Legislature(2019 - 2020)ADAMS ROOM 519
04/17/2019 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB38 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 38 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 38
"An Act making appropriations, including capital
appropriations, supplemental appropriations,
reappropriations, and other appropriations; making
appropriations to capitalize funds; and providing for
an effective date."
9:01:08 AM
NEIL STEININGER, CHIEF BUDGET ANALYST, OFFICE OF MANAGEMENT
AND BUDGET, OFFICE OF THE GOVERNOR, introduced himself.
SHELLY WILLHOITE, PROGRAM BUDGET ANALYST, OFFICE OF
MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, introduced
herself.
Co-Chair Wilson indicated Mr. Davis was online.
Ms. Willhoite introduced the PowerPoint Presentation:
"Deferred Maintenance Update" (copy on file). She indicated
she would review the status of the state's deferred
maintenance and the state's balances. Mr. Steininger would
review some history and how the state planned to use the
recommended deferred maintenance monies in the budget. Mr.
Davis would provide an update on the Division of Facilities
Services, and how they planned to use a new system to
manage deferred maintenance statewide.
Ms. Willhoite began with slide 2: "Deferred Maintenance:
Explained." She explained that deferred maintenance was
maintenance or repairs deferred to a future budget cycle or
postponed until funding was available. Preventative
maintenance was handled within the operating budget. She
explained that when preventative maintenance could not be
completed and things fell into disrepair, projects were
moved into the deferred maintenance category. Projects were
most often items that could not be addressed though
preventative maintenance. She asserted that preventative
maintenance was key to preventing items from falling into
the deferred maintenance category.
Ms. Willhoite continued that the legislature appropriated
money for preventative maintenance annually through the
operating budget through facilities management allocations
and the public building fund. She reported that when
deciding about maintenance, changing business needs were
taken into consideration.
Ms. Willhoite moved to slide 3: "Deferred Maintenance:
State Maintained Facilities." Currently, the state had
about 2,200 facilities statewide. The facilities
encompassed 14 entities including the University of Alaska
and the Court System. The state had about 19 million square
feet of space with a combined replacement value of
approximately $8.6 billion. The chart provided a visual of
the number of facilities broken down by department. The
Department of Transportation and Public Facilities (DOT)
had the largest number of facilities followed by the
University. The Department of Environmental Conservation
had only one facility.
Ms. Willhoite turned to slide 4: "Deferred Maintenance:
Facility Types." She reported that facility types varied by
entity. For example, the University had classrooms,
libraries, dorms, and office space. Whereas, the Department
of Administration had mainly office space. The Department
of Corrections and the Department of Health and Social
Services had 24 hour facilities such as the Pioneer Homes,
and prisons. The Department of Military and Veterans
Affairs had military and other types of facilities and
armories. The Department of Natural Resources oversaw park
service cabins, shelters, and other types of shops. The
chart provided a look by square feet by entity. She
highlighted the University and DOT having the largest
number of total square feet. Although the University had a
fewer number of facilities, it had a greater number of
square feet.
9:05:14 AM
Co-Chair Wilson asked if OMB was taking into account
buildings rented by the state. Ms. Willhoite replied the
numbers only represented facilities owned by the state.
Co-Chair Wilson asked how many buildings or the number of
square feet the state rented. Ms. Willhoite would provide
the information.
Vice-Chair Ortiz asked about the category for the capitol
building. Ms. Willhoite responded that the capitol building
was currently under the governor's office. The governor's
office had the capitol building and the governor's mansion
which were state-owned.
Co-Chair Wilson commented that the legislature maintained
the building. She thought that if the governor owned the
capitol building, he should maintain it. She was new to
Legislative Council and was curious. Ms. Willhoite would
have to get back to her.
Vice-Chair Ortiz thought it was strange, with a separation
of powers, that the governor would own the capitol
building. Co-Chair Wilson thought the issue might need
further review. Ms. Willhoite commented that it was on the
list for the governor's office. However, she would confirm
ownership of the building.
Co-Chair Wilson was under the impression that the
legislature owned the building and was allowing the
governor to occupy it. She thought it was possible for it
to be the other way around. She thought clarification was
important in terms of the budget.
Ms. Willhoite continued to slide 5: "Deferred Maintenance:
Statewide Totals." She reported the total current deferred
maintenance balance was $1.98 billion which included $1.85
billion from the executive agencies and the Court System.
Major school maintenance was $134.7 million. She noted that
the school major maintenance reflected only the districts'
priorities. School districts did not provide their full
maintenance list. She continued that of the $134.7 million,
$113.8 million was the state's share of the total.
Co-Chair Wilson asked how the state's share was $113.8
million. Mr. Steininger would get back to the committee
with a response.
Representative Carpenter asked if the state requested the
school districts' full list of deferred maintenance
projects. Ms. Willhoite explained that school districts use
to provide their full list. However, because they were only
partially funded, school districts found it was a better
use of time to prioritize the list and only provide the
most important items. She offered to request a full list.
Representative Carpenter thought that if the legislature
was deciding on funding for deferred maintenance,
legislators should be provided with the full list of
projects.
Co-Chair Wilson was concerned with additional burdens being
placed on school districts.
9:09:03 AM
Representative Carpenter would like to see how projects
were being prioritized.
Vice-Chair Johnston asked if the deferred maintenance
applied to all school districts that were outside of
organized boroughs. She wondered if it applied to state
schools funded by state construction. She thought the
figure was a low number. She did not think they applied to
districts such as the Anchorage School District, the Mat-Su
School District, or the Fairbanks North Star Borough School
District. Ms. Willhoite could provide the project details
that made up the $134 million. She was aware that Mount
Edgecumbe and the Anchorage School District were included.
Representative Knopp thought school districts owned their
own buildings and that the figure encompassed Mount
Edgecumbe and the Alaska Vocation Education and Technical
Center (AVTEC). He would appreciate a full list.
Co-Chair Wilson indicated that all schools could apply for
monies for deferred maintenance. She explained that the
state provided grant money every year. Every school
district could apply for funds. It was based on the largest
need. She advised looing at the list on the Department of
Education and Early Development's website. If the
legislature appropriated $10 million, the money would be
applied to the priority list as far down as possible. The
following year priorities would be reshuffled, and another
amount appropriated and applied based on priority. Many of
the school districts making a request for monies were small
and without the ability to bond.
Representative Josephson commented about school bond debt
reimbursement, much of which was for new construction in
the amount of $140 million for FY 19. He wanted to know the
definition for major maintenance.
Vice-Chair Ortiz commented that the bonding process in
relationship to schools was something separate from the
appropriation Co-Chair Wilson just spoke of. Co-Chair
Wilson responded, "Correct." She elaborated that it was a
grant for the total project and school districts could also
bond.
Representative Knopp thought a grant for a deferred
maintenance request was not the same as the state having a
deferred maintenance project. He believed grants were based
on available funding. Co-Chair Wilson explained that the
state had a school maintenance fund for schools only. For
buildings owned by the agencies, funding was not available
under major maintenance grants.
Ms. Willhoite continued with slide 5. She reported that the
total peaked at $2.3 billion in FY 2012. There was an
initiative from the administration to significantly reduce
the deferred maintenance by initiating a 5-year plan where
they funded at least $100 million per year for 5 years. As
a result, the deferred maintenance dropped. The low was
$1.6 billion in FY 17. Since then, the trend moved up as
the deferred maintenance allocations decreased.
Co-Chair Wilson asked how much money had been set aside for
deferred maintenance since FY 11. Ms. Willhoite responded
that it averaged about $123 million for 5 years.
Ms. Willhoite moved to slide 6: "Deferred Maintenance:
Backlog by Entity." The slide showed a different visual
perspective of the deferred maintenance backlog. The
majority of deferred maintenance was for the University of
Alaska totaling $1.2 billion. The Department of
Transportation and Public Facilities was high on the list
at $320 million. The school district maintenance requests
totaled $135 million and all other entities totaled $300
million.
9:14:54 AM
Co-Chair Wilson asked whether the state or the University
was responsible for the University buildings. Mr.
Steininger answered that the University was responsible for
its buildings. However, it was part of the executive branch
and was the reason for their inclusion in the executive
branch totals.
Co-Chair Wilson asked if the state currently had a priority
list for the University. Mr. Steininger responded
affirmatively. Co-Chair Wilson wanted to see the
information.
Vice-Chair Johnston asked if the state evaluated whether it
was worth doing doing deferred maintenance on a building.
Ms. Willhoite responded that another slide would show the
changes being implemented by looking at the facility
condition index. More detail would be provided when the
slide was up.
Ms. Willhoite discussed the graph on slide 7: "Deferred
Maintenance: Backlog by Entity." she pointed to the bar
chart which allocated each of the backlogs by entity. The
University and DOT made up the largest portions.
Mr. Steininger advanced to slide 8: "Deferred Maintenance:
Funding History." He would be reviewing the funding history
of deferred maintenance and the reasons behind the proposal
put forward in the governor's budget. He explained that
from 1998 to 2010 deferred maintenance funding was sporadic
and inconsistent. It was allocated to specific departments
for specific projects. He pointed out a spike in 2009 of
$127 million and lows of $6.5 million in 2000-2005. The
time period built up some of the backlog. In 2011 a 5-year
initiative was started to appropriate $100 million annually
for 5 years to try to address the backlog to bring it down.
Mr. Steininger turned to the chart on slide 9: "Deferred
Maintenance: Funding History." It highlighted the sporadic
highs and lows in the past. The 5 years in which higher
appropriations for deferred maintenance were awarded could
be seen on the chart. The higher appropriations had a
significant effect on the backlog. It provided some
reliability because of a plan being in place. It allowed
the department to plan ahead for the deferred maintenance
needs and to address the issue in less of an ad hoc manner
and more of a deliberate manner.
Mr. Steininger advanced to slide 10: "Deferred Maintenance:
Backlog (excluding school major maintenance." He pointed
out the trend of the backlog dropping over 5 years because
of the higher levels of funding. He also highlighted the
lag as the projects were being completed and the return of
a backlog. The state ended up reversing the positive trend
it had entered into. He advocated for a deliberate plan for
deferred maintenance.
Co-Chair Wilson asked why it was not until the present that
the state was deciding to implement a plan. Mr. Steininger
thought the state had always known it needed a plan. He
reported that the end of the 5 years of funding coincided
with significant revenues for the state. He suggested that
in leaner times the concerted effort dropped off.
Co-Chair Wilson asked in 5 years whether the state moved
out or sold any of its buildings. She wanted to see the
chart separated into one chart showing only the University
and another with all of the other state buildings. She
asked if the state had sold any of its buildings due to the
backlog. Mr. Steininger indicated Mr. Davis would be
speaking to the divestment of buildings. He was aware that
Department of Military and Veterans Affairs had divested in
some armories and a couple of other buildings that had come
off of the books. Mr. Davis would also discuss a property
disposal workgroup that was started to look further into
the state's portfolio of assets and what might need to
change. The idea was to get rid of some of the backlog
without appropriating money to it.
9:20:19 AM
Mr. Steininger continued to slide 11: "Deferred
Maintenance: What We Have Learned and a Plan Forward." He
pointed out that the pattern of funding coincided with high
years of revenue. It also reversed the growing trend of the
backlog when the state had a plan that was followed. He
also noted that a consistent reliable level of funding that
departments could count on allowed for better decisions to
be made. He also pointed out that in looking at the past
was that much of the deferred maintenance was directed to
specific projects or to specific agencies. There was not
flexibility to manage it holistically at a statewide level.
about two years prior the administration started
appropriating deferred maintenance to the Office of the
Governor and then distributing the funds looking at the
facilities altogether. It was the start of the process of
moving towards the Division of Facilities Services. It
allowed a look at the projects across agencies rather than
in a vacuum.
Co-Chair Wilson asked if a priority list had been
developed. Mr. Steininger responded that each department
had a priority list. Each department had slightly different
criteria that they applied to their assets and building. He
spoke of the intricacies of managing different types of
facilities. The idea was to try to get every state facility
looked at through the same lenses and the same standards in
order to prioritize the state's limited deferred
maintenance money adequately across all of the agencies.
Co-Chair Wilson asked when legislators would know how the
money would be spent, if it were to give the governor's
office $25 million. Mr. Steininger responded that in the
prior year the department began working on the list and had
it out in mid-July. In an upcoming slide he had the lists
by agency. He could also provide detailed backup about how
the state allocated the $25 million in FY 18 and FY 19. He
suggested that as the Division of Facilities Services
matured as an organization, the information would be
available sooner rather than later. Co-Chair Wilson
commented, "It would be hard without a plan."
9:24:30 AM
Mr. Steininger reviewed slide 12: "Deferred Maintenance:
Alaska Capital Income Fund." He maintained that one of the
key pieces in planning was reliability and knowing a source
of funding while in a constrained fiscal environment.
Senate Bill 107 [Legislation passed in 2018] designated the
Alaska Capital Income Fund for deferred maintenance. In
prior years, the receipts for the large vessel gambling
taxes had been transferred into the Alaska Capital Income
Fund, and the receipts of the large passenger vessel
gambling funds supplemented the governor's budget. Annually
approximately $35 million to $40 million would be available
for allocation to deferred maintenance.
Co-Chair Wilson asked if the gambling tax was $35 million
to $40 million annually. Mr. Steininger replied that the
$35 million to $40 million was a combination of Emerita
Hess money flowing into the Alaska Capital Income Fund as
well as large passenger vessel gambling taxes. The Emerita
Hess money was estimated to be approximately $27 million
per year. He had seen years where the large passenger
vessel gambling taxes were as high as $10 million.
Representative Josephson asked what other purposes the fund
was used for besides deferred maintenance. Mr. Steininger
indicated that in most recent years the fund was mostly
used for deferred maintenance. The fund had been used for a
handful of other purposes including for highways. The fund
was a designated fund and could be used for anything
through appropriation. However, OMB thought it was good
policy to set a baseline for deferred maintenance funding.
Mr. Steininger detailed slide 13: "Deferred Maintenance:
Governor's Proposed Budget." He reported that in the
governor's proposed budget under consideration there was a
request for FY 19 supplemental funding in the amount of $21
million designated general funds (DGF) from the Alaska
Capital Income Fund. In FY 20 the proposed budget included
$26.6 million DGF for statewide facilities, $7.4 million
DGF for K-12 major maintenance, $4.5 million other funds
for the Public Building Fund, $5 million DGF for the
University, and $2.8 million UGF for the Court System.
Co-Chair Wilson asked what the supplemental dollars were.
She wondered what projects needed to be completed by July
1, 2019. Mr. Steininger responded that the supplemental
amount appropriated was the balance of the Alaska Capital
Income Fund at the end of FY 19. He explained that because
there was no reverse sweep language and no draws from the
Constitutional Budget Reserve (CBR) in the governor's
proposed budget, the balance of the Alaska Capital Income
Fund would have otherwise been swept into the CBR. In order
to ensure that the money was used for deferred maintenance
and that it was adequately funded, OMB chose to appropriate
the amount through a supplemental request. By doing so,
there was the extra benefit of OMB being able to begin
distributing the money to projects once the bill passed. It
was beneficial because it better conformed to the
maintenance season in Alaska.
Co-Chair Wilson asked which projects would be given money.
Mr. Steininger would have to provide the information later.
The list of projects was updated each October. Co-Chair
Wilson suggested that asking for $21 million without
providing a list of what projects would be receiving funds
made it difficult for her to do her job. She did not want
to sign a blank check for $21 million. She had hoped that
the presentation would provide more information.
9:30:43 AM
Vice-Chair Johnston was surprised that the information
could not be reviewed and provided in the winter. She asked
about the hiatus in the winter. Mr. Steininger clarified
that OMB received a list of deferred maintenance priorities
in October and provided it to the legislature annually. The
Office of Management and Budget did not ask for continued
updates through the winter because of the cycle of
construction and the maintenance schedule. He thought Mr.
Davis could speak more to the logistical impacts of
updating a holistic list in the winter for every
department.
Co-Chair Wilson asked Mr. Steininger to define "holistic."
Mr. Steininger indicated that from a department perspective
the state was looking at its entire suite of assets. From
the state's perspective and the perspective of the Division
of Statewide Facilities, all of the state's assets needed
to be looked at.
Representative Josephson stated that it was his
understanding that the administration did not want to do a
reverse sweep. Rather, it wanted to take sources such as
the Power Cost Equalization (PCE) funding and move it to
the general fund. He asked if the $21 million was an
exception. Mr. Steininger responded that the administration
felt the need to obligate the balance of the Alaska Capital
Income Fund for deferred maintenance because of the
reversal of a trend of the backlog diminishing and starting
to grow again. The administration recognized it was a
significant priority. Although the state had the property
disposal group, the assets the state chose to retain needed
to be properly maintained.
Co-Chair Wilson clarified that although the slide indicated
DGF, it was funding that could be utilized for schools,
bond reimbursement, or anything else. The money happened to
be sitting in a different type of fund. She did not believe
the fund received the same scrutiny as unrestricted general
funds (UGF). In other words, the $21 million could be
applied to school buildings, the state's major maintenance
list, or towards bond reimbursement. It could be
appropriated in whatever way the legislature saw fit. She
invited Ms. Cramer to make additional comments.
9:34:44 AM
LAURA CRAMER, DEPUTY DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, provided a back story having coordinated the
capital budget for the legislature for the previous 4
years. She explained that OMB had a list of prioritized
items by agency. However, emergent circumstances sometimes
occurred shifting certain priorities up or down. For
example, during spring break-up a correctional institution
experienced sewage or water pipes breaking which brought a
project from low on the deferred maintenance priority list
to the top. By giving a lump sum to OMB it could be
disbursed as projects became emergent. The flexibility that
came with providing OMB with a lump sum for deferred
maintenance had worked well over the previous 2 years.
Mr. Steininger continued to owever, there were emergent
situation
slide 14: "Deferred Maintenance: FY 2018 Statewide
Appropriation Status." He relayed that the slide
represented the distribution the administration made with
the $20 million appropriation in FY 18. He explained that
when the administration was looking at the project and how
it would distribute the monies, it looked at life, health,
and safety issues, as well as assets at risk of imminent
failure. The administration considered timely project
execution, funding shovel-ready projects. Maintenance in
order to meet a program mission with demonstrated returns
on investment was also a criteria. He pointed to the list
of agencies and their corresponding allocations. He would
happily provide a list of specific projects that were
funded. He indicated that the administration held a certain
amount for emergency purposes.
Mr. Steininger turned to slide 15: "Deferred Maintenance:
FY 2019 Statewide Appropriation Status." He relayed that in
FY 19 the state received another $20 million for deferred
maintenance. The funding was spread across 28 projects and
13 agencies. The same standards he had mentioned were used.
Some of the common projects included roof replacements,
safety compliance, and plumbing and electrical repairs. The
list totaled just over $20 million. In the distribution,
the administration included the $400,000 held for
contingencies in the prior year and another $100,000 for a
project that was completed under budget in the prior year.
In FY 19 the state distributed all of the funds rather than
holding them for contingency purposes. Since projects were
being done under budget, money could be found for
contingency situations.
Co-Chair Wilson noted that the Department of Corrections
(DOC) was at $9.4 million for a 2-year period. She wondered
if it was the reason the administration was considering
looking at closing correctional facilities and sending
inmates out of state. Ms. Cramer responded in the negative.
She clarified that the state's correctional facilities
required a significant amount of deferred maintenance which
was the purpose of the spend.
Co-Chair Wilson wondered if the high cost of maintenance
had any bearing on whether buildings stayed open. Ms.
Cramer responded that when DOC evaluated which institutions
should be considered for closure, all costs would be
considered. She deferred to DOC to answer her question more
specifically.
9:38:59 AM
Co-Chair Wilson commented that the list belonged to the
administration and had nothing to do with programs; it had
to do with buildings. She noted that the Wildwood
Correctional Complex was being evaluated for closure. She
was uncertain how the $9.4 million would be spent. She
understood that a certain building might be so old that the
state would need to look at other alternatives. She asked
if the condition of the Wildwood facility was influencing
its closure.
Ms. Cramer conveyed that her understanding of the selection
of Wildwood was because there was a specific building at
the Wildwood Correctional Complex that was segregated from
the rest of the full institution that could be shut down
completely. Whereas, the rest of Alaska's institutions were
single buildings and could not be segregated out and
closed. She deferred to DOC to specifically speak to why
Wildwood was chosen.
Co-Chair Wilson relayed that it was her understanding that
the department did not make the choice. She clarified that
there might be a building in poorer condition than the one
slated to be closed. Ms. Cramer responded that she was not
aware of any correctional facility in such disrepair that
it needed to be closed. Co-Chair Wilson thought a
significant amount of money was being put into corrections.
9:41:03 AM
Representative Carpenter returned to slide 14. He asked Mr.
Steininger if he was providing the committee with a listing
of prioritization in terms of life, health, safety,
imminent failure, project execution, and maintenance to
spaces that were meeting a program's mission and had a
demonstrated return on investment. He wondered if those
facilities that were not meeting a program mission or had
not demonstrated a return on investment were on the list.
Mr. Steininger replied that the list included the
distribution detail and the projects that were selected
following the criteria. He asked Representative Carpenter
if he was looking for a list of projects that did not meet
the criteria.
Representative Carpenter was interested in seeing an entire
list. Mr. Steininger could definitely provide a full list
of all deferred maintenance projects identified and
prioritized by all state agencies. He conveyed that in the
prioritization that the administration underwent in 2018
and 2019 it tried to transition towards the Division of
Facilities Services model. Mr. Davis would be going into
significant detail on how the division would start
prioritizing projects using a facilities condition index
(FCI) and more objective criteria. Previously, the
administration had followed the objective criteria used by
each department and did a comparison across departments.
The administration was currently working with Mr. Davis and
his team who were getting the Division of Facilities
Services off the ground.
Co-Chair Wilson recalled FY 18 being $32 million rather
than $20 million. She asked if she was correct. Mr.
Steininger indicated that the $20 million was the amount
directly appropriated to the Office of the Governor for
statewide deferred maintenance. He would have to get back
to the committee about the other amount of Alaska Capital
Income Fund monies which might have been appropriated as
well. He recalled there were years where more earnings were
deposited into the Alaska Capital Income Fund than were
appropriated, which was why there was an additional $21
million available.
Co-Chair Wilson commented that the information did not show
the University. She was certain it received funds every
year. Mr. Steininger answered that the $20 million was
appropriated to the Office of the Governor. The remaining
$12 million was for the University and the Court System.
The University received $5 million and the Court System
received $2.5 million. There was also $4.5 million for the
Public Building Fund that was appropriated to the
Department of Administration for public buildings.
Co-Chair Wilson asked if he was talking about FY 19. Mr.
Steininger corrected her, "FY 18." Co-Chair Wilson wondered
if there were additional funds to the $20 million in FY 19.
Mr. Steininger answered in the affirmative. He reported
that there was $4.9 million in the Public Building Fund and
$2 million that went to the University.
Co-Chair Wilson commented that she would appreciate more
accurate numbers. She was really concerned that there were
many more questions than answers. She was frustrated that
answers might be provided in an email, but the public did
not always get the information.
Representative Josephson commented that in the detail of
the deferred maintenance it noted a roof repair at Wildwood
Correctional Complex. It specified Building 10. He hoped
the building was one the governor intended to use since it
had just been fixed. Ms. Cramer indicated that it was the
department's plan to continue to use the facility for now.
Co-Chair Wilson stated that the department did not have a
plan. She remarked that the legislature was still waiting
on the development of a plan. Mr. Steininger handed the
presentation over to Mr. Davis.
9:46:56 AM
MARK DAVIS, DIVISION OF FACILITIES SERVICES, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES (via teleconference),
reviewed slide 16: "Deferred Maintenance: Statewide
Facilities Approach." He relayed that the Division of
Facilities Services was established based on a statewide
study, department level collaboration, and recommendations
dated back to 2015. In 2017, OMB directed that the division
be established and to begin the process of consolidating
the function of facilities maintenance into one
organization. He continued that July 1, 2018 was the start
of operations for the division. One of the expectations
that had been articulated to his team from OMB was
assistance and recommendations in the areas of deferred
maintenance and state-owned facilities.
Mr. Davis continued to slide 17: "Deferred Maintenance:
Opportunities." He indicated that from working with the
Facilities Council and members of OMB the division
developed a method for prioritizing facilities deferred
maintenance requests. The goal of the division was to
incorporate an FCI as an unbiased comparison of facilities
as a component of its recommendations. The division
expected to begin the FCI assessments in the following
fiscal year.
Mr. Davis furthered that the division secured a contract
with Aim AssetWorks, and it was currently implementing an
enterprise level computerized maintenance management
system. It would be the system of record for all facilities
data and would provide the division the capability to
manage the information for more than 2,000 facilities owned
by the state. The division was also looking to link the
State of Alaska energy efficiency program with select
deferred maintenance projects.
Co-Chair Wilson asked when the administration would be
looking at the deferred maintenance plan to determine
whether a facility was needed any longer. Mr. Davis
responded that the directive from the Office of the
Governor generated a work group that was established, and
the departments agreed to take up the matter of considering
which facilities might be eligible for closure. He would be
addressing the topic further in the presentation. It was a
separate effort in determining whether the department
should keep a certain building. However, it was part of the
overall picture of decreasing the amount of deferred
maintenance required from year-to-year.
Vice-Chair Johnston expressed concern that she was not
seeing a cooperative system between the two directives.
Co-Chair Wilson thought that deciding whether a facility
was needed should happen prior to making a list of
maintenance priorities.
9:51:10 AM
Mr. Davis discussed slide 18: "Deferred Maintenance:
Strategy." The proposed strategy for facilities deferred
maintenance included an assessment which had an objective
component based on the condition of a building and energy
efficiency. The department, in turn, used the information
working with the Facilities Council to prioritize potential
deferred maintenance projects, track the execution of the
projects and results, capture key performance levels, and
capture key component indicators to measure results. The
goal was to have a consistent method to assist OMB and the
departments in the prioritization and decision making
relative to deferred maintenance.
Co-Chair Wilson asked about qualifying for Alaska Housing
Finance Corporation (AHFC) loans that the committee had
heard about previously having to do with energy audits and
the possibility of low-interest loans. Mr. Davis relayed
that the program was available to all of the departments.
The two people that ran the program for the state worked in
the Division of Facilities Services. The administration
tried to maximize the program whenever possible.
Co-Chair Wilson opined that the program was not being
maximized at all. The committee had heard only one loan had
ever been taken out. She asked how the program was being
utilized. Mr. Davis responded that Alaska energy efficiency
programs had more than one project. He was happy to provide
a full list of projects that had been completed. Currently,
there were 7 projects in play and about 70 building since
the beginning of the program.
Co-Chair Wilson clarified that she was talking about the
loan program. Once an energy efficiency audit was
completed, there was a loan program available rather than
using UGF dollars. She provided an example where an energy
upgrade would create a savings which, in turn, could be
used to pay back the original loan to make the
improvements. Mr. Davis responded that the administration
considered a number of different financing options for each
project. Co-Chair Wilson disagreed because the legislature
was considering making the funds available to non-profits.
She thought it might be a way for the state to catch up on
its deferred maintenance. She thought it was important for
the government to take advantage of the loan fund.
9:54:23 AM
Mr. Davis reviewed slide 19: "Deferred Maintenance:
Assessing Conditions and Needs." The division's proposed
vision moving forward was a coordinated and programmatic
approach to involving all of the departments. The
division's vision included characteristics of continuity,
transparency, and was result-based. He wanted to see the
leveraging of the state's expertise as much as possible. An
objective assessment would be involved using an FCI. He
elaborated that the index was equal to the value of repairs
of a facility divided by the total replacement value of the
facility.
Mr. Davis continued that the division would incorporate a
building mission and system factors component. The building
mission factor would represent how essential a facility was
to a department's ability to carry out its mission. They
system factor incorporated how critical the system was that
needed repair. For example, fire and life safety related
items would be rated highly. The facilities condition
indexes, the building mission, and system factors were what
the division used to arrive at a project index value that
could be prioritized and vetted by the Facilities Council.
Mr. Davis reported that following a first pass at
prioritizing projects, the division would incorporate
energy efficiency factors into consideration such as energy
intensity or energy costs to determine opportunities for
leveraging combined deferred maintenance and financed
energy improvements.
Co-Chair Wilson asked how much the state could be saving
with the energy efficiencies if they were to be completed.
Mr. Davis stated that it depended on the building, its
size, and the scope of the project. Generally, projects
paid for themselves within about 15 years.
Co-Chair Wilson asked about the 7 energy efficiency upgrade
projects and whether they had been completed. Mr. Davis
stated that the 7 projects were currently being worked on
but were not completed. Co-Chair Wilson queried what funds
were being used to complete the upgrades. Mr. Davis
answered that the funds were coming from low-cost
commercial loans and financing. He offered to provide a
complete list of the financing for the projects. Co-Chair
Wilson thought the information might be helpful so the
state could better assist AHFC, as their interest might be
too high.ousing
Vice-Chair Johnston liked the project index value. She
suggested also including an asset value index. It would
assist in determining the value, need, and viability of an
asset.
Mr. Davis thought Vice-Chair Johnston made a very good
point. He turned to slide 20: "Deferred Maintenance:
Prioritization and Selection." The steps included
prioritization by the department, then a discussion with
the Facilities Council to talk about all of the projects.
The input would be provided to OMB for further decisions
and further prioritizations. The division viewed the
discussion as a great forum to combine the objective data
that was generated on the facilities and other
considerations. The division also hoped the process would
generate more requests for energy efficiency projects.
Mr. Davis explained slide 21: "Deferred Maintenance:
Results Based Performance and Reporting." The slide showed
a way the division would be able to evaluate a facility
after a deferred maintenance project was complete. The same
matrixes could be applied that were used in the selection
of prioritization measuring the results after words. The
feedback and reporting should reinforce the use of a rule-
based process and show evidence that the deferred
maintenance efforts were extending the life of the state's
facilities.
9:59:41 AM
Mr. Davis moved to slide 22: "Deferred Maintenance:
Disposing of State Assets." He relayed that the Division of
Facilities Services worked with the Facilities Council to
compile the data on facilities and to provide the
information to OMB. Based on the scope of the task, the
department agreed to participate in a statewide workgroup
to generate the information and to provide recommendations.
There were a number of regulations and statutes regarding
the disposal of state-owned facilities. The assets that had
been federally funded might require some repayment
depending on the rules of the different federal agencies.
In some cases, remediation might be required prior to the
disposal of an asset with hazmat present. The role of the
division in the process was to provide the data on
facilities and pass the recommendations to OMB. He reported
some divestment of facilities over the prior 20 years. For
example the Department of Military and Veterans Affairs
(DMVA) had disposed of 15 facilities since 2006. The
department had a strategic plan that included disposing up
to 50 other facilities over a period of time.
Mr. Davis noted that DOT recently sold 2 facilities at $5.5
million combined. There had been a few other property
disposals across the state.
Co-Chair Wilson asked where the money went. Mr. Davis
responded that in most cases the money went back to the
department. He could provide more detailed information.
Co-Chair Wilson asked if the University was part of the
discussion surrounding the disposal of facilities. Mr.
Davis responded in the negative. Co-Chair Wilson asked why
not. Mr. Davis answered that the University had not been
part of the workgroup. Co-Chair Wilson queried why not. Mr.
Davis offered to get back to the committee.
Co-Chair Wilson thought the University needed to be part of
the discussion. Ms. Cramer interjected that the University
managed its own assets and had divested some of them. She
was aware that there were ongoing efforts to divest more of
their assets. The University had a separate effort
occurring internally. She was happy to reach out to see if
the University wanted to participate in the
administration's efforts as well.
Co-Chair Wilson asked if the University provided a priority
list to OMB. Ms. Cramer responded that the University
provided a list to OMB. The University wanted to receive a
level of funding of about $80 million to $100 million to
address its deferred maintenance. The University, similar
to the Court System, received a sum of money from the state
and was left to decide how to manage its deferred
maintenance. The University had its own maintenance crew as
well.
Co-Chair Wilson commented that the University was one of
the fastest growing deferred maintenance entities that
owned federally funded buildings. The University might be
subject to the repayment of federal funds.
Representative Carpenter remarked that Ms. Crammer had used
the word "want" in asking the University to participate. He
thought the word should be "need." He concluded from the
presentation that the state had failed to properly manage
deferred maintenance for several years. It appeared that
the state was making an effort to establish a better path
moving forward. He thought it was important that the
largest cost department participated in the state's
efforts. He perceived it was gross negligence on the part
of the legislature that the University had not been
participating. He was uncertain what needed to occur for
the University to participate, but he stressed it should
happen. He wanted to know if any statutes needed to be
changed to get the University to participate. He wanted
feedback either presently or later as to why the University
was not participating. Ms. Crammer responded that the State
of Alaska did not manage University assets. She would reach
out to the University and would encourage them to get back
to the committee about their plan.
10:05:19 AM
Co-Chair Wilson remarked that if the legislature wanted the
University to participate, it could stop giving the
University money to encourage involvement.
Representative Carpenter understood the University might
manage its assets, but the state paid for them.
Co-Chair Wilson was concerned because the school districts
also managed their assets, but they participated and
provided a list. She thought that not everyone was being
treated fairly.
Vice-Chair Johnston recommended caution. She thought DOT
sometimes broke into silos. She preferred that the
University report to the legislature. Otherwise,
opportunities for reassessment might get lost. She also
preferred to have the University provide reports of
deferred maintenance similar to what the school districts
provided. She wanted the legislature to be able to apply a
standard for appropriation. She advised caution about
putting everything in one bucket.
Co-Chair Wilson thought the University needed to be at the
table to discuss deferred maintenance.
Representative Josephson agreed that the legislature helped
the University in a sizable way. The University generated
more revenue that the state provided. The University was
not a department of the government, and the Supreme Court
had made such a determination. There was a list of
departments in statute, and the University was not one of
them. He cited a case that described the University's
authority. It had constitutional and independent standing.
It also had its own bonding authority and its own debt
through bonding. The University also owned buildings that
were over 100 years old. He agreed that there was linkage
and leverage and that a conversation needed to happen.
Co-Chair Wilson continued to advocate for the involvement
of the University. She thought it was important that the
University participated as long as it continued to ask for
state funding.
Representative Carpenter commented that many of the issues
the state dealt with using federal funds had strings
attached. In some instances, the state was mandated to meet
certain requirements. He did not see the situation with
deferred maintenance and the University much differently.
He thought it was appropriate for the state to have some
control in how the University was spending state dollars as
well as a requirement that the money was spent efficiently
and effectively. He agreed with having strings attached.
Co-Chair Wilson asked if there was a way for the public to
access a list of state properties available for disposal by
community. Mr. Davis was not aware of a list. He could look
into it. the division could respond to specific requests.
He did not know if there was access to a complete listing.
Co-Chair Wilson asked about a list of facilities mandated
to stay open because of receiving federal funds. She
supplied an example of the Alaska State Ferries.
10:11:11 AM
Vice-Chair Johnston thought there was a public disposal
process which required public notice. She also noted there
was a tiered bidding system and various levels of
participation.
Mr. Davis reviewed slide 23: "Deferred Maintenance: Looking
Ahead." The division would continue to assist OMB and to
work with the Facilities Council in the process. The
division was looking forward to getting uniform assessments
of the state's facilities in order to focus the resources
that were made available. The division would also provide
feedback on how the process was working. He concluded his
presentation.
Representative Carpenter thought the division had made a
great first step at adopting better management processes.
He asked Mr. Davis to share a timeline going forward. He
wanted to know when results would start to emerge. Mr.
Davis replied that the division was putting out a request
for proposal for the expertise for conducting the FCI
process. The division would prioritize a set of buildings
for the experts to work with to provide feedback to the
division. Simultaneously, the division would be training
in-house staff how to do the process. He expected to apply
the metrics in the following year to the first set of
priorities. He expected that the amount of buildings to be
assessed would grow based on the division's capacity.
Vice-Chair Johnston noted the large number of backlog
dollars for DOT. She asked if the amount had to do with all
aspects of highways. Mr. Davis responded that there were
other categories of deferred maintenance. He indicated that
the focus of the presentation was facilities, but he agreed
there were other components of deferred maintenance
including highways.
Vice-Chair Johnston asked if aviation maintenance dollars
were for runways other than the international airports. Mr.
Davis responded, "That is correct."
Vice-Chair Johnston asked about deferred maintenance for
harbors. Mr. Davis responded that the harbors had different
funding mechanisms depending on which harbor was being
discussed. Some harbors were maintained through the Harbor
Maintenance Grant Program. Some harbors were owned and
maintained by cities and boroughs, and some were state
funded. The deferred maintenance monies would be directed
to the state-owned harbors.
Co-Chair Wilson announced that someone from the Court
System was present if any members had questions.
Co-Chair Wilson relayed the agenda for Thursday.
Representative Josephson asked if a crime bill would be
getting to finance in the following week.
Co-Chair Wilson confirmed that a crime bill would be heard
in the following week and that there would be a number of
hearings on the issue in the next week and over the
weekend. Members needed to be prepared to work through the
following weekend.
HB 38 was HEARD and HELD in committee for further
consideration.