Legislature(2001 - 2002)
04/10/2001 01:37 PM Senate TRA
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ALASKA STATE LEGISLATURE
SENATE TRANSPORTATION COMMITTEE
April 10, 2001
1:37 p.m.
MEMBERS PRESENT
Senator John Cowdery, Chair
Senator Jerry Ward, Vice Chair
Senator Robin Taylor
Senator Gary Wilken
Senator Kim Elton
MEMBERS ABSENT
All Members Present
COMMITTEE CALENDAR
SENATE BILL NO. 152
"An Act relating to the handling of and interest on contract
controversies involving the Department of Transportation and Public
Facilities or state agencies to whom the Department of
Transportation and Public Facilities delegates the responsibility
for handling the controversies."
MOVED SB 152 OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 8(FIN) am
"An Act establishing the Legislative Pioneer Road Development Task
Force; and providing for an effective date."
MOVED CSHB 8(FIN)am OUT OF COMMITTEE
SENATE BILL NO. 44
"An Act establishing an Alaska Toll Bridge and Causeway Authority;
and providing for an effective date."
MOVED SB 44 OUT OF COMMITTEE
SENATE BILL NO. 45
"An Act making an appropriation for the design of the Knik Arm
crossing; and providing for an effective date."
MOVED SB 45 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
SB 152 - No previous Senate committee action.
HB 8 - No previous Senate committee action.
SB 44 - See Transportation minutes dated 3/22/01 and 4/3/01.
SB 45 - See Transportation minutes dated 3/22/01 and 4/3/01.
WITNESS REGISTER
Janet Seitz
Staff to Representative Rokeberg
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Testified for the sponsor of HB 8.
Dennis Poshard
Special Assistant
Department of Transportation &
Public Facilities
3132 Channel Dr.
Juneau, AK 99801-7898
POSITION STATEMENT: Opposed to HB 8 and answered questions about
SB 44, SB 45 and SB 152.
Paula Terrell
Vice President
Thane Neighborhood Association
Juneau, AK
POSITION STATEMENT: Opposed to studying a road from Juneau to
Atlin [HB 8].
Susan Schrader
Alaska Conservation Voters
PO Box 22151
Juneau, AK 99802
POSITION STATEMENT: Opposed to the task force membership in, and
inadequate fiscal note for, HB 8.
Doug Gardner
Assistant Attorney General
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Answered questions about SB 152.
Kevin G. Brady
745 W. 4th Ave., Suite 502
Anchorage, AK 99501
POSITION STATEMENT: Testified in support of SB 152.
Mike Miller
Association of General Contractors of Alaska
7101 Debarr Rd.
Anchorage, AK 99504
POSITION STATEMENT: Testified in support of SB 152.
Katelyn Markley
Alaska Industrial Development and Export Authority (AIDEA)
813 W. Northern Lights
Anchorage, AK 99503
POSITION STATEMENT: Discussed the financial impact of SB 152 on
AIDEA.
ACTION NARRATIVE
TAPE 01-13, SIDE A
Number 001
CHAIRMAN JOHN COWDERY called the Senate Transportation Committee
meeting to order at 1:37 p.m. Senators Ward, Elton and Cowdery were
present. The first order of business to come before the committee
was HB 8.
HB 8-LEGIS.PIONEER ROAD DEVELOPMENT TASK FORCE
MS. JANET SEITZ, staff to Representative Rokeberg, sponsor of HB 8,
described the bill as follows. HB 8 sets up a Legislative Pioneer
Road Development Task Force consisting of representatives from the
Alaska Trucking Association, Operating Engineers, Teamsters Union,
Alaska Chamber of Commerce, Associated General Contractors, and
other organizations. The task force's job would be to identify
roads that are important to the future of the economic development
of Alaska and to study the feasibility of upgrading and developing
some of these roads. In addition, the task force is to consider
rights-of-way under the RS 2477 in order to protect the state's
interest in those rights-of-way. It should also recommend a
schedule of appropriations subject to federal and other funds. HB
8 contains a list of 25 road projects to review and allows the
review of other road projects with merit. The task force is to
submit a written report of its findings and recommendations to the
legislature before the second session of the 22nd Alaska
Legislature convenes. The act will be repealed on March 15, 2002.
CHAIRMAN COWDERY noted that when federal funds are involved, the
roads have to meet standards that make the projects expensive. He
asked how that is addressed in HB 8.
MR. SEITZ said the Department of Transportation and Public
Facilities' (DOTPF) staff has testified in other committees that
Representative Rokeberg's vision of gravel roads would qualify for
federal funding. She pointed out that Representative Rokeberg
submitted amendments for the committee's consideration.
SENATOR ELTON commented that DOTPF has gone through a very
extensive planning process [the Statewide Transportation
Improvement Process - STIP]; it may be too early to tell how
successful that process has been. The benefit to that process is
that it was a grounds-up approach to transportation planning
instead of a top-down approach. He asked how Representative
Rokeberg came to include some roads and transportation corridors
that were not included in that plan.
MS. SEITZ said the roads listed in HB 8 come from the work done by
the House Special Committee on Economic Development, Trade and
Tourism over the last few years. She provided committee members
with a packet of information from that committee. She pointed out
it is not the sponsor's intention to interfere with the STIP, but
instead to add to that planning process and to give DOTPF
information that it might not have otherwise looked at.
CHAIRMAN COWDERY asked if the task force will set the priorities
for these roads.
MS. SIETZ explained that the task force will identify and establish
a priority ranking for projects to develop or upgrade roads and
submit the list to the legislature.
CHAIRMAN COWDERY asked a representative from DOTPF to testify.
MR. DENNIS POSHARD, Special Assistant, DOTPF, stated the department
has some objections to HB 8. He said if money was no object, DOTPF
would support the study and construction of many of the corridors
listed. But, the fact of the matter is, DOTPF is operating with a
constrained budget, so it is concerned about building up
expectations to build roads that may not be built. DOTPF is also
concerned that should those roads be built, added maintenance will
be necessary. Some of the corridors on the list will create
substantial maintenance burdens. He said that one of the repeated
arguments in support of HB 8 is that DOTPF has not been building
any new roads. DOTPF has built some new small segments of roads
recently; the limiting factor is one of dollars. He pointed out
that when one balances the fact that over 200 miles of the Dalton
Highway is under contract to be paved, that project is a much
higher priority than most of the corridors mentioned in HB 8. The
issue for DOTPF is one of prioritization and not hesitancy to build
new roads; its priority has been to upgrade existing roads. DOTPF
believes HB 8 will create an unnecessary task force that will build
up expectations about road corridors that don't pencil out from a
dollars and sense perspective and from a prioritization
perspective.
Number 614
CHAIRMAN COWDERY commented the Alcan Highway helped Alaska and a
lot of the pioneer roads.
SENATOR TAYLOR asked Mr. Poshard to clarify what he meant when he
talked about building expectations.
MR. POSHARD said this task force will recommend roads that most
would agree will help develop corridors in Alaska but whether or
not it is realistic that those roads will be built when they are
viewed from the perspective of statewide priorities is not known.
He pointed out that DOTPF has done studies on many of these
corridors already. DOTPF looked at a road from Bethel to Napaskiak,
which is a short distance, but it would have cost almost $5 million
per mile to build. The road to Nome is currently being studied in
the Northwest plan and maybe recommended in that plan. The road to
Cordova is part of the Prince William Sound planning process. The
community of Cordova is split on the issue and the ferry service
improvements pencil out much better from a dollar perspective. He
noted that several of the corridors listed in the bill have already
been studied and determining whether a road segment will be the
best use of money without taking into consideration rail, barging,
airport improvements and alternative means of transportation would
be a disservice in building expectations on the part of the public.
SENATOR TAYLOR asked who decides what is realistic.
MR. POSHARD said that DOTPF uses a public process when doing
regional plans that involves the general public. The regional
plans use economic models, transportation cost models and
preliminary engineering studies.
SENATOR TAYLOR asked who sets the policy carried out by DOTPF.
MR. POSHARD said DOTPF operates under the constraints set in
statute.
SENATOR TAYLOR commented the legislature follows a very public
process too. He said he finds Mr. Poshard's testimony to be
arrogant and offensive in that he indicated that DOTPF will
determine, on everyone's behalf, what is realistic. He stated the
Legislature determines what is realistic and it will set the policy
and asks the departments to carry those policies out. The
Legislature uses a public process to set policy and the reality of
that policy should not get measured by a bureaucrat in DOTPF. He
asked Mr. Poshard to reconsider some of his comments and to assist
the committee in its efforts to discern what the public believes
are priorities.
MR. POSHARD apologized and said his comments were not intended to
offend. He said he was trying to point out that DOTPF uses a
public process that is federally required. It follows that process
to determine how best to program in the resources that the federal
government has given the state to spend on transportation. In
addition, DOTPF has to come to the Legislature for approval of its
capital budget every year, and that will not change, so the
Legislature ultimately has the final say in what DOTPF spends the
federal transportation dollars on.
CHAIRMAN COWDERY noted that Senator Wilken had a proposed
amendment.
SENATOR WILKEN moved to adopt Amendment 1 and explained that it
will add an item (27) for a roughly 60 mile connection from Chena
Hot Springs Road northeast to Circle Hot Springs Road. The
addition would connect and make a loop from Fairbanks to Circle Hot
Springs and down the Steese Highway.
CHAIRMAN COWDERY noted that with no objection, Amendment 1 was
adopted.
SENATOR TAYLOR moved to adopt Amendment 2, to add item (28) to the
list of projects to study a road across the Cleveland Peninsula.
CHAIRMAN COWDERY asked if that is the Bradfield Canal Road.
SENATOR TAYLOR said it would be an extension of it. The Bradfield
Canal Road would run from the tip of Bradfield Canal into British
Columbia. The Cleveland Peninsula road would be necessary to
connect Ketchikan to the Bradfield Canal Road.
SENATOR ELTON commented that nothing in HB 8 precludes the task
force from looking at any other projects. He said he will not
object to the amendment but advised committee members that he plans
to offer an amendment that will bring balance; it will remove a
project.
SENATOR TAYLOR added that, regarding Amendment 2, most of the roads
on Revilla Island are logging roads and by interconnecting those
and building two small bridges, one could drive out of Ketchikan.
CHAIRMAN COWDERY asked if there was any opposition to Amendment 2.
There being none, Amendment 2 was adopted.
SENATOR ELTON moved to adopt Amendment 3, to remove on page 3, line
27, item number (22), a road from Juneau to Atlin, British
Columbia. He said he believes the problem with HB 8 is that it
uses a top-down approach instead of a bottom-up approach beginning
at the community level. He believes the Southeast Transportation
Improvement Plan would be an appropriate place to make these
decisions. He noted he has received a lot of comments about HB 8,
specifically about the road from Juneau to Atlin. The vast
majority of people who contacted him oppose the inclusion of that
road. Deleting that road from the bill will accurately reflect the
opinions he's heard and if the community wants such a road, it
should be discussed at the community level first.
REPRESENTATIVE ROKEBERG commented that the Juneau to Atlin road was
added at the request of Representative Hudson from Juneau when the
bill was heard in the House Transportation Committee.
SENATOR WILKEN asked where Atlin is located and whether such a road
would connect to a road system so that he could drive to Juneau.
SENATOR ELTON said it does. Atlin is a short distance from Juneau
over the ice field. The road would run up the Taku River and into
Atlin, connecting with the Canadian road system.
SENATOR WILKEN asked Senator Elton whether he would prefer to
remove it from the bill or to add it to the top of the list.
SENATOR ELTON said he would prefer that it be removed.
SENATOR TAYLOR said he has also received comments from many people
from Juneau that favor a road to Atlin. He pointed out the Atlin
road could be built for a fraction of the cost of any other
accesses in or out of the community. But for the interference by
this Administration on development of the Tulsequah Chief Mine and
the permits that have already been granted, that road would be
there today. This road would go from Thane Road through Sheep
Creek to the Tulsequah Chief Mine Road and would not involve the
environmental impacts that would occur on the eastern Lynn Canal
route and it would cost less to maintain.
SENATOR ELTON said this road has been part of an ongoing study and
that it was part of the access issue study. The professionals and
engineers came to a different conclusion. Many of the people that
contacted his office use the Taku River as a sports destination,
commercial fish in that area, or are from the neighborhood through
which the road would run. He repeated that these kinds of
decisions need to be made at the local level. He added that one of
the reasons the Tulsequah Chief Mine is not in operation has to do
with First Nations in Canada.
CHAIRMAN COWDERY called for a roll call vote on Amendment 3.
Senator Elton voted in favor, Senators Ward, Taylor, Wilken and
Cowdery voted against, therefore Amendment 3 failed.
REPRESENTATIVE ROKEBERG asked the committee to consider another
amendment (Amendment 4) that would change the entity that appoints
the civil engineer to the task force from the State Board of
Registration for Architects, Engineers and Land Surveyors to the
Alaska Professional Design Council. He noted this amendment was
requested by the State Board.
SENATOR TAYLOR moved to adopt Amendment 4.
CHAIRMAN COWDERY announced that with no opposition, Amendment 4 was
adopted.
SENATOR TAYLOR noted he had a proposed amendment in his packet that
defines a rural area.
SENATOR WARD asked to see a copy of the amendment as he was not
comfortable with new definitions of the word "rural." He asked if
"rural" is defined in current law to be anything 50 miles from
Anchorage.
CHAIRMAN COWDERY said he did not know.
SENATOR TAYLOR noted that he would have to oppose the amendment if
it is offered because it says that none of the towns visited by the
Alaska Marine Highway System in Southeast Alaska would be
considered rural, such as Angoon and Hoonah.
SENATOR WARD asked Representative Rokeberg what the intent of the
proposed amendment is.
REPRESENTATIVE ROKEBERG said the task force will have four members
appointed from rural areas. His intent was to make sure that the
task force had representation from the rural parts of the state.
CHAIRMAN COWDERY asked Representative Rokeberg if he sponsored the
amendment.
REPRESENTATIVE ROKEBERG said that is correct.
SENATOR WILKEN asked Representative Rokeberg how strongly he felt
about the amendment.
REPRESENTATIVE ROKEBERG said he would defer to the wisdom of the
Senators on this issue.
SENATOR TAYLOR moved SCS CSHB 8(TRA) from committee with individual
recommendations.
CHAIRMAN COWDERY noted that two people were waiting to testify.
MS. PAULA TERREL, Vice President of the Thane Neighborhood
Association, asked the committee to rescind its action on failing
to adopt Amendment 3. The Thane Neighborhood Association is not
opposed to HB 8, but it does oppose a road from Juneau to Atlin.
The association opposes such as a road for the following reasons:
· Heavy avalanche danger;
· The road would travel through a neighborhood that currently
has a dirt road;
· The road would travel through the Dupont area, which is
heavily used by local, tourism, and recreational groups;
· In the Juneau access road study the Atlin road project was
ruled out because the British Columbia government opposed that
portion of the road;
· High maintenance costs;
· The First Nations in British Columbia have filed a lawsuit to
stop development of the Tulsequah Chiefs Mine, which is why
the permit for a road to that mine has been held up.
The Thane Neighborhood Association also supports the commercial
fishing groups and the Taku River homeowners association, groups
that oppose this road.
SENATOR TAYLOR said he completely agrees with Ms. Terrell and that
it's not his intent to take a road out past Thane Road because of
the reasons she stated. He noted there is a hole through Mt.
Roberts so if a tunnel was punched through it, the road would never
come near the Thane Road neighborhood.
MS. SUSAN SCHRAEDER, representing Alaska Conservation Voters (ACV),
said ACV has several concerns with this legislation. Last month,
the Senate Transportation Committee heard testimony on SB 3, a bill
that would authorize an appropriation to do a study of North Denali
access. A major criticism of the Denali Task Force was that they
thought the membership of that task force was totally imbalanced
with members opposed to a northern access route. She believes the
same criticism can be leveled at the Pioneer Road Task Force. It
is almost exclusively weighted with pro-road advocates. Alaskan
history has shown, time and again, that road projects are very
controversial and the best way to avoid some of that controversy is
to have a good public process. The fiscal note associated with
this bill does not provide for many local hearings or notification
of comment periods. The task force should be funded sufficiently
to allow for a meaningful public process so that the task force can
determine what communities want. Ms. Schrader said a healthy
economy for Alaska will not be found by looking backwards at 80
year old rutted tractor trails. She encouraged legislators to put
its time and resources into meaningful studies to improve the
transportation needs of the state that will enhance economic
opportunities. HB 8 will establish a controversial, faulty process
to take a look backwards. She asked the committee to oppose the
bill.
SENATOR TAYLOR moved and asked unanimous consent that SCS CSHB
8(TRA) move from committee with individual recommendations. There
being no objection, the motion carried.
SB 44-ALASKA TOLL BRIDGE AND CAUSEWAY AUTHORITY
SB 45-APPROP: DESIGN OF KNIK ARM CROSSING
VICE CHAIRMAN WARD asked Ms. Brown to present SB 44 and SB 45.
MS. LORETTA BROWN, staff to Senator Ward, sponsor of both bills,
explained that SB 44 and SB 45 are related. SB 44 establishes a
toll bridge authority and SB 45 would facilitate the building of a
Knik Arm causeway. The bills are essentially the same as bills
introduced in the Thirteenth Alaska Legislature. The proposed
legislation would appropriate $1 million in state general funds to
form an authority and to design a crossing that will span Cook
Inlet from the Port of Anchorage to Point Mackenzie. Eighty
percent of construction costs will be covered by federal funds.
The causeway authority will issue transportation bonds for up to 20
percent of the cost and collect tolls to repay the bonds.
Congressman Young has stated that the Knik Arm causeway is one of
his two top priorities.
SENATOR TAYLOR asked Mr. Poshard if DOTPF has done any studies on
the Knik Arm causeway.
MR. POSHARD informed the committee that some studies were done in
the mid-1980s.
SENATOR TAYLOR asked whether DOTPF studied alternative methods of
transportation such as high speed ferries.
MR. POSHARD said he does not know what alternatives were studied.
SENATOR TAYLOR asked whether DOTPF decided a causeway was a
realistic project.
MR. POSHARD said DOTPF believes it should take a hard look at this
project and supports the appropriation to get into the
environmental process. DOTPF requested $20 million recently
through the congressional delegation for the environmental phase of
the Knik Arm causeway. Congressman Young has been very supportive
of that request.
SENATOR TAYLOR maintained that someone must have decided the
project is realistic if those funds were requested.
VICE-CHAIRMAN WARD explained that the Thirteenth Legislature
appropriated $5 million for a study for the Knik Arm causeway. One
component was the "do nothing" proposal and that is where the
ferries came in or where people would continue to drive the
existing route. He was the sponsor of that legislation and at that
time Congressman Young was not in his current position.
SENATOR TAYLOR moved SB 44 from committee with individual
recommendations.
VICE-CHAIRMAN WARD announced that with no objection, SB 44 moved
from committee.
SENATOR TAYLOR moved SB 45 from committee with individual
recommendations.
VICE-CHAIRMAN WARD announced that with no objections, SB 45 moved
from committee. He then stated the committee would take up SB 152.
SB 152-DOTPF-RELATED CONTRACT CLAIMS
MR. DON SMITH, staff to Senator Cowdery, sponsor of SB 152,
explained that the measure relates to the handling and interest on
contract controversies involved in DOTPF. The proposed legislation
would simply require that when a contract settlement with DOTPF is
in dispute and finally settled in favor of the contractor, interest
must be paid to the contractor on the settlement amount for the
time the contract was in dispute. The interest would accrue at the
rate applicable to judgments and interest in state statute.
TAPE 01-13, SIDE B
Disputes do occur and many take way too long to settle. There is
no urgency to settle on the state's part, therefore interest
expenses would increase the settlement incentive. The state earns
interest on the money while it is under dispute and, many times,
financially strapped contractors end up settling simply because
they can't fight the time delay. Contractors have to pay their
expenses while the dispute is ongoing. SB 152 would provide
fairness. Letters of support from the Alaska General Contractors
and others have been placed in members' packets.
SENATOR TAYLOR said he met with Dick Hatten (ph), the executive
director of the Alaska General Contractors and learned that this
would apply to cases that do not go to court.
MR. SMITH said that is correct.
SENATOR TAYLOR clarified that these cases are arbitrated and
involved claims for cost overruns or change orders.
VICE-CHAIRMAN WARD said he would have DOTPF staff address the
details.
SENATOR TAYLOR said he believes if a case is taken to court, the
winning party would have the right to pre-judgment interest.
Mr. Dennis Poshard, Special Assistant, DOTPF, and Mr. Doug Gardner,
Assistant Attorney General, took the witness stand.
SENATOR TAYLOR asked Mr. Gardner if SB 152 will apply to matters
that are being litigated.
MR. GARDNER said the bill applies to administrative claims. He
explained that an example would be a situation in which a
contractor is building a road and a condition changed. Alaska law
requires the contractor to bring a claim before DOTPF under the
procurement code. There are a variety of different levels of
review and a final decision is made by the Commissioner after a
review by a hearing officer has taken place. The party can appeal
the decision in Alaska Superior Court. If appealed to the court
system, the case will always be considered an appellate case.
VICE-CHAIRMAN WARD took public testimony.
MR. KEVIN BRADY, an attorney with Olds, Morrison, Rinker and Baker,
informed the committee that he has had the opportunity to litigate
approximately four claims through the administrative hearing
process, even up into the judicial review process. The cases are
large and complex involving tens of thousands of documents. The
process itself takes anywhere from 24 to 60 months. During that
period of time, no interest accrues on the contractor's claim, to
the financial detriment of the contractor. Private owners pay
prejudgment interest, federal agencies pay prejudgment interest,
municipalities and cities pay pre-judgment interest, so there is no
legitimate basis for DOTPF, or any other state agency, to withhold
pre-judgment interest and treat contractor claimants disparately
from other tort or contract claimants. He offered to answer
questions.
VICE-CHAIRMAN WARD asked if any law exists that prevents DOTPF from
paying pre-judgment interest now.
MR. BRADY said to his knowledge, there is not. He said sometime in
1998, DOTPF made the decision, based on what he believes is an
erroneous interpretation of an Alaska Supreme Court case, that it
no longer has to pay.
VICE-CHAIRMAN WARD asked Mr. Gardner to elaborate on that case.
MR. GARDNER said he is not counsel of record in that case but that
case is pending before the Alaska Supreme Court at this time.
SENATOR TAYLOR asked what shift or change of policy DOTPF made in
1998 based upon an interpretation of a Supreme Court decision.
VICE-CHAIRMAN WARD then asked if the 1998 case is being appealed.
MR. GARDNER said the issue that he believes was raised in the case
that Mr. Brady was referring to involves a 1996 Alaska Supreme
Court decision named Danko Exploration v. State (924 P2nd 432). He
noted it has been a fairly long standing interpretation of the
state's status of its sovereign immunity that the state only agrees
to be sued in capacities where it waves its sovereign immunity. He
said:
I don't believe that the issue has been raised, at least
not to my knowledge, and again the attorney in the case
may know more but I don't believe the question of pre-
judgment interest has come up very often to the extent
that we have begun litigating it in this case is because
the claimant, who Mr. Brady represents, raised the issue.
But, we believe if the - and I don't want to - I don't
think it would be useful to go through the Danko decision
here, but I think that if the decision is read, it's my
sense that this has been a long standing interpretation
of Alaska law. The pre-judgment interest occurs when the
state waives its sovereign immunity on that issue and it
has not, according to our reading of the Danko case by
the Alaska Supreme Court and by the Superior Court judge
that visited this issue on two occasions and found that
the state had not waved its sovereign immunity on this
issue. So, I would say at this point, it was the
Department of Law's position that pre-judgment interest
wasn't - couldn't be awarded on these claims and that
position has now been validated by a Superior Court judge
and will be heard by the Supreme Court. So, I wouldn't
say it's an erroneous interpretation of the law, it seems
to be accurate according to the court.
SENATOR TAYLOR asked if, prior to the Danko case when the state
paid [indisc.].
MR. GARDNER said he is not aware of any case in which the state
paid pre-judgment interest on a disputed claim that was going
through the administrative process. He noted there are other cases
cited within Danko that suggest that this line of logic has gone
back further than 1996.
SENATOR TAYLOR asked Mr. Brady if he had any further comment.
MR. BRADY said he would like to correct several of Mr. Gardner's
statements. He stated the commissioner's office had authorized
awards of pre-judgment interest, even up to and including 1998.
[Mr. Brady's next statement was inaudible]. He concluded by saying
the Department of Law took the position that pre-judgment interest
was an inappropriate component of the award, and since then DOTPF
discontinued the practice of awarding pre-judgment interest to
contract claimants.
VICE-CHAIRMAN thanked Mr. Brady.
MR. MIKE MILLER, the immediate past president of the Associated
General Contractors of Alaska, stated support for SB 152. He
stated that in his experience, pre-judgment interest became a
controversy in the late 1980s in the Northern region. That
controversy was settled at the regional level after almost three
years of "butting heads." He pointed out that in public works
construction, a contractor has no choice but to complete the work
or perform the work that he's supposed to do. Even if there is a
dispute, the contractor must complete the work otherwise the
contractor will be liable for breach of contract. Given the
state's ability to drag claims out forever, contractors are at a
huge disadvantage to recover. The time value of money is a basic
principle in our economic society and the contractors only want to
be treated fairly. SB 152 will quell any doubt as to whether state
sovereignty is given up. It corrects an oversight; the wording of
SB 152 was in the model procurement code as it was contemplated by
the legislature in the 1980s, but fell out for some reason.
MS. KATELYN MARKLEY, Development Specialist with the Alaska
Industrial Development and Export Authority (AIDEA), said that
AIDEA works through DOTPF under the procurement rules. Disputes do
arise when construction projects are underway and, in the past,
AIDEA has been able to settle those disputes through negotiated
settlements. She said it is difficult to estimate a fiscal note
for this bill. It could range from zero, if no disputes occur, to
the millions. She told the committee that the contractor on the
Healy [indisc.] gold project originally had a claim in the
millions. The settlement, just based on an 18 month time period,
could have been based on a $10 million claim, and could have cost
an additional $1.6 million [in pre-judgment interest]. AIDEA
settled the claim for approximately $1.1 million. Had AIDEA paid
interest based on the dates the claim when filed, the cost would
have been an additional $188,000. AIDEA didn't pay interest and
once the claim was settled, the claim was paid the following month.
Ms. Markley repeated that she cannot provide a fiscal note but
should this arise, it could have an impact on AIDEA projects.
VICE-CHAIRMAN WARD noted there was no further testimony.
SENATOR TAYLOR moved SB 152 from committee and asked for unanimous
consent.
VICE-CHAIRMAN WARD announced that with no objection, the motion
carried and that the bill does not have any further referrals.
With no other business to come before the committee at this time,
he adjourned the meeting at 2:40 p.m.
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