Legislature(2005 - 2006)BUTROVICH 205
04/07/2005 01:30 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| SB153 | |
| Overview: Dotpf Projects | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 153 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 153-INTERNATIONAL AIRPORTS REVENUE BONDS
1:36:39 PM
CHAIR HUGGINS announced SB 153 to be up for consideration.
MR. MIKE BARTON, Commissioner, Department of Transportation and
Public Facilities (DOTPF), said:
The bill before you raises the bond cap for the
issuance of international revenue assistance revenue
bonds by $288 million. This increase will allow us to
issue bonds that will be used to finance projects at
Fairbanks and Anchorage airports.
Anchorage is the number one cargo airport in North
America. The outlook for cargo at Anchorage indicates
a steady growth in cargo and much of the airports
operation is financed by cargo carriers. The airport
is operated in accordance with an agreement with a
carrier that obligates the carriers to pay for the
operation of the airport, including the redemption of
these bonds that we would like to issue. The operating
costs are paid out of revenues from the carriers and
federal FAA funds for capital programs.
1:38:21 PM
There are 27 carriers that are signatory to the
agreement and they voted in January on the Capital
Improvement Projects that these bonds will finance and
approved the package. Revenue bonds are commonly used
at airports across the country to finance this type of
capital improvement. As an example, I think that each
of the New York airports carries about $2 billion in
bond debt. These bonds will provide the financing for
new terminals in Fairbanks, the concourse A and B
retrofit in Anchorage and a number of airfield
projects. There are no general funds involved in this
project.
1:40:18 PM
SENATOR COWDERY said Anchorage International Airport sells more
fuel than Los Angles International Airport and Houston
International Airport, which indicates its size and importance.
He heard approximately 11 percent of the Anchorage workforce is
involved in the airport. He expressed support for SB 153.
CHAIR HUGGINS said it is important for the committee to know
what projects the bill would allow and how the bill would affect
the price of airline tickets in Alaska.
COMMISSIONER BARTON said ticket purchasers and federal taxpayers
would pay for the improvements. In addition to the terminal
projects, SB 153 would allow runway reconstruction and airfield
maintenance equipment in Fairbanks. The runway reconstruction
would cost almost $52 million; the airfield maintenance
equipment would be just under $3 million. With the terminal
projects, the total cost of maintenance and improvements at
Fairbanks would be $155 million over the next five years.
Expenditures in Anchorage will include aprons, general aviation
parking, additional taxiway, a snow melting system, homeland
security upgrades in the terminal, noise abatement improvements,
safety, security, and information system improvements,
utilities, roads and grounds upgrades, airfield maintenance
equipment and advanced project planning and design. The total
investment will be Anchorage is $288 million over the next five
years.
SENATOR KOOKESH arrived at 1:46:04 PM.
CHAIR HUGGINS asked whether additional land has been set aside
to accommodate the planned expansion of the Anchorage
International Airport.
COMMISSIONER BARTON said land has been set aside to accommodate
the future expansion of the Anchorage International Airport.
CHAIR HUGGINS said:
Let's take a worst-case scenario, which is this bond
package doesn't happen. Could you give us your
thoughts as Department of Transportation Commissioner,
about the impact of that in terms of the concourses
and hazardous materials and things of that nature.
COMMISSIONER BARTON responded:
One of the major reasons for the concourse A and B
retrofit is that they are deficient in terms of
seismic standards. The octagonal end of concourse B is
at extreme risk. The concourse itself is the next
level down in risk and the ticket and concessions area
is also at extreme risk.
1:49:37 PM
DAVE EBERLE, Director of Airport Construction, Department of
Transportation and Public Facilities (DOTPF), said:
Concourse B poses the largest risk. The hexagon at the
end of concourse B and the ticket lobby and concession
area are at the next highest-level risk. Concourse B
itself could actually suffer a total collapse in the
event of a major quake according to a recent thorough
evaluation of all of the airport structures. Concourse
A is in the best shape. It is the most recently
constructed and only has a few seismic deficiencies.
However, there are some structural upgrades that
should be done to A at this time.
COMMISSIONER BARTON asked Mr. Eberle to address the Fairbanks
terminal.
MR. EBERLE responded:
I don't know all of the details of Fairbanks, but I do
know they have similar structural deficiencies in the
older sections of their buildings. There are
additional problems in Fairbanks due to the location
of the terminal to the taxiways. There are some
interference issues arising from clearance
requirements between the taxiway and any jets parked
at the terminal.
1:52:09 PM
They have evaluated whether they should rehabilitate
the existing terminal or build a new terminal. They
have decided that it is most cost effective to upgrade
the newer sections of the terminal and to rebuild the
older sections of the terminal.
COMMISSIONER BARTON said that the vulnerability of the airport
to seismic activity represents a great liability to the state
since it could be accountable for losses associated with a
collapse of the concourse. He added that in the event of an
earthquake, it would be very important to have an operational
airport.
CHAIR HUGGINS said:
Mr. Commissioner, I think that it is important to
Alaskans to have some assurance that we won't have a
repeat of the cost overruns that we had in the
previous concourse.Could you speak to us for a few
moments about that.
COMMISSIONER BARTON responded:
I would be delighted to address that. First, part of
an overrun on concourse C was the result of 9/11.
Second, part of the additional cost was a result of
increased space needs that were identified by the
airlines. The third part was a result of the building
permit process and none of us want to revisit what
happened there. We have decided to use a different
management process for both Fairbanks and Anchorage,
what is commonly called 'Construction Manager at
Risk'. Before we enter into the final construction
contract, we will ask for a guaranteed maximum price
for each of the terminal facilities.
This is a process that has not been used much in
Alaska. It has been used in other parts of the
country. It has been used extensively by the City of
Phoenix. I think that, coupled with the management
structure that we have agreed with, with the airlines
called 'Program Executive Committee' which is a
committee composed of an airline representative and
some DOT staff, which will look at any changes in
scope that might come forth as this project moves down
the road, and they will make recommendations to me on
whether to accept or reject them. Our goal is to bring
this project in on time and on budget and we think
that this process will allow us to accomplish that.
SENATOR COWDERY asked if the state would insure the contractors
working on the projects or if the contractors would insure
themselves.
1:57:27 PM
MR. EBERLE replied that the design firm would have annual
insurance through the Division of Insurance. He said the
department has not decided if it will buy a project-specific
policy such as it did for the concourse C project. The
construction manager at risk would not be the appropriate
contracting body to carry the annual insurance; it would be
carried through the designer. Either the department would place
a separate policy or it would be done through the design
department.
1:59:04 PM
SENATOR FRENCH asked how the projects would add to the cost of
an airline ticket.
MR. BARTON replied he assumes the airlines have considered the
question and have determined that it would not significantly
affect their market.
2:00:40 PM
SENATOR FRENCH asked whether the cost of improvements would be
paid by local ticket revenue.
COMMISSIONER BARTON said the payment would not be localized
since the airports of Anchorage and Fairbanks are operated as a
single entity in terms of cost recovery.
COMMISSIONER BARTON remarked about 80 percent of the revenue
collected from the International Airport System is collected
from cargo carriers is not related to passenger ticket prices.
2:03:11 PM
SENATOR FRENCH asked the state's upper limit to pay for bonds at
both airports.
COMMISSIONER BARTON replied the limit is ultimately determined
by what the bond buyers are willing to pay. He does not know a
specific number and he reminded the committee that many airports
have a greater bond debt than Alaska has.
DEVEN MITCHELL, debt manager, Department of Revenue, commented:
The question as far as what is the airports capacity
to borrow is answered by a complex equation, if you
will. There are rates and charges at the airport as
it is operated as an enterprise fund as Commissioner
Barton pointed out, and there is potential competition
for the cargo carriers from other airport systems in
North America. I think that Anchorage has certain
strategic advantages in terms of its geographic
location and its regulations. As far as how their
fees compare to the other potential competition, they
are well below the other airports.
As far as additional bonds, we have covenants that are
in our bond documents which are already outstanding
that limit our ability to issue additional bonds. We
have to have a feasibility report conducted and meet
both an additional bonds test as well as an early
recovery requirement projected into the future. So
those are assurances that we have provided to
purchasers of this debt that we won't borrow too much.
Again, as commissioner Barton pointed out, the market
has indicated what they are comfortable with this
level of borrowing and if we were to go beyond that,
the rating of the airport system as a revenue
enterprise would be in jeopardy and it would be more
difficult to sell such bonds.
In all of my interactions with the ratings analyst
that cover the airport system as well as underwrites
that follow the state generally and the airport
specifically, they have all been of the opinion that
it is still reasonable and very doable for the system
to undertake this level of construction activity.
SENATOR FRENCH asked how one determines the expenses included in
a bond package.
MR. BARTON replied the first determination is whether it is a
capital improvement project or equipment for a capital
improvement project. After that is decided, a meeting is held
with the airlines to go through the non-operating budget items
and come to an agreement on what the program would be.
2:07:45 PM
SENATOR FRENCwhether all of the aforementioned improvements fall
under capital expenses rather than operating expenses.
COMMISSIONER BARTON responded that all of the expenses that have
been put before the committee are capital expenses.
2:08:49 PM
CHAIR HUGGINS remarked there were 27 carriers on the list of
signatories and asked if some of them were swept up in the
momentum.
COMMISSIONER BARTON said:
There is no question, some of them didn't even vote.
They were provided a ballot to vote. I think that
there were only a total of 15 or 17 votes for the
highest project. Some of the carriers do not
participate, but the way that the voting structure is
set up is that two-thirds of them have to disapprove a
project for it to be not approved. In other words, not
voting is recorded as approval. So some of them may
well have thought this through and understanding that
process, just didn't bother to go through the process
of voting.
CHAIR HUGGINS asked whether it is possible that a number of
carriers could go away and thus cause general fund dollars to
have to be used on the bonds process.
COMMISSIONER BARTON said these bonds are insured and no general
fund dollars are at risk since the insurance will cover any
failure on the part of the signatories. Secondly the probability
of carriers going away is higher than that of the markets going
away. If an individual carrier leaves the Anchorage market,
somebody would replace it.
2:12:42 PM
SENATOR COWDERY asked whether the pavement construction problems
associated with non-layered pavement have been corrected.
COMMISSIONER BARTON responded they have been corrected. He asked
his assistant to explain the cause of the problems.
MR. EBERLY said he did not know.
2:14:50 PM
CHAIR HUGGINS remarked highways in Alaska have a five-year life
expectancy. He asked what is the lifespan of Alaskan runways as
compared those of the Lower 48.
MR EBERLY replied:
A lot of the life expectancy of a runway has to do
with the volume and weight of the aircraft using that
runway; it has a lot to do with the materials used to
build the runway. I believe that the Fairbanks runway
is in excess of 30 years old and that is why they are
going through a major reconstruction effort. Here in
Anchorage I would expect a runway to last from four to
seven years.
SENATOR COWDERY moved SB 153 from committee with individual
recommendations and attached fiscal notes. There being no
objections, the motion carried.
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