Legislature(2013 - 2014)BARNES 124
02/28/2013 02:00 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| HB23 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 23 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 23-KNIK ARM BRIDGE AND TOLL AUTHORITY
2:18:03 PM
CHAIR P. WILSON announced that the only order of business would
be HOUSE BILL NO. 23, "An Act relating to bonds of the Knik Arm
Bridge and Toll Authority; relating to reserve funds of the
authority; relating to taxes and assessments on a person that is
a party to an agreement with the authority; and establishing the
Knik Arm Crossing fund."
2:18:54 PM
REX SHATTUCK, Staff, Representative Mark Neuman, Alaska State
Legislature, on behalf of Representative Neuman, sponsor of HB
23, stated the bill would amend the Knik Arm Bridge and Toll
Authority's (KABATA) enabling statutes to provide for a
successful procurement of the Knik Arm Crossing (KAC) project
and to generate the best value for the state. This bill was
written in consultation with KABATA.
2:20:10 PM
MICHAEL FOSTER, Chair, Knik Arm Bridge and Toll Authority
(KABATA), Department of Transportation & Public Facilities
(DOT&PF) offered to give a brief recap presentation.
MR. FOSTER turned to KABATA's mission [slide 1]. He stated that
the KABATA was set up to advance the Knik Arm Crossing (KAC).
He pointed out the corridors and road alignments in the
Southcentral Alaska area, including for the Glenn Highway and
the Parks Highway, Knik-Goose Bay Road, and the Port MacKenzie
Rail extension. Additionally, he mentioned the population
trends in Southcentral Alaska, noting that 54 percent of
Alaskans live in this area. He reported that approximately
300,000 live in the Anchorage Bowl area and about 90,000 in the
Matanuska-Susitna area based on the Anchorage metropolitan
census figures [slide 5]. He discussed the 2035 population
forecast that shows that over the next 25 years substantial
growth will occur in the Matanuska-Susitna Borough (MSB) area.
He related that different population forecast models predict
population increase estimates ranging from 115 percent to 119
percent over the 25 year period with significant growth in the
Anchorage area predicted from the Eagle River Bridge north to
Eklutna. In fact, this area is estimated to grow by 74 percent
over the next 25 years. Additionally, the Anchorage bowl is
nearly out of available land for residential, business,
commercial, and industrial purposes.
2:22:29 PM
MR. FOSTER turned to the 2035 population statistics [slide 6].
He said some discussion has surrounded the use of the University
of Alaska's (UAA) Institute of Social and Economic Research
(ISER) figures. He deferred to Representative Neuman to address
that issue. The Woods and Poole Economic Inc.'s population
forecast model, which is an independent third party model, and
KABATA's model all show that in 2035, significant growth will
occur in Southcentral Alaska in the Matanuska-Susitna area.
MR. FOSTER turned to slide 7, entitled, "Historic and Projected
Population Trend 1985 to 2035." He highlighted the 2035
projections, which shows nearly a linear curve related to the
availability of land.
2:23:45 PM
MR. FOSTER said that population growth drives traffic increases.
In 1985, Eklutna had an increase of about 16,000, in 2010 at
29,000, and traffic is forecasted in 2035 at over 60,000
vehicles [slide 9]. The growth at Hiland Road - at the six-lane
point - from 2010 to 2035 is estimated to increase from 50,000
to over 110,000 based on the population projections from Eagle
River to Eklutna and population projections from the Matanuska-
Susitna Borough (MSB). This slide graphically shows the
population points based on 2010 average daily traffic and using
the 2035 estimated traffic [slide 11].
2:24:41 PM
CHAIR P. WILSON pointed out ISER's population estimate is
different from KABATA's estimates. She asked whether he could
explain the difference in the estimated population projections.
MR. FOSTER deferred to Representative Neuman to address.
2:25:18 PM
MR. FOSTER discussed what happens without a bridge [slide 13].
He explained that in 2008, the DOT&PF considered transportation
needs based on the traffic and population demands going forward,
in which the Glenn Highway from Eagle River north would become a
six-lane highway to handle the increased traffic. Further, the
Glenn Highway from downtown Anchorage to Eagle River north would
become an 8-10 lane roadway, based on actual traffic counts, he
said. He reported the 2008 estimates totaled $3 billion in
federal/state funding. He reiterated the DOT&PF's Long Range
Plan totaled about $3 billion improvements to the Glenn Highway.
MR. FOSTER related the bridge option under consideration is a
private-public partnership model (P3) [slide 11]. The KABATA
has short-listed three firms, who have each undergone a rigorous
solicitation - as the potential private developers. The private
partners in the public-private partnership (P3) would be
responsible for financing, designing, building, operating,
maintaining, and collecting tolls for the proposed Knik Arm
Crossing (KAC) project and the draft contract would be a 35-year
concession or contract.
2:27:15 PM
MR. FOSTER related that to make this project as attractive as
possible for the financial markets, the State of Alaska -
through this bill and legislation - would be to create a reserve
fund for the initial years. The $600 million funding source
would be [Federal Highway Administration [FHWA]] Safety-LU
private activity bonds (PAB). Again, the state would be a
conduit - the state would not secure the PAB nor would the state
be financially obligated to the bonds. The state would only
provide the capacity for the private partner to apply for the
bonds. Additionally, the Transportation Infrastructure Finance
and Innovation Act of 1998 (TIFIA) financing would be the same
type of model - the state would act as a conduit and would not
sign for the financing nor have any financial responsibility for
it. He characterized the funding as a pass through.
Additionally, the contract terms provide for a termination for
convenience clause that would allow the state to terminate if
the state decides not to proceed, which he characterized as
being similar to a lease agreement, with a payout value. He
emphasized that from the beginning the bridge will be owned by
the state and once construction begins the bridge project will
become a state asset. However, the private partner would not
receive the first availability payment until the bridge is open
for use. Thus during construction the private partner will
finance the project.
2:29:27 PM
REPRESENTATIVE MARK NEUMAN, Alaska State Legislature, referred
to a memo dated March 22, 2011, in members' packets from
Professor Scott Goldsmith, from the University of Alaska's
Institute of Social and Economic Research (ISER). He explained
that the ISER figures were below the 2010 U.S Census figures.
He suggested that by taking the ISER figures and correlating
them to the U.S. Census population, that the figures would fall
within one or two percent. As a matter of fact the figures are
still in the 85,000-90,000 range, he said. He recalled ISER had
estimated approximately the population at 170,000 and KABATA had
predicted 190,000. He said, "You can nitpick about those
numbers all day long, but there's still a lot of people."
2:31:06 PM
REPRESENTATIVE NEUMAN asked to have a document distributed
entitled, "Current Traffic Safety Corridors (TSC) & Candidates
as of August, 2009" that helps explain the safety issues. In
response to Chair P. Wilson, Representative Neuman deferred to
Mr. Foster to address the numbers of estimated vehicles for the
bridge being based on a four-lane bridge and the associated
costs. He again referred to his handout, which lists the
highway safety zones as of August 2009. He reported the
fatalities and major injuries per 100 million vehicle miles on
the Palmer/Wasilla Highway and Glenn Highway to the Parks
Highway at 16.7; from Lucus Road to Big Lake at 17.3; the
Knik/Goose Bay Road at 22.84. After all, the Seward Highway is
often highlighted, but its fatalities and major injuries rate
per 100 million vehicle miles is 13.1. He indicated the
community has been undergoing transportation planning for post-
bridge construction. In fact, [with the KAC] traffic would be
reduced considerably on the Glenn Highway, he said. Currently,
30,000 vehicles travel from the Matanuska-Susitna to Anchorage
each day, he reported. Specifically, he pointed out the last
rut rehabilitation costs at $55 million per the DOT&PF.
Further, rut rehabilitation must be done every five years. He
pointed out that 82 percent of the freight to the state comes in
via the Port of Anchorage. Thus all the heavy freight and
containers destined to Fairbanks and Prudhoe Bay could bypass
the Glenn Highway. Additionally, the proposed Knik Arm Crossing
(KAC) would reduce the length of travel considerably, which is
one reason why the bridge has been supported by the Fairbanks
Chamber of Commerce: it would reduce traffic and trucking
costs. He indicated if the road rehabilitation could be
stretched to 8 to 10 years, it would also represent a
considerable cost savings to the state.
2:35:24 PM
REPRESENTATIVE NEUMAN said those who live in Wasilla are
familiar with the pinch points and congested traffic, such that
Wasilla Lake is on one side, the highway and railroad and
Lucille Lake on the other side. He characterized this roadway
as an over congested highway, which the community has been
trying to alleviate. Additionally, Wasilla to Big Lake
represents the most dangerous stretch of highway in the state is
also proposed to be expanded to a four-lane highway. Further,
the Knik Arm Crossing (KAC) would reduce heavy freight, reduce
accident rates, and improve traffic freight infrastructure to
help turn Alaska resources into jobs. He suggested that
expanding the Glenn Highway - which is currently over capacity -
is estimated to cost over $ 4 billion. Thus obtaining a bridge
funded by private industry would be much less expensive.
2:37:02 PM
REPRESENTATIVE NEUMAN turned to the Federal Highway
Administration [FHWA] funds under the Moving Ahead for Progress
in the 21st Century Act (MAP-21). He related that Governor
Parnell supports creating a reserve fund using an appropriation
of $10 million this year and funding an additional $35 million
each year until 2018 for a total of $150 million. This fund
would basically be a loan that would be repaid, he said. He
estimated sufficient traffic would cross the bridge to create
enough tariffs in approximately seven to eight years for the KAB
project to become revenue neutral. The toll revenue would be
repaid into the reserve fund, once traffic increased and as new
housing is expanded from Anchorage. Any excess revenue must be
used for transportation projects, including aviation, marine, or
highway projects. He pointed out that the state is trying to
diversify its income revenue streams, with 90 percent of the
state's revenue derived from oil, which is declining rapidly,
the state must find new ways for revenue sources. He said this
is an opportunity for the state to spend $1 billion within the
first 20 years of the project time line for transportation
projects in Alaska. Thus this project would also relieve
congestion on the state general funds.
2:39:35 PM
REPRESENTATIVE NEUMAN reiterated that this would relieve
pressure on general fund expenditures. He emphasized that
finding new revenue sources and diversifying the economy is a
must. Additionally, this infrastructure would open up
development on the west side of Cook Inlet. He related that
$400,000 is in the Governor's FY 14 proposed budget to assess
resource development options in the Susitna Basin. This
infrastructure would help develop natural resources, which is
critical to diversify the state's economy and increase revenue
streams to the state. In fact, numerous benefits of this
project besides public safety exist, including diversifying
revenue streams, creating jobs, finding more opportunities to
turn resources into jobs for Alaskans. He concluded that this
[project] pays for itself. In the end, this project is ready to
build; it's ready to go, he said. As he looks forward and
currently, revenue streams are in the negative. Certainly, the
state doesn't have funds for large capital projects since the
state has a $1 billion deficit. He offered his belief that
partnering with private industry to bring in $1 billion in
private industry investment to create 1,500 jobs over the next
four years is critical to the state. He predicted that if the
state doesn't partner with private industries that the effect on
the operating budget will be huge. In short, this bridge could
get Alaska to the point of building a pipeline and a dam. He
said, "This is a bridge to the future and I hope we have the
vision to continue on with that, Madame Chair and I'll be glad
to answer any questions."
CHAIR P. WILSON responded that she didn't mind having the state
pay for some capital projects and infrastructure; however, she
wanted to ensure if the tolls are insufficient to cover the
availability payment, the state would pay.
REPRESENTATIVE NEUMAN answered that under the worst case
scenario some projections were made, but Mr. Foster could best
explain the projections.
REPRESENTATIVE P. WILSON reiterated that the state should pay;
for infrastructure; however she wanted to be sure the facts the
committee has are the right facts. She asked whether the
committee has an updated financial plan from KABATA. She was
unsure of whether the federal government is on hold in terms of
the TIFIA financing.
2:44:03 PM
REPRESENTATIVE NEUMAN referred to a letter to Mr. Callenda,
Director, Transportation Infrastructure Finance and Innovation
Act Joint Program Office, U.S. Department of Transportation
dated [November 15, 2012] from Governor Parnell. He read:
I have received a copy of your September 25, 201
letter to the Knik Arm Bridge and Toll Authority
(KABATA). In that letter, you state that the U.S.
Department of Transportation (US DOT) is postponing
consideration of our Transportation Infrastructure
Finance and Innovation Act (TIFIA) Letter of Interest
until the State appropriates, or is reasonably likely
to appropriate, funding for the KABATA project
(Project).
As you know the Alaska legislature has previously
authorized use of federal funds and has appropriated
State matching funds for the Project. The
construction phase is included in the approved
Statewide Transportation Improvement Program. KABATA
is currently purchasing the right-of-way and acquiring
the permits necessary for construction. In addition,
my Capital Budget will be submitted to the Alaska
State Legislature in December, and it is my intent to
include funding for a Project Reserve.
KABATA will continue to work closely with your office,
and the State of Alaska expects full consideration by
US DOT and your office for an invitation to submit a
TIFIA loan application on behalf of the successful
proposer.
REPRESENTATIVE NEUMAN recapped that the aforementioned letter is
a letter of intent from the legislature for continued funding
for the reserve and the letter is signed by Governor Parnell.
2:45:56 PM
CHAIR P. WILSON asked whether TIFIA has responded back to this
letter.
REPRESENTATIVE NEUMAN responded that this letter was a positive
response to TIFIA.
MR. FOSTER answered yes; and offered to quote from a September
25, 2012 letter.
CHAIR P. WILSON asked for the date of the governor's letter.
REPRESENTATIVE NEUMAN answered the letter he read was dated
November 12, 2012 and was in response to the September 25, 2012
letter from the U.S. Department of Transportation (US-DOT).
CHAIR P. WILSON asked whether the sponsor has heard back from
the U.S.-DOT since the November 12, 2012 letter from Governor
Parnell.
MR. FOSTER answered yes; that the U.S.-DOT is waiting for the
legislature to pass the bill. In further response to a
question, he clarified that the U.S.-DOT has responded.
2:46:38 PM
CHAIR P. WILSON added for further clarification on the fiscal
note.
REPRESENTATIVE NEUMAN answered that the fiscal note is a zero
fiscal note since the funding would be a loan. He said the
DOT&PF has put in a zero fiscal note since the funding would be
in a reserve account that would be repaid. In further response
to a question, he agreed the toll fees would provide the
repayment and the contractor would receive the availability
payment and if insufficient the state would make up the
difference.
2:47:30 PM
MR. FOSTER clarified that the TIFIA program is being
administered under MAP-21. The TIFIA program is a continuation
of the program, but it contains significant changes. First, the
funding would consist of $17 billion capacity, which equates to
33 percent of the eligible capital costs. The FHWA has
indicated most of these projects would fall under 33 percent of
capital costs eligible rather than 49 percent. For example, of
the $1 billion, $333 million would be part of the TIFIA
allocation. Thus the TIFIA's $17 billion in funding would
equate to $55 billion in capital improvement funding. To date,
26 projects have submitted letters of interest, including
KABATA, he said. The selection criteria is on a first-come
first-served model so if the project meets the criteria, and
project is invited to submit an application, the project would
basically fall within the TIFIA's funding cycle. As projects
are received, the overall TIFIA's capacity is lowered. Again,
26 letters have been submitted, but none of the 26 projects have
been invited to submit an application to date. The 26 projects
span 17 states, including Alaska, but the overall capacity is
$17 billion. He acknowledged that the KABATA has previously
applied merely to stay in the queue and have the U.S.-DOT remain
familiar with the project. Even though KABATA has not yet been
invited to submit an application, it did not expect to be asked
since KABATA has been working on a record of decision and its
financial model. However, the project has matured to the point
of the record of decision, permits, right-of-way acquisition,
and the governor's commitment - through the capital budget - to
create the reserve fund. Once the legislation is in place, he
offered his belief and confidence that KABATA will be invited to
submit an application. He concluded that would be the next
process under the letter of interest.
2:50:31 PM
MR. FOSTER continued. He stated that prior to being asked to
submit an application KABATA would seek a Standard and Poor's
(S&P) rating on project. In fact, the DOR has done this on
KABATA's behalf. He reported the rating for this project is an
investment grade rating so it also passes the TIFIA federal loan
program test. He reaffirmed that the KAB project would have no
impact on state's credit rating. He summarized that the two
tests performed by S&P indicate the project was an investment
grade - which is what KABATA needs for TIFIA - plus, under
KABATA's worst case scenario will not affect the state's credit
rating.
2:51:31 PM
CHAIR P. WILSON turned the gavel over to Vice Chair Isaacson.
2:51:46 PM
REPRESENTATIVE KREISS-TOMKINS asked when TIFIA will invite
KABATA to submit a loan application.
MR. FOSTER indicated that the U.S.-DOT has indicated that it
will not move forward until the commitment from the legislature
is in place. Due to timing, KABATA does not want to submit an
application until the mechanisms are in place since a 60-day
time clock starts. This timeframe includes 30 days to respond
to KABATA on the application completeness, and once complete,
the U.S.-DOT starts its time clock to make a determination. He
emphasized that the KABATA needs to have the reserve account
partially funded through the capital budget, the bill needs to
be passed, and KABATA already has the S&P rating. Thus as soon
as legislation is in place, the KABATA will ask the U.S.-DOT to
move their letter of interest into a pre-application state.
2:53:03 PM
REPRESENTATIVE KREISS-TOMKINS understood that the U.S.-DOT does
not want to authorize KABATA a TIFIA loan until the state makes
a financial commitment by funding the reserve fund. However, in
order for the legislature to conduct its financial due
diligence, the state wants assurance of KABATA's financing plan
and specifically, whether the TIFIA loan will be in place. Thus
one of these two pieces needs to come first. He expressed
concern that the state would be financially liable. In other
words the state would base its approval on a project that
assumes a TIFIA loan, which may or may not be approved.
REPRESENTATIVE NEUMAN answered that KABATA cannot apply for the
TIFIA loan until the project exists. This bill would create the
[Knik Arm Crossing (KAC)] project. The financing mechanism for
the toll revenue is in members' packets. Further, the S&P bond
ratings indicate this is a very worthy project, which all shows
a lot of credibility for this project exists.
2:54:36 PM
REPRESENTATIVE KREISS-TOMKINS said the difference between the
interest on a TIFIA loan and a General Obligation (GO) bond is
significant, which is why this project is really predicated on a
TIFIA loan.
MR. FOSTER acknowledged the situation is similar to a chicken
and egg situation. He viewed the KABATA's financing as being
similar to as pre-qualifying for house loan before someone shops
for a house. In this instance, the U.S.-DOT said in its
September 25, 2012 letter, "It becomes clear, that the issue is
reasonably likely to be resolved favorably in the near future."
He interpreted this statement to mean the passage of this
language [HB 23], the creation of the reserve fund, and the
governor's plan to fund the reserve fund. Keep in mind the
reserve fund isn't necessary until the bridge is actually open.
In the event that the project is not eligible for a TIFIA loan,
KABATA does not have an alternate financial plan. The KABATA
would then need to evaluate whether another financial plan is as
attractive. He said that TIFIA, in some respects, would be a
gift to this project as well as to the multitude of the other 26
projects. He explained the TIFIA structure, such that TIFIA
would loan between 33-49 percent of eligible capital project
costs. He reiterated the private partner would not make any
payment on the loan until the bridge is open. In the initial
years, the TIFIA payment structure is very favorable structure
since it's a green field project. Additionally, TIFIA and the
MAP-21 funds are designed to create new development, new
projects, and new infrastructure. Accordingly, TIFIA is so
attractive to the private investor that KABATA, on behalf of the
state, is doing everything is can to secure the TIFIA loan. He
assured members that KABATA is doing everything it can. Even if
the reserve fund were to be funded completely, until a contract
is signed, the reserve fund is just sitting there. If some
place along the road the proposals come in and the criteria
can't be met or the availability payment can't be kept under a
curve that is manageable, the state does not have any moral
obligation nor does the state have a commitment for the reserve
fund to be in trust, until the contract is signed, he said.
2:59:23 PM
REPRESENTATIVE NEUMAN said he views the KABATA project as one
which will create 1,500 jobs and $1 billion in private industry
investment. He said he chaired the House Health and Social
Services Standing Committee and the number of people who applied
for food stamps has doubled. He offered his belief that $3
billion capital budgets are gone. He encouraged the committee
to consider this project because otherwise what will the future
look like without these jobs.
[HB 23 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 23 vers A.pdf |
HTRA 2/28/2013 2:00:00 PM |
HB 23 |
| HB 23 Sponsor Statement.pdf |
HTRA 2/28/2013 2:00:00 PM |
HB 23 |
| HB 23 Common Myths of Knik Arm Crossing.pdf |
HTRA 2/28/2013 2:00:00 PM |
HB 23 |
| HB 23 Imp of Legislation to TIFIA Loan.pdf |
HTRA 2/28/2013 2:00:00 PM |
HB 23 |
| HB 23 KABATA Fact Slides.pdf |
HTRA 2/28/2013 2:00:00 PM |
HB 23 |
| HB 23 KABATA Summary Short Version.pdf |
HTRA 2/28/2013 2:00:00 PM |
HB 23 |
| HB23 2012 Gov TIFIA Letter of Interest.pdf |
HTRA 2/28/2013 2:00:00 PM |
HB 23 |
| HB23 ISER LTR.pdf |
HTRA 2/28/2013 2:00:00 PM |
HB 23 |
| HB23 KABATA ATA 20130228.doc |
HTRA 2/28/2013 2:00:00 PM |
HB 23 |
| HB023-DOT-KABATA-2-23-13.pdf |
HTRA 2/28/2013 2:00:00 PM |
HB 23 |