Legislature(2021 - 2022)BELTZ 105 (TSBldg)

03/09/2021 01:30 PM Senate TRANSPORTATION

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

Document Name Date/Time Subjects
SB74 GO Bond Back-Up Packet.pdf STRA 3/9/2021 1:30:00 PM
SB 74
SB74 GO Bond Project Listing.pdf STRA 3/9/2021 1:30:00 PM
SB 74