Legislature(2003 - 2004)
05/10/2003 09:05 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 213 "An Act establishing the Knik Arm Bridge and Toll Authority and relating to that authority; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-chair Wilken stated that this legislation would provide for the establishment of an independent authority to build and operate a Knik Arm Bridge. MIKE BARTON, Commissioner, Department of Transportation and Public Facilities, expressed that this bill would establish a separate and independent authority, which would function in a similar manner as the Alaska Housing Finance Corporation, to build and operate a bridge across Knik Arm. In addition, he stated that it would provide for the creation of a three-person board, which would be comprised of the commissioners of the Department of Revenue and the Department of Transportation and Public Facilities, and a public member appointed by the Governor. He specified that each of these persons would serve a five-year term with the option of an additional five-year term. Mr. Barton declared that the majority of the language in the bill pertains to the Authority's ability to: issue revenue bonds; accept and receive federal government funding; provide for Legislative oversight of bonds; and manage the construction and operation of the bridge. Co-chair Wilken announced that the purpose of this hearing is to entertain issues regarding the bill. Senator Olson asked whether a change in administration would "automatically change" the Board's membership. Commissioner Barton replied that even though the commissioners of the two departments might change as the result of a new administration, this situation would not immediately affect the members of the Board as they are appointed for five-year terms. Senator Olson asked the reactions to this legislation by the affected communities, particularly the reaction of the Municipality of Anchorage which would be most impacted by this legislation. Commissioner Barton responded that "there is an amazing amount of support" for the construction of a bridge. He stated that at a recent meeting in Palmer in the Matanuska-Susitna Borough, no opposition to the bridge was experienced. Senator Taylor noted that the distance across Knik Arm is short. Therefore, he suggested that a fast ferry and/or a hovercraft might be viable alternatives to a bridge. Commissioner Barton acknowledged the suggestion. Senator Hoffman, referring to the three-person administrative staff as outlined in the accompanying May 5, 2003 Department of Transportation and Public Facilities fiscal note, asked whether it is imperative that staff be hired immediately upon the establishment of the Authority. Additionally, he asked at what point the tolls generated from the bridge would support the bridge's administrative costs. Commissioner Barton voiced the need for early hire of the administrative staff, as they would be able to assist the Authority in securing adequate funding and design determinations for the bridge. He noted that the construction of the bridge is anticipated to occur in the 2007 to 2009 timeframe, depending upon the bridge design. Senator Hoffman asked when the bridge design requests for proposals should be conducted in order to start construction in the 2007 to 2009 timeframe. Commissioner Barton responded that it would depend on the bridge option selected. He stated that bridge design work should be conducted in 2005 and 2006. Senator Olson voiced surprise that there is no opposition to this legislation as, he stated, this is not typically the norm when a project could negatively affect property values in an area. Commissioner Barton reiterated that, while there might be some concern, no opposition has been expressed. Co-Chair Wilken voiced concern regarding the Department's fiscal note and the subsequent impact on the FY 04 budget. Co-Chair Wilken opined that communities, specifically the Municipality of Anchorage and the Mat-Su Borough, should be able to participate in discussions with the Bridge Authority. Therefore, he questioned whether the word "confer," as denoted in the bill in Article 2. Powers and Duties, Subsection (a)(17) on page 4, line 27, is "strong enough." (17) confer with municipal and other governments, metropolitan planning organizations, and the department, concerning the Knik Arm bridge; Commissioner Barton referred the Committee to language in Subsection (b)(5), on page 5, line 18 that specifies that the Authority must coordinate activities with these communities. (5) coordinate the exercise of its powers to plan, design, construct, operate, and maintain the Knik Arm Bridge with the department, and with the mayors of the Municipality of Anchorage and the Matanuska-Susitna Borough. Co-Chair Wilken acknowledged this language; however, he opined that the word "coordinate is a soft word." Co-Chair Green testified to the Mat-Su Borough's long-term support of this project. She responded to Senator Olson's remarks pertaining to the project's adverse effect on Anchorage property values by asserting that the Mat-Su Borough would similarly be affected by a loss of traffic in its core area. However, she noted that allowing traffic to be expedited from the area toward Anchorage would relieve congestion and provide other communities more direct access to Anchorage. Co-chair Green voiced, however, that the Mat-Su Borough is concerned about the primacy of the Department. Furthermore, she noted that while the Mat-Su Borough and the Municipality of Anchorage might not always agree on an issue, both communities support improvements in the regional transportation system. She voiced support of Co-Chair Wilken's concern about "soft language," and she expressed further concern regarding the Department's "higher level of control;" particularly the Department's control on project funding. SFC 03 # 87, Side A 10:41 AM Commissioner Barton responded that this legislation would establish "a separate legal authority that would be able to raise revenue through the sale of bonds." He assured that the bonds would not be an obligation of the State, as the Authority would issue them. Furthermore, he noted that it would be Authority, rather than the Department that would be working with the various municipalities Co-Chair Green asked how the situation would be resolved, were the two communities "to totally disagree" on the project. Senator Taylor declared that the Bridge Authority must be created as an autonomous entity in order to issue bonds. Furthermore, he voiced that while it might be desired for the public to have greater input and that the affected communities should consult with the Authority regarding the project, he attested that the action of providing communities with a "primacy" control could jeopardize the asset that the bonds are pledged to "payoff." He voiced that stronger language might negatively affect the Authority's ability to sell bonds. Co-Chair Wilken asked the Department to address these concerns and report back to the Committee. Additionally, he asked the Department how a delay in action on this legislation might impact the project. Commissioner Barton responded that even if no action were taken on the bill this Legislative session, the Department would continue to "proceed on the course we're on." However, he asserted that it would be beneficial to pass the legislation this year, as the establishment of the Bridge Authority would assist in focusing efforts and developing methods to secure funding that would contribute to getting the bridge built. Senator B. Stevens voiced concern regarding "the extent of the power of the authority" and how it would affect the communities of Anchorage and the Mat-Su Borough. To that end, he asked for an explanation of the term "appurtenant facilities" as referenced in Article 2. Powers and Duties. Section 44.90.111 subsections (1), (7), and (16) on page three and four that read as follows. Article 2. Powers and Duties. Sec. 44.90.111. Powers and duties of the authority. (a) In furtherance of its purposes, the authority may (1) own, acquire, construct, develop create, reconstruct, equip, operate, maintain, extend, and improve the Knik Arm bridge and its appurtenant facilities; (7) issue bonds and otherwise incur indebtedness, in accordance with AS 44.90.211, in order to pay the cost of the Knik Arm bridge and its appurtenant facilities; the authority may also secure payment of the bonds or other indebtedness as provided in AS 44.90.221; (16) exercise powers of eminent domain or file a declaration of taking as necessary for the Knik Arm bridge and appurtenant facilities under AS 09.55.240 - 09.55.460 to acquire land or an interest in land; Senator B. Stevens opined that this language seemingly specifies that the Authority is the entity that is responsible "for paying the cost of the bridge and its associated facilities," as well as "defining in terms of land and facilities," what is required by the Authority in order to build the bridge. He surmised therefore, that the Authority would be responsible for the bridge section of the transportation corridor between the two municipalities, and would issue bonds to enable the bridge to be built as well as levying fees to pay for those bonds. Commissioner Barton stated that is correct. Senator B Stevens voiced that the mechanism for including communities in the events leading up to the construction of the bridge is provided; however, he questioned how communities would be involved after the bridge is built. Commissioner Barton concurred that this language "addresses the crossing itself and its immediate environs." He stated that the federal highway program would be involved because the north and south side approaches to the bridge would affect the federally funded road network to such place as Houston and Talkeetna in addition to the Mat-Su Borough and the Municipality of Anchorage. He reminded Committee Members that the federally mandated Regional Transportation Planning Organization is charged with addressing conflicts that a transportation project such as this one, "might incur to a great part of the State." Senator B. Stevens asked whether the Knik Arm Bridge Authority "would be a participant in the Regional Transportation Planning Organization." Commissioner Barton responded that while the Authority "would have a lot of involvement" with the Organization, he is unsure as to whether the Authority would be a member of it. Senator B. Stevens interjected that boroughs, cities, and the State are members of that organization. Commissioner Barton agreed. Senator Bunde pointed out that this project would require the State to expend "$2.5 million of scare dollars" to access the "free" federal highway fund money. Therefore, he stated that while it might be nice to have this bridge, he deemed it "unnecessary at this time." Senator Hoffman stated that this legislation appears to provide the Knik Arm Bridge Authority with the power to operate outside of the Executive Budget Act. He asked the justification for providing the Authority with this ability as opposed to the State providing funds and maintaining control of such things as the Municipality of Anchorage International Airport improvements. Commissioner Barton responded that the Executive Budget Act does not apply to the Authority's ability to issue revenue bonds. KATHLEEN STRASBAUGH, Assistant Attorney General, Governmental Affairs Section, Civil Division, Department of Law, clarified that the Authority would be required to comply with the Executive Budget Act with the exception that the revenues generated by the sale of the bonds would be obligated to pay off those bonds. She noted that this provision is mirrored after the Alaska Housing Finance Corporation (AHFC) that operates in this manner and has the duty to repay its bonds. Ms. Strasbuagh noted, however, that the money appropriated by the State for operating expenses does not qualify for exemption, as is specified in Article 2. Powers and Duties. Sec. 44.90.111. Subsection (b)(2) that reads as follows. (2) comply with the provisions of AS 37.07 (Executive Budget Act), except that AS 37.07 does not apply to the activities of the authority that relate to the authority's borrowing of money as provided in this chapter, including the issuing of its obligations or evidence of that borrowing and the repayment of the debt obligation; Commissioner Barton noted that this exemption might be unnecessary; however, he suggested that a person with bond experience should advise on the matter. Senator Hoffman noted that AHFC has collateral comprised of housing and other properties that are readily marketable as opposed to the Knik Arm Bridge Authority. Therefore, he stated that were the Authority not granted this exemption, the State could be liable for the repayment of the bond debt. Commissioner Barton voiced that the intent of the legislation is to separate the State from the sale of revenue bonds in order to not obligate the State. He noted that an insurance company as opposed to the State would be responsible were the aforementioned airport bonds defaulted upon. Co-Chair Wilken opined that while language in the bill specifies that the State would not be obligated for these bonds, he questioned what is referred by the phrase "other monies" as referenced in Sec. 44.90.241 Nonliability on Bonds. Subsection (b) on page nine, lines 20-23 that reads as follows. (b) The bonds issued by the authority do not constitute an indebtedness or other liability of the state or of a political subdivision of the state other than the authority, but shall be payable solely from the income, receipts, or other money or property of the authority. Co-chair Wilken further inquired regarding language in Sec. 44.90.221. Trust indentures and trust agreements. that provides for the establishment of a capital reserve fund. He worried that because the State would be "recognizing the bridge and the debt" that the "other monies" specified might be the State's "saving account," and that in future years, the State might be allocating "money to pay that debt and/or the operation of a bridge that people aren't using." Commissioner Barton replied that, "it is not the intent to obligate the State." Co-Chair Wilken asked whether there are other State programs modeled in this fashion. Commissioner Barton responded that such programs would include AHFC, the Alaska Industrial Development and Export Authority (AIDEA), some portions of the Alaska Railroad Corporation, and the Alaska Aerospace Development Corporation. Co-Chair Wilken asked whether any of the State's international airports have a similar authority. Commissioner Barton responded no. Co-Chair Wilken asked whether the Authority could be terminated and its responsibilities assumed by the Department of Transportation and Public Facilities once its financial obligations are retired, as specified in Sec. 44.90.021. Establishment of authority. Subsection (b) on page two, lines four and five that reads as follows. (b) The authority may not be terminated as long as it has bonds, notes, or other obligations outstanding. Upon termination of the authority, its rights and property pass to the state. Commissioner Barton stated that the toll revenues generated from the bridge would fund the operational costs of the bridge. Co-Chair Wilken asked the role of the Authority upon completion of the bridge, specifically, he asked why the Department of Transportation and Public Facilities could not operate the bridge. Commissioner Barton stated that the autonomy of the Authority must be maintained until the bond obligation is fulfilled or another mechanism of paying off the bonds is established. Co-Chair Wilken opined that the three-person Authority could be maintained; however, the Department could oversee the bridge operations. Commissioner Barton conveyed that this might be possible. Senator Bunde pointed out that the Department's fiscal note could be considered "seed money" as the bridge's administrative expenses would by paid by toll revenue rather than by State money once the bridge was operational. Senator Hoffman asked whether other State boards include Governor appointees with no specific background or "ties" to the program. Commissioner Barton responded that the Governor also appoints individuals to the Boards of the Alaska Railroad Corporation, AHFC, and AIDEA. Senator Hoffman expressed that he would be sponsoring amendments that would address the composition of the Authority's Board to provide for a higher level of involvement by the Municipality of Anchorage and the Mat-Su Borough as well as the inclusion of non- voting State legislators, one from the Senate and one from the House of Representatives, on the Board. Co-chair Wilken summarized that these issues would be addressed at a follow-up meeting. He ordered the bill HELD in Committee.