Legislature(1997 - 1998)
03/18/1997 01:32 PM TRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 improvements. 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 proposition. 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 belt. SENATOR WILKEN moved that on line 9, "$6,000,000" be deleted and insert "$4,500,000". Without objection, the Amendment 1 was adopted. 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.