Legislature(2009 - 2010)

04/13/2010 02:42 PM Senate TRA


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                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE TRANSPORTATION STANDING COMMITTEE                                                                          
                         April 13, 2010                                                                                         
                           2:42 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Albert Kookesh, Chair                                                                                                   
Senator Linda Menard, Vice Chair                                                                                                
Senator Bettye Davis                                                                                                            
Senator Kevin Meyer                                                                                                             
Senator Joe Paskvan                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 357(FIN)                                                                                
"An Act relating to the sale of land owned by the Alaska                                                                        
Railroad that is not necessary for railroad purposes."                                                                          
                                                                                                                                
     - MOVED CSHB 357(FIN) OUT OF COMMITTEE                                                                                     
                                                                                                                                
CS FOR HOUSE JOINT RESOLUTION NO. 42(JUD)                                                                                       
Proposing amendments to the Constitution of the State of Alaska                                                                 
creating a transportation infrastructure fund.                                                                                  
                                                                                                                                
     - MOVED SCS CSHJR 42(TRA) OUT OF COMMITTEE                                                                                 
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 357                                                                                                                  
SHORT TITLE: AK RAILROAD CORP. LAND SALES                                                                                       
SPONSOR(s): REPRESENTATIVE(s) STOLTZE                                                                                           
                                                                                                                                
02/19/10       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/19/10       (H)       TRA                                                                                                    
03/16/10       (H)       TRA AT 1:00 PM CAPITOL 17                                                                              
03/16/10       (H)       Heard & Held                                                                                           
03/16/10       (H)       MINUTE(TRA)                                                                                            
03/23/10       (H)       TRA AT 1:00 PM CAPITOL 17                                                                              
03/23/10       (H)       Moved CSHB 357(TRA) Out of Committee                                                                   
03/23/10       (H)       MINUTE(TRA)                                                                                            
03/24/10       (H)       TRA RPT CS(TRA) NT 5DP                                                                                 
03/24/10       (H)       DP:    MUNOZ,    T.WILSON,    GRUENBERG,                                                               
                         PETERSEN, P.WILSON                                                                                     
03/24/10       (H)       FIN REFERRAL ADDED AFTER TRA                                                                           
04/01/10       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
04/01/10       (H)       Heard & Held                                                                                           
04/01/10       (H)       MINUTE(FIN)                                                                                            
04/02/10       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
04/02/10       (H)       Moved CSHB 357(FIN) Out of Committee                                                                   
04/02/10       (H)       MINUTE(FIN)                                                                                            
04/05/10       (H)       FIN RPT CS(FIN) NT 4DP 4NR                                                                             
04/05/10       (H)       DP:   THOMAS,   AUSTERMAN,   FAIRCLOUGH,                                                               
                         STOLTZE                                                                                                
04/05/10       (H)       NR: GARA, DOOGAN, KELLY, N.FOSTER                                                                      
04/05/10       (H)       LETTER OF INTENT WITH FIN REPORT                                                                       
04/07/10       (H)       TRANSMITTED TO (S)                                                                                     
04/07/10       (H)       VERSION: CSHB 357(FIN)                                                                                 
04/08/10       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/08/10       (S)       TRA, FIN                                                                                               
04/13/10       (S)       TRA AT 1:00 PM BUTROVICH 205                                                                           
                                                                                                                                
BILL: HJR 42                                                                                                                  
SHORT TITLE: CONST. AM: TRANSPORTATION FUND                                                                                     
SPONSOR(s): TRANSPORTATION                                                                                                      
                                                                                                                                
02/05/10       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/05/10       (H)       TRA, JUD, FIN                                                                                          
02/09/10       (H)       TRA AT 1:00 PM CAPITOL 17                                                                              
02/09/10       (H)       Moved Out of Committee                                                                                 
02/09/10       (H)       MINUTE(TRA)                                                                                            
02/10/10       (H)       TRA RPT 6DP 1NR                                                                                        
02/10/10       (H)       DP: JOHANSEN, MUNOZ, JOHNSON, T.WILSON,                                                                
                         PETERSEN, P.WILSON                                                                                     
02/10/10       (H)       NR: GRUENBERG                                                                                          
02/17/10       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
02/17/10       (H)       Heard & Held                                                                                           
02/17/10       (H)       MINUTE(JUD)                                                                                            
02/22/10       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
02/22/10       (H)       -- MEETING CANCELED --                                                                                 
03/01/10       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
03/01/10       (H)       Moved CSHJR 42(JUD) Out of Committee                                                                   
03/01/10       (H)       MINUTE(JUD)                                                                                            
03/04/10       (H)       JUD RPT CS(JUD) 1DP 4NR                                                                                
03/04/10       (H)       DP: LYNN                                                                                               
03/04/10       (H)       NR:   GRUENBERG,    HERRON,   DAHLSTROM,                                                               
                         RAMRAS                                                                                                 
04/10/10       (H)       FIN AT 9:00 AM HOUSE FINANCE 519                                                                       
04/10/10       (H)       Moved CSHJR 42(JUD) Out of Committee                                                                   
04/10/10       (H)       MINUTE(FIN)                                                                                            
04/11/10       (H)       FIN RPT CS(JUD) 3DP 7NR                                                                                
04/11/10       (H)       DP: FAIRCLOUGH, AUSTERMAN, KELLY                                                                       
04/11/10       (H)       NR:   THOMAS,   GARA,   DOOGAN,   JOULE,                                                               
                         N.FOSTER, STOLTZE, HAWKER                                                                              
04/12/10       (H)       TRANSMITTED TO (S)                                                                                     
04/12/10       (H)       VERSION: CSHJR 42(JUD)                                                                                 
04/13/10       (S)       TRA AT 1:00 PM BUTROVICH 205                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE BILL STOLTZE                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION STATEMENT:  Sponsor of HB 357.                                                                                       
                                                                                                                                
WENDY LINDSKOOG, Vice President of Corporate Affairs                                                                            
Alaska Railroad Corporation                                                                                                     
POSITION STATEMENT:  Testified that HB 357 highlighted concerns                                                               
that customers have with ARRC, but that the model is worth                                                                      
protecting.                                                                                                                     
                                                                                                                                
JEFFREY DAVIES, President                                                                                                       
American Federation of Government Employees                                                                                     
Alaska Railroad Workers Local 183                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 357.                                                                       
                                                                                                                                
JOHN COOK, Board of Directors                                                                                                   
Alaska Railroad Corporation                                                                                                     
POSITION STATEMENT:  Highlighted potential problems associated                                                                
with HB 357.                                                                                                                    
                                                                                                                                
PETER MACKSEY, Customer Relations                                                                                               
Steelfab                                                                                                                        
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 357.                                                                          
                                                                                                                                
CARL ANDERSON, Owner                                                                                                            
Cook Inlet Tug and Barge                                                                                                        
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 357.                                                                          
                                                                                                                                
MARK STEARNS                                                                                                                    
Alaskan Wood Molding                                                                                                            
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 357.                                                                          
                                                                                                                                
MARK HICKEY, representing himself                                                                                               
Juneau, AK                                                                                                                      
POSITION STATEMENT:  Testified in strong support of HJR 42.                                                                   
                                                                                                                                
SHIRLEY MARQUARDT, Mayor                                                                                                        
City of Unalaska and                                                                                                            
2nd Vice President, Alaska Municipal league and                                                                                 
Board of Directors, Southwest Alaska Municipal Conference                                                                       
POSITION STATEMENT:  Testified in strong support of HJR 42.                                                                 
                                                                                                                                
KATHY WASSERMAN, Executive Director                                                                                             
Alaska Municipal League                                                                                                         
Juneau, AK                                                                                                                      
POSITION STATEMENT:  Provided supporting information to HJR 42.                                                               
                                                                                                                                
LOIS EPSTIEN, Director                                                                                                          
Alaska Transportation Priorities Project and                                                                                    
Alaska Licensed Engineer                                                                                                        
POSITION STATEMENT:  Testified in support of HJR 42.                                                                          
                                                                                                                                
DAVID LEVY, Executive Director                                                                                                  
Alaska Mobility                                                                                                                 
POSITION STATEMENT:  Testified in support of HJR 42.                                                                          
                                                                                                                                
JOHN MACKINNON, Executive Director                                                                                              
Associated General Contractors of Alaska                                                                                        
POSITION STATEMENT:  Testified in support of HJR 42.                                                                          
                                                                                                                                
DAVE CRUZ, President                                                                                                            
Associated General Contractors of Alaska                                                                                        
POSITION STATEMENT:  Testified in support of HJR 42.                                                                          
                                                                                                                                
FRANK RICHARDS, Deputy Commissioner                                                                                             
Department of Transportation and Public Facilities (DOTPF)                                                                      
POSITION STATEMENT:  Provided information related to HJR 42.                                                                  
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
2:42:07 PM                                                                                                                    
                                                                                                                                
CHAIR ALBERT  KOOKESH called  the Senate  Transportation Standing                                                             
Committee meeting  to order at 2:42  p.m. Present at the  call to                                                               
order were  Senators Meyer, Davis,  and Kookesh.  Senators Menard                                                               
and Paskvan arrived soon thereafter.                                                                                            
                                                                                                                                
              HB 357-AK RAILROAD CORP. LAND SALES                                                                           
                                                                                                                                
CHAIR KOOKESH announced the consideration of HB 357. [CSHB
357(FIN) was before the committee.]                                                                                             
                                                                                                                                
2:42:59 PM                                                                                                                    
REPRESENTATIVE BILL STOLTZ, sponsor of HB 357, presented the                                                                    
bill speaking to the sponsor statement:                                                                                         
                                                                                                                                
     To  spur  economic  development throughout  the  state,                                                                    
     House Bill  357 adds  a fourth  clause to  the existing                                                                    
     language governing how  the Alaska Railroad Corporation                                                                    
     (ARRC) may dispose of land.  House Bill 357 will enable                                                                    
     the  railroad  to sell  land  that  is not  needed  for                                                                    
     essential  railroad purposes.  This bill  does not  ask                                                                    
     for  any irresponsible  disposal of  land, as  the sale                                                                    
     must  be initiated  by the  board of  directors on  two                                                                    
     conditions.  The first  condition is  that the  land is                                                                    
     not essential  to railroad  operations, and  the second                                                                    
     condition is that  the sale is in the  best interest of                                                                    
     the state of Alaska.                                                                                                       
                                                                                                                                
     As  support has  shown, current  leaseholders are  very                                                                    
     unhappy  with the  inability to  purchase their  leased                                                                    
     properties from  the railroad.  In general  real estate                                                                    
     dealings,  private  purchases   are  made  in  mutually                                                                    
     beneficial  sales.  House  Bill  357  encourages  these                                                                    
     sales after determination by the  board of directors of                                                                    
     the  railroad  looks  at each  sale  with  the  overall                                                                    
     benefit to the  state of Alaska as the  key driver. Not                                                                    
     only  will   the  private  sector  benefit   from  this                                                                    
     addition  to state  law, the  railroad  will also  have                                                                    
     increased  ability to  make  decisions regarding  their                                                                    
     overall real estate portfolio.                                                                                             
                                                                                                                                
     The sale  and relationship of private  and public lands                                                                    
     are  vital  to the  economic  growth  of the  state  of                                                                    
     Alaska.  I ask  for your  consideration and  support of                                                                    
     House Bill  357 to  promote Alaskan growth  through the                                                                    
     diversification of  land ownership, increasing  the tax                                                                    
     base   of  the   state,  and   encouraging  responsible                                                                    
     development of Alaskan land.                                                                                               
                                                                                                                                
REPRESENTATIVE STOLTZE clarified that any leasehold sales would                                                                 
be permissive and considered on a case-by-case basis.                                                                           
                                                                                                                                
2:46:23 PM                                                                                                                    
SENATOR PASKVAN joined the meeting.                                                                                             
                                                                                                                                
REPRESENTATIVE STOLTZE told the  committee that ARRC Board Chair,                                                               
John Binkley, has  taken a leadership role  in acknowledging that                                                               
there have been  problems in the way the railroad  has dealt with                                                               
communities  and  lessees.   HB  357  would  help   to  keep  the                                                               
conversation going, he  said. In conclusion he  restated that the                                                               
bill  is   permissive  and  provides  opportunities   that  don't                                                               
currently exist.                                                                                                                
                                                                                                                                
2:49:34 PM                                                                                                                    
SENATOR MENARD  asked if the  current leaseholders  would receive                                                               
priority if the railroad decided to sell its land.                                                                              
                                                                                                                                
REPRESENTATIVE STOLTZE  replied the  bill specifies  that current                                                               
leaseholders  would  have first  right  of  refusal, but  it's  a                                                               
policy issue that is debatable.                                                                                                 
                                                                                                                                
SENATOR MENARD  said she  is torn  because, although  the lessees                                                               
have a stake, it makes good business  sense for the land to go to                                                               
the highest bidder.                                                                                                             
                                                                                                                                
REPRESENTATIVE STOLTZE  replied it's  debatable, but he  opted to                                                               
protect leaseholder's  time and money investments,  some of which                                                               
go back over 50 to 60 years.                                                                                                    
                                                                                                                                
CHAIR  KOOKESH  asked  if  this   simply  adds  a  fourth  option                                                               
governing how the railroad may dispose of its land.                                                                             
                                                                                                                                
REPRESENTATIVE  STOLTZE confirmed  that the  bill was  written to                                                               
reflect that intent.                                                                                                            
                                                                                                                                
2:52:06 PM                                                                                                                    
SENATOR PASKVAN said he understands  that the bill was written to                                                               
give current leaseholders the right to match the highest bid.                                                                   
                                                                                                                                
REPRESENTATIVE STOLTZE responded that  he believes it was written                                                               
that way.                                                                                                                       
                                                                                                                                
SENATOR  PASKVAN  expressed  concern about  unduly  delaying  the                                                               
transaction and asked  if there would be a limit  on the time the                                                               
leaseholder would have to meet the high bid.                                                                                    
                                                                                                                                
REPRESENTATIVE STOLTZE said  he believes that would be  up to the                                                               
railroad, but he believes ARRC would act in good faith.                                                                         
                                                                                                                                
SENATOR  PASKVAN said  he tends  to  agree with  the sponsor.  It                                                               
would be  in ARRC's best economic  interest to act in  good faith                                                               
in these transactions.                                                                                                          
                                                                                                                                
2:55:18 PM                                                                                                                    
SENATOR MENARD asked  if the railroad would argue  for the status                                                               
quo since  it gets  eight percent annual  return from  its leased                                                               
land.                                                                                                                           
                                                                                                                                
REPRESENTATIVE  STOLTZE clarified  that the  proceeds would  stay                                                               
with  the railroad  and  he  believes ARRC  could  make an  eight                                                               
percent  return on  its  money. The  agency  is unencumbered  and                                                               
outside the Executive Act, and  in some instances it should lower                                                               
interest  rates  to  help certain  small  communities.  It's  not                                                               
always about making the most on every dollar, he said.                                                                          
                                                                                                                                
SENATOR MENARD  complemented Representative  Stoltze for  his due                                                               
diligence.                                                                                                                      
                                                                                                                                
2:58:15 PM                                                                                                                    
SENATOR MEYER asked him to elaborate  on what would happen to the                                                               
proceeds from the sale of the land.                                                                                             
                                                                                                                                
REPRESENTATIVE STOLTZE  said this legislation clarifies  that the                                                               
proceeds  stay with  the  railroad  and could  only  be spent  in                                                               
increments as interest accrues.                                                                                                 
                                                                                                                                
SENATOR MEYER asked  if he's heard that the passage  of this bill                                                               
could impact the railroad's bond rating.                                                                                        
                                                                                                                                
REPRESENTATIVE STOLTZE said  he hasn't heard that  and isn't sure                                                               
how a  permissive activity that  may not happen could  affect the                                                               
rating. It  begs the question of  why some people are  working so                                                               
hard to kill the bill, he added.                                                                                                
                                                                                                                                
3:01:09 PM                                                                                                                    
CHAIR  KOOKESH asked  if this  bill could  force the  railroad to                                                               
sell land.                                                                                                                      
                                                                                                                                
REPRESENTATIVE STOLTZE said no; it's a gentle nudge.                                                                            
                                                                                                                                
CHAIR  KOOKESH  observed that  the  railroad's  concern seems  to                                                               
hinge on the  language that says the money in  the account may be                                                               
appropriated.                                                                                                                   
                                                                                                                                
REPRESENTATIVE STOLTZE  explained that an amendment  in the House                                                               
Transportation   Committee  substituted   the   word  "use"   for                                                               
"appropriated" but legislative legal said  that to comply with 45                                                               
U.S.C.   1207(a)(5)Alaska  Railroad   Transfer   Act  of   1982),                                                               
"appropriated" was the right language.                                                                                          
                                                                                                                                
CHAIR  KOOKESH  asked for  clarification  that  the language  was                                                               
changed on the advice of  legislative legal counsel; there was no                                                               
intention to do harm.                                                                                                           
                                                                                                                                
REPRESENTATIVE STOLTZE said that's correct.                                                                                     
                                                                                                                                
3:03:12 PM                                                                                                                    
WENDY  LINDSKOOG, Vice  President  of  Corporate Affairs,  Alaska                                                               
Railroad Corporation, thanked the  sponsor for introducing HB 357                                                               
and bringing to light some  of the frustrations that leaseholders                                                               
have  had with  ARRC.  She  assured the  committee  that ARRC  is                                                               
discussing  ways to  address  those concerns  and  is working  to                                                               
improve  customer relations  with its  leaseholders. Real  estate                                                               
revenues are  the bread and  butter of  the railroad and  a vital                                                               
part of  what has  made ARRC a  successful operating  entity. The                                                               
model  that allows  ARRC to  lease  land is  excellent and  worth                                                               
protecting, she said.                                                                                                           
                                                                                                                                
MS.  LINDSKOOG  said  that  it  has  never  been  the  railroad's                                                               
practice to  sell land and there  is concern that this  bill will                                                               
create an  expectation that  that practice  may change.  This may                                                               
further frustrate  customers, she said. Ms.  Lindskoog referenced                                                               
a  letter to  legislators  from John  Binkley articulating  those                                                               
concerns. She  said she  appreciates that  Representative Stoltze                                                               
clarified that  his intent is  not to mandate land  sales because                                                               
the board wouldn't  necessarily take that path if  this bill were                                                               
to pass.                                                                                                                        
                                                                                                                                
MS. LINDSKOOG  informed the committee  that the concern  that was                                                               
raised   by   ARRC's   bond  counsel   centered   on   the   word                                                               
"appropriate." She noted  that Bill O'Leary, acting  CEO and CFO,                                                               
could answer  questions in regard  to that potential  problem. In                                                               
conclusion she said,  "We do understand this  doesn't require the                                                               
railroad to sell land, it is permissive at this point."                                                                         
                                                                                                                                
3:07:59 PM                                                                                                                    
CHAIR KOOKESH asked if she  would greatly object if the committee                                                               
passed the  bill as currently  drafted. There is  no requirement;                                                               
the  bill  simply  provides  the railroad  a  fourth  option  for                                                               
disposing of land.                                                                                                              
                                                                                                                                
MS. LINDSKOOG  replied they could  live with it because  the bill                                                               
is permissive and does not require action.                                                                                      
                                                                                                                                
SENATOR  PASKVAN  noted  that  the  last  sentence  of  the  bill                                                               
contains the word  "appropriated" and a reference  to federal law                                                               
and asked  if compliance  to that federal  law is  compulsory for                                                               
ARRC.                                                                                                                           
                                                                                                                                
MS. LINDSKOOG declined to answer  a legal question and referenced                                                               
a  legal  memo from  the  ARRC's  general counsel  that  strongly                                                               
recommended substituting  another term for "appropriated"  in the                                                               
legislation. The  terms "retained and managed"  [and "used"] were                                                               
suggested as viable  alternatives. "Maybe it's just  one of those                                                               
instances where our  legal team at the railroad has  a little bit                                                               
different take  on the  issue than  the legislative  legal team,"                                                               
she added.                                                                                                                      
                                                                                                                                
SENATOR PASKVAN  pointed out  that any  language the  state might                                                               
use would  be preempted if  45 U.S.C. 1207(a)(5)is  compulsory on                                                               
the railroad.                                                                                                                   
                                                                                                                                
3:10:31 PM                                                                                                                    
JEFFREY  DAVIES,  President,  American Federation  of  Government                                                               
Employees, Alaska Railroad Workers  Local 183, said he represents                                                               
350  employees who  are concerned  about the  effect that  HB 357                                                               
might  have on  the railroad's  ability  to continue  as a  self-                                                               
sufficient operation.  In 2009  ARRC had to  lay off  many needed                                                               
positions  in response  to rising  operational costs  and without                                                               
real estate  revenue to offset operational  shortfalls the impact                                                               
could have  been greater,  he said.  The employees  he represents                                                               
believe  these are  necessary assets  that continue  to serve  as                                                               
intended. The  model works; changing it  could create uncertainty                                                               
or  lessen job  stability and  reduce the  benefits that  Alaskan                                                               
jobs provide, he said.                                                                                                          
                                                                                                                                
3:13:07 PM                                                                                                                    
JOHN COOK, Board of Directors,  Alaska Railroad Corporation, said                                                               
he has  a background in  real estate development. He  thanked the                                                               
sponsor for introducing  the bill and said it's  brought to light                                                               
some communication problems that  ARRC has with the leaseholders.                                                               
He's new to  the board and welcomes discussion, but  he does have                                                               
certain concerns about the unintended  consequences of this bill.                                                               
The first relates  to the right of first refusal  because it will                                                               
have the overall affect of depressing market rates.                                                                             
                                                                                                                                
The  second concern  is that  developers would  potentially lease                                                               
pieces of  property and  then attempt  to purchase  and subdivide                                                               
that property. That  may be the property's highest  and best use,                                                               
but just that  one person would garner the profit  instead of all                                                               
Alaska residents.  He said he  can also see situations  where the                                                               
lessee  would ask  to purchase  the property  under the  right of                                                               
first refusal  and have  a preexisting agreement  to sell  to the                                                               
developer for a profit when the title vests.                                                                                    
                                                                                                                                
3:16:56 PM                                                                                                                    
PETER MACKSEY,  Customer Relations, Steelfab, stated  support for                                                               
HB 357.  He related that  this family-owned business has  been on                                                               
the same ten-acre site for about  60 years. They pay taxes on the                                                               
property, which  would be tax  free if the railroad  didn't lease                                                               
it. He noted that less than one  percent of the land in Alaska is                                                               
in private hands and  he thinks that this is a  chance to allow a                                                               
viable  business  to  expand.  He expressed  the  view  that  the                                                               
railroad seems to act like a  state agency when it suits them and                                                               
a  private company  when  it  doesn't. HB  357  doesn't push  the                                                               
railroad into selling its leasehold land, it offers the option.                                                                 
                                                                                                                                
3:19:57 PM                                                                                                                    
CARL ANDERSON, Owner, Cook Inlet  Tug and Barge, said the company                                                               
has  been in  the family  since 1938.  He is  concerned that  the                                                               
railroad is  in the transportation  business, but when  times are                                                               
tough  it can  apply for  subsidies  or stimulus  funds or  raise                                                               
rates.  These options  aren't available  to other  transportation                                                               
companies, he said.                                                                                                             
                                                                                                                                
3:21:28 PM                                                                                                                    
MARK  STEARNS,  Alaskan   Wood  Molding,  said  he   has  been  a                                                               
leaseholder since 2001 and in  that time his effective costs have                                                               
increased  from  about $10,000  per  year  to $42,000  per  year.                                                               
Leaseholders have no  recourse when the railroad  decides to levy                                                               
increases.  HB  357 would  provide  some  certainty and  make  it                                                               
reasonable to make further investments  in their buildings. Until                                                               
recently his  company was  told that  extending the  lease wasn't                                                               
possible, which hindered any desire  to make improvements and the                                                               
ability to  get bank loans.  He described  the bill as  a win-win                                                               
for the railroad and its leaseholders.                                                                                          
                                                                                                                                
3:25:01 PM                                                                                                                    
REPRESENTATIVE STOLTZE  reiterated that  the bill  is permissive.                                                               
It's spurred  by a  desire to  be responsive  to the  majority of                                                               
Alaskans who aren't involved with the railroad.                                                                                 
                                                                                                                                
CHAIR KOOKESH closed  public testimony and asked the  will of the                                                               
committee.                                                                                                                      
                                                                                                                                
SENATOR  MENARD  moved  to  report HB  357  from  committee  with                                                               
individual recommendations and attached fiscal note(s).                                                                         
                                                                                                                                
REPRESENTATIVE  STOLTZE commented  that  it's  puzzling that  the                                                               
railroad  submitted an  indeterminate fiscal  note given  that it                                                               
isn't under the  Executive Budget Act. The result is  that it has                                                               
a finance committee referral.                                                                                                   
                                                                                                                                
3:27:58 PM                                                                                                                    
SENATOR MEYER  objected to state  that he  too is puzzled  by the                                                               
fiscal note.  He suggested that  to avoid a finance  referral the                                                               
committee could  zero out  the indeterminate  part of  the fiscal                                                               
note.                                                                                                                           
                                                                                                                                
CHAIR KOOKESH opposed the suggestion.                                                                                           
                                                                                                                                
SENATOR MEYER removed his objection.                                                                                            
                                                                                                                                
CHAIR  KOOKESH announced  that  without  further objection,  CSHB
357(FIN)   moved   from   the  Senate   Transportation   Standing                                                               
Committee.                                                                                                                      
                                                                                                                                
             HJR 42-CONST. AM: TRANSPORTATION FUND                                                                          
                                                                                                                                
CHAIR KOOKESH  announced consideration of HJR  42. [CSHJR 42(JUD)                                                               
was before the committee.]                                                                                                      
                                                                                                                                
3:30:54 PM                                                                                                                    
REPRESENTATIVE PEGGY WILSON,  sponsor of HJR 42,  said the Alaska                                                               
Transportation Infrastructure  Fund (ATIF) requires  three pieces                                                               
of  legislation to  put it  into practice.  HJR 42  is the  first                                                               
piece. It will  put a constitutional amendment  before the voters                                                               
to   allow  a   dedicated  transportation   fund.  The   enabling                                                               
legislation, which will  be taken up later, defines  how the fund                                                               
will be  used and how  the appropriations will be  disbursed. The                                                               
third piece is to appropriate seed money into the fund.                                                                         
                                                                                                                                
In FY10 Alaska received 87  percent of its transportation funding                                                               
from the  federal government, which  is more per capita  than any                                                               
other  state.  This is  not  likely  to  continue under  the  new                                                               
federal  highway  authorization bill,  she  said.  In any  event,                                                               
state-funded projects  that meet the same  construction standards                                                               
can be  done faster  and cheaper  because state  requirements are                                                               
less stringent.                                                                                                                 
                                                                                                                                
REPRESENTATIVE PEGGY  WILSON told  the committee that  during the                                                               
interim  the House  transportation  committee met  and looked  at                                                               
ways  to  improve  the   transportation  infrastructure  in  this                                                               
geographically diverse  state. This  involved travel  to villages                                                               
and  urban areas  to look  at  transportation challenges,  safety                                                               
corridors,  congested areas,  and roads  in need  of repair.  The                                                               
committee also  heard from  the Alaska  Municipal League  and the                                                               
Mat-Su Borough about jointly contracting  an independent study on                                                               
the fiscal  challenges associated with transportation.  She noted                                                               
that Larry Persily  also completed a study on  the fiscal options                                                               
for funding infrastructure upgrades.  Day-long hearings were held                                                               
to highlight issues and pose potential solutions.                                                                               
                                                                                                                                
3:34:09 PM                                                                                                                    
REPRESENTATIVE   WILSON   reminded   the   committee   that   the                                                               
constitution grandfathered  in two transportation funds:  one for                                                               
roads and one  for water and harbors. She said  she believes that                                                               
it's  time  to  reinstate  a  dedicated  transportation  fund  to                                                               
address the  state's transportation needs. With  a dedicated fund                                                               
it will be  clear exactly what funds are  available from year-to-                                                               
year  for  capital  projects and  major  maintenance.  For  these                                                               
reasons I  think the  voters will vote  to reinstate  a dedicated                                                               
fund for transportation, she said.                                                                                              
                                                                                                                                
CHAIR KOOKESH asked for a  motion to adopt the proposed committee                                                               
substitute (CS).                                                                                                                
                                                                                                                                
SENATOR MEYER moved to adopt the  work draft Senate CS for CS for                                                               
HJR  42,  labeled 26-LS1411\T,  as  the  working document.  There                                                               
being no objection, version T was before the committee.                                                                         
                                                                                                                                
REBECCA ROONEY,  staff to Representative Peggy  Wilson, explained                                                               
three  changes  between  the  bill  versions,  one  of  which  is                                                               
substantive. The  current version T  has a small  language change                                                               
beginning on page  1, line 15, to clarify that  the revenue would                                                               
go into  the fund  after July  1, 2011  even though  the enabling                                                               
legislation isn't as yet following.                                                                                             
                                                                                                                                
On  page  2,  line 1,  the  phrase  "provided  by  law" is  in  a                                                               
different position  in the  sentence to  clarify that  it applies                                                               
just to  the special  registration fees provided  by law  and not                                                               
all registration fees provided by law.                                                                                          
                                                                                                                                
The substantive  change occurs on  page 2, lines 4-5  and relates                                                               
to the annual appropriation to  the fund. The version that passed                                                               
the House  said, "…the legislature  may appropriate  a percentage                                                               
of the  average market value of  the fund" each year.  The Senate                                                               
CS says,  "…the legislature may  appropriate a percentage  of the                                                               
state fuel  taxes and registration  fees received by the  fund in                                                               
that year  and a percentage  of the  average market value  of the                                                               
fund…".                                                                                                                         
                                                                                                                                
MS.  ROONEY directed  attention to  a spreadsheet  in the  packet                                                               
showing  two scenarios.  Scenario 1  shows a  $1 billion  initial                                                               
appropriation,  the  annual   appropriations,  and  the  revenues                                                               
realized from  the vehicle registration  fees and the  motor fuel                                                               
tax. Scenario 2 shows what  happens if you allow for expenditures                                                               
of 50 percent  of those fuel taxes and  vehicle registration fees                                                               
each  year. This  demonstrates  the  importance of  appropriating                                                               
more up front, she said.                                                                                                        
                                                                                                                                
3:40:23 PM                                                                                                                    
SENATOR PASKVAN  expressed a desire  to see a table  showing just                                                               
the revenue coming from the fees.  He said he wonders what policy                                                               
concerns might arise  out of allocating $1 billion  that can't be                                                               
touched.                                                                                                                        
                                                                                                                                
MS. RAINEY said she would provide that information.                                                                             
                                                                                                                                
3:41:48 PM                                                                                                                    
SENATOR MEYER  asked what  would happen  to the  appropriation if                                                               
the fuel tax was repealed as it was two years ago.                                                                              
                                                                                                                                
REPRESENTATIVE  WILSON  said  in  that  event  just  the  vehicle                                                               
registration fees would  be appropriated. But for  this to really                                                               
work, it's important to seed the fund initially, she added.                                                                     
                                                                                                                                
SENATOR  MEYER said  he supports  the bill,  but he  worries that                                                               
that there might  be pressure on the Legislature  to increase the                                                               
fuel tax in order to get more money into the fund.                                                                              
                                                                                                                                
REPRESENTATIVE  WILSON  said a  future  Legislature  may look  at                                                               
that, but the  federal government will be  providing less revenue                                                               
for  transportation in  the  future so  it's  important to  start                                                               
planning for  that. This  is the  best way we  could think  of to                                                               
start that process, she said.                                                                                                   
                                                                                                                                
3:45:31 PM                                                                                                                    
MARK HICKEY,  representing himself,  stated that  he is  a former                                                               
commissioner of  transportation and he strongly  supports HJR 42.                                                               
He related  that he  has worked  on this measure  in one  form or                                                               
another  since the  mid '80s.  He  agreed with  the sponsor  that                                                               
Alaska had  this dedicated fund  at statehood; but when  the fuel                                                               
tax was  raised in the '60s  the Department of Law  (DOL) advised                                                               
that changing the rate of  taxation did away with the dedication.                                                               
Based on  that advice,  the accompanying  statute that  said that                                                               
these funds  shall be  used for highway  and harbor  purposes was                                                               
amended to say that the funds may be used for those purposes.                                                                   
                                                                                                                                
MR. HICKEY said that since that  time DOL's advice has been shown                                                               
to be  incorrect. In  fact, in  the mid 90s  the tobacco  tax was                                                               
increased in  the dedicated school  fund and that has  never been                                                               
challenged.  It's clear  that the  constitution  framers did  not                                                               
intend for  there to  be a  need for this  measure and  it's also                                                               
clear that the  Legislature in 1960 didn't intend as  a policy to                                                               
eliminate the  dedication, he said.  That Legislature  thought it                                                               
had no choice.                                                                                                                  
                                                                                                                                
MR. HICKEY  said changing the  constitution to allow  a dedicated                                                               
fund isn't done  lightly. To his knowledge the  permanent fund is                                                               
the only  one that's  been established  since statehood.  He said                                                               
that it's  been shown  that for  transportation there  are strong                                                               
arguments   in  favor   of  doing   this.  There   is  a   strong                                                               
understanding in the public that these  are user fees and that as                                                               
needs  increase there  may be  a need  to do  something different                                                               
with user fees. In the '90s  there was a proposal to increase the                                                               
fuel tax and the polling showed  that over 70 percent of Alaskans                                                               
supported an increase  if the funds were dedicated.  They did not                                                               
support the  increase without an  assurance that the  funds would                                                               
be used for transportation purposes.                                                                                            
                                                                                                                                
MR. HICKEY noted that Alaska is  the only state that doesn't have                                                               
a  state-funded  transportation  program. HJR  42  provides  that                                                               
ability. This would  be most helpful to small  rural projects and                                                               
would keep federal dollars for larger projects.                                                                                 
                                                                                                                                
Responding to  questions raised earlier,  he said  it's important                                                               
to  understand   that  the  fuel   tax  was  suspended   and  not                                                               
eliminated.  The   record  from  the   Constitutional  Convention                                                               
indicates that  if this measure  passes and then  the Legislature                                                               
eliminated the tax,  the dedication would be lost.  "I think it's                                                               
clear  from the  record that  a suspension  probably wouldn't  do                                                               
that," he said. Referring to  Senator Meyer's question he said he                                                               
believes that  the public  would support a  fuel tax  increase if                                                               
the funds were dedicated.                                                                                                       
                                                                                                                                
3:51:57 PM                                                                                                                    
SHIRLEY  MARQUARDT,   Mayor,  City   of  Unalaska;   Second  Vice                                                               
President,   Alaska  Municipal   league  (AML);   and  board   of                                                               
directors,  Southwest  Alaska   Municipal  Conference,  said  the                                                               
conference passed a resolution in  support of this type of stable                                                               
funding for  the infrastructure needs  across the state.  AML has                                                               
made this a top priority for  several years. She related that the                                                               
City  of Unalaska  has a  five-year  capital budget  plan and  if                                                               
funding  opportunities for  projects are  up  in the  air, it  is                                                               
extremely  risky  and potentially  expensive  to  go through  the                                                               
permitting and  design process. In  the past the city  have spent                                                               
over  $1  million on  design  for  roads  and then  not  received                                                               
funding, she said.                                                                                                              
                                                                                                                                
3:53:43 PM                                                                                                                    
KATHY  WASSERMAN, Alaska  Municipal  League  (AML), informed  the                                                               
committee about  of the caliber  of persons who were  involved in                                                               
the  study  that  the  sponsor  mentioned.  They  had  two  prior                                                               
commissioners of  transportation on  the study, which  was funded                                                               
by  AML,  the  Municipality  of Anchorage,  Mat-Su  Borough,  the                                                               
Alaska Truckers Association, and  the Alaska General Contractors,                                                               
she said.  This is  an issue  that has been  under work  for many                                                               
years and the people who  conducted the study were knowledgeable.                                                               
Everyone  who  has been  involved  with  these organizations  has                                                               
spent time  in Washington D.C. and  could see the writing  on the                                                               
wall a  couple of years  ago that Alaska  is in deep  trouble and                                                               
will be one of the states that suffers mightily.                                                                                
                                                                                                                                
3:55:04 PM                                                                                                                    
LOIS  EPSTIEN,  Alaska  licensed engineer  and  Director,  Alaska                                                               
Transportation Priorities Project (ATPP),  said ATPP works with a                                                               
wide variety of organizations  to promote sensible transportation                                                               
policies  in  Alaska.  ATTP   supports  addressing  the  upcoming                                                               
decline   in  federal   transportation   money   by  creating   a                                                               
transportation infrastructure fund. However,  the language in HJR
42  could mislead  the  public into  thinking  that only  capital                                                               
projects  would  be  covered  by the  fund.  ATPP  supports  this                                                               
legislation  if the  language is  amended to  clarify that  money                                                               
from the fund  could be used for major  maintenance projects, she                                                               
concluded.                                                                                                                      
                                                                                                                                
3:56:53 PM                                                                                                                    
DAVID  LEVY,  Executive   Director,  Alaska  Mobility  Coalition,                                                               
stated support  for HJR 42. He  said the mobility coalition  is a                                                               
private  nonprofit  that  advocates   for  public  and  community                                                               
transportation statewide.  He echoed the comments  of Mark Hickey                                                               
and described HJR  42 as a creative way to  deal with capital and                                                               
maintenance transportation challenges statewide.                                                                                
                                                                                                                                
3:58:27 PM                                                                                                                    
JOHN   MACKINNON,   Executive    Director,   Associated   General                                                               
Contractors of  Alaska (AGCA), said  AGCA, which  represents over                                                               
650  Alaska  businesses,  supports  HJR  42.  This  would  put  a                                                               
constitutional amendment  question before  the voters  to provide                                                               
dedicated revenue for a  transportation infrastructure fund. This                                                               
has been  a priority  of the  AGCA for many  years, he  said. The                                                               
proposed  fund  would  encompass   all  modes  of  transportation                                                               
infrastructure,  including maintenance.  The  collection of  fuel                                                               
taxes and  vehicle registration  fees directed  into the  fund is                                                               
commensurate to  a user-fee concept.  The public  understands and                                                               
can support user  fees as opposed to general  taxation going into                                                               
a general fund.  He restated support for the  legislation as well                                                               
as the amended language in the committee substitute.                                                                            
                                                                                                                                
3:59:54 PM                                                                                                                    
DAVE CRUZ,  President, Associated General Contractors  of Alaska,                                                               
stated full support  for HJR 42 as a step  in the right direction                                                               
for Alaska to take control of its destiny.                                                                                      
                                                                                                                                
4:00:27 PM                                                                                                                    
SENATOR PASKVAN  asked his  thoughts on  the suggestion  to amend                                                               
the language  to include maintenance  as opposed to  just capital                                                               
projects.                                                                                                                       
                                                                                                                                
MR. CRUZ expressed  the view that maintenance  should be included                                                               
as opposed  to building a road  with state funds and  then trying                                                               
to get federal funds to maintain it.                                                                                            
                                                                                                                                
SENATOR  MENARD   noted  that  the  suggestion   was  for  "major                                                               
maintenance" and asked if there  is a specific dollar amount over                                                               
which a maintenance project becomes a major maintenance project.                                                                
                                                                                                                                
4:01:34 PM                                                                                                                    
MR. CRUZ  declined to state  a threshold without  consulting with                                                               
members.                                                                                                                        
                                                                                                                                
4:02:13 PM                                                                                                                    
FRANK    RICHARDS,    Deputy    Commissioner,    Department    of                                                               
Transportation  and  Public  Facilities  (DOTPF)  explained  that                                                               
DOTPF is routinely funded for  major maintenance activities under                                                               
the  capital  program.  This includes  deferred  maintenance  and                                                               
major  bridge   maintenance.  Regular  maintenance   efforts  are                                                               
undertaken  under annual  operating costs.  He stated  the belief                                                               
that  it  was  the  intent  of the  sponsor  that  HJR  42  would                                                               
establish an infrastructure fund  for capital projects that would                                                               
include  major reconstructions,  major rehabilitation,  and other                                                               
major maintenance efforts.                                                                                                      
                                                                                                                                
SENATOR  MENARD  asked   what  would  be  included   in  a  minor                                                               
maintenance project.                                                                                                            
                                                                                                                                
MR. RICHARDS replied  those would be the things that  are done on                                                               
an annual  basis including sweeping streets,  sealing cracks, and                                                               
changing streetlight bulbs.                                                                                                     
                                                                                                                                
4:03:47 PM                                                                                                                    
SENATOR PASKVAN  said if he  would support amending  the language                                                               
to specifically include major maintenance.                                                                                      
                                                                                                                                
MR. RICHARDS  said he  believes that  it's a  policy call  by the                                                               
Legislature  that  in  the regular  annual  appropriations  DOTPF                                                               
normally receives  capital project  funds for  major maintenance.                                                               
The current language is sufficient.                                                                                             
                                                                                                                                
CHAIR  KOOKESH summarized  that  Mr. Richards  believes that  the                                                               
phrase "capital projects" on page  2, line 6, would include major                                                               
maintenance. He asked Representative Peggy Wilson to comment.                                                                   
                                                                                                                                
REPRESENTATIVE PEGGY  WILSON stated  her belief that  the current                                                               
language  is sufficient  to include  major  maintenance, but  she                                                               
wouldn't object to inserting "major  maintenance" on page 2, line                                                               
6, following  "transportation". If  it would reassure  the voters                                                               
it might be a good idea, she said.                                                                                              
                                                                                                                                
CHAIR  KOOKESH said,  based on  the testimony  from DOTPF,  he is                                                               
satisfied with the current language.                                                                                            
                                                                                                                                
SENATOR PASKVAN concurred.                                                                                                      
                                                                                                                                
CHAIR KOOKESH closed  public testimony and asked the  will of the                                                               
committee.                                                                                                                      
                                                                                                                                
4:07:26 PM                                                                                                                    
SENATOR PASKVAN  moved to  report Senate  CS for  CS for  HJR 42,                                                               
version  T, from  committee with  individual recommendations  and                                                               
attached  fiscal note(s).  There  being no  objection, SCS  CSHJR
42(TRA) moved from the Senate Transportation Standing Committee.                                                                
                                                                                                                                
There being  no further  business to  come before  the committee,                                                               
Chair Kookesh adjourned the meeting at 4:07 p.m.                                                                                

Document Name Date/Time Subjects