Legislature(1997 - 1998)
03/18/1997 01:32 PM Senate TRA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE TRANSPORTATION COMMITTEE
March 18, 1997
1:32 p.m.
MEMBERS PRESENT
Senator Jerry Ward, Chairman
Senator Gary Wilken, Vice Chairman
Senator Lyda Green
Senator Rick Halford
MEMBERS ABSENT
Senator Georgianna Lincoln
OTHER MEMBERS PRESENT
Senator Robin Taylor
COMMITTEE CALENDAR
SENATE BILL NO. 27
"An Act relating to the relocation to Ketchikan of certain offices,
functions, and employees of the Alaska marine highway system."
- MOVED SB 27 OUT OF COMMITTEE
SENATE BILL NO. 34
"An Act giving notice of and approving a lease-purchase agreement
with the City of Soldotna for a maintenance facility of the
Department of Transportation and Public Facilities."
- MOVED CSSB 34(TRA) OUT OF COMMITTEE
PREVIOUS SENATE ACTION
SB 27 - See Senate Transportation minutes dated 3/11/97.
SB 34 - See Community & Regional Affairs minutes dated 3/10/97.
WITNESS REGISTER
Joe Ambrose, Staff
Senator Taylor
State Capitol
Juneau, Alaska 99801-1182
POSITION STATEMENT: Explained the previously requested document.
Kurt Parkan, Deputy Commissioner
Department of Transportation & Public Facilities
3132 Channel Drive
Juneau, Alaska 99801-7898
POSITION STATEMENT: Discussed the impacts of SB 27.
Jack Shay, Mayor
Ketchikan Gateway Borough
344 Front Street
Ketchikan, Alaska 99901
POSITION STATEMENT: Supported moving the AMHS administrative
offices to Ketchikan.
Joe Ambrose, Staff
Senator Taylor
State Capitol
Juneau, Alaska 99801-1182
POSITION STATEMENT: Addressed the draft impact analysis.
Senator John Torgerson
State Capitol
Juneau, Alaska 99801-1182
POSITION STATEMENT: Prime Sponsor of SB 34.
Lisa Parker, Planning Director
Kenai Peninsula Borough
144 N. Binkley
Soldotna, Alaska 99669
POSITION STATEMENT: Supported SB 34.
ACTION NARRATIVE
TAPE 97-8, SIDE A
SB 27 FERRY SYSTEM HEADQUARTERS IN KETCHIKAN
Number 001
CHAIRMAN WARD called the Senate Transportation Committee meeting to
order at 1:32 p.m. and introduced SB 27 as the first order of
business before the committee. SB 27 was held over for a finalized
report which has been added to the packet. Chairman Ward asked if
anyone from the department was present to testify. Kurt Parkan
came forward and Chairman Ward noted that there was a request for
the marked up draft of the report which has not been submitted.
Mr. Parkan was not familiar with that request.
JOE AMBROSE , Staff to Senator Taylor, explained that in a letter to
Senator Ward, Mr. Hayden indicated that there was an earlier draft
of the document which had been returned to the contractor. The
document in the packet is the second version, not the original.
The request was for the original document.
CHAIRMAN WARD asked Mr. Parkan why the committee did not have that
original document.
Number 051
KURT PARKAN , Deputy Commissioner for the DOT/PF, was not familiar
with the request. Mr. Parkan offered to locate the draft version
for the committee. In response to Chairman Ward, he informed the
committee that Commissioner Perkins and Director Hayden are meeting
in Ketchikan with Marine Highway employees and the firm
representative is not present as well.
Number 072
Mr. Parkan read the following statement into the record:
Based on all the issues and supporting information and data it can
be concluded that to move the Marine Highway System administrative
offices from Juneau to Ketchikan is not in the best interest of the
system or its stake holders. The perceived benefits of such a move
do not justify the substantial fixed costs of the move and the
additional operational costs and complexity created by the move.
In order to have an unbiased analysis of the impacts on moving the
Alaska Marine Highway headquarters from Juneau to Ketchikan, the
AMHS contracted out for an economic analysis. The contract with
Information Insights out of Fairbanks was signed on January 8,
1997. The contract calls for a draft report on March 15, and you
have a copy of that report I understand.
The proposed move to Ketchikan includes three major impacts:
noneconomic impacts on the parties effected by a move of AMHS
administrative offices, a stake holder analysis, the operational
impacts of the move in the form of a cost benefit analysis on a
state cash flow basis, and the economic impacts of a move on the
cities of Juneau and Ketchikan. The question of the AMHS
administrative office move arises during difficult economic times
both for Ketchikan and for the state government in general. The
impending closure of Ketchikan's pulp mill will create significant
unemployment and a down turn in the community's economy. Our
political leaders are looking for positive steps that can be taken
to assist Ketchikan through this difficult transition. At the same
time however, government is experiencing growing fiscal pressure
from decreasing oil revenues. Alaskans expect to see a down sizing
of state government services for the rest of this decade. As a
result, any move of AMHS administrative offices will be examined
closely for cost justification. If the public perceives the move
as wasting state resources, AMHS will suffer.
Some of the stake holder issues. The impacts to stake holders
include costs to the system and other state agencies. In addition
to cash flow and economic effects, there are other noneconomic
impacts. While an analysis of the institutional and political
impacts may appear overly subjective, the issues underlying them
may provide a better understanding of the true meaning of the
effect of a move on Juneau, Ketchikan, and Southeast Alaska.
Number 110
Effects of a move on the AMHS costumers. In large part, the move
will have little direct impact on AMHS customers. Most passenger
contact with AMHS is over the toll free 800 number. These
passengers probably don't know or care where they are calling. A
change would make no difference as long as communications are of
acceptable quality. There would be some impact to our customers
who visit AMHS administrative offices. This would be particularly
significant for those Southeast and Southwest Alaska community
representatives who annually travel to Juneau throughout the year
and use the opportunity to visit the Commissioner and other DOT/PF
offices to discuss their transportation needs. For these
communities, an additional trip to Ketchikan could be necessary -
adding time, distance, and travel costs to the journey. In
addition, people come down here and meet with their representatives
and all sorts of other state agencies as a one stop sort of
shopping, if you will.
The effects of a move within DOT/PF. Separation of the AMHS
administrative offices from the rest of the Department of
Transportation/Public Facilities offices will also have an impact
on the Marine Highway System. The absence of day to day contact
between AMHS leadership and the DOT/PF Commissioner's office will
reduce the quality of communication and restrict the opportunities
for us to work together to solve problems. Any loss of opportunity
for daily contact between the Commissioner's office and the AMHS
can only be detrimental to AMHS. Our Commissioner is in the
process of conducting an efficiency review of departmental
operations to save money for the state and to bring greater
emphasis on direct service to the public. While this project is
still in process, one can speculate that the plan will include
tighter integration of planning, design, engineering and
administrative support across divisions and regions. The
separation of AMHS administrative offices from the rest of DOT/PF
may inhibit these cost savings efforts. Of particular concern to
AMHS stakeholders should be the effect of AMHS's absence from
everyday decision-making by the department. Distance rarely
improves influence and frequently has a negative effect. Out of
sight is likely to lead to out of mind in departmental planning and
budget-making. It is not unlikely that a future Commissioner
separated from AMHS by both distance and possible creation of a
separate AMHS Authority will tend to focus his/her efforts on
roads, airports, and ports rather than the Marine Highway System.
When the Commissioner determines the proposed allocation of federal
funds for highways, it may be that he/she will wear roads colored
glasses resulting in fewer federal dollars for Marine Highway
improvements.
Number 155
Impacts of the move on regional cohesiveness. The AMHS customers
and stake holders will have to consider the regional impacts of a
decision to move the administrative headquarters from Juneau to
Ketchikan. As noted in the operational issues above, there will be
some impact on the ability of AMHS administration to effectively
meet the Legislature's need for timely information on budget and
operational issues. Just as important may be the greater
difficulty in coordinating transportation planning with other
transportation modes.
Cost benefit issues was the second major component that the study
reviewed. The preliminary estimate is that the operational costs
will increase by $600,000 annually, including rent of new
facilities. Ongoing costs and benefits of the move are difficult
to estimate. The effect of a move on operations will manifest
itself primarily in communication and travel costs. Data
communications would have to move off the main frame hub, voice
circuits switched from the state system in Juneau to the
municipally owned Ketchikan public utilities. Travel costs are
likely to be significant due to operational requirements for AMHS
administrative staff to be in Juneau for regular meetings and
interaction with the Legislature and other state agencies. A move
of the AMHS administrative offices from Juneau to Ketchikan clearly
provides better in person service to customers in Ketchikan and
southern Southeast Alaska. It should be noted however that for
customers from elsewhere on the Southeast mainline and in
Southwest, the AMHS administration would have increased travel time
and costs for in person meetings. A major operational impact of a
move of AMHS administrative offices to Ketchikan is the need and
cost of sending AMHS staff to and from Juneau, often on short
notice to meet the informational needs of the Alaska Legislature
and its staff.
The fixed costs associated with the proposed move include the
relocation of personnel and equipment from Juneau to a new and as
yet unspecified, but probably newly constructed location in
Ketchikan. A significant issue here is productivity loss both as
a result of the disruption of the move process, resettlement of
both households and work place, and retraining new workers to
replace those who decide not to make the move. In the fixed costs
arena, the largest driver is the need for space to house the 116
positions currently located in Juneau or the portion of those jobs
that would move. Other primary issues related to fixed costs for
the movement of personnel and equipment and the hiring and training
of new staff to fill the positions vacated by those who choose not
to move. In general, all fixed cost issues point toward an overall
negative impact of office movement.
Number 192
Based on preliminary economic analysis, no space is currently
available for lease or purchase in Ketchikan that would meet the
needs of the AMHS administrative offices. Sufficient acceptable
space would be constructed and leased to the AMHS for an estimated
$1.75 per square foot per month. AMHS currently occupies both
state owned and leased space. Neither AMHS nor any other state
agency pay rent for state owned space. The Department of
Administration pays the cost of lease space.
Movement of personnel. There are 116 administrative positions in
Juneau of which 95 are currently staffed. It is important to know
how many employees holding positions in Juneau would be willing to
move to Ketchikan. Based on current survey data, about 40 percent
of the current employees would relocate. Any office relocation
results in lost productivity for the staff effected. The initial
economic impact analysis is conservative estimating lost
productivity assuming one month of lost productivity for each
currently employed staff member, including about one week of lost
time arranging and conducting the physical move and one week in
transition period at the new offices. The loss of current staff
together with the time and cost of new hiring will add additional
productivity costs. Unfortunately, the current staff who choose
not to relocate will not necessarily continue working at AMHS until
moving day. It is likely that there will need to be some temporary
new hires in Juneau during the months leading to the moving day and
some permanent new hires to start in Juneau and need to be moved to
Ketchikan. Both types of hiring impose operational costs on AMHS,
including the management time to go through the personnel process
and the time to train new hires. Those who are hired in Juneau to
move to Ketchikan add either costs of a move to Ketchikan if hired
in Juneau or travel status payment if hired in Ketchikan, but
working in Juneau until the move.
Moving the computer network to Ketchikan is a major undertaking
with two facets. The first is the physical movement of computers
and other network items. The second and larger issue is the
infrastructure required to support the data communication needs of
the network. Based on estimates, up front costs would total about
$50,000 for just the move. Operational costs would be more
significant in the long run. Initial calculations on community
economic impact indicate that Juneau's growing economy would absorb
the impact of job losses within one quarter while job creation in
Ketchikan would only marginally soften the economic impact of the
mill closure. In short from an economic perspective, moving the
offices to Ketchikan create fewer benefits to Ketchikan than some
might hope while moving the offices from Juneau has a smaller
economic impact on the community than some may fear.
The benefits of moving AMHS administrative offices do not justify
the substantial fixed costs of the move or the additional
operational costs and complexity created by the move. The
improvement to communications between Ketchikan based employees and
Juneau based management is far outweighed by the losses to
communication between Juneau based management and their
counterparts in the department and elsewhere in state government.
Number 240
CHAIRMAN WARD reiterated that the committee wanted the draft imp
analysis report because there has been some indication that the
report had a slant and request.
JACK SHAY , Mayor of the Ketchikan Gateway Borough, noted that
Ketchikan was sensitive to the regional impact of such a move.
Mayor Shay was happy to hear that the study had been completed, but
was intrigued by whether the question was properly stated. With
regards to the aforementioned communication impacts, Mayor Shay did
not believe it to be that serious with all of the technology
available. Mayor Shay was concerned with the fiscal impacts
created by the move. Mayor Shay suggested that a phased move over
time could create less of a fiscal impact. For example, moving the
engineering offices first followed by other divisions if successful
would soften the effects. Mayor Shay emphasized the support for
such a move and pledged the efforts to assist in the move.
JOE AMBROSE , Staff to Senator Taylor, commented that the draft
impact analysis does raise some valid concerns, however none of
them are insurmountable. The department provided the committee
with a highly abridged version of the report which primarily
focused on the negative aspects. Mr. Ambrose pointed out that most
of those currently working in Juneau that were not willing to move
to Ketchikan are at the clerical level which is understandable.
Those clerical positions would also be easier to fill. Mr. Ambrose
explained that due to the economic disaster relief funding,
Ketchikan is in a position to possibly build a building to house
the AMHS as well as the regional headquarters for the State
Troopers. With regards to the references implying that SB 27
intends to improve communication between the Juneau administrative
offices and Ketchikan employees, Mr. Ambrose said that is not the
case. From the beginning, the communication between the
administration of the Marine Highway and the fleet itself has been
the emphasis.
CHAIRMAN WARD reiterated to Mr. Parkan that the previously
requested draft document be provided to the next committee of
referral, State Affairs. Chairman Ward said that he intended to
move SB 27 on to State Affairs.
SENATOR WILKEN expressed concern with some of the comments
regarding the AMHS in previous meetings. If there is a problem,
Senator Wilken hope that the Commissioner would fix the problem.
Senator Wilken moved to report SB 27 out of committee with
individual recommendations and accompanying fiscal notes. Without
objection, it was so ordered.
SB 34 DOT MAINTENANCE FACILITY AT SOLDOTNA
Number 346
CHAIRMAN WARD introduced SB 34 as the next order of business. A
brief at ease was taken.
SENATOR TORGERSON , Prime Sponsor, explained that SB 34 authorizes
the Department of Administration to enter into a lease-purchase
agreement with the City of Soldotna in order to finance the
relocation of the Department of Transportation maintenance facility
that has been located on the Kenai River. The land for the move is
land that is owed to the state by the borough. The current site
has environmental problems. There have been hydrocarbons on the
site and currently two small clean-up programs are occurring. Some
materials are being leaked into the Kenai River which has lead to
the need to relocate the facility.
Senator Torgerson informed the committee that he did not wish to
offer the CS at this time, but rather suggested an amendment that
would lower the price from $6 million to $4.5 million. There has
been debate regarding whether the clean-up price, the bonding
price, should include environmental clean-up and demolition of the
existing building. The question is whether it is appropriate for
the City of Soldotna to bond under a lease-purchase agreement for
those activities. There has not be a decision on this issue.
Senator Torgerson did not believe that bond council would even loan
money on such a function. The Department of Revenue has indicated
that there is language that would authorize such. The CS does not
clearly state that the City of Soldotna would be the entity selling
the bonds. The City of Soldotna wants to be actively involved in
this process. Senator Torgerson explained that the amendment would
delete the environmental clean-up monies in the original bond
proposition.
SENATOR GREEN asked if this was discussed last year, but not as a
lease-purchase agreement. SENATOR TORGERSON said that the Governor
put $1 million in the budget for one-fifth of the project. The
Governor intended to hold onto the $1 million during the
corporation process and continue to appropriate $1 million per year
until there was enough money to move the facility. Senator
Torgerson did not believe that was appropriate which lead to this
revenue bond proposal. After meeting with the Governor and the
City of Soldotna, it was determined that the $1 million would not
be appropriated, but rather money for ongoing environmental clean-
up. Senator Torgerson pointed out that SB 34 was patterned after
the Palmer fire fighting facility legislation.
In further response to Senator Green, SENATOR TORGERSON said that
no one particular person is at fault for the environmental
problems. The facility is a DOT facility. Also the environmental
laws have changed over the years; what was once the standard is now
a hazardous waste. This is the case with many facilities.
CHAIRMAN WARD asked if Senator Torgerson wanted the original bill
to be moved. SENATOR TORGERSON clarified that he intended for the
amendment to be adopted, but if the committee is not comfortable
with that the adjustment could be made in Finance.
CHAIRMAN WARD inquired as to the long term plans after the
completion of the clean-up of the property on the Kenai River.
SENATOR TORGERSON said that if the property could be cleaned up to
a standard in which a letter or certification could be issued
saying that the property was environmentally safe, there would be
limitless options. Unfortunately, the State of Alaska nor any
environmental agency over clean-up has never issued such a
certification. Basically, a letter of no further action required
is issued which limits the options. Senator Torgerson indicated
that the City of Soldotna would utilize the property as a green
belt.
SENATOR WILKEN moved that on line 9, "$6,000,000" be deleted and
insert "$4,500,000". Without objection, the Amendment 1 was
adopted.
Number 450
LISA PARKER , Planning Director for the Kenai Peninsula Borough,
stated that the Kenai Peninsula Borough supported SB 34. Ms.
Parker offered to answer any questions of the committee.
CHAIRMAN WARD asked if the existing DOT site could become some sort
of public use area. LISA PARKER explained that after clean-up is
completed, the site would be available for selection by the borough
and the intent would be to expand the existing park held by the
City of Soldotna. Ms. Parker noted that there has been some
discussion regarding placing the Kenai River Center on the site.
The Kenai River Center is a joint center funded by the borough
which houses the borough's State Park and Fish and Game.
SENATOR HALFORD asked if consideration was given to a straight
capital appropriation. LISA PARKER said that last year that was
considered, but as Senator Torgerson mentioned that did not go
through the process.
SENATOR TORGERSON pointed out that there are necessary conforming
amendments. On line 10, "$1,300,000" would need to be deleted and
replaced with "$620,000" and on line 11, "$10,000,000" would need
to be deleted and replaced with "$6,200,000".
SENATOR WILKEN moved Amendment 2 as described above. Without
objection, Amendment 2 was adopted.
SENATOR WILKEN moved to report CSSB 34(TRA) out of committee with
individual recommendations and accompanying fiscal notes. Without
objection, it was so ordered.
There being no further business before the committee, the meeting
was adjourned at 2:12 p.m.
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