Legislature(2007 - 2008)CAPITOL 17
02/08/2008 03:00 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB297 | |
| HB340 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 297 | TELECONFERENCED | |
| *+ | HB 340 | TELECONFERENCED | |
HB 340-CAPSTONE AVIONICS FUND/LOANS 4:18:36 PM CHAIR OLSON announced that the next order of business would be to take up HOUSE BILL NO. 340, "An Act establishing the Alaska capstone avionics revolving loan fund and relating to the fund; and providing for an effective date." 4:18:48 PM FRANK RICHARDS, Deputy Commissioner, Office of the Commissioner, Department of Transportation & Public Facilities (DOT&PF), explained that the purpose of HB 340 is to increase aviation safety in Alaska by offering low interest loans for the purchase and installation of capstone avionics equipment. He explained capstone avionics is the next generation of technology to improve flight safety and community access in Alaska. The technology, called automatic dependent surveillance broadcast (ADSB), allows aircraft equipped with avionics to interact with ground infrastructure and satellite stations to provide pilots with their exact location: latitude, longitude, altitude, air speed, rate of ascent and descent, surrounding terrain information, and location of other aircraft equipped with capstone avionics in real time weather. The Federal Aviation Administration (FAA) sponsored this technology and tested capstone avionics initially in the lower Yukon Kuskokwim Delta (YK) near Bethel and later in Southeast Alaska. The results for aircraft equipped with capstone avionics are a 47 percent reduction in accidents and a 33 percent reduction in fatalities. The FAA would like to expand capstone avionics technology throughout the state with a goal of equipping 4,000 of the 6,500 aircraft in Alaska with capstone avionics. 4:21:01 PM MR. RICHARDS further explained that HB 340 would create a low interest loan program within the DCCED to provide aircraft owners a low interest loan for the initial purchase cost of capstone avionics rather than incur out-of-pocket expenses. He said DOT&PF supports HB 340. GREG WINEGAR, Director, Division of Investments, Department of Commerce, Community, & Economic Development (DCCED), said that capstone avionics has shown the potential to save lives and reduce accidents. He offered that the division has administered loan programs since the early 70s. The division offers experience, expertise, and the infrastructure to administer the capstone avionics program proposed in HB 340. In fact, the capstone avionics program in HB 340 is patterned after other loan programs administered by the division. The loan program is structured for aircraft owners to purchase avionics through a revolving fund and as repayments are received, the Division of Investments can make additional loans to other aircraft owners. This bill would stipulate loans for up to 80 percent of the cost and installation of the capstone avionics. The interest rate is set at 4 percent for loans for up to 10 years. Terms for repayment of an average $12,000 loan would be $122 per month or $1,480 per year annually, he opined. The division's goals for the capstone avionics terms were to provide aircraft owners a manageable repayment schedule, cover the expenses of the program, allow future loans, and return the initial capital to the general fund. The fiscal note requires a $4.8 million general fund appropriation, which would allow the division to make 400 loans in the first year and 60 loans each year thereafter. The program would sunset in 2020, at which time any unexpended funds and earnings would revert to the general fund. The division is requesting two new positions for the program, a loan officer, and a loan closer. The positions would only be filled if sufficient loan activity warranted the positions and current staff could not absorb the additional workload. He noted the division recently upgraded its computer software, which he anticipated will gain efficiencies and allow the division to absorb the accounting necessary for the capstone avionics program. He related that the Division of Insurance strongly supports HB 340. 4:24:31 PM CHAIR OLSON inquired as to whether the capstone avionics program would be structured similar to the Commercial Fishing and Agriculture Bank (CFAB) loan program. MR. WINEGAR answered that the capstone avionics loans would be different in that CFAB is a cooperative that handles fishing related loans, whereas the capstone avionics loans would be similar to the division's other revolving loan funds. 4:24:48 PM REPRESENTATIVE RAMRAS expressed his support for HB 340. He related his understanding that HB 340 would incrementally equip 4,000 Alaska-based aircraft with capstone avionics in order to qualify for federal funding and improve aircraft safety. He inquired as to whether the capstone avionics technology is subject to improve or if it is static. He further inquired whether the aircraft initially equipped will require updates as the state moves towards the target of equipping 4,000 aircraft. MR. RICHARDS answered that those who initially purchase capstone avionics or any technology-based product are purchasing what is currently available in the market. He offered his understanding that the prototypes for capstone avionics tested in Bethel saved lives. By the time the testing began in Southeast Alaska, the technology evolved to what is probably the second generation of capstone avionics. While the "shelf life" for any technology is short, it does not mean that the initial generation of the technology is obsolete, he opined. He offered that any capstone avionics captures and presents information to the pilot. He also noted that some aircraft the division hopes to equip date from 1940 to 1960, yet the aircraft is still operating. The ultimate goal is to help provide pilots with information on weather conditions and terrain, he opined. REPRESENTATIVE RAMRAS asked what level of federal funding is available for the capstone avionics project. MR. RICHARDS answered that the actual FAA capital infrastructure investment will be approximately $125 million of which $25 million is budgeted this year for the corridors between Anchorage and Fairbanks and from Nome to Kotzebue. The remaining [$100] million will provide the infrastructure for the rest of the state. The FAA anticipates that the ongoing operational cost will be in the hundreds of millions of dollars, he said. 4:29:45 PM MR. RICHARDS, in response to Representative Ramras, specified that in order to access the federal funding, the FAA would require certain benchmarks. Still about 800 commercial aircraft will be the first aircraft equipped. REPRESENTATIVE RAMRAS highlighted the importance of air safety. He inquired as to whether the state should offer partial grants to encourage early adoption of capstone avionics to ensure enough aircraft owners participate in the program so that the state will qualify for the federal funding. MR. RICHARDS answered that the administration believes that the low interest loan program will encourage participation in the capstone avionics program. He suggested that the legislature could decide whether or not to offer grants as further incentives to equip aircraft with capstone avionics. MR. WINEGAR, in further response to Representative Ramras, said that the interest rate had been developed to ensure a low rate and, at same time, cover program expenses, provide the ability for future loans, and return the initial capitalization of the program. 4:31:36 PM REPRESENTATIVE GATTO related that he previously inquired as to whether a [Bellanca] Citabria would qualify for the capstone avionics. He further inquired as to whether an ultralight, glider, or home-built plane would also qualify. MR. RICHARDS said he was not certain whether experimental kit planes, gliders, and ultralights would qualify for the program. He offered that the FAA is currently targeting fixed-wing and rotary-type airplanes. REPRESENTATIVE BUCH surmised that the FAA part 135 would cover some of the types of planes that had been mentioned, although ultralights would not likely fit. 4:34:13 PM MR. RICHARDS, in response to Representative Gardner, answered that capstone is the term that was used during the pilot project, and the term remained so that the technology is now referred to as "capstone avionics." In further response to Representative Gardner, Mr. Richards said that more than one manufacturer offers the technology and more than one private- sector installer is knowledgeable about capstone avionics technology. 4:35:34 PM REPRESENTATIVE NEUMAN acknowledged the value and importance of the capstone avionics. He expressed concern that the operating costs for two employees are set at $117,000, which will continue to rise. He inquired as to whether some mechanism could be built into the loan program to ensure that the capstone avionics program is self-sustaining. MR. RICHARDS noted his agreement conceptually with Representative Neuman. He explained the program costs would be paid out of revolving-loan fund. The capstone avionics program is based on projections of 400 loans in the first year with an additional 60 loans in subsequent years. The variable trigger in whether to fill the two positions requested in the fiscal note is loan demand. Unless there is enough loan demand to warrant hiring, the division will absorb the program tasks with its existing staff. In 2020, the earnings will revert back to the general fund. If demand fell off prior to that date, the division and the legislature could revisit the matter. 4:39:05 PM REPRESENTATIVE GATTO inquired as to whether the capstone avionics program staff are required to be state employees. MR. WINEGAR said the Division of Investments already has the infrastructure in place so it would be difficult to provide for such a small program in the private sector for the same administrative costs. The private sector would pay a much higher interest rate than the state does, he noted. 4:42:36 PM REPRESENTATIVE RAMRAS offered his understanding that 4 percent of $4.8 million would generate about $170,000 per year, such that the receipts would appear to offset the administrative costs. He noted the economic multiplier since installations of capstone avionics will be performed by the private sector. The intent of HB 340 is to qualify for $99 or $125 million initially and for several hundred million in federal funds, with the aggregated purpose to make aviation safer in the state. MR. RICHARDS noted his agreement. 4:43:42 PM LEONARD KIRK, Assistant Director; Capstone Coordinator, University of Alaska Anchorage (UAA), Aviation Technology Division, University of Alaska informed the committee that UAA developed and delivered training for phase one and two of the capstone avionics pilot program. He said that UAA has been involved in performing safety and access studies and has found a 48 percent reduction in aviation accidents due to capstone avionics. Additionally, capstone avionics affords pilots extended flying hours for more days of the year and during hours of darkness. Therefore, the overall effect has been a 50 percent reduction in accidents in the rural communities served by aircraft equipped with capstone avionics. The capstone avionics equipment is well accepted and also performs well, he opined. The University of Alaska has campuses throughout the state and would like to participate in training to accrue access and safety benefits for all Alaskans, he noted. 4:45:43 PM MR. KIRK, in response to Representative Gardner, said that he cannot provide specific numbers for the percentage of accidents reduced. However, prior to capstone avionics the state averaged a fatal accident every 29 days, but since the advent of capstone avionics the state has experienced no aviation fatalities for 26 consecutive months. He further noted that prior to initiating capstone avionics, the accident rate in the Yukon-Kuskokwim Delta was four times higher than the rest of the state. By 2003, the Yukon-Kuskokwim Delta had the lowest accident rate in the state. He recalled statistics that revealed approximately 124 lives were saved during phases one and two of the pilot program. 4:46:54 PM PATRICK THURSTON, Director of Operations, Hageland Aviation, said that his company is the largest user of capstone avionics equipment in Alaska. He offered that Hageland Aviation has used the capstone avionics technology since its first experimental stage and the results show unequivocally that this technology is here to stay. The state needs the capstone avionics program so the rest of the state can enjoy the benefits of increased aviation safety, he opined. At the level where the "rubber meets the road" his pilots find capstone avionics technology is as fundamental as the gas in the tanks, he opined. He recalled positive feedback from passengers traveling with Hageland Aviation, who often must fly in harsh conditions. He noted that their passengers are aware of the technology employed and appreciate the increased safety. He noted that Hageland Aviation has 42 planes, but only 2 do not yet have the technology. He expressed strong support for [the proposed capstone avionics program] in HB 340 for his company's use and for the safety benefits it provides for passengers in the state. 4:48:37 PM REPRESENTATIVE NEUMAN inquired as to how the Division of Investments would prioritize applications if more than 400 applicants applied for the program and how the division would prioritize between commercial and private pilot requests for capstone avionics. MR. WINEGAR answered that in other division programs applications are typically processed on a first-come basis. He said it depends on how fast loans are processed and how quickly payments revolve back to the fund. He surmised that the division will assess demand for the program after the first year. If there is a greater demand than anticipated, the division may need to seek additional funding from the legislature or find another funding source, he opined. He noted that one unknown factor is how many applications the division will receive and whether companies and pilots will choose to install capstone avionics in their planes without using the capstone avionics program. 4:50:36 PM WILFRED RYAN, President, Alaska Air Carriers Association (ACCA); Alaska Airmen's Association, Inc., noted the presence of several aviation personnel. He explained that his remarks are consolidated remarks from Jim Cieplak, a representative from the Alaskan Aviation Safety Foundation, and Mike Stedman, Wings of Alaska, who also serves as the Vice-President of the Alaska Air Carriers Association to save time for the committee. However, they are both present today to answer any questions that may arise. In response to an earlier question, he noted that Alaska has approximately 10,000 total aircraft, of which 6,500 are active aircraft that would be eligible to be equipped with capstone avionics. While the current equipment [for capstone avionics] is expensive, over time the cost will subside, he opined. MR. RYAN said that without an incentive program such as the one proposed in HB 340, owners would likely wait until the price of the equipment went down. Thus, the state could lose out on federal dollars. The FAA is poised to distribute roughly $306 million to Southeast Alaska, Anchorage, Fairbanks, Nome, and Kotzebue. Alaska could potentially lose a $187 million federal investment if it does not meet the threshold outlined by the Memorandum of Agreement with the FAA, he said. The organizations that are represented here today support Governor Palin's announcement concerning the aviation safety initiative to help Alaska's pilots obtain state of the art capstone avionics. He echoed earlier testimony that capstone is a trademark name that was coined during the research and development phases of the program, which represents a joint effort between the industry and the FAA to improve Alaska Aviation safety. He offered statistics such as that more than 90 percent of Alaska is accessible only by air and that Alaska has the highest aviation accident rate in the nation. Thus, an expedited statewide capstone avionics is essential for future air travel in Alaska, he opined. MR. RYAN said that the aviation industry is currently working to ensure that HB 340 meets the accelerated installation of capstone avionics needed to secure substantial benefits for Alaska. The FAA has forecasted a public benefit of $824 million over the next 27 years, with a 33 percent reduction in aircraft fatalities, improved search and rescue operations, improved medical evacuations, reduced aircraft accidents, and enhanced access to rural communities, he said. If 4,000 aircraft are equipped with capstone avionics, it would provide safety for 90 percent of the flight hours and 90 percent of the area in the state, he opined. He offered support for HB 340 from the ACCA, which represents more than 150 air carriers and suppliers of aviation products and services. He also offered support from the Alaska Airmen's Association, Inc., which represents more than 2,000 private pilots and mechanics, and individuals interested in flight safety. Finally, the Alaskan Aviation Safety Foundation, an organization dedicated to improving aviation safety in Alaska, supports HB 340, he related. 4:55:59 PM REPRESENTATIVE GARDNER inquired as to the timeline in the Memorandum of Agreement with the FAA. She further asked Mr. Ryan to elaborate on the projected result to equip 4,000 aircraft with capstone avionics. MR. RYAN answered that the Memorandum of Agreement with the FAA covers a five-year timeline. During that time, the FAA will expend $100 million in ground-based infrastructure and simultaneously 4,000 aircraft would be equipped with the capstone avionics. He clarified that the 90 percent of the flight hours mentioned are based on a projection of the hours flown by 4,000 aircraft, whereas the 90 percent of the area represents the current areas where accidents have occurred. 4:57:32 PM MR. RYAN, in response to Representative Gatto, said that there has been little or no opposition to HB 340. REPRESENTATIVE RAMRAS expressed interest in early adoption of the capstone avionics in aircraft so that the state would qualify for the federal funding. He inquired as to how many of the 4,000 planes that are targeted for capstone avionics equipment are commercial, and therefore would also be eligible for depreciation and federal benefits to reduce cost. He further inquired as to whether the cost is scaled depending on whether the plane is small or large. MR. RYAN speculated that there will be a tremendous cost for early adoption due to the overall cost of the technology. He related that to equip a Piper PA-18 "supercub" or a Cessna 180 is projected at $12,000, but that it could cost $70,000 to equip a commercial Instrument Flight Rules (IFR) equipped aircraft such as single turbine Otter or the twin-engine turboprop Beech 1900. Currently, there are 600 commercial aircraft statewide, and of those 375 are equipped with capstone avionics and most of the planes are located in the Yukon Kuskokwim Delta area and Southeast Alaska. The remaining commercial aircraft probably will use the capstone avionics program offered in HB 340, he opined. He noted that his company has five twin-turbine aircraft equipped with phase one capstone avionics and with the passage of HB 340, he said he hopes to use the revolving-loan program to update the equipment. MR. RYAN, in response Representative Ramras, stated that about 20 percent of the aircraft in the state are commercial aircraft. REPRESENTATIVE RAMRAS suggested that the committee move HB 340 to the next committee. He suggested that the sponsor and industry work with the Department of Transportation & Public Facilities (DOT&PF) to reduce the rate of interest for private aircraft to offer an inducement of 4 percent. He surmised that the capstone avionics would lower premiums. He maintained his interest in providing an additional inducement for private aircraft early adopters of capstone avionics, such as to reduce the rate to 1 per cent or less. He noted that commercial carriers have the advantage to deduct the interest rate and depreciate the cost of the capstone avionics products. Thus, increasing the number of private pilots that could use the capstone avionics program could help the industry reach the goal of equipping 4,000 aircraft with the capstone avionics technology. MR. RYAN said industry has an outstanding relationship with DOT&PF. He clarified that only one company currently manufactures the universal access transceiver, multiple companies produce the multi-function display, and by contract there is only one provider for the ground based infrastructure. 5:04:55 PM MR. RYAN, in response to Representative Gatto, answered that the presence of capstone avionics alone does not impact insurance rates. However, because the aviation industry has created an Alaska-based insurance pool and because the accident rate has been reduced in the past 8 years the industry enjoys a 25 percent reduction in aircraft hull and liability premiums. MR. RYAN, in response to Representative Gatto, answered that the 25 percent represents a combined total reduction for hull and liability insurance. In response to Representative Gardner, Mr. Ryan answered that all of the 375 commercial aircraft equipped with capstone avionics counts toward the FAA requirement of 4,000 planes, but only a handful of private pilots have capstone avionics installed due to the high cost of installation. 5:06:42 PM CHAIR OLSON closed public testimony on HB 340. 5:06:49 PM REPRESENTATIVE NEUMAN moved to report HB 340 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 340 was reported from the House Labor and Commerce Standing Committee.
| Document Name | Date/Time | Subjects |
|---|