Legislature(2011 - 2012)SENATE FINANCE 532
02/28/2012 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB170 | |
| Overview of Port Projects: Port of Anchorage | |
| Overview of Port Projects: Arctic Port Study, Department of Transportation and Public Facilities | |
| 54074 $1 MILLION GF TO CONTINUE THE ARCTIC PORTS STUDY | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 170 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SENATE BILL NO. 170
"An Act requiring vocational education counseling in
public schools."
9:09:46 AM
Senator Thomas explained that SB 170 introduced vocational
counseling to 7th, 9th, and 11th graders. He offered that
some students expected to get out of school and
automatically get into a trade or vocation, but that they
often had very little understanding of what it took to
become successful in that particular trade. He explained
that the bill did not create any redundancy in school
services, but that it required schools to offer vocational
counseling in the 7th, 9th, and 11th grades. He offered
that evidence showed that when people had vocational
counseling, they were more successful in school and life;
the counseling also had a positive effect on the juvenile
justice system. He concluded that the bill had no cost
associated with it.
Co-Chair Stedman discussed a zero fiscal note in the
packet.
Senator Olson inquired if the legislation had any support
from the school districts. He observed that the bill did
not fund any of the counseling and expressed concern that
it represented an "unfunded mandate." Senator Thomas
responded that all the districts that he had talked to had
supported the bill and that the Department of Education and
Early Development had the existing resources in place to
implement the legislation.
9:12:19 AM
Senator Thomas MOVED to report SB 170 out of committee with
individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
SB 170 was REPORTED out of committee with a "do pass"
recommendation and with a previously published zero fiscal
note: FN1 (EED).
^OVERVIEW OF PORT PROJECTS: PORT OF ANCHORAGE
9:13:47 AM
AT EASE
9:14:49 AM
RECONVENED
9:14:53 AM
DAN SULLIVAN, MAYOR, CITY OF ANCHORAGE, ANCHORAGE (via
teleconference), stated that the Port of Anchorage (POA)
was a vital asset for Alaska. He related that shortly
before he had taken office in 2009, there were construction
problems with the port installation and that his office had
spent the last two years reviewing the construction; over
that time, the project's costs had increased dramatically.
He related that the new estimate of the needed funding had
originally been $1 billion, but that he had scaled the
design down, which reduced the estimate to $350 million. He
mentioned that the governor had allocated $200 million in
his budget for the POA Intermodal Expansion Project, but
that the port was seeking the full funding of $350 million.
He shared that there was a new relationship and agreement
between the Municipality of Anchorage and the U.S. Maritime
Administration (MARAD), which was the federal agency in
charge of the construction project. The new memorandum of
agreement with MARAD set a whole new level of oversight,
which included an oversight committee, a technical
committee, a quality control program, liability insurance,
and a U.S. Army Corps of Engineers' third party review of
the project. He opined that the POA Intermodal Expansion
Project was back on the right track and that fiscal
certainty was the last remaining hurdle for the project.
STEVE RIBUFFO, INTERIM DIRECTOR, PORT OF ANCHORAGE,
presented an update of the POA Intermodal Expansion Project
titled "POA Presentation"(copy on file).
9:18:09 AM
Mr. Ribuffo discussed slide 2 titled "Facts about the
Port."
• The major point of entry for containerized cargo in
Alaska
• Services support over 200 rural communities in the
State
• Annually, 240,000 containers move through the Port
• Since 2000, an average 4 million tons of goods and
materials pass through the Port's facilities annually
• 90% of merchandise goods for the Railbelt and
interior Alaska.
• 100 million pounds of bypass mail items
• 52,000 vehicles processed annually on average
• 80% of the cement for concrete
Mr. Ribuffo addressed slide 3 titled "Cargo Distribution
Map" and related that it illustrated the distribution of
cargo from the POA via road, rail, barge, and plane. The
distribution pattern supported over 200 rural communities
with fuel and bypass mail deliveries.
Mr. Ribuffo spoke to slide 4 titled "Fuel Services &
Military Support."
Fuel Services:
• 11 million barrels of fuel annually
• 2/3 of the jet fuel for Ted Stevens Anchorage
International Airport
• 100% of the jet fuel for Joint Base Elmendorf-
Richardson
• 2/3 of all fuel used by the military in Alaska
• 1.4 million barrels of fuel are shipped from POA to
rural Alaska
Military Support:
• Designated a Department of Defense National
Strategic Seaport
• One of only 19 ports in the nation to have this
designation
• Supported over 30 deployments since 2005, including
Stryker Brigade deployments to Iraq and Afghanistan
Mr. Ribuffo stated that the POA would be hosting the
commissioning of the naval warship "Anchorage" in the
spring of 2013.
Mr. Ribuffo spoke to slide 5 titled "Employment & Payroll."
• Regular Operations:
• $50 million aggregate annual payroll from Port
Stakeholders
• Ship days over 3,600 vehicles moving through port
• Non-ship days over 600 vehicles
• Expansion Project:
• Directly employs 150-200 tradesmen & women annually
• Over 200 companies involved in project from 2005 -
2009
Mr. Ribuffo related that the POA was a major economic
engine for Alaska that contributed over $750 million per
year to the economy, with higher estimates reaching over $1
billion. The port not only played an important role in
Alaska's economy, but it also accounted for 30 percent of
the business from the Port of Tacoma. He observed that port
operations created jobs for a variety of trade industries,
including union members such as longshoreman, operating
engineers, and teamsters.
Mr. Ribuffo discussed slide 6 titled "Port Stakeholders."
A "stakeholder" is a company that relies regularly on
the port facilities to conduct routine business and/or
leases port property.
• Horizon Lines
• Totem Ocean Trailer Express (TOTE)
• Alaska Basic Industries (ABI)
• Tesoro Alaska
• Crowley Marine Services
• Aircraft Service International Group (ASIG)
• Flint Hills Resources
• Alaska Railroad Corporation
• U.S. Army - Alaska and U.S. Transportation Command's
Surface Deployment & Distribution Command (SDDC)
• Cook Inlet Tug and Barge
Mr. Ribuffo spoke to slide 7 titled "Annual Dock Tonnage"
and stated that the POA averaged around 4 million tons of
cargo per year. He explained that the "Dry Bulk Goods"
category consisted predominately of commodities such as
cement and steel. The "Petroleum Shoreside" category
referred to petroleum products that passed through the
port's valve yard on route to either an on-port storage
facility or over the dock, and which were originally
delivered to the port via pipeline or rail. The "Petroleum
Dockside" category referred to petroleum products that
passed through the port's valve yard while entering or
leaving the port, and which were transported by a fuel
tanker or barge. He noted that the break down between
petroleum and the "Vans/Flats/Containers/Vehicles"
category was about 50/50, but that recently petroleum
business had represented about 52 percent of the port's
cargo.
Mr. Ribuffo explained slide 8 titled "Revenue & Operating
Projections." He stated that the slide showed the POA's
actual revenue and operating expenses in 2011, as well as
the projections for 2012 through 2021; the projections
included revenue increases associated with the completion
of the new berths, as well as anticipated revenue that
would result from changes by existing tenants. He pointed
out that the port had a stable customer base and an
expanding facility that was near a population center.
9:22:30 AM
Co-Chair Stedman asked for an explanation of the revenue
projections on slide 8 and inquired if a population growth
in the Anchorage and Mat-Su areas accounted for the rising
revenue. Mr. Ribuffo responded that the projected increases
in revenue would be a result of negations with companies
for either a presence on the POA or a growth in their
business at the port; new businesses changes by current
tenants would increase the amount of tonnage across the
dock and would result in more revenues.
Co-Chair Stedman queried if slide 8 represented a stand-
alone analysis or whether it also factored in Port
McKenzie. Mr. Ribuffo responded that it was a stand-alone
analysis for the POA.
Co-Chair Stedman inquired if another port being built
"across the straits" would have an effect on the POA's
revenue projections. Mr. Ribuffo responded that to the best
of his knowledge, it would not have an effect. He explained
that the POA had been an import port for a long time and
that interest in the port came from "like" businesses or
existing port businesses that were growing.
Co-Chair Hoffman observed that the POA had a healthy
projected cash flow and queried what the anticipated use of
the money was. Mr. Ribuffo replied that the port had
traditionally put the annual profits back into the project
as its funding contribution towards completing the
construction and added that the port had done this
"religiously" for the past five years.
Co-Chair Hoffman further inquired what the cash flow was
used to purchase. Mr. Ribuffo responded that the port's
money went into the construction pool for that particular
season. He offered that it might be used for the
installation of bulkhead sheet pile, movement of gravel,
paving of surfaces, and likewise activities.
Co-Chair Hoffman asked if the POA would be doing additional
construction through 2021 and noted that slide 8 showed a
projected cash flow of about $11 million in 2021. Mr.
Ribuffo stated that if the POA received the $350 million in
funding that it was requesting, the estimated completion
date was in 2019; after the construction was completed, the
port would have to reconsider how its profits would be
used. He mentioned that the POA had a facility that
required a significant amount of maintenance and that in
the future, the port might be investing in increasing the
annual amount of work that went into repairing sheet pile
and "the like"; leftover funds would stay in a bank as
profit.
Co-Chair Stedman noted that the port's expenses were
projected to grow at a rate of 2.75 percent, but that the
revenue was projected to grow at 6 percent. He inquired why
the port's expenses were only moving at the rate of
inflation. Mr. Ribuffo responded that he did not have a
definitive answer for the question, but that the revenue
growths were based on expectations of new revenues to the
port that would result from changes to the businesses at
the port. He explained that the expenses would not grow as
much as the revenues because the required lifecycle
maintenance cost of the new area would be far lower than it
was on the current pile-supported dock, which was part of
the reason why the port wanted to do the construction
project. He added that slide 8's projections represented an
estimate based on the port's "best estimates at this time."
9:27:26 AM
Co-Chair Stedman requested a more detailed breakdown of the
expected changes over time to the POA's revenue and
expenses, as well as the projections on its operational
cash flow. Mr. Ribuffo responded that he would provide the
requested information.
Co-Chair Hoffman stated that a large expense to the
operation of the port was dredging, which had been paid for
by the Army Corps of Engineers. He inquired if the federal
government would continue to pay for the dredging at the
port, given the "tightening" of the federal budget. Mr.
Ribuffo responded that the port had discussions with the
Army Corps of Engineers regarding that issue and that the
port did not anticipate any problems with the continuation
of federal funding for maintenance dredging.
Co-Chair Stedman requested that the POA provide the
committee with the expected costs of the dredging. He
stated that the committee needed to know what exposure the
state had in regards to dredging and observed that the
state would not be building a port, which was structured so
that dredging ceased if the federal government had a
budgetary constraint. Mr. Ribuffo acknowledged the request.
Co-Chair Stedman referenced Co-Chair Hoffman's earlier
question regarding net cash flows and stated that he
assumed that there was no marginal debt regarding the
port's net cash flow, "so it would be all equity
construction going forward." Mr. Ribuffo replied that if
additional capital construction was required, the port
would have to consider its ability to fund the construction
with either debt or profits. He added that the port did not
anticipate any future construction beyond the completion of
the current project. Co-Chair Stedman interjected that his
understanding of the port's current project was that the
state was the last player standing and that the
municipality and the federal government were no longer
involved. He concluded that the state of Alaska was
responsible for finishing the port's project and inquired
if this assumption was correct. Mr. Ribuffo responded in
the affirmative.
Co-Chair Stedman queried how much debt the POA could handle
with its operations. Mr. Ribuffo replied that there was a
slide later in the presentation addressing the issue.
Mr. Ribuffo spoke to slide 9 titled "The Port is 50 years
old and in a deteriorated condition." He stated that the
cathodic protection system had exceeded its useful life and
that there was severe corrosion throughout the facility. He
mentioned that a 2011 memo had estimated that there were
1300 pilings that required repairs due to age and
corrosion. He observed that since 2004, the port had only
repaired 111 pilings, which was an average of 16 pilings a
year and that it cost about $1.6 million to replace that
many pilings annually. He offered that assuming that the
corrosion stopped completely and the port "quadrupled" its
efforts, it would still take 15 years to complete the
necessary repairs, which would not add increased seismic
protection or provide any modernization of the port's
facilities. He referenced Co-Chair Hoffman's earlier
question regarding how the port's cash flow would be used
and stated that increasing the number of piles that were
repaired per year was one of the activities that the money
would be used for.
9:31:49 AM
Mr. Ribuffo discussed slide 10 titled "The Project will
replace the current container facilities while providing
modern, reliable and expanded infrastructure for our
future." He explained that the POA Intermodal Expansion
Project area was outlined in yellow on the slide and had
been scaled back from its original scope. When completed,
the new facilities would allow the port's current container
ship tenants, TOTE and Horizon Lines, to move their ships
off the old facility to the new, larger and more modern
berthing spaces, which were built to a higher level of
seismic stability and operational safety. He stated that
the two barge berths would provide new economic and
business opportunities for shippers in the region, as well
as ready access to a rail line that extended the full
length of the port. Additional benefits of the project
included access to 65 acres of commercial or industrial
land, with immediate access to intermodal connections and
water-born transportation. He related that the combination
of increased berthing space and acreage would allow the
port to better facilitate military deployments, accommodate
larger vessels that had a deeper draft, and support
resource development projects in the state and region. He
added that perhaps most importantly, the new dock would be
built to a higher degree of seismic stability, which would
insure that the port would remain operational following an
earthquake.
Co-Chair Stedman stated that there had been concerns about
icing issues. He explained that there were concerns
regarding putting ships alongside the sheet metal walls
without the ability to push the ice underneath the docks,
which was a process that was currently being done. Mr.
Ribuffo stated that it was impossible to push ice under the
dock. He explained that iced froze around the piles and
that during the winter, the piles and ice were frozen
together. He related that the process used by tug boat
companies to prepare the dock for winter arrivals was to
use tractor engines to move the ice away from the dock. He
related that the process for removing ice was well
practiced and that ice had never been a problem for the
port. He added that the port had never closed because of
ice and that with respect to port operations, ice had not
been a problem in the five years he had been at the port.
Co-Chair Stedman pointed out that his question was whether
icing would be problem in the future, once ships were being
laid along the sheet metal wall. He mentioned that members
of the maritime industry had indicated that the sheet metal
wall could be substantially different than the current
piling dock regarding how to deal with icing issues. Mr.
Ribuffo stated that his understanding of studies that were
conducted by the Army Corps of Engineers was that ice would
not be a factor for ships that were docking along the
bulkhead wall. Co-Chair Stedman requested that a copy of
the Army Corps of Engineers' letter be provided to the
committee.
9:35:36 AM
Co-Chair Hoffman pointed to the three construction blocks
on slide 10. He noted the dates for construction inside the
blocks and inquired if they were correct. Mr. Ribuffo
responded in the affirmative. Co-Chair Hoffman queried what
impact "jettying out like this" would have on silting at
the most utilized portion of the dock and further inquired
if the port anticipated any additional silting. He opined
that the current type of construction would cause "eddying"
and wondered if there had been any studies regarding how
the construction could affect silting in the downward
portion of the inlet. Mr. Ribuffo responded that Co-Chair
Hoffman's analysis was correct and that the Army Corps of
Engineers was currently conducting modeling to help
determine the phasing for moving the container ships off of
the current dock to the north end without there being an
adverse impact on the day to day operations. He offered
that by the time all the information was gathered, the port
would be able to construct a good plan for phasing the
container ships' movements in order to insure that any
eddying or increased siltation, which might form under the
new structure, would not be an impact to container ship
operators or the petroleum ships that docked to the south
of the current facility.
Co-Chair Hoffman asked if the vast portion of the
additional reclamation would be done with piling as well.
Mr. Ribuffo replied that the remainder of the POA, beyond
the redefined construction project, would stay the same.
Co-Chair Hoffman clarified that he was referring to
construction for the three parcels that were outlined in
yellow on slide 10 and queried if the vast portion of that
construction would be done using piling. Mr. Ribuffo
responded that the construction would use an open cell
sheep pile wall with fill behind it.
EMILY COTTER, DIRECTOR, MARKETING AND PUBLIC AFFAIRS, PORT
OF ANCHORAGE, interjected that up to 65 acres of the fill
had already been placed and was visible within some of the
yellow outlined areas on the slide; the fill was currently
being used for staging materials.
9:39:00 AM
Co-Chair Stedman stated that there was substantial
maintenance on the current dock due to corrosion and age.
He observed that the scaled down version of the project,
which was outlined in yellow on slide 10, removed part of
the current dock and inquired whether the port had plans to
remove the rest of the current dock. Mr. Ribuffo responded
that there were no plans to take out the remainder of the
current dock, particularly in the south end where the
petroleum business took place; this area would be
maintained in its current structure.
Co-Chair Stedman wondered how the port would decrease its
maintenance costs if it kept in place and maintained the
old structure. Mr. Ribuffo responded that the port expected
lower increases in maintenance costs on the new structure
and would also keep the current level of maintenance on the
old structure; the port would be increasing the amount of
investment in doing pile repairs in order to sustain the
facility. He concluded that in the end, the port would see
the same level of profits that "we see now" and would still
be able to operate without having to rely on tax payers.
Co-Chair Stedman asked for a more detailed breakdown of the
POA's expenses. He pointed to the port's projected growth
rate of expenses over 11 years and stated that if the port
was making new additions and leaving its old infrastructure
in place, it still had to maintain the old infrastructure.
He questioned the projected growth rate of the port's
expenses and requested additional information. Mr. Ribuffo
acknowledged the request.
Co-Chair Hoffman inquired what type of feedback the POA had
gotten from its stakeholders regarding the proposed scaled
back project. Mr. Ribuffo responded that the primary
stakeholders that were affected by the project were TOTE
and Horizon Lines. Initially, TOTE had expressed concerns,
particularly with the design of the new facility that it
would be moving into; the concerns had been addressed to
TOTE's satisfactions. He added that Horizon Lines was
looking forward to the opportunity to relocate to a
modernized facility, which had larger container cranes and
that the company might be changing the type of vessels that
it brought to the port. He concluded that both of the
port's primary stakeholders were in support of the project.
Co-Chair Hoffman inquired if the port's other stakeholders
were in support of the project. Mr. Ribuffo responded that
the rest of the stakeholders operated primarily on the
south end of the port on the petroleum docks. He concluded
that the stakeholders on the south end had been satisfied
with the support and service that the port had provided so
far and that he did not see that changing in the future.
Mr. Ribuffo discussed slide 11 titled "Expanded
Opportunities."
Recent Customers:
· BP & ExxonMobile - Drill Pipe for the North Slope
Operations
· U.S. Army - Alaska - Military Deployments
· Chugach Electric - Sub-station infrastructure
· Film Productions - Big Miracle
· Holland America - 7 to 9 summer port calls
New Customers:
· Tetrotech - CIRI Fire Island Wind Farm turbines &
construction equipment
· A Refined Petroleum Storage Facility/Barge Operator
· A Container Barge Operator
· Alaska Basic Industries - Planned storage expansion
· USS Anchorage - Commissioning ceremony
Future Possibilities:
· Current Petroleum Tenant - Addition of a new product
line
· Film Productions
· Resource development projects - Gasline, dam, etc.
Mr. Ribuffo stated that the "Recent Customers" category
represented non-tenant customers, which had used the
facility in the last 18 to 24 months. Under the "New
Customers" category, the POA had listed businesses that had
formally indicated intent to use port facilities. The port
was unable to disclose the names of all of the new
businesses due to the proprietary nature of the
discussions; however, the port at least provided a generic
description of how the customer would use the facility. The
last section of the slide described potential opportunities
in the future that lacked formal intent. He pointed to the
addition of a new product line in the third category and
stated that it was "80 percent a sure thing." He related
that when the addition of the new product line came to
fruition in the latter part of 2013, the port's tonnage
would go back over 5 million tons per year. He noted that
although the port had managed to provide for new customer
use in the past, this was growing increasingly more
difficult due to space constraints. He stated that due to
the close relationship the port had with its primary
lessees, it was able to accommodate transient customer
requests. He shared that the port counted on short-term
access to the leased land in order to accommodate larger
shipping requests such as those of municipal light and
power and that while there was not anything financial in it
for the lessees, everyone understood the importance of
making logistics operations at the port a success. He noted
that although the project was not complete, the 65 acres of
new laydown area had already been used to store transient
cargo. He concluded that the port had a lot of new
opportunities, but that it needed more finished space.
9:44:50 AM
Co-Chair Stedman requested copies of the port's
correspondence with its "New Customers" category that was
on slide 11. He stated that if there was a problem with
disclosure, the committee would cross that bridge when it
came to it. He wanted to give the committee the opportunity
to see documentation regarding who was actually interested
in the port and of what magnitude the interest was. Mr.
Ribuffo acknowledged the request.
Senator Olson additionally requested how much the port's
"New Customers" category planned on spending in the area
and how much business they would be putting through the
port. He observed that the Finance Committee was more
interested in the financial aspects than it was in what the
names of the businesses were. Mr. Ribuffo inquired if
Senator Olson wanted the financial information included
with port's response back to committee that described the
businesses. Co-Chair Stedman responded in the affirmative
and further requested information regarding a timeline, if
there was one, of when the potential customers needed the
facility or an indication if the interest was more general.
Mr. Ribuffo replied that the same question had been asked
the prior year and that several of the companies had agreed
to provide the requested information, as well as their
names; furthermore, he appreciated that the committee had
kept the confidentiality of the companies and offered that
the same agreement could probably be reached again.
Mr. Ribuffo explained slide 12 titled "Funding."
The project has been funded through a combination of
port, state and federal funds.
$331 million received to date:
Federal Funds - $138.7 million
State Funds - $ 121.3 million
Port of Anchorage Funds - $ 71.0 million
· The Port also qualifies for a $75 million line of
credit and is currently allowed
to draw up to $51 million. Currently it has drawn
$40 million of this credit line.
· The Port has also put $31 million towards the
project from savings and revenues since 2001.
Mr. Ribuffo related that the POA had $29 million in
uncommitted appropriations and could draw another $11
million on its line of credit. If needed, the port
currently had access to up to $40 million.
Mr. Ribuffo began to speak to slide 13 titled "State Funds
Received" and noted that the state funding received for the
project to date was $121 million. Co-Chair Stedman
requested a clarification on slide 12. He observed that a
line of credit was often used for short-term financing
versus using long-term debt financing. He inquired if the
port's line of credit was an actual line of credit or
whether it was the amount that the facility could be put in
debt. Mr. Ribuffo stated that the municipal manager might
provide a better answer, but that his understanding was
that line a credit was issued from a bank and could be
drawn from, up to a certain limit; the borrower would pay
interest on the drawn amount, which got "rolled over" in
periods of 120 to 180 days. He related that the port had
drawn $40 million on its line of credit and continued to
roll it over and pay the interest on it. He concluded that
when the port was finished with the construction, it would
begin to start paying the line of credit back.
9:48:46 AM
Co-Chair Hoffman stated that his questions did not reflect
a lack of support of the project, but that he believed the
committee needed to be well versed on all the aspects of
the POA because it was "Alaska's port." He queried if there
had ever been a dividend to the Municipality of Anchorage
from the port, given the surpluses and the funds from the
federal and state governments. Mr. Ribuffo responded that
the municipality paid an annual fee instead of taxes in
order to help city government; the fee was somewhere
between $500,000 to $750,000 per year, but it depended on
what the port's revenues had been. He related that the port
also paid what were called "intergovernmental charges" for
those services that the municipality provided to the
enterprises and utilities for services that the port did
not have the staff to perform.
Co-Chair Hoffman requested that the POA provide a copy of
its dividends for the last ten years to the Municipality of
Anchorage. Co-Chair Stedman asked the port to provide the
requested information.
Co-Chair Stedman inquired why the port had a short-term
line of credit instead of long-term debt.
GEORGE VAKALIS, MUNICIPAL MANAGER, PORT OF ANCHORAGE (via
teleconference), replied that the port had received "a
pretty good deal" regarding the interest on its line of
credit and that it was more cost effective to use the
short-term line of credit at the current time.
Co-Chair Stedman queried if a line of credit was as "easily
callable" as a long-term bond. Mr. Vakalis responded that
he was unsure about it being easily callable, but that the
line of credit was still good as long as the port continued
to make its payments; furthermore, the port did not have
any difficulty making the payments.
Co-Chair Stedman inquired when the port expected to switch
its short-term credit into long-term debt and offered that
it did not appear that the port had the ability to pay the
line of credit off, given the hundreds of millions of
dollars in upcoming capital costs. Mr. Vakalis responded
that the port was currently working with its chief
financial officer in order to figure out the best way to
finance the debt.
Mr. Ribuffo discussed slide 14 titled "Federal Funds
Received" and related that the project had received a total
of $138.7 million in federal funds. He stated that federal
funding had been the project's primary source of funding in
its early years; however, the port had not seen any federal
funding in the past two years. He shared that the port was
now also pursuing funding at the federal level through
competitive grants, but that it was clear that future
federal funding would be at lower levels than it had been
in the past.
Co-Chair Stedman directed the presentation back to slide 13
and asked for an explanation of the slide.
Mr. Ribuffo continued to discuss slide 13 and stated that
it listed the state funds that the project had received, as
well as the Senate bills that had appropriated those funds.
9:53:20 AM
Co-Chair Stedman stated that over the last several years,
the committee had been very supportive of moving the POA
Intermodal Expansion Project forward. He offered that the
committee's support could be seen on slide 13's "year after
year" of funding increments and observed that the federal
government and the municipality had pretty much backed out
of the financing part of the project. Mr. Ribuffo replied
that the port was aware of, and appreciated "very much,"
the state's support regarding the project.
Co-Chair Stedman requested the port to provide the
committee with its timeline, otherwise knows as "burn
rate," for the funds needed to complete the project as it
was proposed. Mr. Ribuffo acknowledged the request.
Mr. Ribuffo explained slide 15 titled "Funds Expended on
Project" and explained that it listed the total funds that
had been expended on the project since its inception. He
stated that to date, $301 million had been spent and/or
obligated on the areas listed on the slide. He noted that
the POA Intermodal Expansion Project involved many
activities that were not happening on the north end. In the
years that preceded 2007, when the port was able to start
the north end, a lot of rework was done to make the port
more accessible; improvements included the addition of a
rail line for trucking operations, the construction of a
haul road that connected the port to the military base in
Anchorage, and the 65 acres of added fill. The haul road
was being used not only for gravel hauling for the project,
but also for military deployments. He offered that a lot of
good things had been accomplished since the beginning of
the project, but that it went unnoticed sometimes.
Mr. Ribuffo discussed slide 16 titled "Funding." He stated
that in order to successfully move forward, plan more
efficiently, and be able to exploit economies of scale to
better control costs, the port needed to have complete
funding for the project up front. He related that in its
annual request to the legislature, the Municipality of
Anchorage's highest priority was to secure $350 million for
the POA Intermodal Expansion Project; the requested amount
was based on a 2011 cost estimate and included an added
contingency. He shared that it was the POA's intent to
construct the project with $350 million of state funds and
not have to return to the legislature for more funding. He
observed that full, upfront funding would allow the port to
create multi-year bids and would also allow the creation of
efficiencies that did not currently exist; upfront funding
would eliminate the need to pay for the constant
mobilization and demobilization of construction
contractors, would allow the contractors to purchase
material at the best available prices, and would eliminate
the risk of further increasing the project costs that were
caused by a lack of funding and inefficiencies that were
created by constantly changing the contractor of record.
Co-Chair Stedman observed that the legislature had not
expected to fully fund the project for completion, but had
basically inherited the project because the other
participants were no long able to come to the table and/or
had other constraints; he opined that it should not go
unnoticed how the state became the backer of the project.
Mr. Ribuffo responded that it had not gone unnoticed.
Senator McGuire pointed out that if the state was going to
invest its money, it should do so with a focus on success
and efficiency. She opined that rather than short funding
the project, the state could create project efficiencies by
funding the full amount.
9:57:52 AM
Co-Chair Hoffman inquired if there was official
documentation or assurances, which stated that the
Municipality of Anchorage would not seek additional funding
in future years if the requested $350 million was provided.
Mr. Ribuffo replied that the assurance consisted of Mayor
Sullivan's, as well as his own, commitment to the
committee. He related that he did not intend to go anywhere
until the project was completed, but deferred to the
municipal manager for a follow-up response.
Co-Chair Hoffman stated that he had been at the finance
table for close to 20 years, during which time he had
probably seen "ten managers and ten mayors come forward."
He shared that he was concerned about what the stances of
future managers and mayors would be. He reiterated his
support of the project, but offered that assurances should
come from the municipality and not just the mayor.
Co-Chair Stedman noted that if the project had been fully
funded a few years ago, the requests would have been
"pushing" $1 billion. He offered that clearly the project
had been out of control and that it would have been a lot
harder to get it back on track with full funding versus the
incremental funding. He observed that there was some risk
exposure to sending $350 million down the table. Mr.
Ribuffo related that subsequent slides discussed the ways
the port had reorganized to take more control of the
project than it had in the past.
Co-Chair Hoffman pointed out that he agreed with Senator
McGuire that providing the funding upfront would be the
most efficient method of funding because it would result in
a savings to the state of millions of dollars. He clarified
that his concern had been about assurances regarding Mr.
Ribuffo's statement.
Co-Chair Stedman requested that Mayor Sullivan provide a
response to Co-Chair Hoffman's question regarding
assurances in the packet of other responses that would be
submitted to the committee.
Mr. Ribuffo discussed slide 17 titled "Project History."
· 1999: The Port's 10-year Master Plan recommends an
expansion program to meet future needs.
· 2003: The Port partners with the U.S. Maritime
Administration (MARAD) to implement the program.
· 2005: The preferred alternative is selected (current
project design) and the permitting process begins.
· 2006: Terminal Road Rail Extension and Coast Guard
floating dock completed.
· 2007: The project receives final permits.
· 2008: North and South Backlands filled and
Port/Tidewater Rd. improvements completed. Bulkhead
construction in the northern phase begins.
· 2009: Dry Barge Berth bulkhead and mooring complete.
Bulkhead construction continues. The port is made
aware of problems in the spring of 2009.
· 2010: Bulkhead construction halted when the extent of
the damage was revealed.
· 2011: Work focused on completing sheet pile
inspections to establish the integrity
10:01:42 AM
Mr. Ribuffo addressed slide 18 titled "Old Paradigm." He
related that the slide was a flow chart that depicted how
the project had been managed in the past and that it showed
the relationships and responsibilities of each project
partner. He stated that the POA was responsible for
securing funding and coordinating construction phasing with
its operation needs. MARAD was the lead federal agency for
the project and was responsible for contracting and
procurement, oversight, quality assurance and control, as
well as managing the project's funding. MARAD used to hire
the Integrated Concepts and Research Corporation (ICRC) to
manage and develop the project; ICRC, in turn, relied on a
variety of subcontractors to design and construct the
project. He concluded that the arrangement between the
involved partners was based on the 2003 memorandum of
understanding between MARAD and the Municipality of
Anchorage, which had some serious problems.
Mr. Ribuffo highlighted slide 19 titled "New Paradigm."
Old Paradigm Problems:
• No direct authority over project contractors by
Port/Muni.
• No on-site MARAD representative at Port.
• No direct liability or bonding protection for
Port/Muni.
• No Port directed construction oversight authority.
New Paradigm Solutions:
• New agreement establishing oversight committee.
• On-site MARAD representative.
• A performance bond has been established for
Port/Muni.
• On-site construction observers reporting directly to
Port.
• Direct involvement in quality control & assurance
program and monitoring.
• Established a technical review committee.
Mr. Ribuffo related that major changes were enacted in
order to address the old paradigm's problems and insure the
local control of the project.
Co-Chair Stedman inquired what the port's construction bond
covered. Mr. Ribuffo replied that the bond covered all
construction activities that were conducted after the
establishment of the new memorandum of understanding.
Senator Thomas queried whether the POA had a "strong voice"
or the contractual authority to direct the contractors and
change the ongoing activities. Mr. Ribuffo responded that
ICRC was the contractor through May 31, 2012. He related
that the memorandum of understanding that the port had
signed would fundamentally turn the project over to the
municipality to manage from June 1 onward. He concluded
that the relationships would be codified in new contracts
going forward.
Mr. Ribuffo discussed slide 20 titled "Enacted Solutions."
Enacted Solutions:
In September, 2011, the Municipality of Anchorage
signed a new Memorandum of Agreement with MARAD. The
new agreement provides increased accountability from
all parties and ensures local control of the project
moving forward.
The 2011 agreement:
· Formalized the Project Oversight and Management
Organization giving the Port & Muni a decision making
role in all aspects of the project.
· Ensures that MARAD will place a full-time
representative at the Port.
· Increases liability and performance bond coverage for
the Muni
· Transfers all contracting and procurement
responsibilities from MARAD to the Muni or their
designee by May 31, 2012.
Mr. Ribuffo stated that the new agreement ensured the local
control of the project in the future and represented a new
direction for the project.
10:05:54 AM
Mr. Ribuffo explained slide 21 titled "Establishing
Control."
Establishing Control:
Additional measures have been taken to ensure the
success and accountability of future construction.
· The U.S. Army Corps of Engineers is conducting an
independent design review and an analysis of the work
completed to date.
· The U.S. Department of Transportation's Office of the
Inspector General is conducting an audit of MARAD's
contracting and procurement methods in its port
development program using the Port of Anchorage as a
case study.
· MARAD has engaged AECOM, a nationally known company,
to conduct a "root cause" analysis of work performed
prior to 2010.
Mr. Ribuffo stated that the U.S. Army Corps of Engineers
had engaged CH2M Hill in the review and analysis work,
which was expected to be made public in late April or May
of the current year.
Mr. Ribuffo thanked the committee for its time and
reiterated that the POA Intermodal Expansion Project was
the highest priority for the Municipality of Anchorage. He
concluded that the new measures and a commitment for full
funding would enable the project to move forward
successfully with local control and increased
accountability.
Co-Chair Hoffman stated that he had visited a ship in the
POA the prior summer. He recalled that at the time of his
visit, there had been discussions regarding the utilization
of the port for tourism. He noted that the presentation did
not address tourism being utilized by the port and inquired
whether that aspect was still under consideration. Mr.
Ribuffo directed the committee's attention to slide 11,
which showed that the Holland America Line had been
bringing the MS Amsterdam since 2010; the Amsterdam was
expected to return in the current season with seven port
calls. He observed that the port also occasionally received
the smaller, condominium high-end cruises and that it
expected at least one such cruise to return this year.
Because of the geographic structure of the port and through
negations with the U.S. Coast Guard, accommodations were
made for controlling traffic to securely move passengers
and their luggage on and off of the port. He observed that
the port had a cooperative relationship with its
stakeholders and the Coast Guard. He concluded that the
port did not make a lot of money off of cruise ships;
however, it liked having tourism on its resume, as well as
having the cruise ships being visible from downtown
Anchorage.
10:09:34 AM
Co-Chair Hoffman queried what the anticipated annual
revenue from cruise ship activity would be. Mr. Ribuffo
replied that he did not have a specific number to give the
committee, but that the port's sources of revenue, as they
pertained to cruise ships, came from the state's head tax,
as well as from fees charged for support at the dock.
Co-Chair Stedman requested that Mr. Ribuffo return to the
committee with a response to Co-Chair Hoffman's question
regarding cruise ship income. He noted that there was a lot
of impact from visitors going into the communities.
Senator McGuire noted that Alaska's Film Tax Credit had
spurred new economic development in the state, particularly
in the city of Anchorage and inquired how the movie "Big
Miracle," as well as the tax credit had impacted the Port
of Anchorage. Mr. Ribuffo responded that Big Miracle was a
first time experience for the port on how to deal with a
Hollywood production company. He related that the film
company had spent three months looking at different
locations on the port and had ended up filming one scene on
the location. He offered that a film scene that was three
minutes in length represented two and a half days of leased
real estate for the port and mentioned that the scene in
the movie was filmed on the project's 65 acres of fill. He
stated that the port had leased 3 or 4 acres to the film
for staging vehicles and trailers for the cast. He observed
that the film did not generate a lot of money for the port,
but that it was an enjoyable and cooperative experience.
Senator McGuire requested that the port provide the exact
revenue figures that the film generated for the port. She
noted that even if the generated revenue was a small
amount, the committee needed to get a feel for what the
future growth opportunities for the state were. She offered
that certain areas had growth opportunities that might
currently be measured in small amounts, but that those
areas could represent increased opportunities in the
future. Mr. Ribuffo responded that he would provide the
requested information for the committee, but opined that
the revenue figures that the film generated for the
Anchorage area would be more interesting.
10:13:06 AM
Senator Thomas asked for a clarification on slide 21 and
queried if any state funding would be expended on the three
activities listed on the slide. Mr. Ribuffo replied that
the dollars to fund those studies had already been spent.
Senator Ellis extended his thanks to Mr. Ribuffo and Ms.
Cotter for their efforts and related that he represented a
district and a constituency that were significantly
affected by activities at the port. He commented that Mr.
Ribuffo was often present at local meetings within his
district and stated that the port's engagement and
communication with the community was appreciated. Mr.
Ribuffo responded that he had only missed one meeting in
the last two years because it had coincided with his
wedding anniversary, but that communication "puts a lot of
fears aside."
Senator Olson inquired how the POA's corrosion maintenance
practices and technologies compared to those of other ports
along the West Coast and opined that corrosion in these
warmer-water ports would be much more of a factor. Mr.
Ribuffo stated that Cook Inlet was one of the most
corrosive environments in the world because its waters were
brackish, constantly moving, and filled sediment. He stated
that the portion of the port that was currently under
construction utilized a galvanized-steel open cell sheet
pile and related that other ports had not used galvanized
steel. The galvanized steel was more expensive and would
also have cathodic protection attached to it. He opined
that the new process would extend the life of the steel to
75 or 100 years. He related that cathodic protection did
exist on the old port and that it still existed on parts of
the port, but that it was beyond its useful life in other
areas. He concluded that the port was trying to keep up
with putting sleeves on the pilings that support the old
dock in order to extend its life.
Co-Chair Stedman expressed his appreciation to the POA for
its efforts.
10:18:46 AM
AT EASE
10:23:18 AM
RECONVENED
^OVERVIEW OF PORT PROJECTS: ARCTIC PORT STUDY, DEPARTMENT
OF TRANSPORTATION and PUBLIC FACILITIES
JEFF OTTESEN, DIRECTOR, PROGRAM DEVELOPMENT, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES, began a presentation
titled "Arctic Port(s) Study Update"(copy on file). He
stated that the Arctic Port Study covered a coastline of
about 1,000 miles with three seas, two oceans, and three
separate oil and gas provinces that were undergoing lease
sales. He shared that the Arctic region had tremendously
large resource deposits of minerals, coal, gas, and oil, as
well as an extremely limited roadside network that did not
allow any one port to serve as a redistribution point to
other locations. He offered that it would take more than
one port to serve the region and stated that the study was
being referred to as the "ports study" instead of "port
study."
10:24:59 AM
Mr. Ottesen discussed slide 1 titled "Study History."
· January 2008 Port and Harbor Conference sparked wide
interest in focusing attention on Alaska's ports
· November 2010 Port and Harbor Conference built on this
and identified a long list of ongoing and new needs
including an Arctic port.
· May 2012 Arctic Port Kickoff Meeting (charette) was
held with numerous stakeholders
· December 2012 Army Corps of Engineers and Alaska DOT&PF
execute $3 million Alaska Deep-Draft Arctic Ports Study
Feasibility Study Cost Sharing Agreement.
Mr. Ottesen discussed the first bullet point and recalled
that in the 80s, the state had become less involved in port
and harbor needs; since that time, communities, community
leaders, and other stakeholders had asked the state to get
back to a more active role with its ports and harbors. He
addressed the third bullet point and stated that the
Department of Transportation and Public Facilities (DOT)
had matched funding with the Army Corps of Engineers to
hold a two-day meeting; the meeting's purpose was to bring
numerous stakeholders together in order to begin the
dialogue of what an Arctic should look like, what needs it
would serve, as well as the opportunities and limitations
of building such a port.
Co-Chair Stedman requested a definition of the geographical
parameters of the Arctic Port Study. Mr. Ottesen responded
that there were multiple definitions of "Arctic" with
regard to Arctic ports. He offered that Congress referred
to the Artic as everything north of, and including, the
Aleutian Islands. He stated that there was language put in
the study's 2012 appropriation that asked the study to
identify ports north of Nunivak Island. He observed that
there was one definition from the legislature and another
from Congress, but that the study was essentially using the
Nunivak Island definition. He noted that there had been
discussion about extending the Nunivak Island boundary as
far south as the Kuskokwim River Delta. He concluded that
the range of the study extended northward past the Seward
Peninsula and around to the common Canadian border in the
Yukon.
Co-Chair Hoffman inquired if the boundary was north of
Nunivak Island or whether it included Nunivak Island. Mr.
Ottesen responded that the boundary included Nunivak Island
and everything north of it.
Co-Chair Stedman noted that he would have expected the
request to be for the outside of the Kuskokwim.
Mr. Ottesen addressed slide 2 titled "2012 Funding
Purpose."
· "Study and identify potential Arctic deepwater port
sites. A deepwater Arctic port would be a long-term
vital asset to national security and to the State's
economy.
· It would provide a new, northernmost port for the US
Coast Guard to protect and patrol the state's Arctic
waters. Such vessels require a minimum of -35 feet."
Co-Chair Stedman queried if the port would include any
military use, particularly the Navy, or whether the Coast
Guard would primarily use the facility for spill response,
enforcement, patrols, etc. Mr. Ottesen responded that when
DOT had held the charette conference the previous May, the
Navy, the National Oceanic and Atmospheric Administration
(NOAA), and the Coast Guard had all been invited and had
participated. He stated that the NOAA patrol craft were
about the same size as the Coast Guard patrol craft and
that any port that would accommodate the Coast Guard would
also accommodate NOAA; both organizations had indicated
that they did not currently intend to place vessels in an
Arctic port on a permanent basis, but that they would use a
port for resupplying, refueling, etc. He mentioned that the
Navy was more reluctant to attend the conference, but that
it had sent an officer "almost at the last minute." He
concluded that the Navy had been cryptic regarding its
interest in the port and noted that the Navy had much
larger vessels, which would change the type of port that
was needed.
10:30:17 AM
Co-Chair Stedman observed that there seemed to be
acceleration in the shipping over the north side of Siberia
with both Norway and Russia, as well as some of the issues
regarding China. He inquired if there was increased
interest within the Coast Guard to get measures in place to
deal with increased traffic flows, as well as other issues
in the Arctic. Mr. Ottesen responded that the interest was
there and that the traffic in the Arctic was growing. He
observed that several natural gas condensate super-tankers
had transited through the Bering Straits the prior year on
their way to markets in Asia and stated that very large
vessels were going through the Arctic on a routine basis.
He related that nations that did not even have a stake hold
in the Arctic were currently building icebreaker ships and
stated that the Arctic was the new gold rush because of its
resources and opportunities for transport. He shared that
there were tremendous cost savings in moving vessels across
the Arctic. Co-Chair Stedman clarified that the resource
rush in the Arctic involved oil and not actual gold. Mr.
Ottesen replied in the affirmative.
Senator Olson inquired what type of icebreaker construction
was going on in other countries and further queried if any
of them would be polar class. He noted that the USCGC Healy
was barely able to break through four feet of ice on its
way to Nome recently, and wondered whether the icebreakers
coming out of Brazil would be able to safely transit
through U.S. waters. Mr. Ottesen replied that he had heard
about the icebreakers being constructed in other countries
anecdotally from a Coast Guard officer's presentation and
that the class of the ships was not divulged; however, he
had the impression that the icebreakers were being made for
the purpose of entering and operating within Arctic waters.
He indicated that he would look into the matter of what
type of icebreakers were being constructed.
Mr. Ottesen discussed slide 3 titled "Army Corps
Partnership Schedule."
· Use multi-criteria decision analysis technique to
screen potential sites
· Identify Potential Sites Final List by September 2012.
· Evaluate Public-Private Partnership (P3) finance
mechanism
· 2013-2014 Site Specific Feasibility Phase
Mr. Ottesen related that the partnership schedule with the
Army Corps of Engineers would have the study produce a short
list of port sites by the end of the year. He shared that
there was a meeting with the Army Corps of Engineers and its
experts the following day and that it would be the first
meeting where the multi-criteria decision analysis technique
would be used. He discussed the second bullet point and
stated that the study hoped to have a draft report finished
by the end of 2012. He spoke to the last bullet point and
related that the specific feasibility phase would start to
examine port sites in great detail.
10:34:20 AM
Mr. Ottesen explained slide 4 titled "Ports Vital to Many
Needs."
· Sovereignty/Homeland Protection
· Resource protection
· Offshore oil and gas exploration/development
· Search and rescue/Incident response
· Onshore resources export
· Community supply and economic activities
· Fisheries
Mr. Ottesen observed that there were many different reasons
to build an Arctic port and that each reason generated a
specific set of criteria for what that particular port
might look like. He spoke to the first bullet point and
stated that the Coast Guard currently flew a C-130 as its
primary mechanism for asserting sovereignty in the Arctic
regions of Alaska; the aircrafts left anchorage about every
other week on a one-day over flight. He related a story
about going on one of the over flights and shared that the
Coast Guard was pretty limited in its ability to operate in
the region. He noted that if the Coast Guard were to
operate in the Arctic region with helicopters, which it
would soon need to, two helicopters would be needed on
standby and that because there was no place to hangar the
helicopters in the region, the aircraft were sent on day
trips. He relayed how expensive it was to fly a helicopter
from Kodiak up to Barrow, Kotzebue, or Nome and stated that
the helicopters would overnight in those locations only if
the weather was good. He noted that the Coast Guard needed
two helicopters because one had to serve as the rescue unit
for the crew of the other aircraft if it went down.
Mr. Ottesen shared that another need in the region was
resource protection activities such as oil and gas spill
response and fisheries patrols. He observed that the
region's first year of oil and gas exploration was
scheduled to occur in the summer of the current year and
that the drillship was currently on its way to the Chukchi
Sea; other leases were scheduled to occur year by year
thereafter. He offered that there would be as many as two
dozen ships operating in the Chukchi Sea this summer and
that given that there were multiple leases, there would be
a large number of vessels operating in the Arctic region in
the future; the vessels would need to be refueled, re-
crewed, and re-provisioned with food and parts. He
concluded that dealing with the vessels would involve a
tremendous amount of logistics and that the opportunity to
provide services in the region was currently very limited.
He relayed that onshore resources export from coal and
other minerals required large bulk carriers that used a
different kind of vessel; a port for these carriers and
vessels would have different needs than a port that was
constructed as a community provisioning port. He referenced
an energy crisis in Nome the previous winter and shared
that communities needed to be re-provisioned and
resupplied. He noted that Kotzebue operated a shallow-water
port and that it could benefit from a deeper-water port. He
stated that the coastal communities relied on precarious
mechanisms for shipping and that there should be more
reliability to shipping, as well as more opportunity for
the communities to be sustainable. He shared that as the
ice moved north, fisheries also moved north and that the
increased fisheries activity in the region created an
opportunity and a set of needs.
Mr. Ottesen addressed slide 5 titled "Port Needs Vary."
· Different needs, require different port
characteristics:
· Mining export: very deep draft, proximity to
resource
· Oil and gas services: intermediate depth,
proximity to on-shore services, and off-shore
leases
· Potentially, no one port site ideal for all needs
Mr. Ottesen reiterated that the port needs associated with
the different purposes were quite distinct. He concluded
that all of the varying criteria for the different port
purposes was the reason it would be likely that no one part
site would be ideal for all of the needs.
10:39:11 AM
Mr. Ottesen discussed slide 6 titled "Natural Harbor Sites
Scarce."
· Few natural harbors with wind and wave protection
· Marine structures must withstand significant ice
forces
· Water depth is generally shallow in Arctic shore areas
· Dredging will likely be necessary, on-going
Mr. Ottesen explained slide 7 titled "Linking Need to
Funding."
· Funding should relate to overall purpose:
· Sovereignty/Homeland - federal
· Resource protection - federal and state
· Search and rescue - federal and state
· Off-shore resources - federal
· On-shore resources - state/private
· Community/Economic development - state/local
· Fisheries - state/local
Mr. Ottesen noted that most of the different purposes for
ports had a federal connection and were the responsibility
of the federal government; however the federal government
was not "in a mood right now" to give funding.
Mr. Ottesen discussed slide 8 titled "Funding Issue."
· Little National Economic Benefit as measured by federal
rules
· Corps, other federal agencies reluctant to
participate
· Despite strong federal nexus, federal funding in doubt
· Public Private Partnership (P3) tool being evaluated
Mr. Ottesen related that the Army Corps of Engineers had
indicated that there was a long list of ports around the
nation that had a very high "national economic benefit" and
that those ports would be funded before an Arctic port.
Mr. Ottesen explained slide 9 titled "P3s-Public Private
Partnerships."
· Increasingly common means to achieve public goods,
typically infrastructure
· General characteristics:
· Contract between public-sector and private party
for a public service or good
· Substantial private sector role; typically design,
finance, build and operations involved
· Costs borne by users rather than public
· Requires robust economics to cover risks
· Private entity often a new special purpose company
Mr. Ottesen discussed slide 10 titled "Why the Trend to
P3s?"
· Someone else's money involved
· Off books of government spending or debt
· Brings private sector expertise and management skills
· Possible tax advantages to private investors
· Aligns risk and reward to single entity
· What's old is new again
· Early American toll roads, continental railroad
were P3s by another name
· Canada currently uses P3s at far greater level
· British Columbia requires P3 consideration for all
public projects
Mr. Ottesen discussed the third bullet point and stated that
the benefit of private sector expertise and management was
commonly overlooked in the U.S., but that it was the primary
driver for why other nations were turning to P3s. He pointed
out that Canada used P3s at about 10 times the rate of U.S.,
but that because Canada had one-tenth of the U.S's
population, it was actually using P3s at 100 times the rate
that the of U.S. on a per capita basis.
10:44:34 AM
Mr. Ottesen explained slide 11 titled "Fitting P3s to
Alaska."
· Many Alaska projects require government help
· Thin economics due to low user base
· High costs due to environment, geography
· Other ways to tap into private expertise
· the Alaska Industrial Development and Export Authority
(AIDEA) has long been in business to assist beneficial
quasi-public projects
· Skagway ore terminal
· Red Dog road and terminal
· Ketchikan Shipyard and Drydock
Mr. Ottesen stated that AIDEA, in some respects, had
characteristics of a P3 and that DOT had been talking to
AIDEA about being the department's financing partner in the
future.
Mr. Ottesen spoke to slide 12 titled "Related Efforts."
· Congressional Delegation working on several fronts to
help: icebreakers, hydrographic surveys, federal port
funds, international interest
· Statewide digital mapping effort will focus on
northwest Alaska this year to update onshore mapping
information in Arctic port study area
· (Some mapping costs eligible as state match)
Mr. Ottesen discussed slide 13 titled "2013 Appropriation
Request."
· Governor's capital budget request:
· #54074 $1 million GF to continue the Arctic Ports
Study
· Matched by $0.5 million federal funds
· Based on the 2012 effort, carry on the site
specific port feasibility investigation
Mr. Ottesen spoke to slide 14 titled "Canada's Northern
Strategy."
· Sovereignty
· Deepwater port, vessels and year round military
base
· Environment
· Monitor and protect on- and off-shore resources
· Social and Economic Development
· Improve circumstances of residents
· Enable resource development for jobs and tax base
· Governance
· Working for sustainable local governance
Mr. Ottesen reported that Canada planned on building an
Arctic port that was staffed with a year-round military
base and that Canada saw the Arctic as an important part of
its future.
10:47:06 AM
Mr. Ottesen discussed slide 15 titled "Key Take-Aways."
· Multiple ports likely necessary to serve many needs
· No single governmental entity likely to cover full
costs of arctic port: federal, state or local.
· Resource user(s), may bring economies of scale to help
finance.
· Today's push for minerals and energy could expand
opportunities
· Some form of private participation seems desirable
(AIDEA, P3s or ?).
· Need to shift federal focus to national security need
versus economic purpose
Senator McGuire requested that AIDEA be involved in funding
discussions regarding an Arctic port. She recalled having
mentioned in prior comments that the state might have to
invest through AIDEA in order to get its own icebreaker.
She offered that Alaska had more at stake than any other
place in the U.S. regarding the Arctic. She requested that
conversations with AIDEA be added to slide 8's potential
funding tools and opined that there were all kinds of
creative options that could be explored. She mentioned that
she had been conducting conversations with the Canadian
Government through her leadership role in the Pacific
Northwest Economic Region (PNWER) and that these
discussions had covered the successes of the NORAD model.
She encouraged DOT to continue to reach out to the Canadian
Government for potential partnerships. Mr. Ottesen
responded that he had failed to mention how much DOT had
been involved with AIDEA. He related that the department
and AIDEA had recently met together in Vancouver with the
P3 board, which managed the P3s for the government in
British Columbia. He pointed out that the department was
currently holding meetings with AIDEA on Umiat, Ambler, and
other projects regarding the potential use of P3s.
Co-Chair Hoffman commented that AIDEA had a dynamic and
energetic chairman. He thought that the state was moving in
the right direction regarding the Arctic issue, but that it
was moving too slow and was not proactive enough in leading
the U.S. to becoming an Arctic nation. He addressed one of
Mr. Ottesen's opening comments that had indicated that the
state was turning around and redirecting its efforts
regarding port and harbor development; he offered that
maybe DOT should abandon its efforts to get the City of
Bethel to take over the regional port that serviced the
Kuskokwim and Yukon Rivers.
Senator Thomas stated that if the state moved forward, it
should be looking at locations that had some available
infrastructure. He was unsure if it was a good idea to
construct a port in "the middle of nowhere," when there
were towns on the western coast of the state that already
had port facilities, airports, roads, etc. He thought that
existing roads and other forms of transportation could be
extended to connect areas so that the state would be
creating an Arctic port out of something that already
existed, rather than trying to create something out of
nothing.
10:53:44 AM
Co-Chair Stedman thanked DOT for keeping the committee
informed and observed that the state of Alaska was clearly
a little more energetic about an Arctic port than the
federal government was; however, the committee would
attempt to work through that issue with the federal
government. He discussed the following meeting's agenda.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 022812 - PIEP October 2011 Quarterly Report.pdf |
SFIN 2/28/2012 9:00:00 AM |
Overview Port Projects Overview Ports and Harbors |
| 2011 Q4 Report to Legislature.pdf |
SFIN 2/28/2012 9:00:00 AM |
Overview Ports Projects |
| 022812 DOT Arctic Ports Study Update.pdf |
SFIN 2/28/2012 9:00:00 AM |
Overview Port Projects |
| 022812 SFIN RailPowerPoint.pdf |
SFIN 2/28/2012 9:00:00 AM |
Overview Port Projects |
| 022812 Army Corps of Engineers - Arctic Ports Study.pdf |
SFIN 2/28/2012 9:00:00 AM |
Overview Port Projects |
| 022812 - 2012 POA Lifeline-1.pdf |
SFIN 2/28/2012 9:00:00 AM |
Overview Port Projects |
| POA Presentation 2 28 12 - 2.pdf |
SFIN 2/28/2012 9:00:00 AM |
Overviews Port Projects |