Legislature(2001 - 2002)
04/30/2002 01:36 PM Senate TRA
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 271-MARINE AND RAIL TRANSPORTATION AUTHORITY
CHAIRMAN COWDERY announced SB 271 to be up for consideration.
SENATOR WARD, sponsor of SB 271, moved to adopt the proposed
committee substitute (CS) to SB 271, Version C, labeled
Utermohle, 4/19/02. There were no objections and it was so
ordered [TAPING DIFFICULTIES].
He said he thought it is in the best interests of the State of
Alaska to form an authority, give it a half million acres of
ground and start the ferry system on its way to becoming a self-
sufficient transportation system. After talking to members, it
became clear that combining the Alaska Railroad and the Alaska
Marine Highway System (AMHS) would not happen so a committee
substitute was drafted to remove the Alaska Railroad.
MR. BOB DOLL, Director, Southeast Region, Department of
Transportation and Public Facilities (DOTPF), said:
The bill has two major impacts. First, it creates a new
administrative and operating regime for the Alaska
Marine Highway System. That new regime would isolate
the Marine Highway System from the public contact
process that the department has in place and which we
believe should be maintained and strengthened.
Secondly, it attempts to create a funding mechanism for
the Marine Highway through the sale of public land. In
the light of these primary impacts in the bill, the
department does not support SB 271.
With regard to funding the Marine Highway through the
sale of land, I'll be brief since that's not my
expertise. Land located along the railroad right-of-
way, of course, has an inherent value from the fact
that it is linked to a transportation method that also
links the communities along the way. There is no
analogy for the Marine Highway System's routes. It is
our understanding that the land contemplated for sale
by SB 271 is already available for sale. We are
skeptical that SB 271 would create a market for public
land that does not already exist. If the land in
question does, in fact, find buyers, the resource will
have a finite life that we'll eventually find ourselves
in much the same circumstances as today.
Turning to the operating regime for the Marine Highway,
there are a number of issues that the bill raises. The
first is that the bill would remove the Marine Highway
from the Department of Transportation. The Department
is the logical location for an organization whose
primary function is to provide a public transportation
system, one that is responsive to public needs and
imaginative in meeting them. The creation of a Marine
Highway Authority will not improve public access to the
Marine Highway operations and planning, but would
rather isolate it in its direction from the public's
influence. We believe such an isolation is not in
Alaska's interest.
Secondly, the bill sets up a new competition for
federal funds, the results of which are difficult to
predict. Currently, the Department is by federal law
the conduit by which federal highway transportation
funds are allocated to the state. Within the
Department, the Marine Highway competes with all other
transportation modes for the use of those funds and, to
date, the Marine Highway has competed quite
successfully. The bill provides for Marine Highway
Authority participation in the Department's planning
process, but the Department would have a drastically
reduced interest in the operation and maintenance of
the Marine Highway System.
I have real concerns about the continued ability of a
Marine Highway Authority to compete for federal funding
in a department from which it has been severed. The
bill does nothing to change the Marine Highway's
dependence upon legislative support for its mission.
Even if the funding scheme for land sales were wildly
successful, approval by the legislature would still be
required for the annual [indisc.] and for most of the
remaining functions now performed with legislative
authorization. Its employee organizations would bargain
collectively with a board of directors, but the outcome
would still require ratification by the legislature. It
is not apparent to us how the Marine Highway System
would benefit from an isolation of the executive
functions while preserving intact its current
relationship with the legislature.
In summary, Mr. Chairman, we believe that the
relocation of the Marine Highway under a Marine Highway
Authority would degrade rather than improve the marine
highway needs of Alaskans. It will not improve
[indisc.] nor improve the system's ability to attract
and retain the competent and dependable employees it
requires. Further, it will weaken the Marine Highway's
ability to compete with federal funding and create
tensions among transportation objectives, which do not
now exist. Thank you for your attention and I'll be
happy to address any questions the committee may have.
CHAIRMAN COWDERY asked if this bill passes, whether the resources
it generates will go to the Marine Highway System.
MR. DOLL replied that he thought that was the intention.
CHAIRMAN COWDERY asked him if the Marine Highway System is
healthy enough that it does not need any new sources of dollars.
MR. DOLL replied, "We've always had a requirement to appear
before the legislature for public funding, yes."
CHAIRMAN COWDERY asked whether he would he support the bill if
the Marine Highway System was removed from the executive budget.
MR. DOLL replied that he would have to examine the outcome as he
wasn't sure of all of the implications.
SENATOR ELTON said he was interested in Mr. Doll's comments about
the sale of land being inadequate to sustain the operations of
the Marine Highway System. He said he didn't see anything in the
bill that addresses the sale of land other than giving the
Authority the ability to turn land back to the Department of
Natural Resources for sale with the proceeds of the sale going to
the original land owner, not to the Authority. He asked Mr. Doll
or the sponsor to point out the provision that allows the sale of
land to generate funds for the Authority.
MR. DOLL replied that he was relying on AS 37.14.570 on page 20.
He thought that was what that fund was intended to do.
SENATOR WARD said that is correct; that is the intention.
SENATOR ELTON said the section that provides for the Acquisition
and Management of Property on page 6, line 15, of Version C gives
the Authority the ability to purchase property in AS 19.55.230
when it addresses the disposal of land or rights in land. It
says:
The Authority may vacate land or rights in land
acquired for the Alaska Marine Highway System by
executing and filing a deed in the appropriate
recording district. Upon vacating, title reverts to the
person's heirs, successors or assigns in whom it was
vested at the time of the taking. The Authority may
also transfer land not considered necessary for the use
by the Alaska Marine Highway System to the Department
of Natural Resources for disposal with the proceeds of
disposal credited to the funds from which the purchase
of the land was originally made.
He thought that meant that if they dispose of land, they don't
have access to the proceeds from the disposal of it.
SENATOR WARD responded:
If they give the land to the Department of Natural
Resources to sell it, it's credited to the funds from
which the purchase of land was originally made that
would revert back to the original fund that is within
the Authority's jurisdiction to spend. That is the way
the drafter said to do this. That's the procedure that
you actually go through in order to get the proceeds
back into the fund that the Authority has the authority
over to extend. That absolutely was the intent. The
intent was to give a half million acres to this
Authority and for them sell it, lease it, barter it,
exchange it, chop trees down on it, pave over it, do
whatever they want, but to start deriving some kind of
income off of the half million acres.
SENATOR ELTON asked Mr. Doll what the relationship is now between
the Marine Highway System and the national highway system and
whether the state could be in danger of severing that
relationship by the establishment of an authority.
MR. DOLL replied:
Each state highway agency, the Department of
Transportation in our case, is the federally
statutorily required channel through which federal
transportation funds flow. The only exception is where
there may be a local municipal transportation authority
of which Anchorage is the only example in Alaska. That
relationship would not be disturbed, but the bill
attempts to assert the interests of the Marine Highway
by making very specific the Authority's participation
in the Department's planning process, which of course,
also includes programming funds. Thus far that system
has worked quite well, in my view. The Department, I
think has been generous with regard to federal highway
funds and maintaining particularly in recent years when
we've had to go to a great deal of effort to keep the
ships regulatorily compliant. A lot of money has gone
into that process.
If the Authority is set up as a separate agency within
the state, and if the department has no interest or
concern for its operation, I'm apprehensive that in
some future relationship the interests of the
Department and the Marine Highway will be reflected in
a degree to which it supports the division of those
federal funds throughout the state. And, of course,
there's always competition for those funds. Now the
department has an interest in how the Marine Highway
operates. If we separate that, I honestly can't
forecast what that would produce. I know that the
competition for highway, bridge and tunnel construction
is real and the requirements throughout Alaska. What it
would be in the future is really difficult to forecast.
SENATOR WARD asked Mr. Doll if his concern is that this bill may
cause a reduction in federal contributions and support because of
the separation. He said that is the opposite of what he thinks
would happen. He thinks it would be very good for the Marine
Highway System to be an entity of its own and to be able to
compete in that process. For the last five years it has appeared
to him that the Marine Highway System needs a better standing
within DOTPF's discussion of priorities.
MR. DOLL replied:
My concept of how things are working at the moment are
that when I come to the commissioner with a requirement
for a federal project and when we study them within the
total DOT context, we represent those as transportation
projects for which the Department is responsible. The
Department has an interest in how well the Marine
Highway operates… Every one of those incentives to
provide adequate funding for the Marine Highway is
present and we take advantage of that. If we change the
circumstances so that the Department is no longer
responsible for the Marine Highway's operation, I'm not
sure how powerful my arguments would be and I'm not
sure how powerful the arguments of the Authority would
be given the fact that the Department is no longer
responsible for its operation.
SENATOR WARD said just for the record, most of the language for
the Authority in the bill was completely gleaned out of Senator
Taylor's bill.
SENATOR TAYLOR asked Mr. Doll to characterize the financial
success of the Railroad and the Marine Highway over the last 10
years. He asked Mr. Doll why the Railroad has been successful and
the Marine Highway has been an "abject failure."
MR. DOLL said he wasn't qualified to comment on the Railroad's
success, but its reputation is very good, but it also has a great
many assets that it capitalizes on - not the least of which are
all the cruise ship docks that it utilizes. There is no
comparable real estate asset available to the Marine Highway
System.
SENATOR TAYLOR asked him if he knew what the railroad's primary
assets are from which its profits come.
MR. DOLL replied that he had no idea.
SENATOR TAYLOR said it is all land. He said the Senate just
passed a bill extending some of the railroad's leases from 35
years to 55 years, because the people who lease land from them
want to lease it for a longer period.
MR. DOLL replied:
You're well aware that land alongside a railroad has
inherent value. There is no comparable land available
to anybody else in Alaska. The Railroad is capitalizing
on the fact that its land lies along a communications
link that links community centers, population centers
as well as being available to the transportation link
itself. There is no comparable land available to us.
I don't know, and I'm not prepared to suggest to the
committee that I know how much revenue this proposal
would generate. I have no way of estimating that and
I've not seen any estimates of it.
I'm only suggesting that the concept that some
substitute for legislative funding can be found to
operate the Marine Highway is, I think, speculation and
I would not like to see a situation develop where the
legislature believes it has a substitute for GF funding
for the Marine Highway and in fact that does not exist.
I would like to have the continued legislative support
that we've had in the past and I don't think a
substitute exists for that in the potential for sale of
raw land throughout Alaska.
SENATOR ELTON asked, regarding the original question regarding
the federal funding, if the AMHS has an ability to work with an
authority or is its ability in distributing federal funds limited
to working with the Department of Transportation or an
organization such as AMATS.
MR. DOLL replied that the federal statutory requirement is that
they operate through the state highway agency. They would not be
able to deal directly with the Marine Highway Authority.
SENATOR ELTON said he remembered discussions about the railroad
and that its profit center is the leases that it has for fiber
optics. He said one way he would view this bill more favorably is
to allow the lease for the submarine fiber optic cable to revert
to the Marine Highway Authority. Then they would have taken an
initial step toward financial viability for the Marine Highway
System.
CHAIRMAN COWDERY said he didn't agree that their profit is the
fiber optics lease. In his town, the whole Ship Creek basin is
owned by the railroad and they lease land. He thought the
railroad's biggest revenue source is the real estate it owns.
SENATOR WARD said when the Railroad was originally transferred to
the State from the federal government, land for tracks and close
to the tracks was transferred along it. An additional 47,000
acres that was transferred was not near the Railroad; it owned
the land to supplement its operation. The location of the 500,000
acres given to the Authority will not make any difference. The
Authority could do whatever it wanted to do with its land. The
Railroad's land is the reason it is making a profit this year.
SENATOR TAYLOR asked Mr. Doll what the AMHS would do if it
doesn't do this. He thought the AMHS is in desperate condition
now.
MR. DOLL replied:
I don't believe there is any substitute for dollars to
operate a ferry system and I believe that
administrative restructuring is going to get us where
we need to go. The Department is working diligently and
successfully to reduce the cost of operating the Marine
Highway System and I think at the same time improve the
service to riders. I also believe that there is no
substitute for money to keep the system going. I'm not
a fiscal expert, but I recognize that support for the
Marine Highway in terms of funding has certainly been
declining and the situation that the Senator describes
is doubtlessly true. The Department will continue to
work hard to reduce the cost of operating the system
and improve their service to its passengers and I think
the remaining issues are exactly what we're talking
about here.
SENATOR TAYLOR asked if land isn't a stable way for the AMHS to
acquire an income stream, what Mr. Doll would suggest to them as
policy makers to set up to provide the AMHS with the type of
stable income stream it needs.
MR. DOLL replied that there were various proposals for raising
money and he wasn't qualified to comment on them. He would have
no way of knowing if it's likely that substantial funds would
come from the proposed projects. He thought the AMHS will still
need the support of the legislature to get the kind of funding it
needs.
SENATOR TAYLOR asked Mr. Doll if he read anything in the bill
that said the legislature would not still have an obligation to
support the AMHS until this proposal was running.
MR. DOLL replied that he didn't have any anticipation of that. He
wouldn't want anyone to conclude that because the land was made
available and if it didn't bring in the funds that were needed
that the legislature had washed its hands of that concern. That
would be an unfortunate outcome.
SENATOR TAYLOR said they had never done that with the University,
the Railroad or the Mental Health Trust lands. Over the years,
there has been no indication that that would happen.
SENATOR WARD added that he talked to former Senator Lloyd Jones
who is now affiliated with the Transportation Committee under
Congressman Don Young and both of them have assured him that this
process is not only something that is being done in some places,
but it's a completely appropriate one and wouldn't affect federal
funding.
TAPE 02-19, SIDE B
MR. LAUREN GEHRHART, Executive Director, Southeast Conference,
said they were formed in 1958 to promote the formation of the
Alaska Marine Highway System. He said they recently became aware
of the changes in the bill and are concerned that caution is
taken with how the Authority would be formed. They want an
opportunity to talk with the sponsors about it. No one knows what
kind of a revenue stream could be anticipated out of 500,000-acre
land grant.
He also thought that other efficiencies could still be explored.
He told the committee that the Southeast Conference had been
tracking these issues closely over the last few years and decided
recently it should attempt to perform its own study of the
problems and potential solutions. The Conference has obtained
grant money and is engaged in a study process right now to
identify all different kinds of ferry operations around the
world, primarily in the U.S. They want to learn from other
people's experiences what might adopt best to this region. They
expect to have preliminary findings by the middle of next month
and hope to provide the next legislature and governor with a
detailed analysis and recommendations.
SENATOR WARD asked him how long his organization has been in
existence.
MR. GEHRHART replied that it was founded in 1958 in Petersburg by
civic leaders who saw a need for a marine highway.
SENATOR WARD asked if the Southeast Conference supported the
marine highway authority bills sponsored by former Senator Lloyd
Jones or Senator Robin Taylor.
MR. GEHRHART replied that he didn't know for certain if those
bills were supported by the Conference. They have paid a lot of
attention to the problems it has experienced over the last 16
years. He stated, "The way the system was designed in 1962 seemed
to work just fine then. Obviously, our needs have changed,
situations have changed, funding is different. So we need to
address that."
SENATOR WARD said he was not familiar with the Southeast
Conference and he didn't ride the Marine System any more than he
had to, but he said this is the same authority bill as the other
two. He thought there was a philosophical difference about
whether the AMHS should remain a line item agency or become an
Authority with 500,000 acres in addition to other revenue
streams. He asked Mr. Gerhardt if he saw a bright future for the
Marine Highway System the way it is now.
MR. GERHARDT replied:
I think our organization is on record supporting the
Marine Highway System, because it is our highway
system. The issue about this particular piece of
legislation - I know there are some changes in what's
shown here as the organizational structure and that's
very important to us. I know that there were issues in
the prior bills just how this body is constituted and
what their authority is. The new wrinkle that you have
here obviously is the land grant, which I think is
innovative thinking. I'm glad to see people trying to
solve the issue of the recurring budget problems the
system faces. To answer your question about the future
of the Marine Highway System, yes we have concerns. We
know that it's a struggle every year to get adequate
funding to operate the system and we know that there
are efficiencies that can be realized by some changes
perhaps. We are very concerned though, that we would
make sure what we would come up with here would truly
fix the system and doesn't end up spinning it off into
the nether world.
SENATOR WARD asked if he was opposed to the Marine Highway System
becoming an authority if it could be set up in a manner he is
comfortable with.
MR. GEHRHART replied that they are not opposed to anything that
will address their problems. In their study, they are attempting
to determine whether an authority or some other structure would
better address them.
SENATOR WARD asked what other structures he had come up with.
MR. GEHRHART replied that the study is ongoing.
SENATOR WARD said he had been studying this for five years.
People had been taking money out of the fund and now it is gone.
He maintained, "This might not be the right answer, but nobody
else has come up with one including your group that is now going
to study it a little more…"
SENATOR ELTON said he wanted to put the sponsor more at ease on
this and said:
The Southeast Conference has done an absolutely
incredible job in bringing all of the communities
together in Southeast Alaska on issues as diverse as
the Southeast Regional Transportation Plan, education,
fishing issues, a lot of the economic issues that drive
this. And I can assure the members of this
committee…about the integrity and the work ethic of the
Southeast Conference. I don't think that their purpose
in reviewing the system that we have now and other
models that could be applied to the Marine Highway
System is simply an effort to produce another report,
because this is an organization that is results
oriented and I've got an awful lot of comfort in the
notion that whatever they propose is going to be taken
seriously be people who depend on this transportation
system.
SENATOR ELTON asked Ms. Carroll if land that was available for
the trust was open to public selection and, if so, what amount of
interest has been expressed by the public in lands that have
sufficient value to enhance the Marine Highway.
MS. CAROL CARROLL, Department of Natural Resources (DNR), replied
that all of the land that the state owns has been classified and
what is classified as available for different purposes is
certainly available for people to come to the state and say they
would like to lease it or hold a timber sale.
SENATOR ELTON asked what kind of public interest DNR gets from
people who want access to those lands. He asked if the Authority
controlled those lands, would there be a higher public interest
in the use of them than with DNR.
MS. CARROLL said as she understands it, if there is a good
prospect for something, that activity would be taking place right
now.
SENATOR TAYLOR asked what the average price per acre was for land
that had been sold by the State of Alaska since statehood.
MR. BOB LOEFFLER, Director, Division of Mining, Lands, and Water,
replied a rough estimate is $750 and a lot of that land is
extremely remote.
SENATOR TAYLOR said that goes all the way back to when lands were
sold at a 50% discount etc.
MR. LOEFFLER said he didn't believe that was correct, but that
figure included lands sold since 1980. He offered to get the
committee better information.
SENATOR TAYLOR asked if DNR just had a land sale on Prince of
Wales and what the price per acre was.
MR. LOEFFLER said he would have to look up that information.
SENATOR TAYLOR said he thought the lots were 2.5 to 3 acres and
some sold for over $40,000, about $15,000 per acre. He said using
an average of $10,000 per acre times 500,000 acres equals $5
billion. He remarked, "That probably wouldn't be enough the way
our current ferry system is operating. I think they could run
that stuff down a rat hole and still be trying to sell ferries
two years later…"
He asked Mr. Loeffler to explain the difference in management
style between the lands DNR managed for over 30 years for the
University of Alaska and the $1.5 million made off of it and the
over $45 million the University has made off exactly the same
land using its management style in about the last nine years
since they took it over.
MR. DICK MYLIUS, Resource Assessment and Development Manager,
DNR, explained that the University had a windfall and that was
revenue that was almost entirely from state lands, not University
lands.
SENATOR TAYLOR noted that that timber was cut off of state land,
which is the same land Senator Ward is talking about in this
bill. The land was turned over to the University and they chose
to harvest the timber and make money off of it.
MR. MYLIUS responded that they had very extensive harvests in
that area before, during and after that sale, but it's not under
his division.
SENATOR WARD moved to pass CSSB 271(TRA), Version C, from
committee with individual recommendations.
SENATOR ELTON objected and said that he wasn't arguing that the
problems facing the Marine Highway System and all of our
transportation systems are not significant, however:
It's a lack of money to do the maintenance, which means
that we don't do deferred maintenance, which means that
we're doing the most expensive maintenance of all. It's
not a problem that's unique to the Marine Highway
System and I guess that when people say, 'If not this,
what?' my suggestion is that we spend the money we need
to do to maintain our transportation infrastructure.
We're not doing it with harbors, we're not doing it
with ports, we're not doing it with the Marine Highway
System, we're not doing it with our roads and highways.
So the problem faced by the Marine Highway System is
not unique. I guess the only other thing that I would
say is that after an hour of testimony, we've come up
with a different way of managing our Marine Highway
System and I'm much more comfortable with the approach
that's being adopted by the Southeast Conference. I
guess the last thing that I want to say is I think I've
heard some comments here that cast aspersions on to the
managers that may even suggest that the present
managers of the Marine Highway System are perfectly
capable of tossing away $1 billion and I find that
suggestion offensive and I don't think it's true and I
think that if that's the basis upon which this bill is
going to move forward, it's the wrong reason for this
bill to move forward.
SENATOR WARD said he thought this was a good bill and he wouldn't
care if all the people that currently run the Marine Highway
System were appointed by the governor to run the new authority.
He didn't think that was the point. He noted:
The point is we need to separate the Marine Highway
Authority away from the current position that it is as
a line item agency and we need to give it a half
million acres and more for a land base and other
things…
SENATOR WARD called for a roll call vote on his motion to move
CSSB 271(TRA) from committee. SENATORS WARD, TAYLOR, WILKEN, and
COWDERY voted in favor; SENATOR ELTON voted against.
SENATOR ELTON moved for reconsideration.
SENATOR WARD noted that the committee would have to rescind its
action.
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