Legislature(1993 - 1994)
02/11/1993 05:00 PM TRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE TRANSPORTATION STANDING COMMITTEE February 11, 1993 5:00 p.m. MEMBERS PRESENT Representative Gary Davis, Vice-Chair Representative Al Vezey Representative Curt Menard Representative Bill Hudson Representative Eldon Mulder Representative Jerry Mackie MEMBERS ABSENT Representative Richard Foster, Chair COMMITTEE CALENDAR *HB 26: "An Act relating to the control of outdoor advertising." HELD OVER FOR FURTHER CONSIDERATION *HB 23: "An Act mandating the sale of the Alaska Railroad; and providing for an effective date." HEARD AND HELD OVER; WORK SESSION ONLY FOR INFORMATIONAL PURPOSES WITNESS REGISTER REPRESENTATIVE CURT MENARD Alaska State Legislature State Capitol Juneau, Alaska 99801-1182 465-2679 Position Statement: Prime Sponsor of HB 26 JEFF OTTESEN Department of Transportation and Public Facilities 3132 Channel Drive Juneau, Alaska 99801 465-6954 Position Statement: Testified on HB 26 TED SMITH P.O. Box 1026 Willow, Alaska 99687 495-6637 Position Statement: Constituent of Rep. Menard's - spoke via teleconference in favor of HB 26. GARY WILSON Federal Highway System P.O. Box 021648 Juneau, Alaska 99802 789-9615 Position Statement: Testified on HB 26 REPRESENTATIVE TERRY MARTIN Alaska State Legislature State Capitol Juneau, Alaska 99801-1182 465-3783 Position Statement: Prime Sponsor of HB 23 ROBERT S. HATFIELD, JR., President Alaska Railroad Corporation 421 W. First Ave. Anchorage, Alaska 99510 265-2403 Position Statement: Spoke against HB 26 HARRY McDONALD, President Carlile Enterprises, Inc. 1524 Ship Avenue Anchorage, Alaska 99501 276-7797 Position Statement: Testified via teleconference in favor of selling the railroad BOB RUBY Federal Highway Administration P.O. Box 021648 Juneau, Alaska 99802 586-7180 Position Statement: Available to testify on HB 26 MARK HICKEY Hickey and Associates 9091 Sheiye Way Juneau, Alaska 99801 586-2263 Position Statement: Lobbyist for Alaska Railroad, available to testify on HB 23 JAMES B. BLASINGAME Director of Administration Alaska Railroad Corporation 421 W. First Ave. Anchorage, Alaska 99510 265-2680 Position Statement: Available to testify against HB 26 PREVIOUS ACTION BILL: HB 26 SHORT TITLE: PROHIBITED HIGHWAY ADVERTISING BILL VERSION: SPONSOR(S): REPRESENTATIVE(S) MENARD TITLE: "An Act relating to the control of outdoor advertising." JRN-DATE JRN-PG ACTION 01/04/93 31 (H) PREFILE RELEASED 01/11/93 31 (H) READ THE FIRST TIME/REFERRAL(S) 01/11/93 31 (H) TRANSPORTATION,CRA,JUDICIARY, FINANCE 02/11/93 (H) TRA AT 05:00 PM CAPITOL 17 BILL: HB 23 SHORT TITLE: MANDATE SALE OF ALASKA RAILROAD BILL VERSION: SPONSOR(S): REPRESENTATIVE(S) MARTIN TITLE: "An Act mandating the sale of the Alaska Railroad; and providing for an effective date." JRN-DATE JRN-PG ACTION 01/04/93 30 (H) PREFILE RELEASED 01/11/93 30 (H) READ THE FIRST TIME/REFERRAL(S) 01/11/93 30 (H) TRANSPORTATION,STATE AFFAIRS, FINANCE 02/11/93 (H) TRA AT 05:00 PM CAPITOL 17 ACTION NARRATIVE 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.