Legislature(2005 - 2006)BUTROVICH 205
02/24/2005 01:30 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| SB92 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 92 | TELECONFERENCED | |
| + | HB 115 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE TRANSPORTATION STANDING COMMITTEE
February 24, 2005
1:40 p.m.
MEMBERS PRESENT
Senator Charlie Huggins, Chair
Senator John Cowdery
Senator Hollis French
MEMBERS ABSENT
Senator Gene Therriault
Senator Albert Kookesh
COMMITTEE CALENDAR
SENATE BILL NO. 92
"An Act relating to charges paid or collected by users or
occupants of an airport facility owned or controlled by the
state."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 92
SHORT TITLE: AIRPORT CUSTOMER FACILITY CHARGES
SPONSOR(s): SENATOR(s) STEVENS B BY REQUEST
02/04/05 (S) READ THE FIRST TIME - REFERRALS
02/04/05 (S) TRA, FIN
02/24/05 (S) TRA AT 1:30 PM BUTROVICH 205
WITNESS REGISTER
Sheryl Sutton
Staff to Senator Ben Stevens
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of SB 92
Mark Pfeffer
Venture Development Group
Anchorage, AK
POSITION STATEMENT: Supports SB 92
Kip Knudson
Department of Transportation & Public Facilities
3132 Channel Dr.
Juneau, AK 99801-7898
POSITION STATEMENT: Commented on SB 92
John Steiner
Attorney Generals office
Alaska Court System
303 K St.
Anchorage, AK 99501-2084
POSITION STATEMENT: Commented on SB 92
ACTION NARRATIVE
CHAIR CHARLIE HUGGINS called the Senate Transportation Standing
Committee meeting to order at 1:40:49 PM. Present were Senators
Hollis French, John Cowdery, and Chair Charlie Huggins.
1:41:32 PM
SB 92-AIRPORT CUSTOMER FACILITY CHARGES
CHAIR HUGGINS announced SB 92 to be up for consideration.
SHERYL SUTTON, staff to Senator Ben Stevens introduced SB 92.
She spoke of both SB 92 and of the committee substitute, (CS).
In 2001 a bill was passed regarding customer facility charges.
During negotiations specific issues were identified as needed
clarification. SB 92 clarifies and expands the utilization of a
customer facility charge. SB 92 adds a maintenance charge, which
when collected will pay for the maintenance and operation of the
facility. SB 92 assures the Alaska Department of Transportation
Public Facilities through a public hearing process will set any
charges.
1:44:48 PM
MS. SUTTON added the CS has an effective date added to SB 92.
The changes made in the CS revolve around the flow of funds.
1:45:58 PM
CHAIR HUGGINS made a motion to use version \F as a working
document. Hearing no objections, the motion carried.
CHAIR HUGGINS clarified SB 92 is an evolution of a previous bill
introduced in 2001.
1:47:42 PM
SENATOR COWDERY stated the main focus of the CS is to clarify
the customer facility charge (CFC) is not revenue of the state
and that the bonds would be marketable.
MS. SUTTON agreed.
SENATOR COWDERY asked whether there were other airport projects
that use CFCs.
MS. SUTTON responded there were none she was aware of.
SENATOR COWDERY asked if the rental cars would be subject to the
same taxes when they move to the new facility.
MS. SUTTON deferred the question to Mark Pfeffer.
SENATOR COWDERY asked Mr. Pfeffer the number of cars the new
facility would hold.
1:49:09 PM
MARK PFEFFER, Venture Development Group, testified rental cars
would be subject to the same taxation as presently. The facility
will hold approximately 1,400 cars.
SENATOR COWDERY asked whether all the car rental companies would
be moved to the new facility.
MR. PFEFFER answered all eight concessionaires would operate out
of the new facility.
SENATOR COWDERY asked if the revenue and debt service would
change after the 30-year lease expired.
MR. PFEFFER speculated the state could elect to continue to
impose the facility maintenance portion of the charge.
SENATOR COWDERY asked whether the rental car companies would be
forced to move to the new facility.
MR. PFEFFER answered their concessions agreement requires them
to relocate. Those operating off site are not required to
collect any CFC charges from their customers.
1:52:05 PM
SENATOR HOLLIS FRENCH asked Mr. Pfeffer if there would be more
space in the parking garages at the airport.
MR. PFEFFER said yes.
1:54:10 PM
SENATOR FRENCH asked whether it was only the rental car
companies who would pay into the concessionaires fund.
MR. PFEFFER answered yes.
SENATOR FRENCH asked how much the facility would cost to build.
MR. PFEFFER answered $42 million.
SENATOR FRENCH commented the last big airport project cost
substantially more than planned. He asked Mr. Pfeffer how he
plans to recoup any additional building costs.
MR. PFEFFER answered it would all be paid through customer
facility charges. It is a private sector initiative.
1:56:38 PM
SENATOR FRENCH asked Mr. Pfeffer if he was bearing the risk of
exceeding projected building costs.
MR. PFEFFER answered that he was bearing the risk of delivery.
Venture Development Group will be the ground lessor for the
facility. They will be required to develop plans to the level of
review by the airport and building permit process. They will
receive a bid from a contractor. A third party independent cost
estimator will bid it as a back up check. Contingencies will be
built into the contract and bonded.
1:59:04 PM
SENATOR FRENCH said it sounds like the contractor would absorb
the risk if the building costs rise.
MR. PFEFFER agreed but added the contractor would put limits
into the contract.
SENATOR FRENCH expressed his concern about the cost being
exponentially more than the original plan, and it might cripple
the concessionaires.
MR. PFEFFER admitted the process is not perfect but it is better
than the alternatives.
2:01:32 PM
SENATOR COWDERY asked Mr. Pfeffer who would pay the remaining
debt on the parking facility if Anchorage relocates the airport
in the future.
MR. PFEFFER speculated the city would have to incorporate
extinguishing existing debt on all facilities.
2:04:06 PM
CHAIR HUGGINS asked him to explain the design build timeline.
MR. PFEFFER explained the lease application has been submitted.
The commissioner of the Department of Transportation (DOT) will
give notice of the intent to collect the facility charge, which
is a 90-day notice period. An early CFC charge will commence,
which pays for debt service for $1.5 million to complete soils
investigations and take the design to 35 percent. So far these
processes take up to three months. The guaranteed maximum price
would be received from the contractor. The price would be lined
up with bond documents. Alaska Industrial Development and Export
Authority (AIDEA) would be the conduit to issue the bonds. Bonds
would be sold and construction would commence in mid summer of
2005. Spring of 2006 vertical construction would begin.
2:07:19 PM
CHAIR HUGGINS asked who would be responsible for traffic pattern
connectivity.
MR. PFEFFER explained it was all part of the project.
CHAIR HUGGINS asked where the rental cars would park in the
interim.
MR. PFEFFER advised they would relocate to below grade level.
Rental cars will be returned to the long-term parking lot.
2:09:28 PM
SENATOR FRENCH asked if there would be less parking available
during construction.
MR. PFEFFER said yes.
CHAIR HUGGINS asked the number of rental car agencies that are
committed to the CFC.
MR. PFEFFER replied he has written commitment from six of the
eight current rental car companies.
2:11:48 PM
MR. PFEFFER added the rental companies would either choose to
participate or move off the premises.
2:13:20 PM
MR. PFEFFER reported there was no opposition so far. Car rental
companies go through a bid process when applying to operate on
the airport premises. The airport has imposed an eight-company
limit.
CHAIR HUGGINS commented the alternative for other car rental
companies is they can locate off site.
MR. PFEFFER agreed and said they can bid when the bid opens and
bump another rental agency that bid less money for the terminal
spot. This process maximizes revenues to the state.
2:17:07 PM
CHAIR HUGGINS asked whether this type of system is used anywhere
else.
MR. PFEFFER responded the trend across the country is going to
parking terminals such as the one he is proposing to build.
CHAIR HUGGINS asked Mr. Pfeffer to explain the price mechanisms
and surcharges imposed on the customer.
MR. PFEFFER described a concession fee of 10 percent, a state
tax of 10 percent, a local Anchorage city tax of 8 percent, a
customer facility charge of $4.00. All tolled it equals 33
percent.
CHAIR HUGGINS asked him to explain the roles of the interested
parties to the project.
2:19:53 PM
MR. PFEFFER explained the airport owns the ground and they
decide how to use it to the best interest of the city. The
Municipality of Anchorage has jurisdiction on the design
process. Once the final step is completed, the facility becomes
the property of the state.
2:22:17 PM
CHAIR HUGGINS asked whether there have been any problems
anywhere else in the country with this type of facility.
MR. PFEFFER responded no. He added Alamo Rental Car Agency filed
bankruptcy nationally a few years ago that caused a
consolidation in the industry.
2:24:31 PM
CHAIR HUGGINS asked Mr. Pfeffer how he would handle
environmental issues.
MR. PFEFFER replied that environmentally the terminal is better
than the present process. There would be less traffic since the
parking terminal will house everything needed for the
maintenance of the rental cars.
CHAIR HUGGINS asked Mr. Pfeffer to describe the role of his
company.
MR. PFEFFER explained his company is a commercial real estate
developer in Anchorage.
2:26:08 PM
MR. PFEFFER added Venture Development Group is a long time
company that has a long track record. The company has a solid
structure. All contracts are insured and bonded.
2:27:50 PM
CHAIR HUGGINS asked what agency has leverage over Venture
Development Group.
MR. PFEFFER answered the DOTPF, AIDEA, the rental car industry,
and the Municipality of Anchorage
CHAIR HUGGINS announced a short recess at 2:29:20 PM.
CHAIR HUGGINS reconvened the meeting at 2:39:28 PM.
KIP KNUDSON, deputy commissioner, Department of Transportation
and Public Facilities (DOTPF) testified the Ted Stevens
International Airport and the DOTPF have worked together on the
project and it meets with their approval.
SENATOR COWDERY asked Mr. Knudson what would happen in the event
of a tragedy such as an earthquake.
MR. KNUDSON responded SB 92 does not envision details such as
that. He assumes damages would be covered by insurance.
2:42:48 PM
JOHN STEINER, assistant attorney general, Department of Law
(DOL), informed the committee his primary client is the
international airport system. The DOL is working on the project
on behalf of the DOT/PF. He has reviewed SB 92 for compliance
with state law and is comfortable with SB 92 and also with
Venture Development Group. He noted the trustee would hold the
maintenance reserves generated by the CFC. In 30 years, the
reserve fund will dissolve into an airport fund to use for
continued maintenance of the facility but the details are not
fully worked out.
MR. STEINER confirmed what Mr. Pfeffer said regarding the terms
of the memorandum of understanding as currently drafted, the CFC
is proposed to be implied only on cars rented at the airport or
cars delivered to renters to be picked up at the airport. If the
airport is moved in the future, he does not know what would
happen to the remaining debt of the facility. Fundamentally the
bond obligation is not a state obligation. Details regarding an
extreme change such as moving the airport are not addressed in
SB 92.
2:47:14 PM
CHAIR HUGGINS asked Mr. Steiner if SB 92 applies only to Ted
Stevens International Airport.
MR. STEINER answered no, SB 92 applies to any state owned
airport.
CHAIR HUGGINS asked Mr. Steiner if he believed SB 92 to be
legally sound.
MR. STEINER stated the proposed airport terminal is a
public/private partnership. There are not many models like this
but he sees no conflicts.
CHAIR HUGGINS asked Mr. Steiner if the average person has a
clear and easily accessible alternative to rent a car in
Anchorage without using the concessionaires, therefore avoiding
all the additional airport terminal fees.
MR. STEINER said yes. The airport has specific commercial rental
agreements with off airport providers. A van would transport the
customer to an off site rental agency. There are also cabs and
busses. On site vendors are prohibited from advising customers
how to get around the additional fees.
2:52:04 PM
CHAIR HUGGINS asked if he knew of any circumstances that would
allow rental car agencies to opt out of the parking terminal
agreement creating a financial risk to the project.
MR. STEINER responded a feasibility study would be done to
determine the market for rental cars. Typically because of
airport traffic, there is a good market.
2:54:23 PM
SENATOR FRENCH asked who determined the $4 daily CFC fee.
MR. PFEFFER answered it was the rental car industry.
SENATOR FRENCH remarked that nothing in SB 92 indicates what the
fee will be.
MR. PFEFFER commented there would be an annual adjustment.
CHAIR HUGGINS asked Mr. Pfeffer who sets the fee.
MR. PFEFFER responded it was the DOTPF. Prior to an adjustment,
they advertise and take public comments.
SENATOR FRENCH asked if the $4 fee would cover the projected $42
million dollar figure of the project.
MR. PFEFFER responded yes.
SENATOR FRENCH commented if SB 92 passes it does not necessarily
mean the building would be built; it just puts the mechanics in
place.
MR. PFEFFER agreed.
2:57:09 PM
CHAIR HUGGINS asked Mr. Pfeffer if all the agencies involved in
the project were solid.
MR. PFEFFER answered it was an A-team project. He said he was
approached by the industry in 2000 and was asked to help with
the project. The fundamentals of the project are good. It
provides a great product to the customers. The airport likes it
and the car rental industry is in support. There is zero fiscal
impact to the state.
3:00:40 PM
There being no further business to come before the committee,
Chair Huggins adjourned the meeting at 3:01:14 PM.
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