Legislature(2019 - 2020)SENATE FINANCE 532

04/05/2019 09:00 AM FINANCE

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09:01:11 AM Start
09:03:06 AM Deferred Maintenance Update:
10:25:53 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Deferred Maintenance Update: OMB & DOT TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                       April 5, 2019                                                                                            
                         9:01 a.m.                                                                                              
9:01:11 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair  Stedman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 9:01 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Senator Natasha von Imhof, Co-Chair                                                                                             
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Lyman Hoffman                                                                                                           
Senator Peter Micciche                                                                                                          
Senator Donny Olson                                                                                                             
Senator Mike Shower                                                                                                             
Senator Bill Wielechowski                                                                                                       
Senator David Wilson                                                                                                            
MEMBERS ABSENT                                                                                                                
Senator Click Bishop                                                                                                            
ALSO PRESENT                                                                                                                  
Shelley   Willhoite,   Capital    Coordinator,   Office   of                                                                    
Management  and   Budget;  Neil  Steininger,   Chief  Budget                                                                    
Analyst,  Office of  Management  and Budget,  Office of  the                                                                    
Governor; Senator Cathy Giessel.                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
Mark  Davis,  Director,  Division  of  Facilities  Services,                                                                    
Department   of   Transportation  and   Public   Facilities;                                                                    
Christopher  Hodgin,   Project  Manager,   Statewide  Public                                                                    
Facilities,   Department   of  Transportation   and   Public                                                                    
DEFERRED MAINTENANCE UPDATE:                                                                                                    
     OFFICE OF MANAGEMENT and BUDGET                                                                                            
    DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES                                                                          
Co-Chair von Imhof discussed housekeeping.                                                                                      
Co-Chair von Imhof stated that  as the keeper of the capital                                                                    
budget, she was looking  closely at the deferred maintenance                                                                    
backlog. She was concerned that  the weak capital budgets of                                                                    
previous  years  had  compounded  the  problem  of  deferred                                                                    
maintenance. She thought  it was important for  the state to                                                                    
take care of its assets.                                                                                                        
^DEFERRED MAINTENANCE UPDATE:                                                                                                 
     OFFICE OF MANAGEMENT and BUDGET                                                                                          
    DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES                                                                        
9:03:06 AM                                                                                                                    
SHELLEY   WILLHOITE,   CAPITAL    COORDINATOR,   OFFICE   OF                                                                    
MANAGEMENT AND BUDGET,                                                                                                          
9:04:48 AM                                                                                                                    
Ms.   Willhoite   discussed   the   presentation   "Deferred                                                                    
Maintenance Update," (copy on file).                                                                                            
Ms.  Willhoite looked  at  Slide  2, "Deferred  Maintenance:                                                                    
     ? Deferred Maintenance is maintenance and repairs                                                                        
     postponed     due     to     lack     of     resources,                                                                  
     construction/repair schedules, etc.                                                                                      
          o Maintenance and repairs are activities that                                                                         
          keep assets in safe, effective, working condition                                                                     
     ? Deferred maintenance projects are most often items                                                                     
     that   cannot   be   addressed   through   preventative                                                                  
          o Preventative maintenance is important to                                                                            
          managing growth and severity of future deferred                                                                       
          o Currently, most entities manage maintenance                                                                         
          o    Legislature    appropriates    funding    for                                                                    
          preventative maintenance annually - facilities                                                                        
          management allocations; Public Building Fund                                                                          
          o Maintenance decisions must consider changing                                                                        
          business needs                                                                                                        
9:06:24 AM                                                                                                                    
Ms.  Willhoite  spoke  to Slide  3,  "Deferred  Maintenance:                                                                    
State Maintained Facilities":                                                                                                   
     ? Over 2,200 facilities                                                                                                    
     ? 14 entities including University of Alaska and                                                                           
     ? 19 million square feet of space                                                                                          
     ? Combined replacement value of $8.6B                                                                                      
Ms. Willhoite addressed  the bar graph on  slide 3, entitled                                                                    
'Number of  Facilities by  Entity.' She  noted that  DOT had                                                                    
the  most facilities  with 645,  followed by  the University                                                                    
with 426.                                                                                                                       
Ms.  Willhoite referenced  Slide  4, "Deferred  Maintenance:                                                                    
Facility Types":                                                                                                                
     ? Types of facilities vary by entity                                                                                       
     o   UA   manages   classroom,   laboratory,   research,                                                                    
     residential, and office space                                                                                              
     o DOA manages general office space                                                                                         
     o DOC and DHSS both manage 24 hour facilities                                                                              
     o DMVA manages military and other facilities and                                                                           
     statewide armories                                                                                                         
     o DNR oversees park service cabins, shelters, fire                                                                         
     suppression and preparedness shops                                                                                         
Ms.  Willhoite noted  that the  graph  charted total  square                                                                    
feet by entity; the University  had the most square footage,                                                                    
which included a variety of facilities.                                                                                         
9:08:29 AM                                                                                                                    
Ms.  Willhoite turned  to Slide  5, "  Deferred Maintenance:                                                                    
Statewide Totals":                                                                                                              
     ? Total of $1.97 billion, including                                                                                      
          o Executive agencies and Courts $1.84 billion                                                                         
               ? Agency DM total is comprehensive                                                                               
          o School District Major Maintenance $134.7                                                                            
               ? School Major Maintenance total is only                                                                         
               district's highest priorities                                                                                    
          *($113.8 million is State's share of the total)                                                                       
9:09:26 AM                                                                                                                    
Senator  Shower asked  whether there  were state  facilities                                                                    
that were rented, or leased,  that the state was responsible                                                                    
to maintain.                                                                                                                    
Ms. Willhoite offered to provide the information later.                                                                         
9:10:22 AM                                                                                                                    
Senator Micciche  looked at  Slide 4  and asked  whether the                                                                    
departments had gone through an  exercise to determine which                                                                    
facilities were  no longer critical to  operations and could                                                                    
be sold to the private sector.                                                                                                  
Ms. Willhoite noted that the  governor had issued a Property                                                                    
Disposal  Directive  in February  2019.  She  said that  the                                                                    
topic would be covered in a later slide.                                                                                        
Senator Micciche asked whether there  was a chance that some                                                                    
of the  facilities on the  list would be surpluses  when the                                                                    
study was complete.                                                                                                             
Ms. Willhoite answered in the affirmative.                                                                                      
9:11:27 AM                                                                                                                    
Co-Chair von Imhof asked when the study would be complete.                                                                      
Ms. Willhoite stated that June 30, 2019.                                                                                        
9:11:53 AM                                                                                                                    
Co-Chair Stedman  thought that the legislature  should be at                                                                    
the table  when discussion occurred over  the liquidation or                                                                    
the surplusage  of equipment or  facilities. He  thought the                                                                    
legislature might  be interested  in having a  discussion on                                                                    
the outcome of the study.  He believed members might want to                                                                    
review  policy  decisions  before  they  were  executed.  He                                                                    
mentioned the Alaska Marine Highway System (AMHS).                                                                              
Co-Chair von Imhof  added that she would like to  see a plan                                                                    
concerning School Bond Debt Reimbursement.                                                                                      
9:13:20 AM                                                                                                                    
Senator Wielechowski disclosed a conflict of interest.                                                                          
Senator  Wielechowski asked  for  a  definition of  deferred                                                                    
maintenance. He  wondered about a depreciation  schedule and                                                                    
urgency of the funding for deferred maintenance.                                                                                
Ms.   Willhoite  stated   that   deferred  maintenance   was                                                                    
maintenance that  had been postponed  due to lack  of funds.                                                                    
She  understood that  a list  had been  sent out  to members                                                                    
that listed deferred  maintenance by department, prioritized                                                                    
by need. The issues included  leaky roofs, old HBAC systems,                                                                    
leaking  windows, and  pluming  and  electrical issues.  She                                                                    
added  that  the  department  was  working  to  implement  a                                                                    
software   package   that    would   allow   for   statewide                                                                    
9:15:17 AM                                                                                                                    
Senator Micciche  relayed that  he had  worked on  the issue                                                                    
when  he  was a  mayor.  He  thought that  departments  were                                                                    
reluctant to dispose of property  because the property could                                                                    
be used for storage.                                                                                                            
9:16:50 AM                                                                                                                    
Ms. Willhoite continued to address Slide 5:                                                                                     
     ? Total peaked at $2.3 billion in FY2012                                                                                 
          o Reduced significantly through a five-year                                                                           
          funding plan beginning in                                                                                             
          o DM was $1.6 billion in FY2017 & $1.7 billion in                                                                     
     ? FY2018 and FY2019 show an upward trend                                                                                 
9:17:39 AM                                                                                                                    
Ms.  Willhoite considered  Slide  6, "Deferred  Maintenance:                                                                    
Backlog by Entity":                                                                                                             
     • The majority of deferred maintenance backlog is                                                                        
        within the University of Alaska ($1.2B) and the                                                                       
        Department of Transportation and Public Facilities                                                                    
    School District Major Maintenance requests total                                                                       
    All other entities total $300M                                                                                         
9:18:20 AM                                                                                                                    
Ms.  Willhoite  displayed  Slide 7,  "Deferred  Maintenance:                                                                    
Backlog by  Entity," which showed  a bar graph  that offered                                                                    
the  backlog  amounts  by agency.  The  University  has  the                                                                    
highest amount  at approximately $1.2 billion,  DOT followed                                                                    
with $301,483.3.                                                                                                                
9:18:52 AM                                                                                                                    
Senator Hoffman  asked whether Ms. Willhoite  had a deferred                                                                    
maintenance schedule broken down by region or city.                                                                             
Ms. Willhoite agreed to provide the information requested.                                                                      
9:19:23 AM                                                                                                                    
Co-Chair Stedman  asked for a  breakdown of  the components.                                                                    
He thought that it would  be illuminating to see which areas                                                                    
of the state had the greatest need.                                                                                             
Co-Chair von Imhof  appreciated Co-Chair Stedman's comments.                                                                    
She  thought  a total  list  and  an  annual plan  would  be                                                                    
helpful as well as a rubric  by which the decisions had been                                                                    
9:21:19 AM                                                                                                                    
Senator  Micciche  wondered  whether there  was  information                                                                    
available on  the criticality and importance  of repairs. He                                                                    
wondered whether  a list that  prioritized repairs  could be                                                                    
shared with the committee.                                                                                                      
Ms. Willhoite stated that testifiers  from DOT would address                                                                    
the question.                                                                                                                   
9:22:13 AM                                                                                                                    
Senator Wilson referenced the   FY19 DM Distribution Detail                                                                     
(copy on  file). He pointed  out that there  were facilities                                                                    
that had been mothballed that  ranked higher on the priority                                                                    
list. He requested information on  how the priority list was                                                                    
Co-Chair von  Imhof thought Senator  Wilson had made  a good                                                                    
9:23:03 AM                                                                                                                    
Senator Shower  thought that some  of the items on  the list                                                                    
should  be viewed  as operating  costs  rather than  capital                                                                    
Co-Chair von Imhof hoped that  the department would consider                                                                    
the states  short building  season, workforce, and mobility,                                                                    
within  the rubric  used  when  crafting the  prioritization                                                                    
9:24:34 AM                                                                                                                    
NEIL STEININGER, CHIEF BUDGET  ANALYST, OFFICE OF MANAGEMENT                                                                    
AND  BUDGET, OFFICE  OF THE  GOVERNOR, highlighted  Slide 8,                                                                    
"Deferred Maintenance: Funding History":                                                                                        
     ? From FY1998 to FY2010, DM funding was sporadic and                                                                     
          o Spikes in 1999 ($53M), 2006 & 2007 ($33M), 2009                                                                     
          o Low years 2000-2005 averaged $6.5M                                                                                  
     ? FY2011 began a five-year initiative to address DM                                                                      
          o Initiative of $100M annually for five years                                                                         
          o Actual average funding of $123M for DM; $18.6M                                                                      
          for School Districts                                                                                                  
Mr.  Steininger looked  at Slide  9, "Deferred  Maintenance:                                                                    
Funding  History,"   which  showed   a  bar  graph   of  the                                                                    
appropriation history of deferred maintenance.                                                                                  
Mr.  Steininger addressed  Slide 10,  "Deferred Maintenance:                                                                    
Backlog (excluding school  major maintenance)," which showed                                                                    
a  bar  graph  that  revealed   the  impact  of  the  5-year                                                                    
initiative.   The  peak   backlog   in   2012  of   deferred                                                                    
maintenance had  decreased as  significant amounts  of money                                                                    
were put into deferred maintenance.                                                                                             
9:26:22 AM                                                                                                                    
Co-Chair Stedman  looked back to  Slide 9. He  recalled that                                                                    
from 1998 through 2006, budgets  had been flat funded, which                                                                    
had  contributed to  the  deferred  maintenance backlog.  He                                                                    
said that  in 2006, the  state found itself with  more money                                                                    
allowing   for   increased   appropriations   for   deferred                                                                    
maintenance of school district facilities.  He said that the                                                                    
committee had  worked from 2006  to the present  to decrease                                                                    
the  deferred maintenance  backlog in  the state.  He warned                                                                    
that as  the state  prepared for several  years of  flat and                                                                    
declining budgets  the backlog should monitored  so that the                                                                    
pent-up  demand  did not  end  up  absorbing future  surplus                                                                    
Co-Chair  von Imhof  referenced Slide  8. She  asked whether                                                                    
OMB planned to put forward  a deferred maintenance plan that                                                                    
would  recommend  a specific  amount  be  spent on  deferred                                                                    
maintenance for  FY 2020, and beyond,  or if it would  be up                                                                    
to the legislature to land on a number.                                                                                         
9:29:40 AM                                                                                                                    
Mr. Steininger advanced to  Slide 11, "Deferred Maintenance:                                                                    
What We Have Learned & A Plan Forward":                                                                                         
       Pattern  of funding  DM backlog coincides  with years                                                                  
     of high revenues                                                                                                         
       The  SLA 2010-2014  initiative reversed the  trend of                                                                  
     growing DM backlog                                                                                                       
          o Gave entities predictability and confidence                                                                         
        Without  a  consistent level  of  funding,  entities                                                                  
     cannot effectively execute planned renewal                                                                               
          o Funding uncertainty leads to emergency only                                                                         
        In a  constrained  fiscal  environment, a  statewide                                                                  
     approach  provides  DM  attention to  highest  priority                                                                  
     needs across multiple agencies                                                                                           
Mr. Steininger  looked at Slide 12,  " Deferred Maintenance:                                                                    
Alaska Capital Income Fund":                                                                                                    
       SLA2018  SB107 designated Alaska Capital  Income Fund                                                                  
     for Deferred Maintenance                                                                                                 
     ?  Supplemented  by  Large  Passenger  Vessel  Gambling                                                                  
     taxes in Governor's proposed budget                                                                                      
     ? Provides steady baseline funding for Deferred                                                                          
     ? Approximately $35-40 million annually                                                                                  
Mr. Steininger  agreed that  a plan  would be  beneficial to                                                                    
solving the problem.                                                                                                            
9:30:48 AM                                                                                                                    
Co-Chair von  Imhof asked about  the second bullet  on Slide                                                                    
Mr.  Steininger replied  that the  bullet  reflected a  fund                                                                    
transfer  of revenue  from Large  Vessel Passenger  Gambling                                                                    
Tax, into the  Capital Income fund; the  Capital income fund                                                                    
funded  the deferred  maintenance. Essentially,  $27 million                                                                    
was deposited  into the  Capital Income  fund from  the ERA,                                                                    
through  the Amerada  Hess account,  and  an additional  $10                                                                    
million per year could come  from the Large Passenger Vessel                                                                    
Gambling Tax.                                                                                                                   
9:32:04 AM                                                                                                                    
Co-Chair von Imhof asked whether  the fund sources and level                                                                    
of funding were in the governor's proposed budget.                                                                              
Mr. Steininger answered in the affirmative.                                                                                     
9:32:13 AM                                                                                                                    
Co-Chair  Stedman thought  it  might be  helpful  to have  a                                                                    
historical  accounting  of  the  gambling tax  in  order  to                                                                    
understand how it had been spent since its creation.                                                                            
Co-Chair von  Imhof agreed with Co-Chair  Stedman. She asked                                                                    
for Mr. Steininger to provide  the historical information on                                                                    
the tax.                                                                                                                        
9:33:09 AM                                                                                                                    
Senator Wielechowski  asked whether there was  an average of                                                                    
how  much  deferred maintenance  was  added  to the  backlog                                                                    
Ms. Willhoite  specified that  FY 2017 to  FY 2018  showed a                                                                    
growth of  $58 million, while  FY 2018  to FY 2019  showed a                                                                    
growth of $169 million.                                                                                                         
Senator  Wielechowski understood  that  it  would take  47.5                                                                    
years to  pay down the  $1.9 billion in  backlogged deferred                                                                    
maintenance if  the plan was  to spend approximately  $35 to                                                                    
40  million annually;  simultaneously, $58  to $100  million                                                                    
would be added per year to the backlog.                                                                                         
Mr. Steininger thought the math sounded correct.                                                                                
Senator  Wielechowski   asked  whether  this   payment  plan                                                                    
sounded viable to the department.                                                                                               
Mr. Steininger thought  it was a first step  towards a plan.                                                                    
He asserted  that consistency in  funding was  important, as                                                                    
was the  amount of funding.  He said that DOT  could provide                                                                    
further detail.  He lamented that currently  each department                                                                    
was looking  into deferred maintenance  independently, which                                                                    
made  it difficult  to gain  a consistent  look at  the true                                                                    
deferred maintenance  needs across  the state  using similar                                                                    
objective standards for every facility.                                                                                         
9:35:29 AM                                                                                                                    
Co-Chair von Imhof  thought $35 to $40 million  was the bare                                                                    
minimum of a credit card  balance. She wondered why a higher                                                                    
amount was  not being suggested, considering  the governor's                                                                    
agenda to decrease the budget.                                                                                                  
Mr. Steininger stated that these  were the amounts available                                                                    
when the budget was being developed.                                                                                            
Co-Chair von Imhof  pointed out that it had  been two months                                                                    
since the budget was released.                                                                                                  
9:36:08 AM                                                                                                                    
Senator  Shower asked  about a  federal  match for  deferred                                                                    
Mr.  Steininger explained  that there  was no  federal match                                                                    
associated  with  the  deferred  maintenance  appropriations                                                                    
that  had  been  put  forward.  He said  that  some  of  the                                                                    
projects on the  backlog list could be  eligible for federal                                                                    
match dollars,  if that were  the case, OMB  would encourage                                                                    
seeking the federal match.                                                                                                      
9:37:47 AM                                                                                                                    
Senator Micciche  referenced his  STIP remarks  from earlier                                                                    
and hoped  he had not  added to Senator  Showers  confusion.                                                                    
He suggested that the backlog  problem was not new. He asked                                                                    
whether  the  administration   had  investigated  how  other                                                                    
states managed their deferred maintenance.                                                                                      
Mr.  Steininger deferred  the  question  to testifiers  from                                                                    
9:40:12 AM                                                                                                                    
Mr.  Steininger spoke  to Slide  13, "Deferred  Maintenance:                                                                    
Governor's Proposed Budget":                                                                                                    
     ? FY2019                                                                                                                   
          ? Supplemental: $21 million DGF                                                                                       
     ? FY2020                                                                                                                   
          ? Statewide Facilities: $26.6 million DGF                                                                             
          ? K-12 Major Maintenance: $7.4 million DGF                                                                            
          ? Public Building Fund: $4.5 million Other                                                                            
          ? University: $5.0 million DGF                                                                                        
            Courts: $2.8 million UGF                                                                                            
Co-Chair von  Imhof asked about K-12  Major Maintenance. She                                                                    
noted there were 4 locations in  the state that did not have                                                                    
organized boroughs  and therefore  did not have  the ability                                                                    
to get a local match.  She asked what options those boroughs                                                                    
have for maintaining their buildings.                                                                                           
Mr. Steininger  replied that he  did not have an  answer. He                                                                    
said he would get back to the committee.                                                                                        
9:41:32 AM                                                                                                                    
Senator  Hoffman relayed  that  a few  years previously  the                                                                    
legislature passed  a bill to utilize  the Rural Educational                                                                    
Attendance Area  fund that had  been dedicated  strictly for                                                                    
the unmet  needs for  the construction  of new  schools, the                                                                    
appropriation   had   been   opened  to   include   deferred                                                                    
maintenance  for rural  schools. He  was unsure  whether the                                                                    
funds were being utilized in the proposed budget.                                                                               
9:43:10 AM                                                                                                                    
Senator  Wilson  discussed  the  recent  earthquake  in  the                                                                    
Anchorage area  and associated  damage. He  wondered whether                                                                    
any of  the facilities  in the backlog  were damaged  in the                                                                    
Ms. Willhoite stated that the  administration had asked each                                                                    
department  to   remove  any  items   that  may   have  been                                                                    
reimbursed by insurance or other earthquake funding.                                                                            
9:43:50 AM                                                                                                                    
Co-Chair Stedman  agreed with  Senator Hoffman  that caution                                                                    
was  needed when  making major  policy  changes. He  worried                                                                    
about  rural areas  that may  not have  the ability  to fund                                                                    
maintenance  projects without  state  assistance. He  warned                                                                    
that a  balance should  be maintained  by focusing  on rural                                                                    
areas as much as urban areas.                                                                                                   
9:44:59 AM                                                                                                                    
Mr. Steininger referenced Slide  14, " Deferred Maintenance:                                                                    
FY2018 Statewide Appropriation Status":                                                                                         
        SB23, FY2018 Capital, funded $20M in statewide                                                                          
     Deferred Maintenance                                                                                                       
     ? Distributed across 8 agencies, prioritizing:                                                                             
          o Life, health, and safety                                                                                            
          o Assets at risk of imminent failure                                                                                  
          o Timely project execution                                                                                            
          o Maintenance to space to meet program mission                                                                        
          with demonstrated return on investment                                                                                
Mr. Steininger  noted that  2018 showed a  shift in  how the                                                                    
state  addressed   deferred  maintenance,  by   funding  $20                                                                    
million at  the statewide  level, which allowed  projects in                                                                    
different departments to be weighed against each other.                                                                         
9:46:09 AM                                                                                                                    
Mr. Steininger  turned to Slide 15,  " Deferred Maintenance:                                                                    
FY2019 Statewide Appropriation Status":                                                                                         
      ? SB142, FY2019 Capital, funded $20M in statewide                                                                         
     Deferred Maintenance                                                                                                       
     ? 28 projects across the 13 agencies                                                                                       
     ? Common projects include:                                                                                                 
          ? roof replacements                                                                                                   
          ? safety compliance replacements                                                                                      
            plumbing and                                                                                                        
          ? electrical repairs                                                                                                  
     ? Distributed remaining FY2018 funding                                                                                     
Mr. Steininger noted  that the table reflected  a total over                                                                    
$20 million  because in FY  2018 the portion  of contingency                                                                    
for  emergent projects  was withheld  from the  $20 million,                                                                    
approximately $400 thousand, and  one department had managed                                                                    
to finish their projects with  funds left over, leaving some                                                                    
extra  money to  distribute  in  FY 2019.  He  said that  in                                                                    
making  the distributions  the department  had been  working                                                                    
with the  Division of Facility  Services to get  their input                                                                    
on how finds should be distributed.                                                                                             
9:47:22 AM                                                                                                                    
Co-Chair  Stedman noted  the listed  backlog  by agency.  He                                                                    
said that in  2011, if the University had  been removed from                                                                    
the list,  the deferred maintenance would  have dropped from                                                                    
$1.6 billion to  $858 million. He furthered  that doing that                                                                    
same exercise in 2019, the  number went form $1.8 billion to                                                                    
approximately $600  million; he thought that  the University                                                                    
should  be  factored  out  when  determining  the  aggregate                                                                    
numbers for deferred maintenance.                                                                                               
9:48:47 AM                                                                                                                    
9:49:10 AM                                                                                                                    
Senator Shower  wanted to know  why the  University deferred                                                                    
maintenance backlog was so high.                                                                                                
Co-Chair von Imhof thought part  of the problem was that the                                                                    
University  did  an  expansion with  libraries,  engineering                                                                    
buildings,  and  museums,  that  were  large  and  expensive                                                                    
9:50:19 AM                                                                                                                    
MARK  DAVIS,  DIRECTOR,  DIVISION  OF  FACILITIES  SERVICES,                                                                    
DEPARTMENT  OF  TRANSPORTATION  AND PUBLIC  FACILITIES  (via                                                                    
teleconference),    presented   slide    16,   "    Deferred                                                                    
Maintenance: Statewide Facilities Approach":                                                                                    
     2015  EFMAC* Creation & Recommendations                                                                                
     2016   State  Facilities Council Formed, Centralization                                                                
     Analysis Recommendation & Approval                                                                                         
     2017    Determination  of lead  agency for  Centralized                                                                
     Facilities Services  DOT&PF                                                                                                
       Advantages to  centralized operations and maintenance                                                                  
     of state facilities                                                                                                      
          o One lead agency                                                                                                     
          o A  programmatic and inclusive view  of our state                                                                    
          building asset portfolio                                                                                              
          o   Commonality  of   processes,  procedures   and                                                                    
     2018     Initiation  of   the  Division  of  Facilities                                                              
          o Facilities  from DOT&PF, DOA and  DEED currently                                                                    
          o Expansion  ongoing through 2020 to  include most                                                                    
9:51:39 AM                                                                                                                    
Mr. Davis displayed Slide 17, "Deferred Maintenance:                                                                            
        Develop  framework  for  facilities     maintenance,                                                                  
     improvements  and  care  -  built  on  best  practices,                                                                  
     procedures and metrics                                                                                                   
       Strive for a systematic, objective funding program                                                                     
         Plan  deferred   maintenance   improvements  in   a                                                                  
     deliberate, comprehensive manner                                                                                         
     ? Integrate energy efficiency program into the process                                                                   
          o Leverage financeable  energy improvement project                                                                    
          opportunities  to  complement  available  deferred                                                                    
       Develop Facilities Condition Indexes(FCI)                                                                              
          o  Provide holistic  view  of  all state  building                                                                    
          o  Baseline  health   of  our  assets;  prioritize                                                                    
          deferred maintenance needs                                                                                            
          o   Analyze    backlog   of    existing   deferred                                                                    
          maintenance items in relation to actual needs                                                                         
        Implement a Computerized Maintenance Management                                                                       
     System (CMMS) for monitoring statewide maintenance and                                                                   
     facilities conditions                                                                                                    
Mr.  Davis noted  that from  working  with facility  council                                                                    
representatives form  each department, and OMB,  the process                                                                    
for  prioritizing facilities  deferred maintenance  requests                                                                    
had been refined  with the goal to  incorporate a Facilities                                                                    
Condition  Index   (FCI)  as   an  unbiased   comparison  of                                                                    
facilities   to   be   used   as   a   key   component   for                                                                    
recommendations. He  said that  he expected  to use  the FCI                                                                    
assessments in  FY 2021.  He relayed  that the  division had                                                                    
secured a contract  with the AiM AssetWorks  company and was                                                                    
implementing  a computerized  maintenance management  system                                                                    
that would enable the division  to deal effectively with the                                                                    
2,000 plus buildings owned by  the state. He said that steps                                                                    
were  begin  taken  to link  the  Alaska  Energy  Efficiency                                                                    
program with future deferred maintenance projects.                                                                              
9:53:24 AM                                                                                                                    
Co-Chair von Imhof asked about  the last bullet on slide 17.                                                                    
She wondered if the CMMS system was up and running.                                                                             
Mr.  Davis  stated  that the  process  of  implementing  the                                                                    
system had  begun and would  take 2.5 years to  complete. He                                                                    
expected  the first  module would  go live  on September  1,                                                                    
9:54:16 AM                                                                                                                    
Senator  Wilson  wondered   whether  implementation  of  the                                                                    
system was being coordinated through DOA.                                                                                       
Mr.  Davis responded  that the  system requirement  had been                                                                    
developed   during  the   18-month  long   study,  done   in                                                                    
conjunction  with the  overall decision  to consolidate  the                                                                    
maintenance function.  He said that a  software subcommittee                                                                    
had  been established  with members  from the  4 departments                                                                    
that had made the recommendation.                                                                                               
9:56:04 AM                                                                                                                    
CHRISTOPHER  HODGIN,   PROJECT  MANAGER,   STATEWIDE  PUBLIC                                                                    
FACILITIES,   DEPARTMENT   OF  TRANSPORTATION   AND   PUBLIC                                                                    
FACILITIES  (via  teleconference),   highlighted  Slide  18,                                                                    
"Deferred Maintenance: Strategy":                                                                                               
     Proposed Vision Forward - A Programmatic View                                                                            
     Establish   effective,   continuous,  transparent   and                                                                    
     results   based   program  to   accomplish   facilities                                                                    
     deferred   maintenance  (DM)   and  energy   efficiency                                                                    
             Objective assessment  and  uniform analysis  of                                                                  
          existing  facility  conditions, energy  efficiency                                                                    
          DM needs.                                                                                                             
             Prioritization  and   selection  integrating  -                                                                  
          structured,  consistent and  predictable means  of                                                                    
          DM and energy projects.                                                                                               
          ? Execution of the selected and funded projects                                                                       
             Results   based,  measurable   Key  Performance                                                                  
          Indicators  and  reporting  to  show  progress  on                                                                  
          project   execution,   facility  improvement   and                                                                    
          return on investment.                                                                                                 
9:57:04 AM                                                                                                                    
Mr. Hodgins looked at Slide 19, "Deferred Maintenance:                                                                          
Assessing Conditions & Needs":                                                                                                  
     Deferred   maintenance  moving   forward      statewide                                                                    
     objective   approach    to   assess    conditions   and                                                                    
     comprehensively plan for recapitalization of assets:                                                                       
     ?  Beginning  with   Facility  Assessments  to  develop                                                                    
     Facilities Condition Indexes (FCIs) for each facility                                                                    
     ?  Incorporate  building  mission  and  system  factors                                                                    
     (Sf), (Mf)                                                                                                                 
     ? To  arrive at Project  Index Values that can  be used                                                                    
     to prioritize and vet priorities                                                                                           
     ?  Further  Incorporate  Energy Efficiency  Factors  to                                                                  
     determine   opportunities   to  leverage   a   combined                                                                    
     deferred  maintenance and  financed energy  improvement                                                                    
9:58:48 AM                                                                                                                    
Co-Chair von  Imhof thought the concepts  had been discussed                                                                    
in  the private  sector  for years.  She  asked whether  the                                                                    
department  was starting  the  process in  2019,  or if  the                                                                    
process had been done in the past.                                                                                              
Mr.  Hodgins  stated  that the  Facilities  Condition  Index                                                                    
(FCI) had  been used by  some departments in the  past, such                                                                    
as  Department  of Health  and  Social  Services (DHSS).  He                                                                    
furthered that  some aspects  had been  taken from  what had                                                                    
already been  built and  some of  it was  incorporating best                                                                    
practices with  departments that had never  gone through the                                                                    
process before.                                                                                                                 
Co-Chair  von Imhof  asked whether  DOT  and University  had                                                                    
used the process before.                                                                                                        
Mr.  Hodgins was  unsure that  the University  had used  the                                                                    
process before.                                                                                                                 
10:00:18 AM                                                                                                                   
Co-Chair Stedman discussed  the deferred maintenance numbers                                                                    
for the University.  He believed that there  was a benchmark                                                                    
issue  that  should  be  tracked in  a  linear  fashion.  He                                                                    
queried the use of  the term  recapitalization  and wondered                                                                    
about the status of any accounts for replacing buildings.                                                                       
Mr. Davis  thought the  slide used a  poor choice  of words.                                                                    
The intent  was to  convey that the  that state  assets were                                                                    
being taken care  of and the life of those  assets was being                                                                    
increased  to  the  greatest  extend   possible  and  in  an                                                                    
efficient manner.                                                                                                               
10:02:21 AM                                                                                                                   
Co-Chair  Stedman asked  about  the FCI  and  looked at  the                                                                    
formula  on Slide  19.  He inquired  about  a new  facility,                                                                    
which  he thought  should  not  have any  of  the upkeep  or                                                                    
repair issues  factored into the  equation. He asked  how to                                                                    
justify substantial funds expended on new buildings.                                                                            
Mr.  Davis  understood the  question.  He  believed that  at                                                                    
times   the  terms   'operation'   and  'maintenance'   were                                                                    
interchangeable. He  said that both  words covered  the work                                                                    
and  supplies  that would  be  required  for a  building  to                                                                    
achieve the functionality for which it was designed.                                                                            
10:04:04 AM                                                                                                                   
Mr.  Hodgins  addressed  Slide  20,  "Deferred  Maintenance:                                                                    
Prioritization & Selection":                                                                                                    
     Use  a consistent  and structured  process for  project                                                                    
     Candidate projects  by priority > Vetting  and Review >                                                                    
     Final Recommendation to OMB > Projects funded                                                                              
     1. Deferred Maintenance  candidate projects prioritized                                                                    
     by  Project Index  Value (PIV)  and Energy  improvement                                                                    
     2.  Candidate  projects  reviewed by  State  Facilities                                                                    
     Council   for   any   adjustments   and   creation   of                                                                    
     recommended final list                                                                                                     
     3. Division of  Facilities Services submits recommended                                                                    
     deferred maintenance projects to OMB                                                                                       
     4. State funds projects                                                                                                    
10:04:58 AM                                                                                                                   
Mr. Hodgins advanced to Slide 21, "Deferred Maintenance:                                                                        
Results Based Performance & Reporting":                                                                                         
     Objective  measurements  to determine  performance  and                                                                    
     improvements   from   completed  deferred   maintenance                                                                    
     Potential Key Performance Indicators:                                                                                    
     ? FCI Improvements  before and after FCI values                                                                            
     ?  Energy  Use Index  (EUI)  Improvement  - before  and                                                                    
     after values                                                                                                               
     ? Value of DM projects completed per year                                                                                  
10:05:35 AM                                                                                                                   
Mr. Davis looked at Slide 22, "Deferred Maintenance:                                                                            
Disposing of State Assets":                                                                                                     
       Property Disposal Directive                                                                                            
          ?   State   Facilities   Council   working   group                                                                    
          investigating   options   for   reducing   State's                                                                    
       Broad and Complex    each situation is a case-by-case                                                                  
       Governing Federal Regulations and Rules:                                                                               
          ?   Environmental  regulations   for  contaminated                                                                    
         sites and hazardous materials remediation                                                                              
          ? Multiple Federal Agency  rules   Federal Highway                                                                    
          Administration,  Transit Administration,  Aviation                                                                    
       State Statutes                                                                                                         
          ?  AS 44.68.110,  AS 02.15.060-070,  AS 19.05.070,                                                                    
          AS   14.07.030,   AS    38.05.035       authorizes                                                                    
          Departments    of    Administration,    Education,                                                                    
          Transportation and  National Resources  over sales                                                                    
          and transfers of property, dependent on type                                                                          
       Internal Policies                                                                                                      
          ?  Department of  Administration Property  Control                                                                    
          Manual and guidance                                                                                                   
       Historical disposals  have been limited                                                                                
          ?  Includes  DHSS,  DNR,  DF&G  building  or  land                                                                    
Mr.  Davis shared  that there  were  several regulations  in                                                                    
statute   that  governed   the  disposal   of  state   owned                                                                    
facilitates,  and  those  assets  that  had  been  federally                                                                    
funded could  require some repayment.  He said that  in some                                                                    
cases  remediation  could  be required.  He  said  that  the                                                                    
divisions   role  in the  process  was  to collaborate  with                                                                    
facilities council  representatives to  make recommendations                                                                    
to OMB. He noted that  the Division of Military and Veterans                                                                    
Affairs had  disposed of 15  facilities since 2006  and were                                                                    
in the  process of divesting  up to 50 more  facilitates. He                                                                    
said that  recently DOT had  sold two  facilitates, bringing                                                                    
$5.5 million back to the state treasury.                                                                                        
10:07:20 AM                                                                                                                   
Senator  Hoffman  wondered who  was  on  the State  Facility                                                                    
Council and how often the council convened.                                                                                     
Mr.   Davis  stated   that  the   council  members   were  a                                                                    
spokesperson from  each department,  and partners  from OMB,                                                                    
and met at least once a quarter.                                                                                                
Senator Hoffman asked whether there  were written minutes of                                                                    
the meetings  that could be  reviewed by the public  and the                                                                    
Mr. Davis  stated that council  minutes were kept  and could                                                                    
be made available to the public.                                                                                                
10:08:59 AM                                                                                                                   
Co-Chair von  Imhof recalled  in a  previous administration,                                                                    
there had been a list of  facilities that DOT had planned on                                                                    
putting up for  sale. She wondered whether  the division was                                                                    
planning    on   incorporating    work    done   by    prior                                                                    
Mr. Davis  stated that he  had information from  prior years                                                                    
that the group would be reviewing over the next few months.                                                                     
10:09:48 AM                                                                                                                   
Co-Chair  Stedman thought  it would  be  helpful to  receive                                                                    
information on  previous administration's work  on potential                                                                    
Co-Chair  von  Imhof  thought  it  was  important  that  the                                                                    
legislature receive updates on  a periodic basis, especially                                                                    
during sessions when the  legislature was making allocations                                                                    
in a  constrained budget  environment. She  was eager  to be                                                                    
provided with  an update  on the work  done by  the previous                                                                    
10:11:53 AM                                                                                                                   
Senator  Micciche   looked  at  Slide  22   and  the  bullet                                                                    
regarding governing federal regulations  and rules. He asked                                                                    
whether  the states   remediation standards  were excessive.                                                                    
He  though that  the council  should consider  the standards                                                                    
and whether they needed revision.                                                                                               
Mr.  Davis  stated   there  had  been  no   changes  to  the                                                                    
regulations. He said that the standards would be examined.                                                                      
10:12:57 AM                                                                                                                   
Co-Chair Stedman had  a point of concern.  He referenced Mt.                                                                    
Edgecumbe  school and  abandoned buildings  in the  area. He                                                                    
had  concern   that  the   facilities  and   the  associated                                                                    
demolition  cost  would  be  shifted  onto  the  school.  He                                                                    
thought  the facilities  contained  asbestos,  and that  the                                                                    
formulas used by DOT should consider  the age of some of the                                                                    
building on that campus.                                                                                                        
Co-Chair von Imhof  assumed there would be a  list that went                                                                    
with   the  deferred   maintenance  budget   and  that   Mt.                                                                    
Edgecumbe, or  anything on the  list, could be  discussed in                                                                    
more depth later.                                                                                                               
10:15:32 AM                                                                                                                   
Senator Hoffman addressed the last  bullet point on slide 22                                                                    
that  pertained to  historical disposals.  He wanted  to see                                                                    
the acreage of land that  went along with the disposals, and                                                                    
any future facility disposal being considered.                                                                                  
Mr.  Davis  acknowledged  the request  for  information.  He                                                                    
added  that  the only  land  parcel  that was  conveyed  was                                                                    
approximately an acre  of land near Birch  Lake in Fairbanks                                                                    
that had become landlocked by private owners.                                                                                   
10:17:11 AM                                                                                                                   
Senator   Wilson    considered   the    statewide   deferred                                                                    
maintenance backlog list for 2019.  He asked for information                                                                    
pertaining to harbor maintenance.                                                                                               
Mr.  Davis said  that depending  on what  was presented  for                                                                    
consideration, not everything would end up on the list.                                                                         
10:18:17 AM                                                                                                                   
Co-Chair  Stedman interjected  that  over a  decade ago  the                                                                    
legislature  had put  together a  package to  deal with  the                                                                    
deferred  maintenance of  harbors. He  said that  a proposal                                                                    
had been  made that the  state would  pay for 50  percent of                                                                    
the new construction costs, and  costs would be encapsulated                                                                    
in an  enterprise fund at  the local level. He  relayed that                                                                    
the  program had  been successful,  which  was why  deferred                                                                    
maintenance for harbors was near zero.                                                                                          
10:19:39 AM                                                                                                                   
Senator  Shower   lamented  that  Mt.  Edgecumbe   had  been                                                                    
designated  as  a  historical   site.  He  wondered  whether                                                                    
federal dollars  were available for upgrades  to state owned                                                                    
buildings on the historical register.                                                                                           
10:20:42 AM                                                                                                                   
Senator  Wielechowski  asked  what  percentage  of  deferred                                                                    
maintenance was  capable of being done  by state maintenance                                                                    
workers  versus   the  percentage  that  would   go  out  to                                                                    
Mr. Davis did not have the  exact percentage of the work but                                                                    
said that  there was a  lot of work  done by the  state that                                                                    
could be categorized as deferred maintenance.                                                                                   
10:21:32 AM                                                                                                                   
Senator Wielechowski  asked whether  there had been  a cost-                                                                    
benefit  analysis  of  increasing  in-house  maintenance  or                                                                    
construction staff  versus contracting  the work  to private                                                                    
Mr. Davis answered that there  had not been a specific cost-                                                                    
benefit  analysis done  but that  one could  be done  in the                                                                    
10:22:32 AM                                                                                                                   
Senator  Micciche understood  that there  was a  backlog but                                                                    
did not think  it was as severe when DOT  and the University                                                                    
were scheduled separately.                                                                                                      
10:23:39 AM                                                                                                                   
Co-Chair  Stedman was  curious whether  the Courts  used DOT                                                                    
for  repairs  or  had  any   streamlined  process  to  lower                                                                    
maintenance costs.                                                                                                              
Mr.  Davis  stated  that   DOT  maintained  court  buildings                                                                    
through RSA and other arrangements.                                                                                             
10:24:22 AM                                                                                                                   
Mr. Davis spoke to  Slide 23, "Deferred Maintenance: Looking                                                                    
     ? Develop framework for facilities        maintenance,                                                                     
     improvements and care - built on best practices,                                                                           
     procedures and metrics                                                                                                     
     ? DM distribution considerations based on objective                                                                        
     rating system to address most critical projects                                                                            
     ? Plan deferred maintenance improvements in a                                                                              
     deliberate, comprehensive manner                                                                                           
     ? Build on successes and lessons learned                                                                                   
     ? Constant attention to preventative maintenance                                                                           
     ? Stewardship based on consistency and predictability                                                                      
Co-Chair  von Imhof  invited OMB  to  revisit their  funding                                                                    
recommendation   for    FY   2020    deferred   maintenance,                                                                    
considering the backlog discussed  at the table. She thought                                                                    
that  the  backlog could  be  broken  down into  parts.  She                                                                    
stressed that  the committee was  open to suggestions  as it                                                                    
crafted the capital budget. She discussed housekeeping.                                                                         
10:25:53 AM                                                                                                                   
The meeting was adjourned at 10:25 a.m.                                                                                         

Document Name Date/Time Subjects
040519 FY2019 Distribution Detail.pdf SFIN 4/5/2019 9:00:00 AM
Deferred Maintenance 2019
040519 FY2018 Deferred Maintenance Distribution.pdf SFIN 4/5/2019 9:00:00 AM
Deferred Maintenance 2019
040519 Deferred Maintenance Presentation OMB.pdf SFIN 4/5/2019 9:00:00 AM
Deferred Maintenance 2019
040519 FY19 DM Backlog Statewide OMB.xlsx SFIN 4/5/2019 9:00:00 AM
Deferred Maintenance 2019