Legislature(2005 - 2006)FAHRENKAMP 203
03/02/2006 02:00 PM Senate TRANSPORTATION
| Audio | Topic |
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| Start | |
| SB273 | |
| SB303 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 303 | TELECONFERENCED | |
| = | SB 273 | ||
SB 303-KNIK ARM BRIDGE AND TOLL AUTHORITY
2:09:40 PM
CHAIR CHARLIE HUGGINS announced SB 303 to be up for
consideration.
SENATOR JOHN COWDERY moved to adopt version F as the working
document before the committee.
GEORGE WUERCH, Chairman of the Board, Knik Arm Bridge And Toll
Authority (KABATA), introduced Deputy Commissioner Tom Boutin,
John Manly, Jim Cantor, and project counsel, William Green. He
stated they were all in support of the committee substitute (CS)
for SB 303.
WILLIAM GREEN thanked the legislative staff for the Senate
Transportation Standing Committee, particularly Deborah
Grundmann, for being so helpful.
2:13:06 PM
MR. GREEN said the Knik Arm Bridge and Toll Authority (KABATA)
was created in 2003 to build a bridge across Knik Arm for the
purpose of connecting the Municipality of Anchorage to the
Matanuska-Susitna Borough, to improve the transportation systems
in upper Cook Inlet and to stimulate and enhance the support for
economic development on a statewide basis.
Since 2003 KABATA has been busy with investigative and
environmental impact studies and have found that the federal
funding will be insufficient to complete the project and so it
must look to other public and private financing and funding
sources.
In discussions with various experts who have been through the
process of raising funds from the private sector and the Federal
Highway Administration it has been identified that the KABATA
Act be specific in several aspects. For example, the
Transportation Infrastructure Finance and Innovation Act (TIFIA)
would like the statute to mention them as a source of financing
by name.
The purpose of SB 303 is to clarify and make more specific the
powers of KABATA and to ensure both the public and the private
financing sectors that the Authority has the underlying
legislative authority to allow them to form partnerships.
2:17:55 PM
MR. GREEN continued explaining SB 303 provides exclusive
authority to KABATA for setting bridge tolls, provides explicit
authority to enter into public-private partnerships and other
financing arrangements. It authorizes obtaining loans from the
TIFIA, it sets the dollar amount of revenue bonds that the
authority may issue, and it provides several different means for
collection of tolls and other obligations owing to the Authority
that need to be collected.
2:19:13 PM
The CS eliminates redundancies, clarifies language, and corrects
technical errors. He said none of the changes in the CS are of a
significant substantive nature. He offered to answer questions.
2:20:26 PM
SENATOR COWDERY asked Mr. Green whether KABATA has come up with
a toll figure.
MR. GREEN deferred the question to Mr. Wuerch.
MR. WUERCH informed committee members they have no final number
yet but data collected suggests between three and five dollars.
They also recommended that once set, the toll not be changed for
ten years. A tollgate on the bridge will not be necessary. An
electronic card could be installed in the vehicle and a beam
would be used to tally the passage to an established account. He
said a strenuous financial analysis would be made before any
investor would be approached.
SENATOR COWDERY commented the Whittier Tunnel sustains more
traffic than what early surveys estimated. He expressed support
for the bill. He asked whether it would be possible to add a
railroad to the bridge.
MR. WUERCH said a railroad bridge could be built alongside but a
highway bridge would not be able to support a railroad.
2:25:11 PM
SENATOR FRENCH noted the CS gives the toll-setting authority to
KABATA. He asked whether that was the case in the original bill.
MR. WUERCH responded it was in the original bill but the
language made it unclear.
SENATOR FRENCH asked the entity that sets the toll for the
Whittier Tunnel.
MR. WUERCH did not know. He noted the Whittier Tunnel was an
operational toll collected by the Department of Transportation
(DOT), not one that requires bond paybacks.
2:27:16 PM
SENATOR FRENCH expressed concern over the high toll rate
anticipated for the Knik Arm Bridge. He said initial data on the
Whittier Tunnel suggested the toll would be one dollar and fifty
cents but is actually twelve dollars. He expressed unease that
the Knik Arm Bridge could become comparable.
MR. WUERCH agreed and said the federal money that was originally
set aside for the Knik Arm Bridge has shrunk from $230 million
to $93 million dollars. The state match is not on the table yet
so that is a "wait and see." He compared the deal to buying a
house and said if you have a good down payment the mortgage is
easy to find.
2:29:32 PM
SENATOR FRENCH asked Mr. Green whether there was something about
the non-recourse bonds that required more explicit language in
the bill.
MR. GREEN said yes. The original legislation did set up the
authority to issue revenue bonds but it also said the Authority
had to come back to the Legislature to get approval for the
aggregate amount of the bonds.
SENATOR FRENCH asked the process of how the bonds would be sold.
He questioned the relationship between TIFIA and the United
States Department of Transportation.
MR. GREEN responded technically there is no relationship from a
legal perspective but from a financial perspective they are both
funding sources. The state would have no obligation on the
bonds.
2:33:19 PM
SENATOR FRENCH noted the primary mechanism is to sell the bonds
on Wall Street and then the federal government notes a
multiplier effect.
MR. GREEN explained the purpose of the TIFIA loan program is to
provide subordinated debt to fill gaps in the funding stream. It
is a layered financing mechanism that has to be coordinated but
not necessarily dependant on one another.
SENATOR FRENCH clarified that they all ultimately look to the
toll as the source of repayment.
MR. GREEN agreed.
2:34:50 PM
SENATOR KOOKESH asked whether they are confident they have the
money to build the bridge.
MR. WUERCH responded they have a work plan that phases the
project and they hope to get some work done in summer of 2006.
There is also a governor's bill, which includes paving the Port
McKenzie Road. Initially that was a large cost associated with
building the bridge but it is now proposed as a separate funding
item in the supplemental. KABATA is working closely with the
Port of Anchorage to share as many costs as possible. After the
pre-built pieces are done, then they intend to sit down with
private investors and look for partnerships to finish up the
project. The idea of phasing allows the project to move ahead.
2:36:27 PM
SENATOR COWDERY expressed support for the paving project on the
Port McKenzie Road.
MR. WUERCH agreed.
2:38:28 PM
CHAIR HUGGINS noted the Anchorage Parking Authority is allowed
to access a person's permanent fund dividend to collect on fees
owed and said there are provisions in SB 303 which allow that as
well.
MR. GREEN agreed. He said the financial advisors and others like
the language of the bill.
2:41:42 PM
CHAIR HUGGINS said SB 303 seems to be directed more toward the
Senate Finance Standing Committee than the Senate Transportation
Standing Committee.
MR. GREEN added the CS takes things a step further, which would
allow the Authority to build the bridge in phases without 100
percent financing. He said the bill places a ceiling on the
total amount of revenue bonds that could be issued by the
Authority. The State Bond Council, the attorney general's
office, and the Department of Revenue reviewed the bill and the
suggestions made have been incorporated in the CS. He made note
of a typographical error that needs correcting.
2:47:50 PM
SENATOR FRENCH noted the cost of steel is rising each year. He
asked Mr. Wuerch whether the funds for the project would cover
the true costs of steel.
MR. WUERCH admitted KABATA was concerned as well and
commissioned their engineering firm to look at commodity
pricing. There are two concepts for bridge construction,
reinforced concrete or all steel trust. Both options would still
be estimated at $600 million or less taking into consideration
the increased price of steel. KABATA built a contingency in the
initial cost so the commodity increase has been accommodated.
SENATOR FRENCH said fiscal conservatives worry that proponents
of a project typically over-estimate benefits and under-estimate
costs. He said his gut feeling was that the KABATA estimates
were lower than what they are actually going to be. He expressed
concern that the outcome would be a toll so high that nobody
could use the bridge.
2:51:26 PM
ANTON JOHANSEN commented on the bill. He said the traffic on the
Whittier Tunnel is lower than was projected and the state now
takes $2 million a year out of the Statewide Transportation
Improvement Program (STIP) to fund the operational costs. He
said he heard there was lobbying to take more from the STIP. He
expressed concern over the funding of the Knik Arm Bridge and
said they could destroy state transportation funding. He stated
concern that the roads could be built up to the bridge and the
bridge might never get built, which would be a case of roads
leading to nowhere.
2:53:27 PM
CHAIR HUGGINS asked Mr. Johansen his affiliation.
MR. JOHANSEN identified himself as a highway contractor and
partner with Great Northwest Incorporated.
2:54:01 PM
STEVE CLEARY, executive director, Alaska Public Interest
Research Group (AKPIRG), shared concerns over the relationship
with KABATA and the State of Alaska. He said he interprets the
bill to read such that KABATA would have eminent domain power,
which should be reserved for government agencies. He wondered
whether the state would have to consume the debt were KABATA to
fail and go bankrupt. He said the bill also gives KABATA the
power to sell land and to receive land from the state, which
appears like a land grant. He suggested they put a higher limit
on the bonds.
2:56:08 PM
MR. CLEARY added there were bills out in the current Legislature
limiting the powers of eminent domain and he questioned whether
other toll authorities receive it. Finally, he said it appears
there could be conflict of interest between KABATA and the land
ownership status on either side of the bridge. If a staff or
board member owns land but was also deciding on eminent domain
of that land it would appear to be a conflict of interest. He
looked up the State Bond Committee and said it encompasses the
commissioners of the Departments of Community and Economic
Development, Administration, and Revenue and that the
commissioner of Revenue is a board member of KABATA.
2:58:00 PM
CHAIR HUGGINS asked Mr. Cleary whether he supported the Knik Arm
crossing.
MR. CLEARY said his group was not in support of the Knik Arm
crossing. They believe it will be a financial burden to the
state and that the state will end up stuck with both the
construction and operational cost of the bridge.
JIM CANTOR, Chief Assistant Attorney General, Transportation
Section, Department of Law (DOL), announced that he was
available to answer questions. As far as eminent domain
authority, the Alaska Railroad has that, he said.
CHAIR HUGGINS asked Mr. Cantor about the authority to own and
manage the land.
MR. CANTOR said currently the Department of Natural Resources
(DNR) and the Department of Transportation (DOT) manage the
land.
CHAIR HUGGINS asked Mr. Cantor whether there was a conflict of
interest with the Commissioner of the Department of Revenue
being on both boards.
MR. CANTOR said not from a legal perspective. The Attorney
General wants a bill that would meet KABATA's requirements but
also make sure that nothing halts the ability of the state to
issue the bonds and that it would be a revenue bond.
3:01:13 PM
TOM BOUTIN, Deputy Commissioner, Department of Revenue (DOR),
testified that the DOR has a seat on each of the boards that
issues debts and he is the person delegated to those seats. SB
303 sets up the ability to issue stand-alone revenue bonds and
those bonds would not impact the State of Alaska credit. Some
state agencies have the authority to issue a variety of credits.
The Student Loan Corporation, for instance, is authorized by the
Legislature to issue state moral obligation debt and they are
revenue bonds backed by student loan receipts. There are revenue
bonds that carry the moral obligation to the state, which carry
a higher level of credit and a higher level of commitment than
is in SB 303.
3:02:35 PM
A small amount of the debt of Alaska Housing Finance Corporation
is moral obligation debt and some is state guaranteed debt,
which was authorized by the Legislature and by the voters. Some
of Alaska Industrial Development Export Authority (AIDEA) debt
carries a moral obligation, which has to be authorized by the
Legislature but most of their debt issuing programs are stand-
alone revenue bonds. The international airport system is a
stand-alone revenue bond, relying entirely upon the rates and
fees of the airport system.
CHAIR HUGGINS asked Mr. Boutin whether he felt there was a
conflict of interest with an employee from the DOR sitting on
the KABATA board.
MR. BOUTIN said no. The Department of Revenue is secretary to
the State Bond Committee and has a seat on each of the boards
that issue debt. Those boards issue debts that have different
levels of credit security and commitment by the state. SB 303
authorizes stand-alone revenue bonds and the bondholder's
recourse would be limited to the rates and fees and the value of
the structures and any revenues and reserve funds that have been
pledged by KABATA to repay the debt.
3:04:50 PM
MERLE THOMPSON testified against SB 305. Initially he was in
favor of the bill but has attended many meetings on the project
and now questions whether it is a good idea. He mentioned
dangerous stretches of road close to the proposed bridge that
need improvement and suggested that should be a priority.
3:07:51 PM
MR. THOMPSON felt that most people would not use the bridge
because it does not save much time and the cost seems
prohibitive. He said business owners in Wasilla have expressed
concern that a bypass road would affect their businesses.
3:10:02 PM
CHAIR HUGGINS asked Mr. Thompson whether he would be in support
of the bridge if the government earmark were intact.
MR. THOMPSON said he would feel better if the state had the
federal monies. He described himself as a fiscal conservative
and said SB 303 does not seem fiscally responsible.
STEPHANIE KESLER, President, Government Hill Community Council,
testified with concern over KABATA's power of eminent domain.
She said the KABATA board is very small and only requires a
quorum of three who would be able to exercise eminent domain.
Three private individuals would have the power of eminent domain
and could take property if they so desire. She said their
experience with KABATA during the EIS process has been a less
than positive experience. She challenged the will of KABATA to
follow an open process in good faith.
3:14:17 PM
SENATOR COWDERY noted that many legislative committees operate
with a quorum of three.
STEPHANIE KESLER countered that legislative proceedings are run
by elected officials who represent the people. She re-stated her
concern that the KABATA board is comprised of private
individuals who could benefit from their votes.
3:15:12 PM
EMILY FERRY testified she works with Alaska Transportation
Priorities Project, a statewide watchdog group advocating for
safe, reliable, efficient and fiscally responsible
transportation within Alaska. She brought the 2005 annual report
from KABATA to the committee's attention and advised that,
according to their budget; about 256 million dollars are still
without an identified funding source. She expressed concern that
the project would take away from the other roads in Alaska that
are in need of repair.
3:16:38 PM
MS. FERRY added the second concern was the conflict of interest
issue. One of the KABATA board members is Mike Barton,
Commissioner of the Department of Transportation, who oversees
the STIP process whereby transportation projects are
prioritized. Because of that conflict, the Commissioner's
position should be removed from the KABATA board. She said her
organization was pleased to see the contract tightened and that
the state's credit would not be affected.
SENATOR KOOKESH asked Ms. Ferry the process of how Commissioner
Barton got appointed to the KABATA board.
MS. FERRY explained it is in the authorizing legislation that
the Legislature drafted.
SENATOR COWDERY asked whether her group was affiliated with any
other political or watchdog group.
MS. FERRY said they work with other organizations but are
essentially a stand-alone organization. They have an advisory
board of retired DOT engineers and people within the state.
Their funding comes from a variety of foundations.
SENATOR COWDERY asked whether her testimony was a conflict of
interest.
MS. FERRY said no. The Alaska Transportation Priorities Project
is pretty consistent in their message that Alaska should spend
transportation dollars on existing infrastructure first and
foremost by improving existing roadways, ferries, airports,
ports and harbors.
3:19:54 PM
COLLEEN JAMES testified in opposition to SB 303. She said the
transportation money should be spent on more critical projects.
ROBERT WELLS, Executive Director, MatSu Resource Conservation
and Development, testified in support of SB 303. He said the
bridge would be a vital contribution to the future of the MatSu
and Wasilla area.
MR. GREEN came back to the table to advise the committee of a
technical error in the CS. Page 8 line 24, the sentence should
read, "The bond resolution shall fix the aggregate principle
amount and..." So after the word "shall" insert "fix the",
after the word aggregate, strike the word "the" and strike the
second "fix."
CHAIR HUGGINS advised he would transfer the CS back to the
drafters. He said he preferred to move the bill today since it
really was more of an issue for the Senate Finance Standing
Committee.
3:24:53 PM
SENATOR COWDERY moved CSSB 303(TRA) from committee with
individual recommendations and attached fiscal notes.
There being no further business to come before the committee,
Chair Huggins adjourned the meeting at 3:25:55 PM.
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