Legislature(2017 - 2018)CAPITOL 17
03/16/2017 01:00 PM House TRANSPORTATION
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Marine Highway System Reform Project by the Southeast Conference | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 136 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
March 16, 2017
4:23 p.m.
MEMBERS PRESENT
Representative Louise Stutes, Co-Chair
Representative Chuck Kopp
MEMBERS ABSENT
Representative Adam Wool, Co-Chair
Representative Matt Claman
Representative Harriet Drummond
Representative Mark Neuman
Representative Colleen Sullivan-Leonard
Representative David Eastman (alternate)
Representative Gabrielle LeDoux (alternate)
COMMITTEE CALENDAR
PRESENTATION: ALASKA MARINE HIGHWAY SYSTEM REFORM PROJECT BY
SOUTHEAST CONFERENCE
- HEARD
HOUSE BILL NO. 136
"An Act relating to motor vehicle franchises, motor vehicle
transactions, motor vehicle dealers, motor vehicle
manufacturers, and motor vehicle distributors."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
ROBERT VENABLES, Energy and Transportation Coordinator
Southeast Conference
Juneau, Alaska
POSITION STATEMENT: Co-Presented the Alaska Marine Highway
Services Reform Project Business and Operational Plan.
JOHN WATERHOUSE, Chief Concept Engineer
Elliot Bay Design Group
Seattle, Washington
POSITION STATEMENT: Co-presented the Alaska Marine Highway
Services Reform Project Business and Operational Plan.
ACTION NARRATIVE
4:23:07 PM
CO-CHAIR LOUISE STUTES called the House Transportation Standing
Committee meeting to order at 4:23 p.m. Representatives Stutes
and Kopp were present at the call to order.
^PRESENTATION: Alaska Marine Highway System Reform Project by
the Southeast Conference
PRESENTATION: Alaska Marine Highway System Reform
Project Business and Operational Plan
by the Southeast Conference
CO-CHAIR STUTES announced that the only order of business would
be a presentation by the Southeast Conference titled "Alaska
Marine Highway Services Reform Project Business and Operational
Plan".
4:25:01 PM
ROBERT VENABLES, Energy and Transportation Coordinator,
Southeast Conference, offered that the presentation would
address questions and issues regarding the costs of the Alaska
Marine Highway System (AMHS) and what could be done to make the
system more sustainable and viable. He advised that the
Southeast Conference was formed 58 years ago in large part to
create the AMHS, and it is pleased to lead the statewide effort
in determining what measures could be taken to move the AMHS
forward. Denis Watson, Mayor of the City of Craig, is chair of
the committee, and Jim Calvin, McDowell Group, has performed
exhaustive work on the AMHS issue moving forward. He described
that Mr. Waterhouse and his firm, Elliott Design Group, have
been involved with the AMHS itself for quite a few years, but
also with other firms and marine highway transportation systems
throughout the country. The Southeast Conference leads the
project steering committee [depicted on slide 2, "Project
Steering Committee"]. He advised that labor and unions are
represented in this effort because the goal is to reach across
the state to include stakeholders representing all of the
"causes and regions" that the AMHS touches. He offered that a
statewide steering committee applied to be part of this group
and have met throughout the year.
4:27:13 PM
MR. VENABLES turned to slide 3, "Ferry Summit" and advised that
the Project Steering Committee began with a well-attended
listening session in Anchorage with the intent that the process
would lead to recommendations addressing the needs the public
believes the AMHS needs to perform and produce. He referred
back to slide 2 and added that the ex officio member is the
Department of Transportation & Public Facilities reflected
through Commissioner Marc Luiken and Deputy Commissioner Michael
Nuessl.
4:28:20 PM
JOHN WATERHOUSE, Chief Concept Engineer, Elliot Bay Design
Group, advised that the Elliot Bay Design Group is a naval
architectural and marine engineering firm that has worked in
marine transportation issues for many years. He related that
his AMHS origins began in 1980, and that his firm is a successor
firm to Philip F. Spaulding Associates, the original firm that
designed the four Alaska ferries in the 1960s. He pointed out
that his company has a long background and interaction with
ferry systems in general and with the Alaska Marine Highway
System (AMHS) in particular.
MR. WATERHOUSE turned to slide 4, "Key Themes" and referring to
the listening session held in Juneau, related that
transportation is a foundation for the Alaskan economy because
without transportation other state activities would not happen,
which is a fundamental aspect to keep in mind. Transportation
provides engagement between communities across the state, offers
access to fundamental services, health care, shopping,
entertainment, and connection to the Lower-48, for example when
the U.S. Coast Guard and others move their families to different
duty stations. He related that the government has a
transportation role in providing an overarching service to the
benefit of the citizens, and his company is reviewing the best
structure in moving AMHS forward.
MR. WATERHOUSE turned to slide 5, "Critical Concepts" and
advised that the critical concepts to any marine transportation
system are as follows: Dependability, the schedule is known 18
to 24 months in advance in order to accommodate business
transportation plans and the public's travel plans, but
especially businesses; Reliability, seldom breaks down,
assurances the system is available for the public; Efficiency,
clear metrics used to improve revenue and reduce expenses,
including the value AMHS receives for its transportation
dollars; Sustainability, such that structured finances are
predictable and the benefits to Alaska are recognized.
4:31:35 PM
MR. WATERHOUSE turned to slide 6, "Proposed Vision Statement"
and offered that labor and management both pointed to the lack
of a clear vision for the AMHS. Although, when pressing
management and crews on what the vision statement was, they did
not know, or they could only remember parts of the vision
statement. Effective organization of transportation, he
explained, is a clear vision, and while working with the
Department of Transportation & Public Facilities (DOTPF) and
management, a "stretch vision" was created. Wherein, he further
explained, the AMHS would be the preeminent marine travel
experience while connecting with other intermodal components of
state, federal and international transportation systems. The
AMHS would set itself up as being better than just adequate
because Alaska is more than just an adequate state, he related.
MR. WATERHOUSE turned to slide 7, "Proposed Mission and Values"
and pointed to the fairly extensive mission and value
statements. He described the elements of a marine
transportation system that must be "touched upon every day" as
follows: Safety, because safety is fundamental to the service
being provided to the public; Excellence, people come to work
every day trying to do their best; Integrity and Respect,
includes the traveling public using the service, fellow crew
members, management, and the citizens of Alaska that allow this
system to exist; Partnerships, managing operations in a fiscally
responsible manner and finding partnerships that will help
leverage the abilities of the system in a manner that benefits,
such as other marine transportation entities, businesses, or
public agencies across the nation, in order to get "more bang
for the buck;" Teamwork, operating as a cohesive team through
honest, respectful, and trusting interactions because teamwork
delivers a reliable system.
4:34:12 PM
MR. WATERHOUSE turned to slide 8, "Goverance Summary" and
explained that the Elliot Bay Design Group reviewed the manner
in which other ferry systems across the United States and the
world are governed, their models and best practice, in order to
improve and offer a better delivery of service for the AMHS. He
related that his company has been working with the agencies
listed and; therefore, it has a deep understanding as to how
each system was structured, and the strengths and benefits of
the different governance structures. He pointed to the left
side of the slide and explained as follows: AMHS is a line
agency of government; GGF - the Golden Gate Ferry System in San
Francisco Bay organized as a transportation district; BCF -
British Columbia Ferry System, originally a Crown Corporation
and currently a public corporation; WSF - Washington State
Ferries is a line agency; NCF - North Carolina Ferry System; New
York Waterways is a passenger only ferry service around the City
of New York, a public/private partnership wherein the operations
side handled by a private company and ownership of the docks,
piers handled by the Port Authority of New York and New Jersey;
BPJ - Bridgeport Port Jefferson Ferry, privately owned over 100
years and operates between Port Jefferson on Long Island, and
Bridgeport, Connecticut; SSA - Steam Ship Authority of
Massachusetts provides ferry service to the Islands of Nantucket
and Martha's Vineyard; CM - Caledonian MacBrayne a Scottish
ferry system, similar to the AMHS in that it provides a lifeline
service to small communities throughout the Country of Scotland.
4:36:44 PM
MR. WATERHOUSE turned to slide 9, "Identified Best Practices"
and explained that best practices included: a clear vision and
mission for the system, facilitates governance, and gets
everyone on the same page and direction; setting clear
performance goals and giving the management of the system
authority and fiduciary responsibility over both revenues and
expenses, thereby having the fiduciary responsibility of
striking that balance and moving things along; in the event the
system operates with financial support from state government or
a public entity, there must be a predictable long-term funding
source identified for both operations and capital construction
in that marine transportation is highly capital intensive and
acquiring assets or modifying assets does not occur in one or
two years, it takes multiple years to make changes in the system
and, therefore, stable funding is absolutely vital; and
oversight works best with a dedicated board providing some
insulation for the day-to-day management from political forces.
He related that that is part of the reason British Columbia
Ferries, for example, shifted from being a Crown Corporation to
a public corporation in order to get that distance from the
changing political landscape.
4:38:02 PM
MR. WATERHOUSE turned to slide 10, "Goverance Analysis" and
advised that after performing a goverance analysis the following
was determined: insulating management from politics, how to hire
good managers and let them manage; how to give management
control over both setting tariffs, the revenue side of the
equation, and managing expenses - the largest expenses of the
AMHS are labor, fuel, and maintenance; retain access to vital
federal funding - prevent jeopardizing access to those funds in
the event of a change in governments; how to coordinate with
other transportation modes, the customers are not really there
to ride a ferry but rather as part of a journey; and recognize
that Alaska is a unique situation and that the ferry system must
be seen as a benefit to all Alaskans and not simply certain
communities, determine a manner in which to send out the message
that the efforts and time spent on the AMHS is seen as an
integral part of what makes Alaska, Alaska.
MR. WATERHOUSE turned to slide 11, "Public Corporation (CalMac
model)" and advised that of the various models they reviewed
there were real strengths in the Caledonian MacBrayne [Hebridean
& Clyde Ferries] (CalMac) from Scotland. He reiterated that it
is organized as a corporation with a single shareholder which,
in this case would be the State of Alaska [just as in Scotland].
Wherein the public corporation enters into a contract with
government on a fee for service basis after working out the
minimum level of service, and the relationship between a
government and transportation. The mission is to operate the
system as efficiently as possible and treat it as a business.
He recommended keeping in mind that transportation necessitates
being nimble in order to respond to a highly dynamic
environment, such as weather, changing travel patterns and
tourism activities. He also recommended determining some
compensation and incentive systems in line with peer businesses,
ways to reward excellence and promote the best activities. At
the end of the day, he said, government continues to own the
assets, vessels and terminals, and leases those to the public
corporation through standard and proven marine practices for
leasing capital assets on the waterfront. He suggested
providing oversight by a board of directors with members
representing the different key stakeholders, similar to the
structure of the Alaska Railroad Corporation with attention to
the needs of labor, fiduciary responsibility, and good fiscal
discipline.
4:42:16 PM
MR. WATERHOUSE turned to slide 12, "Improved Line Agency
(Interim)" and commented that transitioning to a public
corporation would not occur overnight, if it occurs at all
because the leg work has not been completed to determine whether
that is the best path forward, which would occur in Phase 2.
During the interim, there must be a determination in how to
improve the current operation of the AMHS, and he stressed that
one of the most potent tools is finding a way to forward fund
that system, find a way to provide some fiscal predictability in
order to work with its service network, its customers, and be
able to post its schedule for next year. Forward funding is a
key component, he expressed, and recommended shifting labor
relations from the Department of Administration (DOT) to the
Alaska Marine Highway System (AMHS) to give it some degree of
control over its largest cost center. He further recommended
the following: rationalize tariffs, the AMHS is currently
involved in a process to determine a more reasonable and
transparent tariff structure so the public understands how those
tariffs are set, and a component of this is its new reservation
system that will provide opportunities for dynamic pricing or
cross-selling of opportunities; and, allow incentives for
management and employees, offering more flexibility and reward
for those who step up and do more than "just a good job."
MR. WATERHOUSE advised that have finished their Phase 1 effort
with a report and a set of recommendations and are currently in
discussions with Southeast Conference regarding a scope of work,
budget, and schedule, for Phase 2.
4:44:30 PM
MR. WATERHOUSE turned to slides 13-14, "AMHS Reform Project -
Phase 2" and "Phase 2 Objectives" and advised that the
objectives are as follows: identify reforms that will improve
operations and stabilize finances; inform and engage key
stakeholders to build consent toward reform; and, give guidance
on the necessary legislation changes to make the transition from
a line agency of the DOT to a public corporation.
4:45:02 PM
MR. WATERHOUSE turned to slide 15, "Tasks" and pointed to the
six vital tasks and one optional task identified as follows:
Revenue Analysis, look at the revenue side of the equation, what
is the fare elasticity for the different routes in the system,
what are the opportunities for partnering with other business to
enhance fares, and what are sources of non-fare revenue that
could be brought into the system; Operations Analysis, dig into
the operations, how are the vessels crewed, how are the vessels
maintained, how are the terminals staffed, are there better ways
of organizing the operations to be more efficient or enhance the
customer's experience that would then allow for an enhanced
revenue source; Operations Financial Model - come up with a
yardstick to evaluate different operational choices in moving
forward to rationalize the system, and how to determine
differences; Structure and Benefits of Public Corporation,
identify the structure and benefits of a public corporation
because if a strong coherent argument could not be made as to
why change should occur, there would be no convincing the key
stakeholders to go through the expense and effort of making the
change happen; [Mr. Waterhouse skipped over the Transition
Plan]; and, Public Process and Stakeholder Engagement, "an
overarching all" is the public process and stakeholder
engagement because everyone must be pulling in the same
direction, he said. An optional task is the capital needs of
the system and he related that the fleet is having some vessel
replacement as the new Alaska class ferries, designed by the
Elliot Bay Design Group, are under construction in Ketchikan.
Although, these two new vessels are not the end of the story and
he put forth the questions, what sort of additional vessels
should be constructed, and the dollars involved, should that be
accomplished as part of Phase 2, or leave it to other entities
to determine. He opined that the discussion as to how to deal
with the long-term capital will take place during Phase 2.
4:47:42 PM
MR. WATERHOUSE turned to slide 16, "Revenue Analysis" and
reiterated that the objective of the revenue analysis is to
identify the mix of public funding and other revenue that will
provide for the sustainability of AMHS over the next 25 years.
He then advised that an advisor joining the project at Phase 2
is Mike Anderson, and he described Mr. Anderson's background in
dealing with labor negotiations and capital projects. The
deliverable aspect is the Long-Range Revenue Development
Strategy Report and advised that the McDowell Group is their
partner and will lead the work product effort.
4:49:40 PM
MR. WATERHOUSE turned to slide 17, "Operations Analysis" and
advised that the Elliot Bay Design Group will lead the
operations analysis due to its background in ferry systems and
will identify the basic transportation and shipping needs for
Alaska, and the key user group, such as, Alaska residents,
Alaska businesses, and the strong tourism component. He offered
that part of the challenge is determining the balance between
those three user groups that makes the most sense moving forward
which looks at the "four-dimensional chess" of matching vessels
to routes to schedules to frequency of service, determining how
to meet the needs of the different users groups, the cost
structure associated with it, and has demands as far as labor,
terminals, and asset requirements, he explained. Mr. Waterhouse
related that from that data they will produce a deliverable
Vessel and Terminal Operations Report with strategic operational
goals, working closely with AMHS management and employees.
MR. WATERHOUSE turned to slide 18, "Operations Financial Model"
and advised they are not looking for the optimum system because
there is not the time or ability to completely go through and
optimize. Frankly, he said, that is not the role of a study
group, that's the role of the management that will ultimately be
brought in to run the system as a public corporation. The
Elliot Bay Design Group's goal with the operations financial
model is to offer yardsticks for measuring what change could
mean to the system in terms of operating costs and benefits to
the user groups. He explained that they will look for
opportunities, such as the concession side on board the vessels,
routes, or other aspects of the operation that are innovative
and beneficial to the state. From that data, a Long-Range
Financial Strategy Report focused on the balancing of revenues
and expenses will be produced.
MR. WATERHOUSE turned to slide 19, "Structure & Benefits of
Public Corporation" and explained that the Elliot Bay Design
Group will work with the McDowell Group on the structure and
benefits of a public corporation. He said, "What is that
compelling story that we can tell having done our work on
revenue and operations to say why this is the path forward --
or, the recommended path forward for the State of Alaska?" He
advised they will review how that goverance structure actually
works, what would be the duties and responsibilities of a board,
what would be the interaction with other state agencies, and
from that data the Elliot Bay Design Group will determine the
clear argument on why a public corporation would make sense.
4:53:12 PM
MR. WATERHOUSE turned to slide 20, "Transition Plan" and said
that after defining what the vision might look like in 20 years,
to then look at the current situation and determine how to offer
guidance on what must begin occurring in order to transition
from the current AMHS to a marine highway system that will cover
the next 50 years. In that regard, he said they will put
together a transition plan or a goverance strategy to advise the
executive and legislative branches on a possible path forward.
MR. WATERHOUSE turned to slide 21, "Public Process and
Stakeholder Engagement" and commented that throughout the
process there will be a public process and stakeholder
engagement and will look at holding additional hearing sessions
on this project. The steering committee assembled for this
project represents communities across Alaska in order to be
certain the efforts of Phase 2 reflect input from those
communities. The McDowell Group will look at a combination of
public messaging, surveys, meetings with listening sessions, web
sites, and how to receive input from the public reflecting
Alaskans needs for this system.
MR. WATERHOUSE turned to slide 22, "Timeline" and expressed that
the timeline is aggressive as the goal is to have enough
information that legislation could be considered by the time of
the Southeast Conference meeting this fall, or earlier if
possible. The ability to meet this schedule will be determined
by what is gleaned along the way because this is a large and
complex operation with many moving parts. He said they will
look to the steering committee, communities across Alaska, and
resources within the Department of Transportation & Public
Facilities (DOTPF), the Department of Administration (DOA), and
other branches of Alaska's government to assist in completing
this project.
4:55:59 PM
MR. VENABLES turned to slide 23, "Project Sponsors" and stressed
that even though he sees an expanded role for communities and
the private sector to partner and create other streams of
revenue for the AMHS envisioned for the future, AMHS will always
be a public entity as he is not looking to privatize this as a
private system or port authority. He pointed out that there has
been broad support across the state and the entities listed on
the slide have provided financial support for the project
currently. The goal is to have completed the "meat of the work"
for the next legislative session.
4:57:17 PM
CO-CHAIR STUTES disclosed that the AMHS is one of her "pet
projects" as it is a critical part of Alaska's transportation
system and her goal is to optimize the system. There are "all
kinds of different waters around here," and she asked whether a
more standard ferry could be built and utilize in a large area.
The two vessels currently under construction are fairly specific
and would not do well on a route from Homer to Kodiak, for
instance, and she asked whether the lack of a standard
measurement for any of the anticipated vessels could be
contributing to the problem.
MR. WATERHOUSE responded that the AMHS does not have a class of
vessels, but rather 13 classes of vessels. He pointed out that
a success of Alaska Airlines is that it flies one class of
airplanes and, unfortunately, the oceans are not as forgiving as
the air ways. He explained that AMHS has vessels operating on
open ocean routes, large vessels operating on somewhat protected
inland routes, and smaller vessels that can access the docks and
piers in the smaller communities. Nominally, he explained,
there are three classes of vessels, and part of the Phase 2
effort will be looking at the routes and assets on those routes
to determine the best mix of vessel sizes and types to offer
flexibility to the system and also meet the mission requirements
of schedule and capacity.
5:00:03 PM
CO-CHAIR STUTES referred to the 13 classes of vessels, and asked
the number of classes of different docks, as that appears to be
problematic as well.
MR. WATERHOUSE opined that AMHS calls at 33 different terminals,
and a significant number of those terminals are not controlled
or owned by AMHS. There, he pointed out, is the challenge of
AMHS not only calling at its own terminals, but also calling at
terminals managed, designed, and used by other entities. He
described it as a complex problem and at the end of the day, the
vessels and terminals have to work together. Terminals are
difficult when looking at the connection to other transportation
networks and the challenges of meeting the landscape of Alaska
in a working manner. There are opportunities, he offered, for
some standardization and monetization of the terminals, and to
determine whether there are ways to make them generate revenue
other than just as a place to take tickets.
5:01:33 PM
CO-CHAIR STUTES said she would presume that all of these items
would go into the same bucket when determining the system.
MR. WATERHOUSE answered that they will be looking at these
items, but their ability to dig deeply will be limited by the
time allowed as it will be a sprint to cover the many areas and
offer enough information to the Southeast Conference to create a
set of solid and defensible recommendations. Clearly, he
related, not every last question will be answered.
5:02:20 PM
REPRESENTATIVE KOPP offered his excitement about this project as
Co-Chair Stutes and he are huge fans of the ferry system and he
appreciates the current leadership of DOTPF heading in this
direction. He referred to a previous statement of how to
message this information to Alaskans, how to talk about the
direction this is moving, and to the proposed vision statement,
and described that this project is opening up Alaska. The
biggest problem Alaskans have is occupying their own land due to
a lack of access and, he stressed, Alaska has approximately 900
road miles with 25,000 coastal miles. Somehow that fact needs
to be messaged so people understand that "we're not Alaska
without the marine highway system, we literally fall back into a
postage stamp size that we occupy" he related, but with DOTPF
and AMHS the entire State of Alaska can be opened up, and that
vision needs to be pushed hard. He referred to the public
corporation models such as the British Columbia Ferry System and
the Caledonian MacBrayne and asked whether they have shown to be
sustainable.
MR. WATERHOUSE responded that both systems are sustainable. The
British Columbia Ferry System recently signed a 10-year labor
contract with its labor unions which offers long-term stability
and predictability in its cost structure. Caledonian MacBrayne
recently signed a renewed 7.5-year contract with the Scottish
government which will ensure that its operating budgets and
schedules are set, but also that the fees paid to it by the
government are known and predictable and tied to required
specific service delivery standards. He related that part of
Phase 2 is looking at how those systems transitioned and whether
there are lessons to be learned. The person who was formerly
head of the London Stock Exchange, and currently in charge at
CalMac Ferries, Caledonian MacBrayne Clyde & Hebridean Ferries,
and he were discussing Phase 1 of this project and Mr.
Waterhouse was promised full cooperation for the Elliot Bay
Design Group in moving forward. Mike Corrigan, former President
and CEO of BC Ferries, will also work closely with the Elliot
Bay Design Group.
5:05:53 PM
CO-CHAIR STUTES commented that she has been working for three
years to get the system forward funded and she has not given up
even though this is not the prime year. She stressed that
forward funding Alaska's ferries is critical to contributing to
its sustainability, and that it would be revenue generating.
5:06:55 PM
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 5:06
p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AMHS Reform Presentation House Transportation 3_16_2017.pdf |
HTRA 3/16/2017 1:00:00 PM |
Presentation by SE Conference on the AMHS Reform Project |