Legislature(1999 - 2000)
04/29/1999 01:35 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
April 29, 1999 1:35 p.m.
MEMBERS PRESENT
Senator Jerry Ward, Chairman
Senator Drue Pearce, Vice Chair
Senator Rick Halford
Senator Georgianna Lincoln
MEMBERS ABSENT
Senator Mike Miller
COMMITTEE CALENDAR
SENATE BILL NO. 160
"An Act establishing a passenger surcharge on persons transported
by the Alaska Railroad; and providing for an effective date."
-MOVED CSSB 160(TRA) OUT OF COMMITTEE
PREVIOUS SENATE ACTION
SB 160 - No previous action to report
WITNESS REGISTER
Ms. Llewellyn Lutchansky, Finance Aide
Senator John Torgerson
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Presented SB 160
Mr. Bill Sheffield, President and CEO
Alaska Railroad
POSITION STATEMENT: Opposed SB 160
Ms. Carrie L. Williams, City Manager
City of Whittier
P.O. Box 608
Whittier, AK 99693
POSITION STATEMENT: Supported SB 160
ACTION NARRATIVE
TAPE 99-10 , SIDE A
SB 160-ALASKA RAILROAD PASSENGER SURCHARGE
CHAIRMAN WARD called the Senate Transportation Committee meeting to
order at 1:35 p.m. and brought SB 160 before the committee.
Number 012
MS. LLEWELLYN LUTCHANSKY, Finance Aide to Senator Torgerson, stated
that SB 160 would put a $5 surcharge on all passengers traveling on
the Alaska Railroad. It is one of the tools introduced by Senate
Finance as part of the legislature's strategy to identify new
revenue sources through non-oil industry contributions to the
state's General Fund.
Number 035
MR. BILL SHEFFIELD, Former Governor of Alaska and President/ CEO of
the Alaska Railroad, said the railroad opposes SB 160 and he
requested the opportunity to describe how it does business in order
to explain its opposition.
A $5 surcharge would create or worsen a number of problems related
to administrative costs and competitive pricing, and the release of
proprietary information of its customers. It would also
significantly raise ticket prices for Alaskans using core
transportation services, and present a significant disincentive for
the development of commuter service.
The railroad sells and tracks tickets by segments, not by
individual passengers. Re-tooling the system to track by
individuals would create an unnecessary administrative cost to
manage the surcharge and would do nothing to improve business. The
railroad has been developing new markets for its passenger service.
Tour buses would have an unfair advantage over the same market
segments the railroad serves. The development of a rail station at
the Anchorage International Airport is part of the overall plan to
develop a commuter service from Mat-Su Valley through Anchorage to
Girdwood and the airport. The rail station will also enable the
railroad to move cruise ship passengers from Seward and Whittier
more efficiently to the airport. A surcharge on every passenger
wouldn't allow the railroad to do that. When DOTPF builds the
International Airport Minnesota Viaduct, they'll put through a tube
so the railroad will have a Y coming into the airport from Seward,
cutting down time. The track has been straightened out and a lot
of work has been done on the Seward run.
The railroad can't legally provide ridership numbers without
disclosing proprietary information on its major commercial
customers, Westours and Princess Tours. Even if the numbers were
kept confidential, it wouldn't require a great mathematical leap
for a competitor to figure out what its competition carried on the
railroad by looking at the total amount included in the General
Fund budget from that source.
A $5 surcharge becomes a 25% increase on the adult fare and a 50%
increase on the child's fare for the Talkeetna-Hurricane passenger
service. In Whittier, a $5 surcharge in an individual trip raises
the round-trip adult fare 100% from $10 to $20. A book of ten one-
way tickets for $45 would become $95, with most of the cost
attributable to the surcharge. Consumer fares are driven up by the
cost of providing the service and its relative convenience compared
to driving.
The Alaska Railroad enabling legislation requires that all revenues
be kept by the railroad for its purposes and there is no provision
for transfers to the General Fund. Further, the federal act
authorizing the transfer was the basis for inclusion of the
railroad revenue provision inserted in the state enabling law.
There may be conflicts with federal law. Also, the bill may
violate federal statute 49 USC 11501 which provides that a state
cannot impose a tax that discriminates against railroads. The
proposed tax is discriminatory because there is no similar tax on
bus, airplane or ferry passengers.
The railroad uses Federal Transit Authority funds for some of its
capital projects that it was given through the T-21 bill. There
may be a conflict. MR SHEFFIELD said, "It's kind of like robbing
Peter to pay Paul if you tax the railroad which is state-owned."
MR. SHEFFIELD discussed the railroad's net revenues for capital
improvements, and the ways it has improved technology and
strengthened assets to provide better service.
Number 248
SENATOR PEARCE said she is keenly interested in the Anchorage
International Airport rebuild of the domestic passenger terminal.
She understands that the railroad received money from the federal
government through the largesse of Senator Stevens, allowing the
railroad to build the terminal at the airport. In discussions with
members of the tourism industry, she has been told that they think
these dollars ought to be used by the railroad for on-going track
maintenance and building the railbed. They are concerned that
because of the array of directions cruise ship passengers go, the
railroad may not have enough tourists using the rail to be able to
afford overhead and maintenance on the terminal building even
though it's cost-free and will be leased from the airport. She
asked Mr. Sheffield to share financial information that indicates
the terminal can be self-supporting.
MR. SHEFFIELD replied that he didn't have the figures before him
but would follow up with Senator Pearce on it. The railroad can
afford to pay the overhead and maintenance of the building. The
airport is run by a consortium of airlines that don't want the
railroad station to cost them money, and the railroad has assured
them that it won't. It will begin its tunnel operation so the
airport can go ahead with road work next year. The tunnel with a
moving sidewalk will move passengers from the parking garages into
the main atrium of the airport. The railroad will build and pay
for the tunnel which will also benefit the airport. The railroad
will generate enough income from passenger service to handle
overhead.
SENATOR PEARCE asked if the ARR has signed letters of agreement
from tour companies to bring people to the airport railroad
terminal.
MR. SHEFFIELD said no, it has agreements this year with some of the
major cruise ships that will use the Seward turn. Both Princess
Tours and Westours have guaranteed a certain number of passengers.
This year a second train will go to Seward, and a person will have
about 7 different ways to get to Seward and back to Anchorage, a
popular option. The airport terminal won't open until 2002. Next
year the railroad will appear in the cruise ship brochures.
SENATOR PEARCE said that makes a lot of sense, but she's concerned
that the railroad would have enough people using the facility at
the airport terminal.
MR. SHEFFIELD said the airlines will start checking luggage for the
cruise ships at Seward this year so that it no longer will go to
the airport, a big plus for the railroad and the airport. He said
he doesn't doubt that with more ships, once the railroad is
available and competitive on time and dollars, the people will be
there.
CHAIRMAN WARD asked who the railroad competes with. MR. SHEFFIELD
said that with Seward, it's competitive with buses owned by
Princess Tours and Holland America Line. There is no written
agreement they will quit running the buses. The railroad would
haul two loads of 300 cruise ship passengers each, and the railroad
station has a holding area on the second floor for 350 people.
Certain cruise passengers only go to Seward in order to catch a
plane and return home. The railroad will get 40% of the 1500
people on a ship. It will rehab the Seward dock this year as a
passenger dock, with a freight dock next door.
Number 390
MS. CARRIE WILLIAMS, City Manager of Whittier, stated that the City
supports SB 160 with one proviso. While it is appropriate for the
state to seek other means of raising revenues, in the case of
communities such as Whittier that is due to open through the Anton-
Anderson Tunnel in May 2000, the surcharge would constitute in the
interim a burden of a 50% tax. She asked that in these affected
communities some provision be added to the bill allowing their
exemption until June 1, 2000, when road access will be available to
the local residents.
SENATOR LINCOLN asked once the tunnel is built and the residents
have an option, would most people use their own vehicles instead of
the train. MS. WILLIAMS said certainly, the Whittier residents are
not anticipating ever using the shuttle again, parking cars in
Portage or on flatcars. The winter rate currently is about $50
round-trip for a vehicle. There would be no logic in maintaining
that run when the anticipated toll through the tunnel is $15 round-
trip.
MR. SHEFFIELD commented that it is uncertain what will happen to
the shuttle when the road opens. A direct train leaves Anchorage
every morning and services the day cruises and about 7 day boats in
Whittier. Trains would go through the tunnel four times a day with
passengers in the summertime.
CHAIRMAN WARD mentioned a draft amendment to the bill, and asked
the City of Whittier's opinion regarding the transfer of the
Whittier dock to the Alaska Railroad. He said it appears to be a
federally transferred asset to a state-owned asset.
Number 469
MS. WILLIAMS handed out the amendment and said the City has been in
contact with the Department of Defense since the tank farm and
DeLong Dock were closed down. Whittier needs to support its fishing
and freight industries. Since the tunnel ruling and the support of
the courts, Whittier has anticipated increased fishing in the
Sound. The Benedict plant in Anchorage is looking forward to
increased product.
The tidelands under the dock and the dock itself are extremely
important assets to be kept in a public purpose. The city had no
authority over those lands under the federal ownership. If it
becomes surplused, it would go through the standard federal
government procedure, looking first at the needs of other federal
agencies.
Research vessels and private enterprise want to come into Whittier.
The city has received a proposal to expand the private dock areas
to support the excursion fleet. Whittier is developing its tax base
so it can provide government services, as the legislature can no
longer support it with increased revenue sharing and Safe
Communities. The city sees that it needs to bring these entities
in.
Under statute the Alaska Railroad is for rail-essential purpose
only. MS. WILLIAMS pointed on a map to the Alaska Railroad freight
yard. She commented, the waters reach 600 feet right off the
breakwater. She referred to a survey map showing the substantial
tidelands attached to the DeLong Dock. The property fragments the
uplands. All of these issues brought the city to the Department of
Defense in 1997 to ask that it be considered when the property is
surplused.
MS. WILLIAMS said the city thanks the railroad for obtaining the
ground lease on all the non-rail-essential areas above the rail
yard to develop business. It is a shared revenue and the railroad
will see profits "as we privatize everything we possibly can, even
parking and items like that."
The city decided a permit was needed but couldn't obtain it from
the Department of Defense. This year the Alaska Railroad made an
offer to go into jointly permitted use in the interim until the
property becomes surplused. MS. WILLIAMS believed it was
progressing well, not knowing the end result would be a loss of all
title to tidelands and the dock to the Alaska Railroad under
pending draft legislation at the federal level.
CHAIRMAN WARD asked if it would be detrimental for the state if the
property went to the railroad instead of the city.
MS. WILLIAMS said local governments need a preference over lands
within their boundaries for economic development. The state
directive is to become more self-sufficient, so the city is looking
at local hire and diversification. The City of Whittier has 28
acres and must support more business development in freight, fish
and tourism.
CHAIRMAN WARD asked if the congressional delegation succeeded in
transferring the dock to the railroad, would Whittier fishermen be
able to supply the new fish processing plant in Anchorage.
MS. WILLIAMS said although there have been conversations about
joint use, she was not under the impression it would have priority.
With all the new excursion and tourism operations coming in, the
city has no city dock facility, only a recreational dock. A couple
operators lightered off the dock. The AHTNA development would have
more excursion ability from the DeLong Dock. She asked how private
enterprise could compete with capital-free investment of a tax-
exempt entity.
The amendment by Senator Pearce would give the legislature the
oversight to decide where assets could best be utilized. Many
municipalities have properties that the federal government may
surplus.
CHAIRMAN WARD asked if any development has been done on the dock.
MS. WILLIAMS said the federal government has only allowed the
emergency response vans on the dock.
SENATOR LINCOLN referred to a letter from Ms. Williams to the
Department of Defense (DOD) in August 1998 regarding the dock
facilities, and the resolution expressing their desire to obtain
the property and related tidelands. She asked their response.
MS. WILLIAMS said DOD packaged this with their request at the
Alaska level for disposal of that property, sent it to Hawaii and
then back East. Beyond that, the city has heard nothing in writing
until receiving this draft legislation.
TAPE 99-10, SIDE B
Number 583
SENATOR LINCOLN commented it is no surprise, then, to DOD that
Whittier wants the dock.
MS. WILLIAMS said in 1997 when the city was looking at the tank
farm and DOD was trying to find a bidder to use it again for fuel,
the DOD gave her the "heads up." The city contacted Senator
Stevens and he was helpful in defining ownership. She pointed out
the railbelt area and the deep water port.
CHAIRMAN WARD asked if she has calculated a dollar amount the city
would lose if it doesn't get the dock. MS. WILLIAMS replied the
revenue from wharfage is nominal to the loss of economic
development in support of fishermen. The standard tariff is not
part of the issue. The city collects sales tax from the tenders.
As the statute is currently written, the Alaska Railroad is
technically under no obligation to collect local taxation. Local
employment of fishermen is an issue. The road will be a tremendous
asset to their ability to get fresh product to the Benedict plant
in Anchorage.
SENATOR PEARCE asked if the only deep water port availability is
the DeLong Dock and the railroad dock.
MS. WILLIAMS answered yes, that these waters are extremely deep and
there is literally nowhere to build another dock at the current
time. She handed out the HGR Short-term Critical Needs Plan that
identified the DeLong Dock as the commercial fishing dock. If
cruise ships return, they need to be at the head of the bay in the
northwest corner "to avoid the 250 buses per ship coming right into
the middle of our small boat harbor area."
CHAIRMAN WARD invited Mr. Sheffield to join the discussion.
Number 537
MR. SHEFFIELD said he didn't want to leave the committee with the
impression the railroad hasn't cooperated with or tried to help the
City of Whittier. He led the way on the ARR Board to help
Whittier. He thought it was unfair that the state was going to
build a road into Whittier where there isn't a public restroom or
place to park a car, and no money. DOTPF, the city and the
railroad each put in $50,000 to participate in a master plan of
immediate and long-term needs.
The railroad gave the city a long-term lease on all the land that
it doesn't use for essential railroad purposes, mainly the
intermodal facility for unloading freight. It's free for the first
five years, graduating up to a sharing of the profit from the
leasing of the land. Whittier's income is from taxation of
improvements and buildings on the land. It was a benevolent lease
with the railroad providing funds to survey the land into segments
so the person leasing can pay for the survey of the amount of land
they lease.
The railroad has been working for six months with the Corps of
Engineers to get a temporary joint use permit of the DeLong Dock
for the city and the railroad. It is not yet resolved. The
railroad had entered into a Memorandum of Understanding (MOU) that
it thought Whittier would agree to, but it did not. The MOU states
the railroad would make efforts to get the dock into its ownership
and apply to DNR to use the tidelands underneath the dock and 20
feet around it. All other tidelands on the shoreline would be
recommended to go to the City of Whittier. The railroad would also
work to get the tank farm transferred to the city as early as
possible. Part of it will be used for parking and staging of the
road operation. The railroad and the city jointly reserved some
property that will be worked out as tourism facilities are
developed.
MR. SHEFFIELD reiterated that the railroad wants the dock. It has
the marginal wharf already and the railroad dock where the barges
come in every 7 days from Prince Rupert and Seattle. The railroad
could rehab the DeLong Dock and accommodate fishermen as well as
day cruise operators. State Troopers might want to put a boat
there at some point, as well as Fish & Game and the Coast Guard.
The railroad formerly owned the dock, but the Army took it to put
in the fuel pipeline from Anchorage to Whittier. The railroad
thinks it can work out an agreement with Whittier.
Number 442
CHAIRMAN WARD asked if the dock were transferred to the City of
Whittier, did he think the city would work with the railroad.
MR. SHEFFIELD said he didn't know. It would be in the railroad's
and the city's best interest to work together if the dock was
transferred to the railroad. New businesses and commercial fishing
boats will come in. With the road, freight could go out seven days
a week. The railroad will rehab the railroad dock so that barges
can pull up alongside it. Now they go to the marginal wharf. There
isn't a lot of land available.
SENATOR LINCOLN agreed there isn't much land and the Alaska
Railroad takes up a lot of frontage. Referring to the unsigned
MOU, she asked why Whittier couldn't as easily as the ARR develop
the dock facility for cruise ships, day cruises, commercial
fishing, and fish processing. She suggested that perhaps it could
have an agreement with the railroad, and said that parcel would
help the economic development process for that small community.
MR. SHEFFIELD said it's an intermodal facility important to the
railroad's economy. The railroad went to the bank to borrow funds
to rehab the dock, which needs expensive repairs. ARR has the
wherewithal while the City may not, at this time. The railroad is
trying to get the joint use permit.
SENATOR LINCOLN asked if the railroad has started the dialogue with
the federal government on the dock transfer.
MR. SHEFFIELD said Congressman Young put in legislation, initially
unbeknownst to him, to transfer the dock to the Alaska Railroad. He
received a copy of it only the day before yesterday. CHAIRMAN WARD
asked how recently the legislation was introduced, and MR.
SHEFFIELD said he didn't know exactly, but within the past 10 days.
SENATOR PEARCE commented that the railroad already owns every inch
of deep water where a dock to handle large ships could be built in
an area that has road access. MR. SHEFFIELD disagreed, saying the
whole frontage from boat storage to the creek is controlled by the
city and it has a road. SENATOR PEARCE said it can't be accessed
because you can't cross railroad property, so it controls access to
the tidewater. MR. SHEFFIELD said they gave the road to DOTPF
which maintains it.
MS. WILLIAMS countered the DOTPF has been given those properties to
extend the road to the north to meet federal highway standards and
provide a pedestrian path. It's not available, the waters drop off
extremely deep right there. With airspace withheld, DOTPF would not
allow roads off this federal highway into the deeper water, even if
the engineering was there. The railroad has withheld the rights
for a spur track to access those lands if the tank farm is removed.
SENATOR PEARCE said this dock is the only feasible facility for
upgrade. The legislature put a lot of funds into the road to
Whittier to open up access to Prince William Sound, and it doesn't
make sense to invest in access and then have the railroad tie up
all the water access in Whittier. She said she didn't hear
Governor Sheffield talk about any essential railroad business that
it can't already do with the land and the dock it presently owns.
She doesn't support railroad ownership of the last open piece of
land. The public has very little control over what the railroad
does.
MS. WILLIAMS said cruise ships and excursion boats along West Camp
Road have become an impossibility due to DOTPF federal road
standards and airspace requirements, leaving only the head of the
bay.
Number 271
SENATOR HALFORD commented that we have two creations operating
under charter and law of the State of Alaska who both have
legitimate interests and constituencies that the legislature wants
to serve. The railroad can afford to give Whittier some land. He
said he didn't know if he was smart enough to know where that
should be or how it should work, but the two entities ought to be
able to figure it out.
MS. WILLIAMS pointed out triangular lands on long-term lease with
a fee split with the railroad, allowing for development. That is
why the city has worked to obtain the joint use permit for the
DeLong Dock, and when the draft legislation came from Don Young's
office, "it was quite a shock."
SENATOR HALFORD discussed the unsigned MOU that would produce two
lots, with the railroad as the lead agency, and asked if it was
somebody's advocacy point of view and how far from agreement they
are.
MR. SHEFFIELD replied that he was under the impression that the
City Manager had agreed to the MOU and would sell it to her
council. He said that didn't happen because it wasn't presented
positively to them.
MS. WILLIAMS said she and the Mayor rejected the MOU at the last
meeting in February. They felt the compromise was that the railroad
had the financial means to maintain the physical structure of the
dock, and the city had adjacent tidelands, so the city would
receive the tidelands and the railroad would receive the dock with
a joint use purpose designation. The city would lease the
tidelands to the owner of the capital improvement.
SENATOR HALFORD said unless there is a legislative solution that
may fly in the face of congressional action, "what we should be
doing is locking everybody in a room and saying nobody gets food or
water until you agree."
MS. WILLIAMS clarified for Senator Lincoln that the 6.13 acres is
tidelands and a fraction of filled uplands.
CHAIRMAN WARD asked if the railroad's position is to wait for the
federal legislation to transfer the dock.
MR. SHEFFIELD said he didn't know if the transfer would happen, but
he's going forward with the Corps of Engineers joint use permit so
the railroad can use the dock this year. The railroad would still
do an MOU with the City of Whittier.
SENATOR HALFORD commented that the argument is over the terms of
the MOU.
MS. WILLIAMS said the intent of the federal legislation is total
ownership of the tidelands, filled tidelands and dock structure
itself. Consequently, the city has brought this request for amended
language to the statute. It should be an open competitive process
for assets, and the city has contractors who could operate the
dock.
SENATOR LINCOLN said in Galena, Ft. Yukon and Ft. Greely the
Department of Defense works with the community to surplus its
properties. She was puzzled about where the federal legislation
came from.
TAPE 99-11, SIDE A
Number 003
MR. SHEFFIELD replied his land person has worked for six months
with the Corps over the temporary use permit. He was unaware that
the city asked DOD for the dock transfer.
CHAIRMAN WARD asked for discussion on SB 160.
SENATOR HALFORD said he's reluctant to either amend it or move it.
He'd like to see the city and the railroad "get together and make
a deal."
CHAIRMAN WARD said the railroad opposes SB 160.
SENATOR LINCOLN said the effective date should be June 1, 2000 to
exempt the affected communities, not January 1, 2000, to avoid a
double surcharge when the tunnel opens. She would want to amend
the bill.
SENATOR HALFORD suggested that amendment, and amending the
surcharge to $5 not to exceed 15% of the ticket price in Finance
Committee. He said $5 to run the shuttle to Whittier would be too
high. He would be willing to move the bill out if that was the
wish of the committee, but he repeated that ultimately he would
like to see Whittier and the Alaska Railroad work out who gets what
part of the dock.
Number 092
SENATOR PEARCE said she didn't disagree but she didn't think there
should be yet another entity receiving federal property without the
legislature knowing about it, because it creates a long-term
liability and it could also create an anti-competitive situation.
She wouldn't have a problem with the railroad wanting land for
essential railroad services, but its lobbyist in D.C. dropped
something in a bill that the legislature wouldn't have known about
without the vigilance of the City of Whittier. SENATOR PEARCE said
she is tired of the largesse of the congressional delegation who
don't plan in conjunction with the state legislature, which now has
a billion dollar fiscal gap.
SENATOR PEARCE moved her Amendment D1. The text follows.
Page 1, line 1, following "Act":
Insert "relating to acquisition of federal land or federal
property by the Alaska Railroad Corporation;"
Page 1, following line 3:
Insert new bill sections to read:
"*Section. 1. AS 42.40.285 is amended to read:
Sec. 42.40.285. Legislative approval required. Unless
the legislature approves the action by law, the corporation may not
(1) exchange, donate, sell, or otherwise convey
its entire interest in land;
(2) issue bonds;
(3) extend railroad lines; this paragraph does
not apply to a spur, industrial, team, switching, or side track;
(4) lease land for a period in excess of 35 years
unless the corporation reserves the right to terminate the lease if
the land is needed for railroad purposes;
(5) apply for or accept a grant of federal land or
federal property within a municipality; before approving an action
under this paragraph, the legislature must determine that the
federal land or federal property is required for essential railroad
purposes.
*Sec. 2. AS 42.40.410 is amended to read:
Sec.42.40.410. Federal land. Except as provided in
AS 42.40.285(5), the [THE] corporation may submit applications on
its own behalf as an instrumentality of the state for acquisition
of federal land available under federal law that will enhance the
essential railroad operations of the corporation if it is available
under a federal law other than the Alaska Statehood Act of 1958
(P.L. 85 - 508, 72 Stat. 339), as amended. The corporation may
receive in its own name conveyances of all interest in federal
land."
Page 1, line 4:
Delete "*Section 1."
Insert "Sec. 3."
Renumber the following bill section accordingly.
Without objection, the amendment was adopted. CHAIRMAN WARD asked
the wish of the committee.
SENATOR PEARCE moved CSSB 160(TRA) out of committee with individual
recommendations and accompanying fiscal note. Without objection, it
was so ordered.
SENATOR PEARCE asked Mr. Sheffield if Mr. Zane is lobbying for the
Alaska Railroad in Washington. He replied that he is. She asked
how he could not have known that Mr. Zane had the amendment put in.
MR. SHEFFIELD said he was out of town for a few days and didn't
know when it was drafted or when Congressman Young would introduce
it. He did know the railroad was going to ask for it. It looked
like a long process to get the dock transferred, and it was
advanced to the railroad that legislation might be a solution.
Number 154
MR. SHEFFIELD stated for the benefit of Senator Halford who wasn't
present earlier in the hearing that SB 160 would be devastating to
the railroad for the commuter business it has planned for 2002 or
2003. He said the head tax makes it non-competitive, and it's
discriminatory and unfair.
With no further business before the committee, CHAIRMAN WARD
adjourned at 3:20 p.m.
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