Legislature(2001 - 2002)
03/26/2002 09:19 AM Senate FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
March 26, 2002
9:19 AM
TAPES
SFC-02 # 42, Side A
SFC 02 # 42, Side B
SFC 02 # 43, Side A
CALL TO ORDER
Co-Chair Pete Kelly convened the meeting at approximately 9:19 AM.
PRESENT
Senator Pete Kelly, Co-Chair
Senator Dave Donley, Co-Chair
Senator Jerry Ward, Vice Chair
Senator Lyda Green
Senator Gary Wilken
Senator Alan Austerman
Senator Loren Leman
Senator Donny Olson
Also Attending: SENATOR JOHN TORGERSON; SENATOR ROBIN TAYLOR;
SENATOR GENE THERRIAULT; GREGG MALONEY, Special Education, Division
of Teaching and Learning Support, Department of Education and Early
Development; BOB LABBE, Director, Division of Medical Assistance,
Department of Health and Social Services; DAN EASTON, Director,
Division of Facility Construction & Operation, Department of
Environmental Conservation; BRAD PIERCE, Senior Economist, Office
of Management & Budget, Office of the Governor
Attending via Teleconference: From Anchorage: GOVERNOR BILL
SHEFFIELD; MARK MYERS, Director, Division of Oil and Gas,
Department of Natural Resources; WILL ABBOTT, Commissioner,
Regulatory Commission of Alaska, Department of Community and
Economic Development; From Fairbanks: ANDY WARWICK, Chair of Board
of Directors, Fairbanks Water & Sewer, Inc
SUMMARY INFORMATION
SB 345-SCHOOL SERVICES FOR DISABLED STUDENTS
The Committee heard from the sponsor, the Department of Education
and Early Development, and the Department of Health and Social
Services. The bill was moved from Committee.
SB 319-SHALLOW NATURAL GAS LEASING
The Committee heard from the sponsor, the Department of Natural
Resources, and took public testimony. One amendment was considered
and adopted, and the bill reported from Committee.
SB 280-WATER/SEWER/WASTE GRANTS TO UTILITIES
The Committee heard from the sponsor, the Department of
Environmental Conservation, the Department of Community and
Economic Development, and industry representatives. The bill was
held in Committee.
SB 111-BONDS TO FUND PORTS AND HARBORS
The Committee heard from the sponsor, the Office of the Governor,
and took public testimony. The bill was held in Committee.
SENATE BILL NO. 345
"An Act relating to medical assistance for rehabilitative
services for certain children with disabilities; relating to
agreements to pay medical assistance for covered services paid
for or furnished to eligible children with disabilities by a
school district; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Senator Green, the sponsor of the bill, informed the Committee this
bill would allow school districts to act as vendors in supplying
special services to Medicaid eligible students thereby qualifying
for reimbursement from the federal Medicaid program for those
services. She noted the passage of this bill would allow Alaska to
join 42 other states already being reimbursed through this funding
mechanism.
Senator Green noted these services for students with learning
disabilities and other special needs are already provided and
expensed in existing school district budgets. She estimated the
expected reimbursement monies could accrue several million dollars
for the State's school districts and supplement their budgets. She
stressed that school districts would be held accountable for
establishing and maintaining a billing process for this Medicaid
reimbursement program.
Senator Green noted the accompanying fiscal note is the result of
the Department of Health and Social Services' need to employ a
program administrator to oversee this program. She voiced concern
that small districts might need assistance from larger districts to
establish a billing system, but clarified this would be a
"voluntary" rather than mandatory program involving federal
receipts.
GREGG MALONEY, Director of Special Education, Division of Teaching
and Learning Support, Department of Education and Early
Development, informed the Committee that school districts are
experiencing increasing operating costs, and the Medicaid funds
generated from this program could "help offset" the increasing
expenses without requiring "significant" state resources.
Co-Chair Kelly explained the proposed reimbursement process would
entail the State providing funding for the special services that
school districts provide, the federal Medicaid program would
reimburse the school districts for those services, and the school
districts would reimburse the State.
Mr. Maloney responded this bill does not mandate the process Co-
Chair Kelly outlined; however, suggests it as an option. Mr.
Maloney stated that each participating school district would work
with the Department to develop a plan.
AT EASE 9:25 AM / 9:27 AM
BOB LABBE, Director, Division of Medical Assistance, Department of
Health and Social Services, echoed Mr. Maloney's comments regarding
the bill.
Senator Ward mentioned that Mr. Labbe had previously worked with
this Medicaid reimbursement program in Oregon.
Senator Green offered a motion to "move SB 345 out of Committee
with accompanying fiscal notes and individual recommendations."
There being no objections, SB 345 was REPORTED from Committee with
a previous $138,000 fiscal note dated 3/05/02 from the Health
Purchasing Group, Division of Medical Assistance, Department of
Health and Social Services, and a new $787,000 fiscal note dated
3/05/02 from Medicaid Services, Division of Medical Assistance,
Department of Health and Social Services.
CS FOR SENATE BILL NO. 319(RES)
"An Act relating to shallow natural gas leasing; and providing
for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
SENATOR JOHN TORGERSON, sponsor of the bill, explained that the
original shallow gas leasing program was established to enable
"exploration and production of shallow gas lease deposits in rural
areas to supply energy" to rural area users. He informed the
Committee the changes proposed in this bill would "evolve the
program into a more robust and viable commercial program that
should benefit all parties." He stated the key elements in the
proposal include such things as the generation of increased revenue
to the State by raising application fees for shallow gas leasing
from $500 to $5,000 thereby keeping the fee more in line with the
actual expense of processing the application; lowering the
Department of Natural Resources administrative costs by instituting
automatically renewable leases and removing "unworkable deadlines"
for issuance of leases; providing better reservoir management;
replacing the 3,000 foot depth requirement with language stating
that some portion of the field must be within 3,000 feet of the
surface; increasing field acreage to allow for a viable leasing
program; removal of the requirement for prospective applicants to
conduct a title search; improving protection for surface land
owners; and implementing a conversion methodology to allow existing
leases to be converted to the new program.
MARK MYERS, Director, Division of Oil and Gas, Department of
Natural Resources testified via teleconference from Anchorage to
voice the Department's support of the bill. He stated these
warranted changes would convert the program into a commercial
program that would provide benefits to the State and landowners.
JOHN TANIGAWA, Special Projects Manager, Evergreen Resources
Corporation, testified via teleconference from Mat-Su in support of
SB 319 as it removes obstacles to exploration activities. He stated
the bill is economically sound, and an "excellent example" of the
State working with industry to benefit government, industry, "but
particularly the public."
KEVIN TABLER, representative, Unocal, testified via teleconference
from Anchorage to voice that Unocal supports the amendments to this
bill. He asserted that the shallow gas-leasing program enhances
access to and development of the State's resources.
CHARLOTTE MACCOY, representative, Teck Cominco Alaska, testified
via teleconference from Anchorage to voice support for this bill.
She stated the proposed amendments address concerns Teck Cominco
has regarding bonding requirements. She alerted the Committee that
private lands might have been inadvertently omitted from proposed
language regarding the depth issue change located on page 4, in
Sections 7 and 8.
Mr. Myers shared with the Committee that the Department recognizes
Teck Cominco's concerns and stated an amendment could address both
of Teck Cominco's concerns.
Co-Chair Kelly asked Mr. Myers to work with Senator Torgerson to
develop amendment language.
The bill was SET ASIDE. [Note: This bill was brought back before
the Committee later in the meeting.]
CS FOR SENATE BILL NO. 280(RES)
"An Act permitting grants to certain regulated public
utilities for water quality enhancement projects and water
supply and wastewater systems."
This was the first hearing for this bill in the Senate Finance
Committee.
SENATOR GENE THERRIAULT, sponsor of the bill, reported that "under
current law, privately owned public water and wastewater utilities
are not eligible to participate" in certain State grant funding
opportunities. He commented this ineligibility places the privately
owned utilities' ratepayers at a disadvantage when compared to
ratepayers of municipally owned utilities. He explained this
legislation provides "for inclusion of privately-owned water and
waste water utilities in the State water and wastewater grant
program, if the Regulatory Commission of Alaska (RCA) regulates the
rates." He noted that the Senate Resources Committee version of
this bill "removes criteria inserted by the Senate Labor & Commerce
Committee" stipulating that the utility must serve as the primary
utility for the municipality. He explained the Resources version of
the bill thereby expands the "pool" of utilities the bill would
apply to.
Senator Therriault noted "that regulation by the RCA ensures that
all the economic benefits of these grants" would provide funding
for utilities' upgrades and expansions without forcing ratepayers
to burden the expense. He furthered that this bill would also allow
utilities "to expand in areas that are on the peripheral of the
existing system, thereby providing water and wastewater services to
families" who are currently outside of the service area.
Senator Therriault noted the Resources Committee substitute makes
grants available for public water and wastewater utilities;
however, restricts grants for solid waste improvements to
municipality owned utilities.
Senator Therriault summarized the intent of this bill is to make
grant funds available to provide Alaska's residents with safe water
and sewer regardless of whether the water and wastewater utility is
owned by a municipality or a private group.
Senator Therriault reiterated that the Labor & Commerce Committee
version of this bill is more narrowly drafted than the Resources
Committee version; therefore, a zero fiscal note from the
Department of Environmental Conservation accompanies the Labor &
Commerce Committee's version, while a $93,000 fiscal note from the
Department accompanies the broader Resources Committee version.
Co-Chair Kelly inquired if Senator Therriault agrees with the
analysis supporting the $93,000 fiscal note.
Senator Therriault responded the Resources Committee version allows
for a larger pool of utilities to qualify for the grants; and not
all of them have sophisticated accounting systems or are sizable
entities with a sufficient number of employees to manage the grant
application process. He continued that the Resources version would
allow small utilities such as trailer park operators, who might not
have much grant processing expertise, to apply for the grants. He
commented this might result in the State needing to provide staff
to assist recipients during the grant process; therefore, he noted,
some of the fiscal note is legitimate.
Senator Therriault communicated to the Committee that the language
of the bill is drafted to apply to utilities statewide, and would
allow municipally owned water and waste water utilities that are
grappling with privatizing their utilities to make that decision
without being burdened with complying with the current grant
funding restrictions.
Senator Olson asked why the initial grant program excludes private
water and wastewater utilities.
Senator Therriault responded that initially, municipalities managed
most of the systems and current scenarios were not anticipated.
ANDY WARWICK, Chair, Board of Directors, Fairbanks Water & Sewer,
Inc., testified via teleconference from Fairbanks, and voiced that
Fairbanks Water & Sewer's customers would be "favorably" impacted
by the passage of this bill.
Senator Therriault commented that the Regulatory Commission of
Alaska (RCA) would not permit any grant monies used to expand a
facility to be calculated as part of the rates paid by the
utility's users. He clarified that ratepayers could not be charged
as if the utility had acquired a loan or invests private capital;
therefore, "because of the RCA rate regulation, the benefit of the
grant does flow through to the individual ratepayer."
Senator Green asked if a utility's ratepayers would absorb the
costs of improvements if a grant were not in place.
Senator Therriault noted that costs incurred for improvements,
upgrades, expansions and the like would be passed on to the
ratepayers if a private or commercial loan were in place.
Senator Green asked if RCA has different criteria considerations
for grant requests from a municipally owned utility grant
application compared to a privately owned for profit utility.
WILL ABBOTT, Commissioner, Regulatory Commission of Alaska,
Department of Community and Economic Development, testified via
teleconference from Anchorage and responded there are no
differences in the process.
Senator Green inquired how many utilities would be affected by this
legislation.
Senator Therriault answered that 36 utilities are eligible under
current regulations, with projections of another 50 utilities
qualifying under the Resources Committee version and a relatively
small number of additional utilities qualifying under the Labor &
Commerce Committee version.
Senator Green asked for characteristics and locations of the
additional utilities.
Senator Therriault responded that the additional 50 utilities would
include small ones such as trailer parks and some subdivisions.
Senator Green requested a list of the utilities be supplied to the
Committee. She asked if an option for low-interest loans was
considered, as she is concerned the expansion of the program might
compete with other statewide requests for grant funding.
Senator Therriault noted that other legislation does allow
utilities to be eligible for the State's low-interest loan program;
however, he agreed that the Resources "version of the bill brings
in a lot of new competitors for the available grant dollars."
Senator Ward asked for clarification that the fiscal note would
provide Department support to the fifty new utilities that might
apply for the grants.
Senator Therriault responded in the affirmative, as a number of the
utilities have never participated in the grant program and would
need assistance in the application process.
Senator Ward asked why assisting these utilities in completing
their grant applications would result in the need for additional
staff.
Senator Therriault responded that in any application process, the
Department provides assistance to the applicants. He commented that
municipalities that have previously applied for the grants are
familiar with the process.
Senator Ward questioned why it is the responsibility of the
Department to assist in helping people apply for these grants.
Senator Green noted that grant writing is the issue.
Senator Leman questioned if the owner's equity increases as a
result of the grant supported improvements, and who is compensated
for the improvements if the utility is sold to another party.
Senator Therriault responded that if improvements were made, the
value of the asset would increase; however, RCA regulations
guarantee that ratepayers could not be charged for the improvements
through paying higher rates.
Senator Therriault commented that the asset base of the utility
does increase regardless of whether it is publicly or privately
owned. He reiterated that the underlying goal is to provide safe
water and sewer systems to Alaskans.
Senator Leman asked if the RCA grant regulations would protect
ratepayers from paying higher rates to a new owner who purchased
the grant-improved utility.
Mr. Abbott clarified that the increased assets are called
"contributed capital," and "recorded in the books," they remain
there. He continued that if the facility transfers from a
municipally owned to a privately owed business, the contributed
capital remains on the books, and the new owner could not claim a
rate of return from it.
Co-Chair Kelly surmised that the contributed capital would be
reflected in the sale price.
Mr. Abbot responded that would be correct.
Senator Austerman asked for further clarification of the value
process when a private utility sells its grant improved utility to
another private enterprise.
Senator Therriault stated the assets transfer from one owner to
another; however, any improvements resulting from grants as
"contributed capital" remain "on the books." He furthered that the
new owner would not be paying for something that could not be
recouped.
Co-Chair Kelly noted the improvements could be reflected in the
sale price of the utility, but could not be reflected in the rates.
Senator Austerman commented that state grants would enable an owner
to "build a bigger and better machine," which would garner the
current owner more profit when the utility is sold regardless of
the rate structure.
Co-Chair Kelly concurred, but stressed the new owner would be aware
"that a certain portion of that asset you can't recoup costs on
through the rate structure."
Senator Austerman responded that if a utility is improved and
enlarged, it could serve more customers and reap more revenue and
other benefits.
Senator Ward voiced the understanding that these grant dollars
could not be used for expansion, but only for refurbishing.
Senator Therriault corrected that the grants could be used for
expansion or for refurbishment of a utility.
Senator Ward noted that using grant money for maintenance on a
utility would "free up" the owner's money for other expansion needs
and, in this situation, the expansion would not be classified as
contributed capital.
Mr. Abbott concurred.
Senator Ward furthered that if a utility received a five million
dollar grant and used those funds for maintenance expenses, and
subsequently invested five million dollars of private funds to
expand their facility, the expansion would be treated as an asset.
Again, Mr. Abbott concurred.
Senator Therriault stated his understanding that the dollar amount
of the grant would be considered as contributed capital, no matter
what it is used for, and; therefore, could not be considered in the
rate base.
Mr. Abbott concurred.
SFC 02 # 42, Side B 10:07 AM
Senator Ward reiterated that if a private utility receives grant
money for maintenance needs; this would essentially free up the
owner's money for capital improvements. He asserted that by using
grant money in this fashion, the owner's capital improvements would
increase the value of the utility because those improvements would
not be classifieds as grant capital improvements.
Mr. Abbott stated that regardless of how a grant is utilized by a
utility the funds are considered contributed capital from which an
owner could not profit. He furthered that the cost of expansions
and improvements made to the utility using private funds could be
recouped with rate increases.
Senator Ward questioned if the RCA, in its grant request process,
reviews an entire utility's operation.
Mr. Abbott responded that all components are considered by RCA
during the grant request process.
Senator Green questioned the previous sale of the Fairbanks North
Star Borough water and wastewater utility to a private entity
considering that the municipally owned utility would have qualified
for State grants.
Senator Therriault responded that the sale of the Fairbanks utility
to a private entity disqualified the utility from applying for the
grants. He opined the Fairbanks North Star Borough's decision to
sell its utility "was a smart decision" because the privately owned
group managing the utility has upgraded the utility and made it a
much more efficient operation. He predicted that numerous local
governments would be grappling with the decision as to whether to
sell their water and wastewater utilities in the upcoming years. He
questioned if, in the pursuit of achieving higher levels of
efficiency, the current eligibility for grants criteria might be a
deterrent.
Senator Green asserted the for-profit nature of private ownership
would "set it apart" from publicly owned facility where the revenue
generated supports the facility or is deposited into a
municipality's budget.
Senator Therriault contended that much of the profit in the
Fairbanks's utility is reinvested in the facility; whereas before
the municipality "siphoned off money, quite a bit of the money." He
asserted that the facility "suffered" because of that, and under
the current private ownership, the facility is becoming more
modernized and efficient.
Senator Austerman applauded the privatization of the utility;
however, voiced concern over a policy change on how state grants
would apply to the private sector resulting in the "potential for
profitability" from receiving those grants. He cautioned that the
Senate Resource Committee version of the bill "opens the door quite
a bit" and may result in "opening Pandora's box."
Co-Chair Kelly inquired if Senator Austerman prefers the Senate
Labor & Commerce Committee version of the bill.
Senator Austerman stated that the versions are similar
"philosophically."
Senator Therriault understood the concern with expanding the grant
applicants beyond the eligible original pool and agreed that the
Senate Resources Committee substitute does expand the program
significantly, resulting in a sizable fiscal note. He noted the
Senate Labor & Commerce committee substitute only extends
eligibility to utilities that are the primary water and wastewater
utility servicing a community.
Senator Ward inquired as to the number of privately owned utilities
that would be eligible under provisions in the Senate Labor &
Commerce committee substitute.
DAN EASTON, Director, Division of Facility Construction &
Operation, Department of Environmental Conservation responded that
of the 36 municipality utilities the Senate Labor & Commerce
committee substitute would apply to, only the utility operating in
Fairbanks is privately-owned. He noted that the Kake Tribal
Corporation currently owns the City of Pelican's water system;
however, ownership is being transferred to the City of Pelican.
Senator Ward inquired if there is a list available of the
communities that would be eligible under the Senate Resources
committee substitute of the bill.
Mr. Easton responded that of the approximately 50 utilities that
could be eligible under the Senate Resources committee substitute
of the bill, RCA maintains a list of the 20 currently regulated by
RCA.
Senator Ward asked why the State is obligated to supply personnel
to help utilities apply for these State grants as indicated by the
fiscal note from the Department of Community and Economic
Development.
Co-Chair Kelly stated there are regulations in the Department of
Community and Economic Development program that obligates the State
to provide assistance to small communities.
Mr. Easton elaborated that in addition to the State assisting small
communities with their grant applications, the majority of the
Department's efforts are in the actual administering of the grant.
He explained that the Department does not disperse grant funds in a
lump sum, but rather reimburses the grantee as a project
progresses. He continued that ten percent of the grant funds are
withheld until a project is finished, and the State completes a
final audit on the project.
Senator Ward asked the witnesses if the majority of the funding in
fiscal note accompanying the Senate Resources committee substitute
is for administration of the grants.
Mr. Easton affirmed that is correct.
AT EASE 10:20 AM / 10:24 AM
Co-Chair Kelly requested Senator Therriault to further analyze the
differences between the two-committee substitutes. Co-Chair Kelly
noted the bill would be held in Committee at this hearing.
Senator Wilken disclosed he is a minority shareholder in the
Fairbanks Sewer & Water utility company.
Senator Wilken commented that the sale of the Fairbanks North Star
Borough's water and wastewater utility to a private company is
reflective of a new trend in the industry. He continued that as
this trend continues, other changes in regulations might occur.
Senator Wilken contended that the passage of this bill would
benefit the ratepayers, not the shareholders of a utility.
Mr. Abbott reiterated there is no rate of return or profit on
improvements funded by contributed capital.
Senator Wilken characterized contributed capital "as a transparent
asset," for it could not be reflected in the sale price nor could
the prospective buyer profit from it.
Mr. Abbott agreed with Senator Wilken's comments.
Senator Ward asked if the private business group that purchased the
Fairbanks' utility knew it was ineligible for the State grants.
Senator Wilken responded that being ineligible for these State
grants was a concern of the new owners of the Fairbanks' utility;
however they felt they could operate the utility more efficiently
with or without those funds.
Senator Green asked if the additional grant applicants allowed
through the Senate Resources committee substitute would be
considered at the same level as the original pool of applicants.
Mr. Easton responded that all applicants would be added to the
grant pool; however, the new applicants would be at a "slight
disadvantage" as the current grant system prioritizes by assigning
points to projects that are already underway or in stages of
development.
Senator Green asked about incentives to utility systems to expand
into new service areas.
Mr. Easton responded that at some point it would be important to
clarify "whether these grants would be available to developers to
be used as part of constructing a new development."
Senator Green voiced that any expansion in the number of eligible
participants would affect the grant "pool."
Senator Austerman asked if the RCA is involved in the sale of a
utility and its sale price, or if involvement is limited to the
rate structure.
Mr. Abbott responded that the RCA is involved in a sale to the
extent of determining if the sale price is "reasonable" and within
the ability of the utility to recover the purchase price from rates
levied and continue to be viable. He contended the RCA does not
intend to get too involved in ownership transfers as "it is a sale
between two consenting parties, and as long as the purchasing party
understands what they could base their rate structure on," the RCA
is satisfied.
Co-Chair Kelly asserted this bill would be held in Committee to
afford the sponsor additional time to address concerns.
Co-Chair Donley voiced support for the State to investigate avenues
to enable this program to be self-sustaining; perhaps using program
receipts to recoup costs associated with the program.
The bill was HELD in Committee.
CS FOR SENATE BILL NO. 319(RES)
"An Act relating to shallow natural gas leasing; and providing
for an effective date."
[This bill was heard earlier in the meeting]
AT EASE 10:33 AM / 10:34 AM
Amendment #1: This amendment deletes "field subject to lease under
AS 38.05.177" and inserts "field, if a part of the field is within
3,000 feet of the surface" on page 4, lines 26-27 and page 5, line
26.
Senator Wilken offered a motion to adopt Amendment #1.
Co-Chair Kelly objected for discussion.
Senator Torgerson explained that Amendment #1 addresses an
oversight in the bill that limits producing gas to "lands leased
from the state." He stated that the adoption of this amendment
would make the language consistent throughout the bill.
Co-Chair Kelly withdrew the objection.
There being no objection, Amendment #1 was ADOPTED.
Senator Leman moved "to report the committee substitute for Senate
Bill 319 Finance from Committee with individual recommendations and
accompanying fiscal note."
There being no objection, CS SB 319 (FIN) was REPORTED from
Committee with a new zero fiscal note, dated 3/22/02 from the
Department of Natural Resources.
AT EASE 10:36 AM / 10:44 AM
CS FOR SENATE BILL NO. 111(TRA)
"An Act relating to the issuance of certificates of
participation to finance deferred maintenance and construction
projects for certain public harbor facilities; giving notice
of and approving the entry into, and the issuance of
certificates of participation in, lease- financing agreements
for those public harbor facility projects; repealing a
provision relating to the financing of construction and
renovation of facilities for certain ports and harbors; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
SENATOR ROBIN TAYLOR, sponsor of the bill, explained this is
"primarily a bond package bill" to fund construction and facility
upgrade projects in municipal ports and harbors the Department of
Transportation and Public Facilities has identified. He stated the
facilities' needs, according to engineering surveys and Department
estimates, amount to $44,521,500.
Senator Taylor stressed that the goal of upgrading the harbors in
such places as Sitka, Petersburg, Valdez and other ports throughout
the State, is to enable the State "to turn over all future
maintenance responsibilities and ownership of these harbors to the
individual communities." He asserted that the investment of the
State's capital now would reduce future maintenance requests.
Co-Chair Kelly asked Senator Taylor to explain the Certificates of
Participation process.
Senator Taylor explained that by issuing a Certificate of
Participation (COP), the State of Alaska guarantees the funding;
however, the security is found within the project itself and the
project, in essence, is owned by the certificate holder during the
time the project is being paid off.
Senator Taylor clarified this is the current funding mechanism,
however, announced he would prefer the use of general obligation
(GO) bonds with the decision made by Alaska's voters as to whether
these are the projects to fund. He stated the bill is crafted using
the COP funding because this is the process considered the prior
fiscal year.
Senator Green noted the backup material indicates the City of Nome
is in need of additional funding for capital improvements to its
dock; however, she understood that the City of Nome owns the dock.
Senator Taylor corrected that the State owns the dock in Nome.
Senator Green referred the Committee to page 1,Section 1, line 10
of the bill that indicates both Nome and Adak own their docks.
Senator Taylor voiced that the Nome harbor and dock project was
fully funded and deleted from the most recent project list
identified by the Department.
Co-Chair Kelly informed the Committee that the list [copy on file]
is in need of being updated.
Senator Taylor noted there was a unique problem in the Adak harbor
because that harbor was conveyed to the Adak Native Corporation by
the federal government, however, a funding mechanism was found to
rebuild their small boat harbor.
LOREN GERHARD, Chair, Juneau Docks and Harbors Board, and Executive
Director, Southeast Conference, testified in support of this bill
as many Southeast Conference community members' harbors are in need
of repair. He voiced appreciation for the Legislature's role in
completing harbor improvements in such places as Ketchikan, Sitka
and Craig. He informed the Committee that many communities "are
hard-pressed" to find funds to allocate to harbor deferred
maintenance. He stressed that harbors are an integral component of
a communities' economy as they generate significant commerce from
such things as commercial fishing, sport fishing, and tourism. He
noted that once the improvements allowed under this bill are
completed, the transfer of the dock systems to the communities
"would remove the responsibility to the State and would allow
communities to establish priorities" for docks and harbors. On
behalf of the Southeast Conference members, he urged the Committee
to approve this bill.
Senator Austerman noted this bill reflects an approximate $7
million allocation for Juneau and requested clarification that the
responsibility for all of Juneau's harbors would be transferred
from the State of Alaska to the City and Borough of Juneau.
Mr. Gerhard responded that is correct.
Senator Austerman asked if the list of City and Borough of Juneau
harbors included in the bill encompasses all of the city's harbors.
Mr. Gerhard replied that the list is complete.
BUDD SIMPSON, citizen of Juneau, member, Juneau Docks and Harbors
Board, and Chair, Juneau Docks and Harbors Board Capital
Improvement Projects Committee, noted that Juneau's harbors, all of
which are owned by the State, have not received any State funding
since 1989 and are "in dire need" of deferred maintenance. He
commented that the City has funded some harbor maintenance projects
through local users' fees.
BRAD PIERCE, Senior Economist, Office of Management & Budget,
Office of the Governor, stated this bill is drafted as a COP that
"is essentially a revenue bond" using marine motor fuel tax
receipts of approximately $6.1 million. He explained that the
fiscal note for all the projects is expected to total $45 million.
Mr. Pierce shared that the Administration views this as a "user
pay" scenario, which they advocate to be the funding source instead
of a GO bond. He characterized the harbors and docks as valuable
assets that pay for themselves through such things as moorage fees.
He furthered that the user-pay principle established in this
situation could set "an important precedent to identify this fund
source and use it to pay for these bonds, where we wouldn't have to
use our GO capacity for this." He voiced the possibility that these
user fees could also be used in the future to fund other projects.
He summarized that the Administration "is very much in favor of the
revenue bond approach," specified in the drafting of this bill.
Mr. Pierce conveyed that the Governor supports using GO bonds for
such things as school construction.
Senator Green asked how the Marine Fuel Tax revenue is currently
used.
Mr. Pierce responded, "there are two segregated accounts within the
general fund:" one consists of revenue generated from a Highway
Motor Fuel Tax and the other from the Marine Motor Fuel Tax. He
commented that both accounts are specifically identified in
statute.
Senator Green asked if there is a provision that would prohibit
these taxes from being specified as a funding source for these
projects.
Mr. Pierce stated these taxes could be used for this purpose.
Senator Green asked if the Marine Fuel Tax is in effect Statewide.
Mr. Pierce responded users in coastal communities and other areas
of the state where boats are used pay the tax.
Senator Green voiced that some users do not have ports or harbors
in their area.
Mr. Pierce concurred.
GOVERNOR BILL SHEFFIELD, Representative, Port of Anchorage,
testified offnet from Anchorage to notify the Committee that the
Port of Anchorage is undergoing a six million dollar FY 02 State
Capital Budget appropriation upgrade project in conjunction with a
$160 million expansion and rehabilitation project. He related to
the Committee that the Port of Anchorage is a regional port that
serves 80 percent of the State of Alaska and 90 percent of the
people of the State. He conveyed that the Port's business increases
two percent a year and in twenty years the business volume would be
double its current level. He stressed that the demands of this
growth applies pressure for continuing expansion and improvements.
He conveyed the need for continuing financial support from the
State for infrastructure improvements to maintain efficiency and to
ensure reasonable freight rates.
Governor Sheffield shared that upon completion of the current
projects, the Port of Anchorage would be 51 percent federally
financed with the remainder of funding contributed by the State,
the Municipality of Anchorage, and other minor funding mechanisms.
He urged the inclusion of the Port of Anchorage in this bond bill
and explained how this bill's proposed funding allotment would
coordinate with other funding sources in financing future Port
projects.
PAUL ANDERSON, Mayor Pro Tem, City of Petersburg, testified via
teleconference from Petersburg, in support of the updated monetary
numbers reflected in the bill as Petersburg's harbors are old and
in need of upgrades.
SFC 02 # 43, Side A 11:06 AM
GREG MEISSNER, Member, Wrangell Harbor Board, testified via
teleconference from Wrangell to voice support for this bill.
JAMES STOUGH, Member, Wrangell City Council, testified via
teleconference from Wrangell, to voice support for this bill.
DAN HICKMAN, Member, Petersburg Harbor Board, testified via
teleconference from Petersburg in support of the bill. He asked the
Committee to move this bill forward, and indicated that the City of
Petersburg is looking forward to assuming ownership of the harbors.
Co-Chair Donley commented that the Administration does not appear
to realize the importance of the Port of Anchorage to the Railbelt
and Bush Alaska. He stated that the efficiency of the Port directly
impacts the rates that a vast majority of consumers pay for
groceries and other goods that enter the State through the Port. He
stated that the Legislature should recognize that the Port of
Anchorage and the Anchorage and Fairbanks airports are systems that
affect a lot of people and areas.
The bill was ordered HELD in Committee.
ADJOURNMENT
Co-Chair Pete Kelly adjourned the meeting at 11:09 AM.
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