention to the written testimony in
members' packets from the International Union of Operating
Engineers Local 302.
2:36:16 PM
CO-CHAIR HUGHES closed public testimony on the Knik Arm Crossing
project.
2:39:55 PM
REPRESENTATIVE NAGEAK remarked that when he was a young man the
cost of gasoline was $.35 per gallon. He recalled when the
Parks Highway was built what a difference in time it made. He
described it as being progress. He viewed it as being the
difference between the old and new ways. He stressed that
projects are necessary. He remarked on improvements in the
quality of life in Anchorage and other parts of Alaska since the
60s. He said the Bush aspires to improve the quality of life.
He remarked on the cost of gasoline in rural Alaska, which is
over $ 7 a gallon. In terms of the [KAC], it will reduce the
cost of doing business, especially for the trucking companies.
He still wants the road to his house, but he said he also
recognizes that some projects are much needed ones. At some
point, he will come back and request the road [to his house].
2:41:30 PM
MS. DOUGHERTY emphasized that the new study shows an incredible
difference in traffic. She stated that under the P3 [public-
private partnership] process, the KABATA was looking at carrying
the whole availability payment with toll revenue, but when that
wasn't possible the project considered a reserve account. Now,
the KAC seeks enough funding to repay approximately one-third of
the financing plan since the TIFIA needs to be covered. She
characterized the KAC plan as a much more conservative approach.
She argued that the figures are not the same, that [traffic and
toll revenues] are approximately half of the predictions in the
early years, in part, because the KAC used a local firm, as well
as an economist who has performed multiple studies for the
Municipality of Anchorage - and was raised in Soldotna.
Further, the KAC performed significant outreach to local people.
She predicted approximately 3,500 ADT [average daily traffic],
with a slow ramp up, but within 10 years extra lanes will be
needed. Thus, the growth will still be there. The new study
indicates the ADT will start more slowly, but once the town
sites are developed, the traffic will shoot up, in part, due to
the lack of single family homes in Anchorage and people
preferring not to live in condos. She suggested that the
predicted ADT figures are ones that could be met even in small
communities such as Barrow.
MS. DOUGHERTY said, "If you step back and look at it from a
'pass the red face' test, it absolutely passes 'the red face
test'". All the studies show that the Matanuska-Susitna valley
is growing, even during downturns, she stated.
2:44:49 PM
CO-CHAIR HUGHES summarized that the newer figures show a
slightly slower ramp up but the [KAC] is considered a viable
project in terms of traffic.
MS. DOUGHERTY answered yes. She recalled one testifier
suggested that the sensitivity didn't address the willingness to
pay a toll. She acknowledged that the socioeconomic
sensitivities studies don't include that, but the traffic and
revenue study does since it applies toll friction. The toll
friction reduces the traffic, she said, and that is included in
the aforementioned study.
2:45:48 PM
REPRESENTATIVE ORTIZ recalled one testifier said that the KAC
will be the highest toll in the country. He asked whether she
agreed with that statement.
MS. DOUGHERTY answered that most toll roads in the Lower 48
apply the toll every half mile so it isn't a fair comparison to
the KAC proposed tolls. In further response, she reported that
the proposed toll has been modeled at $5 each way, which would
grow with inflation. The KAC has done surveys and studies that
indicate people are willing to pay those tolls.
2:46:43 PM
REPRESENTATIVE MILLETT recalled hearing the same discussion when
the Whittier tunnel was build, as to whether people would pay
the toll. She recalled the toll is set at $6 each way. She
indicated it is a busy port and the tunnel has taken pressure
off Seward and Whittier. She ascribed to the theory, "Build it
and they will come." She said she lives in Anchorage and it's
becoming a public safety issue due to the increase in cluster
homes being built. She said she is not threatened by the road
since she believes traffic will grow since there isn't any land
in Anchorage.
2:49:20 PM
JEFF OTTESEN, Director, Division of Program Development,
Department of Transportation & Public Facilities (DOT&PF), asked
to address the STIP amendment since it currently reflects that
the governor asked to slow down major projects to allow them to
be reevaluated. This meant money in the STIP for the Juneau
Access and KAC were designated for other projects to avoid
losing the federal funding. The DOT&PF has moved other projects
forward to take the place of these two large projects. As part
of the federal requirements, the department needed to select
projects under active design or under environmental work. It
takes 3-5 years to bring a project to the point of using federal
funding for construction. He indicated the DOT&PF has selected
projects from around the state, including replacing 10 bridges.
2:51:15 PM
MR. OTTESEN clarified that $154 million is being reprogrammed
this year, not $900 million. In addition, one other project is
a technical that allows the IFA [Inter-Island Ferry Authority]
to use funds for their ferries. The remaining projects listed
either delay the two major or move in approximately 20 other
projects.
2:52:04 PM
CO-CHAIR HUGHES asked whether the other projects using the
amended STIP funds will require general fund dollars, and if so,
how much would be required.
MR. OTTESEN answered that the federal funds require matching
funds, and whether the federal funding is applied to major
projects or lesser ones will use same amount of matching funds.
He reported that the DOT&PF uses general fund at the rate of $9
of state funding for every $91 of federal funding.
CO-CHAIR HUGHES appreciated the clarification since some people
were confused and thought that not moving forward on major
projects will save general fund dollars.
MR. OTTESEN clarified that the way the financing plan is set up
for the KAC requires the use of state bonds as its matching
funds. The state bonds are state-provided dollars that are
borrowed dollars, which are repaid over time. He characterized
the financing as more of a technical issue.
2:53:35 PM
CO-CHAIR HUGHES asked whether the KAC would use less general
funds than if the funding were used on projects that moved up on
the STIP.
MR. OTTESEN answered yes; although it is a matter of timing.
The state bonds must be repaid with general fund dollars, at
least initially, until the traffic and toll revenues reached the
point in which the bonds would be repaid by revenue from the
project. He characterized it as being illustrated in the
cascade chart [on slide 3], in which it would be one of the
lower buckets.
2:54:22 PM
CO-CHAIR HUGHES said she recently attended a Transportation
Finance Subcommittee. She referred to federal SAFETEA-LU [Safe,
Accountable, Flexible, Efficient Transportation Equity Act: A
Legacy for Users], funding. She recalled one memo she received
indicated $32.1 million was designated for the KAC.
MR. OTTESEN reported that there was initially over $90 million
in earmark funding, which was used for preconstruction activity
that has happened for nearly a decade. Although some of the
remaining $31 million in funding is being used for right-of-way
acquisition, it is not actually expended. In addition, there is
approximately $23 million in earmarked funds dedicated to the
KAC that has not yet been assigned a project number, but is
obligated. He explained that once the DOT&PF asks to put money
on a project, it obligates the federal funds.
2:55:58 PM
REPRESENTATIVE CLAMAN asked whether the state bonds earmarked
for Knik Arm Crossing (KAC) can be allocated to different
projects.
MR. OTTESEN answered that last year, the legislature approved
$300 million in bonding in House Bill 23 for the KAC,
exclusively, subject to the TIFIA loan approval. Thus, without
an approved TIFIA loan, the bonds won't be sold.
2:56:54 PM
REPRESENTATIVE CLAMAN related his understanding that the bonds
are contingent upon the TIFIA loan, so if the loan doesn't go
through, the state is not authorized to issue the general
obligation (GO) bonds.
MR. OTTESEN answered that he is correct.
2:57:09 PM
CO-CHAIR HUGHES recalled the OMB director indicated a bill still
needed to be passed.
MR. OTTESEN answered that he is not aware of any proposed
legislation. He suggested that there may be some things that
House Bill 23 has expanded, but nothing is required to move
forward with the TIFIA application.
2:58:05 PM
CO-CHAIR HUGHES indicated that AO 271 [Administrative Order 271]
pertained to discretionary funds. She indicated that non-
discretionary funds could still move forward and asked what is
still moving forward.
MR. OTTESEN deferred to Ms. Dougherty.
2:58:48 PM
MR. OTTESEN, in terms of impact, stated that by subtracting out
the earmarks dedicated to the KAC, that the project would
require $271 million of other federal highway funds [FHWA] that
are general purpose, which means that funding could be used on
other projects in the state for National Highway System [NHS]
projects. He said this represents about 90 percent of the FHWA
funding the state receives each year. Thus, if the project was
performed all at once, it would represent a one-year
appropriation of funding at the current level. There are ways
to spread that out, especially since the project is anticipated
to span four years; which would reduce the overall impact to the
STIP.
MR. OTTESEN said for the last three years many projects are
coming in under the estimate, in fact, approximately $100
million per year. The DOT&PF takes the "extra dollars" that
were not needed and find projects in the same year. In response
to a comment, he agreed it is a good problem to have, but it
does mean the design squads have more work to complete. The
DOT&PF has already had $35 million come back this year. The
overall effect of spending $75 million a year to do this project
will be almost nil, he said, if the state takes advantage of the
low bid environment. He anticipated that the trend will
continue since the cost of construction is contingent on the
price of energy.
3:01:36 PM
REPRESENTATIVE HUGHES asked Mr. Ottesen to recap and provide
some figures he mentioned today.
3:01:53 PM
MS. DOUGHERTY referred to Administrative Order 271 (AO 271) and
indicated that the KAC has stopped work with its consultants,
and slowed down the right-of-way work, although acquiring
federal lands is a lengthy process, she said. She did not
anticipate any eminent domain proceedings will be necessary.
The KAC has jumped to work on tolling operation plans that will
be needed in the future. Further, she reported that the KAC has
been "polishing up" the TIFIA letter of interest, which is web-
based. This process includes a variety of studies and
documents, including links to traffic and toll revenues studies,
the National Environmental Policy Act of 1969, and proof that
the KAC can collect tolls. These items can be transmitted in an
electronic format so the TIFIA can click on the hyperlinks and
see the necessary proof.
3:03:23 PM
CO-CHAIR HUGHES said she thought the work was minimal and there
isn't a lot of non-discretionary obligated functions going on.
MS. DOUGHERTY explained that the term "discretionary" can mean a
variety of things. The KAC thinks of federal highway dollars as
being non-discretionary since the FHWA authorizes the agency to
make expenditures that are specifically for right-of-way
acquisition so it can't be used for something else.
3:04:05 PM
CO-CHAIR HUGHES clarified that the AO 271 referred to contracts.
MS. DOUGHERTY, in reference to building demolition, stated that
the KAC is under contract to take buildings off of properties
that have already been purchased. She stated that cancellation
would result in approximately $250,000 non-participating funds
that would need to be general funds.
3:04:39 PM
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 3:04
p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Feb 5 Knik Arm Crossing House Transportation v2 2-5-15.pdf |
HTRA 2/5/2015 1:00:00 PM |
|
| Feb 5 DOT FINAL 15-01-13-White Paper on Knik Bridge Project-FINAL.pdf |
HTRA 2/5/2015 1:00:00 PM |
|
| Feb 5 State Highway Transportation Funds - Research.pdf |
HTRA 2/5/2015 1:00:00 PM |
|
| Feb 5 Oregon Road Usage Fee Program - Research.pdf |
HTRA 2/5/2015 1:00:00 PM |
|
| Feb 5 public testimony - IUOE Local 302.pdf |
HTRA 2/5/2015 1:00:00 PM |
|
| Feb 5 public testimony - fed earmarks email.pdf |
HTRA 2/5/2015 1:00:00 PM |