Legislature(2013 - 2014)BARNES 124
01/29/2013 01:00 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s): Department of Transportation & Public Facilities (dot&pf) | |
| Knik Arm Bridge and Toll Authority (kabata) Update | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
HOUSE TRANSPORTATION STANDING COMMITTEE
SENATE TRANSPORTATION STANDING COMMITTEE
January 29, 2013
1:04 p.m.
MEMBERS PRESENT
HOUSE TRANSPORTATION
Representative Peggy Wilson, Chair
Representative Doug Isaacson, Vice Chair
Representative Eric Feige
Representative Lynn Gattis
Representative Craig Johnson
Representative Bob Lynn
Representative Jonathan Kreiss-Tomkins
SENATE TRANSPORTATION
Senator Dennis Egan, Chair
Senator Fred Dyson, Vice Chair
Senator Anna Fairclough
Senator Click Bishop
Senator Hollis French
MEMBERS ABSENT
HOUSE TRANSPORTATION
All members present
SENATE TRANSPORTATION
All members present
COMMITTEE CALENDAR
CONFIRMATION HEARING(s):
Department of Transportation & Public Facilities (DOT&PF)
Pat Kemp, Commissioner - Juneau
- CONFIRMATION(S) ADVANCED
OVERVIEW: KNIK ARM BRIDGE AND TOLL AUTHORITY (KABATA)
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
PAT KEMP, Commissioner
Department of Transportation & Public Facilities (DOT&PF)
Juneau, Alaska
POSITION STATEMENT: Testified as commissioner, although not yet
confirmed to the Department of Transportation & Public
Facilities (DOT&PF) during his confirmation hearing.
MICHAEL FOSTER, Chair
Knik Arm Bridge and Toll Authority (KABATA)
Department of Transportation & Public Facilities
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint Presentation on the
Knik Arm Bridge and Toll Authority (KABATA) update.
KEVIN HEMENWAY, Chief Financial Officer (CFO)
Knik Arm Bridge and Toll Authority (KABATA)
Department of Transportation & Public Facilities
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the presentation
on Knik Arm Bridge and Toll Authority (KABATA).
ACTION NARRATIVE
1:04:52 PM
CHAIR PEGGY WILSON called the joint meeting of the House and
Senate Transportation Standing Committees to order at 1:04 p.m.
Present at the call to order from the House Transportation
Standing Committee were Representatives Kreiss-Tomkins, Lynn,
Isaacson, Feige, and P. Wilson; Representatives Johnson and
Gattis arrived as the meeting was in progress. Present from the
Senate Transportation Standing Committee were Senators Dyson,
Bishop, and Egan; Senators French and Fairclough arrived as the
meeting was in progress.
^Confirmation Hearing(s): Department of Transportation & Public
Facilities (DOT&PF)
Confirmation Hearing(s):
Department of Transportation & Public Facilities (DOT&PF)
1:06:08 PM
CHAIR P. WILSON announced that the first order of business would
be the confirmation hearing for Pat Kemp, Commissioner,
Department of Transportation & Public Facilities (DOT&PF).
1:06:25 PM
PAT KEMP, Commissioner, Department of Transportation & Public
Facilities (DOT&PF), provided his background. He said he is a
lifelong Alaskan and came up through the ranks of the
department. He began working on a survey crew for the
Department of Highways, and later for the DOT&PF once the two
organizations merged. After college, he began working for the
DOT&PF primarily on design and construction, as well as on
maintenance. In 2006, he retired after 30 years of service. In
2011, he returned to DOT&PF as deputy commissioner and was
initially assigned to roads and public facilities. He detailed
some of his accomplishments, including issues related to
railroad crossing costs, pavement resurfacing, chip/seal on the
Kenai Peninsula, and sharing of resources during storm events.
Additionally, he said the DOT&PF is close to resolving a
Whittier tunnel agreement. Further, he initiated an idling
policy that requires trucks to shut off automatically which
saves the DOT&PF hundreds of thousands of dollars a year. The
department has also implemented a "tow plowing" policy. He also
said he developed more discretion with highway safety, including
increasing speed limits on the Alaska, Richardson, and Glenn
Highways; and that he has found ways to use Highway Safety
Improvement Plan (STIP) funding to address "rock fall" on the
Glenn Highway.
1:10:57 PM
COMMISSIONER KEMP stated that he has enhanced the DOT&PF's
relationship with the Federal Highway Administration (FHWA), the
state's federal partners and has transferred buildings to Alaska
Industrial Development and Export Authority (AIDEA) in exchange
for a building at Ward Cove to assist the AMHS. He also stated
he changed the Alaska Class Ferry (ACF) back to a shuttle ferry
service, which kept that project on track. He opined as deputy
commissioner he has served the department well, which has
prepared him to assume the position as commissioner. In
conclusion, he said he is humbled by the governor's appointment
and to speak to the committees today. He offered his belief
that he has developed good working relationships with
legislators and offered to be forthright and honest with members
and make an effort to try to address their concerns.
1:12:35 PM
REPRESENTATIVE FEIGE remarked that normally campaign events in
his district are boring, but one issue elicited a cheer in the
room: the DOT&PF's announcement of an increase to speed limits.
He pointed out his district had experienced some issues due to
heavy rains; however, the commissioner took action quickly and
timely and crews are currently fixing the Glenn Highway and
keeping it from possible closure.
1:13:44 PM
REPRESENTATIVE ISAACSON congratulated the commissioner as the
first Alaskan born commissioner in the state to come up through
the ranks to become commissioner. He appreciated hearing about
the accomplishments thus far. He asked how the commissioner
intends to involve the public with respect to DOT&PF activities
beyond roads.
COMMISSIONER KEMP clarified that he is the first Alaskan-born
commissioner for the DOT&PF. He said public involvement is the
backbone for considerable work on developing DOT&PF's projects.
In fact, the department has maintained a calendar for public
meetings and posts the calendar on its website. Further, he
offered his belief the department goes "above and beyond the
public involvement process" and works to help people understand
the projects. For example, he described an instance in which a
person e-mailed him with a series of complaints. He initially
responded by e-mail to acknowledge he understood the person was
upset with the department on a number of scores. Subsequently,
he offered to direct department staff in his region to meet him.
At that point the person responded in a much more conciliatory
tone. Ultimately, the DOT&PF was able to address the person's
concerns in a satisfactory manner, he stated.
1:16:18 PM
REPRESENTATIVE ISAACSON brought up changes to the ACF's project
from a proposed single large vessel to two proposed shuttle
ferries. He asked whether the department will have a public
process for the proposed shuttle ferries.
COMMISSIONER KEMP agreed the DOT&PF would do so. He explained
that the ACF went through a significant vetting process in the
early 2000s, which culminated in the 2004 Southeast Alaska
Transportation Plan (SATP). He characterized shuttle ferries as
being one key link in the plan. In 2006, the DOT&PF moved
forward with the shuttle ferry concept; however, the project
"morphed" over time from the initial shuttle ferry concept to a
quasi-mainline ferry, he said. Ultimately, under his direction,
the DOT&PF scaled back the project. He anticipated a design
concept report would be finalized in the next couple weeks. He
also agreed the public would be involved in the process. In
conclusion, he predicted the public will like the shuttle ferry
project since it will offer the AMHS more capacity, will cost
less to operate, and it will be within the DOT&PF's budget.
1:18:12 PM
SENATOR FRENCH asked about the Juneau Access Road project. He
asked him to discuss his involvement and coordination of the
project.
COMMISSIONER KEMP answered that 20 years ago the incoming
commissioner assigned him the Juneau Access Road project. He
stated that he worked on pre-construction engineering, although
he acknowledged that for a short time he was also the project
manager. He admitted he initially did not know anything about
the project but he also assumed a road project would be too
costly. In response to a comment, he clarified Juneau is the
largest community not connected to a road system in North
America since Victoria, British Columbia is on an island.
Essentially, as staff he analyzed and reviewed the cost of the
ferry system, including the demand, opportunity, and flexibility
to travel. In conclusion, financially, the road project "came
out ahead." Incidentally, he related the initial Environmental
Impact Statement (EIS) was signed by him. Currently, the
project is undergoing a court-ordered EIS, which is due out in
draft in March or April. Lastly, he noted the shuttle ferries
will be incorporated in the plan as part of the no-build
alternative.
1:20:44 PM
SENATOR FRENCH asked whether anything in this year's budget
would help create the Juneau Access Road project.
COMMISSIONER KEMP answered yes, that a $10 million request is
included in the governor's capital budget. In further response,
Commissioner Kemp recalled the east side of Lynn Canal
alternative stops at the Katzehin Delta across from Haines,
which would require a five to ten miles ferry ride to Haines.
SENATOR FRENCH asked whether the shuttle ferries would be ideal
for that run.
COMMISSIONER KEMP agreed they would be ideal. He said the
shuttle ferry could handle the demand, which is about seven
times greater than currently provided given the estimated annual
average daily traffic (AADT) of 500 vehicles per day. In
further response to a question, he clarified the AADT is an
estimate by DOT&PF's engineers of the daily demand for travel
between Juneau and Haines. Thus, the DOT&PF estimated 500
vehicles a day would travel on the road if the Juneau Access
road current existed.
1:22:37 PM
SENATOR BISHOP recalled his own confirmation hearing by the
legislature. He remarked that the state is fortunate to have
Commissioner Kemp come back to state service. Additionally, he
noted he first worked with Commissioner Kemp in the private
sector and found him to be trustworthy. He noted Commissioner
Kemp's efforts helped advance training apprenticeships in
Alaska. He expressed interest in the proposed "tow plow"
operation. He said he appreciated Commissioner Kemp's personal
achievements. He remarked, on a personal note, that two of
Commissioner Kemp's children are engineers and one is district
attorney in Juneau. He concluded by thanking Commissioner Kemp
for his service.
1:24:18 PM
SENATOR FAIRCLOUGH said she echoed Senator Bishop's comments.
She thanked Commissioner Kemp for his service to the state. She
asked Commissioner Kemp to discuss his management style.
COMMISSIONER KEMP answered that he likes to delegate and
currently has three excellent deputy commissioners.
Specifically, he changed from assigning deputy commissioners to
a transportation mode to using a team approach to set the
DOT&PF's policy and improve communications with the legislature
and the governor's office. So far, he viewed nothing but
positives from appointing Kim Rice and Rueben Yost to join Steve
Hatter as his deputy commissioners. Under his leadership, the
responsibility to accomplish projects and tasks rests with the
division directors - like Jeff Ottesen, Captain Falvey, and
Steve Titus. He reported that this approach is working very
well. During the past two years, as deputy commissioner, he has
met with the regional directors to identify deficiencies in
function and communication issues. Currently, the DOT&PF's
deputy commissioners now spend more time in the field,
interfacing with legislators and directors. Thus, by increasing
efficiencies by delegating and improving communications, he has
been able to cross things off the issues list, he said.
1:27:46 PM
SENATOR FAIRCLOUGH commended Commissioner Kemp on his ability to
make improvements in communications; however, she viewed this
hearing as focusing on his leadership and expertise and
leadership and not on one project or accomplishment. She asked
him to describe the importance of public process and how that
process shapes and reflects the decisions the DOT&PF implements.
COMMISSIONER KEMP answered that public involvement and input is
important to the department. He said that public input depends
on the specific type of project. For example, on a National
Highway System (NHS) project, the DOT&PF's emphasis is to
promote safety, ensure good traffic flow, and improve commerce,
whereas on a local project the process is more "touchy feely"
and the DOT&PF works to incorporate more of the public comments
as the scope of the project progresses. He characterized
incorporating public input as a function of the project's
budget. Sometimes the public wants enhancements included in
projects, which are not possible to achieve. For example, in a
proposed 20 mile highway paving project, the public input
process might identify that people also want bike paths,
lighting, and sidewalks added. Ultimately, if the department
added the additional requests, the 20-mile paving project would
need to be pared down to a one-mile project to accommodate the
public's input. Therefore a line must often be drawn. Although
the DOT&PF is sometimes criticized for its decisions, he said he
felt confident the record will reflect the department very much
considers public input.
1:30:11 PM
CHAIR P. WILSON, in her as Chair of the House Transportation
Committee, indicated she has worked with Commissioner Kemp.
Consequently, she said she has observed improvements in DOT&PF's
decisions on roads, which is an area under Commissioner Kemp's
purview. Specifically, she said the funding method on road
projects has improved. Previously, Alaska typically funded the
most difficult projects with federal highway funds; however,
under Commissioner Kemp some of the easier projects have been
funded with federal funds, which frees up state monies for local
projects. This has resulted in cost savings, she stated. She
acknowledged that she appreciates the commissioner's style and
demeanor. She concluded by saying she has really enjoyed
working with him.
1:32:01 PM
REPRESENTATIVE ISAACSON characterized Commissioner Kemp as a
"gentle giant." He described his communication style as
beneficial. To illustrate, he pointed out the Interior Region
must maintain the largest amount of roads that span a huge
district. He said the Interior Region sometimes feel "short
shrifted" so having excellent communication helps. He also
acknowledged that sorting through the railroad crossing
maintenance has been helpful to his district. He referred to
the requirement for the state rail plan to be updated every five
years, which he indicated hasn't been done in twenty years. He
asked the commissioner to elaborate on whether the plan will be
updated, since it is important to communities.
COMMISSIONER KEMP agreed the state is responsible for rail
plans. He agreed that the rail plan hasn't been updated for the
twenty years, in part, since the federal funding process was
different. In fact, the DOT&PF wasn't required to request
Federal Railway Administration (FRA) funds. However, the FRA
funds are more "front and center" now and the rail plan
currently needs to be updated. He reported the DOT&PF has hired
a consultant, met with the two railroads - Alaska Railroad and
White Pass Yukon Route (WP&YR) - and has been busy updating the
plan. In fact, the DOT&PF plans on extending the WP&YR to
obtain access to heavy ore deposits, he said. To summarize, the
DOT&PF is working with the railroads to update the document,
which he anticipated would result in a good document that the
DOT&PF can use for funding purposes.
1:35:16 PM
CHAIR EGAN indicated at one time he also worked for the DOT&PF.
In fact, he has known Commissioner Pat Kemp since 1971, he
stated. He recalled when Commissioner Kemp was hired. Although
he sometimes disagrees with Commissioner Kemp on issues, he has
always found him to be honest, straight-forward, and truthful.
He said, "On behalf of my community and our district of
Southeast, I'm very proud of you. You'll be a perfect fit."
1:36:12 PM
SENATOR FAIRCLOUGH asked Commissioner Kemp to describe the most
challenging project and also the most rewarding project he's
completed.
COMMISSIONER KEMP answered that working as a structural engineer
the Douglas bridge project was the most challenging project
since it consisted of a prestressed cantilevered bridge, which
at the time was the fifth longest span in the world. Although,
he has been involved in a thousand other projects since then,
the Douglas bridge project remains as the most challenging
project he could recall. In further response, he agreed the
Douglas Bridge project also represented the most rewarding
project for him since it encompassed many challenging aspects.
In fact, working on the bridge also led him to become a
registered engineer.
1:37:54 PM
REPRESENTATIVE KREISS-TOMKINS recalled the commissioner hopes to
integrate different divisions within DOT&PF and expanded deputy
commissioner Yost's role. He asked Commissioner Kemp to
describe other actions he will take to "de-silo" the deputy
commissioner roles.
COMMISSIONER KEMP answered his team has been together for about
a week so he has not yet determined other changes. He
characterized the team as "fresh" noting he was appointed
commissioner about a month ago. Thus far, the team is working
out quite well, he said.
1:39:22 PM
REPRESENTATIVE KREISS-TOMKINS recalled the committee previously
discussed the Marine Transportation Advisory Board (MTAB) and
the Alaska Class Ferry (ACF). He acknowledged the respectful
apology the commissioner made to the committee, which was well
received. He understood the commissioner did not consult with
the MTAB since he was unfamiliar with the board. He asked
whether the commissioner has any other realms he is similarly
unfamiliar with outside of ferries.
COMMISSIONER KEMP responded that he is familiar with all modes
of transportation. He stated he has worked with facilities, the
AMHS, and aviation during his 30-year career, as well as ferry
terminals. Although he was assigned as deputy commissioner for
highways, he did not think it would be a fair assessment to
characterize highways as being his only focus since he views his
background at DOT&PF as being well-rounded. He acknowledged he
is not totally up to speed on the Anchorage International
Airport System (AIAS); however, he doesn't think he has an
Achilles heel in any division. He offered to further consider
this and respond at a later date.
REPRESENTATIVE KREISS-TOMKINS asked what role the commissioner
envisions for MTAB.
COMMISSIONER KEMP offered his belief the MTAB will act in an
advisory role. He commended Robert Venables as a great chairman
and board members as being very involved with the AMHS. He
admitted he hadn't known quite how far an advisory board's role
extended, but as a result of attending the MTAB's recent board
meeting he more fully understands the sensitivities a bit
better. He acknowledged the MTAB's advisory role as being
different from a board of directors' role.
1:42:50 PM
REPRESENTATIVE KREISS-TOMKINS recalled the commissioner
identified one achievement as the changes made to the Alaska
Class Ferry (ACF) project to bring the project under budget and
obtain future savings. He understood the design concept report
for the proposed shuttle ferries is not yet completed. He
compared the proposed 350-foot ACF, engineered at 35 percent and
budgeted at $160 million vis-à-vis the two proposed 280-foot
vessels. In fact, the proposed shuttle ferries total 560 feet,
which currently are at zero percent engineering. He asked
Commissioner Kemp to comment what certainty he has that the
revised project will come in under $120 million given the two
proposed shuttle ferries have not yet been designed.
COMMISSIONER KEMP answered that the initial global estimate for
the shuttle ferries is $49.5 million each; however the cost of
any vessel is not linear to its length. Once the ACF was
discovered over budget, the governor wanted to "chop length" but
despite removing amenities the DOT&PF still couldn't get the
project under budget. Specifically, the ACF project costs
increased exponentially once the mechanicals, crew staterooms,
and safety items were added. He reiterated that cost is not a
linear formula. In essence, the proposed roll-on roll-off ferry
- with an interior similar to a fast ferry that represents a
much simpler design - leads to lower operating cost. He
confirmed the DOT&PF's goal is to construct the two proposed
ferries for under $100 million. He reported he will meet with
the shipyard next week and anticipates the design concept report
will be finished in a couple weeks.
1:46:02 PM
REPRESENTATIVE KREISS-TOMKINS asked for a firmer date for the
design concept report.
COMMISSIONER KEMP indicated he initially thought the report
would be finished by mid-January. While the DOT&PF has a
preliminary draft for the proposed shuttle ferries, the
department is currently in the process of reviewing the draft.
Although the proposed shuttle ferries currently have an ocean
hull design, the main consultant may come back with a slightly
different design. He anticipated the design might be similar to
the hull design used by the Inter-Island Ferry Authority in
Ketchikan. He expressed interest in meeting with the shipyard
and the Elliott Bay Design Group as soon as possible.
1:47:03 PM
REPRESENTATIVE ISAACSON made a motion, after reviewing the
qualifications of Pat Kemp for the position of commissioner of
the Department of Transportation & Public Facilities (DOT&PF),
to forward the confirmation of Pat Kemp to the joint session of
the legislature for consideration.
CHAIR P. WILSON noted that the motion is on behalf of the House
Transportation Standing Committee. She reminded members that
signing the report regarding appointments to boards and
commissions in no way reflect individual members' approval or
disapproval of the appointees, and that the nominations are
merely forwarded to the full legislature for confirmation or
rejection.
A roll call vote was taken. Representatives Isaacson, Feige,
Gattis, Johnson, Kreiss-Tomkins, Lynn, and Wilson voted in favor
of confirmation of Pat Kemp as commissioner of Department of
Transportation & Public Facilities (DOT&PF). Therefore, the
confirmation for Pat Kemp was reported out of the House
Transportation Standing Committee unanimously by a vote of 7-0.
1:48:26 PM
CHAIR EGAN asked for motion on behalf of the Senate
Transportation Committee.
SENATOR DYSON REPRESENTATIVE made a motion to for the forward
the name of Pat Kemp to the full senate to be considered for the
office of commissioner of the Department of Transportation &
Public Facilities (DOT&PF).
1:48:36 PM
A roll call vote was taken. Senators Dyson, Fairclough, Bishop,
French, and Egan voted in favor of the confirmation of Pat Kemp
as Commissioner of Department of Transportation & Public
Facilities (DOT&PF). Therefore, the confirmation for Pat Kemp
was reported out of the Senate Transportation Standing Committee
unanimously by a vote of 5-0.
1:49:05 PM
The committee took an at-ease from 1:49 p.m. to 1:53 p.m.
^KNIK ARM BRIDGE AND TOLL AUTHORITY (KABATA) Update
KNIK ARM BRIDGE AND TOLL AUTHORITY (KABATA) UPDATE
1:53:48 PM
CHAIR P. WILSON announced that the final order of business would
be the Knik Arm Bridge and Toll Authority (KABATA) update.
1:53:56 PM
MICHAEL FOSTER, Chair, Knik Arm Bridge and Toll Authority
(KABATA), began his PowerPoint presentation by reviewing the
mission statement [slides 2-3]. In 2003, the KABATA was created
by the legislature under AS 19.75 with the mission to connect
the east and west side of Cook Inlet, which is also referred to
as the Knik Arm Crossing (KAC). He highlighted that the three
parts of his presentation today will consist of population,
traffic projections, and the public private partnership (P3)
proposal.
1:55:36 PM
MR. FOSTER referred to the regional population [slides 4-5]. He
noted that the 387,516 population totals about 54 percent of
Alaska's population, with about 92,000 residents residing in the
Matanuska-Susitna area and 296,000 residents residing in the
Municipality of Anchorage area. He discussed the 2035
population forecasts, which show the population figures and
percent of growth are based on the Alaska Department of Labor
projections, Woods & Poole's economic and demographic
projections - a third-party independent - Wilbur Smith
Associates (WSA), and the University of Alaska's Institute of
Economic Research (ISER) projections, which all predict about
the same population growth [slide 7]. The 2010 to 2035 figures
represent actual population and population projections. This
shows the growth in the past 25 years at 140 percent and
estimated in the next 25 years at 112.7 percent in the
Matanuska-Susitna area. The overall population increased for
the region was 44.5 percent in 2010 and is expected to remain at
42.9 percent going forward to 2035.
1:55:58 PM
MR. FOSTER turned to the historic and projected population trend
from 1985 to 2035 [slide 7]. In his recent state of the state
address, Governor Parnell indicated that in the past two years
Alaska experienced a higher percentage of growth than it has for
the past two decades. Of course, population growth drives
traffic increases [slides 9-10]. In 1985, Eklutna experienced
an average annual daily traffic (AADT) of 15,682 vehicles, which
by 2010 had increased to 29,665, and is forecasted to reach
65,000 by 2035. These projections are based on a no-bridge
alternative, he said. He contrasted the AADT at Hiland Road in
1985 at 33,555 to traffic in 2010 of 52,824, which is projected
to increase to 110,000 by 2035. In fact, currently the Glenn
Highway is at design capacity. While this doesn't mean more
traffic cannot travel on the highway, it does mean traffic will
move more slowly. According to national standards, the traffic
counts put the Glenn Highway at capacity at four lanes and at
peak flow using six lanes.
1:58:47 PM
CHAIR P. WILSON asked for any projections on estimated crashes
for the Glenn Highway after it goes beyond capacity.
MR. FOSTER answered that crashes would increase; however, to
meet the projections the Glenn Highway would have to be expanded
to an eight or ten-lane highway.
1:59:38 PM
REPRESENTATIVE KREISS-TOMKINS asked for the source of the 2035
traffic forecast used.
MR. FOSTER answered that the 2010 traffic counts were based on
actual numbers. The 2035 AADT figures were based on the
estimated on population model projections. Estimates predict
population from Eagle River Bridge north to Eklutna will
increase by 74 percent or an additional 37,000 residents. The
Matanuska-Susitna Borough traffic projections estimate an
additional 100,000 residents will reside north of Anchorage. In
further response, Mr. Foster related that the traffic forecast
was obtained from KABATA's consultants, Wilbur Smith Associates
(WSA) and from the DOT&PF's figures used in its long-range
transportation plan.
2:00:58 PM
MR. FOSTER pointed out the graphics for the Glenn Highway's AADT
Counts [slide 11]. He briefly discussed the "no bridge
alternative" [slide 12-13]. Currently, the DOT&PF's State
Transportation Improvement Plan (STIP) is used to fund projects.
Assuming the Knik Arm Crossing project is not built, the DOT&PF
would need to find ways to handle northbound traffic from
Anchorage. Thus, the "no bridge alternative" means the state
must accommodate the potential 60,000 vehicles AADT at Eklutna,
assuming by then the Glenn Highway would be a six-lane highway.
Additionally, to accommodate the potential 110,000 AADT on
Hiland Road would require the Glenn Highway would be eight lanes
from South Eagle River to Fifth Avenue in Anchorage. In 2008,
the STIP's cost estimates for highway upgrades total $3 billion,
although the upgrades would happen in phases and be based on
FHWA funds and the STIP allocation. He reiterated the 2008 cost
allocation for the Glenn Highway expansion is projected at $3
billion, with projections based on estimates by the Anchorage
Metropolitan Area Transportation Solutions (AMATS) and from the
state DOT&PF's STIP plan.
2:02:59 PM
MR. FOSTER discussed the bridge alternative for the Knik Arm
Crossing [slides 14-15]. In 2003, the legislature established
the KABATA. Currently, the Glenn Highway runs north from
Anchorage and forks with the Parks Highway heading north to
Fairbanks and the Glenn Highway continues on to Glennallen. He
pointed out other projects in the area, including the Port
MacKenzie Rail Extension, the South Big Lake, and Burma Road
projects. He turned to an aerial photo of the project alignment
for the KABATA project for the Knik Arm Crossing (KAC) project,
which consists of building a 14,000-foot crossing plus adding 18
miles of road. He emphasized that the project is not just the
bridge structure, but also the 18 miles of road improvements to
the A/C coupler, and eventually would include the Ingra-Gambell
connection. Additionally, the project also would include a cut-
and-cover tunnel under a Government Hill neighborhood, travels
around the backside of the Port of Anchorage, and would cross
the Elmendorf Air Force Base (AFB) radar cage installation, past
Anderson Bay and connecting to Burma Road.
2:04:46 PM
MR. FOSTER explained Phase 1 of the private-public-partnership
(P3) for the Knik Arm Crossing [slide 17]. He stated that Phase
1 of the project includes a four-lane foundation with a
pedestrian and bicycle lane. Phase 1(a) would consist of a two-
lane deck to accommodate the initial lower traffic volumes, but
the deck could be expanded to a four-lane when needed. He
emphasized the foundation will initially be built for the entire
four-lane structure. In response to a question, he answered the
bridge would span approximately two miles, or 9,000-10,000 feet,
with fill abutments. He related that no "water work" will need
to be done after the initial construction. He detailed the cut-
and-cover tunnel [in Government Hill] would consist of four
lanes. This project has been pre-qualified as a National
Highway System (NHS) project, with a 44-foot width of actual
driving lanes - consisting of a 10-foot shoulder, two 12-foot
lanes, and a 10-foot shoulder. Thus, the road would not be
closed if an accident happens since it is wide enough to
accommodate traffic during construction. He estimated the cut-
and-cover tunnel would take approximately four years to
construct. He briefly explained the state's agreement in the P3
partnership means the first availability payment would not be
due until the bridge is open and available for traffic. He
estimated the cost estimates in 2015 dollars, which for Phase
1(a) is $715 million for a four-lane structure and a two-lane
bridge, cut-and-cover tunnel for Government Hill and the A/C [A
Street/C Street] connector improvements. He further explained
that Phase 1(b) has a cost estimate of $125 million, which
consists of the conversion to a four-lane bridge, but does not
include the Ingra-Gambell road improvements.
2:08:07 PM
SENATOR FRENCH asked who would absorb any project cost overruns.
MR. FOSTER answered the private partner has total responsibility
for financing, designing, building, operating, maintaining, and
collecting tolls. The state does not have any risk for any
construction cost overruns, delays in schedules, or any other
factors related to construction of the Knik Arm Crossing, he
said.
2:08:37 PM
SENATOR FRENCH understood that if the bridge costs three times
as much as the projected amount the state would be insulated
from the cost calamity.
MR. FOSTER agreed that if the project costs were twice as much
or half the cost, the state would be insulated. He
characterized it as being similar to the lease payment for a
building. The parties agreed to the lease and if it costs more
to build the building, the owner must still pay the same lease
amount. Thus, the availability payment would consist of the
state's obligation to pay once the project is available for
traffic. Typically, P3 models come in about ten percent under
the estimated construction cost, he reported.
2:09:59 PM
SENATOR FRENCH said he was under the impression the state was
"on the hook" so if the toll revenue did not cover the necessary
payment the state would need to make up the difference. He
asked for further clarification.
MR. FOSTER answered Senator French is correct that the state is
obligated to make up the toll difference. The state's "skin in
this game" is that the state owns the toll revenue. He
explained that the state must make the availability, or lease
payments, to the private partner as part of the initial
contract. In the event traffic is low and the toll revenue is
insufficient to make the availability payment, the reserve fund
would be used to make up the difference. However, the state is
insulated in terms of the construction, operation, and
maintenance portions of the project regardless of the costs to
the private partner. He reiterated the state is insulated from
those costs. He confirmed the state's risk or "skin in this
game" is the ability to earn sufficient toll revenue to make the
contractual availability payments.
2:11:28 PM
SENATOR FRENCH asked to hone in on the project financing since
the Knik Arm Crossing has been the subject of heated controversy
in his district. He related a scenario in which $1 billion is
budgeted for the Knik Arm Crossing project, but the bridge
ultimately costs $3 billion to complete. He asked whether the
state would cover tolls up to $1 billion of the availability
payment. He surmised the construction company would want to
recover its overrun costs.
MR. FOSTER answered the state has no obligation to the private
partner if it costs more to build, operate, or maintain the
project. The state's liability and obligation, by contract,
would be limited to the availability payment, similar to a lease
payment for office space.
2:12:33 PM
SENATOR BISHOP asked whether the project cost overruns would be
between private partner, the bonding company, and the bank.
MR. FOSTER agreed.
2:12:44 PM
CHAIR P. WILSON said a marine pilot indicated the tides are so
strong that it could impact the bridge structure. She asked for
clarification on the structural safety.
MR. FOSTER answered that from an engineering perspective
nature's concrete or consolidated glacial till is the best
material to use. He elaborated that the scour area of Cook
Inlet is bathed twice a day by six or seven knot tidal currents;
however, the pilings would be embedded in nature's concrete. He
emphasized consolidated till is the best material for building
pilings and structures. In fact, the project is fully
engineered in terms of ice dynamics, seismic loading, currents,
scour, and foundation [slide 18]. Additionally, the private
partner is responsible to build, finance, and maintain the
structure to a certain criteria which means the project must be
maintained to the state's level of expectation. After all, the
private partner will have 10 percent equity in the project and
90 percent bonding so the company will figure a way to get any
problem fixed, he stated. In essence, any design flaw would be
passed on to the private partner via the P3 contract, he said.
2:14:51 PM
MR. FOSTER provided a view of the late season [slide 19]. He
explained an oscillated drilled shaft operation and described
the auger process that would be used on the project [slide 20].
He recalled similar use of an oscillated drilled shaft operation
used on a DOT&PF project for a highway crossing at the Tanana
River. He pointed out one advantage with an oscillated drilled
shaft operation is less noise, which is important since
endangered species live in the Cook Inlet.
2:15:59 PM
MR. FOSTER showed an illustration of the project at the
foundation wrap up at season 2 [slide 21]. The project would be
at the deck installation phase in this depiction, he said.
2:16:14 PM
CHAIR P. WILSON recalled questions have been raised about the
concern that the project lies on an earthquake fault.
MR. FOSTER agreed that most of Southcentral Alaska sits on some
type of earthquake fault and seismic activity exists in Alaska,
noting the 1964 earthquake in Anchorage. He said engineering
focuses on the acceleration factor. He assured the committee
the bridge would be built to seismic standards so if the
contractor failed to meet the standards, any failure of the
structure would fall on the contractor.
2:17:34 PM
MR. FOSTER compared illustrations depicting an aerial view of
Government Hill before and after the proposed project completion
[slides 22-23]. He pointed out the location of the former
military tank farm at the top of the slide. He reported the
status, noting one property still needs to be acquired for the
cut-and-cover portion of the project. He related that the
KABATA is currently working on acquiring one duplex and the
other commercial properties are on railroad leased land.
2:18:59 PM
CHAIR EGAN asked whether KABATA's change to a cut-and-cover
concept on the Government Hill portion of the project has
extinguished some resident's fears.
MR. FOSTER answered that an outspoken group does not support the
project; however some people do support it. He explained the
cut-and-cover tunnel is a mitigation factor intended to reduce
impacts of the project on the community. He acknowledged some
concern still exists in the Government Hill area.
2:20:00 PM
SENATOR FRENCH asked specifically where the cut-and-cover bridge
will be located.
MR. FOSTER identified the location of the cut-and-cover tunnel,
which he described as a $50 million effort to mitigate the
impact of the project on the community. In further response to
a question, Mr. Foster answered no, the photograph does not show
the Ingra-Gambell Connection; however, it shows the A/C coupler
connection in Phase 1(a). Mr. Foster agreed with Senator French
that the slide refers to "after Phase 1" and not after the
"Ingra-Gambell Phase 2."
2:22:17 PM
REPRESENTATIVE ISAACSON asked for clarification on the location
of the cut-and-cover tunnel. He then pointed a four-lane road
in the middle of the slide and asked whether this is the
location of the cut-and-cover location.
MR. FOSTER agreed that was the location.
2:24:32 PM
MR. FOSTER discussed the Knik Arm Crossing Phase 2, [slide 24],
which provides a four-lane upgrade to Point MacKenzie Road and
includes the new viaduct connection to Ingra-Gambell Road, with
an estimated cost in 2015 at $276 million; however, Phase 2 is
not part of the public private partnership, but would be paid
through the toll revenue. In other words, Phase 3 of the Knik
Arm Crossing project would not be needed unless sufficient toll
revenue and traffic exists, but once it is deemed necessary the
toll revenue would cover the construction costs. He
characterized Phase 3 as a stand-alone project, but is one that
could be added to contract [slide 25]. He described Phase 3 as
a natural connection north out of Anchorage.
2:26:17 PM
MR. FOSTER referred to the public-private partnership (P3)
[slides 26-27]. He emphasized that the P3 agreement represents
a contract between the private entity and KABATA. He reported
that KABATA has currently narrowed the contractors down from six
to three highly qualified firms. He said the private partner
contractor would be responsible to finance, design, build,
operate, and maintain the project over 35 years. He reiterated
the length of the contract is for 35 years and the state would
not be financing the project.
2:27:09 PM
MR. FOSTER detailed the P3's risk allocations [slide 28].
Unlike the Red Dog project, the P3 is a true separation - or a
corporate veil - between the private and government sector. He
emphasized the state's responsibility is toll revenue and if the
toll revenue is short the state would still need to make
payment. He characterized it as being similar to an office
building that is leased at partial capacity, in which the owner
must still make the payments on the building. He explained the
capacity improvements represent KABATA's responsibilities for
the Ingra-Gambell connection and the Point MacKenzie Road
project upgrade to four lanes. The private developer would take
on its risk and rewards and the state takes on its risk, which
is toll revenue, he said.
2:28:27 PM
CHAIR P. WILSON asked how soon after Phase 1 is completed does
Phase 2 need to happen. She offered her belief Phase 2 will be
necessary in order to obtain toll traffic volumes.
MR. FOSTER agreed. He clarified the project would begin with
Phase 1(a), which is the full build out with a two-lane deck,
and as traffic builds and toll revenue increases, the revenue
generated would be used to build out Phase 2.
2:29:33 PM
CHAIR P. WILSON said some people may be concerned that
sufficient traffic will not exist without Phase 2.
MR. FOSTER reiterated that the only reason Phase 2 would be
necessary is if high traffic exists. Thus as traffic picks up
the next two lanes would be built. He acknowledged the A/C
coupler is one connection while Ingra-Gambell would also provide
an improved connection, especially for access to the Seward
Highway.
2:30:45 PM
CHAIR P. WILSON understood the bridge will initially be a four-
lane bridge and as people will use it sufficient tolls provide
for Phase 2.
MR. FOSTER answered the bridge foundation would consist of four
lanes; however the deck itself is two lanes, which would be
expanded as revenue builds Phase 1(b) is built, and subsequently
Phase 2 would also be built. He pointed out that the
correctional facility is 81 miles from Anchorage - one way - but
will only be a 12-mile trip using the proposed bridge. He said
the proposed bridge is needed for future growth. He asked
members to look at the models, noting the proposed Knik Arm
Crossing is necessary to defer the costs. He acknowledged at
some point the Glenn Highway might need to be expanded, but
substantial growth will occur on the west side of the Cook
Inlet. In response to a question, Mr. Foster agreed that the
pilings will be strong enough to support a four-lane bridge and
the in-water work will be completely finished during Phase 1 of
the project.
CHAIR P. WILSON asked whether the additional lanes can be built
while the bridge is kept open.
MR. FOSTER answered the private partner has responsibility for
bridge construction for Phase 1(a), the two-lane deck, plus
Phase 1(b), which consists of a four-lane deck that would be
built based on traffic necessity. He indicated if the bridge is
shut down for any reason no availability payment will be made.
He said the purpose of an availability project is the structure
must be available or a penalty will be levied. Thus, he
emphasized that it is in the private partner's interest to keep
the bridge open for traffic.
2:33:36 PM
MR. FOSTER turned to the P3 procurement and the shortlisted
teams [slides 29-30]. He described the process as a rigorous
process, yet all six main firms chose to submit a proposal for
the project. He concluded the bids indicate the project is a
healthy and mature project. The three shortlisted teams are
broken into equity, design-build, operations and maintenance,
design, and financial advisor components. He offered his belief
the shortlisted teams represent world-class groups.
2:35:03 PM
SENATOR FAIRCLOUGH asked for the criteria used to determine
world-class applicants and if the respondents had previous toll
authority experience.
MR. FOSTER described the rigorous procurement process used. He
related that the partner had to have the ability for ten percent
equity, representing the "skin in this game" that can be lost.
The group that reviewed this submittal included representatives
from the Department of Revenue, Law, DOT&PF, and KABATA.
Finally, the governor's office was informed, he said. He
offered to provide the criteria used for the submittal, which
was not a standard highway proposal.
SENATOR FAIRCLOUGH said she was interested in the criteria used
to create the short list and whether these groups have operated
a toll bridge previously, including any financials. She
understood due diligence has been performed; however, she would
still like the information.
2:37:30 PM
SENATOR BISHOP referred to the shortlisted teams and remarked
one company has built the only bridge across the Yukon River and
another is building the Tanana Bridge. He characterized the
shortlisted teams as "the best of the best."
MR. FOSTER agreed.
2:38:13 PM
MR. FOSTER listed Alaskan projects that have been good for the
state. He said that Alaska firms are well represented including
Alaska Interstate Construction LLC, URS Alaska, LLC, Golder
Associates, Inc.; Denali Drilling, R&M Consultants, Inc. [slide
31].
MR. FOSTER reported the procurement process that KABATA will use
after the shortlist, which includes a request for proposal (RFP)
will be issued in May, proposals will be submitted, an
evaluation and selection of the best value proposer will be
conducted, and the award and execution of the private partner
agreement will occur [slide 32]. He anticipated it would the
cost each of the three entities or firms $6 to $8 million to
prepare their proposals. He explained each proposal must
include the full design, the financials, maintenance, and
operations submittals. He related each firm will also provide
its own investigative work. Therefore the proposal includes a
$2 million stipend that will be paid to the two unsuccessful
bidders, provided they meet the criteria for the solicitations.
For example, if one of firm submits something that does not meet
the criteria, the firm would not be paid a stipend, he said.
Finally, he reported that the state will own the design and the
submittal and can take the best from the two unsuccessful
submittals and roll in into the successful design. He said this
aspect will enable the state to purchase the work product for
about $.25 per dollar. He characterized the stipend as being a
standard and routine process used in the private sector. In
response to a question, he agreed the stipend is $2 million for
each unsuccessful bid.
2:41:14 PM
SENATOR BISHOP recalled each firm must conduct its own
investigations. He asked whether this references the due
diligence for geotechnical work on the foundation.
MR. FOSTER answered that the state will provide its coastal,
tidal, geological, geotechnical, and seismic information. He
said the firms could use and supplement the information. He
clarified the firms can use or add to the information, which
represents the private partner's risk and costs and not the
state's risk.
2:41:54 PM
REPRESENTATIVE KREISS-TOMKINS asked if common practice in a P3
agreement to award a stipend to losing bidders and if so, how
large a stipend is normally paid.
MR. FOSTER responded it is typical to award stipends in P3
agreements in the private sector, but awarding stipends is a new
form of procurement in Alaska. He said stipends can range from
a few hundred thousand dollars to more than $2 million depending
on the total project's value and how much information is
available. He cautioned that the state would not want to pay
five unsuccessful firms a stipend; however, the three short
listed firms will spend considerable funds to participate and
offering a stipend tends to attract firms. One of the state's
advantages is that the state will own the final work product;
thus the state pays for a portion of the work product that can
be used for value engineering (ve). He said he does not
currently have statistical figures but he offered to provide
them at a later date. In further response, he agreed to provide
the scope of stipends for comparable projects and size.
MR. FOSTER agreed to provide the information to the committee.
2:44:57 PM
SENATOR FAIRCLOUGH remarked that the Alaska Gasline Inducement
Act (AGIA) produced a $500 million payment to receive
information that could also be used later. She understood the
legislature has tried to look forward and have firms bid on
projects, and would acquire and retain that information for
future use if the firm is not successful.
2:45:44 PM
MR. FOSTER turned to P3 contract terms, including the scope,
term, potential financial and credit support, termination for
convenience clause [slide 33]. He explained that $150 million
in funding would be used for the project reserve to make up for
the anticipated shortfall as traffic develops for the toll
bridge. Additional funding for the Knik Arm Crossing includes
$600 million in SAFETEA-LU private activity bonds (PAB)
allocation, and $500 million in Transportation Infrastructure
Finance and Innovation Act of 1998 (TIFIA). He acknowledged
substantial interest has been expressed in the two
aforementioned funding sources. He reiterated that the state
would not be financing this project. The private partner would
apply for the TIFIA loan; however, the state would provide the
conduit for it as a public entity and the state would use the
$600 million in PAB and $500 million in TIFIA. He characterized
this as being a moral obligation, which is not debt service
related to PAB or TIFIA. For example, what makes TIFIA - which
is a MAP-21 program - so attractive is that it helps fund
infrastructure. The KABATA was one of the first in line for
this first-come first-served program. Currently, the TIFIA
application is on hold awaiting the legislature's approval to
demonstrate the state's commitment to the project. He described
TIFIA's terms as very forgiving, noting although interest
accrues a payment is not required during the first five years.
This deferred payment would allow the private partner to use the
program to fund the project and as toll revenue increases, the
availability payment will also increase. Essentially, TIFIA
would be worth $100-$150 million up-front to the private partner
in this model. He emphasized the importance of both TIFIA and
PAB as being important to the private developer. Again, the
state has no debt service or liability - or cosign liability -
in the agreements, he said.
2:49:06 PM
CHAIR P. WILSON asked whether MAP-21 changes improved the TIFIA
program.
MR. FOSTER responded that the newest TIFIA program has about $17
billion available, ranging from 33 percent to 49 percent based
on project eligibility. For example, a developer could apply
for a TIFIA loan on a $1 billion project, which essentially
would equate to $33 million. He said he has a list of states
that have applied for the program since December 2012. He
recalled that applicants have applied for $8 of the $17 billion
available. He further recalled KABATA is either first or second
on the list. He said he has responded to critic's comments on
KABATA's continued TIFIA applications by stating that KABATA
must stay in the queue. While KABATA has previously filed a
letter of interest to TIFIA, the project is now mature and is
shovel ready. Further, TIFIA funds are not based on political
criteria of the past, but are now first-come first-served loans.
Currently, KABATA has submitted a letter of interest and is on
hold, pending commitment from the state to move the project
forward, he also said. Additionally, the governor has submitted
a letter to the FHWA in strong support of the project. Further,
the governor has committed in his capital project for the
project. He concluded that KABATA needs TIFIA to move the
project forward.
2:52:41 PM
CHAIR EGAN asked whether the $600 million for the SAFETEA-LU
Private Activity Bonds (PAB) is still available even though the
federal funds have lapsed.
MR. FOSTER answered yes. In response to a further question, Mr.
Foster agreed the PAB has already been reserved. He related the
$600 million is available for the private partner to apply for
and use; however, the TIFIA terms are much more attractive and
valuable to the private partner and in turn, for the state since
it would equate to lower-cost proposals.
2:53:47 PM
REPRESENTATIVE ISAACSON asked when allocation for SAFETEA-LU
will expire since the program has lapsed.
2:54:07 PM
KEVIN HEMENWAY, Chief Financial Officer (CFO), Knik Arm Bridge
and Toll Authority (KABATA), answered said the SAFETEA-LU
established a $15 billion national cap for private activity
bonds (PAB), which will be allocated by the U.S. Department of
Transportation for projects until the cap is fully consumed.
Thus the funds did not expire with the end of SAFETEA-LU. He
concluded the $600 million is available through procurement and
if it is not used by a time certain will be deposited to the
pool. He indicated KABATA is the only allocation without an
expiration date on the PAB capacity allocation. He anticipated
that taking action over next year or two will ensure the benefit
of the PAB, which will allow the private partner to borrow tax-
exempt funds for public purpose projects with private
participation.
2:55:33 PM
REPRESENTATIVE FEIGE stated that he has a series of questions to
ask and KABATA can respond at a later date. He referred to
slide [5], to the population growth in region. He suggested the
decision to use or not use the Knik Arm toll bridge will depend
on the time it takes to either traverse the bridge or use the
highway. For example, he said drivers will decide whether it is
shorter to go over the bridge or drive on the Glenn Highway. He
asked whether the consultants prepared a map including a time
analysis to display time differences for the routes. He further
suggested that ground zero should be Gambell and Fifth Avenue.
He referred to slide 6, to the population growth and asked
specifically where the growth will occur. He indicated this
specific information has a bearing on the pool of people
available to use the bridge and pay the toll. He next referred
to slide 13, to options to expand the Glenn Highway, recalling a
toll was not considered. He asked for the reason a toll was not
considered on the Glenn Highway and whether a Glenn Highway toll
would be a reasonable alternative to providing revenue to fund
an expansion of the highway.
REPRESENTATIVE FEIGE questioned KABATA's assertion that the
state is not financing the Knik Arm Crossing project, finding it
somewhat misleading. After all, the state will make the
availability payments and is obligated to make the payments
whether or not the toll revenue is sufficient to make them. He
understood the graduated scale; however, the state assumes the
risk. He read," The primary risk to the state is that tolls
will fall short of the availability payment requirement." He
asked where the shortfall funds will come from. He offered his
belief that the shortfall funds would come from statewide
highway funds for all of Alaska. He asserted the availability
payment liability creates a significant and major risk.
Finally, he asked what traffic count across the bridge is
necessary to have sufficient toll revenue to make the
availability payment. He clarified he would like specific
numbers. He recalled the comparison on the Glenn Highway and
how it directly relates to projected population in 1985 and
2010. He characterized it as a direct correlation since as
population increases it results in an increase in passenger
counts on the Glenn Highway. After all, if the passenger counts
are split, it is important to know how many people need to use
the bridge to make the availability payment and whether
sufficient population will exist. He remarked he is suspicious
the population increases will not happen since it is notoriously
difficult to predict population growth. He concluded population
shortfalls represent a significant risk for this project and to
the state's finances.
2:59:40 PM
SENATOR FRENCH asked to add to the excellent questions posed by
Representative Feige. He offered his belief the state does not
adequately assess risks on its projects by identifying what
could go wrong on government projects. He related a scenario in
which one assumption is that the Knik Arm Crossing comes in on
target, but no traffic uses the bridge. He asked for the amount
of the largest payment necessary using this worst case scenario.
MR. FOSTER suggested his subsequent slides will answer this
question as well as some of Representative Feige's questions.
He said he does have the specific information. He pointed to
the termination clause in the P3 contract that will allow the
state to terminate the contract for convenience, or to pay it
off and take over the project.
MR. FOSTER turned to why the reserve fund is needed [slide 34].
He indicated this is similar to a line of credit that is paid
back. Secondly, the reserve fund will cover forecasted revenue
shortfalls during early year ramp-up period. Finally, the
reserve fund will reduce the availability payments by reducing
the cost of capital. He offered to provide the committee with
answers to Representative Feige's questions.
3:02:00 PM
SENATOR FAIRCLOUGH asked who will negotiate the availability
payment, or lease payment - the state's "skin in this game."
Additionally, she further asked at what point is the full faith
and pledge of the state made. She expressed her preference to
have written responses rather than have Mr. Foster answer the
questions today. Additionally, she also asked for the decision-
making point of contract capacity and whether the contractor or
KABATA determines this or if the state is involved. She
clarified she is asking whether a criterion is built into the
contract to make it a state obligation to build.
3:03:16 PM
MR. FOSTER related the KABATA has projected obligations and toll
revenues [slide 35]. He said the graph represents a 45-year
model, showing the P3 contract's 35-year duration. He explained
this is based on the base-case traffic models. He pointed to
the initial years in terms of the reserve draw to make the
availability payments. Secondly, the Phase 1(b) project would
be built. He said traffic generated revenue is depicted and
after ten years the state's total net surplus is estimated at
$2.2 billion. He pointed out that any net revenue from this
project can be used for Title 23 services statewide. He
reiterated that the dividends will come back to transportation
fund or another mechanism to be used for projects, including the
AMHS, bridges, roads, or harbors. He summarized the advantage
of the Knik Arm Crossing project is the ability for a project to
generate income for future transportation projects in Alaska
[slides 37-38].
3:04:56 PM
MR. FOSTER turned to Senator French's questions. He said the
governor's office requested "sideboards" so the KABATA provided
the worst-case model, and this model - with a five percent
likelihood of happening - depicts traffic significantly under
projections. If that happened the amount of the state
expenditures over 35 years would total $777 million; however,
the estimate shows that less than ten years later the state will
earn $900 million in net revenue after repaying the reserve. In
essence, he reported the worst case scenario is that in 35 years
the state has a five percent likelihood of making the base case,
but the state still comes out whole with net surplus ten years
after the concession is over. He said KABATA went one step with
another scenario - again, a five percent chance of happening -
by assuming a termination event occurs in 2031. He
characterized this as being the worst point for a termination
event since Phase 1(b) would have just been completed, but
traffic has not yet built up for the toll. He reiterated the
worst case would mean the state must buyout the concession at
$1.14 billion in 2031, which includes the funds deposited to the
reserve. Thus, using this worst case scenario, the buyout plus
the termination exposure would mean a $960 million check, plus
the reserve funds.
SENATOR FRENCH thanked Mr. Foster, noting the state would own
the bridge at that point.
MR. FOSTER stated that the state would invest approximately $30
million a year if it needed to terminate the concession in 2031.
He reviewed the benefits for Alaskans [slides 37-38]. He
reported the proposed project would generate 1,500 jobs for the
four-year construction period and provide savings in freight,
drivers' costs, fuel savings, and emissions. Additionally, he
stated it represents an alternative to the Glenn Highway and
would provide additional access to commercial land on the
western side of Cook Inlet, closer to the Goose Creek
Correctional facility. Further, the project would support Port
MacKenzie and the Port of Anchorage. Finally, the project would
provide the first access to western Cook Inlet. As an aside, he
reported 47 percent of the Kenai Peninsula Borough (KPB) lies on
the west side of Cook Inlet. The project lies 28 miles from the
road system supporting the Beluga area, which points to a R2R
benefit. He also reported the DOT&PF has been tasked with
developing an overview and route selection to connect the west
side of Cook Inlet to this project.
3:08:49 PM
MR. FOSTER said Alaskans recognize the bridge's value and a
tremendous number of them support the bridge [slide 40]. He
explained the figures for rural Alaska, the Interior, and
Southcentral Alaska were derived from Dittman Research.
3:09:15 PM
MR. FOSTER concluded his presentation with a short video [slide
41].
3:10:49 PM
ADJOURNMENT
There being no further business before the committees, the joint
House and Senate Transportation Standing Committee meeting was
adjourned at 3:10 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| KABATA Joint Transportation Cmte I (2).pdf |
HTRA 1/29/2013 1:00:00 PM |
|
| Kemp Resume.pdf |
HTRA 1/29/2013 1:00:00 PM |