Legislature(2001 - 2002)

04/26/2001 01:43 PM TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
          SB 195-OPERATION OF WHITTIER TUNNEL BY WHITTIER                                                                   
          SB 196-EXEMPTION FROM TOLL FOR WHITTIER TUNNEL                                                                    
             SB 197-PROHIBIT TOLL FOR WHITTIER TUNNEL                                                                       
                                                                                                                                
CHAIRMAN COWDERY  announced that he  would hear SB 195, SB  196, and                                                            
SB 197  simultaneously  as  they all  have to  do with  the City  of                                                            
Whittier.                                                                                                                       
                                                                                                                                
MR. MATT ROWLEY,  City of Whittier, said he will address  two issues                                                            
related to the tunnel toll.   The first is the impact of the toll on                                                            
the residents  of Whittier  and the  second is  the impact the  toll                                                            
will have on  Whittier's business  community.  Mr. Rowley  commented                                                            
that  Governor Knowles  observed  that the  Whittier  tunnel is  the                                                            
city's lifeblood  of commerce.  Concerning the impact  on Whittier's                                                            
residents, this is the  only toll road in Alaska.  The imposition of                                                            
this toll is unprecedented  in Alaska and creates a potential burden                                                            
that is  not imposed  on any other  community  on the state  highway                                                            
road  system.   Anyone who  travels  into or  out of  Whittier on  a                                                            
regular basis  under the current toll  structure will pay  $3,000 to                                                            
$4,000 per year in toll fees.                                                                                                   
                                                                                                                                
Regarding Whittier's economy,  which relies on a 100-day season, the                                                            
Whittier  business community  is in  direct competition  with  other                                                            
business communities  around Anchorage, the Kenai  Peninsula and the                                                            
rest of the state.  The  Whittier business community will be bearing                                                            
the added cost  unfairly, which will  adversely affect the  business                                                            
community's  ability to compete  in an open  market.   Visitors  who                                                            
travel  down the  Seward Highway  only  have so  many discretionary                                                             
dollars to spend. If those  travelers are faced with the prospect of                                                            
spending  $15 to  $40  to travel  to Whittier,  it  is questionable                                                             
whether they  will opt to  come to Whittier.   If they do  spend the                                                            
$40, in  the case  of motor  homes, that  $40 will  not be spent  at                                                            
local businesses.                                                                                                               
                                                                                                                                
MR. ROWLEY said a second  issue is the effect on passengers arriving                                                            
in Whittier  via the marine  highway system.   Passengers coming  to                                                            
Whittier  to get on the  ferry will be penalized  because they  will                                                            
have to pay  the full round trip tunnel  fare.  Although  the tunnel                                                            
has a different set of  maintenance operation circumstances than the                                                            
highway,  he believes  it  is the  responsibility  of  the state  to                                                            
maintain the tunnel as it does the highways.                                                                                    
                                                                                                                                
MAYOR  BEN  BUTLER  of the  City  of  Whittier  made  the  following                                                            
comments about SB 195.   The City of Whittier believes it would make                                                            
good sense for  the State of Alaska to give the city  the ability to                                                            
control the tunnel to help  with the operational expenses.  The city                                                            
feels it impacts Whittier  more than any other place in the state so                                                            
the city should  have a voice in the  matter. The city assembly  has                                                            
discussed  setting  up  an authority  to  operate  the tunnel.    An                                                            
authority would provide  the ability to bring everybody to the table                                                            
to discuss  the fee structure  and it would  prevent any one  entity                                                            
from being in control of the tunnel.                                                                                            
                                                                                                                                
Number 872                                                                                                                      
                                                                                                                                
MR.  DENNIS  POSHARD,   Special  Assistant  with  DOTPF,   made  the                                                            
following  comments on  SB 195, SB  196, and SB  197.  Regarding  SB
195, the effective date  of July 1, 2001 is problematic.  Currently,                                                            
the  design-build-operate    contract  signed   by  DOTPF  for   the                                                            
construction and  operation of the tunnel runs through  May of 2002.                                                            
Should DOTPF have  to cancel that contract by July  1 of 2001, DOTPF                                                            
would  be liable  to  the  contractor  for lost  profits  and  other                                                            
expenses incurred.   In addition, the design-build-operate  contract                                                            
contains a warranty because  it is a one-of-a kind new tunnel system                                                            
with  a  lot of  complicated  computer   software  programs,  tunnel                                                            
controls, ventilation  systems, and  other features.  Under  the two                                                            
year operation  agreement, the contractor has two  years to identify                                                            
and  correct any  problems  before  DOTPF agrees  to  take over  the                                                            
ownership.  Should DOTPF  cancel the contract in order to enter into                                                            
a  contract with  the  city,  that would  pose  a problem  with  the                                                            
warranty.                                                                                                                       
                                                                                                                                
CHAIRMAN  COWDERY asked if  Mr. Poshard is  suggesting changing  the                                                            
effective date.                                                                                                                 
                                                                                                                                
MR. POSHARD  said  he cannot  say that there  is a  certain time  at                                                            
which this bill  makes sense, but he repeated the  effective date of                                                            
July 1, 2001 causes  problems for DOTPF.  At a minimum,  DOTPF would                                                            
request delaying the date  until after the current contract expires.                                                            
Delaying the effective  date will also allow time  for a prospective                                                            
contractor  to  get  the training  required  to  operate  a  tunnel.                                                            
Anyone who  works on the tunnel must  be trained and qualified  as a                                                            
firefighter  and must  take safety  training that  is unique  to the                                                            
tunnel.   Workers  will also  have to  learn about  the operations,                                                             
scheduling, and other matters  related to the tunnel.  That training                                                            
will take time.  He maintained  that the July 1, 2001 effective date                                                            
is not realistic.                                                                                                               
                                                                                                                                
MR. POSHARD  said his next  point is that  although SB 195  requires                                                            
DOTPF to enter  into a contract with the city, it  does not speak to                                                            
what reasonable  terms  and limitations  should be  included.   This                                                            
approach puts  the state in a poor  negotiating position  as it will                                                            
give  a potential  contractor  a lot of  leverage.   Although  DOTPF                                                            
would contract  with  the City of  Whittier to  operate the  tunnel,                                                            
DOTPF's  contract with the  Alaska Railroad  Corporation (ARRC)  for                                                            
the use of  the tunnel might be problematic  also.  He was  not sure                                                            
whether DOTPF could abrogate  that responsibility to the contractor.                                                            
As a part of that  contract, DOTPF has assumed a substantial  amount                                                            
of liability  for anything  that occurs  within  the tunnel.   DOTPF                                                            
will retain that contractual  liability whether it contracts for the                                                            
operation  of that  facility  or not.    Therefore,  DOTPF would  be                                                            
forced to contract  with the city  for the operations of  the tunnel                                                            
but still  be on the hook  for any liability,  including  liquidated                                                            
damages that might arise out of a delay of the train.                                                                           
                                                                                                                                
MR. POSHARD  said DOTPF's  biggest concern  with both SB 196  and SB
197 is  that the  provisions related  to tolls  will cause  problems                                                            
with federal  agencies.  He anticipates  that federal agencies  will                                                            
not allow  a specific  class of  people to be  exempted from  paying                                                            
tolls.   DOTPF  pursued  charging  one rate  on the  marine  highway                                                            
system for  residents of Alaska and  another rate for non-residents                                                             
but was  prevented from  doing so  by the federal  agencies  because                                                            
federal money  is used.  In the case  of the marine highway  system,                                                            
the federal agency  said charging different rates  could trigger pay                                                            
back  provisions  associated  with  federal highway  projects.    He                                                            
anticipates  that the  same pay back  provision  would apply  to the                                                            
toll collection  portion of  the tunnel.   DOTPF expects to  collect                                                            
$2.5 million  in tolls during  its first  full year of collections.                                                             
That money was slated to  cover the state's cost for maintaining the                                                            
tunnel.  If SB 197 does  move forward, those funds will have to come                                                            
from elsewhere and a fiscal note would reflect those changes.                                                                   
                                                                                                                                
CHAIRMAN COWDERY asked  if any of the tolls that are collected go to                                                            
the ARRC now or are slated to in the future.                                                                                    
                                                                                                                                
MR. POSHARD said he does not believe so.                                                                                        
                                                                                                                                
SENATOR  WARD asked  Mr. Poshard to  supply the  committee with  the                                                            
warranty language for the  tunnel and an explanation of the specific                                                            
problems with that warranty if the operators are changed.                                                                       
                                                                                                                                
MR. POSHARD agreed to do so.                                                                                                    
                                                                                                                                
CHAIRMAN  COWDERY commented  that the City  of Whittier has  trained                                                            
firefighters  and  some Whittier  residents  currently  work at  the                                                            
tunnel.  He announced that  he would hold all three bills until some                                                            
of the  concerns expressed  today are resolved.   He then  adjourned                                                            
the meeting.                                                                                                                    

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