Legislature(2005 - 2006)HOUSE FINANCE 519

02/14/2005 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 42 JOE WILLIAMS, SR., COASTAL TRAIL TELECONFERENCED
Moved Out of Committee
+ HB 102 FOREIGN MEDICAL SCHOOL GRADUATES TELECONFERENCED
Moved Out of Committee
+ HB 115 AIRPORT CUSTOMER FACILITY CHARGES TELECONFERENCED
Moved CSHB 115(TRA) Out of Committee
Bills Previously Heard/Scheduled
HOUSE BILL NO. 115                                                                                                            
                                                                                                                                
     An Act relating to charges paid or collected by users                                                                      
     or occupants of an airport facility owned or controlled                                                                    
     by the state.                                                                                                              
                                                                                                                                
JOSH  APPLEBEE,  STAFF, REPRESENTATIVE  TOM  ANDERSON,  noted                                                                   
that HB 115  would provide a mechanism for  customer facility                                                                   
charges or Consumer Finance Charges  (CFC) to improve airport                                                                   
facilities  without the  expenditures  of State  funds.   The                                                                   
most common  projects  that CFC's  are used  to fund are  car                                                                   
rental facilities.   The  bill provides  a revenue  stream to                                                                   
maintain  and operate  the facilities,  without requiring  an                                                                   
increase  in the  airport-operating  budget, as  the cost  of                                                                   
maintenance  would  be  paid  for  by  the  related  customer                                                                   
facility maintenance charges.                                                                                                   
                                                                                                                                
He reiterated that HB 115 would  implement a valuable private                                                                   
market  tool to  construct improvements  to Alaska  airports,                                                                   
without the  expenditure of public  funds.  It would  help to                                                                   
improve  amenities provided  to  the traveling  public,  both                                                                   
Alaskan and non-Alaskan.                                                                                                        
                                                                                                                                
Mr. Applebee  advised that this  would be a private  industry                                                                   
initiated  project, sponsored  by  local  airport car  rental                                                                   
companies.    He stated  that  they  are  in the  process  of                                                                   
undertaking a  similar project  at Ted Stevens  International                                                                   
Airport  in  Anchorage.   The  project  was delayed  by  9-11                                                                   
events and  is now  moving ahead.   During negotiations  with                                                                   
the  State  over  the implementation  of  the  project,  bond                                                                   
counsel identified certain issues  with language set forth in                                                                   
Ch. 99,  SLA 2001.   That language needs  to be  clarified to                                                                   
ensure that the bonds are marketable.                                                                                           
                                                                                                                                
Mr. Applebee  continued, issues  revolve around clarifying  a                                                                   
new revenue stream  generated by the CFC, which  would not be                                                                   
considered  revenue for  the State.   The bond  is a  private                                                                   
initiative and ensures that the  bond trustee, not the State,                                                                   
take custody  for those funds.   Without that  clarification,                                                                   
the 2001 language does not adequately  clarify that the CFC's                                                                   
are  not  revenues  for  the State  to  use  for  making  the                                                                   
determination  of  whether they  would  are  subject to  pre-                                                                   
existing airport bonds.  The definition  of what bond related                                                                   
purposes that the CFCs can be  applied to, would also clarify                                                                   
inclusion of  debt reserve funds  and other bond  underwriter                                                                   
requirements.                                                                                                                   
                                                                                                                                
Mr. Applebee pointed out that HB 115 offers:                                                                                    
                                                                                                                                
   · New jobs,                                                                                                                  
   · Efficiency and innovation in the car rental market,                                                                        
   · Partnership with private enterprise,                                                                                       
   · Modernization to compete with airports nationally, and                                                                     
   · Enhanced convenience.                                                                                                      
                                                                                                                                
Vice-Chair  Stoltze pointed  out  that the  Attorney  General                                                                   
alluded  to technical  changes.   Mr.  Applebee advised  that                                                                   
they were  working with  that office;  those changes  are not                                                                   
substantive enough to hold the bill up.                                                                                         
                                                                                                                                
2:28:08 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Stoltze asked  where in  the legislative  process                                                                   
would  those  considerations  be  addressed.    Mr.  Applebee                                                                   
stated that  until the  changes are  "flushed out"  under the                                                                   
current title,  they will be addressed  by the time  the bill                                                                   
passes out of the House to the Senate.                                                                                          
                                                                                                                                
2:29:03 PM                                                                                                                    
                                                                                                                                
Representative Weyhrauch  questioned the statement  regarding                                                                   
"without  public  funds".    Mr.  Applebee  stated  that  the                                                                   
mechanism  described   in  statute,  the   customer  facility                                                                   
charges, passed on to the consumer  in addition to the public                                                                   
maintenance  charges, are  the funds  that would  be used  to                                                                   
construct and maintain that facility without public funds.                                                                      
                                                                                                                                
Representative  Weyhrauch asked  where in  the bill  was that                                                                   
language located.   Mr. Applebee explained that  the language                                                                   
refers to  the customer facility  charges and that  there are                                                                   
not public funds.                                                                                                               
                                                                                                                                
Representative Weyrauch asked  if the sponsor would object to                                                                   
including  that language.    Mr. Applebee  did  not think  it                                                                   
would  be  appropriate  within  the drafting  language.    He                                                                   
thought  that   the  sponsor  would  know.     Representative                                                                   
Weyrauch requested to incorporate  that intent into the bill.                                                                   
                                                                                                                                
Co-Chair  Meyer requested  that language  be held until  full                                                                   
testimony had been taken.                                                                                                       
                                                                                                                                
Representative  Hawker pointed  out that  the answer  to that                                                                   
concern  was included on  Page 3,  Line 6,  "if the  State on                                                                   
behalf of the department did not incur the indebtedness".                                                                       
                                                                                                                                
2:31:09 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Stoltze  asked  if   it  was  intended  that  the                                                                   
legislation  only  apply  to  international  airports.    Mr.                                                                   
Applebee responded  that the intent was to provide  it to any                                                                   
area that has a market that could  be sustained through their                                                                   
customer activity, to build and maintain a facility.                                                                            
                                                                                                                                
Vice-Chair  Stoltze inquired  if it would  be problematic  to                                                                   
limit  it to  that and  not including  rural  airports.   Mr.                                                                   
Applebee replied  that the sponsor would not  object to that,                                                                   
however it  would limit them  in any future circumstance  and                                                                   
the possibility of  that area developing a market  that could                                                                   
sustain it.                                                                                                                     
                                                                                                                                
Vice-Chair  Stoltze  pointed  out  that the  airport  in  his                                                                   
district, is the  only rural airport that makes  money in the                                                                   
State.  He acknowledged  that he wanted to  protect the small                                                                   
business owners.                                                                                                                
                                                                                                                                
2:33:21 PM                                                                                                                    
                                                                                                                                
Representative Weyhrauch  understood that only  the Anchorage                                                                   
airport  would  be  affected.    Mr.  Applebee  replied  that                                                                   
currently, the  only market studies and planned  projects are                                                                   
in Anchorage.                                                                                                                   
                                                                                                                                
Representative  Weyhrauch asked  how many airport  facilities                                                                   
in Alaska  are owned and controlled  by the State  of Alaska.                                                                   
Mr.  Applebee  did  not  know and  offered  to  provide  that                                                                   
information to Committee members.                                                                                               
                                                                                                                                
Representative  Weyhrauch  asked  why the  legislation  would                                                                   
exempt the  entire process  of the Administrative  Procedures                                                                   
Act in terms  of notice and  the opportunity to comment.   He                                                                   
pointed out  that the  public will be  paying these  fees and                                                                   
the increases associated with them.                                                                                             
                                                                                                                                
Representative  Weyhrauch asked  why the  501-C-3's would  be                                                                   
exempt from paying  rent and would the public  be deprived of                                                                   
equal  use of the  airport.   He emphasized  that one  entity                                                                   
would be paying  and another would not and how  could that be                                                                   
equal.  Mr. Applebee did not know.                                                                                              
                                                                                                                                
Representative  Weyhrauch pointed  out that the  Department's                                                                   
Commissioner periodically  adjusts the fees to  pay the debt.                                                                   
He asked what  "periodically" means.  Mr.  Applebee responded                                                                   
that  would depend  on the  Commissioner;  the bill  provides                                                                   
some latitude.                                                                                                                  
                                                                                                                                
2:35:42 PM                                                                                                                    
                                                                                                                                
MARK   PFEFFER,   CO-OWNER,    VENTURE   DEVELOPMENT   GROUP,                                                                   
ANCHORAGE,   noted   that   his    company   has   contracted                                                                   
individually with  the operations  of 7 rental  car companies                                                                   
that operate  at the  Anchorage International  Airport.   The                                                                   
project started in  2000 and was put on hold  during the 9-11                                                                   
events.  He stated that the rental  car companies have worked                                                                   
closely  with the  airport in  Anchorage  to come  up with  a                                                                   
solution to  address the congestion  and rental  car problems                                                                   
at that location.                                                                                                               
                                                                                                                                
The project  provides  for a facility  outside the  Anchorage                                                                   
International  Airport  to  be  connected  to  a  rail  depot                                                                   
tunnel.   It would allow for  passengers to come  through the                                                                   
tunnel and  be out of  the weather into  a rental  car lobby.                                                                   
He  spoke to  the  intended  process, which  could  eliminate                                                                   
traffic and  trips to  and from remote  sites.  The  facility                                                                   
would be  paid for  by a customer  facility charge  and there                                                                   
would  be no  obligation on  the part  of the  State.   Funds                                                                   
would be generated by revenue bonds.                                                                                            
                                                                                                                                
Mr. Pfeffer stated  that the intent is to  begin construction                                                                   
by this spring.  Language needs  to be clarified for the bond                                                                   
issuance in  April 2005, whereby  allowing construction.   He                                                                   
offered to answer questions of the Committee.                                                                                   
                                                                                                                                
2:39:04 PM                                                                                                                    
                                                                                                                                
Representative  Weyhrauch asked  if  the proposal  was for  a                                                                   
garage  for parked  cars.  Mr.  Pfeffer replied  that it  was                                                                   
initially called  a garage  but now it  is called  a terminal                                                                   
and  it  would  park 1,400  cars.    Representative  Weyrauch                                                                   
clarified that it will be a rental car facility.                                                                                
                                                                                                                                
Representative  Weyhrauch  inquired   if  there  would  be  a                                                                   
lounge.  Mr. Pfeffer understood  that the lounge would remain                                                                   
in  the airport  terminal.   Representative  Weyhrauch  asked                                                                   
where that  language was  located in the  bill.   Mr. Pfeffer                                                                   
replied that  was language in  existing legislation  and that                                                                   
certain  sections   would  be  amended  addressing   customer                                                                   
facility charges.                                                                                                               
                                                                                                                                
Representative  Weyhrauch asked if  the same language  was in                                                                   
existing statute,  which exempts  the notice for  the comment                                                                   
period for the public.  Mr. Pfeffer  did not know referencing                                                                   
Page 3,  Lines 21-22,  that the  Department "shall  provide a                                                                   
public notice".   He  stated that  because of timing  issues,                                                                   
that will not happen.                                                                                                           
                                                                                                                                
Representative Weyhrauch clarified  that since it is going to                                                                   
be revenue bonds, essentially,  the rental car companies will                                                                   
have  a surcharge  on the  cars  that they  rent, a  facility                                                                   
charge, and that  the revenue for that would be  used for the                                                                   
bonding purposes.  Mr. Pfeffer  responded that the car rental                                                                   
companies  will collect  a charge  from  the customer,  which                                                                   
would be  remitted to  a third party  trustee that  would pay                                                                   
back the  bondholders.   That money  will never become  funds                                                                   
for the  State.  The anticipated  cost of the project  is $42                                                                   
million dollars  and will  be built all  at one time,  not in                                                                   
phases.    In  response  to  Representative   Weyhrauch,  Mr.                                                                   
Pfeffer explained  that bonds sold would be in  the amount of                                                                   
$42  million   dollars  and  that   the  facility   would  be                                                                   
earthquake proof and have a bomb blast test.                                                                                    
                                                                                                                                
2:42:25 PM                                                                                                                    
                                                                                                                                
Representative  Hawker asked if  the finance community  drove                                                                   
the need  for the legislative  change.  He believed  that the                                                                   
change  was needed  so  that a  bond trustee  could  directly                                                                   
receive  the  funds.    Mr.  Pfeffer  acknowledged  that  was                                                                   
correct and that the State could  impose the charge.  In this                                                                   
case, the industry  said to the State that they  did not like                                                                   
the State's plan and wanted to submit their own proposal.                                                                       
                                                                                                                                
2:44:25 PM                                                                                                                    
                                                                                                                                
Representative  Weyhrauch asked if  the title would  prohibit                                                                   
the Fairbanks and/or Juneau area.                                                                                               
                                                                                                                                
2:45:49 PM                                                                                                                    
                                                                                                                                
Representative  Kelly  asked  where  the clean  up  would  be                                                                   
occurring.  Mr. Pfeffer responded  that the bond insurers and                                                                   
underwriters are working to clarify  the language in order to                                                                   
get the  best bond  rates; that work  is not quite  complete.                                                                   
Language changes  are run through  the airport  attorney, Mr.                                                                   
John Steiner  who works with the  Department of Law.   He has                                                                   
provided  some stylistic  changes.   Mr.  Steiner offered  to                                                                   
draft  language  for  the  Senate  Transportation  Committee.                                                                   
Those changes  will be  submitted at that  time so  that they                                                                   
can be dealt within a transportation committee.                                                                                 
                                                                                                                                
2:48:09 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Stoltze believed  that there  would be a  through                                                                   
look into the legislation in the Senate.                                                                                        
                                                                                                                                
2:48:49 PM                                                                                                                    
                                                                                                                                
Representative Hawker MOVED to  report CS HB 115 (TRS) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal  note.  There being NO  OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CS HB  115 (TRS)  was reported  out of  Committee with  a "do                                                                   
pass"  recommendation  and  with   a  zero  note  #1  by  the                                                                   
Department of Transportation & Public Facilities.                                                                               

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