Legislature(2003 - 2004)
01/28/2003 01:34 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
January 28, 2003
1:34 PM
TAPE HFC 03 - 2, Side A
TAPE HFC 03 - 2, Side B
TAPE HFC 03 - 3, Side A
CALL TO ORDER
Co-Chair Harris called the House Finance Committee meeting
to order at 1:34 PM.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Eric Croft
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Carl Moses
Representative Gary Stevens
Representative Bill Stoltze
MEMBERS ABSENT
Representative Bill Williams, Co-Chair
Representative Jim Whitaker
ALSO PRESENT
Edgar Blatchford, Commissioner, Department of Community and
Economic Development; Pat Ladner, President and CEO, Alaska
Aerospace Development Corporation (AADC), Department of
Community and Economic Development; Ray Riutta, Executive
Director, Alaska Seafood Marketing Institute; Patrick
Gamble, President and CEO, Alaska Railroad Corporation; Bill
O'Leary, Vice President, Finance, Alaska Railroad
Corporation
PRESENT VIA TELECONFERENCE
None
GENERAL SUBJECT(S):
Agency Overviews: Alaska Aerospace Development Corp
Alaska Seafood Marketing Institute
Alaska Railroad Corporation
The following overview was taken in log note format. Tapes
and handouts will be on file with the House Finance
Committee through the 23rd Legislative Session, contact 465-
2156. After the 23rd Legislative Session they will be
available through the Legislative Library at 465-3808.
LOG SPEAKER DISCUSSION
TAPE HFC 03 -
SIDE A
001 Co-Chair Harris Convened the meeting at 1:34 pm. Roll
was called and a quorum was established.
ALASKA AEROSPACE DEVELOPMENT CORPORATION
(AADC)
004 PAT LADNER, PRESIDENT Thanked the Co-chairman for the
AND CEO, ALASKA opportunity to highlight the successful
AEROSPACE DEVELOPMENT progress of his corporation since its
CORPORATION inception in 1992. He explained that
their central goal was to bring aerospace
business and technology to Alaska, their
primary means by creating a space port to
launch rockets and satelites. He
noted that, despite setbacks, Alaska has
been competitive in the national defense
market. He referred to the Kodiak launch
complex as part of an extensive test
program. He commended their program for
its innovation and uniqueness.
331 Representative Croft Asked for clarification about the failure
of the Iridium enterprise.
Mr. Ladner Explained that this commercial satellite
venture had encountered financial
difficulties. He noted that the program
had launched a portion of its
constellation, then entered into
bankruptcy and was acquired by another
corporation. He noted that the U.S.
Department of Defense subsequently rented
a portion of the venture. He also stated
that he had met with the company to
discuss replenishment of the
constellation.
500 Mr. Ladner Referred to a visual presentation showing
photographs of the launch site in Kodiak,
including the launch pads, payload
processing facilities, satellite orbiting
systems, and methods for containing toxic
chemicals.
625 Mr. Ladner Described other photos of the launch
facility and offices. He explained the
facility's response to NASA requests. He
highlighted the
· Mission control center;
· Ppf water deluge system;
· Payload processing facility;
· Processing bays;
· Air showers, lockers, etc.;
· Launch pads with rotating service
doors;
· Overhead cranes for heavy equipment;
· Transition bays; and
· Sub orbital facilities.
1200 Mr. Ladner Explained the methods for launching
rockets. He also pointed out that the
facility had responded to the terrorist
alerts of September 11.
1309 Mr. Ladner Then showed tape of the actual launching
of rockets from the facility.
1513 Mr. Ladner Explained that maintaining missile
defense interest in Kodiak was a
priority. He showed an aerial view of
the Kodiak Launch Complex, noting plans
to build an additional launch pad in
order to be able to launch two rockets
simultaneously. He stated that such an
endeavor would require approximately $100
million in construction costs. He
stressed that efforts would be made to
ensure the maximum amount of business
would go to Alaskan contractors.
1732 Mr. Ladner Referred to a chart illustrating the
increasing receipt of grants to support
the program. He pointed out that, since
1992, their organization had received
over $80 million in grants for
construction and equipment. The chart
also illustrated launch revenues, each of
which brings in approximately $5 million,
over and above its costs, to the State.
He summarized that approximately $100
million in total assets and revenue had
been generated over ten years.
1937 Mr. Ladner Noted that launches were scheduled for
August and December. He showed an
illustration of a system schematic,
representing $15 million worth of
equipment in two locations. He stated
that the next launch would occur in King
Salmon, Alaska. He explained that a
minimum of twelve people were needed to
operate the two systems, and noted that
training local personnel was a priority.
2159 Representative Commended the level of technology
Stevens demonstrated by the current system, and
its marked improvement over the past. He
noted that he represented the House of
Representatives as a non-voting member of
the Board of Directors for AADC. He
directed the praise for the system
improvement toward the tenacity and
strength of Mr. Ladner.
2319 Mr. Ladner Also commended his staff for the
improvements. He noted that their
primary concerns surrounded working with
the federal government, as well as
handling safety concerns that could
significantly delay launches and cause
financial losses in the short term.
2421 Representative Foster Asked about the effects of extremely cold
temperatures on launches.
2437 Mr. Ladner Explained that colder temperatures did
not prove insurmountable. He outlined
some techniques for dealing with
temperature extremes using blankets and
heaters.
2543 Representative Foster Inquired as to the toxicity of launch
chemicals.
2611 Mr. Ladner Explained that, although some chemicals
were quite toxic, preventative measures
were taken to avoid injuries. He noted
the high degree of safety procedures
followed during these launches.
2721 Representative Asked whether the corporation paid a
Stoltze dividend to the State Treasury.
2741 Mr. Ladner Responded that the corporation hoped to
pay such a dividend in the future.
2750 Representative Hawker Noted that the license to operate a
commercial space transportation facility
was scheduled to expire in September of
2003.
2812 Mr. Ladner Stated that this was not a concern, due
to the high level of praise from the U.S.
Department of Transportation and the FAA.
2852 Representative Hawker Asked whether there were significant fees
associated with the license renewal.
2907 Mr. Ladner Stated that there were no fees.
2918 Co-Chair Harris Thanked Mr. Ladner and concluded the
discussion on this subject.
ALASKA SEAFOOD MARKETING INSTITUTE (ASMI)
2953 RAY RIUTTA, EXECUTIVE Stated that he had been in his position
DIRECTOR, ALASKA since August of 2002. He read a prepared
SEAFOOD MARKETING written testimony outlining ASMI's
INSTITUTE mission and actions (see attached). The
testimony covered:
· Marketing efforts;
· Food service partnerships;
· Education;
· Funding;
· USDA Market Access Program; and
· Export and domestic marketing.
3804 Mr. Riutta Provided an estimate of their current
standing in the market and the future
outlook.
3929 Mr. Riutta Referred to charts that illustrated base
funding and revenue sources for 2003, as
well as budget disbursements (also
attached).
4041 Mr. Riutta Pointed out the cost of Federal monies
and its relationship to the current drop
in fisheries tax revenues. He noted that
$1 million in Federal funds, which were
available to ASMI, were not accessed due
to a lack of matching funds.
4230 Mr. Riutta Highlighted sales successes over the past
year. He commended the ASMI staff and
reiterated their priority of aggressively
promoting Alaskan salmon.
4357 Co-Chair Harris Asked Mr. Riutta to elaborate on the
appropriations for ASMI listed in the
Saltonstall-Kennedy Grant [part of the
U.S. Commerce Department's Appropriations
Bill, SB2778 last year] and asked whether
it would require matching funds.
4424 Mr. Riutta Responded that traditionally such an
appropriation would require matching
funds, but that it would depend on the
report language. He noted that the bill
language was not clear in this regard.
4502 Co-Chair Harris Requested that Mr. Riutta report back to
the Committee on this information. He
also asked for clarification regarding
the $1 million in unclaimed federal funds
to which Mr. Riutta earlier referred.
Mr. Riutta Explained that it was an Economic
Development Administration (EDA) grant,
put in place by Senator Stevens three
years prior. The grant was for $5
million to be expended over a three-year
period. He explained that ASMI had
intended to expend the funds in the
current year. However, he noted that
when they projected revenues over that
time, it was discovered that matching
funds would not be available in order to
expend those federal funds. He stated
that ASMI was currently requesting an
extension into the next year from the EDA
for those funds. It would still require
a $1 million match to obtain the funds.
4514 Representative Noted that there was a $20 million
Stevens appropriation in Senator Stevens' bill
for salmon promotion, with some funds
directed toward ASMI. He expressed his
concern about the overall structure
relating ASMI to the corresponding agency
on a federal level, and asked Mr. Riutta
how he envisioned this coordination
occurring.
4654 Mr. Riutta Responded that much would depend on the
report language indicating the details of
the relationship. He estimated that the
federal agency would function as a Board
to oversee grants applications and
administer and disburse those funds. He
stated that he did not expect that the
Board would be involved in actual
marketing efforts.
TAPE HFC 03 - 2, Side
B
4601 Representative //
Stevens
4546 Representative Questioned if it was better to spend
Stoltze state money to leverage federal funds.
4527 Mr. Riutta Stressed the importance of the Task
Force.
4452 Co-Chair Harris Observed that there are a couple of
pieces of legislation regarding the
Salmon Task Force.
4429 Representative Noted that less than only half of $900
Stevens thousand dollars from the original
appropriation has been used and did not
anticipate the need for an additional
appropriation in the current year.
4322 Representative Hawker Asked for additional information
regarding the tax
4289 Mr. Riutta Fisherman pay 1 percent and .3 percent
processor tax is based on purchases at
the purchase price.
4216 Representative Hawker Observed that there was a decrease in the
fleet to processor assessment.
4288 Mr. Riutta Pointed out that the processor tax is
based on all processing and balances out
the salmon only tax.
4135 Mr. Riutta In response to a question by
Representative Foster, noted that the
Agency is considering cruise lines
purchases. They are working hard to
educate the public regarding health
benefits and environmental friendly
aspects.
4016 Mr. Riutta Salmon industry operations are often mom
and pop operations that go back
generations.
3953 Representative Foster Referred to the first chart demonstrating
a 66 percent drop in salmon prices.
3921 Representative Observed that when times are good the
Stevens income is higher but that when times are
bad and revenues are reduced is the time
when marketing is most needed. There have
not been general fund moneys for ASMI in
a number of years.
3819 Representative Joule Questioned the percentage of the state's
fisheries are marketed by ASMI.
3725 Mr. Riutta Stressed that ASMI works to market all of
Alaska's fisheries.
3702 Representative Hawker Asked if cost recovery catch is exempt
from the 1 percent tax.
3637 Mr. Riutta Agreed that the tax is exempt. The Salmon
Task Force has discussed initiating a tax
but ASMI has no opinion.
ALASKA RAILROAD CORPORATION (ARRC)
3558 PATRICK GAMBLE, Provided members with a Special Report to
PRESIDENT & CEO, the Legislature and Administration from
ALASKA RAILROAD the Alaska Railroad Corporation (copy on
CORPORATION file). He noted that they are linked by
the Board of Governors and are not part
of the state General Fund. Employees have
a separate retirement system but are
expected to confirm to state ethics
rules.
3104 Mr. Gamble He stressed that they are the only full
time freight and passenger operation in
the U.S. There is also a marine element.
2908 Mr. Gamble Observed that there is a compromise with
the operation of both freight and
passenger operations, which do not
optimize the bottom line. However, the
ARRC also has the mission to foster the
development of Alaska's economy.
2659 Mr. Gamble The ARRC is a $5.5 million dollar
operation in FY03. Total operations
include real estate. Most of the ARRC
real estate granted by the state is fee
simple. The intent is to lease the land.
The ARRC made $11. million dollars in
FY02.
2604 Mr. Gamble The federal program is a key component.
The FTA primary passenger FRA is
predominantly for freight. The ARRC
receives considerable funds from both.
Based on passengers over rail miles,
which are guaranteed by law.
2455 Mr. Gamble $20 - $30 million dollars from the FTA.
If the corporation were up to par the
federal income would probably be
sufficient for their operations. However,
due to the need for repairs the cost is
insufficient.
2313 Mr. Gamble Most of the federal component goes back
to support the main line or up grades
such as the ones at Denali or Anchorage.
The Corporation pays the maintenance
fees.
2213 Mr. Gamble Observed that excess funds can be used
for roof repair, other repairs, salary,
equipment and the 20 percent match for
FTA funds. The Corporation must decide on
the balance.
2107 Mr. Gamble Observed that FY02 was a flat revenue
year. Expenses increased due to union
wage increases and other contracts that
were signed in the past year. Insurance
and matching 401 expenses also increased.
2012 Mr. Gamble Noted that the Corporation as worked on
safety as the highest priority.
1982Mr. Gamble Operation ratios must improve if revenues
8 are going to remain flat. Initiatives to
cut cost and increase efficiencies have
been addressed. Over $1 million dollars
have been saved by efficiencies.
1829 Mr. Gamble Stressed the need to look to the Future.
The Corporation is conscious that there
the state is on the cusp of all future
development. The line has to be sturdy
and safe to move large volumes. The track
has been prioritized to contribute to a
major reduction in mainline derailments.
1653 Mr. Gamble A bridge program and a strong line is an
invitation to bring on the pipeline.
Passengers are run over the same lines,
which allows the ability to grab
technology and operate multiply trains
and track work crews.
1532 Mr. Gamble The Corporation anticipates passenger
grows and commuter trains.
1448 Mr. Gamble Spoke to expansion and noted that there
may be an opportunity to push out into
new territory.
1421 Mr. Gamble The ARRC is shaping its own future.
Safety will remain the number one
priority. The railroad is seasonal.
Therefore, they must be available to hit
hard from the first day of the season.
1306 Mr. Gamble They are participating in regional
transportation planning groups.
Maximizing velocity and capacity is the
key. Transportation is the common
denominator for economic development.
1120 Mr. Gamble Pointed out the need to continue working
with federal regulations and programs.
The reauthorization of T21 dollars will
occur in the next year, which is the
source of their federal funds.
955 Mr. Gamble Referred to "Hot Topics" contained in
their handout.
921 Representative Meyer Spoke to page 14 and observed that the
forecast anticipates increases. He
questioned what the estimates were based
on.
818 Mr. Gamble Explained that the estimates were
conservative numbers based on current
customers. New development was not
incorporated into the estimates. He
pointed out that it is difficult to
estimate more than two years. They have
not had the opportunity to testify to the
Governor's office in regards to future
issues.
633 Representative Meyer Referred to page 16, capital expenses.
548 Mr. Gamble He observed that that they would not be
able to meet the capital estimates, but
that they would need to be spread into
future years.
407 Bill O'Leary, Vice Explained that FTA and FRA monies are
President, Finance, used for larger projects. There are
Alaska Railroad specific requirements for the
Corporation expenditures of these funds.
402 Representative Meyer Spoke to a rail line between Fairbanks
and Anchorage or a commuter line between
Anchorage and Wasilla.
343 Mr. Gamble Do not know when there would be a serious
look at commuting between Wasilla and
Anchorage. The Corporation plans to
prepare for the eventuality. IF the cost
could be down to an hour the demand would
increase.
155 Mr. Gamble Discussed the Sheep Creek development.
The design phase has begun. The city is
looking at an alternative site for the
convention center.
TAPE HFC 03 - 3, Side
A
14 Representative Meyer Expressed appreciation for the
Corporation.
035 Representative Croft Referred to page 15. He observed that the
operating cost of the railroad doesn't
meet the depreciation.
115 Mr. Gamble Noted that the operation costs match the
income without the depreciation due to
the operation of both freight and
passenger services.
157 Representative Croft Questioned if it is realistic to expect
income to cover depreciation. //
222 Mr. Gamble The key is to get the ration down // to
If the operational ratio is not
301 Representative Croft Questioned the Fort Greely and Canadian
rail extension costs
327 Mr. Gamble Did not have cost estimates. The number
of bridges and tunnels would spike costs.
He observed that $3 to $5 million dollars
would be a medium estimate.
531 Representative Croft Questioned if federal funds would be
available.
547 Mr. Gamble Agreed that federal dollars would be
important to the project. He hoped to
leverage DOT dollars as well.
615 Mr. Gamble In response to a question by
Representative Croft, Mr. Gamble noted
that the right of way is a federal
problem. The state is dependent on
federal action.
729 Representative Croft Questioned if there was anything that
could be done on the state level.
745 Mr. Gamble Pointed out that remote areas are
difficult. The Corporation permits
property for long-term. It does not
qualify for ///
946 Representative Foster Spoke to access and noted that the
Governor mentioned a railroad to Nome. He
asked the number of moose killed.
1042 Mr. Gamble Did not know the number of moose killed
but observed that the number is
negligible.
1162 Co-Chair Harris Referred to the Seward coal-loading
question.
1138 Mr. Gamble Explained that a fully loaded coal train
has difficulty getting over the pass at
Seward. Once a train is over the hill
part of the train is coasting and the
other have is pushing. Dividing the train
in half, which is very costly, solves
this. The solution is to use distributed
power. Remote control radio is used to
carry a heavier train over the hill to
Seward. The Corporation does not
currently have a Korean contract but are
under discussions. He is hopeful that a
contract can be negotiated.
ADJOURNMENT The meeting was adjourned at 3:27 PM
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