02/17/2022 01:30 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| SB170 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 170 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE TRANSPORTATION STANDING COMMITTEE
February 17, 2022
1:49 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. 170
"An Act relating to the Alaska marine highway system;
establishing the Alaska Marine Highway Corporation; and
providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 170
SHORT TITLE: MARINE HIGHWAY CORPORATION
SPONSOR(s): TRANSPORTATION
01/21/22 (S) READ THE FIRST TIME - REFERRALS
01/21/22 (S) TRA, L&C, FIN
02/17/22 (S) TRA AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
THERESA WOLSTAD, Staff
Senator Robert Myers
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of the committee, paraphrased the
sponsor statement, provided a sectional analysis, and presented
a PowerPoint on the Alaska Marine Highway Corporation
established in SB 170.
KATE SHEEHAN, Director
Personnel and Labor Relations
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Answered questions related to the State
Personnel Act during the hearing on SB 170.
WILLIAM MILKS, Chief Assistant Attorney General
Statewide Section Supervisor
Public Corporations & Governmental Services
Civil Division
Department of Law
Juneau, Alaska
POSITION STATEMENT: Answered legal questions during the
discussion of SB 170.
ACTION NARRATIVE
1:49:32 PM
CHAIR ROBERT MYERS called the Senate Transportation Standing
Committee meeting to order at 1:49 p.m. Present at the call to
order were Senators Kiehl, Micciche, Shower, and Chair Myers.
SB 170-MARINE HIGHWAY CORPORATION
1:50:10 PM
CHAIR MYERS announced the consideration of SENATE BILL NO. 170
"An Act relating to the Alaska marine highway system;
establishing the Alaska Marine Highway Corporation; and
providing for an effective date."
1:50:25 PM
THERESA WOLSTAD, Staff, Senator Robert Myers, Alaska State
Legislature, Juneau, Alaska, paraphrased the sponsor statement
for SB 170 on behalf of the committee.
[Original punctuation provided.]
The past few decades have highlighted systemic issues
that pose sustainability risks to the Alaska Marine
Highway System (AMHS), including funding uncertainty,
schedule instability, indirect labor negotiations,
equipment breakdowns, and periodic political changes.
The AMHS is a complex system in crisis that has had
multiple taskforces and workgroups from 1984 to 2020
evaluate management structure and business directives.
The 2020 Alaska Marine Highway Reshaping Workgroup
determined that management structure change was needed
and recommended strengthening AMHS governance,
renegotiation of marine union labor agreements, and
stabilizing budget planning. The 2017 AMHS Reform
Strategic Business and Operational Plan determined
that AMHS management needed to invest in long-term
planning and strategy and recommended transitioning to
a state public corporation.
1:52:29 PM
Without significant changes to the AMHS, coastal
communities may be left without essential marine
transportation services that connect Alaskans with
economic and service hubs and supporting the overall
transportation needs of the state. Senate Bill 170
would transition the AMHS into a public corporation
for the purposes of stabilizing the management
structure, foster greater alignment between management
and labor, and limit exposure to political influence.
While each public corporation is unique in its purpose
and powers as defined in statutes. As a public
corporation, AMHS could develop long-term vision,
foster stability and accountability, and develop fleet
and business operations in a strategic and efficient
manner.
1:53:13 PM
MS. WOLSTAD paraphrased the sectional analysis for SB 170 on
behalf of the committee.
[Original punctuation provided.]
Section 1: Establishes legislative findings and
purposes of the Alaska Marine Highway System
Corporation.
Section 2: Amends AS 12.05.020
Conforming language adding the corporation to state
jurisdiction for prosecution of offenses committed on
aircraft or ferries and other watercraft owned or
operated by the state.
Section 3: Amends AS 19.10.399(8)
Clarifying language regarding the definition of a
highway. Conforming language that removes "state" from
the Alaska state marine highway system.
1:53:43 PM
MS. WOLSTAD continued to paraphrase the sectional analysis
for SB 170 on behalf of the committee.
[Original punctuation provided.]
Section 4: Amends AS 23.05.360(f)
Adds the Alaska Marine Highway System Corporation Act
for administration of the Public Employment Relations
Act by the Alaska labor relations agency.
Section 5: Amends AS 23.05.370(a)
Establishes that the Alaska labor relations agency
shall serve at the request of the corporation as the
labor relations agency for the Alaska marine highway
system.
Section 6: Amends AS 23.40.040
Conforming language that authorizes the corporation
rather than the Department of Transportation to
negotiate and enter into collective bargaining
agreements with employees operating the state ferry
system as masters or members of the crews of vessels,
or with employee bargaining agents.
1:54:23 PM
Section 7: Amends AS 28.90.990(a)(15)
Clarifying language for the definition of a highway.
Conforming language that removes "state" from the
Alaska state marine highway system.
Section 8: Amends AS 29.35.722
Removes the Alaska marine highway system from the
prohibition of conveyance or transfer of ownership or
operation of certain state facilities without approval
of the state legislature.
Section 9: Amends AS 35.27.030(1)
Excludes vessels and boats of the Alaska marine
highway system in terms of art requirements for public
buildings and facilities.
Section 10: Amends AS 35.27.030
Clarifies the definitions of the Alaska marine highway
system and Alaska Marine Highway Corporation in terms
of art requirements for public buildings and
facilities.
1:55:01 PM
MS. WOLSTAD continued to paraphrase the sectional analysis
for SB 170 on behalf of the committee.
[Original punctuation provided.]
Section 11: Amends AS 36.30.990(1)
Conforming language of the state procurement code
definitions that adds the Alaska Marine Highway
Corporation and removes the Department of
Transportation in regards to the vessels, docking
facilities, passenger and vehicle transfer facilities
of the Alaska marine highway system.
Section 12: Amends AS 39.20.310
Conforming language that removes the Division of
Marine Transportation and state ferry and adds the
Alaska marine highway system and Alaska Marine Highway
Corporation regarding exceptions from provisions in AS
39.20.275, AS 39.20.200 39.20.330.
Section 13: Amends AS 39.25.110(16)
Conforming language that removes the Division of
Marine Transportation and adds the Alaska Marine
Highway Corporation regarding exempt service from
provisions of the State Personnel Act.
1:55:41 PM
Section 14: Amends AS 39.35.680(22)
Conforming language that removes the Division of
Marine Transportation, state ferry, and state; adds
the Alaska Marine Highway Corporation and Alaska
marine highway system to definitions of public
employees' retirement systems of Alaska.
Section 15: Amends AS 39.35.680
Conforming language that adds the definition of Alaska
Marine Highway Corporation as defined under its
establishing statute for public employees' retirement
systems of Alaska.
Section 16: Amends AS 39.50.200(b)
Adds the Alaska Marine Highway Corporation boards of
directors to the definition of state commissions or
boards for compliance with public official financial
disclosure requirements.
Section 17: Amends AS 42.
Adds a new chapter to AS 42. "Public Utilities and
Carriers and Energy Programs" titled Chapter 50.
Alaska Marine Highway System Corporation.
1:56:32 PM
MS. WOLSTAD continued to paraphrase the sectional analysis
for SB 170 on behalf of the committee.
[Original punctuation provided.]
• Article 1. Establishment and Organization (Sec.
42.50.010 - 42.50.060)
• Establishment of Alaska Marine Highway System
Corporation as a public corporation within the
Department of Commerce, Community, and Economic
Development.
• Establishes the board of directors, and defines
membership, terms of office, vacancies,
compensation and expenses, and board officers.
• Membership of the board of directors shall
include the commissioner of the Department of
Transportation and Public Facilities,
commissioner of Department of Commerce, and
five members appointed by the governor and
confirmed by the legislature.
• Public members of the board shall represent
three geographical regions and collectively
possess specified experience.
• Article 2. Management. (Sec. 42.50.100 - 42.50.120)
• Establishes the responsibilities of the board,
including management of financial and legal
obligations, adherence to accounting standards,
and development of comprehensive longterm plans
and corrective action reports.
• Establishes board authority to appoint
executive officers.
• Establishes board authority to delegate powers
and duties necessary for management of daily
affairs and operation of the corporation to
chief executive officer.
1:57:39 PM
• Article 3. Administrative Provisions. (Sec.
42.50.140 - 42.50.240)
• Establishes minimum schedule of once every
three months for board meetings, minimum of
four members for quorum, procedures for
adopting regulations, and clarifies the manner
of voting.
• Grants board authority to adopt, amend,
supplement, revise, or repeal regulations to
carry out its functions; and establish bylaws
for adoption of emergency regulations.
• Clarifies that corporation information is
public and establishes authority to designate
and withhold public disclosure of privileged or
proprietary information.
• Establishes that the corporation shall
establish a website that is accessible at
lowest internet website access speed used in
the state.
• Establishes that the corporation shall publish
notice of service schedules and changes for at
least 30 days on corporation website and allow
for public commentary.
1:58:27 PM
Article 4. Powers and Duties (Sec. 42.50.250 -
42.50.320)
• Defines the general powers of the Alaska Marine
Highway System Corporation.
• Establishes that the board shall have its
financial records audited annually.
• Requires the corporation to develop a
comprehensive long-range plan for the Alaska
marine highway system covering 30 years and
revised every five years.
• Requires the board to submit an annual
operations and performance report to the
governor, senate secretary, and chief clerk of
the house of representatives.
• Requires the board to submit travel and
compensation reports with the Department of
Administration annually.
• Clarifies use of assets by the Alaska Marine
Highway System Corporation.
• Establishes that the corporation may contract
with the Department of Transportation to
maintain and service motor vehicles.
• Clarifies and defines indemnity authority of
the corporation for current or former members
of the board, employees, and corporation
agents.
1:59:12 PM
MS. WOLSTAD continued to paraphrase the sectional analysis
for SB 170 on behalf of the committee.
[Original punctuation provided.]
• Article 5. Corporation Property. (Sec. 42.50.350 -
42.50.410
• Authorizes corporation to lease, grant
easements or permits for corporation property
use.
• Establishes that the corporation may sell or
acquire property in its own name, and exchange
lands; subject to terms and conditions.
• Confirms that the corporation may vacate an
easement by executing and filing a deed.
Senate.Transportation@akleg.gov
• Permits public use of corporation land upon
request of a municipality or the state as
authorized by corporation.
• Clarifies adverse possession and prescriptive
easements of corporation land.
1:59:49 PM
• Article 6. Financial Provisions. (Sec. 42.50.500 -
42.50.580)
• Clarifies the limitation of liability for the
corporation and allows the corporation to
purchase liability and casualty insurance.
• Establishes that the corporation may obtain
fidelity bonds.
• Establishes the Alaska marine highway system
operating fund, which consisting of money
appropriated by the legislature and gross
revenue generated from corporation operations.
• Corporation shall account for gross revenue
from operations each fiscal year.
• Establishes a revenue accounting fund that the
corporation shall account for gross revenue;
legislature may appropriate gross revenue
deposited in the fund to the Alaska marine
highway system operating fund.
• Establishes a separate account for vessel
maintenance and replacement within the Alaska
marine highway system operating fund.
• Corporation may request a direct appropriation
or grant from the legislature.
• State shall enter into a minimum service
assurance agreement that is subject to
appropriation each year.
• Corporation shall pay dividends to the state
general fund any amount by which the Alaska
marine highway system operating fund exceeds
projected costs of operation through the next
fiscal year.
2:01:06 PM
MS. WOLSTAD continued to paraphrase the sectional analysis
for SB 170 on behalf of the committee.
[Original punctuation provided.]
• Article 7. Bonds (Sec. 42.50.600 - 42.50.710)
• Establishes practices in which the corporation
may issue bonds by board resolution.
• Clarifies that issued bonds are available for
investment and that the principal of and interest
on bonds of the corporation are payable from
corporation money or assets.
• Bonds may be secured by a trust indentured at the
discretion of the board.
• Clarifies the security for bonds, validity of the
pledge of assets or revue, and remedies.
• State of Alaska and its political subdivisions
are not liable for the debts of the corporation.
• Bonds issued by the corporation are payable
solely from revenue or corporation assets.
• Establishes the validity of signatures appearing
on bonds and the pledges of assets or revenue of
the corporation.
• Clarifies corporation bond financing and state
pledges for securing bonds. Authorizes the
corporation to include the pledge and agreement
of the state insofar as it refers to holders of
bonds of the corporation.
• Establishes that the state are not liable for the
debts of the corporation; and clarifies the
personal liability or accountability due to
execution or issuance of bonds.
2:02:21 PM
MS. WOLSTAD continued to paraphrase the sectional analysis
for SB 170 on behalf of the committee.
[Original punctuation provided.]
• Article 8. Personnel and Labor Relations. (Sec.
42.50.720 - 42.50.740)
• Establishes restrictions on political
activities utilizing corporation money or
property.
• Clarifies that employees are employees of the
corporation and not of the state. However,
employees shall be treated as state employees
for purposes of AS 23.40 and AS 39.
• Corporation may negotiate and enter into
collective bargaining agreements with employees
engaged in operating the Alaska marine highway
system as masters or vessel crew members or
other employees of the corporation.
2:03:04 PM
• Article 9. Miscellaneous Provisions. (Sec. 42.50.800
- 42.50.850)
• Establishes that claims or lawsuits involving
activities of the corporation may not be
brought against the state, rather they shall be
brought against the corporation.
• Board shall name vessels or facilities and
vessels must bear the name of an Alaska
glacier.
• Assets, income, receipts, and other property of
the corporation are exempt from all taxes and
special assessments of the state or political
subdivisions of the state.
• Corporation shall provide free transportation
on vessels for members of the Alaska National
Guard, Alaska Naval Militia, or the Alaska
State Defense Force who is enroute to official
activities to the extent that space is
available.
• Vessels owned by the corporation shall be
maintained and repaired at a shipyard facility
located in the state.
• Exceptions include if the board determines in
writing that no shipyard facilities located in
the state are equipped or qualitied to perform
maintenance or repair; or after taking into
consideration the five percent preference under
AS 36.30.321(a) and the interport differential,
that the proposed cost is unreasonable.
2:04:22 PM
• Clarifies that competitive bid provisions of AS
36.30 does not apply to a contract for
maintenance or repair of marine vessels owned
by the corporation if the contract is awarded
to a shipyard facility in the state.
• Board shall adopt regulations to establish
criteria to determine whether cost of
maintenance or repair work is reasonable, and
criteria used in calculating interport
differential.
• Designated base port for marine vessels
primarily serving east of Icy Cape is Ketchikan
and Seward for vessels primarily serving the
remainder of the state.
• Establishes following laws do not apply to
corporation unless otherwise specified.
• AS 30.15, AS 35, AS 37.10.085, AS 38, AS
44.62.010-44.62.160, AS 44.62.180- 44.62.305,
and AS 44.62.320.
• Article 10. General Provisions. (Sec. 42.50.990 -
42.50.995)
• Provides clarifying language and definitions
for the act.
• Establishes the short title for AS 42. 50 as
Alaska Marine Highway Corporation Act
Section 18. Amends AS 43.40.010.
Adds a new subsection establishing that the
legislature may appropriate funds from the special
highway fuel tax account to the Alaska marine highway
system operating fund for expenditure by the Alaska
Marine Highway Corporation.
Section 19. Amends AS 44.19.027
Conforming language that changes the Alaska Marine
Highway System to Alaska Marine Highway System
Corporation regarding emergency assistance
transportation.
Section 20. Amends AS 44.29.300(a)
Conforming language regarding Statewide Suicide
Prevention Council membership in terms of rural
community connectivity to the main road system or the
Alaska marine highway system.
Section 21. Amends AS 44.33.010
Adds membership on the board of directors
2:06:38 PM
Section 22. Amends AS 44.42.020(a)
Clarifies that the Department of Transportation has
authority over state modes of transportation and
transportation facilities except for the Alaska marine
highway system. Establishes that the department shall
incorporate the corporation's comprehensive long-term
plan under AS 42.50.270 into the department's
comprehensive, long-range, intermodal transportation
plan.
Section 23. Amends AS 44.42.020
Defines marine highway system in terms of Department
of Transportation powers and duties.
Section 24. Amends AS 44.99.030(a)
Adds the Alaska Marine Highway Corporation to the list
of state government agencies and public corporations
prohibited from forming contracts to lobby the state,
municipality of the state, or agency of the state or
municipality.
2:07:18 PM
MS. WOLSTAD said she would not go into the details of the
repealed statutes in Section 25, but noted the specific statutes
being repealed are listed.
Section 25. Repeals the following language regarding
Alaska Marine Highway System.
• Chapter 65. Alaska Marine Highway System.
• Article 1. Comprehensive Plan, Vessels, and
Facilities.
• AS 19.65.011: Comprehensive long-range plan.
• AS 19.65.020: Naming of vessel or facility.
• AS 19.65.030: Acquisition and maintenance of
ferry terminal facilities.
• AS 19.65.035: Transportation of members of the
Alaska organized militia.
• Article 2. Alaska Marine Highway System Fund and
Budget.
• AS 19.65.050: Legislative findings, purpose,
and intent.
• AS 19.65.060: Alaska marine highway system fund
• AS 19.65.070: Revenue accounting.
• AS 19.65.080: Annual appropriation.
• AS 19.65.100: Definitions.
• Article 3. Alaska Marine Transportation Advisory
Board.
• AS 19.65.110: Alaska Marine Transportation
Advisory Board.
• AS 19.65.120: Board composition.
• AS 19.65.130: Officers and quorum.
• AS 19.65.140: Meetings.
• AS 19.65.150: Per diem and expenses.
• AS 19.65.160: Records.
• AS 19.65.170: Legal assistance.
• AS 19.65.180: Powers, duties, and functions.
• AS 19.65.190: Staff.
• AS 19.65.195: Definition.
• Title 35. Public Buildings, Works, and Improvements;
Chapter 10. Public Works.
• AS 35.10.015 (c), (d), and (g). Accessibility
of public buildings and facilities.
• Title 36. Public Contracts; Chapter 30. State
Procurement Code.
• AS 36.30.850 (b)(28): Application of this
chapter.
• Title 36. Public Contracts; Chapter 36. Miscellaneous
Provisions.
• AS 36.90.049: Maintenance of state marine
vessels
• Title 37. Public Finance; Chapter 5. Fiscal Procedures
Act.
• AS 37.05.550: Alaska marine highway system
vessel replacement fund
2:07:32 PM
MS. WOLSTAD continued to paraphrase the sectional analysis
for SB 170 on behalf of the committee.
[Original punctuation provided.]
Section 26. Transition language, initial board
members.
Not later than 90 days after the effective date of AS
42.50; the governor shall appoint the initial board of
directors members of the Alaska Marine Highway
Corporation in staggered terms.
Section 27. Transition language, initial appointment
and delegation of powers and duties.
Board of directors of the Alaska Marine Highway
Corporation shall appoint and delegate the chief
executive officer the powers and duties at the first
board meeting.
Section 28. Transition language, initial regulations
and orders and management employees.
Within the first 120 days, the board of directors
shall adopt initial operational regulations of the
Alaska Marine Highway Corporation and the Alaska
marine highway system. Regulations and orders in
effect at date of transfer may remain in effect until
amended or repealed by the board as provided by a
resolution. Authorizes corporation to hire employees
for management of the corporation before its operation
of the Alaska marine highway system begins.
Section 29. Transition language, department
negotiation, nonrenewal, and termination of collective
bargaining agreements. Establishes that the department
shall enter negotiations with a union to assign the
state's interest in the collective bargaining
agreement with the union to the corporation.
• When the department and union reach an agreement,
the state shall assign the state's interest in
the collective bargaining agreement to the
corporation.
• If by June 30th, 2023, the department and a union
cannot reach an agreement on assignment, the
department shall terminate the collective
bargaining agreement at the time and in a manner
provided under the collective bargaining
agreement.
Union contracts between the department and a
union that is assigned to the corporation shall
expire not later than two years from the
effective date of the act.
• Defines unions for this section as the following:
• International Organization of Masters,
Mates, and Pilots
• Marine Engineers Beneficial Association
• Inlandboatmen's Union representing the
Unlicensed Marine Unit
• Alaska State Employees Association
• Alaska Public Employees Association
2:09:47 PM
Section 30. Transition language, corporation
negotiation of collective bargaining agreements.
Authorizes the corporation to negotiate and enter into
a collective bargaining agreement with a union once
the following has been met.
• Board of directors has been appointed.
• Chief executive officer has been appointed and
powers delegated.
• Board of directors has adopted regulations.
• Department has been assigned an agreement with
a union to the corporation, and the agreement
has later been terminated or agreement with the
union has been terminated. Ascertains that the
corporation may negotiate and enter into labor
agreements with unions and individual employees
before the corporation begins operation, if the
agreements have an effective date that is not
earlier than July 1st, 2023.
Section 31. Transition language, transfer of assets;
assumption of rights, liabilities, and obligations.
Department of Transportation shall transfer to the
corporation the vessels, ferry port facilities, real
property, vehicles, and other personal property used
for the Alaska marine highway system. The corporation
shall take title in its own name; and shall assume all
rights, liabilities, and obligations of Alaska marine
highway system.
Section 32. Transition language, operation of marine
highway system by the corporation.
Establishes that the Alaska Marine Highway Corporation
shall begin operating the Alaska marine highway system
on July 1st, 2023.
Section 33. Transition language, miscellaneous
provisions.
Clarifies and defines the transfer of all contracts,
rights, liabilities, bonds, notes, or other
obligations of the Alaska marine highway system as
operated by the Department of Transportation to the
Alaska Marine Highway Corporation Act.
2:11:29 PM
Section 34. Transition provision, report of
transferred assets.
Department of Transportation shall prepare or direct
the preparation of all necessary financial reports of
the assets to be transferred by the department as
described under Section 31 of this Act.
Section 35. Transition, initial reports.
Corporation shall file its first operations and
performance report within 90 days following the end of
its second fiscal year. The corporation shall file its
first travel and compensation report with Department
of Administration by January 21st of the third
calendar year after this Act takes effect.
Section 36. Transition, initial audit.
Board of directors of the corporation shall have the
first audit performed after the second fiscal year of
the corporation, covering the first and second fiscal
years.
Section 37. Conditional effect, notification.
Establishes that Section 14 of this Act, takes effect
only if commissioner of Commerce notified the revisor
of statutes in writing of the date in which the
Department of Transportation has assigned the state's
interest in the collective bargaining agreement to the
Alaska Marine Highway Corporation under section 29 of
this act. Unions defined in section 29 of the act
include the following:
• International Organization of Masters, Mates, and
Pilots
• Marine Engineers Beneficial Association
• Inlandboatmen's Union representing the Unlicensed
Marine Unit
• Alaska State Employees Association
• Alaska Public Employees Association
2:12:51 PM
Section 38. Conditional effect.
Establishes that if section 13 of this Act takes
effect under section 37 of this Act, it will take
effect the day after the date the commissioner of
Commerce notified the revisors of statutes.
Section 39. Effective date.
Except as provided in Section 38, this Act takes
effect immediately.
2:13:14 PM
CHAIR MYERS asked if members had questions.
2:13:34 PM
SENATOR SHOWER related his understanding that this bill would
essentially transfer the Alaska Marine Highway System (AMHS)
from the Department of Transportation and Public Facilities
(DOTPF) and create a corporation in the Department of Commerce,
Community and Economic Development (DCCED). He asked whether the
board or someone else would be responsible for collective
bargaining with AMHS's employees.
2:14:22 PM
MS. WOLSTAD answered that collective bargaining would be under
the Alaska Marine Highway Corporation's board, but the board
could consult with the Department of Administration (DOA).
2:14:35 PM
SENATOR SHOWER asked if the last year's board would be absorbed
in the process or if it would be separately maintained.
2:14:50 PM
CHAIR MYERS asked whether he was referring to the Alaska Marine
Highway Operations Board (AMHOB).
SENATOR SHOWER answered yes.
CHAIR MYERS stated that SB 170 would repeal AMHOB.
2:14:59 PM
SENATOR SHOWER asked whether the department would be required to
use the competitive bid process for in-state purchasing.
2:15:24 PM
MS. WOLSTAD responded that she believed so but offered to
confirm the competitive bid processes and report back to the
committee.
2:15:37 PM
MS. WOLSTAD presented a PowerPoint, SB 170 Alaska Marine Highway
Corporation, on behalf of the sponsor.
2:16:04 PM
MS. WOLSTAD reviewed slide 2, Complex System in Crisis.
• Past few decades have highlighted systemic issues that
pose sustainability risks.
• Funding uncertainty and schedule instability.
• Short-term operational and fiscal planning horizon.
• Exposure to political influence over operational
decisions and procurement.
• Equipment breakdowns of an aging fleet.
• Cumbersome procurement processes.
• Lack of a unified management authority.
• Frequent turnover in senior leadership positions.
• Indirect labor negotiations.
MS. WOLSTAD emphasized this list of issues was identified as
causing problems in the ferry system, having cropped up over and
over again since the 1980s.
2:16:53 PM
MS. WOLSTAD reviewed slide 3, Multiple Studies Recommend
Modifying System Governance.
• 1984 Alaska Marine Highway System Taskforce.
• Determination: Management structure change
is needed to provide business directive and
success.
• 2017 Alaska Marine Highway System Reform
Strategic Business and Operational Plan
• Determination: Management needs to invest
in long-term planning and strategy.
• Recommended transitioning to a state public
corporation.
• 2020 Alaska Marine Highway Reshaping Workgroup.
• Determination: Management structure change
is needed.
• Recommended establishment of a new AMHS
operation and planning board.
• If current challenges persist after
recommended changes are implemented; a
public corporation may be more desirable and
feasible in the future.
MS. WOLSTAD stated this led the sponsor to consider a marine
highway system corporation structure. The sponsor often reviewed
the Alaska Railroad Corporation (ARRC) structure.
2:17:40 PM
MS. WOLSTAD reviewed slide 4, Powers and Authorities Granted in
Alaska Statute to Public Corporations of the State of Alaska.
This slide consisted of a chart showing the powers and
authorities of the Alaska Aerospace Corporation (AAC), Alaska
Housing Finance Corporation (AHFC), Alaska Railroad Corporation
(ARRC), Alaska Industrial Development Corporation and Export
Authority and the proposed Alaska Marine Highway Corporation.
MS. WOLSTAD stated that the proposed AMHC Housing Department
would be under DCCED and have a structure similar to the Alaska
Railroad. She briefly reviewed the power and authority of the
proposed AMHC, including the authority to issue contracts,
create its reserve fund, and establish bylaws and regulations.
She pointed out that Alaska has many corporations, and AMHC
would mesh with some of them.
2:18:40 PM
MS. WOLSTAD reviewed slide 5, Benefits of State-Owned Public
Corporation.
• Diverse Board of Director expertise.
• Infusion of private sector expertise.
• Provide consistent leadership and less exposure to
political influence.
• Structure service levels and rates to reflect
Alaska's transportation needs.
• Strategically poised to capture opportunities
resulting from public-private partnerships
onboard and in the terminals.
• Develop fleet and business operations in a strategic
and efficient manner.
• Provide essential marine transportation services,
connect coastal communities with economic and
service hubs and supporting transportation needs
of the state.
• Provide for continuity of operations and public
accountability.
MS. WOLSTAD highlighted that the emphasis was to support
transportation needs for the entire state, not just Southeast
Alaska but allowing the connection between the road system and
many Southwest and Southcentral communities. In addition, the
goal is also to provide more transparent procedures and
management of the ferry systems.
2:20:01 PM
MS. WOLSTAD reviewed slide 6, Benefits of State-Owned Public
Corporation.
• Provide greater latitude to control costs and enhance
revenue
• Operating as a public corporation preserves
access to federal capital funds and other
financial advantages of government ownership and
operation.
• Develop forward funding to take advantage of
diverse revenue opportunities and establish
scheduling certainty.
• Exemption from State Personnel Act
• Allows corporation to negotiate directly with
labor unions and provide opportunity to align
labor and management interests and reduce labor
costs strategically.
• Exemption from State Procurement Act
• Allows expedited purchases of equipment and
services that better fit the needs of the
transportation system.
2:21:09 PM
MS. WOLSTAD reviewed slide 7, Minimum Service Assurance
Agreement.
• State shall enter into an assurance agreement that is
subject to appropriation each year with the
corporation. (Sec. 42.50.570)
• Nothing prevents the state and corporation from
signing assurance agreements beyond the minimum
level, as subject to appropriation.
• Agreement must assure that cost of each sailing is
reimbursed if ticket sales are insufficient to
generate adequate revenue.
• Corporation and state shall agree to the assured
amount for each sailing by determining the direct
cost of fuel and labor, plus a prorated amount
for overhead and maintenance.
• Rates for tickets on guaranteed sailings must be
set so that ticket revenues would cover the
assured amount of each sailing if 80% of all
tickets for that sailing are sold.
2:22:08 PM
SENATOR SHOWER recalled lengthy discussions about private-sector
companies providing service based on operational costs and
capacity. He emphasized that private airlines do not offer jet
service to most small communities like Hoonah because it is cost
prohibitive. However, the state provides ferry service without
having sufficient passenger capacity. He asked whether the
corporation would have more flexibility to use its assets
efficiently and address union contracts for the ferry system.
2:23:06 PM
CHAIR MYERS acknowledged limiting factors for the AMHS,
including union contracts and the current vessel fleet. Still,
the goal of SB 170 would be to provide the Board of Directors
(Board) of the Alaska Marine Highway Corporation (AMHC) with as
much flexibility as possible for scheduling and creating
efficiencies, including determining the vessels for mainline and
community runs. He recognized that specific routes might break
even, and the system as a whole will need subsidies; hence, the
need for assurance contracts.
2:24:14 PM
SENATOR SHOWER asked how SB 170 would affect contract
negotiations. He acknowledged that personnel costs represent a
substantial amount of the AMHS operating costs. He asked whether
this bill would force a reset or if the prior contracts would
apply until the next collective bargaining session. He wondered
if the corporation would use the current model or develop a new
one.
CHAIR MYERS answered that the current contracts would terminate
upon passage of the bill. Based on discussions with union
representatives, the unions would prefer to allow the current
three-year contracts to remain in effect. He noted he could see
benefits using either option, but he hoped the committee would
have the opportunity to discuss union contracts.
2:25:59 PM
SENATOR KIEHL asked about the elements in the bill that would
provide stability for management. He recalled the presentation
highlighted that the system has suffered with changes in
administration since their priorities changed. He further asked
whether board members could be removed for cause.
2:26:46 PM
MS. WOLSTAD asked whether the question was related to the
removal of board members for inappropriate actions.
SENATOR KIEHL clarified that his question was whether board
members serve at the governor's pleasure or if board members are
subject to removal for cause, more akin to the Alaska Oil and
Gas Conservation Commission structure. He further asked for a
broad sense of how the corporation would stabilize management
across administrations.
2:27:34 PM
CHAIR MYERS referred to page 10, line 23, which states that
board members can be removed for cause. He related that the
governor would appoint board members to serve staggered five-
year terms unless they resign or are removed for cause. However,
board members do not serve at the governor's pleasure.
2:28:07 PM
MS. WOLSTAD said working group members highlighted some fiscal
year issues that arose, including that the system's annual
revenue for a fiscal year must be used or it will lapse. In
addition, the fiscal year ends in the middle of the AMHS's busy
season. One provision in SB 170 would allow the corporation to
set the fiscal year. It would also establish that funds
appropriated to the operations fund do not lapse, so revenue can
rollover without being reappropriated. She stated this would
help provide fiscal stability. Further, the unions appreciated
one aspect of the corporation that allowed for more direct labor
negotiations.
2:29:31 PM
CHAIR MYERS emphasized the goal was to provide the corporation
as much control over the fund as possible to achieve stability
for the system. He acknowledged that the Alaska Marine Highway
Corporation would not have as much flexibility and control as
the Alaska Railroad Corporation (ARRC), but that was because the
railroad originated at the federal level before its ownership
was transferred to the state.
2:30:09 PM
SENATOR SHOWER recalled previous discussions on the bifurcation
of land and sea, such that DOTPF would continue to maintain the
land assets, including docks and buildings. One problem AMHS
currently encounters is the difficulty of managing its system
operations at sea, but also its land assets. He asked if the
functions could be divided between DOTPF and the corporation. He
asked for clarity on the corporation's ability to use its
proceeds and profits, including whether the board could invest
in new vessels.
2:31:03 PM
MS. WOLSTAD responded that the legislature would appropriate
AMHC gross proceeds into an operations' fund. The legislature
could appropriate funds being generated to the operations' fund
and avoid a sweep at the end of the fiscal year.
SENATOR SHOWER asked whether DOTPF would retain land and
buildings and the new entity would manage the ferry system under
the bill.
MS. WOLSTAD answered that the bill currently transfers all
AMHS's assets from DOTPF to the corporation, including the ferry
terminals, roadways, and trucks. Retaining land assets would
avoid the awkwardness of the corporation from needing to obtain
permission to use the ferry terminal or other assets. She said
it would remove some bureaucracy in managing the assets while
streamlining the process.
2:32:50 PM
SENATOR MICCICHE related his understanding that SB 170 would
transfer AMHS into a professionally-operated corporation.
However, the bill micromanages the corporation. He referred to
Sec. 42.50.570 related to minimum service assurance agreements
from the state. He asked why SB 170 doesn't allow the corporate
management the freedom to find better solutions for some of the
ferry runs. He pointed out that the state doesn't dictate to the
Alaska Railroad Corporation who it will serve or how often. He
said he understood the goal was to reduce impact to communities
served, but there may be better options for those communities
going forward.
2:34:25 PM
CHAIR MYERS responded that as sponsor, he was trying to balance
business questions, what might be most efficient with what is
politically possible or necessary. He viewed Sec. 42.50.570 as
constraining the state not the corporation. The contract does
not tell the corporation it must make this sailing. Instead, it
requires the state to contract with the corporation for ferry
service. The minimum service assurance agreements provide a
rough outline of what must be in the contract. He anticipated
that larger communities would have more ferry service per week
per month, and smaller ones would have fewer runs. For example,
the communities might assess the service it received last year
to decide whether that service was sufficient. Based on new
circumstances, the communities might decide to add or reduce
ferry service.
2:36:19 PM
SENATOR MICCICHE referred to the language on page 25, line 20
"sailings a year." He expressed concern over limiting a
professionally-managed board instead of allowing it to find the
best options. He read [lines 4-5 of subsection (b)]"...must
assure that the cost of each sailing is reimbursed ...." He
asked why it reads "each" because some sailings might be
preparing for service to another section of the system,
purposefully be set low to compensate for the offseason. He
offered his view that would limit the corporation.
CHAIR MYERS said he held discussions with the department on
tariffs. He acknowledged that this is the first draft of the
bill, meant to present a rough sketch of the corporation, so
this language probably needs further massaging. He has been
considering a number of ideas as he prepared for this initial
hearing.
2:38:27 PM
SENATOR MICCICHE referred to page 26, lines 15-18, Sec.
42.50.580. Dividends to the state. He stated this might set up a
situation where the corporation has two to three good years and
then COVID-19 2028 or Northern Hemisphere Ebola comes along. He
expressed concern that requiring a dividend when funds exceed
the projected cost potentially would set up a roller coaster
effect requiring additional appropriation in one year, then
providing a dividend in the next. He envisioned that setting up
a corporation with trusted appointees should establish an amount
or percentage of annual operating costs, and anything above that
would go to the state. He said he liked the concept but viewed
this as too heavy-handed. He favored placing more trust in a
professionally-managed corporation.
2:40:02 PM
CHAIR MYERS expressed his willingness to consider changes to the
bill. He pointed out that the bill would set up separate funds
to provide vessel maintenance and replacement funding. The
corporation would not deposit all its funds to the state in good
years since it would retain funds for long-term planning. He
acknowledged the potential roller-coaster nature of the fund. He
explained that the initial draft provides the framework to
discuss dividends because many state corporations provide
dividends back to the state, including the Alaska Housing
Finance Corporation (AHFC) and Alaska Industrial Development
Corporation (AIDEA).
2:41:04 PM
SENATOR KIEHL related that other public corporations have
funding sources. He stated that the Alaska Railroad Corporation
(ARRC) receives federal railroad funds, and AHFC receives
special mortgage banking provisions to allow them to make money.
One thing that the Alaska Marine Highway Corporation (AMHC)
would need is federal transportation funding. He stated that the
Infrastructure Investment and Jobs Act would provide five years
of tremendous funding. Typically, the State Transportation
Improvement Program (STIP) provides funding for routine vessel
replacement, overhaul, and significant terminal repairs. He
expressed concern that putting the corporation outside of DOTPF
could add an extra challenge to get Alaska's needs included in
the STIP.
2:43:19 PM
CHAIR MYERS answered that the decision to place the corporation
in DCCED recognized that DOTPF has not been the best manager for
AMHS. Other corporations are housed in DCCED, including the
Alaska Railroad Corporation (ARRC) and Alaska Industrial
Development Corporation. He stated that placing the corporation
in DCCED recognizes the department understands the corporate
culture and environment that fosters entrepreneurial and
business-oriented decisions. He deferred the federal
infrastructure question to Ms. Wolstad. He also said he held
discussions with the US Department of Commerce and the
Congressional Delegation on federal funding.
MS. WOLSTAD answered that AMHC would act similarly to ARRC,
which is a designated recipient of the Federal Transit
Administration Formula Funds, not a sub-recipient through the US
Department of Transportation. ARRC receives its funding
directly. She pointed out that ARRC is housed within DCCED, just
as AMHC would be under SB 170. AMHC would apply directly for
federal funds and would have access to the grant under the
Bipartisan Infrastructure Law, also known as the Infrastructure
Investment and Jobs Act (IIJA), through its designated-recipient
status. In addition, AMHC would have the ability to apply for
other competitive grant program funding as a designated
recipient. The federal government would verify AMHC's ability to
do revenue accounting.
2:46:03 PM
SENATOR KIEHL acknowledged that IIJA funds would give the state
a window to transform AMHS, but it will only last for five
years. Once that passes, AMHS will not be a designated-direct
beneficiary of federal STIP funds. He acknowledged that ferry
funding and National Highway System (NHS) funds come through
DOTPF. He assumed that was why the bill requires the department
to work with the corporation on the STIP preparation. However,
DOTPF also manages the Community Transportation Program (CTP)
that falls under the STIP. This program allows communities to
use federal funding on municipal roads.
2:47:32 PM
SENATOR MICCICHE pointed out that the legislature is the
appropriating body, so it should share the responsibility for
prioritizing funding for AMHS. He was unsure it was fair to say
that DOTPF had neglected the system. He acknowledged that an
independent corporation might be helpful. He related that
federal funding currently recognizes unpaved highways that could
lead to an annual appropriation similar to STIP funding.
2:49:12 PM
MS. WOLSTAD reported that most of the IIJA funding for ferries
is for a period to be determined. However, the American Marine
Highway Program (AMHP) competitive grant under the US Department
of Transportation Marine Administration will be available for 10
years. It would apply to designated marine highway projects to
expand service options and facilitate integration with the
current US infrastructure port systems. One grant, the Water-
based Transportation for Sustainability to Highways grant, will
assist in integrating the ferry system with the road system for
ten years. This means everything doesn't need to be done
immediately.
2:50:28 PM
SENATOR SHOWER stated that issues arise with the Department of
Transportation and Public Facilities (DOTPF). He offered his
view that members generally would like to try something
different with AMHS. He pointed out that DOTPF is a large
empire. One commissioner is responsible for a vast system,
including airports in the Aleutian Chain and Southeast Alaska, a
ferry system, and a road system. He suggested that breaking AMHS
off and allowing a different group to focus on one aspect is not
bad. He asked whether some funding could be reinvested in
innovation. For example, the board could create a program to
incentivize its employees to develop solutions and receive a
bonus.
2:53:41 PM
CHAIR MYERS stated that the committee had questions on
procurement.
2:53:55 PM
KATE SHEEHAN, Director, Personnel and Labor Relations,
Department of Administration, Juneau, Alaska, stated she was
available to answer questions on personnel. She deferred to Mr.
Milks.
2:54:10 PM
CHAIR MYERS asked Mr. Milks to answer questions on no-bid
contracts.
2:54:43 PM
WILLIAM MILKS, Chief Assistant Attorney General, Statewide
Section Supervisor, Public Corporations & Governmental Services,
Civil Division, Department of Law, Juneau, Alaska, responded
that some public corporations are exempt from the procurement
code, so it would not be unusual. He explained that typically
corporations have their own rules for procurement to ensure that
public funds are spent for a public purpose.
2:55:33 PM
CHAIR MYERS recalled Senator Shower's question related to giving
an in-state preference to shipyards in Alaska. He asked whether
that was common among other Alaska corporations, such as ARRC or
the Alaska Aerospace Corporation.
2:55:58 PM
SENATOR SHOWER asked if it would be legal for AMHC or any
corporation to let a non-competitive bid process to award a
contract for work in the state or outside Alaska.
MR. MILKS answered that Alaska bidder preferences are allowable
in procurement codes. He offered to research this further with
one of the procurement attorneys and report back to the
committee.
2:56:59 PM
SENATOR MICCICHE asked for DOTPF to evaluate whether AMHC would
be able to access STIP funding. He was unsure whether AMHC would
have an independent path to federal funding or if the
corporation would need to form a formal relationship with DOTPF.
CHAIR MYERS asked if he was asking whether any language would
need to be added so AMHC could receive STIP or other federal
funding or if AMHC would need to be housed in DOTPF.
SENATOR MICCICHE answered yes. He would like to know if a formal
or contractual agreement would be necessary.
2:58:11 PM
SENATOR SHOWER asked if anything would limit AMHC from providing
bonuses or incentives to employees suggesting innovative
solutions to problems.
MR. MILKS replied that this bill was similar to many public
corporations that place their employees in exempt status, which
removes most of the pay restriction policy for classified public
employees. He deferred to Ms. Sheehan to further respond.
2:59:46 PM
MS. SHEEHAN responded that employees in exempt service are no
longer subject to the State Personnel Act or pay schedule. She
pointed out that the bill also requires bargaining so it might
be something that would need to be bargained in the new
collective bargaining agreement.
3:00:10 PM
SENATOR KIEHL referred to the language on page 32, lines 5-7. He
expressed concern that the state was repealing the essay contest
that allows school children to name new Alaska ferries.
MS. WOLSTAD responded that nothing would prevent the board from
holding contests or competitions to name new ferries, but it
does limit them to naming the ferries after glaciers.
3:01:08 PM
CHAIR MYERS said his interest was duly noted.
3:01:28 PM
CHAIR MYERS held SB 170 in committee.
3:01:36 PM
There being no further business to come before the committee,
Chair Myers adjourned the Senate Transportation Standing
Committee meeting at 3:01 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 170_Sponsor Statement_Transportation committee.pdf |
STRA 2/17/2022 1:30:00 PM |
SB 170 |
| SB 170_Sectional_Transportation Committee.pdf |
STRA 2/17/2022 1:30:00 PM |
SB 170 |
| SB 170_Research_AMHC Powers and Authorities.pdf |
STRA 2/17/2022 1:30:00 PM |
SB 170 |
| SB 170_Transportation Committee Presentation_2.16.22.pdf |
STRA 2/17/2022 1:30:00 PM |
SB 170 |