Legislature(2003 - 2004)
05/16/2003 01:49 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 216
An Act relating to international airports revenue
bonds; and providing for an effective date.
MICHAEL BARTON, COMMISSIONER, DEPARTMENT OF TRANSPORTATION &
PUBLIC FACILITIES, explained that the bill would increase
the cumulative authorization for international airport
revenue bonds to support capital improvement projects at the
Ted Stevens Anchorage International Airport & the Fairbanks
International Airport. The bill would authorize the
issuance of $76 million dollars in revenue bonds. Those two
airports are jointly managed as part of the Alaska
International Airport system. The costs and revenues are
pooled. The system is operated through the airport
operating agreement, a contract between the airport and the
airlines. It establishes the business relationships at the
airport, obligates the airlines to pay for the cost of
running & maintaining the airport, including capital
projects and bonded indebtedness through the rates and fees
charged at the airports. It also obligates the airports to
secure agreements on costs with the airlines.
The airlines agreed in 1997 to the terminal redevelopment
project. The bonds requested through the legislation are
revenue bonds. There were two previous issues in 1999 &
2002. The current issue would constitute no obligation of
the State. The bonds would be insured and there would be no
general fund money involved. There are three reasons for
the need for additional funds:
· Transportation Security Administration (TSA)
security requirements;
· Added square footage requested; and
· Design problems, which caused delays.
Commissioner Barton noted the Department had been
negotiating with the airlines since January 2003 regarding
how to cover the cost overrun. An agreement in some areas
was reached acknowledging that Concourse C needs to be
completed. Completion is scheduled for about in about one
year. Another concern is the deferral of the $60 million
dollars in capital projects; project will continue using
federal money.
Commissioner Barton referenced the two handouts. (Copies on
File). Page 18 of the "Business Planning Information"
outlines the bonding requirement. Approximately $48 million
dollars is estimated for the completion of Concourse C; $10
million dollars needed for the match money for federal funds
on the capital project in Anchorage; $3.5 million dollars
needed for capital projects in Fairbanks; $15 million
dollars for the bond issuance costs. Commissioner Barton
stated that the Asian Pacific markets have produced the most
revenue.
Representative Hawker asked if the Airport Fund was out of
cash. Commissioner Barton responded that only the project
needs funds.
Representative Hawker stated that there was a balance of
$81.8 million dollars as of June 30, 2002 in that fund. He
asked if some of that fund balance could be used to address
this concern. Commissioner Barton noted that it was agreed
to use some of those funds for the portion from the terminal
to Concourse C. In order to lessen the impact on airlines
in future years, the Department has agreed to contribute $1
million per year from that fund, as well as $2 million
dollars per year from patent facility charges. He pointed
out the impact on rates and fees listed on Page 20. The
projection has been made for the completion of the entire
terminal and not just Concourse C.
Representative Hawker asked if the number included the
increase required to meet the debt service. Commissioner
Barton responded that it had been included in those numbers.
Representative Hawker asked the rationale, commenting that
"to an extreme"; it could be funded entirely out of that
fund balance. Commissioner Barton did not believe that it
could be cash funded entirely as the State is required to
retain 1.25 times the debt service, necessary from the
previous bond issuance. There are additional on-going
costs. The airport is not designed to make money but
instead to break even and the fees reflect a break-even
situation. Representative Hawker maintained that the cash
reserve numbers were unclear.
Representative Stoltze asked what concerns had been voiced
by Senator Olson. Commissioner Barton stated that the House
Transportation Committee had reviewed the plan and added
that Senator Olson's concerns were related to general
aviation parking and not related to completion of the
concourse base.
Co-Chair Harris asked if the new concourse would exclusively
be used by Alaska Airlines. Commissioner Barton responded
that they would be the major occupants.
Co-Chair Harris asked if there would be increased fees for
some of the airlines to help cover the costs. Commissioner
Barton replied that the airlines through rates and fees
would pay the entire bond. Co-Chair Harris inquired if the
Department was asking for an increase. Commissioner Barton
stated they were and that all occupants agree that Concourse
C should be completed.
Representative Berkowitz inquired if there were any side-
boards on the initial bonding authority. Commissioner
Barton responded that the proposed bill was the same as an
earlier proposed bill, authorizing the bonds.
Representative Berkowitz commented on some of the issues,
which have given rise to increasing the number. These have
been questioned by other legislators who would like to see
some insurance that the problem will not repeat itself.
Commissioner Barton stated that the urgency exists because
the project will run out of cash in September 2003. After
that emergency is resolved, then the entire situation will
be analyzed.
Representative Berkowitz asked if there would be only one
staircase operator at the airport. Commissioner Barton
offered to check into that.
Vice-Chair Meyer MOVED to report SB 216 out of Committee
with individual recommendations and with the accompanying
fiscal note. There being NO OBJECTION, it was so ordered.
SB 216 was reported out of Committee with a "do pass"
recommendation and with fiscal note #1 by the Department of
Revenue.
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