Legislature(2001 - 2002)
04/26/2001 01:43 PM TRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.