Legislature(2001 - 2002)
04/26/2001 01:43 PM Senate TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 195-OPERATION OF WHITTIER TUNNEL BY WHITTIER
SB 196-EXEMPTION FROM TOLL FOR WHITTIER TUNNEL
SB 197-PROHIBIT TOLL FOR WHITTIER TUNNEL
CHAIRMAN COWDERY announced that he would hear SB 195, SB 196, and
SB 197 simultaneously as they all have to do with the City of
Whittier.
MR. MATT ROWLEY, City of Whittier, said he will address two issues
related to the tunnel toll. The first is the impact of the toll on
the residents of Whittier and the second is the impact the toll
will have on Whittier's business community. Mr. Rowley commented
that Governor Knowles observed that the Whittier tunnel is the
city's lifeblood of commerce. Concerning the impact on Whittier's
residents, this is the only toll road in Alaska. The imposition of
this toll is unprecedented in Alaska and creates a potential burden
that is not imposed on any other community on the state highway
road system. Anyone who travels into or out of Whittier on a
regular basis under the current toll structure will pay $3,000 to
$4,000 per year in toll fees.
Regarding Whittier's economy, which relies on a 100-day season, the
Whittier business community is in direct competition with other
business communities around Anchorage, the Kenai Peninsula and the
rest of the state. The Whittier business community will be bearing
the added cost unfairly, which will adversely affect the business
community's ability to compete in an open market. Visitors who
travel down the Seward Highway only have so many discretionary
dollars to spend. If those travelers are faced with the prospect of
spending $15 to $40 to travel to Whittier, it is questionable
whether they will opt to come to Whittier. If they do spend the
$40, in the case of motor homes, that $40 will not be spent at
local businesses.
MR. ROWLEY said a second issue is the effect on passengers arriving
in Whittier via the marine highway system. Passengers coming to
Whittier to get on the ferry will be penalized because they will
have to pay the full round trip tunnel fare. Although the tunnel
has a different set of maintenance operation circumstances than the
highway, he believes it is the responsibility of the state to
maintain the tunnel as it does the highways.
MAYOR BEN BUTLER of the City of Whittier made the following
comments about SB 195. The City of Whittier believes it would make
good sense for the State of Alaska to give the city the ability to
control the tunnel to help with the operational expenses. The city
feels it impacts Whittier more than any other place in the state so
the city should have a voice in the matter. The city assembly has
discussed setting up an authority to operate the tunnel. An
authority would provide the ability to bring everybody to the table
to discuss the fee structure and it would prevent any one entity
from being in control of the tunnel.
Number 872
MR. DENNIS POSHARD, Special Assistant with DOTPF, made the
following comments on SB 195, SB 196, and SB 197. Regarding SB
195, the effective date of July 1, 2001 is problematic. Currently,
the design-build-operate contract signed by DOTPF for the
construction and operation of the tunnel runs through May of 2002.
Should DOTPF have to cancel that contract by July 1 of 2001, DOTPF
would be liable to the contractor for lost profits and other
expenses incurred. In addition, the design-build-operate contract
contains a warranty because it is a one-of-a kind new tunnel system
with a lot of complicated computer software programs, tunnel
controls, ventilation systems, and other features. Under the two
year operation agreement, the contractor has two years to identify
and correct any problems before DOTPF agrees to take over the
ownership. Should DOTPF cancel the contract in order to enter into
a contract with the city, that would pose a problem with the
warranty.
CHAIRMAN COWDERY asked if Mr. Poshard is suggesting changing the
effective date.
MR. POSHARD said he cannot say that there is a certain time at
which this bill makes sense, but he repeated the effective date of
July 1, 2001 causes problems for DOTPF. At a minimum, DOTPF would
request delaying the date until after the current contract expires.
Delaying the effective date will also allow time for a prospective
contractor to get the training required to operate a tunnel.
Anyone who works on the tunnel must be trained and qualified as a
firefighter and must take safety training that is unique to the
tunnel. Workers will also have to learn about the operations,
scheduling, and other matters related to the tunnel. That training
will take time. He maintained that the July 1, 2001 effective date
is not realistic.
MR. POSHARD said his next point is that although SB 195 requires
DOTPF to enter into a contract with the city, it does not speak to
what reasonable terms and limitations should be included. This
approach puts the state in a poor negotiating position as it will
give a potential contractor a lot of leverage. Although DOTPF
would contract with the City of Whittier to operate the tunnel,
DOTPF's contract with the Alaska Railroad Corporation (ARRC) for
the use of the tunnel might be problematic also. He was not sure
whether DOTPF could abrogate that responsibility to the contractor.
As a part of that contract, DOTPF has assumed a substantial amount
of liability for anything that occurs within the tunnel. DOTPF
will retain that contractual liability whether it contracts for the
operation of that facility or not. Therefore, DOTPF would be
forced to contract with the city for the operations of the tunnel
but still be on the hook for any liability, including liquidated
damages that might arise out of a delay of the train.
MR. POSHARD said DOTPF's biggest concern with both SB 196 and SB
197 is that the provisions related to tolls will cause problems
with federal agencies. He anticipates that federal agencies will
not allow a specific class of people to be exempted from paying
tolls. DOTPF pursued charging one rate on the marine highway
system for residents of Alaska and another rate for non-residents
but was prevented from doing so by the federal agencies because
federal money is used. In the case of the marine highway system,
the federal agency said charging different rates could trigger pay
back provisions associated with federal highway projects. He
anticipates that the same pay back provision would apply to the
toll collection portion of the tunnel. DOTPF expects to collect
$2.5 million in tolls during its first full year of collections.
That money was slated to cover the state's cost for maintaining the
tunnel. If SB 197 does move forward, those funds will have to come
from elsewhere and a fiscal note would reflect those changes.
CHAIRMAN COWDERY asked if any of the tolls that are collected go to
the ARRC now or are slated to in the future.
MR. POSHARD said he does not believe so.
SENATOR WARD asked Mr. Poshard to supply the committee with the
warranty language for the tunnel and an explanation of the specific
problems with that warranty if the operators are changed.
MR. POSHARD agreed to do so.
CHAIRMAN COWDERY commented that the City of Whittier has trained
firefighters and some Whittier residents currently work at the
tunnel. He announced that he would hold all three bills until some
of the concerns expressed today are resolved. He then adjourned
the meeting.
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