Legislature(2003 - 2004)

05/10/2003 09:05 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                             
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
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                                                            
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                                                            
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                                                            
          (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                                                            
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.                                                                     

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