Legislature(2005 - 2006)BUTROVICH 205

02/24/2005 01:30 PM TRANSPORTATION


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01:40:49 PM Start
01:41:32 PM SB92
03:01:14 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 92 AIRPORT CUSTOMER FACILITY CHARGES TELECONFERENCED
Heard & Held
+ HB 115 AIRPORT CUSTOMER FACILITY CHARGES TELECONFERENCED
<Pending Referral>
+ Bills Previously Heard/Scheduled 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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