Legislature(2003 - 2004)

04/01/2003 09:02 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                          April 01, 2003                                                                                      
                              9:02 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-03 # 37,  Side A                                                                                                            
SFC 03 # 37,  Side B                                                                                                            
SFC 03 # 38,  Side A                                                                                                            
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Gary Wilken convened  the meeting at approximately 9:02 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice Chair                                                                                                   
Senator Robin Taylor                                                                                                            
Senator Ben Stevens                                                                                                             
                                                                                                                                
Also Attending:    SENATOR JOHN  COWDERY; GEORGE  LAVASSEUR,  Acting                                                          
State Maintenance  Engineer, Office of the Commissioner,  Department                                                            
of Transportation and Public  Facilities; BILL CORBUS, Commissioner,                                                            
Department  of Revenue; RICHARD SCHMITZ,  Staff to Senator  Cowdery;                                                            
MARK O'BRIEN, Chief Contracts  Officer, Contracting, Procurement and                                                            
Appeals, Office  of the Commissioner,  Department of Transportation                                                             
and Public Facilities;                                                                                                          
                                                                                                                                
Attending  via  Teleconference:   Offnet:  JIM  JOHNSON,  President,                                                          
Johnson Tire  Service; CHUCK MCGEE,  US Representative for  Ugigrip;                                                            
RICHARD  NORDNESS,   Executive  Director,  Northwest   Tire  Dealers                                                            
Association;  BRUNO  WESSEL,  Bruno Wessel  Inc.,  Member,  National                                                            
Safety Council, and Member,  Scandinavian Tire and Rim Organization;                                                            
EDEN  LARSON,  President and  Chief  Executive  Officer,  Associated                                                            
Builders  and Contractors  of Alaska;  From Mat-Su:  CLINT  QUIGGLE;                                                            
From  Kenai:   HANNELE  ZUBECK,  Associate   Professor,   School  of                                                            
Engineering, University  of Alaska-Anchorage; From  Fairbanks: ROGER                                                            
BURNS; JEFF ALLING, Alcan  Builders, and Member, Associated Builders                                                            
and Contractors  of Alaska;  From Anchorage:  DON VALESKO,  Business                                                            
Manager, Local 71;                                                                                                              
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB 106-FEE FOR STUDDED TIRES                                                                                                    
                                                                                                                                
The  Committee  heard from  the  Department  of  Transportation  and                                                            
Public  Facilities, the  Department  of Revenue,  the University  of                                                            
Alaska, members of the public and industry representatives.                                                                     
                                                                                                                                
SB  40-CONSTRUCTION OF HIGHWAYS BY DOTPF                                                                                        
                                                                                                                                
The  Committee   heard   from  the   sponsor,   the  Department   of                                                            
Transportation  and Public Facilities and industry  representatives.                                                            
The bill was held in Committee.                                                                                                 
                                                                                                                                
SB 115-CORRECTIONAL INDUSTRIES PROGRAM EXPENSES                                                                                 
                                                                                                                                
This bill was scheduled but not heard.                                                                                          
                                                                                                                                
Co-Chair Wilken indicated  the presence of students representing the                                                            
Close-up program.                                                                                                               
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 106(TRA)                                                                                            
     "An Act relating to studded tires; and providing for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken explained  this bill "imposes  a ten dollar  fee on                                                            
retail sales of studded tires in Alaska."                                                                                       
                                                                                                                                
GEORGE LAVASSEUR,  Acting State Maintenance Engineer,  Office of the                                                            
Commissioner,  Department  of Transportation  and Public  Facilities                                                            
testified this  bill would impose the $10 surcharge  on the purchase                                                            
of all studded tires beginning  July 1, 2003. He cited Department of                                                            
Revenue  estimates  this would  generate  approximately  $2  million                                                            
annually  and would  cost approximately  $50,000  to administer.  He                                                            
noted  businesses  collecting this  surcharge  would  be allowed  to                                                            
retain  five-percent  of  the  surcharge,  up to  $1,000,  to  cover                                                            
expenses.                                                                                                                       
                                                                                                                                
Mr. Lavasseur  commented that many  drivers use studded tires  as an                                                            
aid  to winter  driving  to improve  traction  on icy  surfaces.  He                                                            
shared that  an analysis of Alaska  winter driving conditions  found                                                            
that primary roads  with highest traffic roads are  covered with ice                                                            
or snow only about five-percent  of the time. The remaining "studded                                                            
tire season" he reported that pavements are bare and/or dry.                                                                    
                                                                                                                                
Mr. Lavasseur instructed  that pavement in Alaska wears at a rate of                                                            
".3 inches  per million  studded tire passes,"  which he  translated                                                            
"we lose  about a  dump truck full  of asphalt"  every four  million                                                            
cars with studded  tires traveling over a mile of  roadway. He added                                                            
that each  studded  tire causes  approximately $50  worth of  damage                                                            
over its  life. He informed  that the Department  of Transportation                                                             
and Public Facilities expends  over $5 million annual to repair ruts                                                            
caused by studded tires.                                                                                                        
                                                                                                                                
Mr. Lavasseur  directed  attention to  a photograph  and stated  the                                                            
condition of the road depicted  is typical of "what we're seeing" in                                                            
portions of Southcentral Alaska, as well as in Juneau.                                                                          
                                                                                                                                
Senator Bunde  relayed that he has heard that this  damage caused by                                                            
studded tires does not  occur on roadways in Interior Alaska. He had                                                            
been  told   this  is  due  to  the   usage  of  different   asphalt                                                            
applications.                                                                                                                   
                                                                                                                                
Mr.  Lavasseur  attributed  the lesser-studded   tire wear  to  less                                                            
vehicle  traffic  and  different  weather   conditions  in  Interior                                                            
Alaska. He  stated that more  icepack is  present on Interior  roads                                                            
during a larger percentage of time.                                                                                             
                                                                                                                                
Senator Bunde  asked if the  different damage  rates are in  any way                                                            
related to the materials and application methods used.                                                                          
                                                                                                                                
Mr.  Lavasseur   answered  it  is  not  related.  He   stressed  the                                                            
Department is  "doing several things" to attempt to  improve asphalt                                                            
performance.  He admitted  that the  asphalt used  in Alaska,  which                                                            
originates  as  North  Slope  crude  oil, is  soft.  He  listed  the                                                            
additives  to strengthen the  asphalt, including  the use of  larger                                                            
and harder rock material  imbedded in the asphalt. He qualified that                                                            
rock in Alaska is very  soft due to the areas geological newness. He                                                            
listed the two hard rock  sources in Alaska, one at Cantwell and the                                                            
other near  Haines and informed  of the high  cost to transport  the                                                            
hard rock to the road sites.                                                                                                    
                                                                                                                                
Mr. Lavasseur  gave the Egan Expressway in Juneau  as an example and                                                            
detailed the project utilizing  materials from Haines and Washington                                                            
State.  He remarked  this project  is "holding  up  quite well."  He                                                            
spoke  to the  difficulty  in  locating  hard  rock sources  in  the                                                            
interior regions of the State.                                                                                                  
                                                                                                                                
Senator Bunde  asked if it has therefore been determined  that it is                                                            
less expensive to repave the road than to import hard rock.                                                                     
                                                                                                                                
Mr.  Lavasseur  replied  that  no studies  have  been  conducted  to                                                            
research  this matter; however  the "economy"  in utilizing  Alaskan                                                            
hard rock is  "very important" to  the refiners in Alaska.  He added                                                            
that it is expensive to  barge hard rock into the State. He informed                                                            
that the Department is  initiating a project to ascertain the amount                                                            
of hard rock in the area near Cantwell.                                                                                         
                                                                                                                                
Senator  Bunde interpreted  the  witness'  testimony  to state  that                                                            
roads in Alaska are "softer"  due to the intent to subsidize asphalt                                                            
production from North Slope crude oil.                                                                                          
                                                                                                                                
Mr.  Lavasseur  countered  that  "a  combination   of  factors"  are                                                            
responsible. He  stated that the Department is "fixing"  the Alaskan                                                            
asphalt utilizing modified asphalt.                                                                                             
                                                                                                                                
SENATOR JOHN  COWDERY told of studies  conducted on certain  streets                                                            
in Anchorage,  which  show minimal  development of  ruts due  to the                                                            
addition of rubber and other materials to the asphalt.                                                                          
                                                                                                                                
Mr. Lavasseur  added that speed also  impacts the wear of  pavement.                                                            
                                                                                                                                
Senator   Cowdery  indicated   the   cost  per   studded  tires   is                                                            
approximately  $11 more per tire than  non-studded tires.  He opined                                                            
that "lightweight"  studded  tires hit  the pavement  with the  same                                                            
force and cause  the same amount of damage. He then  told of an "ice                                                            
tire"  developed  in Finland  that  could  be  utilized year-round.                                                             
Although  the cost of  these tires  is higher,  he asserted  options                                                            
other than studded tires are available.                                                                                         
                                                                                                                                
Co-Chair  Wilken drew  attention to  a packet  of the "lightweight"                                                             
studs, which he would share with Committee members.                                                                             
                                                                                                                                
Senator Taylor spoke of  cement roads in Wrangell and the process of                                                            
two-inch overlays  of asphalt on other  roads. He compared  the wear                                                            
on both  road types  and questioned  why cement  is not more  widely                                                            
used.                                                                                                                           
                                                                                                                                
Mr. Lavasseur  replied that Portland cement is excellent  for use in                                                            
areas with a stable  base. However, in areas with  unstable bases he                                                            
stated the  cement cracks, noting  that most of Southcentral  Alaska                                                            
has an unstable base due to freezing and thawing.                                                                               
                                                                                                                                
Senator  Taylor  challenged  that the  base  of Egan  Expressway  is                                                            
stable. He  asked if the Anchorage  area roads were "that  unstable"                                                            
that cement pavement would be unviable.                                                                                         
                                                                                                                                
Mr. Lavasseur answered yes.                                                                                                     
                                                                                                                                
Senator Taylor suggested  chains would cause greater damage to roads                                                            
then studded tires.                                                                                                             
                                                                                                                                
Mr.  Lavasseur   detailed  "an  aggressive   chemical  program"   of                                                            
magnesium chloride utilized  in Southcentral Alaska to keep roads as                                                            
ice free as possible throughout the winter.                                                                                     
                                                                                                                                
Senator Cowdery  asked the witness to compare damage  caused by cars                                                            
versus trucks.                                                                                                                  
                                                                                                                                
Mr. Lavasseur  listed  the width of  cars versus  trucks noting  the                                                            
width  of the  ruts  match the  width of  mid-size  passenger  cars,                                                            
indicating the majority of the damage is caused by cars.                                                                        
                                                                                                                                
Mr. Lavasseur then showed  a photo of a lightweight studded tire. He                                                            
described how  the ruts are caused  and reported that for  every one                                                            
million passes,  approximately  one-tenth of  an inch of roadway  is                                                            
eroded. He stated that  with the 40,000 vehicles traveling the Glenn                                                            
Highway daily, the damage  accumulates in a short period of time and                                                            
the road must be repaired every two to three years.                                                                             
                                                                                                                                
Mr. Lavasseur stressed  that the ruts cause hydroplaning when filled                                                            
with rainwater, and also  hamper the visibility of drivers traveling                                                            
behind a vehicle riding  in a rut as the water sprays. He furthered.                                                            
                                                                                                                                
Senator  Taylor asked  if differential  exists between  the wear  of                                                            
cement and asphalt.                                                                                                             
                                                                                                                                
Mr. Lavasseur  told  of his  experiences  in the  1960s with  cement                                                            
roads  in the  State  of Minnesota.  He  stated that  studded  tires                                                            
caused  significant damage  to the  cement roads  and therefore  the                                                            
cement roads were discontinued.                                                                                                 
                                                                                                                                
BILL CORBUS, Commissioner,  Department of Revenue,  read a statement                                                            
into the record as follows.                                                                                                     
                                                                                                                                
     The  Governor  and  I very  much  appreciate  this Committee's                                                             
     consideration  of  this important  legislation.  As you may  be                                                            
     aware,  the companion  bill, House Bill  173 was substantially                                                             
     changed  in the  House Transportation  Committee  last week  to                                                            
     apply  a $2 fee on all  tires. The Governor  is not opposed  to                                                            
     the changes contained in CS HB 173.                                                                                        
                                                                                                                                
     Why  is this legislation  necessary? SB  106 is a critical  and                                                            
     necessary  element of the Governor's overall  budget investment                                                            
     plan and investment  plan for FY 2004 and he recently submitted                                                            
     it to you for your  consideration. Governor Murkowski's primary                                                            
     mission  is to  build  a robust  growing economy  and  generate                                                            
     sufficient  State revenue  to fund programs  and services  that                                                            
     Alaskans  need  and  expect.  Passage  of SB  106  will  ensure                                                            
     increased  State  revenues   and  may  prevent  elimination  or                                                            
     diminution of other important programs and services.                                                                       
                                                                                                                                
     What  this legislation  will accomplish.  SB 106 will  attach a                                                            
     fee of $10 per studded  tire sold in Alaska to begin in July 1,                                                            
     2003. Businesses,  including tire dealers, service stations and                                                            
     garages  will fill out  monthly reports  of studded tire  sales                                                            
     and  remit the  fees to the  Department  of Revenue  containing                                                            
      five percent of the fees not to exceed $300 per month.                                                                    
                                                                                                                                
     Anticipated  additional  revenue  to  the  State of  Alaska  is                                                            
     approximately $2 million.  The amendment contained in CS HB 173                                                            
     to apply a $2 fee  to all tires is expected to generate revenue                                                            
     of approximately $2.5 million.                                                                                             
                                                                                                                                
     Impact on Alaskan  businesses. Although Alaskan businesses will                                                            
     be called  upon to collect  and remit  the fees, SB 106  allows                                                            
     studded  tire sellers to retain  their administrative  costs up                                                            
     to five percent,  not exceeding $300 per month.  I believe this                                                            
     allowance is fair.                                                                                                         
                                                                                                                                
     In conclusion the  fee of $10 per studded tire is necessary and                                                            
     essential  to the Governor's  spending and investment  plan for                                                            
     Alaska.  The Department  of Revenue  can  and will efficiently                                                             
     administer  the fee  as discussed  in the  Department's  fiscal                                                            
     note. I urge and appreciate  your serious consideration of this                                                            
     legislation  and ask that  you pass it  out of Committee  today                                                            
     with your support for enactment this session.                                                                              
                                                                                                                                
Senator  Bunde voiced  concern  about the  volume  of paperwork  and                                                            
asked if quarterly reports have been considered.                                                                                
                                                                                                                                
Mr. Corbus was unsure if  this had been considered and indicated the                                                            
Department would not oppose a quarterly reporting method.                                                                       
                                                                                                                                
Senator  Taylor asked  if the  intent is  to dedicate  the  revenues                                                            
generated by the fee to highway maintenance or repairs.                                                                         
                                                                                                                                
Co-Chair Wilken  answered the revenues  would be deposited  into the                                                            
State general fund.                                                                                                             
                                                                                                                                
JIM  JOHNSON,  President,   Johnson  Tire  Service,   testified  via                                                            
teleconference  from an offnet location in Anchorage  and referenced                                                            
his written testimony [copy  on file]. He told of testimony given by                                                            
physicians and  engineers serving on the Swedish Road  and Transport                                                            
Research  Institute  (VIT) at  the 1994  Winter  Cities Conference,                                                             
attesting to the increased  deaths and property damage that would be                                                            
caused by a  discontinuance of studded  tires. As a result  of these                                                            
findings, he  informed that the VIT  participated in development  of                                                            
lightweight  environmental   studs  weighing   1.1  grams  and  also                                                            
recommended  better  road construction,   particularly  to the  road                                                            
base.  He relayed  that the  VIT charged  the Alaska  Department  of                                                            
Transportation and Public  Facilities with building "terrible roads"                                                            
and recommended  the  use of the  lightweight  studded tires,  which                                                            
would  minimize  damage.  He  stated  that  his  company  introduced                                                            
environmental  lightweight  studs  to North  America in  1994 in  an                                                            
attempt to be "good corporate citizens".                                                                                        
                                                                                                                                
Mr. Johnson opined  that the damage caused by studded  tires is less                                                            
significant than  claimed by others and pointed out  that the annual                                                            
cost of  $5 million to  repair roads has  not increased since  1993,                                                            
which he calculated  would have increased over time  without the use                                                            
of the  newer lightweight  studded tires. He  claimed the damage  is                                                            
the result  of poor quality road base,  which is not rectified  with                                                            
resurfacing.                                                                                                                    
                                                                                                                                
Mr. Johnson charged that  this legislation would impact lower income                                                            
residents, who  might not be able to afford the $40  additional cost                                                            
to purchase studded  tires. He reported, "Studded  tires is the most                                                            
proven  safety  device  that is  known  to man."  He  attested  that                                                            
although ice  tires, also known as  "friction" tires, have  improved                                                            
driving safety,  they do  not compare to  the starting and  stopping                                                            
ability and the  length of wear of studded tires.  He questioned why                                                            
lightweight  studded tires  were not mandated  rather than  the fees                                                            
for  all  studded  tires  proposed  in  legislation.   He  suggested                                                            
assessing a $2  fee for all tire purchases and utilize  the revenues                                                            
for better  road construction.  He  predicted that  if better  roads                                                            
were constructed  damage would decrease by 30 percent,  and mandated                                                            
use of lightweight  studs would decrease road damage  by 15 percent.                                                            
                                                                                                                                
Mr. Johnson  remarked this legislation  would benefit no  party, and                                                            
the  issue was  creating  revenue  rather than  the  use of  studded                                                            
tires.  He remarked,  "If you're  going to  tax safety,  you have  a                                                            
problem."                                                                                                                       
                                                                                                                                
Senator Cowdery  referenced a study  conducted by the University  of                                                            
Alaska and asked  if the use of studded tires has  resulted in a per                                                            
capita decline in the number of accidents.                                                                                      
                                                                                                                                
Mr. Johnson  did not  know, but  emphasized that  if motorists  were                                                            
discouraged from  purchasing studded tires, fatalities  and property                                                            
damage would increase  and more sand, gravel and chemicals  would be                                                            
required to provide better traction on roads.                                                                                   
                                                                                                                                
Senator  Cowdery asked  the number  of states  with similar  weather                                                            
conditions to Alaska that ban studded tire use.                                                                                 
                                                                                                                                
Mr. Johnson listed Wisconsin  and Minnesota, but pointed out that no                                                            
bans  have been  issued  since 1975  and that  studded  tire use  is                                                            
permitted  on emergency  vehicles.  He  stressed that  injury  rates                                                            
"skyrocketed" when the bans were implemented.                                                                                   
                                                                                                                                
Senator Cowdery asked about bans on studded tire use in Canada.                                                                 
                                                                                                                                
Mr. Johnson  that use of studded tires  is permitted in Canada  with                                                            
the exception of Toronto.                                                                                                       
                                                                                                                                
Senator B. Stevens  asked if the witness has reviewed  the committee                                                            
substitute for HB 173,  which would impose a $2 fee for the purchase                                                            
of all tires.                                                                                                                   
                                                                                                                                
Mr. Johnson supported that bill.                                                                                                
                                                                                                                                
Senator  B.  Stevens  took  issue  with   the  assertion  that  more                                                            
accidents  would occur. He  stated that he  has driven in the  State                                                            
his entire life, never  with studded tires and has had no accidents.                                                            
He questioned the applicability  of the statistics showing increased                                                            
accidents  in Wisconsin  and Minnesota  following  the studded  tire                                                            
ban, suggesting  that winter conditions  over the time period  could                                                            
have been more severe than average.                                                                                             
                                                                                                                                
Mr. Johnson and Senator B. Stevens debated the issue.                                                                           
                                                                                                                                
CHUCK MCGEE,  United States  representative  for Ugigrip,  testified                                                            
via teleconference  from  an offnet  location in  opposition to  the                                                            
bill.  He told  about the  lightweight  tire studs  manufactured  by                                                            
Ugigrip and  other manufacturers,  which have been proven  to reduce                                                            
road  wear.  He  attested   to  the  better  braking   and  traction                                                            
capabilities  of studded tires, citing  the Swedish VTI studies.  He                                                            
stated  that  any cost  increase  would  cause  drivers to  not  use                                                            
studded tires.  He spoke to the benefits of the newer  studs and the                                                            
lesser damage caused by them.                                                                                                   
                                                                                                                                
RICHARD  NORDNESS,   Executive  Director,  Northwest   Tire  Dealers                                                            
Association,  testified via teleconference  from offnet site  in the                                                            
state  of Washington  in  opposition  to  the  bill. He  stated  the                                                            
Association's  position that  studded tires  is an important  safety                                                            
feature for  Alaskan residents. He  remarked that a $10 per  studded                                                            
tire fee would  be have a negative impact on winter  driving safety,                                                            
as many  motorists  could not  afford the  $40 total  and that  many                                                            
drivers would chose to not purchase the tires.                                                                                  
                                                                                                                                
Mr. Nordness also opposed  tire dealers acting as tax collectors. He                                                            
told of  efforts  in conjunction  with legislatures  in Washington,                                                             
Oregon to promote the use of lightweight studs.                                                                                 
                                                                                                                                
Co-Chair Green clarified  the Association represents tire dealers in                                                            
the states of Alaska, Oregon and Washington.                                                                                    
                                                                                                                                
Mr. Nordness affirmed.                                                                                                          
                                                                                                                                
Co-Chair Green  asked if the Association  conducted a comparison  of                                                            
the  licensing and  taxation  of vehicles  registered  in the  three                                                            
states.                                                                                                                         
                                                                                                                                
Mr.  Nordness  replied  the  Association   had  not  conducted  such                                                            
studies.                                                                                                                        
                                                                                                                                
Co-Chair Green  predicted the total licensing and  taxation cost for                                                            
vehicles is significantly less in Alaska.                                                                                       
                                                                                                                                
Senator Bunde  asked if studded  tires are  permitted in Oregon  and                                                            
Washington.                                                                                                                     
                                                                                                                                
Mr. Nordness answered they are.                                                                                                 
                                                                                                                                
                                                                                                                                
SFC 03 # 37, Side B 09:49 AM                                                                                                    
                                                                                                                                
                                                                                                                                
BRUNO WESSEL,  Bruno Wessel Inc.,  Member, National Safety  Council,                                                            
and Member,  Scandinavian Tire and  Rim Organization, testified  via                                                            
teleconference  from an offnet location  in Sarasota, Florida,  told                                                            
of his experiences as an  importer of tire studs since the 1960s. He                                                            
opposed this  bill, as some motorists  could not afford the  tax. He                                                            
disputed  the excuse  that  ice is  only  present on  roadways  five                                                            
percent of the  year, arguing that in Minnesota it  was learned this                                                            
was the time that 90 percent of accidents occurred.                                                                             
                                                                                                                                
Mr. Wessel spoke to the  ineffectiveness of overlaying roads because                                                            
the  ruts  return  rapidly.  He stressed  that  the  roads  must  be                                                            
"milled",  or  ground  out,  before  being  relayed.  He  referenced                                                            
"government  studies" that  found that one  truck is equal  to 6,000                                                            
car passes.                                                                                                                     
                                                                                                                                
Mr. Wessel also  spoke of the VTI and reiterated that  findings that                                                            
reduced studded  tire use would increase  accidents and fatalities.                                                             
He  asserted  that   studded  tires  have  "the  added   benefit  of                                                            
roughening  road  and roughening  the  ice," which  provides  better                                                            
traction for vehicles without studded tires.                                                                                    
                                                                                                                                
Senator Cowdery commented  he has observed vehicles in Alaska's body                                                            
shops for repair that had studded snow tires.                                                                                   
                                                                                                                                
Mr.  Wessel emphasized  that  although  some vehicles  with  studded                                                            
tires would  be involved  in accidents,  they would  be less  likely                                                            
than  vehicles without  studded  tires. He  informed that  he was  a                                                            
delegate at  the Winter Cities Conference  in 1994 and has  traveled                                                            
to Alaska on several occasions.                                                                                                 
                                                                                                                                
CLINT QUIGGLE testified  via teleconference from Mat-Su as a private                                                            
citizen about his 36 years  "in the tire business" and in opposition                                                            
to  this  bill. He  suggested  the  focus  is on  tax  revenue,  but                                                            
stressed the  safety issue. He stressed  that studded tires  prevent                                                            
accidents  and save  lives, particularly  on ice  covered roads.  He                                                            
predicted that because  some motorists could not afford the tax they                                                            
would continue  to drive with old  studded tires or without  studded                                                            
tires.                                                                                                                          
                                                                                                                                
Senator  Cowdery  asked  if  witness agreed  the  average  cost  per                                                            
studded tire is $11 higher than for non-studded tires.                                                                          
                                                                                                                                
Mr. Quiggle  responded the amount  varies from $10 to $12  per tire.                                                            
                                                                                                                                
Senator Cowdery asked if  the witness had experience with ice tires.                                                            
                                                                                                                                
Mr. Quiggle  reported that after driving  with studded tires  for 30                                                            
years,  he experimented  with  ice  tires this  year.  He liked  the                                                            
tires, but  stressed that in the event  the vehicle slides,  the ice                                                            
tires respond significantly slower than studded tires.                                                                          
                                                                                                                                
Senator Cowdery indicated  most modern cars have an ABS brake system                                                            
and he told  of his driving experience  with ice tires on  the hills                                                            
in Juneau.                                                                                                                      
                                                                                                                                
HANNELE  ZUBECK,   Associate  Professor,   School  of  Engineering,                                                             
University  of Alaska-Anchorage, testified  via teleconference  from                                                            
Kenai about a  study she conducted on the social-economical  impacts                                                            
of  studded tire  use  in Alaska.  The  preliminary  report,  titled                                                            
"Socio-Economic  Effects  of Studded  Tire  Use in  Alaska:  Interim                                                            
Executive Summary-March  10, 2003" is on file. Her recommendation is                                                            
that a $10 fee  per studded tire would encourage the  use of driving                                                            
with old studded tires,  which may not provide adequate traction but                                                            
would instill  driver confidence. She predicted this  would increase                                                            
the accident rate.  She furthered the same impact  would result if a                                                            
$2 fee  were imposed  on the sale  of all tires,  as proposed  in HB
173. She suggested  a higher fee for  the conventional heavy  studs,                                                            
which would encourage  drivers to select lightweight  studs and have                                                            
less impact on the State's economy.                                                                                             
                                                                                                                                
Ms.  Zubeck addressed  the  matter of  soft asphalt  informing  that                                                            
hardening  the asphalt  is  possible;  however, cracking  and  other                                                            
problems  would  occur. She  stated  that  aggregate is  the  actual                                                            
issue.                                                                                                                          
                                                                                                                                
Ms. Zubeck listed  the states that currently ban the  use of studded                                                            
tires  and  noted  Illinois   is the  only   state  where  icy  road                                                            
conditions are present.                                                                                                         
                                                                                                                                
Senator Taylor  asked the witness  repeat of the conclusions  of the                                                            
preliminary report.                                                                                                             
                                                                                                                                
Ms. Zubeck  detailed the findings  of the studies, in comparison  to                                                            
data  learned from  research  conducted in  Sweden  and Norway.  She                                                            
qualified that  the annual estimated  damage amount of $5  in Alaska                                                            
is inaccurate and should be reevaluated.                                                                                        
                                                                                                                                
Ms. Zubeck  testified that studded  tire use reduces accident  rates                                                            
and  that reducing  studded  tire  use would  increase  the  overall                                                            
costs, despite  savings in  road maintenance  and revenue  generated                                                            
from the studded tire fee.                                                                                                      
                                                                                                                                
Senator  Taylor appreciated  the University  of Alaska's efforts  on                                                            
this matter.                                                                                                                    
                                                                                                                                
Senator  Cowdery asked  if the ruts  caused by  studded tires  are a                                                            
safety issue as well.                                                                                                           
                                                                                                                                
Ms. Zubeck answered, "absolutely".  She noted the absence of studies                                                            
of  summertime accidents,  as  most  studies concentrate  on  winter                                                            
accidents.  She remarked  that that information  on hydroplaning  is                                                            
important to collect and analyze.                                                                                               
                                                                                                                                
Senator B. Stevens  referenced certain information  contained in the                                                            
section  of the  preliminary  report relating  to  pavement wear  as                                                            
follows.                                                                                                                        
                                                                                                                                
        · Traffic conditions (decrease wear by decreasing traffic                                                               
          volume and proportion of studded tires, decreasing winter                                                             
           speed limits and increasing lane widths); and                                                                        
        · Weather conditions (decrease wear by keeping the road                                                                 
          surface dry).                                                                                                         
                                                                                                                                
Senator B. Stevens commented  that the Legislature does not have the                                                            
authority  or ability  to decrease  traffic and  keep road  surfaces                                                            
dry.                                                                                                                            
                                                                                                                                
Ms. Zubeck clarified that  salting the roads would assist in keeping                                                            
them dry and that  subsidized pubic transportation  could reduce the                                                            
amount of traffic  in urban areas.  She noted that parking  costs in                                                            
Helsinki, Finland  are high and that with the availability  of "park                                                            
and ride" and other public  transportation programs, vehicle traffic                                                            
into the city has been reduced.                                                                                                 
                                                                                                                                
ROGER  BURNS   testified  via  teleconference   from  Fairbanks   in                                                            
reference to the VTI report  and a State of Alaska report, AK-RD-96-                                                            
1, issued in  1996 [copies on file].  He commented on the  amount of                                                            
anecdotal  testimony about  road conditions.  He reiterated  earlier                                                            
testimony that "putting  consumers in harm's way" for the purpose of                                                            
collecting $2 million in  taxes is "unconscionable". Since this is a                                                            
revenue  source  proposal   rather  than  a  matter  of  safety,  he                                                            
supported the house bill  plan to impose a $2 fee on the purchase of                                                            
all new tires, as it would  raise $2.5 million per year. He asserted                                                            
that all  studies show that  studded tires  reduce accidents  and he                                                            
opined that  purchasers should chose  tires based on the  conditions                                                            
of the roads they  drive. He noted that the roads  in Fairbanks have                                                            
ice and snow more often than roads in other parts of the State.                                                                 
                                                                                                                                
Senator Bunde  affirmed the witness  supports a tax on the  purchase                                                            
of all tires.                                                                                                                   
                                                                                                                                
Senator  Taylor associated  himself with the  previous speaker  that                                                            
the purpose  of this bill is to generate  funds. He noted  the funds                                                            
would not be dedicated  for road maintenance. He supported the house                                                            
bill  proposal  to add  a  tax to  the sale  of  all new  tires.  He                                                            
suggested  it would  remove the  arguments for  and against  studded                                                            
tires, which should be addressed in separate legislation.                                                                       
                                                                                                                                
Senator  Taylor offered  a motion  to amend  SB 106  to reflect  the                                                            
language contained  in CS HB 173 to  impose a $2 fee on the  sale of                                                            
all new tires [This conceptual amendment was not numbered].                                                                     
                                                                                                                                
Co-Chair Wilken  requested the motion be removed to  all a committee                                                            
substitute to be drafted for Committee review.                                                                                  
                                                                                                                                
Senator  Taylor   agreed  and  the  motion  was  WITHDRAWN   without                                                            
objection.                                                                                                                      
                                                                                                                                
Senator Bunde  indicated he would  offer amendments for the  purpose                                                            
of discussion,  although  he did not  intend action  to be taken  at                                                            
this meeting.                                                                                                                   
                                                                                                                                
Amendment  #2: This amendment  deletes "studded"  from the  title of                                                            
the committee substitute. The amended title reads as follows.                                                                   
                                                                                                                                
     "An  Act relating  to  tires; and  providing  for an  effective                                                            
     date."                                                                                                                     
                                                                                                                                
This amendment  also eliminates the proposed $10 fee  imposed on the                                                            
retail  sale of studded  tires  and imposes  a fee  of $2.50 on  the                                                            
retail sale of all motor vehicle tires.                                                                                         
                                                                                                                                
This  amendment also  deletes  the language  in  Sec. 43.98.025(b),                                                             
relating  to a $10  fee for  the installation  of studs  on a  motor                                                            
vehicle license, and inserts new language to read as follows.                                                                   
                                                                                                                                
          (b) In addition to the fee imposed under (a) of this                                                                  
     section,  a fee of $5 a tire  is imposed on the retail  sale of                                                            
     tires  studded with metal  studs or  spikes weighing more  than                                                            
     1.1 grams  each embedded in the  periphery of the tire  surface                                                            
     and protruding beyond  the tread surface of the tire, or on the                                                            
     installation  for a fee of metal studs or spikes  weighing more                                                            
     than 1.1 grams each on a motor vehicle tire in the state.                                                                  
                                                                                                                                
Senator Bunde moved for adoption of the amendment.                                                                              
                                                                                                                                
Co-Chair Wilken objected for discussion.                                                                                        
                                                                                                                                
Senator Bunde spoke to  the amendment. He recommended a fee of $2.50                                                            
for each  tire rather than  $2 proposed in  the house bill  based on                                                            
conversations  with  retailers  indicating  that because  tires  are                                                            
usually sold in  sets of four, the $10 total fee would  be easier to                                                            
account.                                                                                                                        
                                                                                                                                
Senator  Bunde removed  his motion  to adopt  the amendment  without                                                            
objection and Amendment #2 was WITHDRAWN.                                                                                       
                                                                                                                                
Amendment  #3:  This conceptual  amendment  changes  the  remittance                                                            
period  for submission  of the collected  fees by  retailers  to the                                                            
State  from monthly  to  quarterly.  The  amended language  of  Sec.                                                            
43.98.025(d) reads as follows.                                                                                                  
                                                                                                                                
          (d) A seller shall collect the fee from the purchaser. A                                                              
     seller  shall  file  a  return  on a  form  prescribed  by  the                                                            
     department  and remit the fee collected to the  department on a                                                            
     quarterly basis of the sale or installation.                                                                               
                                                                                                                                
Senator Bunde moved for adoption.                                                                                               
                                                                                                                                
Senator  Bunde removed  his  motion to  adopt Amendment  #3  without                                                            
objection and the amendment was WITHDRAWN.                                                                                      
                                                                                                                                
Co-Chair   Wilken   requested   members   submit   suggestions   for                                                            
incorporation into a committee  substitute and ordered the bill HELD                                                            
in Committee.                                                                                                                   
                                                                                                                                
Co-Chair  Wilken understood  that Department  of Transportation  and                                                            
Public  Facilities  vehicles  are  exempt  from  weight  limits.  He                                                            
requested Mr. Lavasseur to provide an explanation on the matter.                                                                
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 40                                                                                                         
     "An Act relating to construction of highways by the Department                                                             
     of Transportation and Public Facilities."                                                                                  
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken stated,  "SB  40 allows  the use  of force  account                                                            
construction  only for highway  construction  projects estimated  to                                                            
cost  $250,000  or less.  Projects  greater  than $250,000  will  be                                                            
subject to a competitive  bid process as outlined in State statute."                                                            
                                                                                                                                
RICHARD SCHMITZ,  Staff to Senator  Cowdery, stressed importance  of                                                            
the competitive  bidding process to State government  operations. He                                                            
explained this  is to ensure fairness and to garner  the best prices                                                            
available. He  noted the current system does not accurately  compare                                                            
the  expense  of  private   ownership  of  equipment   and  contract                                                            
employees with  that of State-owned  equipment and State  employees.                                                            
                                                                                                                                
Mr.  Schmitz spoke  to  a handout  [copy on  file],  which reads  as                                                            
follows.                                                                                                                        
                                                                                                                                
     Re: SB 40 alternatives:                                                                                                    
                                                                                                                                
     Is DELIVERY ORDER CONTRACTING an alternative?                                                                              
        · DOC is used by, and was developed by, the Department of                                                               
          Defense (it's called JOC by the Army, SABER by the Air                                                                
          Force) and is being increasingly used by local                                                                        
          governments and educational facilities.                                                                               
        · DOC is a competitively bid, fixed price, indefinite                                                                   
          quantity,     indefinite    delivery    (IDIQ),    general                                                            
          construction contract.                                                                                                
        · The contract typically has a base year with 2 to 4 option                                                             
          years.                                                                                                                
        · The contract sets parameters such as location of work,                                                                
          type of work to be done, design criteria, etc.                                                                        
        · A DOC contract uses unit price guides (UPG) and/or a                                                                  
          unit-price   book  (UPB)  to  establish   a  price  for  a                                                            
          multitude  of lines items of work. A typical UPB has about                                                            
          40,000  line  items in  order to  cover  just about  every                                                            
          imaginable  task. Items that are not in  the book are then                                                            
          negotiated,  priced,  and  added to  the UPB.  A UPG  uses                                                            
          computer cost databases, etc.                                                                                         
        · The contractor bids a coefficient that is a markup or                                                                 
          markdown to the UPB items, rather than a dollar price.                                                                
                                                                                                                                
     What you get with a Delivery Order Contract:                                                                               
        · On-call general contractor where prices for line items of                                                             
          work are predetermined.                                                                                               
        · A contract that is easy to manage.                                                                                    
        · A contract that puts more money into "hard construction"                                                              
          instead of soft upfront costs.                                                                                        
                                                                                                                                
Mr. Schmitz  surmised this  legislation would  provide incentive  to                                                            
the Department of Transportation  and Public Facilities to institute                                                            
new methods of contracting for smaller projects.                                                                                
                                                                                                                                
SENATOR JOHN  COWDERY told of contractors  that bid on a  $3 million                                                            
project located in Saint  Mary's, in which the Department elected to                                                            
utilize a force  account. He opined  this was an abuse of  the force                                                            
account. He reported  that many states have defined  maintenance and                                                            
construction, separated  by dollar amounts. He intended to provide a                                                            
"level playing  field", understanding that the Department  must have                                                            
the ability to  utilize a force account. He considered  the $250,000                                                            
limit  to be  adequate  and  would provide  necessary  latitude.  He                                                            
relayed he  had asked the  Department the  lowest cost of a  project                                                            
located  in rural  Alaska,  in which  a request  for  bids would  be                                                            
issued. He was told the amount was between $75,000 and $100,000.                                                                
                                                                                                                                
Senator Cowdery stated  this legislation would "get the State out of                                                            
the construction business".                                                                                                     
                                                                                                                                
Senator Taylor asked if this legislation would prevent abuses.                                                                  
                                                                                                                                
Senator  Cowdery  responded it  would  require competitive  bid.  He                                                            
noted that currently no limitation is imposed.                                                                                  
                                                                                                                                
Senator Taylor  asked the regulatory  authorization under  which the                                                            
Department  makes the decision that  only certain contractors  could                                                            
bid on a project. He gave  the construction of high-speed ferries as                                                            
an example.                                                                                                                     
                                                                                                                                
GEORGE LAVASSEUR,  Acting State Maintenance Engineer,  Office of the                                                            
Commissioner,  Department  of Transportation  and Public  Facilities                                                            
responded  he would provide  an answer at  a later time at  Co-Chair                                                            
Wilken's request.                                                                                                               
                                                                                                                                
Mr. Lavasseur  testified to  his 29 years  in Southcentral  Interior                                                            
Alaska maintaining highways.  He gave a history of the force account                                                            
method beginning  with a meeting eight  years ago in Washington  D.C                                                            
with the  National  Highway Administration,  where  he learned  that                                                            
other  states  have  the  same  problem  of infrastructure   without                                                            
adequate  funding  to  maintain  it.  As  a  result,  congressional                                                             
approval  was  granted  to  allow  the  use  of  federal  funds  for                                                            
maintenance  purposes,  including  pavement life  extension,  bridge                                                            
repair and gravel-to-pavement  programs. Before this  authorization,                                                            
he reminded that  for several years during the 1980s,  the State did                                                            
not have enough funds to maintain highways.                                                                                     
                                                                                                                                
Mr. Lavasseur  told  of significant  damage  caused by  the melt  of                                                            
discontinuous  permafrost and the use of federal funds  in the force                                                            
account  to maintain  road  smoothness,  and to  rehabilitate  older                                                            
pavements.  He listed  the type  of projects  undertaken with  these                                                            
funds, including  boardwalks, community  roads and capital  projects                                                            
performed by  the Department maintenance  staff. Of the $42,600,000                                                             
appropriated  for  this  purpose in  2003,  86  percent is  paid  to                                                            
private  contractors.  He  detailed  the  percentages  allocated  to                                                            
private contractors  and Department  staff in each region,  based on                                                            
the availability of hot asphalt.                                                                                                
                                                                                                                                
Mr. Lavasseur  indicated  photos showing  heavy  equipment, and  the                                                            
process of repairing roads in the Northern Region.                                                                              
                                                                                                                                
                                                                                                                                
SFC 03 # 38, Side A 10:37 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Mr. Lavasseur asserted  the force account method allows efficiencies                                                            
for maintenance  work done  in Interior Alaska.  He elaborated  that                                                            
the Department  combines  maintenance  resources from  a variety  of                                                            
"camps",   which  allows   reduced   per  diem   costs  and   better                                                            
mobilization of  units. He cautioned that if this  type of work were                                                            
contracted  to the  highest  bidder, the  costs would  increase.  He                                                            
listed design  problems, since typical  as-built specifications  are                                                            
not available  for 150  to 200 sections  of a  particular road  that                                                            
could be worked on. He  added that the sections only measure between                                                            
50 to 300 feet  rather than one continuous  section and that  he has                                                            
learned from  private contractors  they are not interested  in these                                                            
projects. He  attributed this to the  short construction  season and                                                            
the large area in which  equipment and manpower must be distributed.                                                            
He noted that  when a project is comprised of one  section measuring                                                            
three  or more  miles,  a private  contractor  is employed,  as  the                                                            
Department  only  addresses   spot  repairs.  He  assured  that  all                                                            
crushing  is  done by  the  private  sector,  amounting to  over  $1                                                            
million annually  in the Northern  Region. In addition, he  reported                                                            
that  all the  emulsion is  purchased from  the  private sector  for                                                            
approximately  $2.5  million  annually,  and rollers,  belly  dumps,                                                            
tractor-trailers,  and milling machines are rented  from the private                                                            
sector.                                                                                                                         
                                                                                                                                
Mr.  Lavasseur  stressed   the  Department  performs   some  of  the                                                            
maintenance  work because  of the  lower costs  associated with  not                                                            
paying  Davis-Bacon Act  wages,  bypassing bid  packages,  preparing                                                            
construction engineering  on the grade, and not paying for a profit.                                                            
He also spoke of the need  to employ the "highly-trained" Department                                                            
staff for at least nine  months per year, explaining that previously                                                            
the winter  seasonal workers fished  commercially during  the summer                                                            
months before the fishing industry declined.                                                                                    
                                                                                                                                
Mr. Lavasseur  informed that the Department  has been able  to adapt                                                            
to  lower  budget  appropriations,  inflation  and  unfunded  salary                                                            
increases because of cost saving efforts such as these.                                                                         
                                                                                                                                
Mr. Lavasseur  assured the Department was committed  that the abuses                                                            
of the  past would  not occur under  the leadership  of the  current                                                            
Murkowski Administration.  He warned that passage of this bill would                                                            
have a "devastating effect" on the highway maintenance program.                                                                 
                                                                                                                                
Senator  Taylor asked if  a series  of repairs along  50 miles  of a                                                            
highway could  be divided into separate projects,  each costing less                                                            
than   $250,000  and   complying   with  the   provisions  of   this                                                            
legislation.                                                                                                                    
                                                                                                                                
Mr. Lavasseur predicted  the costs would be higher than $250,000. He                                                            
voiced concern that the  Department would be limited by the $250,000                                                            
maximum amount  and indicated  he preferred  a $1 million limit.  He                                                            
gave the repairs  needed to the Alaskan Highway between  Tok and the                                                            
Canadian  border  as an  example of  this.  He stated  that  private                                                            
contractors  would be hired to make  repairs to the larger  sections                                                            
of the  highway, but  the Department  would conduct  the repairs  on                                                            
damaged  sections  of  only  several hundred  yards  in  length.  He                                                            
detailed the process  of staging equipment and a two-year  supply of                                                            
materials  in key  locations along  the highway.  He calculated  the                                                            
cost of repairs utilizing  this method at approximately 65 cents per                                                            
square foot, or $100,000  per square mile of area actually repaired.                                                            
He predicted that to divide  the repairs into smaller projects would                                                            
increase the cost significantly.                                                                                                
                                                                                                                                
Senator  Taylor  restated his  scenario  suggesting  the  Department                                                            
could address the smaller  repair sections as separate projects, yet                                                            
still  utilize   the  efficiencies   of  stockpiled  materials   and                                                            
equipment.                                                                                                                      
                                                                                                                                
Mr. Lavasseur  expressed the Department  would not chose  to violate                                                            
the  intent of  the  bill.  He qualified  that  if the  division  of                                                            
repairs  as   Senator  Taylor  described   were  specified   in  the                                                            
legislation, the Department could utilize the practice.                                                                         
                                                                                                                                
Senator  Cowdery countered  Mr.  Lavasseur's comments  pointing  out                                                            
that the private  sector also has a trained workforce.  He mentioned                                                            
one  project  covering  38 miles.  He  relayed  that he  spoke  with                                                            
Commissioner  Barton  about day-labor  contracts  to address  larger                                                            
projects and had received assurance this would be done.                                                                         
                                                                                                                                
EDEN  LARSON,  President and  Chief  Executive  Officer,  Associated                                                            
Builders  and Contractors  of Alaska, testified  via teleconference                                                             
from an off  net location to dispute  the Department testimony.  She                                                            
characterized this legislation  as designed to prevent abuses to the                                                            
force  account system  in  the future.  While  she was  assured  the                                                            
current  Administration  would not  commit such  abuses, she  voiced                                                            
concern  that the  proposed limitation  must be  imposed to  prevent                                                            
future administrations  from  committing abuse.  She furthered  that                                                            
the limitation  would allow the Department  to perform efficiently.                                                             
                                                                                                                                
Senator   Cowdery  asked   the  size  of   the  membership   of  the                                                            
organization.                                                                                                                   
                                                                                                                                
Ms. Larson listed  145 contractors, their associates  and suppliers,                                                            
representing approximately 4,000 employees in the State.                                                                        
                                                                                                                                
DON   VALESKO,   Business   Manager,   Local   71,   testified   via                                                            
teleconference    from   Anchorage   representing    Department   of                                                            
Transportation  and Public Facilities  the 500 to 600 employees  who                                                            
perform road and facility  maintenance. He voiced concerns with this                                                            
legislation,  particularly  the  impact  it would  have  on  regular                                                            
maintenance operations,  such as snow removal. He  detailed the high                                                            
cost of  clearing roads after  a heavy snowfall,  which must  be bid                                                            
upon under the  provisions of this bill. He understood  one incident                                                            
brought this issue  to light, but stressed that one  incident should                                                            
not "dictate bad legislation".                                                                                                  
                                                                                                                                
Senator  Cowdery  told  of research  indicating  the  definition  of                                                            
maintenance  is "tighter"  in  other states,  and  that many  states                                                            
categorize  projects costing  less than $50,000  as maintenance  and                                                            
those over  $50,000 as construction.  He asked if the witness  would                                                            
favor such definitions.                                                                                                         
                                                                                                                                
Mr.  Valesko  did  not, because  snow  removal  after  even  lighter                                                            
snowfall would require  the bidding process. He stated that the time                                                            
involved with the bidding  process would cause unnecessary delays in                                                            
clearing the roadways.                                                                                                          
                                                                                                                                
Senator  Cowdery  asked  what  information  the  witness  based  his                                                            
comments on.                                                                                                                    
                                                                                                                                
Mr. Valesko  calculated the  $200 daily salary  paid to an  operator                                                            
plus  the $200  daily  cost  for equipment,   multiplied  by the  30                                                            
operators  working five days  per week in  the Anchorage area  to be                                                            
$60,000  per  week.   He  remarked  this would  place  snow  removal                                                            
services in the category of construction, which he disputed.                                                                    
                                                                                                                                
JEFF ALLING,  Alcan Builders,  and Member,  Associated Builders  and                                                            
Contractors of Alaska,  testified via teleconference from Fairbanks,                                                            
in support of  the bill. He agreed this legislation  was prompted by                                                            
an  incidence  of   abuse  committee  by  the  prior  gubernatorial                                                             
administration.   He  expressed  the intent  is not  to hamper  snow                                                            
removal  efforts, but  rather to  prevent the  State from  competing                                                            
with private industry on large construction projects.                                                                           
                                                                                                                                
Mr. Alling  told of bidding  on a University  of Alaska project  and                                                            
the use of multipliers to simplify the process.                                                                                 
                                                                                                                                
Mr. Alling  questioned the  representation  by Mr. Valesko  of union                                                            
members.                                                                                                                        
                                                                                                                                
Senator Bunde  asked if the  employees of  Alcan Builders are  union                                                            
members.                                                                                                                        
                                                                                                                                
Mr. Alling  replied  they are not,  although he  stated the  company                                                            
engages  unionized  subcontractors  and  they "work  together  quite                                                            
happily".                                                                                                                       
                                                                                                                                
Senator Cowdery  asked if most of the private contractors  pay Davis                                                            
Bacon Act wages to its employees.                                                                                               
                                                                                                                                
Mr. Alling answered yes.                                                                                                        
                                                                                                                                
Senator Taylor understood  the presence of a systemic problem of the                                                            
distinction of the Department  between construction and maintenance.                                                            
He  commented   that  in  British   Columbia,  Canada,  maintenance                                                             
operations  have   been  contracted  to  the  private   sector  with                                                            
significant  savings  realized.   He  suggested  the  definition  of                                                            
maintenance and construction  should be given further consideration,                                                            
because  this  legislation   as  written,  could  result   in  "more                                                            
disservice than good."                                                                                                          
                                                                                                                                
Senator B. Stevens  asked if Mr. Lavasseur has reviewed  the handout                                                            
titled, "Air  Force Guide: Simplified  Acquisition of Base  Engineer                                                            
Requirements  (SABER)" [copy on file].  He asked if the information                                                             
contained in this report address preventive maintenance.                                                                        
                                                                                                                                
Mr. Lavasseur  affirmed and  explained that  due to permafrost  melt                                                            
the destruction  of roads has increased rapidly, and  more resources                                                            
have been necessary to perform repairs.                                                                                         
                                                                                                                                
Senator B. Stevens echoed  Senator Taylor's assertion that the issue                                                            
is  based  on  the definitions   of construction   and maintenance.                                                             
Senator  B.  Stevens  characterized  snow  removal  as one  type  of                                                            
maintenance,  yet  preventative   maintenance  is  more  a  type  of                                                            
construction.                                                                                                                   
                                                                                                                                
Senator B. Stevens next  questioned the zero fiscal note, citing the                                                            
second paragraph of the analysis, which reads as follows.                                                                       
                                                                                                                                
     Since  it is not possible to  determine which projects  will be                                                            
     considered  for FAC [Force Account Construction]  over the next                                                            
     six years, we will  base the projected savings on Calendar Year                                                            
     2002.  The estimated  savings  on 2002 force  account  projects                                                            
     (greater than $250,000)  was $4,267,700. Assuming the amount of                                                            
     force  account  projects remains  constant  over  the next  six                                                            
     years, the lost savings would total $25,606,200.                                                                           
                                                                                                                                
Senator  B.  Stevens  asked  if expenses  would  increase  over  $25                                                            
million.                                                                                                                        
                                                                                                                                
Mr. Lavasseur  replied  it would for  the period  of time  indicated                                                            
[six  years].  He elaborated  this  would  be due  to  the costs  of                                                            
issuing   bid  packages,   engineering   design,   advertising   and                                                            
construction management.                                                                                                        
                                                                                                                                
Senator B. Stevens  indicated a fiscal note to separate  legislation                                                            
applying  to  FY  01  [bill  number  and  further   information  not                                                            
provided],  estimated  savings  of $120  million utilizing  a  force                                                            
account.  He  cited the analysis of  the unspecified fiscal  note as                                                            
reading "Assuming the force  account managed costs over the next six                                                            
years,  loss of  savings would  be  a total  of $120  million."   He                                                            
requested reconciliation  of the information of the two fiscal notes                                                            
and the  aforementioned Air  Force report.  He suggested the  matter                                                            
could be discussed after this meeting concludes.                                                                                
                                                                                                                                
Mr. Lavasseur agreed to explain the matter.                                                                                     
                                                                                                                                
Senator B. Stevens  noted the funding has been accounted  more often                                                            
as "one line item" and wanted to understand the reason.                                                                         
                                                                                                                                
Mr. Lavasseur  indicated the  majority of  the projects in  question                                                            
have been gravel-to-pavement.                                                                                                   
                                                                                                                                
Co-Chair  Wilken asked the  year the federal  government ruled  that                                                            
federal National Highway  System funds could be used for maintenance                                                            
purposes as well as construction projects.                                                                                      
                                                                                                                                
Mr. Lavasseur answered 1998.                                                                                                    
                                                                                                                                
MARK O'BRIEN, Chief Contracts  Officer, Contracting, Procurement and                                                            
Appeals, Office  of the Commissioner,  Department of Transportation                                                             
and Public Facilities,  testified via teleconference  from an offnet                                                            
location that he could  answer questions posed by Committee members.                                                            
                                                                                                                                
Mr. O'Brien  addressed Senator  B. Stevens's  queries regarding  the                                                            
fiscal notes,  stating that the differences reflect  a change in how                                                            
the savings  was calculated. He explained,  "there were significant                                                             
savings factors  back in 2000 that resulted in estimates  of savings                                                            
as high  as 55  and 60  percent." He  informed that  upon review  of                                                            
competitive  bids   and  "the  current  marketplace",   the  savings                                                            
estimates  have  been recalculated   to 20  to  25 percent  and  the                                                            
current fiscal note reflects  a savings of 28 percent. He noted this                                                            
percentage  is based  on  a comparison  of  Davis Bacon  Act  wages,                                                            
profit and construction engineering expenses.                                                                                   
                                                                                                                                
Mr.  O'Brien  next  spoke to  the  definitions  of  maintenance  and                                                            
construction  projects,  indicating  AS  19.45.001(2)  provides  the                                                            
definition  of  construction  as "…construction  or  any  derivation                                                            
meaning 'construction,  reconstruction,  alteration, improvement  or                                                            
major repair…'" and (10)  provides the definition of maintenance. He                                                            
assured  this  legislation  would  not  hamper  routine maintenance                                                             
projects,  such  as  snow removal.  However,  he  pointed  out  that                                                            
because  the construction  definition does  not specifically  define                                                            
major repair,  uncertainty  over the classification  of resurfacing                                                             
projects would require the $250,000 provision.                                                                                  
                                                                                                                                
Senator  Taylor   asked  how  the  matter  could  be   resolved.  He                                                            
questioned  the   imposition  of  an  "arbitrary  number"   and  the                                                            
situation  of  the   cost  of  a  project  exceeding   $250,000  and                                                            
automatically  becoming  a  major  repair  that is  subject  to  the                                                            
bidding  process.   He  requested   further  clarification   of  the                                                            
definition of repair and major repair.                                                                                          
                                                                                                                                
Mr. O'Brien  ascertained the definition  of repair was unrelated  to                                                            
the  provisions  of this  legislation,  surmising  that maintenance                                                             
would  continue   to  be  categorized  as  repair   rather  than  as                                                            
construction  and  not  subject  to  the  provisions  of  the  force                                                            
account, although he assured he would review the matter.                                                                        
                                                                                                                                
Mr. O'Brien  agreed with  earlier testimony  that most construction                                                             
should  be  undertaken  through  the  competitive  bid  process  and                                                            
informed that  currently 97 percent  of the work is handled  in this                                                            
manner. He noted that of  the three percent of the work done through                                                            
the force account process,  half is contracted by competitive sealed                                                            
bid. He  stressed that  less than  one-half percent  of the  work is                                                            
therefore not undertaken through competitive bid.                                                                               
                                                                                                                                
Mr. O'Brien  reported that community  roads and boardwalk  projects,                                                            
which   require  considerable   maintenance   activity,   is   often                                                            
transferred from  the Department to the Bureau of  Indian Affairs or                                                            
Indian  Health Agency  undertaking other  projects  in the area.  He                                                            
stated  it  is often  in  the  State's  best interest  and  is  cost                                                            
effective to do so, as  the other agencies have staff, equipment and                                                            
materials on hand to perform  the work. He noted this practice would                                                            
be prohibited under the provisions of this legislation.                                                                         
                                                                                                                                
Senator Cowdery asked the  dollar amount of the three percent of the                                                            
projects  not  currently  addressed   through  the  competitive  bid                                                            
process.                                                                                                                        
                                                                                                                                
Mr. O'Brien replied that  $61 million was expended through the force                                                            
account during the years  1998 through 2002. During the same period,                                                            
he  continued,  the  entire  program  expended  $2,279,000,000.   He                                                            
calculated  the force account  comprised 2.68  percent of the  total                                                            
expenditure.                                                                                                                    
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 11:13 AM                                                                          

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