Legislature(2001 - 2002)
05/02/2001 03:50 PM Senate TRA
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* first hearing in first committee of referral
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+ teleconferenced
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ALASKA STATE LEGISLATURE
SENATE TRANSPORTATION COMMITTEE
May 2, 2001
3:50 p.m.
MEMBERS PRESENT
Senator John Cowdery, Chair
Senator Jerry Ward, Vice Chair
Senator Robin Taylor
Senator Gary Wilken
Senator Kim Elton
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR HOUSE BILL NO. 191(FIN) am
"An Act authorizing financing for certain public transportation
projects; giving notice of and approving the entry into, and the
issuance of revenue obligations that provide participation in,
lease-financing agreements for those transportation projects; and
providing for an effective date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
HB 191 - No previous Senate committee action.
WITNESS REGISTER
Mr. Kurt Parkan
Deputy Commissioner
Department of Transportation &
Public Facilities
3132 Channel Dr.
Juneau, AK 99801-7898
POSITION STATEMENT: Answered questions about CSHB 191(FIN)am
Mike Scott
Municipality of Anchorage and Alaska Municipal League
P.O. Box 196650
Anchorage, AK 99519
POSITION STATEMENT: Supports CSHB 191(FIN)am
John Rabina
George K. Baum & Company
No address provided
POSITION STATEMENT: Supports the GARVEE bond approach to finance
road construction projects.
ACTION NARRATIVE
TAPE 01-17, SIDE A
Number 001
CHAIRMAN JOHN COWDERY called the Senate Transportation Committee
meeting to order at 3:50 p.m. Present were Senators Taylor,
Wilken, Elton and Cowdery. Senator Ward arrived at 3:51 p.m.
The committee took up CSHB 191(FIN)am.
HB 191-FINANCING FOR TRANSPORTATION PROJECTS
MR. KURT PARKAN, Deputy Commissioner of the Department of
Transportation and Public Facilities (DOTPF), thanked the
committee for hearing the "GARVEE bond" bill. He noted DOTPF has
distributed quite a bit of information on GARVEE bonds to
committee members so, in the interest of time, he would answer
questions committee members may have.
SENATOR WARD told the committee he planned to propose an
amendment at the appropriate time.
SENATOR TAYLOR asked if the list of projects in CSHB 191(FIN)am
are in the Statewide Transportation Improvement Plan (STIP).
DEPUTY COMMISSIONER PARKAN said that all of the projects will be
in the STIP if they aren't already because that is a federal
requirement of GARVEE bonds. He explained that some of the
projects added by the House are further out on the STIP but all
projects in the bill have been identified by DOTPF as projects in
the STIP.
SENATOR TAYLOR said a project could be included in the STIP yet
take six years to get to the top of the list. He asked whether
DOTPF has modified the STIP to bring it into compliance with the
list in CSHB 191(FIN)am.
DEPUTY COMMISSIONER PARKAN said the STIP does not need to be
modified until DOTPF has authorization for the bonds, at which
time the STIP will be modified using a process established by the
Federal Highway Administration (FHA).
SENATOR TAYLOR asked how the legislature will be assured that the
projects in CSHB 191(FIN)am will in fact appear on that list. He
commented that he thought the STIP was an independent rating
system done within DOTPF.
DEPUTY COMMISSIONER PARKAN explained the STIP has certain
mechanisms by which projects are included. He said:
Certainly there's the CTP program which has rating
criteria; there's the NHS; there's other elements of
it. With GARVEES, the projects are absolutely placed
into the STIP. If we go forward within them at all,
they have to be in the STIP. It's in effect, forcing
projects to be placed in the STIP, which is, in a way,
more controlling of a project's completion than the
STIP itself under the normal process of the program
because, as you know, projects shift and we feel that
all of the projects within the GARVEE package can be
completed within the five-year period of time necessary
to do so to qualify for the GARVEEs.
SENATOR TAYLOR expressed concern that he has watched the
legislature rely upon the STIP year after year and fund projects,
only to never see those projects built. The next time the STIP
is presented to the legislature, those projects have been delayed
three to five years. Now a whole list of projects can either be
moved into or within the STIP to convenience this legislation.
He said he has never once understood how the STIP worked or why
things are moved but it appears to be caused by a lot of politics
within the department and the administration. He again asked how
the legislature will have any assurance that the list in this
bill will not be changed.
DEPUTY COMMISSIONER PARKAN told Senator Taylor that DOTPF has
looked at all of the projects identified and believes all
projects can be completed within the time period required. All
projects are STIP-eligible and have been identified by DOTPF as
feasible. Including them in GARVEEs provides more assurance that
they will be completed in the time frame allocated than if they
were funded through the normal STIP process. He indicated that
projects get delayed for many reasons, but DOTPF believes it
cannot switch the projects in CSHB 191(FIN)am out for other
projects.
SENATOR TAYLOR asked if item 42 would be the third fast ferry.
DEPUTY COMMISSIONER PARKAN said depending on the ultimate outcome
of the capital budget, it could be the second or the third.
SENATOR TAYLOR asked what route the fast ferry in CSHB 191(FIN)am
will cover.
DEPUTY COMMISSIONER PARKAN explained that DOTPF's original
proposal contained funding for two fast ferries: one ferry was
identified for a Ketchikan-Wrangell link; the other was a
Petersburg-Juneau link. The House took one out and replaced it
with other projects, most of them in Southeast. DOTPF's intent
was to have the Ketchikan-Wrangell ferry online before the
Petersburg-Juneau ferry. In the broader scheme, the first fast
ferry will be the Sitka shuttle, which has already been
authorized. The second fast ferry is designated for Prince
William Sound and was included in the capital budget. The third
fast ferry is designated for the Ketchikan-Wrangell link and the
fourth is for the Petersburg-Juneau link. Since one vessel has
been taken out of the GARVEE package and the Prince William Sound
vessel is in limbo, DOTPF has not had much internal discussion
about what the scenario will be.
SENATOR TAYLOR asked if the plan was to fund the first ferry
with SHAKWAK funds, the second with funds in the capital budget,
and the third and fourth with GARVEE bonds [CSHB 191(FIN)am]
except that one was removed by the House.
DEPUTY COMMISSIONER PARKAN said that is correct.
SENATOR TAYLOR asked if there is any geographical balance to the
list in CSHB 191(FIN)am. He pointed out that $58 million was
included for a road in Anchorage, yet the bill only includes a
few hundred thousand for a road in Ketchikan.
DEPUTY COMMISSIONER PARKAN said he didn't have the breakdown at
the moment but he estimated the bill contains about $70 million
for projects in Southeast, including the two ferries but one was
removed and replaced with the same amount of funding for road
projects; $147 million for Anchorage projects; $57 million each
for projects in Fairbanks and the Mat-Su Valley; $30 to $40
million for projects in rural Alaska; and $15 million for
projects in the Kenai Peninsula. The balance was distributed
statewide.
SENATOR TAYLOR noted if $70 million was originally included for
two high-speed ferries for Southeast, each cost $35 million so
essentially Southeast will get a ferry and, "except for Juneau,
it looks like kind of chump change to me."
DEPUTY COMMISSIONER PARKAN said Southeast will get about $30
million in road projects and about $35 million for the ferry.
CHAIRMAN COWDERY asked why many projects were deleted from the
original bill.
DEPUTY COMMISSIONER PARKAN offered to provide members with a
side-by-side comparison of the original version and the House
Finance Committee version. He pointed out that the House Finance
Committee wanted a smaller package. He indicated that items 34
through 56 on page 4 are the projects that the House Finance
Committee replaced the second fast ferry with.
CHAIRMAN COWDERY commented on an article in the Anchorage Daily
News about how the cost of school upgrades have soared because
busy contractors are bidding higher as a result of the heated up
economy. He noted the [legislature] just passed an airport
funding bill last night. He asked who will build these projects,
whether DOTPF will try to attract out-of-state contractors, and
whether Mr. Parkan believes passing this bill is the right thing
to do.
DEPUTY COMMISSIONER PARKAN said DOTPF does believe passing this
bill is the right thing to do. He noted that part of what is
driving up the cost of "vertical" [building] construction is a
shortage of electricians. DOTPF projects are considered to be
"horizontal" [roads] so they do not use the same labor force.
The spread of the original bill in the amount of $425 million had
construction costs at $250 million. The new number will be
considerably less than $250 million and will be spread out over
five years so the amount that will be added to any one year is
fairly small. As a measure of workforce availability, DOTPF has
reviewed the most recent bids it has received. Almost every
project received between four and six bids, which indicates that
competition for road construction projects is fairly healthy.
Mr. Parkan noted that in his recent conversations with the Alaska
General Contractors (AGC), he was told the AGC would not have any
problem absorbing additional construction within its ranks. AGC
is interested in DOTPF's ability to deal with the projects in
terms of design engineers; DOTPF has been working on that and
feels confident it can continue to spend the FHA funds it
receives.
CHAIRMAN COWDERY said having been a contractor he knows that any
potential savings during a heated up economy is out of sight.
Also, the article mentioned that the projects will require road
building and site preparation. He also expressed concern about
this legislature binding future legislatures by requiring them to
appropriate money for these projects.
DEPUTY COMMISSIONER PARKAN agreed this legislature will be
issuing debt and obligating future funds but DOTPF believes the
benefits realized by the economy will outweigh the costs.
Regarding the argument about obligating future legislatures, Mr.
Parkan said that same argument can be made for any bond debt. In
his view, there is no difference in paying the debt service on
these projects with the federal dollars received from paying the
debt service on the Fairbanks courthouse, for example.
Number 1320
CHAIRMAN COWDERY commented that the matter would be different if
these projects were built with bonds approved with a public vote.
SENATOR WILKEN asked if certificates of participation (COPs) are
used when a private party enters into a contract in which the
state issues debt for a building and then leases the building to
the private party who pays for it through the COPs.
DEPUTY COMMISSIONER PARKAN said that is his understanding.
SENATOR WILKEN asked, in the case of a road, whether the leasing
company owns the road.
DEPUTY COMMISSIONER PARKAN said effectively, whoever holds the
debt certificates could claim that asset.
SENATOR WILKEN stated the certificate of participation is a 15-
year pay down but the state only has a guaranteed six-year T 21
revenue stream. He noted if that program isn't reauthorized, the
full faith and credit of the people would kick in and the state
would have what amounts to a general obligation bond. He
questioned if the certificate of participation in that case would
essentially be an end run around the Constitution because public
votes are required on general obligation bonds. He felt that is a
legal question that needs to be answered before going forward
with this legislation.
DEPUTY COMMISSIONER PARKAN said the obligation is against the
federal funds but the bill allows the legislature to use other
revenues available to it, including the general fund. He asked
that Devon Mitchell speak to the mechanics of the certificates of
participation but he noted that DOTPF is comfortable that the T
21 will be reauthorized because it relies on the bond rating
agencies to provide that level of comfort. About 10 states have
issued GARVEEs knowing that the reauthorization is coming up.
The ratings have been very good. He noted that John Rabina could
address the committee on that aspect of the market's comfort.
Mr. Parkan said the T 21 put firewalls in place which require
about 90 percent of the money invested to be given to the states.
That has created a sense of ownership of that money among the
states. He feels it will be very difficult for Congress to
change a mechanism that is so beneficial to the states.
SENATOR WILKEN commented that CSHB 191(FIN)am presents two
problems: a legal problem, which could be remedied by a letter
of affirmation about the bill's legitimacy from the department;
and second, whether the majority of legislators want to use a
certificate of participation without a vote of the people. He
then asked Mr. Parkan about the list of projects in CSHB
191(FIN)am and how items 3 and 4 (the Ted Stevens Way
Reconstruction project in Kotzebue and the Wood River Road
Reconstruction project in Dillingham) were added since they
weren't in the Governor's original proposal.
DEPUTY COMMISSIONER PARKAN explained that the Ted Stevens Way
Reconstruction project was in the GARVEE package last year and it
was scheduled in the STIP for 2004 The House Finance Committee
put this list together and showed it to DOTPF to make sure the
projects would fit within the GARVEE framework. To his
understanding, the House Finance Committee took the projects off
of the out years of the STIP, particularly as they relate to
Southeast. He added the Wood River Road Construction project was
also in the STIP for 2004.
SENATOR WILKEN asked if all of the projects in CSHB 191(FIN)am
are in the STIP.
DEPUTY COMMISSIONER PARKAN said that is correct.
SENATOR WILKEN noted that his community has expressed concern
about the reduction of $10 million to $3.1 million for [Fairbanks
North Star] borough-wide roads and trails. He also commented
that since February 15 of 2000, he has discussed with DOTPF the
issue of the nine percent match with the federal government.
DOTPF has provided some letters of assurance that he believes are
weak. He asked if DOTPF considers the letter of April 2, 2001 to
be the authorization that allows the state to use its interest
earnings as the nine percent match. If so, Alaska would be the
first state in the nation allowed to do so. He expressed concern
that the federal government has said, "maybe you can, and we're
going to approve it when you apply," therefore maybe Alaska
can't. He asked Mr. Parkan where this issue stands.
DEPUTY COMMISSIONER PARKAN replied, as it relates to arbitrage,
the state is clearly subject to the IRS rules. As it relates to
the use of the interest earnings to satisfy the state's match
requirement, DOTPF staff has talked to FHA staff in Washington,
D.C. and was told that what Alaska is proposing can be done.
DOTPF must file a TEO 45 application, which is an innovative
financing application. DOTPF believes it is a pro-forma
exercise; that application should be submitted within a day or
two and FHA expects to be able to give DOTPF a tentative read on
the application within a day of receipt. He reiterated that
DOTPF must take the first step of filing the application - the
FHA will not provide a definitive answer until it reviews the
application.
SENATOR WILKEN asked if the legislature chooses to proceed with
the GARVEE bond bill, whether it would be acceptable to put a
section in the bill making it contingent upon FHA approval.
DEPUTY COMMISSIONER PARKAN said it would.
Number 1766
SENATOR ELTON commented, in response to the discussion about this
bill overheating the construction economy, that the Senate
Transportation Committee met with many design people in Anchorage
[February 23] who said they would be able to handle the work.
Some concern was expressed that if the work isn't done now, the
state would be facing problems when construction work begins on
the gas line. He said he feels that the GARVEE bond program is
too good to be true and that the state should act with dispatch
before the rules change.
CHAIRMAN COWDERY stated that at the Anchorage meeting, some of
the questions focused on whether Alaska has enough design
engineers to design some of the 10 to 20 year projects. The
committee was told it does.
SENATOR WARD asked who from the FHA gave DOTPF verbal approval to
use interest earnings for the state match, and on what date.
DEPUTY COMMISSIONER PARKAN said DOTPF has received two letters
from the FHA; one in February and one in April.
SENATOR WARD asked if those letters represent the verbal approval
he spoke about.
DEPUTY COMMISSIONER PARKAN answered that when the question was
raised at a previous meeting, DOTPF asked the FHA to provide
something in writing and it provided those two letters.
SENATOR WARD asked if any other opinions exist or whether the two
letters are all the state has to go on.
DEPUTY COMMISSIONER PARKAN said the two letters are what DOTPF
has to date.
SENATOR TAYLOR asked if anything prevents the use of GARVEE bonds
for harbor improvements.
DEPUTY COMMISSIONER PARKAN said all of the projects that fit
within GARVEEs must qualify for FHA funding and fit within the
STIP so harbors are not included in the formula programs under
the FHA funding program. He noted congressional funding has been
earmarked and specifically exempted from the federal highway fund
rules; one such project being the Point Mackenzie project.
SENATOR TAYLOR asked how far the STIP extends.
DEPUTY COMMISSIONER PARKAN answered the STIP is a six-year plan.
SENATOR TAYLOR asked if the maximum time that people would have
to wait for any project in CSHB 191(FIN)am to be started is five
years if the STIP didn't change in that time period.
DEPUTY COMMISSIONER PARKAN said that he believes the six year
plan includes projects that are further out.
SENATOR TAYLOR asserted that it is basically a six-year waiting
list that DOTPF tries to work its way up on.
DEPUTY COMMISSIONER PARKAN said the waiting list is actually much
longer but DOTPF identifies six-years' worth of projects.
Projects are also identified for the years 2006, 2007 and 2008.
SENATOR TAYLOR asked if some of those [the six-year plus]
projects are also included in CSHB 191(FIN)am.
DEPUTY COMMISSIONER PARKAN said that is correct.
SENATOR TAYLOR commented that through this process this
legislature will spend $700 million to build these projects. The
state will receive $425 million for the projects, the projects on
the STIP will move up faster, and DOTPF is assuring that projects
will not disappear and reappear on the STIP.
DEPUTY COMMISSIONER PARKAN stated that some of the projects on
the early years of the STIP will be done through GARVEEs,
allowing other projects to move up faster on the STIP.
SENATOR TAYLOR asked why the state should mortgage itself for
$700 million and pay a "$300 million penalty" to speed up
projects that would be built in two years if the state is going
to get the cash anyway on an annual basis from the federal
government. Doing so will prevent future legislatures from
appropriating money for future projects.
Number 2234
DEPUTY COMMISSIONER PARKAN pointed out that DOTPF had a cost-
benefit analysis conducted that shows the benefit to accelerating
the timeframe of the STIP projects through the use of GARVEE
bonds. He noted that doing the projects sooner will prevent
inflationary costs. Savings to the general fund by using the
interest earnings is also of value. In addition, this approach
provides a sense of certainty that the projects in the near years
in the STIP will be done. Any projects authorized by the bonds
will have to be completed within five years. Communities are
hopeful that some of the projects that have been delayed will
actually get done; one example being the Illinois Street project
in Anchorage.
SENATOR TAYLOR alleged that the legislature appropriates funds
for projects through the capital budget, which this year equals
about $1.2 billion, yet many of the projects do not get built.
He referred to item 43 on page 4, line 10, (Ketchikan: South
Tongass Highway Widening and Path Extension, Phase 1) and noted
that he and Representative Williams appropriated money to repair
that highway and build a bike path during the Hickel
Administration. Two years later, the Knowles Administration came
along and built the bike path but the road has never been
improved. Every year that project shows up on the STIP.
DEPUTY COMMISSIONER PARKAN responded that the projects that
Senator Taylor has had concerns about over the years will be
completed if this bill passes. He pointed out that in the cost-
benefit analysis, the author concluded that the 15 year payback
period using GARVEE bonds provides a lower state cost than the
"pay-as-you-go" STIP approach.
SENATOR TAYLOR asked how many times a state can do a GARVEE
project.
DEPUTY COMMISSIONER PARKAN said a state can use the GARVEE
program as many times as it wishes. Some of the ten states that
have used GARVEE bonds have issued them in a series so that all
of the bonds are not issued at once. Some states have passed
legislation in unanimous support of this approach.
SENATOR TAYLOR said he was asking when the state will run out of
money. He asked:
How many times can you mortgage the future and then the
next one do it, pretty soon don't you run out of future
that you can bond and indebt so that everybody can take
credit for - I went to the legislature and I brought
you home another $425 million [in] projects but, in
doing so, I just spent the money that was going to be
available for the next three-four years? At what point
do you run out?
DEPUTY COMMISSIONER PARKAN said that DOTPF expects the federal
allocation to the state to increase at a rate of 4 to 5 percent a
year. If CSHB 191(FIN)am passes, DOTPF will issue debt and
mortgage the future but the state will receive more money and
there is value associated with improved safety. He noted that
some states have issued a much higher percentage of debt than
Alaska is.
TAPE 01-17, SIDE B
DEPUTY COMMISSIONER PARKAN said that DOTPF expects its coverage
to be eight times, while some states have three times, so Alaska
is issuing debt for a very conservative amount compared to some
other states.
SENATOR TAYLOR asked Mr. Parkan to explain the percentage.
DEPUTY COMMISSIONER PARKAN explained that Alaska's debt service
payment would be a little less than 10 percent, equal to about
$36 million per year.
SENATOR TAYLOR remarked that if DOTPF did this at the same rate
every year, the ability of future legislatures to expend money on
behalf of capital projects would be limited by that amount of
money. He stated that eventually the state would be unable to
build any projects for 15 years while it waits for the federal
funds to come in to pay off the projects already built.
DEPUTY COMMISSIONER PARKAN said he doesn't think anyone is
suggesting that the state issue GARVEE bonds every year but it is
clearly the legislature's prerogative to do so.
SENATOR WARD noted that Senator Wilken asked for a legal opinion
on using interest income to pay for the state match. He asked
that DOTPF also provide the names of the ten states that issue
GARVEE bonds and how their state constitutions address binding
future legislatures.
DEPUTY COMMISSIONER PARKAN said he would be happy to provide that
information and pointed out that quite a bit of analysis has been
done on those states.
SENATOR WARD asserted that Alaska differs from other states in
that many others allow for dedicated funds and have different
abilities to encumber future funds. He indicated that is the
type of information the committee needs before committing to this
legislation.
CHAIRMAN COWDERY asked for an estimate of the administrative
costs associated with this bill. He noted he would hold the bill
in committee to await answers to committee members' questions.
SENATOR WARD noted he would not move to adopt his proposed
amendment today. He asked Mr. Parkan to provide an analysis of
that amendment.
DEPUTY COMMISSIONER PARKAN asked if Chairman Cowdery wanted an
estimate of the administrative costs similar to what is
associated with DOTPF's normal projects.
CHAIRMAN COWDERY explained he is interested in the pass-through
fees and how much DOTPF will take to administer the projects.
DEPUTY COMMISSIONER PARKAN said the amount remains the same for
any project.
SENATOR TAYLOR asked why the administration is not taking the
projects to the voters as has been done historically.
DEPUTY COMMISSIONER PARKAN said voter approval occurs before
general obligation debt is issued, but the state has issued
millions of dollars of debt without a vote of the people as well,
such as for school debt reimbursement.
SENATOR TAYLOR maintained that school debt reimbursement requires
a vote of the tax payers of that community, except in villages
that don't pay anything for schools. The legislature allows
communities to incur debt but only after a vote of the people.
He questioned why the state should be in such a big hurry to do
these projects, many of which will be built within the next few
years anyway.
DEPUTY COMMISSIONER PARKAN explained that certificates of
participation are issued by the state all of the time - they are
not an end run. DOTPF did, last year, propose to do a general
obligation debt. He noted he shared with the committee a letter
from the attorney general's office about the difference between
the two proposals. He offered to provide members with another
copy. DOTPF looked at several things and, in short, the bond
market is much more comfortable now than it was before with
GARVEEs. DOTPF believes it will have a fairly good bond rating
with the certificates of participation. Clearly general
obligation bonds provide the best ratings possible because of
full faith and credit but interest rates are very low right now.
In addition, DOTPF wanted to get the projects done soon. Had the
GARVEEs been approved last year, they could have been put on the
ballot in the general election. He felt Senator Elton's point
about the need to get these projects done in advance of the
construction of a gas line is a good one.
SENATOR WARD asked what the time frame will be to get a legal
opinion and the analysis of the ten other states.
DEPUTY COMMISSIONER PARKAN said he would try to provide the
committee with that information the next day.
CHAIRMAN COWDERY asked for public testimony.
MR. MIKE SCOTT, representing the Municipality of Anchorage (MOA)
- both the Mayor and the Assembly, and the Alaska Municipal
League (AML), stated wholehearted support for the GARVEE approach
presented in CSHB 191(FIN)am. Anchorage has some critical road
needs that the Mayor and Assembly want accelerated. The MOA
believes this bill will assure that these road projects are built
in a timely fashion. Mr. Scott said the MOA shares some of
committee members' frustration and MOA has acknowledged that it
intends to do a better job of getting these projects done. He
said he has heard that contractors need more business and are
ready to go.
MR. SCOTT pointed out that DOTPF could do transfers of
responsibilities with some communities on selected projects. He
acknowledged that the question of whether these projects should
be voted on by the public is a valid one. The legislature will
have the MOA's support in going to the voters, which could be
done with municipal elections in October in the case one is
deemed necessary in the legal opinion. Mr. Scott said the
difference between GARVEE bonds and general obligation bonds is
that everyone's property is put up as collateral for general
obligation bonds whereas a facility is put up as collateral for a
certificate of participation project. Regarding harbors and
ports, Mr. Scott said they can be financed through FHA funds if
authorized by Congress. HB 234 contains about $35 million for
ports and harbors; that bill is now in the Senate Finance
Committee. Port and harbor improvements could be conditioned
upon congressional approval.
MR. SCOTT said that he commutes from the Mat-Su Valley to
Anchorage daily. During the evening, traffic can be backed up at
a traffic light on the Parks Highway for one-half mile. The MOA
believes that although CSHB 191(FIN)am is not a perfect solution,
it is better than any other proposals to date. The MOA is
prepared to work and partner with DOTPF if necessary.
CHAIRMAN COWDERY asked if the Abbott Loop extension to Tudor is
included in this bill.
MR. SCOTT said he believes the Chairman holds great sway over the
future of that project and the MOA defers to his judgment.
CHAIRMAN COWDERY repeated that he would hold the bill in
committee.
MR. JOHN RABINA, Senior Vice President of the George K. Baum
Company, an investment bank, informed the committee that
regarding the viability of the structure the state is
considering, about ten states have very viable programs.
Regarding security, the FHA has been involved in these kinds of
appropriation programs since 1915 so it has a long history with
them. Regarding general obligation bonds, he believes they are
also a viable vehicle but he believes the state has not issued
one since 1982. He has personally been involved in about $1.6
billion in financing for the state over the last ten years.
Either method would work but he believes the GARVEE concept is a
good one. He believes comparing the other ten states to Alaska
is a good idea. He offered to answer questions.
Number 1642
CHAIRMAN COWDERY noted the Alaska Constitution is a model for
other countries so he is not certain that the other states'
powers of appropriation will be similar to Alaska's.
MR. RABINA said Alaska is not the same but he could not elaborate
at this time.
SENATOR WARD asked if GARVEE and general obligation bonds are
issued at the same time, whether they would be repaid in the same
way.
MR. RABINA said they would; general obligation bonds typically
have a higher rating because most of them are based on an annual
tax. A revenue bond has a slightly higher interest rate because
it is usually based upon some kind of enterprise so they rely on
water or electric rates or toll road fares. With regard to the
State of Alaska and GARVEE bonds, the security would be the
annual appropriation from the FHA.
CHAIRMAN COWDERY said the question for most legislators is that
they don't plan to be in the legislature 15 years from now. He
then adjourned the meeting at 4:48 p.m.
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