Legislature(1993 - 1994)
02/11/1993 05:00 PM House TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
TAPE 93-4, SIDE A
Number 015
VICE-CHAIR GARY DAVIS called the meeting to order at
5:10 p.m., and requested that REPRESENTATIVE KURT MENARD,
PRIME SPONSOR OF HB 26, begin his testimony.
HB 26: PROHIBITED HIGHWAY ADVERTISING
REPRESENTATIVE MENARD stated that HB 26 was introduced to
address concerns in relation to stepped up efforts by the
Department of Transportation (DOT) advertising regulations
which remove many illegal signs encroaching in the right-of-
way and in the zone beyond the right-of-way along the Parks
Highway and other primary roads. Rep. Menard said it was
his understanding that the DOT is required to remove the
signs in relation to the new Intermodal Surface
Transportation Efficiency Act (ISTEA) which mandates removal
of the illegal signs or face reduction of 10 percent of
federal funding.
REPRESENTATIVE MENARD addressed his concerns regarding many
small businesses, lodges, gas stations and gift shops along
the highway which have had signs for 15 to 20 years. He
said this has caused problems for many constituents. Rep.
Menard noted that the DOT has considered the hardship that
removal of the encroachment causes and has worked with the
federal highway administration to develop an airspace
leasing program. A program was implemented without any
public participation and has not been well received by the
public. The program allows for signs encroaching in the
right-of-way after someone applies, but the alternative is
that the DOT will remove the encroaching sign since ISTEA
money is in jeopardy for noncompliance. He said the DOT
says it will cost $750.00 to process each lease under the
airspace leasing program. Under the airspace leasing
program they are charging $400.00 to the consumer; $100.00
goes to the application fee and $200.00 for the issuance
fee, plus the fair market lease, which in the Rep. Menard's
district costs $100.00 per year.
REPRESENTATIVE MENARD stated that federal law and state law
are similar and there are several exemptions under federal
law that could apply to Alaska. The federal law allows for
exemptions which are zoned for industrial or commercial, and
allows for agreement between the state and the federal for
areas that are not zoned commercial. In discussions with
the DOT, Rep. Menard felt that there were some areas along
the Parks Highway which were commercial in nature. These
included Willow, Houston and other areas. He noted that an
agreement could allow local government to decide the sign
law and allow for off-premise signs.
REPRESENTATIVE MENARD indicated this could help many
constituents. This bill would provide the mechanism for
less restrictive signage in commercially zoned or unzoned
areas which have commercial characteristics. He stated
local government has the authority to make zoning decisions
and could work with residents to decide the signage controls
in their area. The DOT could work to establish agreements
with the federal highway system.
Number 0135
VICE-CHAIR DAVIS asked if there were any questions from
committee members or from witnesses.
JEFF OTTESEN, from the DEPARTMENT OF TRANSPORTATION AND
PUBLIC FACILITIES, introduced himself for the record and
explained what HB 26 would accomplish compared to what was
currently allowed. He said current Alaska laws in relation
to outdoor advertising that is not directly related to the
premises is generally disallowed. This bill would relax
Alaska's law to be in line with federal law and it would
allow these signs in parts of the highway system but not all
parts.
Number 0180
REPRESENTATIVE MACKIE noted that in relation to the position
paper, the DOT indicated it was neutral towards HB 26 and it
would bring both relief and additional work to the crews
with little net change.
REPRESENTATIVE MACKIE wanted to know how it would create
additional work with little net change.
MR. OTTESEN noted these signs would be placed in the
industrial and commercial categories and still must abide by
a number of rules administered by the DOT and the federal
highway administration. They are required to annually
report those signs and verify that they meet all the rules.
Many areas of the state are prohibited from outdoor
advertising and the pressure in those areas to install signs
would be the same as today. There will be more work in some
ways and less work in others, he said, so he did not feel
there would be much impact.
Number 0279
REPRESENTATIVE VEZEY asked if there was a reduction in
illegal signs.
MR. OTTESEN stated he felt there would be some reduction in
legal signs.
REPRESENTATIVE VEZEY asked if the DOT had requests for signs
in the Fairbanks area.
MR. OTTESEN replied that the enforcement had been more lax
in the Mat-Su area; a lot of illegal activity has gone on.
The Interior district has been more forthright for a number
of years, therefore, the pressure is not there. In
Southeast, there is no any pressure, according to Mr.
Ottesen. The outcry has come from the areas where there was
less enforcement.
REPRESENTATIVE VEZEY stated there had been no problems with
this with his constituents and he noted he was concerned
that if the system was changed that they had become
accustomed to, he might be getting complaints.
MR. OTTESEN stated the other thing he noticed that was the
problem in the Mat-Su and Kenai areas, being south of the
Alaska range, was that they have a heavier forest cover. A
sign 100 feet from the right-of-way is invisible. As you
move north, he explained, the vegetation is more sparse.
Number 0338
VICE-CHAIR DAVIS asked if they would be picking up their
enforcement in the Kenai area where he was from. The
enforcement had been lax, he said, and now that enforcement
has been picked up there have been a lot of complaints.
MR. OTTESEN stated that the history as to how enforcement
got increased needed to be explained. He said in the past
there had been different levels of enforcement within
different districts or regions of the state. About three or
four years ago, the types of highways the state started
putting money into and constructing moved from largely urban
routes to rural routes. As they were doing a project, say
twenty miles along the highway, one of the things they
needed to do before construction was to clear that right-of-
way of illegal signs. The people twenty miles before and
twenty miles after the section they were working on did not
have to remove their signs.
MR. OTTESEN said seeing and hearing about the inequity, the
legislature indicated to the DOT that if they were going to
enforce the rule, they needed to enforce it equally
everywhere. Shortly after, ISTEA came along and said not
only enforce this rule, but enforce it right now.
Number 0366
TED SMITH, testifying via teleconference from the Mat-Su,
asked Mr. Ottesen why they hadn't used the encroachment
permit process to permit signs other than the lease.
MR. OTTESEN stated that he wasn't real sure of that, but the
DOT requires and allows a third-party into the highway using
that land for an exclusive purpose, such as a sign or
expanded parking. He noted the DOT does air leases for a
variety of things; in some cases landscaping. The DOT is
actually required to issue an airspace lease. That lease
document must be approved by the Federal Highway
Administration and the DOT is required to collect fair
market value rent and turn that rent back into the highway
program. These are federal regulations and federal statute.
MR. SMITH stated that there is a statute on the books that
authorizes judicial encroachment permits, and in this bill
there is a provision that bus shelters could be a subject of
encroachment permits. He noted his problem with this was
that a lease seemed like a much more permanent sort of grant
of use, and an airspace lease incurs that there is not
attachment to the land. He said these things are normally
over turnpikes and things like that where people build a
hotel or a restaurant in an airspace over a highway. In the
Willow area, according to Mr. Smith, a lot of the right-of-
way is a grant of easement from the original patentees so
there is no airspace lease in the first place.
MR. OTTESEN commented that Mr. Smith was correct, and this
required them to go back and see who owns the underlying
fee. In those cases, the DOT cannot really lease them the
land, but they must permit their activities in their
easement. That is one place where the encroachment permit
is being used. The term "airspace lease" is quite confusing
to the public - it is a term that is used in statute and
regulation by the Federal Highway Administration, and it
technically means a lease for occupying the right-of-way
above, at, or below the surface of the earth. Even though
it seems to be something suspended in mid-air, that is not
the intent.
Number 0399
REPRESENTATIVE MENARD asked MR. GARY WILSON from the FEDERAL
HIGHWAY SYSTEM how strong the enforcement on this mandate
was and if it was uniform among the 50 states.
MR. WILSON stated it was uniform and that it was probably
more stringent in some of the other states than it has been
in Alaska. They have acknowledged the wide, uncleared
rights-of-way in Alaska that has created problems for
businesses, and so in the past they haven't pushed this too
hard. However, now that the ISTEA legislation is here, they
almost have to.
REPRESENTATIVE MENARD asked if there was a time period that
they had in relation to the time period.
MR. WILSON replied that there was 90 days in the statute to
remove all illegal signs. The illegal signs they were
referring to were outside the highway rights-of-way. He
said ISTEA didn't really pertain to encroachments within the
right-of-way, they've always been illegal and the DOT has
always tried to require removal.
Number 0425
REPRESENTATIVE MENARD asked, In so far as fees that the DOT
charged on permits or airspace agreements, were there any
federal requirements that establishes that certain fees had
to be charged on those areas?
MR. WILSON replied that U.S. Code, Title 23, requires that
fair market value be charged for all non-highway uses of the
highway right-of-way.
Number 0430
REPRESENTATIVE MENARD asked if that was assessed every five
years.
MR. WILSON replied that it was not specific and that the
leases are renewable annually. Fair market value is charged
when it is renewed annually.
Number 0436
VICE-CHAIR DAVIS spoke to Mr. Wilson and indicated that he
understood that Mr. Wilson seemed to be searching for a word
that applies to the situation, and he felt that the federal
and state has been handling their enforcement by
"accommodating" (might be the proper word). He said there
is definitely a problem and always has been. The state has
a wide right-of-way and everybody wants their signs to be
seen. A lot of expense has gone into signs, and to have
someone come down and tell them they have to tear it down is
definitely a problem. There are some five thousand to ten
thousand dollar illegal signs in the right-of-way. The
effort is definitely needed. There has been an attempt by
the federal government, the TODS (Tourist Oriented
Directional Signs) program.
MR. WILSON what the TODS program was to Mr. Ottesen. He
said the TODS program is an optional program authorized by
the federal highway administration. The ISTEA not only
authorizes the TODS program, it encourages the states to go
forward with the program. Alaska has had a program for the
past five years and TODS is part of the solution. He stated
it works for some businesses but not all.
MR. WILSON stated that the primary beneficiaries of TODS are
businesses not in the highway, but back from the highway.
The program is specifically not allowed for someone who has
highway frontage and has the ability to have an on-premise
sign that has the ability to be seen, unless they are in a
situation created by topography, vegetation, or some other
feature that makes them invisible to a traveller going down
the highway. The TODS is available to any business that can
demonstrate that 25 percent of their annual revenue comes
from people who are not local. A dry cleaner is probably
not an eligible business, but a hardware store might be. It
is also eligible to businesses up to 25 miles off the
highway.
Number 0514
REPRESENTATIVE HUDSON moved to pass HB 26 out of committee
with individual recommendations.
Number 0518
REPRESENTATIVE VEZEY objected, noting the amount of
materials in the packet and new information to ingest.
Number 0520
REPRESENTATIVE HUDSON removed his motion. He announced that
HB 26 would be held over for further consideration before
the committee.
HB 23: MANDATE SALE OF ALASKA RAILROAD
Number 0551
VICE-CHAIR DAVIS referred to the next item on the agenda, HB
23, and indicated that this was merely a work session on the
bill; no official action would be taken. He invited the
sponsor of HB 23 to come and testify before the committee.
Number 0561
REPRESENTATIVE TERRY MARTIN began his testimony by stating
that Alaska was approaching a very important date that very
few people realize has a significant difference to the
future of Alaska. He said on January 7, 1995, Alaska will
have full ownership of all the property transferred from the
federal government to the state government for operation of
the Alaska Railroad. He stated there has been a significant
decrease for the federal government. Over the years, there
has been significant concern by various businesses in the
free enterprize system, by the truckers association and
other groups, who are concerned with Alaska competing
against free enterprize.
REPRESENTATIVE MARTIN felt it was appropriate for the
legislature to look into the future of the Alaska Railroad
Corporation to see if they want to keep, sell, or look at
other options. He felt it was important to look at the
Alaska Railroad, give it a true evaluation, and find out all
aspects now in relation to what do we have, how it is
competing, and has it been beneficial to the free market?
What would be gained if the railroad was sold, he asked, and
what would be lost? Take a look at all the pros and cons,
he said.
REPRESENTATIVE MARTIN indicated it would be a good idea to
take the hearings up into the Interior and into Anchorage
and discuss this with the union people, railroad people,
hotel people, tourism; basically, all aspects.
Number 0580
REPRESENTATIVE MARTIN asked if it would be better for
society to consider a private railroad. He asked if we
could do better selling the railroad and leasing out the
land, and to what degree of taxation would Alaska gain
revenues. He indicated there were so many questions that
could be asked, but he felt that they needed to be asked in
order to get an understanding as to what the state had in
the railroad.
REPRESENTATIVE MARTIN stated he wanted to make it very clear
that he did not have any hang-up, and that he did believe in
the free enterprize system; and through the evaluations and
work you would see if this is harmful to competition or
beneficial to competition. Rep. Martin indicated that these
questions must be answered in what is best for Alaska.
Number 0603
REPRESENTATIVE VEZEY indicated he believed very strong in
the free enterprize system, but one question he felt should
be looked at was increased capitalization of the railroad.
In his opinion, more track needed to be built. Rep. Vezey
said he would not want to jeopardize the state expansion of
the track.
Number 0610
REPRESENTATIVE MARTIN replied that a lot of people said
let's expand to the Canadian Railroad, let's make it cheaper
for the Interior to receive merchandise, let's make it
better for Mat-Su Valley to ship out coal and timber. He
said there are a lot of reasons and options perhaps to
expand the railroad. He wanted to look at the future, and
to what degree the state will get involved if it is sold or
kept.
TAPE 93-3, SIDE 2
Number 010
REPRESENTATIVE MENARD stated that it would be expensive to
do a full evaluation and it would be hard to get figures as
to what the value of the railroad is.
Number 010
REPRESENTATIVE MARTIN stated that HB 23 is only a vehicle to
begin looking at the whole issue, as to what revenues it
might generate as a private business. The hotel people are
concerned about hotel agreements. This is just a vehicle
for the committee to determine whether they want to look
into this.
Number 058
BOB HATFIELD, PRESIDENT, ALASKA RAILROAD CORPORATION, began
his testimony by stating that he was disappointed that this
bill was to start discussion rather than engineer the sale
of the railroad, since it is disruptive to negotiations with
potential clients and with employee unions. Action on
legislation such as this where ownership is in doubt makes
borrowing and financing more difficult. He referred the
committee to the Alaska Railroad position paper.
MR. HATFIELD indicated he did not know whether legislation
at this time was appropriate in order to answer the
questions presented by Rep. Martin was asking. He said tt
is terribly expensive to do this. The costs to sell the
Alaska Railroad are unknown. However, during the transfer
process in 1984 to 1985, the U.S. government spent an
estimated $1.7 million for various studies, appraisals and
financial assessment. He noted that the state of Alaska
expended an estimated $2.0 million for acquisition
assessments, facilities assessments, legal advice, analysis
of USRA evaluation, and transfer report.
MR. HATFIELD indicated that he believed the action would be
more of an auction, and it would be incumbent upon the state
of Alaska or somebody to verify information set forth; which
is an extremely expensive endeavor. In the instance of an
auction, he noted that you may or may not get the highest
value for your money. In looking at the future of the
operation, he questioned what is it that can be accomplished
by selling it that cannot be accomplished by holding onto
it.
MR. HATFIELD felt that the Alaska Railroad Corp. currently
does a pretty good job providing passenger services for
tourists and residents of the state. Unless required to do
so, he felt that a private owner would not be interested in
continuing the Whittier shuttle without state subsidy. A
private owner may not be interested in dropping off people
along the railroad line either. Those two operations
together currently lose significant amounts of money each
year.
MR. HATFIELD said the railroad also provides a host of land
leases to municipalities and permits for one dollar per
year, he said. A private owner would certainly change that
to reflect fair market value. The railroad provides a
number of services for resource development; in particular,
the export coal in Korea, which would be difficult to
characterize that as profitable. A private industry would
not continue to operate that operation in the way that the
Alaska Railroad Corporation has, according to Mr. Hatfield.
MR. HATFIELD said the state must look at exactly what they
are trying to accomplish with the Alaska Railroad. He said
the state has a terrific asset with the Alaska Railroad, and
it is something the citizens of Alaska are quite proud of,
and it is something that people have come to rely on; and if
the state tries to sell the railroad, as he had mentioned to
many legislators previously, the transportation business
would have a margin that is razor thin.
MR. HATFIELD noted that railroads in the United States, in
the past though less so today, have gotten the bulk of their
net revenues in real estate and in that regard, the Alaska
Railroad is no different from any other railroad in America.
In 1992, there was a net revenue of about 2.5 million
dollars. Income from real estate was just a little over 4
million dollars. He stated they spent 4 hundred thousand
dollars getting at 4 million dollars, and they lost 2
million dollars on the transportation side, so that gave
them the net revenue of about 2.5 million dollars. As a
rule of thumb, he said, the transportation end loses about 2
million dollars a year.
MR. HATFIELD said that any investment the railroad gets from
operations on the company scale comes from real estate. If
you strip away the real estate from the railroad and try to
operate without the real estate, he stated you would have a
terribly difficult time trying to sell it. If you put the
requirement on the purchaser that they operate the passenger
services in the same manner as currently operated, you will
have to subtract that from your purchase price. If you ask
them to handle the sort of resource development that they
currently do, you will have to subtract that from the
purchase price, as well as the net market value versus the
fair market value in relation to the one dollar a year
leases to municipalities.
If this sale is not handled properly, according to MR.
HATFIELD, you may be disappointed in the amount of money
offered and you will spend a lot of money getting yourself
there. If you are trying to appraise the property and
assess the value, that depends entirely upon the sort of
instructions given the appraiser. If you are pricing to
sell something in 30 days, it has one value. And if you are
pricing to sell in three years under certain circumstances,
it has an entirely different value.
Number 0298
REPRESENTATIVE MULDER asked how much the state currently
subsidizes the Whittier run.
MR. HATFIELD replied that it was approximately one-half
million dollars.
Number 0327
MR. HATFIELD pledged to cooperate with any decisions that
the legislature makes in relation to the sale of the
railroad.
Number 0337
HARRY McDONALD, ANCHORAGE, spoke via teleconference in
reference to HB 23. He stated the railroad deals with them
in four different ways; as a competitor, a good sized
customer, a landlord in two different locations, and that he
is a citizen and a stockholder. He felt they had always had
a problem with the socialistic aspects of the railroad, and
competing with them has been a way of life, not a new
concern, such as the hotel people were currently facing.
The largest concern he felt should be changed was the $4
million real estate subsidy that the railroad has. He felt
that taking the real estate out of the railroad would give a
much more realistic look at what the railroad is really
doing. He was confident that it could break even without
the subsidy. That subsidy should be decided by the
legislature, he said, either by reducing freight rates, or
education, or whatever the case might be. He did not feel a
private sale would ever happen. He said he would prefer
that a more realistic thing happen, such as taking out the
real estate. His next option would be taken to a public
stock offering, or just giving everybody in the state a
saleable, tradable, piece of stock.
Number 0372
REPRESENTATIVE VEZEY said Mr. McDonald had expressed
comments he had heard from a lot of people he knew in the
trucking industry. Which was that their complaint was not
who owned the railroad, but they felt they were competing
against a subsidized entity.
MR. McDONALD stated that he would like to see it privately
owned, so the next best option would be to get the $4
million subsidy out of it, and then if the railroad needs to
come to the state and say they can't provide passenger
service without a million dollar subsidy, then the
legislature can make the decision as to whether they want
the subsidy or not. He said it isn't possible to tell where
the $4 million is being spent now, it might be subsidizing
BP's pipe grade, or it might be subsidizing mail service to
Whittier.
Number 0400
VICE-CHAIR DAVIS adjourned the meeting at 6:35 p.m.
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