Legislature(1997 - 1998)

05/02/1998 09:31 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                           MINUTES                                           
                  SENATE FINANCE COMMITTEE                                   
                         2 May 1998                                          
                          9:31 A.M.                                          
                                                                               
                                                                               
TAPES                                                                      
                                                                             
SFC-98, Tape 150, Sides A and B                                                
                                                                               
CALL TO ORDER                                                              
                                                                             
Senator  Bert   Sharp,  Co-chair,  convened  the   meeting  at                 
approximately 9:31 a.m.                                                        
                                                                               
PRESENT                                                                    
                                                                             
In  addition to  Co-chair  Sharp, Senators  Pearce,  Phillips,                 
Donley,  Torgerson, Parnell,  and  Adams were  present at  the                 
meeting.                                                                       
                                                                               
Also present:  Senator  Lyda Green; Senator  Jerry Ward;  Jeff             
Bush,  Deputy   Commissioner,   Department  of  Commerce   and                 
Economic  Development;  Bob Engelbrecht,  Past  President  and                 
Board  Member, Alaska  Visitor's  Association;  Representative                 
John   Cowdery,   Sponsor;   Lydia    Jones,   Staff,   Senate                 
Transportation  Committee;  Mr.  Cliff  Argue,  Vice-President                 
for  Properties and  Facilities,  Alaska  Airlines and  Chair,                 
Anchorage-Fairbanks  Airlines Airport  Affairs Committee;  Ron                 
Lance,  General Manager,  United Airlines,  Anchorage;  Morton                 
Plumb, Jr.,  Director, Anchorage  International Airport;  Kurt                 
Parkan, Deputy Commissioner, Department  of Transportation and                 
Public  Facilities;  aides  to  committee  members  and  other                 
members of the Legislature.                                                    
                                                                               
Via  teleconference:  Edward Merlis,  Senior  Vice  President,             
Government  Affairs, Air  Transport  Association,  Washington,                 
D.C.                                                                           
                                                                               
SUMMARY INFORMATION                                                        
                                                                               
SB 350    ABOLISH TOURISM MARKETING COUNCIL                                    
                                                                             
          CSSB 350(FIN) was REPORTED out of committee with                     
          no recommendation and attached fiscal note by the                    
          Department of Commerce and Economic Development.                     
                                                                               
SB 352    AIRPORT REVENUE BONDS                                                
                                                                               
          CS  SB 352(TRA) was  REPORTED out of  committee with                 
          no recommendation  and attached previously published                 
          fiscal note  by the Department of Transportation and                 
          Public Facilities.                                                   
                                                                             
SENATE BILL 350                                                              
                                                                               
     "An Act relating to tourism and tourism marketing;                        
     eliminating the Alaska Tourism Marketing Council; and                     
     providing for an effective date."                                         
                                                                               
Co-chair  Sharp noted  that  the committee  had a  new CS  for                 
the bill  and asked  for an  explanation  of differences  from                 
the previous version.                                                          
                                                                               
JEFF BUSH,  DEPUTY COMMISSIONER,  DEPARTMENT  OF COMMERCE  AND                 
ECONOMIC  DEVELOPMENT  (DCED),  informed  the  committee  that                 
DCED  had spent  a significant  amount  of  time working  with                 
the Alaska  Visitor's Association  (AVA); the new  proposed CS                 
was a compromise acceptable to both the state and AVA.                         
                                                                               
Mr.  Bush  provided  an  overview   of  the  legislation.  The                 
department would  be appropriated  money annually (as  part of                 
a  contractual   line-item)  that   would  be  used   for  the                 
marketing  program.   The  state,  through  the   Division  of                 
Tourism  and  DCED, would  put  forth  the items  they  wanted                 
done in  a tourism  marketing program;  a large percentage  of                 
that would  be done as  a large marketing  program, but  there                 
would be  other smaller  programs, such  as the Tourism  North                 
program.  The state  had to  make  an offer  to the  qualified                 
trade  association  under  the contract,   if the  match  were                 
met. All  of the program  could be done  and matched,  but the                 
trade association  would have  the right  of first refusal  on                 
all tourism-related  contracts and  could reject parts  of the                 
program it  did not want  to do (for  example, not wanting  to                 
market  tourism  in  Korea).  The  association  could  do  the                 
piece internally or find another contractor to do the work.                    
                                                                               
Mr. Bush  noted that on  the Senate side,  there had a  been a                 
request to  raise the match  in the bill  to equal the  amount                 
put forth  in the new  millennium plan;  the bill would  raise                 
the match  requirement  in the  private sector  to 60  percent                 
after three years.                                                             
                                                                               
Co-chair Sharp  noted that the  draft being discussed  was the                 
"L" version.                                                                   
                                                                               
Senator  Pearce MOVED  to ADOPT  the "L" version  of CSSB  350                 
(FIN)  (\L, 5/2/98,  Cook) as  a working  document before  the                 
committee. There being no objection, it was so ordered.                        
                                                                               
BOB  ENGELBRECHT,  PAST PRESIDENT  AND  BOARD  MEMBER,  ALASKA                 
VISITOR'S  ASSOCIATION,  testified  that  he did  not  dispute                 
anything  said so  far. He  concurred that  meetings with  the                 
state had  resulted in large areas  of agreement and  that the                 
CS was  a compromise bill  that AVA  was comfortable  with. He                 
referred  to  a  letter  from  Tina  Lindgren  (the  Executive                 
Director of  AVA) that accurately  characterized the  position                 
of the association.  He reported  that the process  of working                 
with  AVA members  and  others  in the  visitor  industry  had                 
been  thorough;  the bill  would  make  some changes  to  some                 
basic tenants, but the compromises were reasonable.                            
                                                                               
Senator  Parnell   queried  language   on  page  3,   line  21                 
regarding  the  right  of first  refusal.  He  questioned  the                 
time-line of  the right and wondered  whether an entity  could                 
essentially  have  it  forever.   Mr.  Bush  referred  to  the                 
section  before  that required  a  contract with  a  qualified                 
trade  association  willing  to  make  the  match,  and  would                 
require the  state to  enter into the  contract. He offered  a                 
possible  scenario of when  the right  of first refusal  might                 
come up:  Mid-contract, the Division  of Tourism could  decide                 
it wanted  a television ad on  the Marine Highway  System. The                 
department   would  have   to  go  to   the  qualified   trade                 
association  and offer  them the  opportunity  to produce  the                 
commercial,  provided   they  came  up  with  the  50  percent                 
match.                                                                         
                                                                               
Senator  Parnell  clarified   that  the  provision  would  not                 
extend  to  the initial  contract  with  the  qualified  trade                 
association,  but to the  other contract.  Mr. Bush  responded                 
that  it  would  essentially  extend  to  all  contracts;  the                 
original  contract could  be  a right  of first  refusal in  a                 
sense, because  the department  would have  to go to  them up-                 
front and offer them the contract for a year.                                  
                                                                               
Senator  Parnell asked  whether  the trade  association  would                 
have  the  right  of first  refusal  to  extend  the  specific                 
contract  or  any other  tourism-related  contract.  Mr.  Bush                 
responded that  they would not  have a right of first  refusal                 
to extend  the  contract; if  there were  two qualified  trade                 
associations  in  a particular  year,  the bill  would  exempt                 
the  particular  contract  from  procurement,  but  would  not                 
prevent  the  department  from  going   through  some  limited                 
solicitation  process  if  there   were  two  qualified  trade                 
associations at the beginning of the year.                                     
                                                                               
Senator  Parnell  asked whether  the  right of  first  refusal                 
language  was  anywhere  else  in the  bill  besides  page  3,                 
lines 21 through 25. Mr. Bush responded no.                                    
                                                                               
Senator  Parnell commented  that he  read the  right of  first                 
refusal  to  extend to  any  other  tourism-related  contract.                 
Mr.   Bush  agreed;   given   the  match   and   money-raising                 
requirements,  he opined that it  would be very difficult  for                 
another qualified trade association to come forward.                           
                                                                               
Senator  Torgerson pointed  to  page 4,  line 7  and the  word                 
"if." He  noted that there had  been a previous concern  about                 
the  association  not  making  the  [mailing]  list  available                 
after  the  state  made  a  substantial  investment  into  the                 
marketing  council. In  all previous  drafts,  there had  been                 
agreed-upon  and adopted language;  now it seemed there  was a                 
stipulation  that  if the  department  decided,  it could  let                 
others into  the market. He had  a problem with the  word "if"                 
as it could  leave the power to  say yes or no on  selling any                 
list  in  control   of  the  board  of  the  qualified   trade                 
association.  Mr. Bush answered  that the language was  put in                 
by drafters  trying to  re-work original  language adopted  by                 
the  committee. The  current version  of  the bill  stipulated                 
that the  list had  to be made  available  to every person  at                 
the  same price  (higher for  non-participants)  if the  right                 
to use a mailing list was sold.                                                
                                                                               
Senator  Torgerson maintained  that  a non-member  could  also                 
be  told that  the  list  was not  being  sold, but  the  list                 
could be provided  to members. He  objected to the way  it was                 
written.  Mr.  Bush  answered  that   the  language  could  be                 
corrected through an amendment.                                                
                                                                               
Senator  Torgerson wanted  more  time to  study the  document.                 
He  noted  that   he  had  other  concerns.  He   referred  to                 
Amendment  6 (offered  by himself)  that  had stipulated  that                 
materials  produced would  be turned back  to the state  after                 
the contract  was over. He asked  why the language was  not in                 
the  version being  discussed.  Mr.  Bush responded  that  the                 
issue had  been dealt with  through a  change made on  page 4,                 
lines  3,  4  and  5;  all  the  materials   were  made  joint                 
property   of  the   qualified  trade   association  and   the                 
division.                                                                      
                                                                               
Co-chair Sharp  pointed out that  the measure had  started and                 
remained  at  30 percent  until  three  years had  passed.  He                 
thought  it would  be  difficult  to create  steps  in the  CS                 
because of Sections 6 and 7.                                                   
                                                                               
In  response to  a question  regarding  the  intent to  report                 
the bill  out of committee,  Co-chair  Sharp thought  the bill                 
would  die if  it  did not  move  out  right away.  There  was                 
discussion about the need for an amendment.                                    
                                                                               
Mr. Bush  detailed that  the problem  (related to the  mailing                 
lists)  was  with  the word  "sells"  and  that  changing  the                 
language  to  "provides"  would  fix it.  The  language  would                 
then  be "if  the  qualified trade  association  provides  the                 
right  to use a  mailing list  generated  under the  contract,                 
the list must  be made available  to every person at  the same                 
price." He  noted that there  could be  a charge based  upon a                 
pro-rata  percentage   of  the  participation   fee  for  non-                 
members.                                                                       
                                                                               
Senator Torgerson MOVED to ADOPT conceptual Amendment 1:                       
                                                                               
     On page 4, line 7                                                         
     Delete "sells" and insert "provides"                                      
                                                                               
There being no OBJECTION, Amendment 1 was adopted.                             
                                                                               
Mr. Bush  spoke to the  fiscal note  by the department,  which                 
had not  been drafted  or distributed.  The fiscal impact  was                 
related  to the  fact  that the  state  would  not longer  get                 
program receipts but would contract the work out.                              
                                                                               
Senator   Parnell  MOVED   to   REPORT  CSSB   350(FIN)   from                 
committee    with   individual    recommendations   and    the                 
accompanying  fiscal note.  There being  no OBJECTION,  it was                 
so ordered.                                                                    
                                                                               
CSSB  350(FIN)   was  REPORTED   out  of  committee   with  no                 
recommendation  and  attached fiscal  note  by the  Department                 
of Commerce and Economic Development.                                          
                                                                               
[There was a recess for floor session]                                         
                                                                               
SENATE BILL 352                                                              
                                                                               
     "An  Act  relating  to  international   airports  revenue                 
     bonds; and providing for an effective date."                              
                                                                               
Co-chair Sharp opened public testimony for the bill.                           
                                                                               
[Brief AT EASE]                                                                
                                                                               
LYDIA JONES, STAFF, SENATE TRANSPORTATION COMMITTEE, read                      
the sponsor statement for SB 352:                                              
                                                                               
     Senate  Bill 352 amends the  statutory bonding  limit for                 
     the  state  of  Alaska  to  sell  international   airport                 
     revenue  bonds. The current  limit is $100,825,000.  This                 
     bill changes  the limit to  $280 million. The  difference                 
     between  the old  amount  and the  new  amount is  $179.1                 
     million,  which is  the amount  of new  debt proposed  to                 
     finance  passenger  terminal  improvements  at  Anchorage                 
     International    Airport.    This    increased    bonding                 
     authority  is only  one component  of  the financing  for                 
     proposed   airport   improvements.    Another   component                 
     included    federal    highway   funds    for    curbside                 
     improvements   and   a  surface   transportation   access                 
     corridor.  A third component  is federal airport  funding                 
     for ramp and airside improvements.                                        
                                                                               
     The  bonding cap contained  in this  bill is $25  million                 
     less  than a  similar bill  introduced  by the  governor.                 
     This  bill  contemplates  an additional  $25  million  in                 
     federal   funding.  Consequently,   we  can  reduce   the                 
     amount  the state  needs  to borrow.  By  taking the  $25                 
     million  off  the table,  it  will  not be  available  to                 
     expand   the  project.   The  $179   million  (plus)   in                 
     proposed  terminal  improvements  represents  the  single                 
     largest   public-works   project  the   state  has   ever                 
     undertaken.  The wisdom of taking  on such a  high amount                 
     of  debt and whether  the international  airport  revenue                 
     fund  can afford  the debt  remains to  be proven in  the                 
     committee-hearing  process.  Several  of  the  small  air                 
     carriers   have  expressed  concern  that   the  proposed                 
     project  is too  big.  They voted  against  it but  lost.                 
     Still,  their concerns  may  be valid  and we  owe it  to                 
     them  to  make the  project  no  more expensive  than  is                 
     necessary.                                                                
                                                                               
     This  bill   is  also  notable  for  what   it  does  not                 
     include.  It differs  from  the governor's  bill in  that                 
     it does  not change the  statutes to allow for  undefined                 
     brokerage   fees  and  unspecified   obligations   to  be                 
     charged   against   the   IARF   [international   airport                 
     revenue   fund].  Additionally,   SB  352  requires   the                 
     Department  of Transportation  and  Public Facilities  to                 
     submit  an  advanced fiscal  year  spending  plan to  the                 
     legislature by January 1 each year of the project.                        
                                                                               
Ms.  Jones noted  that  the bill  was  identical  to CSHB  432                 
(Representative  Cowdrey's  bill).  On  the  House  side,  the                 
bill had  five hearings with over  nine hours of testimony.  A                 
multitude  of questions  concerning  plans  and financing  for                 
the  airport project  were asked  by the  international  trade                 
and  tourism  committee;   the  questions  were   answered  in                 
writing  by  the  Department  of  Transportation   and  Public                 
Facilities   (DOT/PF).  The  information   was  contained   in                 
several  volumes  that  were  available  for  the  committee's                 
review.                                                                        
                                                                               
Ms.  Jones also  noted  that every  effort  had  been made  to                 
make  sure  that   many  aspects  of  the  project   would  be                 
contracted   to  local   contractors  (on   the  record   from                 
DOT/PF).  She   added  that  10   percent  of  the   Anchorage                 
workforce   was  airline-related;   the   project  would   add                 
substantially to local labor.                                                  
                                                                               
Co-chair  Sharp  asked  the  volumes   of  information  to  be                 
available for committee members.                                               
                                                                               
MR.  CLIFFORD   ARGUE,  VICE-PRESIDENT   FOR  PROPERTIES   AND                 
FACILITIES,  ALASKA AIRLINES  and  CHAIR, ANCHORAGE-FAIRBANKS                  
AIRLINES AIRPORT  AFFAIRS COMMITTEE,  testified in  support of                 
SB 352.  He detailed that the  airlines/airport committee  was                 
comprised   of  25  airlines   that  had   signed  lease   and                 
operating  agreements with  one or both  of the  international                 
airports  in Anchorage  and Fairbanks.  He maintained  that SB
352 would  authorize  the issuance  of revenue  bonds to  fund                 
the  much-needed   expansion  of  the  domestic   terminal  at                 
Anchorage International  Airport.  He focused on three  areas:                 
the process, the project, and payments.                                        
                                                                               
Mr.  Argue  began  by  discussing  the  process.  In  November                 
1997, the  airlines voted, in  accordance with the  agreements                 
each  had  executed   and  long-standing  past   practice,  to                 
approve  the financing  and construction  of the terminal  re-                 
development  project  in  Anchorage, with  a  total  estimated                 
cost  of  $191 million.  During  the  voting  process,  DOT/PF                 
pledged  an  additional  $26.5  million   in  federal  highway                 
funds  to  the   project,  leaving  a  net  total   of  $164.5                 
million.  The  vote also  approved  the  Alaska  International                 
Airport  System (AIAS)  to issue airport-revenue  bonds  in an                 
amount  necessary  to cover  the  new net-project  cost,  plus                 
financing  and escalation,  with the  understanding that  AIAS                 
would continue  to use  its best efforts  to obtain  alternate                 
sources  of  funding  and financing  to  reduce  airline  cost                 
exposure. They  hoped that there  would be additional  federal                 
airport improvement program funds available.                                   
                                                                               
Mr.  Argue  reported   that  he  had  been  involved   in  the                 
planning and  development of  airport terminal facilities  for                 
some thirty  years; he  contended that the  work done  to date                 
on  the Anchorage  project  was among  the  most thorough  and                 
professional   he  had   seen.  The   needs  assessment,   the                 
conceptual  solutions, and the  financing plan were  carefully                 
developed   by   an  expert   team   of  airport   staff   and                 
consultants.  There had been  excellent coordination  with the                 
airlines  at  every   step  in  the  process,   with  numerous                 
meetings  and reviews.  He added  that his  colleagues from  a                 
number  of  other   airlines,  including  Lynden,   Northwest,                 
United,  Delta,  Reno,  America  West,  Federal  Express,  and                 
United Parcel  Service, shared the  feeling about  the quality                 
of the process and supported the project.                                      
                                                                               
Mr. Argue  informed the committee  that the previous  week, he                 
had served  on a panel  at the annual  economic conference  of                 
the   Airports   Council   International    (a   large   trade                 
association   of  airports  throughout   the  world)   in  San                 
Francisco.   The  session   was   co-sponsored   by  the   Air                 
Transport  Association,  which was  made up  of the  scheduled                 
domestic airlines  in the U.S.  as well as some  international                 
carriers.  One   of  the  focuses  was  on  the   relationship                 
between  airlines  and  airports.  Very  difficult  situations                 
were  reported, but  he was  pleased  that he  could point  to                 
the  Anchorage  experience as  a  model for  good  cooperation                 
that  resulted  in the  project  eventually  endorsed  by  the                 
airlines.                                                                      
                                                                               
Mr.  Argue  continued  that  with  respect  to  the  Anchorage                 
project, the  serious deficiencies  in the existing  Anchorage                 
domestic  terminal  were well  known,  both as  documented  in                 
studies and  experienced by many  travelers. He stressed  that                 
the  plan to  remedy  existing  shortcomings  and  accommodate                 
forecast  growth between  the present  and the  year 2005  was                 
sound  and  conservative,  and  would   provide  Alaskans  and                 
visitors  from outside  the state  with  a modern,  efficient,                 
and  functional airport  terminal,  serving  the largest  city                 
and air-transportation  hub  of the state.  The project  would                 
allow passengers  flying out  of Anchorage  to use the  newest                 
technologies  to  speed  progress  through  the  terminal.  He                 
emphasized  that Alaska Airlines  was especially exited  about                 
the opportunity  to offer better  customer service  as quickly                 
as possible through a greater use of new technologies.                         
                                                                               
Mr. Argue  turned to his  third area  of focus: financing.  He                 
urged  the  committee  to give  AIAS  maximum  flexibility  to                 
issue  the bonds necessary  for  the project  all at one  time                 
and  immediately,  which  he  believed   was  the  most  cost-                 
effective  way to  proceed,  rather than  trying  to split  it                 
up,  phase it,  or  otherwise delay  it.  The  bonds would  be                 
backed by  airport revenues  generated  from rates, fees,  and                 
charges   to  the   airlines,  concessionaires,   and   others                 
benefitting  from the  airport.  He argued  that the  proposed                 
revenue  bonds would  in  no way  impact the  state's  general                 
fund,  nor  would  they  harm  the   ability  for  either  the                 
Anchorage  or  Fairbanks  airports   to  continue  to  develop                 
other   necessary    capital   improvements    using   already                 
established  funding  mechanisms.   Additional  costs  to  the                 
airlines,  when  considered  on  a cost-per-passenger   basis,                 
would  be modest,  and  the airlines  were  ready  to pay.  He                 
maintained   that   the   AIAS  proposal   was   prudent   and                 
reasonable and  would fund needed  improvements to one  of the                 
major economic  engines of  the state,  and that the  proposed                 
project   was  small   compared   to  what   was  being   done                 
throughout the  rest of the country.  He listed projects  that                 
were planned or underway on the West coast:                                    
                                                                               
   · Seattle, planned at $1.7 billion                                          
   · San Francisco, underway at $2.7 billion                                   
   · Portland, underway at over $800 million so far                            
                                                                               
Mr. Argue  acknowledged  that some  of the  projects were  far                 
more  complex  and  expensive  than  the   proposed  Anchorage                 
project.  He   urged  the  committee   to  move  the   project                 
forward.  He noted that  Denny Bird,  the general manager  for                 
Federal Express  in Alaska, was  unable to be at the  meeting,                 
but fully supported the project.                                               
                                                                               
RON  LANCE,  GENERAL  MANAGER,  UNITED  AIRLINES,   Anchorage,                 
testified  that  in  January  of  1997,  United  Airlines  had                 
approximately  45 employees  in  Alaska; at  the present  date                 
there  were  225 employees  living  mostly  in  Anchorage.  He                 
thought the  numbers represented  a significant investment  in                 
the   Alaskan   economy   and   reflected   United   Airlines'                 
confidence in  the state's ability  to support its  growth. He                 
reported  that   at  present,   operations  were  25   percent                 
passenger-related   and  75   percent  cargo-related.   United                 
Airlines  intended  to expand  cargo  operations  in the  near                 
future;   he  stated   that   the  present   facilities   were                 
inadequate  to support  further  expansion in  both areas  and                 
needed  to be corrected.  From United  Airline's  perspective,                 
it  would  have   been  helpful  if  the  proposed   Anchorage                 
International  Airport expansion  plan represented  in SB  352                 
had been  passed three  years prior.  He reported that  others                 
would testify about the need for the facilities as well.                       
                                                                               
Mr. Lance  emphasized that  the existing  facility simply  did                 
not  fit  the  size  of  passenger  and  cargo  traffic  going                 
through  the Anchorage  airport. He stressed  the fairness  of                 
the process  by  which the  expansion plans  were decided.  He                 
noted  that  United   was  an  employee-owned   airline  which                 
attempted  to move  policy decisions  to  the lowest  possible                 
level.  All  of   the  airlines  involved  had   a  chance  to                 
participate  in  the  decision-making  process  as  well.  The                 
Airport  Affairs Technical  Committee reviewed  the plans  and                 
reduced them  from as many as  15 concepts down to  one; there                 
was   a  lot   of  give-and-take   during   the  process.   He                 
maintained  that everyone  had  a say  and  that a  compromise                 
solution  was  reached  that  would  ultimately  pay  for  the                 
project.  He urged  timely  movement  of the  legislation  and                 
noted  that more  delay would  result in  more triple  parking                 
around   gates  and   problems   for  passengers   and   cargo                 
customers.                                                                     
                                                                               
Senator  Parnell  asked  who had  opposed  the  decision.  Mr.                 
Argue  answered  that  several  carriers   voted  against  the                 
project.  He explained  the  operating agreement  process  for                 
the  Anchorage   and  Fairbanks  airports:  In   order  for  a                 
project  to not  pass, two-thirds  of the  signatories had  to                 
vote  against the  project; that  did not  happen. There  were                 
10 votes  in favor and  12 against  the project. However,  the                 
positive votes  for the project  represented about  85 percent                 
of  the  carriers operating  in  the  domestic  terminal,  the                 
terminal most heavily affected by the project.                                 
                                                                               
Senator  Pearce  asked  for the  names  of  the  international                 
carriers  that voted  against the  project.  Mr. Argue  listed                 
the   negative   votes:  Asiana   Airlines,   Cathay   Pacific                 
Airlines,  China Airlines,  Japan Airlines,  Korean  Airlines,                 
Lufthansa Airlines, and Nippon Airlines Cargo.                                 
                                                                               
Senator  Pearce   reminded  the  committee  that   the  listed                 
carriers would not get the tax.                                                
                                                                               
Co-chair  Sharp  queried  the  domestic  carriers  that  voted                 
against the  project. Mr. Argue  listed the domestic  carriers                 
that voted  against the project:  ARI (?) Aviation,  Evergreen                 
International   Aviation,   Northern  Air   Cargo,   Peninsula                 
Airways,  and Reeve  Aleutian  Airways.  He noted  that  Reeve                 
Aleutian  Airways had  made  a statement  on  the ballot  that                 
they  would  vote  yes if  the  alternate  source  of  funding                 
passenger  facility charges  was included  in the project;  he                 
noted  an April 15  letter to  Senator Ward  stating that  the                 
carrier supported the project.                                                 
                                                                               
Co-chair  Sharp  pointed  to quoted  amounts  spent  by  other                 
airports that  he did not think  related to Alaska  because of                 
the  smaller  size  and  the  fact   that  most  business  was                 
related  to cargo.  He  did not  want United  to  pull out  of                 
Alaska  because  of  lease rates.  Mr.  Lance  responded  that                 
landing  fees  and  lease  costs  were a  small  part  of  the                 
overall cost of doing business.                                                
                                                                               
Co-chair  Sharp  said  he  would  ask  DOT/PF  about  expected                 
increases  in lease  rates  to finance  the  debt. He  thought                 
some  of the airports  with  massive improvements  had lost  a                 
lot of business  from smaller  airlines that could  not afford                 
the  increased  costs.  He was  concerned  that  the  carriers                 
that  voted   against  the   project  were  the   intra-Alaska                 
carriers  that did  90  percent of  the business.  He  queried                 
Reeve  Aleutian  Airways  details. Mr.  Argue  responded  that                 
the  carrier  had  changed  its  conditions   from  the  first                 
ballot mentioned to the letter to Senator Ward.                                
                                                                               
Co-chair  Sharp thought it  was naïve  to believe there  would                 
not  be  an increase  in  passenger-service  charges  after  a                 
quarter  billion  dollars  worth  of  new  financing.  He  was                 
concerned  that a  $3.00 charge  on a  $30.00 trip  was a  lot                 
more  than  a  $3.00  charge  on  a  trip  to  San  Francisco,                 
although  Juneau  had  just  excluded   charging  the  fee  on                 
smaller trips.                                                                 
                                                                               
EDWARD  MERLIS,  SENIOR VICE  PRESIDENT,  GOVERNMENT  AFFAIRS,                 
AIR  TRANSPORT   ASSOCIATION  (ATA),  WASHINGTON,   D.C.  (via                 
teleconference),  testified that  ATA was the principal  trade                 
and  service  organization  of  the  U.S.   airline  industry.                 
Members  transported more  than 95 percent  of passengers  and                 
cargo shipped  on U.S. airlines.  He stated that ATA  believed                 
that the  process that had been  followed at Anchorage  should                 
serve  as a hallmark  of what  airport  expansion projects  in                 
cooperation   with   airlines   should  be.   Throughout   the                 
country,  there   were  efforts   by  local  governments   and                 
airport  authorities  to  control   the  costs  and  scope  of                 
airport  expansions.  He  opined that  the  Anchorage  project                 
was  appropriately  sized and  priced.  He reported  that  ATA                 
urged the prompt passage of the legislation.                                   
                                                                               
[SFC-98, Tape 150, Side B]                                                     
                                                                               
Mr. Merlis  spoke  to the  need to cover  anticipated  federal                 
costs of the Anchorage expansion program.                                      
                                                                               
Co-chair  Sharp queried  the projected  curve  of increase  on                 
existing  fees and  lease costs  to finance  the debt  service                 
of the proposed project.                                                       
                                                                               
MORTON PLUMB, JR., DIRECTOR,  ANCHORAGE INTERNATIONAL AIRPORT,                 
replied that the information was  contained in the two volumes                 
provided for the committee. He  referred to a handout given to                 
committee members with  a short synopsis (page 5);  he did not                 
have  percentages, but  had  approximate  numbers: the  change                 
would be $32.97 in 1999 to around $41.75 in 2010.                              
                                                                               
Co-chair Sharp  conjectured an  increase of about  25 percent.                 
He  asked whether  the plan  included  increases in  passenger                 
fees. Mr. Plumb  responded that he was referring  to passenger                 
facility  charges  (PFC),  which  were  not  included  in  the                 
current proposal. The  plan did not address the  future use of                 
PFCs.                                                                          
                                                                               
Co-chair Sharp  referred to  past testimony  when the  idea of                 
PFCs was  discussed. He queried  the annual amount  of revenue                 
that had been anticipated during the discussions.                              
                                                                               
KURT    PARKAN,    DEPUTY    COMMISSIONER,    DEPARTMENT    OF                 
TRANSPORTATION  AND   PUBLIC  FACILITIES,  replied   that  the                 
Anchorage  airport  was  anticipated   to  generate  about  $5                 
million   annually.   He   recalled  that   there   had   been                 
considerable concern expressed about PFCs.                                     
                                                                               
Co-chair Sharp  questioned the process for instituting  a PFC.                 
Mr. Parkan  responded that  the process  was that  the airport                 
would  collect  the PFCs  after  going  through a  process  of                 
identifying a project that PFCs  would be used for, consulting                 
with the  carriers that would  collect the fee,  presenting an                 
application to the Federal Aviation  Administration (FAA), and                 
going through  a public process.  Then, FAA would  approve the                 
collection  of  PFCs.  He  noted   that  Juneau  had  recently                 
implemented a PFC program and  would start collecting in July.                 
He added  that the  legislature would have  to approve  of the                 
collection  and the  expenditures  of funds  for the  project;                 
there  would   be  no   collection  of   a  PFC   without  the                 
legislature.                                                                   
                                                                               
Co-chair  Sharp  asked  whether  the fees  would  have  to  be                 
appropriated  by  the  legislature   even  if  the  fees  were                 
collected by the Anchorage International  Airport or the AIAS.                 
Mr. Parkan responded in the affirmative.                                       
                                                                               
Co-chair  Sharp  questioned the  duration  of  the bonds.  Mr.                 
Parkan (and others) replied 25 years.                                          
                                                                               
Co-chair  Sharp pointed  out that  there could  be a  possible                 
cost-shift   of  $125   million  onto   passengers,  with   no                 
reflection  of  the  costs  in   lease  payments.  Mr.  Parken                 
responded  that SB  352  was only  the  authorization for  the                 
bond. He noted  that PFCs could be used to repay  a portion of                 
the  debt  payment.  While  the  department  had  proposed  $5                 
million through  PFCs the previous  year, they had  since been                 
working with  the FAA to  find a way of  coming up with  a PFC                 
program reflecting  the unique nature  of Alaska; the  FAA was                 
considering  exempting  certain  portions  of the  state  from                 
having to  pay the  PFCs, which would  reduce the  revenue. He                 
did not  have an estimate of  what would be collected  in PFCs                 
in the future,  but it would be less than the  $5 million that                 
would be collected if everybody in the state were charged.                     
                                                                               
Co-chair  Sharp asked  whether the  fees could  be imposed  by                 
AIAS,  with  proper  public  notice  and  so  on.  Mr.  Parken                 
answered that  the sponsor of  the airport did  the processing                 
of the application.                                                            
                                                                               
Co-chair Sharp asked  whether the users would be  able to vote                 
on the  issue. Mr. Parkan replied  that the question  would be                 
taken  to  the  carriers  that operated  at  the  airport  for                 
consideration.  He  added  that   interest  expressed  by  the                 
carriers would then  be given to FAA for  their consideration;                 
FAA would ultimately approve or deny the PFC.                                  
                                                                               
Co-chair Sharp  pointed out  that the  majority of  the voters                 
would  be  cargo  people,  and   they  would  not  care  about                 
passenger-service charges.  He was concerned the  $125 million                 
would be shifted  to the passengers if it came  to a vote. Mr.                 
Parkan responded  that the  operating agreement  was different                 
than  the process  for PFCs.  He asserted  that it  was not  a                 
matter of a majority vote.                                                     
                                                                               
Senator  Pearce pointed  out that the  reason the  legislature                 
got involved  in the first place  was that DOT/PF had  to come                 
to  them  for  an RPL  [revised  program  -  legislative]  for                 
additional receipt  authority to be able to  collect the fees.                 
She stressed  that the legislature  would have a role  to play                 
because  without  receipt authority,  the  PFCs  could not  be                 
charged.                                                                       
                                                                               
Mr. Parkan noted  that a considerable number  of the passenger                 
carriers  supportted  the  concept  of  PFCs.  Co-chair  Sharp                 
observed  that the  smaller passenger  carriers  did not.  Mr.                 
Parkan noted that Reeve was willing  to collect for Alaska. He                 
acknowledged that the response was mixed.                                      
                                                                               
Co-chair  Sharp pointed  out  that there  were $25,150,000  of                 
current capital projects in the  capital budget, excluding the                 
Anchorage airport project.                                                     
                                                                               
[AT EASE]                                                                      
                                                                               
Co-chair  Sharp queried the  current Statewide  Transportation                 
Improvement  Programs (STIP)  out to 2001  related to  airport                 
improvements. Mr.  Parkan responded  that there was  a portion                 
in the STIP that was a little over $26 million.                                
                                                                               
Co-chair  Sharp  relayed  that  his main  concern  related  to                 
tearing down the existing ramps  and replacing the ramping; he                 
asked whether that was still  in the STIP. Mr. Parken answered                 
that there was a portion still  in the STIP and the department                 
would be  requesting authorization  in the  coming year  for a                 
piece of that.  He that the Intermodal  Surface Transportation                 
Efficiency  Act   (ISTEA)  was  promoted;   the  International                 
Airport  Road  going  up  to  the terminal  was  part  of  the                 
national  highway  system  (NHS)  and  qualified  for  federal                 
highway funding.                                                               
                                                                               
Co-chair  Sharp questioned  the total  NHS allocation  for the                 
ISTEA. Mr. Parkan  responded that there would  only be partial                 
funding for the  current year, but the normal  amount was over                 
$200 million. The new authorization  was expected to be around                 
$300 million.                                                                  
                                                                               
Co-chair  Sharp   indicated  that   the  version   before  the                 
committee  was the Senate  Transportation Committee's  version                 
of HB 352, which  called for an increase in  authority of $179                 
million.                                                                       
                                                                               
Senator Donley MOVED to REPORT  CSSB 352(TRA) out of committee                 
with individual  recommendations  and any accompanying  fiscal                 
notes.                                                                         
                                                                               
Co-chair Sharp OBJECTED. A roll call was taken on the motion:                  
                                                                               
IN FAVOR: Parnell, Phillips, Donley, Pearce                                    
OPPOSED: Sharp                                                                 
Senators Adams and Torgerson were absent from the vote.                        
                                                                               
The MOTION PASSED (4/1).                                                       
                                                                               
Senator Donley stated  for the record that  he shared Co-chair                 
Sharp's  concerns   about  the  structure  of   the  STIP  and                 
inclusion of  the ramp  project in the  STIP. He  believed the                 
administration should be on notice  that the item might not be                 
approved by the legislature, as it should be an airport cost.                  
                                                                               
Co-chair Sharp  referred to  a meeting  in December  1997 with                 
the airport personnel and DOT/PF.  He had asked how many other                 
airport authorities used ISTEA money  to get up the front door                 
on ramping and  parking access. The response had  been one, at                 
Dulles International  Airport outside  of Washington,  D.C. He                 
reiterated concerns.                                                           
                                                                               
CS  SB  352(TRA)  was  REPORTED   out  of  committee  with  no                 
recommendation and  attached previously published  fiscal note                 
by the Department of Transportation and Public Facilities.                     
                                                                               
ADJOURNMENT                                                                
                                                                               
Co-chair Sharp adjourned the meeting at 12:17 p.m.                             

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