Legislature(2005 - 2006)SENATE FINANCE 532
03/14/2006 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB303 | |
| SB304 | |
| SB250 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 303 | TELECONFERENCED | |
| + | SB 304 | TELECONFERENCED | |
| + | SB 250 | TELECONFERENCED | |
| + | TELECONFERENCED |
9:03:05 AM CS FOR SENATE BILL NO. 303(TRA) "An Act amending the Knik Arm Bridge and Toll Authority Act and the powers and authority of the authority to finance construction and maintenance of the Knik Arm Bridge, to set and collect tolls, and to carry out its duties, and making conforming changes to statutes relating to issuance, renewal, or reinstatement of driver's licenses and to levy on permanent fund dividends; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. GEORGE WUERCH, Chair, Knik Arm Bridge and Toll Authority (KABATA), testified that the legislation passed in 2003 establishing the toll authority was one of the best bills of its kind in the nation. However, some improvements could be made to address issues identified in other areas of the country. Additionally, a provision in the current statute requires the Authority to obtain from the legislature a "debt ceiling" of a proposed $500 million, which is requested in this legislation. 9:05:33 AM BILL GREENE, Project Counsel, Knik Arm Bridge and Toll Authority, informed he is retained under contract by the Alaska Attorney General's office. He noted he had provided the Committee with information pertaining to this bill, including a statement of the purpose of the bill and a sectional analysis. Mr. Greene reminded that the Legislature enacted a law in 2003 that created the Authority to construct a bridge across the Knik Arm, linking the Matanuska-Susitna Borough and the Municipality of Anchorage to improve the transportation system and infrastructure in the Upper Cook Inlet area and to support the growth and development of the state. Mr. Greene disclosed that over the past two years, KABATA has consulted with financial consultants, transportation departments of other states, other toll authorities, the Federal Highway Administration, and others. The Authority has learned that the financing sectors require significant specificity, more than is currently provided in statute. This legislation is the culmination of these efforts. It is a housekeeping bill intended to clarify and specify the powers of KABATA. 9:09:10 AM Mr. Greene acknowledged that federal funding is available for this project. However, regardless of the amount of that funding, private sector funds and other public funds would be necessary to finance the project. KABATA requests the authority to engage in securing this financing. This bill would provide the Authority the ability to enter into public and private partnerships for equity financing and debt financing. KABATA would also have the ability to establish the amount of the toll charges and to collect those tolls and other fines. 9:10:45 AM Mr. Greene stressed the importance of the provision in the bill that would allow the Authority to set the limit of the amount of revenue bonds it could issue. Existing statute provides KABATA must request this authorization from the Legislature. 9:11:29 AM Co-Chair Green recalled discussions in another legislative committee about the reason this bill is necessary. She requested an explanation of the "shortcomings or inequities or lack of authority" of the current statute. 9:11:59 AM Mr. Wuerch reiterated the proposed changes are the result of "lessons learned" from the experiences of other toll authorities. The Federal Highway Administration has enacted a new financing program, the Transportation Infrastructure Finance and Innovation Act (TIFIA), to finance loans, lines of credit or investment equity for projects. Some toll authorities that received this financing were sued with the charge alleging that the authorities did not have authorization from their state legislatures to borrow from the federal government. As a result, changes to the TIFIA rules now provide that unless a state's statute specifies the TIFIA program with regard to the toll authority, the authority's application for funding would not be accepted. Mr. Wuerch gave the Tacoma Narrows Bridge in the state of Washington as an example. Funding for construction of a new span from private investors was nearly secured when the governing authority was found to not have authorization from the Washington Legislature to secure the federal funding also necessary for the project. He provided other examples with similar situations. 9:14:27 AM Mr. Wuerch remarked that the estimated cost of the Knik Arm crossing is $600 million. Governor Frank Murkowski submitted a request to the legislature to appropriate $94 million in federal funding and approximately nine percent of that amount in matching State general funds to total about $100 million. If appropriated, the Authority would need to raise the remaining $500 million to fund the project. Preliminary discussions indicate this would be possible. If it were found within the next 12 months to not be possible and that additional public funding was necessary, an appropriation request would be submitted the following legislative session. Mr. Wuerch predicted that a toll fee of $3 would generate $1.5 billion over the 30 years. The revenue stream would justify financing the $500 million KABATA was requesting the legislature authorize it to borrow. 9:15:55 AM Co-Chair Green asked if this legislation would enable KABATA to "more easily arrange for funding, borrowing and security for the project." Mr. Wuerch answered that the assessment was correct. 9:16:07 AM Senator Hoffman asked the State's liability in the event the Authority was unable to repay the bonds issued to fund the project. 9:16:36 AM Mr. Wuerch deferred to the Department of Revenue. 9:16:54 AM TOM BOUTIN, Deputy Commissioner, Department of Revenue, responded that the bonds issued for this project would be "a typical standalone revenue bond structure". The expectation would be that no bonds associated with the state of Alaska would default. This has never occurred. However, protections are included in the structure such as a requirement for a feasibility study by a nationally recognized consulting firm that deals solely with toll road projects. This study would determine whether adequate revenue would be generated to fund a debt service reserve, fund operations and other requirements. Additionally, fund insurance would be purchased from a financial guarantor to protect, not the State, but rather the bondholders. This structure is similar to that employed for bonds issued to fund international airport projects. 9:18:48 AM Senator Hoffman understood the structure. He again asked that if the Authority, for whatever reason, was unable to repay the bonds, whether the State would be liable for the $.5 billion. 9:19:17 AM Mr. Boutin replied that the bondholders would have no legal claim on any State resources, apart from the bridge and its revenues. 9:19:41 AM Senator Stedman asked if the "financial layout" would include any provision to protect the purchaser of those bonds. 9:19:59 AM Mr. Boutin answered yes; that financial guarantee insurance would likely be purchased utilizing a portion of bond proceeds. Providers of this insurance would research the project and determine whether it was an acceptable risk. The project would be undertaken only after a due diligence was performed. 9:21:24 AM Senator Bunde understood that the tolls are anticipated to cover operating costs. However, should the tolls not cover those costs, he predicted that the State would be under pressure to supplant the bridge costs under threat that the bondholders would repossess the bridge. 9:22:11 AM Mr. Wuerch agreed the concern is to implement a method to insure that the facility would continue to operate and serve the public. The bridge would be the asset of KABATA, and therefore this effort would be essential. Discussions were underway with the Department of Transportation and Public Facilities to determine the delineation of the State's responsibility and the Authority's. The Governor was requesting funding to pave the road in the Mat-Su Borough leading to Port McKenzie, the proposed bridge site. This 13 and one-half mile road, owned by the Borough, would serve the bridge. The Borough has entered into an agreement with the Department to assume maintenance responsibilities of the road once it is upgraded. This arrangement would lessen the burden of the Authority. Similar arrangements could be discussed for roads on the eastern landing of the bridge. 9:23:34 AM Co-Chair Green instructed the Committee to limit questions to those specific to the legislation, and to not "revisit history". 9:23:52 AM Co-Chair Wilken characterized the bridge as a "project for the next generation", which he was "generally" in support. However, he was concerned that the proposed "massive" bridges would be constructed at the expense of needed infrastructure in the remainder of the state. 9:25:25 AM Co-Chair Wilken had understood that until July 2004, the Knik Arm Bridge crossing and the Gravina Island Bridge to be located in Ketchikan would be funded with "added money" not included in the normal federal allocation for highways. Changes to the appropriation were made and these funds would be included in the normal allocation. He asked for clarification that the funds would be provided "in total" and that the Legislature would have the responsibility to allocate "as we see fit", as traditionally done. 9:27:07 AM Mr. Wuerch emphasized that the State and the Legislature have complete authority to allocate the funds. The funds originally "earmarked" for the two bridge projects do not require State matching funds, under the normal formula system. However, the Department has opted to request treatment of them as such and request State general funds to supplant the federal funding. 9:27:48 AM Co-Chair Wilken announced he had sent a letter to the Commissioner of the Department of Transportation and Public Facilities approximately six weeks ago stating he would be unable to support these projects until he had received a financial plan indicating how they would be constructed and financed without diverting funds otherwise intended for projects located in the Interior for the next five years. Senator Bunde voiced concerns that if bonds were not sold, expectations would be to finance these projects at the expense of other needed projects. 9:29:24 AM Co-Chair Wilken directed attention to language inserted to AS 19.75.111(a)(8), amended through Section 1 on page 2 of the bill. He interpreted the original statutory language and the proposed inserted language to imply that federal funds were not anticipated when the Authority was established. 9:30:11 AM Mr. Greene stated that the original bill allowed KABATA to incur indebtedness. In research undertaken since, it has been determined that the proposed language is necessary to comply with the federal TIFIA requirements. The most common problem encountered by other toll authorities is insufficient statutory language to specify authority. This legislation would provide the needed clarity and specificity. It would allow the Authority to secure financial debt to fund this project. 9:32:28 AM Senator Stedman counseled on the need for members to deemphasize the impact on one's election district when setting policy for statewide infrastructure. A presentation was given by the Department on the proposed bridges to address the "political agenda" and to show that the predicted impacts in future years were "unrealistic" and would not materialize. Senator Stedman explained that the federal appropriation would be $112 million more than was provided in the previous year. These funds are not categorized for surface transportation, nor are they National Highway System "formula dollars". Rather the funds are included in the Highway Priority Projects Program, the Bridge Discretionary Program, the Transportation Improvement Program, and the National Corridor Infrastructure Improvement Program. Senator Stedman stressed the need to obtain a "clear and accurate representation of what we're faced with" in financing these proposed bridges. Co-Chair Wilken's assertion that the Department is furthering a political agenda was incorrect. Senator Stedman informed that he has contacted the Division of Legal and Research Services, and the Division of Legislative Finance to assist in understanding the impacts. The Alaska Congressional delegation had differed from that of the Alaska Department of Transportation and Public Facilities in the assessment of impact. Agreements for most issues have since been reached. However, if Legislative policies were adopted based on political agendas "that are driven deep in the bowels of" the Department, no projects would be undertaken. 9:35:44 AM Co-Chair Green returned the discussion to this legislation: a housekeeping bill that would prepare the Authority to enter discussions with TIFIA personnel and private lenders. 9:36:12 AM Co-Chair Green referenced inserted language to AS 19.75.111(7) amended through Section 1 of the bill on page 2, line 21 that would extend authority to issue "and refund" bonds. She asked if this is similar to refinancing of bonds. Co-Chair Green's assessment was confirmed. Co-Chair Green next directed attention to subparagraphs (11) and (12) of the same section on page 3, lines 10 through 18. She asked if these provisions were specific to the toll and bridge facilities or whether the Authority's ability to bring civil and criminal actions to collect tolls or fees, and obligate revenue generated from the facilities, could be extended to assets not related to the bridge. 9:37:30 AM Mr. Wuerch replied these provisions apply solely to the proposed bridge. 9:37:40 AM Co-Chair Green asked if other authorities in the state have this ability, such as the Alaska Railroad Corporation. 9:37:54 AM Mr. Wuerch clarified that the Alaska Railroad is an entity of the State government. The provision in this legislation is similar to that employed by the Railroad, although the Knik Arm Bridge and Toll Authority would have more "independence" in bonding activities. This is because KABATA would oversee primarily an infrastructure facility whereas the Railroad entails more operational functions. 9:38:32 AM Co-Chair Green asked about the treatment of any excess toll revenues. 9:38:53 AM Mr. Wuerch responded that the funds would remain in the possession of the Authority for expenditure on future expansions or major repairs. 9:39:11 AM Senator Bunde remarked that KABATA would not pay a dividend to the State. Additionally, adoption of this bill would not commit any federal funding to the project. Co-Chair Green affirmed. 9:39:43 AM Senator Olson asked if this legislation would allow the Authority to change the toll rate. He questioned the conclusion that $3 would be sufficient to generate revenue to repay debt and fund maintenance and operations. The appropriate toll fee for the Whittier Tunnel was originally calculated at $1.50; however, the toll is currently $12. 9:40:33 AM Mr. Wuerch responded that lenders and investors are concerned about which entities could change a toll structure. This legislation would provide that only the Authority's board of directors could make such changes. Mr. Wuerch agreed that $3 would be inadequate. That figure was calculated using an assumption that $200 million of public funding would be provided rather than the currently requested $100 million. 9:42:14 AM Senator Olson noted that other cost projections for this bridge estimate the amount would be greater than $1.5 billion rather than the $600 million claimed by KABATA. Cost overruns incurred during the expansion and upgrade of the Ted Stevens International Airport amount to "hundreds of millions" of dollars more than anticipated. He asked how he could assure his constituents that the project would not stop with the bridge only halfway constructed. 9:43:43 AM Mr. Wuerch disclosed that the Board "wrestles with" the issue of whether the cost estimates are accurate. Three engineering firms have been hired and economist projections of population growth have been consulted to achieve the revised $600 million estimate. This estimate includes $100 million specifically for inflation. Attempts were made to anticipate and avoid problems. The "investment community" would not participate in this project without sufficient assurances. 9:46:03 AM Co-Chair Wilken pointed to language in the bill pertaining to an individual's inability to obtain or renew a driver's license if unpaid tolls or fees were owed. He suggested that the imposition of this provision of 30 days after the due date of the fee or toll should be 60 or 90 days. The shorter time frame could result in undue bureaucracy. Two or three months of overdue remittance would demonstrate intent to avoid payment. 9:47:02 AM Mr. Wuerch did not object to extending the period to 60 days. 9:47:38 AM Amendment #1: This amendment deletes "30" and inserts "60" to subsection (c) of Sec.19.75.915. Liability for payment of tolls., inserted through Section 9 on page 10, line 22. The amended language reads as follows. (c) Upon agreement between the authority and the commissioner of administration, a vehicle owner liable for an unpaid toll or fee due the authority may, after 60 days after the due date, be barred from obtaining or renewing a driver's license or a vehicle registration or license, regardless of whether the vehicle was used at the authority's facilities or incurred the toll or fee, until the toll or fee is paid in full. Co-Chair Wilken moved for adoption. There was no objection and the amendment was ADOPTED. 9:48:00 AM STEVE WALLACE testified via teleconference from Anchorage that he owns a house located at Erickson Street on Government Hill in Anchorage, which is the proposed site of the eastern landing of the bridge. He is dependant on the expeditious progress of this project to determine whether his property would be condemned and purchased by the Authority. Meanwhile, he is unable to sell his home at a time of high real estate values. KABATA's cost estimates could not be verified; rather a study commissioned by the Department of Transportation and Public Facilities estimates the cost could be as high as $1.9 billion. The $600 million projection includes only the bridge and does not include the cost of road infrastructure on both shores. 9:51:52 AM Co-Chair Green interrupted to direct the witness to limit his comments to this bill. 9:52:03 AM Mr. Wallace stressed that this legislation would make KABATA more independent. The Committee should review the "underlying" cost of the project before granting "free reign" to secure financing. The Authority would be "completely independent" and without "political oversight". 9:52:58 AM JAMES CANTOR, Chief Assistant Attorney General, Statewide Section Supervisor, Transportation Section, Civil Division, Department of Law testified via teleconference from Anchorage that he was available to answer questions. It was determined that the Committee had no questions for this witness. 9:53:14 AM STEPHANIE KESLER, Government Hills Community Council, testified via teleconference from an offnet location, that the Legislature has a fiduciary obligation to understand the "true" cost of the proposed bridge. A "fair" comparison must be made of the current estimates to previous estimates, including the differences and items omitted in the updated version. 9:55:20 AM Co-Chair Green asked whether any Member had reason to hold the bill in Committee. 9:55:28 AM Senator Stedman offered a motion to report CS SB 303 (TRA), as amended from Committee with individual recommendations and accompanying fiscal notes. Without objection CS SB 303 (FIN) was MOVED from Committee with zero fiscal notes #1 from the Department of Transportation and Public Facilities, and #2 from the Department of Natural Resources.
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