Legislature(2013 - 2014)SENATE FINANCE 532

03/25/2014 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Scheduled But Not Heard
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
Moved CSSB 182(FIN) Out of Committee
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 25, 2014                                                                                            
                         9:06 a.m.                                                                                              
9:06:08 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Meyer  called the Senate Finance  Committee meeting                                                                    
to order at 9:06 a.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Kevin Meyer, Co-Chair                                                                                                   
Senator Anna Fairclough, Vice-Chair                                                                                             
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Senator  Fred  Dyson;  Nicki  Neal,  Director,  Division  of                                                                    
Personnel    and    Labor     Relations,    Department    of                                                                    
Administration; Kate  Sheehan, Deputy Director,  Division of                                                                    
Labor  Relations, Department  of Administration;  Tom Brice,                                                                    
Alaska Laborers,  Juneau; Ron Arvin, Member,  Mat-Su Borough                                                                    
Assembly,  Juneau;  Paul  Fuhs,  Project  Manager,  Fairview                                                                    
Business  Association,  Juneau;  Roger  Purcell,  President,                                                                    
Houston   Chamber   of   Commerce,  Juneau;   Paul   Grossi,                                                                    
Ironworkers of Alaska, Juneau                                                                                                   
PRESENT VIA TELECONFERENCE                                                                                                    
Larry   DeVilbiss,  Mayor,   Mat-Su  Borough,   Mat-Su;  Dan                                                                    
Sullivan,  Mayor,  City  of  Anchorage,  Anchorage;  Berkley                                                                    
Tilton,  Former President  and  Current  Board Member,  Knik                                                                    
Fairview  Community Council,  Self, Wasilla;  Aves Thompson,                                                                    
Executive Director,  Alaska Trucking  Association, Grapevine                                                                    
Texas;  Don  Dyer,  Director, Economic  Development,  Mat-Su                                                                    
Borough;   Michael   Droege,    Former   President,   Alaska                                                                    
Association of  Realtors, Anchorage; James  Kenworthy, Self,                                                                    
Anchorage;  Stephanie Kesler,  Self, Anchorage;  Bob French,                                                                    
Self,  Anchorage;  Lois   Epstein,  Self,  Anchorage;  Scott                                                                    
Goldsmith, Self,  Anchorage; Verne Rupright, Mayor,  City of                                                                    
SB 182    PUBLIC EMPLOYEE SALARY DIFFERENTIALS                                                                                  
          CSSB 183(FIN)  was REPORTED out of  committee with                                                                    
          a  "No   Rec"  recommendation   and  with   a  new                                                                    
          indeterminate fiscal  note from the  Department of                                                                    
          Transportation and Public Facilities.                                                                                 
2d CSHB  23(RLS)                                                                                                                
          KNIK ARM CROSSING; AHFC                                                                                               
          2d CSHB 23(RLS) was HEARD and HELD in committee                                                                       
          for further consideration.                                                                                            
CSHB 266(FIN)                                                                                                                   
          APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
          CSHB 266(FIN) was SCHEDULED but not HEARD.                                                                            
CSHB 267(FIN)                                                                                                                   
          APPROP: MENTAL HEALTH BUDGET                                                                                          
          CSHB 267(FIN) was SCHEDULED but not HEARD.                                                                            
SENATE BILL NO. 182                                                                                                             
     "An Act  relating to  salary differences  in collective                                                                    
     bargaining agreements subject  to the Public Employment                                                                    
     Relations Act  that are  based on  a difference  in the                                                                    
     cost  of  living outside  the  state  and the  cost  of                                                                    
     living  in the  state; and  providing for  an effective                                                                    
9:07:52 AM                                                                                                                    
SENATOR   FRED  DYSON,   noted   that   the  Department   of                                                                    
Administration  had   created  a  spreadsheet,   "Top  Three                                                                    
Earners -  Marine Units", which  charted the incomes  of the                                                                    
top three earners  in the three bargaining  units. He stated                                                                    
that a point of contention  in the bargaining units was that                                                                    
employees with seniority got to  choose routes and had first                                                                    
choice  of overtime  hours.  He said  that  the most  senior                                                                    
employees  did well  financially  and workers  lower in  the                                                                    
ranks were not  offered a fair chance for  overtime. He felt                                                                    
that this could restrict  a new employee's opportunities for                                                                    
professional growth.                                                                                                            
9:10:21 AM                                                                                                                    
Senator  Olson asked  why the  bill had  not been  initially                                                                    
presented as a fix for outdated statutes.                                                                                       
Senator  Dyson replied  that he  could  only speculate,  but                                                                    
thought that  the leadership at  the time had not  wanted to                                                                    
address a tough issue and anger the unions.                                                                                     
9:11:07 AM                                                                                                                    
Vice-Chair  Fairclough shared  that  the administration  had                                                                    
issued a response to her  question from the previous hearing                                                                    
of the bill  (copy on file). She wondered what  the term "A-                                                                    
days" meant.                                                                                                                    
NICKI  NEAL,  DIRECTOR,  DIVISION  OF  PERSONNEL  AND  LABOR                                                                    
RELATIONS, DEPARTMENT OF ADMINISTRATION, replied that A-                                                                        
days  were typically  accrued in  the  southwest system;  an                                                                    
employee  accrued a  day of  leave for  every day  that they                                                                    
worked.  She said  that when  the employee  was not  at work                                                                    
they turned  in leave so that  they had the ability  to work                                                                    
365 days a year.                                                                                                                
9:12:32 AM                                                                                                                    
KATE SHEEHAN, DEPUTY DIRECTOR,  DIVISION OF LABOR RELATIONS,                                                                    
DEPARTMENT OF ADMINISTRATION, explained  that for the A-days                                                                    
days,  with the  one crew  system, employees  worked 3  to 6                                                                    
months with  no break. A day  of leave was accrued  for each                                                                    
day worked.                                                                                                                     
9:12:53 AM                                                                                                                    
Vice-Chair  Fairclough inquired  whether  the  route of  the                                                                    
vessel interfered with regularly changing crews.                                                                                
Ms. Sheehan  replied in the  affirmative. She said  that the                                                                    
routes were longer; crossing the Gulf of Alaska.                                                                                
9:13:12 AM                                                                                                                    
Vice-Chair  Fairclough asked  whether employees  accumulated                                                                    
overtime on  those long  routes, in addition  to the  day of                                                                    
Ms. Sheehan  replied that it would  depend; employees worked                                                                    
8  hour  days  and  could potentially  accrue  overtime,  in                                                                    
addition to the A-days.                                                                                                         
9:13:41 AM                                                                                                                    
Vice-Chair Fairclough  inquired whether  the standard  was 8                                                                    
hours with the stipulation of 40 hours per week.                                                                                
Ms. Sheehan  replied that  there was  daily overtime;  if an                                                                    
employee  worked in  addition to  8 hours  in one  day, they                                                                    
would receive overtime for that day.                                                                                            
9:14:14 AM                                                                                                                    
Vice-Chair   Fairclough  understood   that  employees   were                                                                    
accumulating  sick leave  and  annual leave  on  top of  the                                                                    
earned day of leave.                                                                                                            
Ms. Sheehan  responded that it  would depend on  which union                                                                    
the  employee belonged  to. She  explained  that the  Marine                                                                    
Engineers'  Beneficial  Association  (MEBA) gave  A-days  or                                                                    
personal leave but  did not offer annual or  sick leave. The                                                                    
Inland  Boatmen's  Union  (IBU)  offered  a  choice  between                                                                    
annual  leave, sick  leave, or  A-days.  She furthered  that                                                                    
Masters,  Mates  and Pilots  (MMP)  did  not accrue  A-days,                                                                    
instead they received a lump-sum payment in lieu of a rate.                                                                     
9:14:50 AM                                                                                                                    
Vice-Chair  Fairclough  understood  that  the  accrual  rate                                                                    
worked as such:                                                                                                                 
1 year = 2 - 4 weeks of leave (depending on your union)                                                                         
2 years = 4 - 6 weeks of leave                                                                                                  
3 years = 4 - 8 weeks of leave                                                                                                  
4 years = 8 - 9 weeks of leave                                                                                                  
She surmised  that the cap was  at 8 - 9  weeks. She queried                                                                    
whether employees received annual or sick leave.                                                                                
Ms.  Sheehan responded  that if  an employee  accrued annual                                                                    
leave then  they also accrued  sick leave on days  that were                                                                    
not A-days.                                                                                                                     
9:15:52 AM                                                                                                                    
Co-Chair Meyer  wondered how  the current  negotiations with                                                                    
the union were going.                                                                                                           
Ms. Sheehan  replied that the administration  was going into                                                                    
negotiations  today with  MMP;  unfortunately and  agreement                                                                    
had not been  made by the 60th day, which  was Friday, March                                                                    
21, 2014. She  said that negotiations were  ongoing and that                                                                    
some  progress had  been made,  but some  significant issues                                                                    
were still contentious.                                                                                                         
9:16:51 AM                                                                                                                    
Co-Chair  Meyer expressed  frustration that  the legislature                                                                    
should  not   be  involved  in  the   collective  bargaining                                                                    
process. He  would leave the  bill's passage up to  the will                                                                    
of  the  committee,  but  maintained  that  the  legislature                                                                    
should not be involved in union negotiations.                                                                                   
9:18:03 AM                                                                                                                    
Senator  Dyson   responded  that  the  bill   spoke  to  one                                                                    
component  that  was  in  statute   and  was  therefore  not                                                                    
bargain-able. He  felt that  the current  administration had                                                                    
proposed  the legislation  due  to  the impending  financial                                                                    
situation as  a way  to rein in  spending. He  stressed that                                                                    
there was  a desire  to drive  down the  mandatory personnel                                                                    
costs. He stated that the  budget for personnel costs in the                                                                    
Alaska Marine Highway System was  alarming. He believed that                                                                    
the bill  was before the  committee because it was  the work                                                                    
of  the  legislative  finance  committees  to  oversee  cost                                                                    
9:20:06 AM                                                                                                                    
Senator  Dunleavy  requested  clarification  that  the  bill                                                                    
would take  the issue out  of statute but would  not prevent                                                                    
it from being negotiated back in sometime in the future.                                                                        
Senator Dyson responded in the affirmative.                                                                                     
Senator Dunleavy understood that  if the system found itself                                                                    
struggling to  find qualified workers  to fill  positions in                                                                    
the  future   then  incentives  would  be   built  into  the                                                                    
agreements of future negotiations.                                                                                              
Senator Dyson responded that it  was possible. He noted that                                                                    
there  was  an  internal   problem  of  employees  lower  in                                                                    
seniority not being able to get  the time it took to qualify                                                                    
for  the   next  license,  which  would   open  entry  level                                                                    
9:21:29 AM                                                                                                                    
Senator  Dunleavy thought  removing  the  statute would  not                                                                    
impact the negotiations process because  it did not create a                                                                    
cap on salaries or benefits.                                                                                                    
9:22:07 AM                                                                                                                    
Senator  Hoffman wondered  whether  the immediate  effective                                                                    
date could extend to a later date.                                                                                              
Senator Dyson responded  that the hard date was  meant to be                                                                    
9:23:15 AM                                                                                                                    
Senator Hoffman  agreed that the  legislature should  not be                                                                    
introducing   legislation  that   would  affect   or  impact                                                                    
negotiations. He  asserted that  it was not  the committee's                                                                    
place  to   interject  legislation  that  would   color  the                                                                    
negotiations of the bargaining unit.                                                                                            
Co-Chair Meyer noted that the  effective date would coincide                                                                    
with the fiscal years.                                                                                                          
9:23:52 AM                                                                                                                    
Senator Hoffman rebutted that it  could take effect during a                                                                    
fiscal year further in the future.                                                                                              
Senator Dunleavy  clarified that the bill  would not prevent                                                                    
future  negotiations and  believed that  the effective  date                                                                    
should remain as written.                                                                                                       
9:24:32 AM                                                                                                                    
Senator Dyson said that the  bargaining unit had substantial                                                                    
Co-Chair  Meyer was  not convinced  that the  effective date                                                                    
needed to be changed.                                                                                                           
Senator Dyson thought that  the administration believed that                                                                    
it  was important  that the  legislation  be implemented  as                                                                    
soon as possible.  He felt that the  administration had been                                                                    
generous to  grandfather in the existing  employees. He said                                                                    
that if moving  the effective date was what it  was going to                                                                    
take for the bill to pass then so be it.                                                                                        
9:26:45 AM                                                                                                                    
AT EASE                                                                                                                         
9:26:54 AM                                                                                                                    
Vice-Chair Fairclough  MOVED to REPORT CSSB  182(FIN) out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
CSSB  182(FIN)  was  REPORTED  out   of  committee  with  no                                                                    
recommendation  and with  a  new  indeterminate fiscal  note                                                                    
from   the   Department   of   Transportation   and   Public                                                                    
9:27:15 AM                                                                                                                    
AT EASE                                                                                                                         
9:30:19 AM                                                                                                                    
2d CS FOR HOUSE BILL NO. 23(RLS)                                                                                              
     "An   Act  creating   the  Knik   Crossing  Development                                                                    
     Corporation as  a subsidiary corporation of  the Alaska                                                                    
     Housing Finance  Corporation and  relating to  bonds of                                                                    
     the Knik Crossing Development Corporation."                                                                                
9:31:11 AM                                                                                                                    
TOM BRICE, ALASKA LABORERS, JUNEAU,  testified in support of                                                                    
HB  23.  He  stated   that  environmental  regulations  were                                                                    
becoming stricter  and construction costs were  on the rise.                                                                    
He  said that  beginning  the project  soon  would save  the                                                                    
state money and  allow for more land to be  developed on the                                                                    
other side of the Knik Arm in Anchorage.                                                                                        
9:32:35 AM                                                                                                                    
Senator Olson  asked whether  Mr. Brice  would have  had the                                                                    
same support  for the  project when he  was a  legislator in                                                                    
the 1990's.                                                                                                                     
Mr.  Brice  replied  that  in the  fiscal  issues  that  the                                                                    
legislature  faced when  he was  a  member outweighed  those                                                                    
faced by  the current legislature.  He said that  during his                                                                    
time as  a legislature  he was  an aggressive  proponent for                                                                    
the Lynn Canal Highway.  He stressed that transportation was                                                                    
vital for Alaska's economic development and growth.                                                                             
9:35:16 AM                                                                                                                    
LARRY   DEVILBISS,  MAYOR,   MAT-SU  BOROUGH,   MAT-SU  (via                                                                    
teleconference),  spoke in  support of  the HB  23. He  felt                                                                    
that the financial  environment was not going  to improve in                                                                    
the  near  future,  but  that  the  regional  and  statewide                                                                    
economic development should not  be ignored. He related that                                                                    
the project had  been presented to the  Conference of Mayors                                                                    
in   2012.  He   shared  that   the  mayors   in  attendance                                                                    
unanimously  agreed  that  the project  should  go  forward,                                                                    
which was  a rare occurrence.  He stressed that  the project                                                                    
was  would   not  benefit  only   the  Mat-Su   Borough  and                                                                    
Anchorage. He  said that  the project  was supported  by the                                                                    
trucking  industry.  He  warned  that  the  state  would  be                                                                    
investing as much  or more money into  widening or upgrading                                                                    
the Glenn Highway  if the state did not go  through with the                                                                    
project.  He viewed  the bridge  as a  "three legged  stool"                                                                    
along with  the railroad and  the port. He relayed  that the                                                                    
right-of-way was  99 percent complete  and that  the borough                                                                    
was ready to further the project.                                                                                               
9:40:16 AM                                                                                                                    
DAN  SULLIVAN,  MAYOR,  CITY OF  ANCHORAGE,  ANCHORAGE  (via                                                                    
teleconference),  spoke in  support  of HB  23. He  stressed                                                                    
that  the project  was  necessary to  connect  the two  most                                                                    
populated  areas in  Alaska. He  said that  the bride  would                                                                    
allow for a  more efficient and easy commute  to the valley.                                                                    
He worried what  might occur should something  happen to the                                                                    
existing  infrastructure,  leaving people  stranded;  public                                                                    
safety  concerns should  be considered.  He highlighted  the                                                                    
positive possibilities  that could occur should  the project                                                                    
move forward. He  believed that access to the  land north of                                                                    
Anchorage  via the  bridge would  bring tremendous  economic                                                                    
and social growth to the  region. He relayed that the bridge                                                                    
had been on the drawing board  for over 50 years and that at                                                                    
some point in  time the decision needed to be  made to build                                                                    
9:44:25 AM                                                                                                                    
BERKLEY TILTON,  FORMER PRESIDENT AND CURRENT  BOARD MEMBER,                                                                    
KNIK   FAIRVIEW  COMMUNITY   COUNCIL,  SELF,   WASILLA  (via                                                                    
teleconference), spoke in  support of HB 23.  He shared that                                                                    
according to the  last census, if it  were incorporated, the                                                                    
Kink-Fairview community would be  the fourth largest city in                                                                    
Alaska. He asserted that a  large population of people would                                                                    
use   the   bridge.   He   believed   that   Department   of                                                                    
Transportation  and Public  Facilities had  enough money  in                                                                    
its  budget to  be able  to allocate  funds for  the project                                                                    
without  impacting  other  projects  needed  throughout  the                                                                    
9:47:37 AM                                                                                                                    
AVES   THOMPSON,   EXECUTIVE   DIRECTOR,   ALASKA   TRUCKING                                                                    
ASSOCIATION, GRAPEVINE TEXAS  (via teleconference), spoke in                                                                    
support of  HB 23.  He believed  that the  alternative route                                                                    
would  provide  important   corridor  to  enable  increasing                                                                    
volumes of freight  to be moved safely  and efficiently into                                                                    
and out  of the  Port of Anchorage.  He understood  that the                                                                    
trucking industry would  not realize all of  the benefits of                                                                    
the  project   until  all  of  the   connector  routes  were                                                                    
finished. He firmly believed that  the project was essential                                                                    
for  expanding  the   association's  capability  to  deliver                                                                    
9:49:09 AM                                                                                                                    
DON  DYER, DIRECTOR,  ECONOMIC  DEVELOPMENT, MAT-SU  BOROUGH                                                                    
(via  teleconference), testified  in  support of  HB 23.  He                                                                    
related  that  there  were  four  key  projects  that  would                                                                    
synergize in the  Port MacKenzie area; the  Knik Arm Bridge,                                                                    
Port MacKenzie,  the Port MacKenzie Rail  Extention, and the                                                                    
As Soon  As Possible  Pipeline Project.  He said  that there                                                                    
were eight other enterprises that  were currently working in                                                                    
the area  and that the  sum of  all the activity  created an                                                                    
opportunity for the  state. He felt that  the main advantage                                                                    
for   Anchorage  and   the  Mat-Su   would   be  the   fluid                                                                    
transportation  corridor  that  would   be  created  by  the                                                                    
bridge.  He   stated  that   there  were   20,000  commuters                                                                    
traveling  from Mat-Su  to Anchorage,  and  back, daily.  He                                                                    
said  that  the bridge  would  ease  traffic congestion  and                                                                    
increase  safety. He  noted that  the state  should purchase                                                                    
any  necessary  materials  from overseas  soon,  to  protect                                                                    
against currency fluctuation.                                                                                                   
9:52:51 AM                                                                                                                    
Senator Olson asked  whether studies had been  done in order                                                                    
to determine the number of crossings.                                                                                           
Mr. Dyer  replied that there  had been several  studies done                                                                    
by KABTA and by the  borough's planning department. He could                                                                    
not speak to the actual number of crossings.                                                                                    
9:54:16 AM                                                                                                                    
Senator Olson  examined a report  that showed  that KABATA's                                                                    
numbers  were 14,337  crossings,  while  the Mat-Su  Borough                                                                    
plan  showed only  4,515. He  wondered  whether the  numbers                                                                    
could be rectified.                                                                                                             
Mr. Dyer  replied that  he would need  to see  KABATA's most                                                                    
current numbers from summer 2013.  He added that the numbers                                                                    
from a report conducted several  years ago had been based on                                                                    
old assumptions and were inaccurate.                                                                                            
9:55:28 AM                                                                                                                    
MICHAEL  DROEGE,  FORMER  PRESIDENT, ALASKA  ASSOCIATION  OF                                                                    
REALTORS, ANCHORAGE (via teleconference),  spoke in favor of                                                                    
HB  23. He  stated that  there  had not  been a  significant                                                                    
infrastructure  project,  in  terms of  roads,  built  since                                                                    
1970.  He opined  that affordable  housing in  the Anchorage                                                                    
market  was  a  problem  for  both  homeowners  and  renters                                                                    
because  of  the  lack of  affordable,  available  land.  He                                                                    
calculated  that  there  were approximately  300  available,                                                                    
affordable  building sites  between Anchorage  and Chuigiak.                                                                    
He believed  that the  issue was one  of public  safety; the                                                                    
bridge  would  take significant  traffic  off  of the  Parks                                                                    
Highway.  He stated  that supporting  this project  spoke to                                                                    
the charge  of the  association to protect  private property                                                                    
rights and  promote affordable  home ownership.  He strongly                                                                    
believed that tolls on the  bridge would service the state's                                                                    
10:00:17 AM                                                                                                                   
JAMES  KENWORTHY,  SELF,   ANCHORAGE  (via  teleconference),                                                                    
expressed concerns  regarding Section  37.15.255, subsection                                                                    
(g). He felt that the issuance  of the bond was dependent on                                                                    
the  toll  revenue  and  that  the  language  represented  a                                                                    
standard  moral obligation  of the  state. He  asserted that                                                                    
with  a  shortfall  of  toll  revenue  KABATA  would  either                                                                    
default on  its obligation or  the legislature would  need a                                                                    
guarantee  each  year  that   the  bond  payments  would  be                                                                    
replenished. He noted  that the federal TIFIA  loan had been                                                                    
denied  six  times in  the  past.  He guided  the  committee                                                                    
thorough  how  the  project would  fail  under  the  current                                                                    
financial assumptions  based on  toll revenues.  He asserted                                                                    
that the latest KABATA  crossing numbers were unreliable and                                                                    
inflated.  He   spoke  to  the   most  recent   KABATA  cost                                                                    
projections  of $1.6  billion, which  included  the cost  of                                                                    
Phase  2. He  asserted  that  the one  page  summary of  the                                                                    
project provided  to the committee  by KABATA,  included the                                                                    
revenue from four  lanes of traffic, but only the  cost of a                                                                    
two lane bridge.  He hoped that the  committee would further                                                                    
investigate the revenue expected to be generated by tolls.                                                                      
Co-Chair  Meyer  noted that  Mr.  Kenworthy  could send  his                                                                    
written testimony to the committee (copy on file).                                                                              
10:07:37 AM                                                                                                                   
STEPHANIE  KESLER,  SELF,  ANCHORAGE  (via  teleconference),                                                                    
expressed concerns  regarding HB  23. She  said that  the $1                                                                    
billion project  required cash flow analysis;  timelines for                                                                    
bond  payments, toll  revenues and  TIFIA payments.  She did                                                                    
not  believe that  the legislature  could  make an  informed                                                                    
decision  without  this  information. She  asked  where  new                                                                    
demographic  numbers were,  and why  they had  not yet  been                                                                    
released. She  questioned the credibility of  a project that                                                                    
had been publicly stated to  cost $900 million and privately                                                                    
admitted  to costing  $1.6 billion.  She stated  that KABATA                                                                    
had been turned down six times  for TIFIA loans, and that it                                                                    
was unrealistic to  expect that the project  would be issued                                                                    
federal funds.  She believed  that the  project was  a gross                                                                    
misuse of  state funds.  She asserted  that the  state could                                                                    
only afford  one large project  and that the  gasline should                                                                    
be the priority.                                                                                                                
10:10:26 AM                                                                                                                   
BOB  FRENCH,  SELF,  ANCHORAGE (via  teleconference),  spoke                                                                    
against  HB  23. He  expressed  concern  with the  financial                                                                    
details  surrounding  the project.  He  pointed  out to  the                                                                    
committee that the packets before  members did not include a                                                                    
fiscal note to estimate the  potential cost to the state. He                                                                    
probed  what  would happen  if  the  bridge tolls  were  not                                                                    
enough  to pay  off  the  TIFIA loan.  He  worried that  the                                                                    
state's credit rating would be  in jeopardy. He relayed many                                                                    
reasons  the project  was not  economically  viable for  the                                                                    
state. [Secretary  Note: Mr. French's full  7 page testimony                                                                    
can be found on BASIS under the HB23 documents tab.]                                                                            
10:14:27 AM                                                                                                                   
Co-Chair Meyer  noted that  the committee  would not  make a                                                                    
decision to move  the legislation out of  committee until it                                                                    
had reviewed all of the pertinent fiscal information.                                                                           
10:14:58 AM                                                                                                                   
LOIS   EPSTEIN,   SELF,  ANCHORAGE   (via   teleconference),                                                                    
expressed  concerns  regarding HB  23.  She  shared that  on                                                                    
April  6,  2013  the  Legislative Budget  and  Audit  (LB&A)                                                                    
issued   its   report   on   KABATA   with   the   following                                                                    
     "KABATA management should revise traffic and toll                                                                          
     revenue projections to address deficiencies."                                                                              
     "Overstated traffic volume in KABATA's traffic                                                                             
     modeling process had the effect of overstating                                                                             
     projected toll revenues."                                                                                                  
Ms. Epstein expressed concern that  the committee would move                                                                    
forward  without  updated   projections.  She  asserted  the                                                                    
committee would be ignoring the  recommendations of the LB&A                                                                    
audit  if it  were  to move  the  legislation without  first                                                                    
reviewing  updated  projections.   She  explained  that  the                                                                    
federal transportation law would  expire on October 1, 2014,                                                                    
and the new  law may dramatically reduce  federal funding to                                                                    
states. She  said that  the TIFIA  loan money  may increase,                                                                    
but  represented a  small amount  of federal  transportation                                                                    
funds.  She  did not  think  that  the  project would  be  a                                                                    
priority  on the  federal level.  She added  that since  the                                                                    
pipeline   for  transportation   projects  was   continually                                                                    
replenished  as infrastructure  aged,  traffic increased  or                                                                    
design  criteria changed,  some  projects would  have to  be                                                                    
cancelled to  fund the  Knik Arm Bridge.  She felt  that the                                                                    
secret  that  the legislature  knew,  but  was unwilling  to                                                                    
admit, was that Alaska spent  millions on roads, bridges and                                                                    
energy development  studies without the  financial resources                                                                    
to complete  any projects. She  said she would be  sending a                                                                    
copy of  the study,  "Easy to  Start, Impossible  to Finish:                                                                    
3", to each  member's office. She said that  the bottom line                                                                    
was that  the state had  in hand  only eight percent  of the                                                                    
approximately $17 billion needed  to complete ten, currently                                                                    
planned, transportation and energy projects.                                                                                    
10:18:39 AM                                                                                                                   
SCOTT GOLDSMITH, SELF,  ANCHORAGE (via teleconference), read                                                                    
from prepared testimony (copy on file).:                                                                                        
     My name Scott  Goldsmith and I am  a Professor Emeritus                                                                    
     of Economics.   I worked for 37 years  at the Institute                                                                    
     of Social  and Economic  Research at the  University of                                                                    
     Alaska Anchorage.                                                                                                          
     I am testifying today as an individual.                                                                                    
     My concern is with state fiscal health.                                                                                    
     This  year  we  have  a $2  billion  shortfall  in  the                                                                    
     general  fund and  we are  currently  drawing down  our                                                                    
     cash reserves at the rate  of about $7 million per day.                                                                    
     We don't  yet seem to  realize the  path we are  on and                                                                    
     where it is taking us.                                                                                                     
     As a  retiree, I  am concerned that  unless we  get our                                                                    
     fiscal house in order I  will soon lose my dividend and                                                                    
     be forced  to start paying  income and sales taxes.   I                                                                    
     am  concerned  that a  fiscal  crash  will lead  to  an                                                                    
     economic crash that  will cut the value of  my house in                                                                    
     half.   I am concerned  that my children may  be unable                                                                    
     to  find jobs  in Alaska  and  be forced  to leave  the                                                                    
     And the  more I  learn about  the cost,  financing, and                                                                    
     so-called benefits  of this project the  more concerned                                                                    
     I become.                                                                                                                  
     Now is  not the  time to take  on new  obligations that                                                                    
     require the state to write blank checks.                                                                                   
     There  is one  blank check  of  up to  $450 million  if                                                                    
     bridge tolls  fail to repay  $300 million in  new state                                                                    
     A  second blank  check of  unknown amount  would be  to                                                                    
     repay  the TIFIA  loan if  bridge tolls  fail to  cover                                                                    
     that obligation.                                                                                                           
     A  third blank  check  of unknown  amount  would be  to                                                                    
     cover  the cost  of connector  road upgrades  to access                                                                    
     the bridge on both ends.                                                                                                   
     A  fourth blank  check of  unknown amount  would be  to                                                                    
     cover  the cost  of potential  cost overruns  on bridge                                                                    
     A  fifth blank  check  of unknown  amount  would be  to                                                                    
     cover the cost of bridge expansion from 2 to 4 lanes.                                                                      
     A sixth check would be  to pay for the highway projects                                                                    
     we won't  be able to  fund because of the  diversion of                                                                    
     federal highway funds to this project.                                                                                     
     And  finally a  seventh blank  check would  be just  to                                                                    
     keep  this  project  on  life   support--  even  if  it                                                                    
     eventually expires.                                                                                                        
     How  can we  evaluate  the so-called  benefits of  this                                                                    
    project unless we know the potential ultimate cost?                                                                         
     Project proponents tell  us not to worry  and assure us                                                                    
     that  the project  actually will  be generating  enough                                                                    
     tolls to pay for other  road projects around the state.                                                                    
     But no  bank would  write a  check based  on assurances                                                                    
     without analysis.    And it would  be irresponsible for                                                                    
     the state  to do so,  particularly as we face  a future                                                                    
     of growing deficits.                                                                                                       
     Unfortunately  we  have  no credible  project  analysis                                                                    
     against  which  to  measure  the  toll  projections  of                                                                    
     project   advocates  or   to  evaluate   the  financing                                                                    
     Last  year  at this  time  an  audit requested  by  the                                                                    
     legislature concluded, and I quote,                                                                                        
     "The  audit   concludes  that  KAC  toll   and  revenue                                                                    
     projections  are   unreasonably  optimistic,   and  the                                                                    
     projected cash flow to the  State are likely overstated                                                                    
     as a  result.  These  are important  considerations for                                                                    
     policymakers  since  the  P3  compensation  arrangement                                                                    
     requires  KABATA  to  make   payments  to  the  private                                                                    
     partner regardless of the  projects ability to generate                                                                    
     toll revenues.  The  deficiencies in KABATA methodology                                                                    
     for  generating   toll  and  revenue   projections  are                                                                    
     addressed in Recommendation No 1."                                                                                         
     Recommendation  No  1  said--KABATA  management  should                                                                    
     revise traffic and toll  revenue projections to address                                                                    
     Subsequent to publication of that  audit KABATA hired a                                                                    
     consulting firm  to conduct an independent  peer review                                                                    
     and  update socioeconomic  data  used in  the Knik  Arm                                                                    
     Crossing Traffic and Toll Revenue projections.                                                                             
     In  the  press  release  announcing  the  study  KABATA                                                                    
     stated  "It is  important to  periodically update  this                                                                    
     information  as  time  passes   and  new  facts  become                                                                    
     Time has passed.  The  final report of that peer review                                                                    
     was due September  20, 2013, but 6 months  later it has                                                                    
     still  not  surfaced.    The   Alaska  partner  in  the                                                                    
     preparation of that report-Agnew  Beck-is a well- known                                                                    
     and respected  planning firm.   They  would not  be six                                                                    
     months late  on a  three month contract.   We  can only                                                                    
     speculate as to  why we don't have that  study in front                                                                    
     of us today.                                                                                                               
     The bottom  line is  that there  is no  new information                                                                    
     today to  address and evaluate  the concerns  raised by                                                                    
     the legislative audit a year ago.                                                                                          
     Why are we even here  today trying to make policy based                                                                    
     on a foundation of known discredited information?                                                                          
     Thank you.                                                                                                                 
10:23:09 AM                                                                                                                   
Senator Hoffman requested that the  Mr. Goldmsith submit his                                                                    
written testimony to the committee.                                                                                             
10:23:25 AM                                                                                                                   
Senator Olson  wondered if Mr. Goldsmith  could provide more                                                                    
accurate project numbers.                                                                                                       
Mr.  Goldsmith  replied  that  he   had  not  conducted  any                                                                    
analysis over  the last several  years. His  concern stemmed                                                                    
from the absence  of any response to the audit  and the wide                                                                    
range of assertions as to the expected use of the bridge.                                                                       
10:24:21 AM                                                                                                                   
Co-Chair Meyer thought that seven  points highlighted by Mr.                                                                    
Goldsmith  should  be discussed  in  further  detail by  the                                                                    
10:24:41 AM                                                                                                                   
RON ARVIN,  MEMBER, MAT-SU  BOROUGH ASSEMBLY,  JUNEAU, spoke                                                                    
in favor of HB 23. He  spoke to whether the Mat-Su was ready                                                                    
for  the  potential  connectivity.   He  stressed  that  the                                                                    
project had been thoroughly vetted  by the assembly. He said                                                                    
that  the  borough  had  created  the  Knik  Town  Site  and                                                                    
presented two  collector and arterial road  bond packages to                                                                    
the public, which passed. He  shared that the borough had an                                                                    
8500 acre  port district and  the port master plan  had been                                                                    
redone. He  relayed that there was  overwhelming support for                                                                    
the project  in his community.  He stressed that  the Mat-Su                                                                    
Borough was  ready for the bridge  to be built. He  spoke to                                                                    
the safety  issues for people  commuting between  the Mat-Su                                                                    
Valley and  Anchorage. He opined  that simple  traffic stops                                                                    
on the  highway disturbed thousands  of people for  miles on                                                                    
10:29:12 AM                                                                                                                   
Co-Chair  Meyer   added  that   the  Glenn   Highway  needed                                                                    
maintenance  as well.  He agreed  with the  points that  the                                                                    
testifier raised.                                                                                                               
10:30:00 AM                                                                                                                   
Senator Bishop  understood that the borough  was considering                                                                    
a Burma Road connector.                                                                                                         
Mr. Arvin  replied in the  negative. He clarified  that form                                                                    
Point MacKenzie  road to connectivity to  the Parks Highway,                                                                    
along the same alignment as  the railroad, Burma through Big                                                                    
Lake  would ultimately  be connected  for  traffic into  the                                                                    
10:31:18 AM                                                                                                                   
Senator Olson requested Mr. Arvin's credentials.                                                                                
10:31:44 AM                                                                                                                   
Mr.  Arvin   replied  that  he   had  been  on   the  Mat-Su                                                                    
Borough/Point  MacKenzie  Port  Commission  and  the  Mat-Su                                                                    
Borough Transportation Advisory Board.                                                                                          
Senator Olson  asked if  he had been  involved in  the Goose                                                                    
Creek Prison project.                                                                                                           
Mr. Arvin replied no.                                                                                                           
10:32:06 AM                                                                                                                   
Senator Olson  thought that a  simple traffic stop on  a two                                                                    
lane bridge would  stop traffic for thousands  of people for                                                                    
miles on end, as well.                                                                                                          
Mr.  Arvin rebutted  that  if there  was  traffic using  two                                                                    
arterials, rather than  one, the Glenn Highway  would not be                                                                    
overburdened with  the traffic because the  traffic would be                                                                    
rerouted over the bridge.                                                                                                       
10:33:09 AM                                                                                                                   
Senator Olson contended  that it would be  more difficult to                                                                    
clean up an accident on a  two lane bridge than on the Glenn                                                                    
Mr. Arvin  replied that  the question did  not speak  to his                                                                    
10:33:29 AM                                                                                                                   
Senator  Olson said  that as  a helicopter  pilot that  flew                                                                    
search and rescue on the North  Slope, he found it easier to                                                                    
land on a road  and not a bridge. He felt  that in the event                                                                    
of an earthquake,  the Glenn Highway would be  a safer place                                                                    
to be than on a bridge.                                                                                                         
Mr.  Arvin responded  that there  was a  lot of  speculation                                                                    
surrounding natural disasters. He  believed that the project                                                                    
was on the right track with the current design standards.                                                                       
10:35:00 AM                                                                                                                   
VERNE    RUPRIGHT,    MAYOR,    CITY   OF    WASILLA    (via                                                                    
teleconference), spoke  in support of  HB 23. He  noted that                                                                    
in 2009 Wasilla and Huston  had brought an injunctive relief                                                                    
in  order to  keep the  project  alive. He  stated that  the                                                                    
bridge was  a strategic  avenue for economics  and commerce,                                                                    
but also for  defense of the state. He  offered an anecdotal                                                                    
story  involving his  father.  He believed  that the  bridge                                                                    
would inevitably be built.                                                                                                      
10:39:19 AM                                                                                                                   
PAUL FUHS,  PROJECT MANAGER, FAIRVIEW  BUSINESS ASSOCIATION,                                                                    
JUNEAU, expressed concerns regarding  HB 23. He offered some                                                                    
ideas  about how  the project  could  interface with  Gamble                                                                    
Street.  He  opined  that  each  time  the  association  had                                                                    
approached KABATA they  had been rebuffed and  told that the                                                                    
environmental  impact statement  ended at  Third Avenue.  He                                                                    
stressed that KABATA needed to  work with the communities in                                                                    
the area that  the project was going to go  through in order                                                                    
for the benefit of all involved parties.                                                                                        
10:40:41 AM                                                                                                                   
Senator  Olson  inquired of  the  issues  that the  business                                                                    
community  had  been  encountering  aside  from  the  KABATA                                                                    
Mr.  Fuhs  replied  that  businesses  had  been  looking  at                                                                    
redevelopment of the entire area,  tax abatement issues with                                                                    
the  community,   and  chronic  inebriates.  He   said  that                                                                    
transportation was a key factor in improving any area.                                                                          
10:41:15 AM                                                                                                                   
Senator  Olson   wondered  why  the  association   had  been                                                                    
rebuffed by KABATA personnel.                                                                                                   
Mr. Fuhs  replied that he did  not know. He felt  that there                                                                    
had been communication and planning  on the Mat-Su side, but                                                                    
that planning on  the Anchorage side did not appear  to be a                                                                    
priority for the authority.                                                                                                     
10:41:39 AM                                                                                                                   
Senator Olson  shared that he  had heard  similar complaints                                                                    
from people living on Government  Hill in Anchorage. He said                                                                    
that KABATA had  bullied people by threatening  to take over                                                                    
10:42:16 AM                                                                                                                   
ROGER  PURCELL,  PRESIDENT,  HOUSTON  CHAMBER  OF  COMMERCE,                                                                    
JUNEAU,  spoke in  support of  HB 23.  He said  that he  had                                                                    
worked to keep  the project alive over the  years. He shared                                                                    
that the  first comprehensive plan  for the bridge  had been                                                                    
drafted in 1972.  He discussed the benefits  that the bridge                                                                    
would bring  to his community.  He relayed that the  City of                                                                    
Huston had  companies from the  Lower 48 that were  ready to                                                                    
come up and  build factories and employ  locals. He asserted                                                                    
that the  project would open  op thousands of jobs.  He said                                                                    
that his community was the  fasted growing population in the                                                                    
state; over 60,000  people. He pointed out  to the committee                                                                    
that  the  new prison  was  driving  prisoners 95  miles  to                                                                    
courtrooms  in Anchorage,  and back  again,  daily. He  said                                                                    
that it  would be a 20  minute drive from the  prison to the                                                                    
courthouse  once  the bridge  was  complete.  He opined  the                                                                    
money  wasted in  the past  for  studies on  the bridge.  He                                                                    
asserted  that the  bridge would  be  the greatest  economic                                                                    
engine since the Trans-Alaska Pipeline System (TAPS).                                                                           
10:46:41 AM                                                                                                                   
PAUL  GROSSI,  IRONWORKERS  OF   ALASKA,  JUNEAU,  spoke  in                                                                    
support  of  HB   23.  He  believed  that   there  would  be                                                                    
development on  the north side  of Knik Arm that  would lead                                                                    
to private sector investment, which  would lead to more jobs                                                                    
for Alaskans. He relayed a  story of fiasco that occurred on                                                                    
the Glenn  Highway that had  caused an upset in  traffic. He                                                                    
expressed concern about safety on the Glenn Highway.                                                                            
10:50:02 AM                                                                                                                   
Senator  Hoffman understood  that  the  project might  bring                                                                    
jobs to  the state,  but he wondered  if the  financial risk                                                                    
that the state would be  taking should be taken into further                                                                    
Mr.  Grossi  replied yes.  He  understood  that the  project                                                                    
could  take   money  away   from  other   necessary  capital                                                                    
projects. He believed  that the project was  creative in the                                                                    
sense  that  it provided  alternative  ways  of funding.  He                                                                    
found it  hard to believe that  there would not be  at least                                                                    
10,000 cars crossing the bridge per day.                                                                                        
10:52:56 AM                                                                                                                   
Senator  Olson wondered  if people  would chose  to drive  a                                                                    
route  that charges  a toll  rather than  drive on  the free                                                                    
10:53:45 AM                                                                                                                   
Co-Chair Meyer  noted that  people who  used the  bridge and                                                                    
highway  would  figure  out the  economics  of  gas  expense                                                                    
versus using the bridge and paying a toll.                                                                                      
10:54:08 AM                                                                                                                   
Co-Chair Meyer CLOSED public testimony.                                                                                         
Co-Chair  Meyer appreciated  the public  testimony. He  said                                                                    
that  the  committee  would  address   many  of  the  public                                                                    
concerns during  future discussions  of the  legislation. He                                                                    
relayed  that it  would  be convenient  if  the two  fastest                                                                    
growing communities  in the state were  connected, but there                                                                    
was concern about the project's financing.                                                                                      
10:54:57 AM                                                                                                                   
HB  23  was   HEARD  and  HELD  in   committee  for  further                                                                    
10:55:11 AM                                                                                                                   
Co-Chair Kelly  said that Operating Budget  amendments would                                                                    
be discussed at a later date.                                                                                                   
CSHB 266(FIN) was SCHEDULED but not HEARD.                                                                                      
CSHB 267(FIN) was SCHEDULED but not HEARD.                                                                                      
10:56:04 AM                                                                                                                   
Co-Chair Meyer discussed housekeeping.                                                                                          
10:56:33 AM                                                                                                                   
The meeting was adjourned at 10:56 a.m.                                                                                         

Document Name Date/Time Subjects
SB182 - opposition - Tengs 2.msg SFIN 3/25/2014 9:00:00 AM
SB 182
SB182 opposition Nelson.msg SFIN 3/25/2014 9:00:00 AM
SB 182
HB 23 - Knik Arm Bridge -Fread.msg SFIN 3/25/2014 9:00:00 AM
HB 23
HB 23 - Knik Arm Bridge -Fread.msg SFIN 3/25/2014 9:00:00 AM
HB 23
HB23 Testimony Catchpole.pdf SFIN 3/25/2014 9:00:00 AM
HB 23
HB023SCSCS(FIN)-DOR-KABATA-03-25-14.pdf SFIN 3/25/2014 9:00:00 AM
HB 23
HB023SCSCS(FIN)-DOT-KABATA 3-21-14.pdf SFIN 3/25/2014 9:00:00 AM
HB 23
HB23 Public testimony - French.pdf SFIN 3/25/2014 9:00:00 AM
HB 23
HB23 Goldsmith KABATA Senate Finance Testimony March 25 2014.docx SFIN 3/25/2014 9:00:00 AM
HB 23