Legislature(1997 - 1998)

03/18/1997 01:32 PM TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                SENATE TRANSPORTATION COMMITTEE                                
                         March 18, 1997                                        
                           1:32 p.m.                                           
  MEMBERS PRESENT                                                              
 Senator Jerry Ward, Chairman                                                  
 Senator Gary Wilken, Vice Chairman                                            
 Senator Lyda Green                                                            
 Senator Rick Halford                                                          
  MEMBERS ABSENT                                                               
 Senator Georgianna Lincoln                                                    
  OTHER MEMBERS PRESENT                                                        
 Senator Robin Taylor                                                          
 COMMITTEE CALENDAR                                                            
 SENATE BILL NO. 27                                                            
 "An Act relating to the relocation to Ketchikan of certain offices,           
 functions, and employees of the Alaska marine highway system."                
  - MOVED SB 27 OUT OF COMMITTEE                                               
 SENATE BILL NO. 34                                                            
 "An Act giving notice of and approving a lease-purchase agreement             
 with the City of Soldotna for a maintenance facility of the                   
 Department of Transportation and Public Facilities."                          
  - MOVED CSSB 34(TRA) OUT OF COMMITTEE                                        
  PREVIOUS SENATE ACTION                                                       
 SB 27 - See Senate Transportation minutes dated 3/11/97.                      
 SB 34 - See Community & Regional Affairs minutes dated 3/10/97.               
  WITNESS REGISTER                                                             
 Joe Ambrose, Staff                                                            
 Senator Taylor                                                                
 State Capitol                                                                 
 Juneau, Alaska 99801-1182                                                     
  POSITION STATEMENT:   Explained the previously requested document.           
 Kurt Parkan, Deputy Commissioner                                              
 Department of Transportation & Public Facilities                              
 3132 Channel Drive                                                            
 Juneau, Alaska 99801-7898                                                     
  POSITION STATEMENT:   Discussed the impacts of SB 27.                        
 Jack Shay, Mayor                                                              
 Ketchikan Gateway Borough                                                     
 344 Front Street                                                              
 Ketchikan, Alaska 99901                                                       
  POSITION STATEMENT:   Supported moving the AMHS administrative               
                      offices to Ketchikan.                                    
 Joe Ambrose, Staff                                                            
 Senator Taylor                                                                
 State Capitol                                                                 
 Juneau, Alaska 99801-1182                                                     
  POSITION STATEMENT:   Addressed the draft impact analysis.                   
 Senator John Torgerson                                                        
 State Capitol                                                                 
 Juneau, Alaska 99801-1182                                                     
  POSITION STATEMENT:   Prime Sponsor of SB 34.                                
 Lisa Parker, Planning Director                                                
 Kenai Peninsula Borough                                                       
 144 N. Binkley                                                                
 Soldotna, Alaska 99669                                                        
  POSITION STATEMENT:   Supported SB 34.                                       
  ACTION NARRATIVE                                                             
  TAPE 97-8, SIDE A                                                            
         SB  27 FERRY SYSTEM HEADQUARTERS IN KETCHIKAN                        
 Number 001                                                                    
  CHAIRMAN WARD  called the Senate Transportation Committee meeting to         
 order at 1:32 p.m. and introduced  SB 27  as the first order of               
 business before the committee.  SB 27 was held over for a finalized           
 report which has been added to the packet.  Chairman Ward asked if            
 anyone from the department was present to testify.  Kurt Parkan               
 came forward and Chairman Ward noted that there was a request for             
 the marked up draft of the report which has not been submitted.               
 Mr. Parkan was not familiar with that request.                                
  JOE AMBROSE , Staff to Senator Taylor, explained that in a letter to         
 Senator Ward, Mr. Hayden indicated that there was an earlier draft            
 of the document which had been returned to the contractor.  The               
 document in the packet is the second version, not the original.               
 The request was for the original document.                                    
  CHAIRMAN WARD  asked Mr. Parkan why the committee did not have that          
 original document.                                                            
 Number 051                                                                    
  KURT PARKAN , Deputy Commissioner for the DOT/PF, was not familiar           
 with the request.  Mr. Parkan offered to locate the draft version             
 for the committee.  In response to Chairman Ward, he informed the             
 committee that Commissioner Perkins and Director Hayden are meeting           
 in Ketchikan with Marine Highway employees and the firm                       
 representative is not present as well.                                        
 Number 072                                                                    
 Mr. Parkan read the following statement into the record:                      
 Based on all the issues and supporting information and data it can            
 be concluded that to move the Marine Highway System administrative            
 offices from Juneau to Ketchikan is not in the best interest of the           
 system or its stake holders.  The perceived benefits of such a move           
 do not justify the substantial fixed costs of the move and the                
 additional operational costs and complexity created by the move.              
 In order to have an unbiased analysis of the impacts on moving the            
 Alaska Marine Highway headquarters from Juneau to Ketchikan, the              
 AMHS contracted out for an economic analysis.  The contract with              
 Information Insights out of Fairbanks was signed on January 8,                
 1997.  The contract calls for a draft report on March 15, and you             
 have a copy of that report I understand.                                      
 The proposed move to Ketchikan includes three major impacts:                  
 noneconomic impacts on the parties effected by a move of AMHS                 
 administrative offices, a stake holder analysis, the operational              
 impacts of the move in the form of a cost benefit analysis on a               
 state cash flow basis, and the economic impacts of a move on the              
 cities of Juneau and Ketchikan.  The question of the AMHS                     
 administrative office move arises during difficult economic times             
 both for Ketchikan and for the state government in general.  The              
 impending closure of Ketchikan's pulp mill will create significant            
 unemployment and a down turn in the community's economy.  Our                 
 political leaders are looking for positive steps that can be taken            
 to assist Ketchikan through this difficult transition.  At the same           
 time however, government is experiencing growing fiscal pressure              
 from decreasing oil revenues.  Alaskans expect to see a down sizing           
 of state government services for the rest of this decade.  As a               
 result, any move of AMHS administrative offices will be examined              
 closely for cost justification.  If the public perceives the move             
 as wasting state resources, AMHS will suffer.                                 
 Some of the stake holder issues.  The impacts to stake holders                
 include costs to the system and other state agencies.  In addition            
 to cash flow and economic effects, there are other noneconomic                
 impacts.  While an analysis of the institutional and political                
 impacts may appear overly subjective, the issues underlying them              
 may provide a better understanding of the true meaning of the                 
 effect of a move on Juneau, Ketchikan, and Southeast Alaska.                  
 Number 110                                                                    
 Effects of a move on the AMHS costumers.  In large part, the move             
 will have little direct impact on AMHS customers.  Most passenger             
 contact with AMHS is over the toll free 800 number.  These                    
 passengers probably don't know or care where they are calling.  A             
 change would make no difference as long as communications are of              
 acceptable quality.  There would be some impact to our customers              
 who visit AMHS administrative offices.  This would be particularly            
 significant for those Southeast and Southwest Alaska community                
 representatives who annually travel to Juneau throughout the year             
 and use the opportunity to visit the Commissioner and other DOT/PF            
 offices to discuss their transportation needs.  For these                     
 communities, an additional trip to Ketchikan could be necessary -             
 adding time, distance, and travel costs to the journey.  In                   
 addition, people come down here and meet with their representatives           
 and all sorts of other state agencies as a one stop sort of                   
 shopping, if you will.                                                        
 The effects of a move within DOT/PF.  Separation of the AMHS                  
 administrative offices from the rest of the Department of                     
 Transportation/Public Facilities offices will also have an impact             
 on the Marine Highway System.  The absence of day to day contact              
 between AMHS leadership and the DOT/PF Commissioner's office will             
 reduce the quality of communication and restrict the opportunities            
 for us to work together to solve problems.  Any loss of opportunity           
 for daily contact between the Commissioner's office and the AMHS              
 can only be detrimental to AMHS.  Our Commissioner is in the                  
 process of conducting an efficiency review of departmental                    
 operations to save money for the state and to bring greater                   
 emphasis on direct service to the public.  While this project is              
 still in process, one can speculate that the plan will include                
 tighter integration of planning, design, engineering and                      
 administrative support across divisions and regions.  The                     
 separation of AMHS administrative offices from the rest of DOT/PF             
 may inhibit these cost savings efforts.  Of particular concern to             
 AMHS stakeholders should be the effect of AMHS's absence from                 
 everyday decision-making by the department.  Distance rarely                  
 improves influence and frequently has a negative effect.  Out of              
 sight is likely to lead to out of mind in departmental planning and           
 budget-making.  It is not unlikely that a future Commissioner                 
 separated from AMHS by both distance and possible creation of a               
 separate AMHS Authority will tend to focus his/her efforts on                 
 roads, airports, and ports rather than the Marine Highway System.             
 When the Commissioner determines the proposed allocation of federal           
 funds for highways, it may be that he/she will wear roads colored             
 glasses resulting in fewer federal dollars for Marine Highway                 
 Number 155                                                                    
 Impacts of the move on regional cohesiveness.  The AMHS customers             
 and stake holders will have to consider the regional impacts of a             
 decision to move the administrative headquarters from Juneau to               
 Ketchikan.  As noted in the operational issues above, there will be           
 some impact on the ability of AMHS administration to effectively              
 meet the Legislature's need for timely information on budget and              
 operational issues.  Just as important may be the greater                     
 difficulty in coordinating transportation planning with other                 
 transportation modes.                                                         
 Cost benefit issues was the second major component that the study             
 reviewed.  The preliminary estimate is that the operational costs             
 will increase by $600,000 annually, including rent of new                     
 facilities.  Ongoing costs and benefits of the move are difficult             
 to estimate.  The effect of a move on operations will manifest                
 itself primarily in communication and travel costs.  Data                     
 communications would have to move off the main frame hub, voice               
 circuits switched from the state system in Juneau to the                      
 municipally owned Ketchikan public utilities.  Travel costs are               
 likely to be significant due to operational requirements for AMHS             
 administrative staff to be in Juneau for regular meetings and                 
 interaction with the Legislature and other state agencies.  A move            
 of the AMHS administrative offices from Juneau to Ketchikan clearly           
 provides better in person service to customers in Ketchikan and               
 southern Southeast Alaska.  It should be noted however that for               
 customers from elsewhere on the Southeast mainline and in                     
 Southwest, the AMHS administration would have increased travel time           
 and costs for in person meetings.  A major operational impact of a            
 move of AMHS administrative offices to Ketchikan is the need and              
 cost of sending AMHS staff to and from Juneau, often on short                 
 notice to meet the informational needs of the Alaska Legislature              
 and its staff.                                                                
 The fixed costs associated with the proposed move include the                 
 relocation of personnel and equipment from Juneau to a new and as             
 yet unspecified, but probably newly constructed location in                   
 Ketchikan.  A significant issue here is productivity loss both as             
 a result of the disruption of the move process, resettlement of               
 both households and work place, and retraining new workers to                 
 replace those who decide not to make the move.  In the fixed costs            
 arena, the largest driver is the need for space to house the 116              
 positions currently located in Juneau or the portion of those jobs            
 that would move.  Other primary issues related to fixed costs for             
 the movement of personnel and equipment and the hiring and training           
 of new staff to fill the positions vacated by those who choose not            
 to move.  In general, all fixed cost issues point toward an overall           
 negative impact of office movement.                                           
 Number 192                                                                    
 Based on preliminary economic analysis, no space is currently                 
 available for lease or purchase in Ketchikan that would meet the              
 needs of the AMHS administrative offices.  Sufficient acceptable              
 space would be constructed and leased to the AMHS for an estimated            
 $1.75 per square foot per month.  AMHS currently occupies both                
 state owned and leased space.  Neither AMHS nor any other state               
 agency pay rent for state owned space.  The Department of                     
 Administration pays the cost of lease space.                                  
 Movement of personnel.  There are 116 administrative positions in             
 Juneau of which 95 are currently staffed.  It is important to know            
 how many employees holding positions in Juneau would be willing to            
 move to Ketchikan.  Based on current survey data, about 40 percent            
 of the current employees would relocate.  Any office relocation               
 results in lost productivity for the staff effected.  The initial             
 economic impact analysis is conservative estimating lost                      
 productivity assuming one month of lost productivity for each                 
 currently employed staff member, including about one week of lost             
 time arranging and conducting the physical move and one week in               
 transition period at the new offices.  The loss of current staff              
 together with the time and cost of new hiring will add additional             
 productivity costs.  Unfortunately, the current staff who choose              
 not to relocate will not necessarily continue working at AMHS until           
 moving day.  It is likely that there will need to be some temporary           
 new hires in Juneau during the months leading to the moving day and           
 some permanent new hires to start in Juneau and need to be moved to           
 Ketchikan.  Both types of hiring impose operational costs on AMHS,            
 including the management time to go through the personnel process             
 and the time to train new hires.  Those who are hired in Juneau to            
 move to Ketchikan add either costs of a move to Ketchikan if hired            
 in Juneau or travel status payment if hired in Ketchikan, but                 
 working in Juneau until the move.                                             
 Moving the computer network to Ketchikan is a major undertaking               
 with two facets.  The first is the physical movement of computers             
 and other network items.  The second and larger issue is the                  
 infrastructure required to support the data communication needs of            
 the network.  Based on estimates, up front costs would total about            
 $50,000 for just the move.  Operational costs would be more                   
 significant in the long run.  Initial calculations on community               
 economic impact indicate that Juneau's growing economy would absorb           
 the impact of job losses within one quarter while job creation in             
 Ketchikan would only marginally soften the economic impact of the             
 mill closure.  In short from an economic perspective, moving the              
 offices to Ketchikan create fewer benefits to Ketchikan than some             
 might hope while moving the offices from Juneau has a smaller                 
 economic impact on the community than some may fear.                          
 The benefits of moving AMHS administrative offices do not justify             
 the substantial fixed costs of the move or the additional                     
 operational costs and complexity created by the move.  The                    
 improvement to communications between Ketchikan based employees and           
 Juneau based management is far outweighed by the losses to                    
 communication between Juneau based management and their                       
 counterparts in the department and elsewhere in state government.             
 Number 240                                                                    
    CHAIRMAN WARD    reiterated that the committee wanted the draft imp        
 analysis report because there has been some indication that the               
 report had a slant and request.                                               
  JACK SHAY , Mayor of the Ketchikan Gateway Borough, noted that               
 Ketchikan was sensitive to the regional impact of such a move.                
 Mayor Shay was happy to hear that the study had been completed, but           
 was intrigued by whether the question was properly stated.  With              
 regards to the aforementioned communication impacts, Mayor Shay did           
 not believe it to be that serious with all of the technology                  
 available.  Mayor Shay was concerned with the fiscal impacts                  
 created by the move.  Mayor Shay suggested that a phased move over            
 time could create less of a fiscal impact.  For example, moving the           
 engineering offices first followed by other divisions if successful           
 would soften the effects.  Mayor Shay emphasized the support for              
 such a move and pledged the efforts to assist in the move.                    
  JOE AMBROSE , Staff to Senator Taylor, commented that the draft              
 impact analysis does raise some valid concerns, however none of               
 them are insurmountable.  The department provided the committee               
 with a highly abridged version of the report which primarily                  
 focused on the negative aspects.  Mr. Ambrose pointed out that most           
 of those currently working in Juneau that were not willing to move            
 to Ketchikan are at the clerical level which is understandable.               
 Those clerical positions would also be easier to fill.  Mr. Ambrose           
 explained that due to the economic disaster relief funding,                   
 Ketchikan is in a position to possibly build a building to house              
 the AMHS as well as the regional headquarters for the State                   
 Troopers.  With regards to the references implying that SB 27                 
 intends to improve communication between the Juneau administrative            
 offices and Ketchikan employees, Mr. Ambrose said that is not the             
 case.  From the beginning, the communication between the                      
 administration of the Marine Highway and the fleet itself has been            
 the emphasis.                                                                 
  CHAIRMAN WARD  reiterated to Mr. Parkan that the previously                  
 requested draft document be provided to the next committee of                 
 referral, State Affairs.  Chairman Ward said that he intended to              
 move SB 27 on to State Affairs.                                               
  SENATOR WILKEN  expressed concern with some of the comments                  
 regarding the AMHS in previous meetings.  If there is a problem,              
 Senator Wilken hope that the Commissioner would fix the problem.              
 Senator Wilken moved to report SB 27 out of committee with                    
 individual recommendations and accompanying fiscal notes.  Without            
 objection, it was so ordered.                                                 
          SB  34 DOT MAINTENANCE FACILITY AT SOLDOTNA                         
 Number 346                                                                    
  CHAIRMAN WARD  introduced  SB 34  as the next order of business.  A          
 brief at ease was taken.                                                      
  SENATOR TORGERSON , Prime Sponsor, explained that SB 34 authorizes           
 the Department of Administration to enter into a lease-purchase               
 agreement with the City of Soldotna in order to finance the                   
 relocation of the Department of Transportation maintenance facility           
 that has been located on the Kenai River.  The land for the move is           
 land that is owed to the state by the borough.  The current site              
 has environmental problems.  There have been hydrocarbons on the              
 site and currently two small clean-up programs are occurring.  Some           
 materials are being leaked into the Kenai River which has lead to             
 the need to relocate the facility.                                            
 Senator Torgerson informed the committee that he did not wish to              
 offer the CS at this time, but rather suggested an amendment that             
 would lower the price from $6 million to $4.5 million.  There has             
 been debate regarding whether the clean-up price, the bonding                 
 price, should include environmental clean-up and demolition of the            
 existing building.  The question is whether it is appropriate for             
 the City of Soldotna to bond under a lease-purchase agreement for             
 those activities.  There has not be a decision on this issue.                 
 Senator Torgerson did not believe that bond council would even loan           
 money on such a function.  The Department of Revenue has indicated            
 that there is language that would authorize such.  The CS does not            
 clearly state that the City of Soldotna would be the entity selling           
 the bonds.  The City of Soldotna wants to be actively involved in             
 this process.  Senator Torgerson explained that the amendment would           
 delete the environmental clean-up monies in the original bond                 
  SENATOR GREEN  asked if this was discussed last year, but not as a           
 lease-purchase agreement.   SENATOR TORGERSON  said that the Governor         
 put $1 million in the budget for one-fifth of the project.  The               
 Governor intended to hold onto the $1 million during the                      
 corporation process and continue to appropriate $1 million per year           
 until there was enough money to move the facility.  Senator                   
 Torgerson did not believe that was appropriate which lead to this             
 revenue bond proposal.  After meeting with the Governor and the               
 City of Soldotna, it was determined that the $1 million would not             
 be appropriated, but rather money for ongoing environmental clean-            
 up.  Senator Torgerson pointed out that SB 34 was patterned after             
 the Palmer fire fighting facility legislation.                                
 In further response to Senator Green,  SENATOR TORGERSON  said that           
 no one particular person is at fault for the environmental                    
 problems.  The facility is a DOT facility.  Also the environmental            
 laws have changed over the years; what was once the standard is now           
 a hazardous waste.  This is the case with many facilities.                    
  CHAIRMAN WARD  asked if Senator Torgerson wanted the original bill           
 to be moved.   SENATOR TORGERSON  clarified that he intended for the          
 amendment to be adopted, but if the committee is not comfortable              
 with that the adjustment could be made in Finance.                            
  CHAIRMAN WARD  inquired as to the long term plans after the                  
 completion of the clean-up of the property on the Kenai River.                
  SENATOR TORGERSON  said that if the property could be cleaned up to          
 a standard in which a letter or certification could be issued                 
 saying that the property was environmentally safe, there would be             
 limitless options.  Unfortunately, the State of Alaska nor any                
 environmental agency over clean-up has never issued such a                    
 certification.  Basically, a letter of no further action required             
 is issued which limits the options.  Senator Torgerson indicated              
 that the City of Soldotna would utilize the property as a green               
  SENATOR WILKEN  moved that on line 9, "$6,000,000" be deleted and            
 insert "$4,500,000".  Without objection, the Amendment 1 was                  
 Number 450                                                                    
  LISA PARKER , Planning Director for the Kenai Peninsula Borough,             
 stated that the Kenai Peninsula Borough supported SB 34.  Ms.                 
 Parker offered to answer any questions of the committee.                      
  CHAIRMAN WARD  asked if the existing DOT site could become some sort         
 of public use area.   LISA PARKER  explained that after clean-up is           
 completed, the site would be available for selection by the borough           
 and the intent would be to expand the existing park held by the               
 City of Soldotna.  Ms. Parker noted that there has been some                  
 discussion regarding placing the Kenai River Center on the site.              
 The Kenai River Center is a joint center funded by the borough                
 which houses the borough's State Park and Fish and Game.                      
  SENATOR HALFORD  asked if consideration was given to a straight              
 capital appropriation.   LISA PARKER  said that last year that was            
 considered, but as Senator Torgerson mentioned that did not go                
 through the process.                                                          
  SENATOR TORGERSON  pointed out that there are necessary conforming           
 amendments.  On line 10, "$1,300,000" would need to be deleted and            
 replaced with "$620,000" and on line 11, "$10,000,000" would need             
 to be deleted and replaced with "$6,200,000".                                 
  SENATOR WILKEN  moved Amendment 2 as described above.  Without               
 objection, Amendment 2 was adopted.                                           
  SENATOR WILKEN  moved to report CSSB 34(TRA) out of committee with           
 individual recommendations and accompanying fiscal notes.  Without            
 objection, it was so ordered.                                                 
 There being no further business before the committee, the meeting             
 was adjourned at 2:12 p.m.                                                    

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