Legislature(2021 - 2022)BELTZ 105 (TSBldg)
03/09/2021 01:30 PM Senate TRANSPORTATION
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| Start | |
| SB74 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
| += | SB 74 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE TRANSPORTATION STANDING COMMITTEE
March 9, 2021
1:33 p.m.
MEMBERS PRESENT
Senator Robert Myers, Chair
Senator Mike Shower, Vice Chair
Senator Peter Micciche
Senator Jesse Kiehl
MEMBERS ABSENT
Senator Click Bishop
COMMITTEE CALENDAR
SENATE BILL NO. 74
"An Act providing for and relating to the issuance of general
obligation bonds for the purpose of paying the cost of state
infrastructure projects, including construction, communications,
major maintenance, public safety, and transportation projects;
and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 74
SHORT TITLE: G.O. BONDS: STATE INFRASTRUCTURE PROJECTS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/05/21 (S) READ THE FIRST TIME - REFERRALS
02/05/21 (S) TRA, FIN
02/25/21 (S) TRA AT 1:30 PM BELTZ 105 (TSBldg)
02/25/21 (S) -- MEETING CANCELED --
03/02/21 (S) TRA AT 1:30 PM BELTZ 105 (TSBldg)
03/02/21 (S) Heard & Held
03/02/21 (S) MINUTE(TRA)
03/09/21 (S) TRA AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
JOHN BINDER, Deputy Commissioner of Aviation
Executive Director
Alaska International Airport System
Department of Transportation and Public Facilities (DOTPF)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions on GO Bond
Airport Improvement Projects (AIP) in SB 74.
NEIL STEININGER, Director
Office of Management and Budget
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Presented a PowerPoint on SB 74, General
Obligation (GO) Bonds: State Infrastructure Projects.
BEN WHITE, Director
Division of Program Development and Statewide Planning
Department of Transportation and Public Facilities (DOTPF)
Juneau, Alaska
POSITION STATEMENT: Answered questions on GO Bond projects in SB
74.
CHRISTOPHER MCCONNELL, Director
Facilities & Campus Services
University of Alaska Anchorage (UAA)
Anchorage, Alaska
POSITION STATEMENT: Answered questions on GO Bond projects in SB
74.
CHERI LOWENSTEIN, Director
Division of Support Services
Department of Natural Resources (DNR)
Juneau, Alaska
POSITION STATEMENT: Answered questions on GO Bond projects in SB
74.
WILLIAM MILKS, Senior Assistant Attorney General
Legislation & Regulations Section
Administrative Services Division
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Answered questions on constitutional issues
related to GO Bonds in SB 74.
ACTION NARRATIVE
1:33:16 PM
CHAIR ROBERT MYERS called the Senate Transportation Standing
Committee meeting to order at 1:33 p.m. Present at the call to
order were Senators Kiehl, Shower, and Chair Myers. Senator
Micciche arrived shortly thereafter.
SB 74-G.O. BONDS: STATE INFRASTRUCTURE PROJECTS
1:33:51 PM
CHAIR MYERS announced the consideration of SENATE BILL NO. 74
"An Act providing for and relating to the issuance of general
obligation bonds for the purpose of paying the cost of state
infrastructure projects, including construction, communications,
major maintenance, public safety, and transportation projects;
and providing for an effective date."
1:35:19 PM
JOHN BINDER, Deputy Commissioner of Aviation; Executive
Director, Alaska International Airport System, Department of
Transportation and Public Facilities (DOTPF), Anchorage, Alaska,
stated that SB 74 uses generic language for the projects in the
capital project summary. He offered to speak to the projects
generally and provide a few examples. The department has
additional information on the projects. Overall, the Alaska
International Airport System is fairly built out throughout the
state, he said. It is very rare that the state has any new
airport construction projects.
1:36:04 PM
MR. BINDER stated that most of the airport projects are to
rehabilitate or reconstruct airport infrastructure. He described
three typical airport projects, detailing work at the Bethel,
Klawock, and Kotzebue Airports. Although the Bethel airport is
the second busiest airport in the state as it serves surrounding
villages, the main runway is dilapidated and needs complete
reconstruction. This project will require removing all the
pavement and reconstructing it, including repaving the
shoulders, lighting replacement and associated taxiway
construction. The Klawock Airport on Prince of Wales Island has
seen deplanements increase dramatically. To mitigate congestion,
the project consists of constructing a parallel runway to
increase safety and enlarge the parking apron. The Kotzebue
Airport needs its crosswind runway reconstructed, as well as
lighting replacement, dust palliative and removal of part of the
general aviation parking ramp to bring the airport into
compliance with FAA requirements.
1:39:05 PM
CHAIR MYERS pointed out that some projects include federal
match, such as the Kotzebue Airport project, but others do not.
He asked which airports receive match.
MR. BINDER responded that the state must provide about five to
six percent match for all airport projects. The discussions are
ongoing as to whether the bond bill could be used as a portion
of the match. However, the funding amounts listed in SB 74
represent only a small portion of the overall project cost. The
rest of the funding is derived from the federal Airport
Improvement Program (AIP) funds.
1:40:08 PM
CHAIR MYERS clarified that most or all projects in SB 74 could
theoretically have federal match.
MR. BINDER restated that all of the airports require a state
match to receive federal funding. However, none of the dollar
amounts fully cover the total project costs.
1:40:54 PM
SENATOR KIEHL referred to the airport projects for $3 million to
$4.25 million. He said if this represents 6 percent of the
project, the project costs would exceed the total cost of most
airports in Alaska. He asked if all the projects would use
federal funding or if some will be 100 percent GO Bond funding.
MR. BINDER responded that the bond request for the Bethel
Airport Project is $4.2 million. However, the overall project
cost is $35.7 million. The remaining $31 million will be
federally funded, he said. The state must pay the 5 percent
match and the $4.2 million covers the match. The Deadhorse
Airport project funding request is for $2.9 million. However,
the total project cost for the taxiway and drainage project is
$23 million. While the overall bond cost is small, it generally
will cover or be considered the match, he said.
1:42:28 PM
SENATOR SHOWER asked how the department will use any surplus GO
Bond funding.
MR. BINDER directed attention to the Bethel Airport project
request for $4.2 million. He said that any additional money over
the match will free up additional federal funding to allocate to
other capital projects. He characterized it as offsetting
federal dollars, which will make those funds available for other
projects.
1:43:41 PM
SENATOR MICCICHE asked how the excess GO bond funding will be
allocated to other projects and if he would identify the
specific projects.
MR. BINDER answered that the current total funding for airport
projects in SB 74 is $32 million, which means that $32 million
will be freed up for other airport projects. He explained that
DOTPF overprescribes its projects each year since some projects
will slip. Since the department cannot predict the specific
projects that will encounter problems, the department will not
allocate the $32 million to other projects until the funding
becomes available. He offered to provide the airport spending
plan to the committee and to identify several of the airport
projects that are next in line.
1:45:23 PM
SENATOR MICCICHE asked for any contingency placed on the
projects for the GO Bonds and the federal match. He explained
that the legislature appropriates funding to DOTPF. Sometimes
this funding does not directly connect to the projects the
legislature intended to fund. DOTPF must have internal reasons
for the reallocation of funds but it would be helpful to better
understand DOTPF's reasoning.
MR. BINDER responded that the department identifies specific
aviation projects to the legislature each year that will use
federal funding. He assured members that the GO Bond funding
will not fund additional projects outside these designated
projects. He offered to provide additional information to the
committee.
1:46:47 PM
SENATOR MICCICHE said he was struggling to understand this
process, which seems a little circular. He related his
understanding that DOTPF was requesting more GO Bond authority
for the 5 percent federal match than needed but it is not clear
where those excess funds will be spent. He related his
understanding that all the projects are not listed in the bill
even though DOTPF anticipates excess funding.
SENATOR KIEHL echoed Senator Micciche's concerns. The statutes
require that all GO Bond bills must identify for the voters the
specific projects being funded. He suggested that this raises
legal and constitutional concerns.
1:48:31 PM
MR. BINDER responded that if SB 74 does not pass, all the
projects listed in the bill will still go forward. These
projects are listed in the [Rural Airport System Airport
Improvement Program (AIP)] spending plan. The GO Bond funding
allocated to these projects means that $32 million in federal
dollars not required on these projects will flow over to the
next projects in the aviation program. He offered to provide the
five-year AIP spending plan, which identifies projects that are
ready to bid and construct. In addition, he offered to provide
five or so projects in the aviation spending plan that are the
likely ones to receive any excess funding.
1:49:38 PM
SENATOR SHOWER suggested that the GO Bond funding only shows a
small segment of the aviation plan. He asked him to identify the
overall spending plan so the committee better understands which
projects will be approved. He said there were multiple sources
of funding discussed at this hearing.
MR. BINDER offered to provide the information so the committee
can better understand the GO Bond proposal in SB 74.
1:50:57 PM
SENATOR MICCICHE asked members to consider the most efficient
use of unrestricted general fund (UGF) and the reasons for
issuing GO bonds. He highlighted that the department has 90
percent match for these projects so it might be better for the
department to use the normal process to fund them. Instead, the
department could prioritize the projects without such high
match. He acknowledged that SB 74 would fund projects scattered
throughout the state. However, these projects may not be the
best choice for the GO Bond proposal, he said.
1:52:04 PM
NEIL STEININGER, Director, Office of Management and Budget,
Office of the Governor, Juneau, Alaska, began a PowerPoint on SB
74, General Obligation (GO) Bonds: State Infrastructure
Projects. He offered to recap the process the administration
used to develop the GO Bond proposal. One goal was to provide
geographic distribution that would benefit Alaska communities.
Funding airport projects helps to reach that goal, he said.
Another goal was to identify projects in existing plans that for
a variety of reasons the state has not been able to fund. While
these projects will eventually be completed via the AIP spending
plan, advancing some of these airport projects now means the
department will not need to use general funds to complete them
in the future. Further, this allows DOTPF to potentially
leverage federal funding through airport match for future
capital budget federal appropriations to the AIP program. Using
GO Bonds gives the department a little more flexibility to
construct a portion of a larger project by using future funding
for projects in the AIP program, he said.
MR. STEININGER explained that including highway Statewide
Transportation Improvement Program (STIP) projects in SB 74
provides certainty to the construction industry by allowing the
industry to conduct advance planning for projects. He remarked
that advance planning really benefits the construction industry.
The administration included projects with federal funds to give
certainty to the STIP award in the future, he said.
MR. STEININGER summarized that the GO Bond proposal in SB 74
will address geographic distribution, the immediacy of some
projects, and future planning for other projects.
1:55:22 PM
SENATOR MICCICHE remarked that he covered the political and
project scheduling. He asked whether the 95 percent match rate
is the most efficient use of bond dollars or if the projects
should be ones that have a lower rate of federal match or no
match at all.
MR. STEININGER answered that some airport projects are eligible
for match and others are not, depending on how the projects fit
in the AIP program. He offered to identify which projects the
department believes are eligible for match in the existing AIP
federal appropriations and awards.
1:56:47 PM
CHAIR MYERS asked for specifics for the Cordova Airport project,
[State of Alaska Capital Project Summary, FY 2022 GO Bond]
reference number 63288.
MR. BINDER related that the Cordova Airport project was to
improve the airport fence and security installations to meet
Federal Aviation Administration (FAA) and Transportation
Security Administration (TSA) requirements.
MR. BINDER explained that the Deadhorse Airport funding was for
taxiway expansion and erosion. There's a shortage of lease lots,
so this project will also connect the airfield to the lease lot
areas. The Fairbanks Airport project is to reconstruct the
shorter runway, he said.
1:57:51 PM
CHAIR MYERS, after determining this project pertained to the
Fairbanks International Airport (FIA), related his understanding
that the FIA was effectively self-sustaining and did not require
additional funding. He asked why this project was included in
the GO bond proposal.
MR. BINDER responded that typically the Fairbanks and Anchorage
International Airport System (AIAS) capital improvements are
funded through their own rates and fees' structure.
CHAIR MYERS asked why the Fairbanks Airport would receive $1.9
million.
MR. BINDER deferred to Mr. Steininger.
MR. STEININGER explained that the administration identified
airport projects that could be moved forward. He acknowledged
that the Fairbanks International Airport's ability to bond
independently was not necessarily considered. He agreed that the
administration could consider alternative financing mechanisms
to fund specific projects and yet achieve the same goals.
1:59:49 PM
SENATOR SHOWER said he would like to see a broader list of the
airport projects. He offered his view that some projects were
included to achieve political goals. He would like confirmation
on project criteria.
MR. STEININGER asked for clarification that the question was to
identify when the projects were scheduled in the AIP and which
ones were pulled forward in the schedule.
SENATOR SHOWER agreed that was correct. He said this raises why,
when, what and where questions about the administration's GO
Bond proposal. He maintained that he would like to see the
broader picture.
MR. STEININGER offered to provide the information.
2:02:18 PM
MR. BINDER reviewed the remaining airport projects. The Homer
Airport project would completely rehabilitate the runaway and
taxiway including subsurface work. He stated that there are no
current projects for the Nome and Utqiagvik Airports, but these
airports do have capital needs. DOTPF will work with the region
and community to identify projects. Further, there is not a
current project for the Wasilla Airport, which is owned by the
city. DOTPF will work with the community to identify the airport
needs.
2:03:27 PM
CHAIR MYERS highlighted that the Wasilla Airport is located on
the road system about an hour's drive from the Anchorage
International Airport. He asked whether including this project
in the bond proposal was the best use of funds.
MR. BINDER responded that the Wasilla Airport is heavily used by
general aviation aircraft. Even though the Wasilla Airport is
near a larger airport, it must complete capital projects to
achieve compliance with FAA requirements.
2:04:56 PM
CHAIR MYERS referred to the eight Dalton Highway Repairs and
Upgrades, reference 63277. He asked for any overlap or duplicate
effort in the project as listed.
MR. STEININGER said the capital project summary sheet, with
reference numbers, draws the connection to the STIP. He deferred
to Mr. White to speak to various Dalton Highway repairs.
2:06:21 PM
BEN WHITE, Director, Division of Program Development and
Statewide Planning, Department of Transportation and Public
Facilities (DOTPF), Juneau, Alaska, stated that the STIP not
only identifies projects by milepost but also by phases. Some
projects may be in one or more phases, he said. For example, the
Dalton Highway project lists milepost 109-121 but it also lists
milepost 109-145. The milepost 109-145 is the parent project. A
smaller portion of the project, such as milepost 109-121, may be
constructed at a different time, he said.
2:07:24 PM
CHAIR MYERS reviewed the GO Bond Listing and Capital Project
Summary by project and reference number. The first project with
questions was the Hyder Float Breakwater Replacement, reference
number 63284.
2:08:04 PM
SENATOR KIEHL asked if the Hyder Float is owned by the state or
the municipality. He asked for the project status, whether the
permitting process was complete and if it was bid ready.
MR. STEININGER deferred to Mr. Binder.
MR. BINDER offered to research this and report back to the
committee.
2:08:59 PM
CHAIR MYERS turned to the Kenai Spur Road Improvements project,
reference number 63297.
2:09:09 PM
SENATOR KIEHL asked if this funding was for Phase 1 or Phase 2
of the project.
MR. WHITE explained that Phase 1 of the Kenai Spur Road
Improvements Replacement Project is for utility relocation and
Phase 2 was for construction of a 5-lane highway to increase
capacity and improve safety.
SENATOR KIEHL asked if both phases were ready to go out to bid.
MR. WHITE answered that the utility relocation is scheduled
prior to the 2021 construction season. However, the actual road
construction will begin next summer, he said.
2:10:26 PM
CHAIR MYERS turned to the Kodiak Chiniak Highway project,
reference 63281.
2:10:42 PM
SENATOR KIEHL stated that he reviewed the Statewide
Transportation Improvement Program (STIP). He related that this
bond request is for ten percent of the total the Kodiak Chiniak
Highway project cost of $23.6 million for the road
rehabilitation from milepost 5 to 21. He asked if the design
work was being funded with GO Bonds or if the funds were for
actual construction.
MR. WHITE offered his belief that the Chiniak Highway milepost 5
to 21 project is slated for construction in 2023.
2:11:56 PM
CHAIR MYERS turned to the Kotzebue Cape Blossom Road project,
reference 63304.
2:12:08 PM
SENATOR KIEHL related his understanding from the STIP that the
New Road Cape Blossom Road was in the permitting phase. He asked
if there was any local match. He said it also appeared from the
STIP as though there was an earmark. He asked for the project
status.
MR. WHITE answered that earmarks did not cover the entire
construction costs so the Kotzebue Cape Blossom Road project is
being constructed in phases. He reported that Phase 1 is ready
for construction and is scheduled to be completed in 2022. Phase
2, which is included in SB 74, is planned for construction in
2022 and 2023.
2:13:20 PM
SENATOR KIEHL asked whether the Kotzebue Cape Blossom Road
project is permitted for construction in 2022 and 2023. He noted
that delays can often occur during the permitting process.
MR. WHITE answered that DOTPF has completed its environmental
documents and permitting for Phase 1. He offered to research and
report back to the committee on the status of the permitting
process for Phase 2.
2:13:56 PM
CHAIR MYERS turned to the Municipal Harbor Facility Grant Fund
project, reference 49780. He asked whether the five harbors
listed are the ones that will receive the planned maintenance,
expansion, and replacement funding or if any new harbor projects
not listed will be funded instead.
MR. STEININGER responded that the intention is to fund the
projects currently on the Municipal Harbor Facility Grant Fund
list. He explained that the process OMB used is like the one the
Department of Education and Early Development Major Maintenance
Grant Fund uses to prioritize projects. He characterized the
development of the Municipal Harbor Facility Grant Fund list as
a robust process. This funding will give the department some
flexibility to fund additional projects if some projects come in
under budget. He said he was not certain how a new harbor
project would affect the list ranking.
2:16:03 PM
MR. WHITE explained that the Harbor Facility Grant Program was
created in 2006. The process for inclusion includes a call for
projects, scoring and evaluating them, and awarding contracts
based on project criteria. The last call for projects was a year
ago, he said. DOTPF plans to proceed with funding based on the
information provided in the GO bond bill proposals. DOTPF will
use the same process for this funding as it did for previous
Harbor Facility Grants.
2:16:51 PM
CHAIR MYERS asked whether DOTPF will have another round of
harbor applications related to this GO bond proposal.
MR. WHITE confirmed the department does not have any plans for
another round of applications.
2:17:20 PM
SENATOR MICCICHE asked whether the Harbor Facility Grant Fund
Program was established in 2006.
MR. WHITE answered yes.
SENATOR MICCICHE said he is familiar with the Harbor Facility
Grant Program. He stated that several harbor projects in SB 74
were selected outside of the Harbor Facility Grant Program list.
He asked why the administration did not simply increase the
grant fund and prioritize projects rather than to fund harbor
projects outside the standard process.
MR. WHITE deferred to Mr. Steininger.
2:18:50 PM
MR. STEININGER acknowledged that the Unalaska Harbor and Craig
Harbor projects were not on the Harbor Facility Grant Program
list but were separate requests for harbor needs. He was not
sure why these projects do not appear in the MHGF program list.
2:19:43 PM
SENATOR MICCICHE asked why the two projects were not on the
Harbor Facility Grant Program list.
MR. STEININGER offered to research this and report back to the
committee.
2:20:28 PM
CHAIR MYERS turned to the Nome Port Road Improvements project,
reference number 63305.
SENATOR KIEHL asked for the amount of the project because it
appears in the STIP at $6.5 million but the GO Bond request is
for $5 million.
MR. WHITE offered to research this and report back to the
committee.
2:21:13 PM
CHAIR MYERS referred to the Parks Highway Little Goldstream
Creek Bridge Replacement project, reference number 63306. He
asked if this project replaces the bridge at milepost 315 just
north of Nenana.
MR. WHITE answered that he believed that is correct.
2:21:44 PM
CHAIR MYERS referred to the Richardson Highway Milepost 117-151
Rehabilitation and Widening, and Milepost 268-343 Passing Lanes
project, reference number 63307. He said a significant portion
of the project was constructed in 2012. However, it appears that
this road section once again needs rehabilitation. He asked what
will be done during this project to ensure that this road will
last longer.
MR. WHITE answered that this project might be a more in-depth
reconstruction of the roadbed whereas the prior project may have
been limited to superficial paving. He offered to check with the
regional DOTPF office and report back to the committee.
2:23:33 PM
CHAIR MYERS turned to the Seward Highway Mile 76-81 project,
reference number 63278.
SENATOR MICCICHE asked if this project includes resurfacing. He
offered his view that the potholes in the area affect life
safety in Portage area.
MR. WHITE answered yes.
2:24:44 PM
CHAIR MYERS turned to the Sterling Highway Milepost 8-25
project, reference number 63302.
SENATOR KIEHL asked how many construction seasons this project
will span.
MR. WHITE offered that per the STIP the project is scheduled for
four construction seasons. However, he will confirm this.
SENATOR KIEHL said it seemed hard for the public to travel if
this project is accelerated with the GO Bond funding.
2:26:14 PM
SENATOR MICCICHE asked how this dovetails with the new
construction on the bypass highway.
MR. WHITE answered that this project is for new construction and
realignment of the Sterling Highway.
SENATOR MICCICHE said that will address Senator Kiehl's concern
because the project will remove a highway curve until it reaches
the realignment point and connects to the old highway.
MR. WHITE answered that is correct.
2:28:48 PM
SENATOR MICCICHE reverted to the Sterling Highway Miles 8-25
project, reference number 63279. He asked whether the bridge
construction was part of this project or if the bridge was in a
separate project.
MR. WHITE answered that the bridge was included in Stage 3 of
the Sterling Highway Miles 8-25 Project.
2:28:33 PM
CHAIR MYERS referred to the University of Alaska (UAA) Building
Energy Performance Upgrades project, reference number 45642. He
explained that it takes 36 years to recover the GO Bond costs.
He asked if this is the best funding method.
2:29:46 PM
CHRISTOPHER MCCONNELL, Director, Facilities & Campus Services,
University of Alaska Anchorage, Anchorage, Alaska, answered that
the energy savings were a conservative estimate. He stated that
some components, such as air handler units and boilers align
strategically with some of the more energy efficiency elements
such as LED lighting upgrades or pneumatic conversions. He
anticipated that the energy savings will be more comprehensive,
but the project also includes other components that are beyond
their useful life.
2:30:53 PM
CHAIR MYERS referred to the UAA Integrated Sciences Building
(CPISB) Combined Heat and Power Energy Savings Project,
reference number 62656. He stated the summary indicates that
this will reduce annual operating costs. He asked for the
current annual cost.
MR. MCCONNELL answered that the current operating costs are
estimated at $132,000 per year.
2:31:58 PM
CHAIR MYERS asked if members had any questions on the projects
discussed at the March 2, 2021, hearing.
2:32:07 PM
SENATOR KIEHL expressed an interest in the Department of Law
addressing the legal and constitutional issues.
2:32:32 PM
CHAIR MYERS stated that last year there were fewer wildfires in
Alaska. He recalled DNR commented that the money would be rolled
into firebreak maintenance. He asked how much funding will roll
over and if that would significantly reduce the need for GO Bond
funding for the Statewide Firebreak Construction Program,
reference number 62961.
2:33:36 PM
CHERI LOWENSTEIN, Director, Division of Support Services,
Department of Natural Resources, Juneau, Alaska, replied that
this funding typically comes from the preparedness budget. The
most that she has seen unspent is 100,000.
CHAIR MYERS clarified that the amount that was rolled over from
last year was 100,000.
MS. LOWENSTEIN offered to research this and report back to the
committee. She recalled that most of the prior year rollover
amounts were much smaller.
2:34:27 PM
CHAIR MYERS asked Mr. Milks to address constitutional questions
on GO Bonds.
2:34:55 PM
WILLIAM MILKS, Senior Assistant Attorney General, Legislation &
Regulations Section, Administrative Services Division,
Department of Law, Juneau, Alaska, related his understanding
that the committee would like to know what can and cannot be
funded through general obligation (GO) bonds. Article 9, Section
8, of the Alaska Constitution provides authority for GO Bonds,
which is basic bonding by a state or local government. Under the
GO bonding process, the legislature passes a bill to authorize
borrowing by issuing GO bonds for a certain purpose. The GO Bond
bill does not become effective unless the voters approve the
bond proposal. Voter approval is necessary because the state is
obligated to repay the bonds since its full faith and credit is
pledged. Article IX, Section 9 of the Alaska Constitution
authorizes general obligation bonds for limited purposes. The
purpose for SB 74 is capital improvements, he said.
2:37:32 PM
MR. MILKS reiterated that the committee would like to know what
can and cannot be funded by GO Bonds. The Alaska Supreme Court
applies a plain ordinary language interpretation of the words in
the Alaska Constitution.
MR. MILKS explained that two Alaska Supreme Court cases address
capital improvements. He said that the question relates to
"capital" and "improvements". The court ruled that "capital"
means some type of real or personal property asset. The court
gave a broad interpretation of an "improvement" to mean some
type of "betterment." In 1962, the Alaska Supreme Court heard
the City of Juneau v. Hixson case. The City of Juneau attempted
to issue $1 million in general obligation (GO) bonds to purchase
land and convey the land to the state for the purpose of
expanding its capital site. The Alaska Supreme Court ruled that
this was a land purchase and not a capital improvement; that
since the land would be conveyed, it would not be an asset for
the CBJ. Thus, there was no expectation from the state that it
would be used for the purpose it would be conveyed.
2:39:22 PM
MR. MILKS said in 1970, the Alaska Supreme Court considered
Wright v. City of Palmer. In that case, the Alaska Supreme Court
ruled that the City of Palmer could use GO Bonds to finance a
land purchase for the subsequent construction and manufacturing
of a processing facility because the City of Palmer will own a
tangible asset. The court said that the bond issue and the plan
of expenditure did not violate the capital improvement
requirement of the Alaska Constitution. Thus, the court
determined the proposed facility was a valid capital
improvement. In its decision, the court also cautioned against
reading the Hixson case so narrowly. The court struck down the
bond issue because no capital improvement would have resulted
from the expenditure of the proceeds. The vice in the Hixson
case was that raw land would have been acquired with the
proceeds and would then have been donated to the State of Alaska
as a proposed capitol site. As a result of the plan, the City of
Juneau would have been left with no tangible asset in place of
the indebtedness, he said.
2:40:16 PM
MR. MILKS said that those two cases generally describe capital
improvements and includes much of what the committee discussed
today, such as roads, bridges, harbor facilities, buildings,
schools, and libraries are considered capital improvements.
However, the court declined to provide a specific definition of
a capital improvement so a common ordinary understanding of
capital improvement would be used, which includes the examples
the court provided.
2:41:22 PM
SENATOR KIEHL highlighted that several projects in SB 74 have
issues under the definition of capital improvement projects
since they do not provide the state with any tangible assets.
For example, resource assessments, hazard assessments, resource
surveys and geology field work are functions that seem
problematic, he said. He related that several attorney general
opinions have been issued over the years that suggest that
ordinary building maintenance rather than building new
facilities or rebuilds would not be considered capital
improvements under the Alaska Constitution. In the late 70s, an
attorney general opinion applied a durability test. He recalled
that opinion ruled that trucks do not fit in the definition. He
asked for the rationale the Department of Law used to determine
how some of these projects qualify as capital projects under the
constitution.
2:41:54 PM
MR. MILKS referred members to the 1962 and 1970 Alaska Supreme
Court cases and common-sense language for guidance. In terms of
ordinary maintenance, the Alaska Supreme Court in the City of
Juneau case declined to provide a definition of capital
improvements. However, it was clear the court considered
"capital" and an "improvement" of that "capital" would qualify.
The Alaska Supreme Court cited a New Hampshire case that said
that one would apply an ordinary sense of a permanent
improvement or betterment as distinguished from ordinary repair
or routine maintenance. He offered his view that this concept
would still apply. He said this means capital improvements are
not routine maintenance or ordinary repair. However, the only
two cases that apply are quite old. In general, the court
intended that the state or local government had the ability to
use public finance to provide for improvements but the
improvements must be capital improvements.
2:44:52 PM
MR. MILKS turned to Senator Kiehl's reference to an attorney
general opinion issued in the late 70s that indicated a fire
truck and his view that this would not be a capital improvement.
He argued that this interpretation falls into a gray area based
on the language of the Alaska Constitution. This is an old
attorney general opinion but he reviewed it. He suggested going
back to the language in the Alaska Constitution. It certainly
could be argued that a fire truck is a capital asset.
MR. MILKS related his understanding that the administration's
goal was to identify projects for a general obligation (GO) Bond
proposal. The bill will go through the legislative process to
identify which projects will be part of the proposal. He agreed
that some projects in SB 74 fall in the gray area. He was unsure
whether a fire engine is a capital project but his colleagues 40
years ago did not think so.
2:46:54 PM
SENATOR KIEHL said he has perhaps stronger opinions than Mr.
Milks about some of the surveys, assessments, and field work as
capital improvements. He recalled the committee previously
touched on the specificity of the projects. He would like to
expand on it. He said that Title 24, Legislature and Lobbying
and Title 15, Elections, have requirements for GO Bonds to list
specific projects, specific locations, and specific dollar
amounts. Although he supports school major maintenance and
addressing these needs, it is difficult for voters to determine
the amount of funds and where those funds will be spent. He
expressed concern how the legislature can satisfy the law.
Further, SB 74 will essentially allow the commissioner of each
department to reallocate the GO Bond funds. This essentially
creates a slush fund, which does not appear to comply with Title
24 and Title 15, he said.
2:48:49 PM
MR. MILKS acknowledged that state law related to general
obligation bonds requires a brief description of each capital
project, the location, and the dollars that will be apportioned
from the total bond project. The committee has identified some
projects that need more detail and as this process moves
forward, more detail should be provided, he said. In terms of
reallocation of funds, SB 74 includes standard language used in
all general obligation bond bills that provides departments the
ability to reallocate between projects. He explained that this
language acknowledges that a specific project may use less funds
or something may arise that prevents the project from moving
forward. In those instances, the reallocation language allows
the commissioner to shift the funds to another project that is
identified within the allocation. This provides some flexibility
for administering the projects, he said.
2:51:17 PM
CHAIR MYERS related his understanding of the justification for
allowing reallocation between projects. He highlighted the
justification for the bill is that the state has shovel-ready
projects. However, if the projects are ready for construction,
the state should know the costs. He acknowledged that the need
for contingencies. However, the voters should know the project
costs and those costs should have some limits, he said.
MR. STEININGER agreed that even when a project is shovel ready,
the cost estimate might change or the project may not go
forward. The reallocation language allows for shifts in funding
when projects are under or over budget. He was unsure whether a
limitation for the amount of reallocation has ever been put in a
general obligation bond bill.
2:54:00 PM
CHAIR MYERS expressed concern that voters might vote to approve
a project in their district but the money could get shifted to a
project in another district.
2:54:59 PM
MR. STEININGER said that the administration proposed projects it
plans on moving forward. He characterized the contingency
language as language that allows some flexibility for
underbudget or overbudget situations.
[SB 74 was held in committee].
2:55:45 PM
There being no further business to come before the committee,
Chair Myers adjourned the Senate Transportation Standing
Committee meeting at 2:55 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB74 GO Bond Back-Up Packet.pdf |
STRA 3/9/2021 1:30:00 PM |
SB 74 |
| SB74 GO Bond Project Listing.pdf |
STRA 3/9/2021 1:30:00 PM |
SB 74 |