Legislature(2007 - 2008)SENATE FINANCE 532
02/22/2008 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB249 | |
| HB226 | |
| SB230 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 230 | TELECONFERENCED | |
| + | SB 249 | TELECONFERENCED | |
| + | HB 61 | TELECONFERENCED | |
| + | HB 226 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 249
"An Act establishing the Alaska capstone avionics
revolving loan fund and relating to the fund; and
providing for an effective date."
Co-Chair Stedman introduced the initial hearing for SB 249,
sponsored by the Governor.
FRANK RICHARDS, DEPUTY COMMISSIONER OF HIGHWAYS & PUBLIC
FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES, explained that SB 249 would create the Alaska
Capstone Avionics Revolving Loan Fund within the Department
of Commerce, Community and Economic Development (DCCED). The
purpose of the project is to increase the safety of aviation
transportation within Alaska by providing low interest loans
for the purchase and installation of Capstone avionics
equipment. Capstone avionics is the next generation of
technology and will improve both flight safety and community
access in Alaska. The technology is called "Automatic
Dependent Surveillance-Broadcast" (ADS-B) and allows
equipped aircraft to interact with ground infrastructure and
satellite stations to provide pilots with essential
information, including: exact location, airspeed, rate of
accent and descent, surrounding terrain, other aircraft and
real time weather. The Federal Aviation Administration (FAA)
sponsored the technology and tested it in rural Alaska.
Mr. Richards stressed that the aircraft equipped with the
new avionics experienced a 47% reduction in accidents and a
33% reduction in fatalities. He said FAA wants to expand
this technology statewide and has funding to build the
necessary infrastructure. The FAA has determined that over
4,000 aircraft need to be equipped with the avionics. Senate
Bill 249 creates a low-interest loan program through DCCED
for aircraft owners unable to shoulder the initial purchase
cost out-of-pocket. He emphasized that the Department of
Transportation and Public Facilities supports SB 249.
9:13:43 AM
GREG WINEGAR, DIRECTOR, DIVISION OF INVESTMENTS, DEPARTMENT
OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, described
the loan program. He explained that the Division of
Investments has been administering state loan programs since
the early 1970s and has experience, expertise and loan
related infrastructure in place to successfully operate the
program proposed by SB 249. Many of the provisions contained
in the bill were patterned after other programs administered
by the Division.
Mr. Winegar explained that the loan fund would allow
aircraft owners who log a substantial number of flight hours
in Alaska to purchase and install the necessary Capstone
avionics. The program would be set up as a revolving fund.
Repayments into the fund would finance loans to additional
participants and the operating costs of the program.
Mr. Winegar said SB 249 stipulates that the program can loan
up to 80% of the cost to purchase and install the avionics,
the interest rate cannot be less than four percent, and the
term may not exceed ten years. He described an average loan
for the program of $12,000, which would mean payments of
approximately $122 each month or $1480 annually. The
Division's goal was to provide loan terms that resulted in a
manageable repayment plan for aircraft owners, while
providing sufficient cash flow to cover expenses, provide
loans to future participants, and return capital to the
General Fund (GF).
Mr. Winegar referred to the fiscal note, which capitalizes
the loan fund with a $4.8 million appropriation. The amount
would allow the Division to provide approximately 400 loans
during the first year and around 60 additional loans each
year thereafter. The program would sunset in 2020, at which
time the money in the fund as well as all future earnings
would revert back to the GF. Senate Bill 249 requests two
positions, one loan officer and one loan closer to handle
the increased workload; however, the positions would be
filled only if loan demands required them. The Division
plans to absorb accounting-related work.
9:15:29 AM
Senator Olson wondered if the State would save search and
rescue money that would not be needed because of the new
technology. Mr. Richards thought there would be savings.
9:16:13 AM
Senator Thomas noticed that the fund would be available to
individuals, corporations, limited liability partnerships,
and so on. He understood the cost to equip an aircraft would
be in the range of $15,000 to $25,000 and wondered if this
was for small planes and small carriers rather than large
planes.
9:17:01 AM
Mr. Winegar answered that the loan program is set up for
commercial operators to have access to the funds. Senator
Thomas was concerned that the funds in the program would be
available to larger carriers that would be more able to
afford the avionics. Mr. Winegar replied that the loan is
first-come, first-served, and would be for commercial
carriers or individual, private pilots.
9:18:27 AM
Senator Elton wondered if the loan fund would be accessible
to people who have already installed the Capstone avionics
and are paying off a loan at a higher percentage rate. Mr.
Richards thought that would be determined through
regulations. In other programs, most loans are set up for
new loans, although there are provisions to pay off interim
financing.
Senator Elton wondered if the loan would be available to
non-Alaskan residents, such as a big game guide who resides
in another state. Mr. Richards responded that eligibility
relates not to residency but to the number of flight hours
logged in Alaska. The number of flight hours required would
be determined by regulation. Senator Elton wondered what
"substantial percentage" of flight hours in the state meant.
Mr. Richards guessed the number would be 90%.
9:20:27 AM
Mr. Winegar explained that there are about 10,000 aircraft
in Alaska, of which 6,500-7,000 are operable. FAA chose
4,000 as the number of aircraft that they felt needed to be
equipped because those aircraft represented around 90% of
the flight hours logged in the state.
Senator Elton referred to the provision regarding the loan
term of ten years and wondered if it were possible to extend
the term of the loan. Mr. Richards replied that there is
some flexibility.
9:23:21 AM
MIKE STEDMAN, DIRECTOR OF OPERATIONS, WINGS OF ALASKA; VICE-
PRESIDENT, ALASKA AIR CARRRIERS ASSOCIATION, testified in
support of 249. He spoke as a pilot with thirty years of
experience in Alaska. He piloted 24 of those years without
Capstone avionics. He described the safety benefits of
having an aircraft equipped with the avionics. Before
Capstone was available, there was an accident approximately
every 29 days in the Yukon-Kuskokwim Delta. More recently,
there was a 29 month period between accidents. Capstone
enhances situational awareness substantially. He emphasized
the importance of real time weather information. Wings of
Alaska currently has 12 airplanes with the equipment and the
pilots fully embrace it.
9:26:25 AM
Mr. Stedman demonstrated what a pilot sees in an airplane
equipped with Capstone avionics. He projected onto a drop
screen in the Committee room what currently operating
aircraft could see. Green, moving diamonds showed the
position of aircraft in the area. The program gave
identification, altitude, and relative position of the
different aircraft.
9:30:45 AM
Co-Chair Stedman asked if there had been a decrease in
accidents and fatalities in other areas around the state.
Mr. Stedman said generally yes, although data is still being
collected. Co-Chair Stedman asked if the industry supports
the amount of allocation and the time frame recommended by
SB 249. Mr. Stedman thought the proposed revolving loan
program is a good start. He explained that Alaska would need
to equip 4,000 within five years to get the full funding
from FAA.
Senator Thomas wondered if the appropriation were sufficient
to cover equipping 4,000 planes. Mr. Stedman answered that
the amount would cover approximately 90 airplanes the first
year. Over the five years the amount would be around $34
million to equip 4,000 planes.
Co-Chair Stedman asked for an overview of the federal
government's participation. Mr. Stedman replied that the
federal government has committed $497 million to this point
and if Alaska does not equip 4,000 planes, $187 million of
that will be lost.
9:33:19 AM
JERE HAYSLETT, PROJECT MANAGER, SURVEILLANCE BROADCAST
SERVICES AND CAPSTONE PROGRAM, FAA (TESTIFIED VIA
TELECONFERENCE), clarified that FAA currently has a
commitment of $493 million for infrastructure. If the 4,000
aircraft are not equipped in five years, FAA would only
commit to $306 million.
9:34:51 AM
Senator Olson wondered how far off shore the Capstone
coverage went. Mr. Stedman thought it went around 30 miles,
although it depends on the altitude of the aircraft. Senator
Olson asked how rapidly the data is updated. Mr. Stedman
replied that the information is real time.
Senator Olson wondered what kind of commitment has been
secured from the general aviation community. Mr. Stedman
said the Alaska Airmen's Association has conducted a survey
to see how many aircraft owners would equip their planes and
how much they would be willing to pay for it. There is
general support.
Senator Elton asked if the Air Carriers Association had a
position regarding whether re-financing should be available
for aircraft that already have the system, or should the
priority be to add equipment to additional aircraft that
have none. Mr. Stedman thought that the more airplanes
equipped the better.
9:38:51 AM
Senator Olson pointed out that he did not see letters of
support from the Alaska Airmen's Association and wondered if
the program would be more attractive if the loan structure
was better. Mr. Stedman thought it would be difficult to
equip 4,000 air planes within five years and any incentive
to help the general aviation pilot would help immensely.
9:40:13 AM
Senator Dyson realized how prohibitive it was for general
aviation pilots to carry insurance, and wondered if
insurance carriers would drop rates for aircraft equipped
with avionics. Mr. Stedman thought that as the accident rate
went down, premiums would go down as well. Senator Dyson
asked if the insurance carriers would only respond to the
accident rate. Mr. Stedman did not know.
9:41:44 AM
LEONARD KIRK, UNIVERSITY OF ALASKA (TESTIFIED VIA
TELECONFERENCE), spoke in support of SB 249. He said the
University of Alaska (UA) has been part of the safety
evaluation of the Capstone system in the Yukon-Kuskoskwim
Delta. The University has also been involved in pilot
training.
Mr. Kirk answered Senator Olson's question about how far
ADS-B reaches: approximately 120 nautical miles line-of-
sight. A ground-based transceiver located at Sitka could see
an aircraft 120 miles out over the ocean. He said the
information is updated every second.
WILFRED RYAN, ALASKA AIR CARRIERS ASSOCIATION (TESTIFIED VIA
TELECONFERENCE), spoke in favor of HB 249 and gave further
answers to Committee members' questions. Regarding Senator
Elton's question about the position of the Association on
refinancing, he said the official position is that operators
should have the opportunity to refinance their equipment. He
added that the Alaska Airmen's Association does support the
program fully. He said there has been approximately a 20%
reduction in insurance rates since the program's inception.
9:46:15 AM
Mr. Ryan said Alaska has been on the forefront with research
and development for the ADS-B program. Currently Alaska is
competing against the rest of the nation in receiving
ground-based transceivers.
Mr. Ryan gave testimony in support of SB 249, representing
the Alaska Air Carriers Association, the Alaska Airmen's
Association and the Alaska Aviation Safety Foundation. These
groups represent nearly all commercial and general aviation
constituents in Alaska. Because more than 90% of Alaska is
accessible only by air, Alaska has the highest aviation
accident rate in the nation. The expedited state-wide
implementation of proven Capstone safety technologies is
essential for the future of flying safety. During a ten year
period from 1997 to 2006, there were 124 fatal aviation
crashes in Alaska. Many of these pilots were mid-career. The
National Institute for Occupational Safety and Health has
determined that based on their annual salaries, the total
loss in earnings exceeded $226 million.
9:49:41 AM
Mr. Ryan noted that the five-year plan includes 4,000
Alaskan-based aircraft, approximately 1,000 commercial
aircraft and 3,000 general aviation aircraft. The safety
incentive program will enable Alaskan operators to install
the safety equipment. Once implemented statewide, FAA
anticipates a 33% reduction in fatal accidents, more
effective search and rescue operations, and a public benefit
of approximately $824 million over the next 27 years.
9:51:34 AM
Senator Olson asked if Mr. Ryan could think of any other
incentives the State could use to entice people to use the
program. Mr. Ryan thought it would be extremely challenging
to bring the general aviation group into the incentive
program. Research has indicated that the population is only
willing to spend about $2,500 each to equip their airplane,
and the avionics package costs about $12,000. Alaska
Airmen's Association currently has about 180 people
interested in the program, but feel it would be difficult to
attract 3,000 equippers from the general aviation group
unless there is financial incentive.
9:52:44 AM
PUBLIC TESTIMONY CLOSED.
Co-Chair Stedman reminded the Committee that the
implementation of SB 249 would open up another fund. He
wanted to critically look at the $120,000 for travel and
supplies in the fiscal note.
SB 249 was HEARD and HELD in Committee for further
consideration.
AT EASE 9:54:15 AM
RECONVENE 10:04:05 AM
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