Legislature(1999 - 2000)
03/10/1999 01:35 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
MARCH 10, 1999
1:35 P.M.
TAPE HFC 99 - 44, Side 1
TAPE HFC 99 - 44, Side 2
CALL TO ORDER
Co-Chair Mulder called the House Finance Committee meeting
to order at 1:35 p.m.
PRESENT
Co-Chair Therriault Representative G. Davis
Co-Chair Mulder Representative Foster
Representative Austerman Representative Kohring
Representative Bunde Representative Moses
Representative J. Davies Representative Williams
Representative Grussendorf absent from the meeting.
ALSO PRESENT
Dave Eberle, Department of Transportation and Public
Facilities; Dennis Poshard, Legislative Liaison, Department
of Transportation and Public Facilities; Kurt Parkan, Deputy
Commissioner, Department of Transportation and Public
Facilities; Annalee McConnell, Director, Office of
Management and Budget, Office of the Governor; Robert Poe,
Commissioner, Department of Administration; Deven Mitchel,
Acting Debt Manager, Department of Revenue.
TESTIFIED VIA THE TELECONFERENCE NETWORK
Rob Stapleton, Journal of Commerce, Anchorage; Ron Simpson,
Airport Division Manager, Federal Aviation Administration,
Anchorage; Morton Plumb, Anchorage International Airport,
Anchorage.
SUMMARY
HB 84 "An Act relating to international airports revenue
bonds; and providing for an effective date."
HB 84 was HELD in Committee for further
consideration.
HB 95 "An Act making and amending appropriations under
art. IX, sec. 17(c), Constitution of the State of
Alaska, from the constitutional budget reserve
fund; and providing for an effective date."
HB 95 was HELD in Committee for further
consideration.
HOUSE BILL NO. 95
"An Act making and amending appropriations under art.
IX, sec. 17(c), Constitution of the State of Alaska,
from the constitutional budget reserve fund; and
providing for an effective date."
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND
BUDGET, OFFICE OF THE GOVERNOR presented the Committee with
an update on the state FY99 cash flow situation. She
observed that there is a three-day lag on the four-year
historical average for cash in and cash disbursements. She
stated that the state should be okay through March 25, 1999.
The March 1, 1999 oil revenue update estimated that the
state would need to draw $485 million dollars from the
Constitutional Budget Reserve for FY99. The spring forecast
will occur around April 1, 1999. She noted that the
additional $200 million dollar draw authorized by the
supplemental might not be sufficient to get through the end
of the year. She observed that the final numbers could shift
even after the Legislature adjourns. She recommended that
the Constitutional Budget Reserve amount be sufficient to
cover items that occur at the end of the fiscal year. Funds
were identified in the order that they would be swept from
General Fund sub-accounts, such as the Railbelt Energy Fund
and the Municipal Matching Grant Fund.
Co-Chair Mulder asked if $485 million dollars would cover
the year. Ms. McConnell clarified that this amount is based
on the March 1, 1999 update. She noted that the additional
draw is due to lower production forecasts. The price update
is slightly higher than forecasted. She emphasized that
there needs to be room to maneuver in case prices drop in
June.
Representative J. Davies clarified that the interest
earnings were included. Ms. McConnell explained that the
vote covers both the principle and the interest. The
projections of how much additional money is needed take into
account the interest earnings on the Constitutional Budget
Reserve.
Ms. McConnell estimated that there would be another
calculation in early May. The amount depends on timing of
tax payments in and school district payments out. The spring
forecast will occur in early April.
HB 95 was HELD in Committee for further consideration.
HOUSE BILL NO. 84
"An Act relating to international airports revenue
bonds; and providing for an effective date."
KURT PARKAN, DEPUTY COMMISSIONER, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES testified in support of
HB 84. He observed that the department is not requesting
additional funds. He clarified that they are requesting an
additional $25 million dollars in bonding authority for the
airport redevelopment project. The authority would provide
cash flow opportunities to meet the construction schedule on
the airport redevelopment project. He gave a brief history
of the project. He noted that the airport terminal project
was presented to the airlines for a vote. The airlines voted
to authorize up to $235 million dollars in bond authority.
The Department of Transportation and Public Facilities set a
price tag of $230 million dollars for the project. This is
still the projected project cost. The department presented
the Legislature with a request for $204 million dollars in
bond authority. There would be finance charges in addition
to the $204 million dollars, which would bring the total
project cost to $230 million dollars. The department
submitted an application to the Federal Aviation
Administration (FAA) for a letter of intent (LOI). This is a
request for federal discretionary dollars to help with the
cost of the project. The Legislature reduced the request
from $204 million dollars to $179 million dollars and
directed the Department of Transportation and Public
Facilities to seek the additional $25 million dollars
through federal funds. The department was successful in
receiving and additional $25 dollars in federal funding
through a LOI with the FAA. The federal dollars will be
received over a ten-year period. The department needs to
have the money over the next four years to complete the
project. The department also received funds for some other
non-terminal related projects. The department is requesting
bond authority to meet cash flow requirements. He explained
that the LOI is a commitment of the federal government to
appropriate the money over the next ten years. The money is
needed to finish the project within four years. House Bill
84 would authorize the department to sell bonds to borrow
money and allow the project to be done on time. The federal
money would be used to pay back the bonds.
In response to a question by Representative Austerman, Mr.
Parkan explained that the total bond package includes
existing bonds related to the airport parking structure.
Representative Bunde asked if the increased debt service
would result in cost overruns. Mr. Parkan responded that the
original proposal included debt service. The amount would
remain the same.
Representative Bunde questioned if there were discussions
between small and large airlines in regards to support of
the project. Mr. Parkan felt that most of the small carriers
were in support of the project.
Representative Bunde asked what areas are increasing in
costs and what will be scaled back to prevent cost overruns.
Mr. Parkan emphasized that the intent is to keep the project
at the $230 million dollar price tag.
Co-Chair Mulder observed that the supplemental bill (HB 100)
was amended to add "north" to the south terminal repairs.
Mr. Parkan explained that the department received approval
from the airlines and authorization from the Legislature for
some work on the south terminal. The work is being
transferred to the north terminal. The intent of the Airline
Affairs Executive Committee was to take it to the full
Airlines Affairs Signatory Group for their consideration.
The request to the Legislature would be subject to a vote by
the airlines. If it is not approved the request would be
withdrawn.
MORTON PLUMB, ANCHORAGE INTERNATIONAL AIRPORT, ANCHORAGE
explained that the work would change the scope from the
south to the north. He recalled that a jet gate was damaged
in an accident. The repair would require them to dig up the
apron. He explained that they would do other work that
requires the apron to be dug up at the same time. The
projects around the international terminal would be similar
to the projects approved for the south terminal.
Mr. Parkan explained, in response to a question by Co-Chair
Therriault, that the north terminal is the international
terminal.
Representative Foster referred to a article in the
"Passenger Terminal World, Annual Technology Showcase Issue
1999" (copy on file). He observed that the design features
geological aspects of Alaska. He questioned if small
carriers are being priced out of the building. Mr. Parkan
stressed that the project costs have not increased since it
was submitted to the airlines. The rates associated with the
project were based on the original cost.
Representative Foster asked if other businesses such as
rental cars would be paying more for their space. Mr. Parkan
stated that they would share in the project costs, but did
not know the amount.
Representative Williams recalled that the air carriers
recommended that the project proceed slowly. Mr. Parkan
clarified that the department is working with the carriers
on the project's schedule. He noted that the schedule is
fairly aggressive so that the traveling public is not
disrupted for too long a time.
Representative Williams recalled that the project was not
entirely supported by the air carriers.
Representative Foster observed that the airport is in an
earthquake zone and asked if the project would be built to
code. Mr. Parkan responded that everything would be built to
code. He observed that while the architectural design
reflects elements of Alaska, the project has been cost to
stay within their budget. Representative Foster stated that
he would like to hear from the airlines.
Representative Austerman asked for more information
regarding the fees. He observed that there has been
discussion of an additional $3 dollar fee for travelers
flying from Kodiak to Anchorage. Mr. Parkan responded that
the terminal is divided into exclusive use and common use
areas. Exclusive use areas are paid by the airline that uses
them. The common use area is divided among all the users.
Rental car vendors and food concessionaires have rates based
on their space use. He noted that the airlines are the
primary supporters of the project costs. The cargo carriers,
through landing and fuel fees, are the principle payers of
the airlines. Landing fees are used for debt payment. He
clarified that the $3 dollar passenger facility charge has
been considered, but has not been implemented.
Co-Chair Mulder asked if Senator Stevens is working on a
bill that would exempt rural communities from passenger
facility charges. Mr. Parkan stated that there were
provisions in both versions of the congressional
legislation. Communities that are not connected to a road
system and have populations under 10,000 would be exempted
if the federal amendment were adopted. Communities that are
connected by road and fly from Anchorage would pay a three-
dollar fee. Kenai, Homer, Juneau, Fairbanks and Kodiak would
be among those that would pay the fee. Mr. Parkan stated
that the Department of Transportation and Public Facilities
decided that they would not go forward with their
application for a passenger facility charge at the Anchorage
International Airport without the exemption that recognizes
Alaska's uniqueness.
Representative G. Davis asked if the Anchorage International
Airport and the Administration are supporting and promoting
the legislation in Washington. Mr. Parkan responded that
they are supporting and promoting the legislation.
Representative Bunde observed that there would be some money
coming in from the federal government to help with the debt
service. He emphasized that the department has stated that
there would not be cost overrides. Mr. Parkan noted that the
cost has not risen in the last year. He emphasized that the
department is closely scrutinizing costs.
Co-Chair Therriault summarized that the bond authority is
needed because the payments are coming over 10 years and it
is a four-year project. He asked if bond authorization would
be needed if the federal payments were received in a four-
year period.
DAVE EBERLE, PROGRAM DIRECTOR, GATEWAY ALASKA, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES responded that the LOI
payments from the federal government include other projects.
He explained that LOI receipts for the first several years
would go to the runway reconstruction project. LOI funds
would not be available for the terminal redevelopment
project until other projects are supported. He observed that
the other projects are necessary for terminal redevelopment.
He noted that the aprons need to be enhanced along with the
concourses.
Co-Chair Therriault asked if it is necessary to bond for the
entire amount.
Mr. Parkan noted that 2002 is the first year that LOI funds
would go to the terminal project. The final completion of
the project is scheduled for the year 2004. He stated that
the money is needed before the department puts the project
to contract.
(Tape Change, HFC 99 - 44, Side 2)
Mr. Parkan explained that the LOI is a letter of intent to
pay discretionary dollars over a certain period of time. It
is subject to congressional appropriation every year. The
FAA is telling the Department of Transportation and Public
Facilities that if Congress gives them the money that they
expect to get every year then the state will get a piece.
Co-Chair Therriault questioned what would happen if Congress
did not appropriate the funding each year.
Mr. Parkan stated that carriers would be responsible for
paying the debt.
DEVEN MITCHELL, ACTING DEBT MANAGER, DEPARTMENT OF REVENUE
explained that the bonds would be structured with a 25-year
maturity, so that in the event that there was non-payment,
there would not be an undue burden placed on the airport.
The expectation would be that the LOI funds would be used
for debt service.
Representative Foster asked if 1-percent for art would apply
to the project. Mr. Parkan noted that 1-percent for art
would apply only to the actual construction cost of the
terminal portion of the project. The 1-percent for art would
apply to $1 million dollars of the project. Representative
Foster asked if architectural elements could be applied to
the 1-percent for art requirement. Mr. Parkan responded that
there might be some architectural elements that could be
applied to meeting the 1-percent for art requirement.
In response to a question by Representative G. Davis, Mr.
Parkan explained that the repairs to the north runway are
needed as a result of an accident. This is a separate
project.
Co-Chair Therriault asked for more information regarding
what can qualify as part of the 1-percent for art. He asked
if any of the building aspects could be considered. He noted
that the building is artistically pleasing.
Representative J. Davies stressed that the state of Alaska
should build attractive public buildings. Co-Chair
Therriault noted that the Fairbanks airport is functional.
Representative Foster emphasized that the traveling public
pays the additional cost. He noted the high cost of
traveling in rural areas of the state.
Representative G. Davis asked what would happen if the
funding authorization were not approved. Mr. Parkan
emphasized that the federal funds are committed. If a
portion of the LOI were not used the money would be returned
to the federal government. Representative G. Davis noted
that user fees could be increased to pay for the project.
Mr. Mitchell stated that there is a five-year limitation on
the tax-free bonds. The bonds would become taxable after
five years.
In response to a question by Representative Austerman, Mr.
Parkan explained that they are in the process of drafting an
application for passenger facility charges at the Anchorage
International Airport. He stated that the application would
only be pursued if the exemptions for rural communities that
are not connected to the road system and have a population
of less then 10,000 were approved. Projects must be
identified before the federal government will approve the
charge. He noted that a portion of the passenger facility
charge could go to the terminal project. The estimated they
would receive $3 million dollars at the Anchorage Airport
from the additional $3 dollar fee. The fees would be
collected until the portion that was identified for use on
specified projects has been reached. It is possible to
continue the tax by submitting additional applications. The
tax could be spent at any state owned airport. It is not the
Department of Transportation and Public Facilities intent to
spend the revenues in areas outside of their collection.
There are restrictions on the use of the fee. A passenger
facility charge can be collected on projects that qualify
for federal FAA funding. Passenger facility charges are not
generally used for projects that qualify for discretional
dollars.
Co-Chair Therriault asked if passenger facility charges
could be used for the general fund match requirement on
roads leading up to the airport. Mr. Parkan did not think
that they could be used for the match requirement because
the project would not qualify for federal FAA funds.
Co-Chair Mulder asked if there are airports that are not
state owned. Mr. Parkan responded that the state does not
own airports in Juneau, Kenai, and some small fields in the
North Slope Borough. He explained that Ketchikan is owned by
the state, but operated by the city of Ketchikan through a
lease agreement. Ketchikan has implemented a passenger
facility charge. Fees are not charged on flights that stop,
but continue as the same flight. He noted that the only
other state that owns most of their airports is Hawaii.
Municipalities or authorities own most airports.
Representative G. Davis added that the state does not own
the Soldtna airport. He suggested that the city of Soldtna
would be interested in transferring ownership to the state.
In response to a question by Co-Chair Therriault, Mr. Parkan
described the application process for collecting passenger
facility charges. Mr. Parkan explained that it takes
approximately six to nine months for the application
process. The airport sponsor identifies the projects that
they want to have funded. Then there is a consultation
meeting with the airlines and they comment on the projects.
The application is then given to the FAA. There are public
comment periods throughout the process. The FAA informs the
applicant if their application is accepted and if any
exemptions are approved.
In response to a question by Co-Chair Therriault, Mr. Parkan
explained that in a scenario involving a flight from Juneau
to Seattle and Portland, that Juneau and Seattle would
collect three dollars each. The collection occurs when the
passenger boards. It is capped to six dollars. The fee is
collected on the last two airports that the passenger gets
on for the return. Portland and Seattle would collect the
fee on the return.
Co-Chair Therriault observed that if the plane also stopped
in Ketchikan and the flight changed that Seattle and
Ketchikan would collect the fee.
Representative Austerman asked why exemptions would be
given. Mr. Parkan stated that the exemptions allow for
unusual circumstances. He explained that there is an
exemption for carriers that receive less than one-percent of
the total implanements at an airport. Juneau has exemptions
based on the fact that it is a community with central air
carriers. Ketchikan has no exemptions.
HB 84 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 2:55 p.m.
House Finance Committee 9 3/10/99
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