Legislature(1995 - 1996)
07/19/1996 03:00 PM Senate MHS
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE TASK FORCE ON THE ALASKA MARINE HIGHWAY SYSTEM
Ketchikan, Alaska
July 19, 1996
3:00 p.m.
TASK FORCE MEMBERS
Senator Robin Taylor
Senator Drue Pearce
Senator John Torgerson
ALSO IN ATTENDANCE
Representative Bill Williams, Ketchikan
Representative Gary Davis, Kenai
Myrna Maynard, Staff to Senator Pearce, Anchorage
Marveen Coggins, Staff to Representative Toohey, Anchorage
WITNESS REGISTER
Gary Hayden, System Director
Alaska Marine Highway System
Department of Transportation & Public Facilities
3132 Channel Drive
Juneau, AK 99801-7898
Michael Downing, Marine Superintendent
Alaska Marine Highway System
Department of Transportation & Public Facilities
3132 Channel Drive
Juneau, AK 99801-7898
Ms. Andrea Barkley
P.O. Box 1037
Ward Cove, AK 99928
Captain Jan Sande
5237 Shoreline Drive
Ketchikan, AK 99901
Ms. Stephanie Rainwater
926 Jackson
Ketchikan, AK 99901
TAPE 1, SIDE A
SENATOR ROBIN TAYLOR, chairing the meeting in the Ketchikan
Legislative Information Office, called the first meeting of the
Senate Task Force on the Alaska Marine Highway System to order at
approximately 3:00 p.m. He stated Senator Torgerson would be
participating in the meeting via teleconference from Kenai and
Senator Pearce would be represented by Myrna Maynard via
teleconference from Anchorage.
It was noted written testimony was received for the record from
Captain William Hopkins of Ketchikan; Wynn Hopkins of Ketchikan;
and Sebastian Biagi of Ward Cove.
SENATOR TAYLOR said it was his intent to begin the meeting with
testimony from the administration to give them the opportunity to
present an overview on how their mission statement is being met, as
well as their plans for their immediate future, especially as
concerns both internal operations and external operations, and
better utilization of the fleet in the future.
SENATOR TORGERSON expressed his interest in information on the
scheduling of the Tustemena, as well the interchange of the ferry
being built and how it will affect the communities in his area. He
also expressed his interest in the task force holding a future
meeting in Seward.
[AT THIS POINT IN THE TAPING OF THE MEETING, GARY HAYDEN, SYSTEM
DIRECTOR, ALASKA MARINE HIGHWAY SYSTEM, SPEAKING VIA TELECONFERENCE
FROM FAIRBANKS, BEGAN HIS OVERVIEW. HOWEVER, DUE TO RECORDING
DIFFICULTIES GARY HAYDEN'S ENTIRE OVERVIEW WAS INDISCERNIBLE AND
NOT TRANSCRIBABLE]
TAPE 2, SIDE A
[DIFFERENT TAPING EQUIPMENT WAS STARTED AT APPROXIMATELY 50 MINUTES
INTO THE MEETING WHEN THE RECORDING PROBLEM WAS DISCOVERED]
GARY HAYEN related that in terms of the costs of operations in
1987, the system spent $64 million and brought in revenues of $33
million. The general fund support at that time was $31.2 million.
Expenditures peaked in 1993 at $71.9 million with a revenue
collection of $40.9 million and general fund support of $30
million. In 1997 the system is looking at expenditures of $67.6
million. He said if you took those dollars and used the producer
priced index and deflated those dollars so that they're consistent,
the '87 dollars would be $64 million and the '96 dollars would be
$57 million, so the system is providing about the same weeks of
service and they are collecting more revenue with less
expenditures.
SENATOR TORGERSON requested he be provided with a copy of the two-
year scheduling plan Mr. Hayden had spoken to earlier, as well as
the suggested scheduling plan for 1998.
SENATOR TAYLOR commented it appears the two-year scheduling plan is
for summer schedules only. He expressed his frustrations at the
lack of consistent schedules for the ferries, as well as trying to
get schedules for the fall and winter season a few months in
advance. MR. HAYDEN explained the winter schedule is driven by a
number of factors. That is when they do their refurbishment and
overhaul program, overhaul and maintenance, and the lay-up of
vessels, which is driven primarily by the budgetary constraints
that the system has. He said if the system were not having to do
refurbishments and regulatory compliance projects, and if they had
a consistent funding, the system could lay out a multi-year winter
schedule and they would be happy to run that.
SENATOR TAYLOR said it appears that they are going to lay out a
multi-year schedule for the summer months, which means they will
sacrifice service during the winter months so they satisfy their
commitments made years in advance for the summer. MR. HAYDEN
explained he can lay out a summer schedule that is consistent
because he knows that he has all of the vessels running during that
time period.
SENATOR TAYLOR asked if there wasn't a way they could schedule
their maintenance so that they don't impact the entire fleet by
having all major vessels going through major maintenance all in the
same year. He said there ought be some planned maintenance on the
fleet that literally runs years in advance. Not being able to get
a schedule for the fall and winter months dramatically impacts
ridership. MR. HAYDEN agreed, and he said he would delighted if he
could provide a three-year schedule, however, funding decisions
don't get made in that context of three years. He noted that in
the 1991 master plan and fleet condition survey, there was a
program laid out as to how much needed to be spent each year on the
vessels, and there were schedules as to when that work was to be
done over the next 20 years. However, the funding for those
activities didn't follow the schedule. The ability to do multi-
year scheduling in the winter time is driven primarily by the
capital projects and also the funding as to when they can run the
ships.
SENATOR TAYLOR noted that the system got $3.5 million in funding
from the Legislature in 1993; $8.5 million in 1994; and $19.2
million in 1995. MR. HAYDEN added that for the current year it is
$10.1 million, however, for the next two years there is hardly
anything in the federal road program. He said he his interested in
running the Aurora next winter if they can bring the cost of that
operation down so that it is more consistent with the revenue that
is generated. On some of the runs the subsidy is 70 percent
compared to 30 percent revenues, and if they can bring those two
numbers closer together, they will be able to run that vessel on an
annual basis and run it longer each year.
SENATOR TORGERSON asked if their lack of advanced knowledge right
now is because of the reauthorization of ISTEA. MR. HAYDEN
responded that it is not. This year, for the fist time, the
Department of Transportation & Public Facilities has laid out a 6-
year CIP program (Capital Improvement Projects) that is basically
competing against road projects. About a month ago he got that 6-
year program, so he knows for the first time what his capital
projects are going to be. SENATOR TORGERSON said there has to be
some ongoing CIP and historical levels on spending so that they can
predict what is going to happen and work schedules within that.
MR. HADEN agreed, and noted he has scheduled out the major
refurbishment program using federal funds over the next six years.
SENATOR TAYLOR asked if any decisions have been made on the design
of the new vessel as concerns the bar facility on that vessel. MR.
HAYDEN responded that there is no bar facility on the new vessel.
He acknowledged there was a bar facility in the original plan, but
it was taken off at the time the decision was made to close the
bars on the existing ships.
SENATOR TAYLOR asked if there were public hearings on the issue and
when the decision was made. MR. HAYDEN said he discussed the issue
with the Southeast Conference on two occasions and it was mentioned
at two or more legislative budget review meetings. The decision to
close the bars was made about two months ago, which was after the
regular session of the Legislature.
SENATOR TAYLOR referred to a DOTPF report dated November 1995
entitled "Transportation Needs and Priorities in Alaska", that
speaks to converting the bar area of the vessels to lounges which
can be used for pizza and espresso service or conference areas. He
said it sounds like somebody made an internal decision on this
issue before November of 1995. He added that he doesn't know where
or how that decision was made, but this was a significant decision
as far as revenues to the fleet, as well as service to the public
without any public input. MR. HAYDEN clarified that the decision
was made by Commissioner Perkins at the end of the legislative
session. During the legislative session they discussed impacts
that would result at certain funding levels and the bar issue was
one of those issues that was mentioned each time they discussed
their budget. It was also discussed with the public who was
interested in their budget and their ability to provide services.
He said the system is faced with coming up with in the order of
$1.9 million in cost reductions, and, unfortunately, $1.9 million
in cost reductions is going to affect people and service in the
system. The possibilities are fairly limited as to what they can
do and what they cannot do.
MYRNA MAYNARD, staff to Senator Pearce, said Senator Pearce wanted
to know if there was any contemplation within the system of
privatizing the bars and having someone else run them. In
response, MR. HAYDEN said he was approached by Marriott Corporation
some time ago, and they were interested in the food services on
board the vessels. However, legally and under the terms of the
system's current contract, they could not contract with Marriott
unless they met same terms and conditions of the existing contract.
Marriott said the contract was too constrictive and that they were
not interested in pursuing their initiative any more. He added
that he has not gone out and sought others because the terms of the
contract says that if there are people working on shift they will
be paid under the terms and conditions in the contracts the system
currently has, whether they are state employees or private sector
employees.
MYRNA MAYNARD commented that food services often times break even,
but she has never known bars to cost money, and it doesn't make
sense that bar service was given up to save money. MR. HAYDEN said
in order to save money on the vessel, you need to reduce personnel
costs. The way to reduce personnel costs is to not provide a
service. One of the services considered was the bar service
because the bar service cost more than the revenue it was
generating. He added that they are also looking at how they can
reduce costs in the food service area.
MS. MAYNARD asked if Mr. Hayden would provide Senator Pearce with
the figures on the cost of running the bars as opposed to the
revenues generated. MR. HAYDEN agreed to provide the information
to the task force members, and he also pointed out that there is a
legislative audit underway on food services, bars, etc., and he is
looking forward to seeing what those numbers show.
SENATOR TAYLOR said it his understanding that several years ago the
accounting methods currently used, upon which he believes Mr.
Hayden is relying for the numbers he is working with, were changed
significantly to discourage private enterprise that might be
interested in vying for the contracts. He said that as a
cautionary note on any numbers that Mr. Hayden might send out, that
if, in fact, they are not directly related to actual hours of
operation and directly accounted on those hours of operation, then
he does think they are very meaningful numbers.
SENATOR TAYLOR also said he would also like to know what profit is
being generated by the 156 full-time employees working in Juneau
for the Alaska Marine Highway System. These employees are still
drawing down a full wage when a lot of folks in his district have
been in a vessel lay-up situation or on temporary status working
summers for four or five years just so they can get on full time.
He noted that since 1975, when the system had about 21 full-time
employees, there has been shocking increase in administration, but
there is still the same number of vessels and the same amount of
crew people.
SENATOR TAYLOR, in expressing concern with the added on costs to
the system, noted that the Division of Risk Management increased
the amount the Alaska Marine Highway pays out of its budget to
cover claims brought against the system and any defense costs, etc.
by $900,000. MR. HAYDEN advised that as it was they were paying
over $3 million on risk management, and to have it increased by
nearly a million dollars was a significant cost increase to the
system. However, the Department of Administration has shown them
how they are paying out more on claims than is being paid in. He
said it was in their budget from day one and it was an issue and
concern.
In his closing comments, MR. HAYDEN said it is obvious there is
disagreement on several points, but he welcomes the Legislature's
assistance is advancing the system because both have the same goal:
serving the public. He believes in the Marine Highway System and
the service that it has provided over the years it has been in
existence, and he believes it can be a viable means of
transportation into the future.
SENATOR TAYLOR noted the presence in Ketchikan of Mike Downing,
Marine Superintendent of the Alaska Marine Highway System. Mr.
Downing stated he had nothing to add to Mr. Hayden's comments at
that time.
ANDREA BARKLEY, testifying in Ketchikan, stated she tended bar on
the Alaska Marine Highway System for 17 years, and the concept of
removing the bar service is terrible in her mind because it
provides such a tremendous passenger service. She noted the bar
area is the only interior smoking area, and if the bars are
eliminated, it will probably become a common seating area and
smoking will be on the outer decks only. She believes it will
significantly reduce the passenger services that are very important
to thousands of people.
SENATOR TAYLOR asked if Ms. Barkley has any knowledge relating to
changes made in the accounting system used by the Alaska Marine
Highway System. MS. BARKLEY replied that she has no personal
knowledge, but in 1985 Tom Shanley, their port steward, called a
meeting of chief stewards in Ketchikan. He expressed the
administration's concern that private enterprise was looking into
possibly vying for the contracts. As a protective measure, he
decided to institute a profit and loss formula for the bars, dining
rooms and gifts shops, and it was structured in such a way that the
costs were excessive in the basic formula. Those areas were
designed to show losses, except for in the summer months when
revenues were really high.
SENATOR TAYLOR commented that same formula is being used today to
justify removing the bars. He then asked Ms. Barkley if she knows
if there has been an increase in the number of employees on the
vessels in the last 10 years. MS. BARLEY answered that overall she
doesn't know, but she does know of at least 10 significant job
losses.
MYRNA MAYNARD asked if Ms. Barkley if she just worked as a
bartender or if she also worked in the food concession area. MS.
BARKLEY responded that she basically works the bar for her 12-hour
shift. Occasionally she will work other areas if it's necessary,
but that's rare. The bartender's work schedule was based on about
a 65 percent workload according to the bar revenue figures. She
spoke to the bartender on the LaConte and asked him approximately
how many hours he tended bar on that vessel. He told her he
actually spends about three to four hours of a 12-hour shift
tending bar, so it is not even close to the 65 percent figure.
SENATOR TORGERSON asked if employees fill out time sheets which
breaks down where they are spending their time. MS. BARKLEY
acknowledged that the bartenders all account for their time tending
bar. In addition, relief personnel come in for several hours a
day, and their bartending time will also be noted because they
receive a higher rate of pay when they are tending bar.
CAPTAIN JAN SANDE, testifying in Ketchikan, said the bar issue came
about on the Aurora after a survey was made of Prince of Wales
Island people about three years ago on services they needed or
wanted changed. The bar issue was one of about 10 questions on
that survey. At that particular time, the big complaint was the
need for winter service, but the only thing that has been done for
the people of Prince of Wales Island is to close the bar.
CAPTAIN SANDE said when the Aurora went down to Tacoma for a major
refit in 1994, he was told that the bar on the Aurora would be
eliminated, so the concept to close the bars has been in the mill
for a long time. He said the reason the people of Prince of Wales
Island even put something down on the form about the bar closure
was because of their concern about people getting drunk on the
Aurora and then getting behind the wheel and driving to various
points on the island. He pointed out that the bars are controlled,
and they do not serve the people after a point. He has found that
people who get off of the ship inebriated have usually been
drinking in the solarium or some place else on the ship.
SENATOR TAYLOR asked Mr. Downing that he be provided with a copy of
the Prince of Wales Island survey, the results of the survey, as
well as the cost of the survey.
CAPTAIN SANDE also noted that since the bar has been closed on the
Aurora, the cafe and bar revenues have dropped from approximately
$6,000 a week to approximately $3,000. During their peak months of
August and December those revenues would go up to approximately
$8,000 a week.
SENATOR TAYLOR asked Captain Sande his knowledge of the staffing
levels on the vessels today relative to where it was 19 years ago.
CAPTAIN SANDE responded it is his understanding that when the
vessels are running there has been a slight decrease, primarily in
the steward's department. SENATOR TAYLOR said he has been told
that 19 years ago there were 150 more employees actually sailing on
the vessels than there ARE today. He added there are less people
that have to be administered to today, and yet the administrative
cost that this system is currently carrying has gone up
tremendously during that period of time.
TAPE THREE, SIDE A
SENATOR TORGERSON asked Captain Sande if he knows of any claims
that have been filed against the Marine Highway System for serving
intoxicated passengers and then letting them leave the ships.
CAPTAIN SANDE replied that although he has no direct knowledge of
any claims, he thinks there have been some. He added that when he
was speaking with George Reifenstein about the bar closure on the
Aurora in 1994, his reason for closing the bars was because of
liability concerns, and he did mention some of these claims.
SENATOR TORGERSON expressed his interest in finding out if the
Marine Highway System has had to pay off some relatively high
expenses associated to claims related to drinking on the ferries.
SENATOR TAYLOR pointed out that the bartenders on the ferries have
had extensive training on how to recognize when and if a person has
had too much to drink, and part of that training was part of this
concern about liability and risk management. He then asked Mr.
Downing to contact the Division of Risk Management to get
information concerning claims they've paid relative to intoxicated
individuals coming off of the ferries.
SENATOR TORGERSON questioned if there would still be the same
liability if a passenger brought on his own alcohol and became
inebriated and then walked off the ship. CAPTAIN SANDE
acknowledged that he thought the liability would be same.
SENATOR TAYLOR asked if pursuant to the current union contracts,
if, in fact, these bars are eliminated, do those bartenders' jobs
disappear. CAPTAIN SANDE answered that the bartender position on
the Aurora went to a different position, although the pay was
equal. SENATOR TAYLOR observed that as the bars are closed down
and those bartender positions are moved to other areas of the
vessels, it will probably result in nine more people, who hold
temporary positions, being bumped off.
MIKE DOWNING, Marine Superintendent, Alaska Marine Highway System,
directed attention to the November 1995 draft of the needs list.
He explained that the way the federal aid works is that for them to
have a project in the current year they need to have started the
process of obtaining the funding as long ago as three years. It
begins with the needs lists, and what goes into that needs list is
anything they consider might be needed in the future. He said that
should help clarify why the bar closure funding was included in
this needs list, because it was recognized at that time as a
possibility.
SENATOR TAYLOR asked if in order to get funds for scheduling
refurbishment of the vessels, they actually get on to a three-year
or five-year list with federal highways and then work their way up
that list. And if that is the case, then why can't they schedule
maintenance three or four years in advance. MR. DOWNING responded
they know what they are doing this year, and they have the funding
for next year fairly well identified. However, next year's funding
is almost completely restricted to the new ocean class vessel, and
he thinks the needs in the fleet are greater than that, and this
creates some variability in the winter schedule in '97-'98.
SENATOR TAYLOR inquired if there is a plan to remove all of the
staterooms on the Malaspina and turn it into a day boat. MR.
DOWNING acknowledged that one of the alternatives being considered
under Juneau Access is to do just exactly that when the ocean class
vessel comes on line. He added that if they think they might do
that, they need to get it into the needs list. Initially, in the
master plan, the ocean class vessel was seen as a replacement for
the Malaspina. Consequently, the refurbishment program for the
Malaspina has been less than it has been on the other vessels. It
is still an efficient vessel, but it is in fairly poor condition
and it was selected because of that condition.
SENATOR TAYLOR said he has heard the rumor for years that the
Malaspina would be sold when the new vessel comes on, although he
has never been able to get the rumor confirmed by anybody. It is
obvious to him now that an internal decision has been made within
the Marine Highway System to continue to let the Malaspina run down
hill until the new vessel comes on, and then it will have to be
sold because it is in such bad shape and there is no use for it.
SENATOR TAYLOR asked Mr. Downing to address the issue of most of
next year's funding being restricted to the new vessel. MR.
DOWNING explained the general fund maintenance will continue on in
parallel to the Federal Aid Refurbishment Program. In the federal
fiscal year 1997, the ocean class vessel is scheduled to use $52
million of the available $240 million. That causes objections from
other areas of the state, but to mitigate that they have worked
with the Federal Highway Administration to level it out and
distribute the cost of the vessel over a three-year period, but
they still end up with a peak in 1997 of $52 million. That is
based on predictions of the cash flow that will be needed in order
to keep up with the contractors progress. He added there is a
spike in the program caused by that vessel, and this is the best
negotiated agreement they could get internally for the use of funds
in those years.
It was further explained by MR. DOWNING that the first $4 million
Mr. Hayden spoke to earlier is state funded CIP. The second $4
million is marine highway funds; it's either revenues or general
fund monies. That goes to pay for the operations side, the
salaries of the staff that is doing the work while the vessel is in
the shipyard. So it is $4 million in operations money out of the
budget every year. The federal program is separate from that.
SENATOR TAYLOR then concluded that is basically $8 million of
general fund money that they know they will have for the salaries,
administrative costs, and capital improvements to be done each year
during those two years when Mr. Hayden said there was nothing.
MR. DOWNING said the 1991 condition survey said that in addition to
the $8 million for maintenance, they needed to spend approximately
$15 million in a federal aid refurbishment program. That condition
survey predated a lot of the regulatory requirements they are now
seeing. Most of the work currently being done is regulatory
driven, such as fire safety, life safety, etc.
SENATOR TAYLOR said it his understanding that when an escape chute,
which was a Canadian product and not approved by the U.S. Coast
Guard, was tested at Todd Shipyards several people were injured
going down it. MR. DOWNING responded that it has been approved by
the Coast Guard; however, that accident during the crew training at
Todd is of great concern to him. There were some minor injuries
and one very significant injury. These chutes address a Coast
Guard requirement and a Safety of Life at Sea Treaty requirement to
provide quick evacuation of the passengers.
SENATOR TORGERSON asked if the 6-year CIP Mr. Hayden spoke to
earlier is broken out into life safety expenditures versus major
maintenance and so forth. MR. DOWNING replied that it isn't, but
he can provide that information and any other information he may
wish to have. SENATOR TORGERSON said this information is important
to him because he is approaching this as a friend to the ferry
system, and he wants to see it continue to operate and to continue
to be able to have a constituency as far as getting the money that
is needed to subsidize it. He needs to be brought up to date so
that he can answer questions the people in his district have
relating to the Marine Highway System.
STEPHANIE RAINWATER, a Second Steward on the Alaska Marine Highway
System, said she was on the Taku at the time the accidents with the
chute happened. Prior to going down the chute there was no video
presentation on the correct way to go down the chute, and only a
brief explanation was given before everybody went down. This
resulted in one chief purser breaking his ankle and tearing a
tendon in his leg and four women spraining their ankles. She
pointed out that it takes 4.5 seconds to go down the chute, and she
can see where there could be problems, especially with the older
passengers in coaxing them to go down the chute. She suggested
there needs to be video presentations from each port explaining how
to get down the chute in a safe manner.
MS. RAINWATER related that she sailed as chief steward on the
Aurora last week, and she keeps hearing about the bar area being
changed over to a pizza and espresso machine area; however, the bar
has been closed on the Aurora for two years and nothing has been
done with that space except to make it a storage room for candy.
Her suggestion on the chief steward's report this week was that
they immediately take some merchandise off of the other vessels and
change it into gift shop for more revenue. She said there is still
the same amount of stewards onboard and this could be a possibility
of bringing in more revenue.
MS. RAINWATER also pointed out that the bars on the ferries have
not be updated for several years, and she suggested that instead of
doing away with them to update them by offering food service,
install some jukeboxes so customers can select and pay for the
music they want to hear, etc. She does not want to see the
remaining bars on the ferries close on September 15 unless there is
a plan in place to fill that space.
SENATOR TORGERSON commented that it doesn't make any sense to close
an area if it is just going to be used as a "broom closet" for two
years. SENATOR TAYLOR added that if, in fact, it is a revenue
generating function and service on the vessel, it is beyond his
comprehension how somebody changed the plans of the new vessel that
is costing $85 million plus to build so that there is no bar on it.
He questioned how that space is now going to be utilized.
SENATOR TAYLOR stated it was his intent to hold another meeting in
August in Seward to give the administration the opportunity to
provide answers to questions raised on the accounting system; what
is going to be done with the personnel when the bars are closed;
and how they justify a $3,000 a week loss in revenue on a vessel
when the costs all remain the same.
MS. RAINWATER noted she was told by Gary Hayden that there are 102
people working in the administration of the Alaska Marine System,
and she has asked for information on how many of those individuals
have had any experience within the fleet so that they are familiar
with the needs of the fleet, as well as its concerns. SENATOR
TAYLOR agreed that was a question that should also be addressed.
SENATOR TAYLOR expressed his appreciation to the people who had
taken time to testify before the task force and then adjourned the
meeting at approximately 5:00 p.m.
* Transcriber's Note: The on-line testimony from Kenai and
Anchorage was extremely hard to decipher and, in many cases,
indiscernible due to the input going into the recorder from those
locations.
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