Legislature(1997 - 1998)
02/19/1997 01:08 PM House TRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE TRANSPORTATION STANDING COMMITTEE February 19, 1997 1:08 p.m. MEMBERS PRESENT Representative Bill Williams, Chairman Representative Beverly Masek, Vice Chairman Representative John Cowdery Representative Jerry Sanders Representative Kim Elton Representative Al Kookesh MEMBERS ABSENT Representative Bill Hudson OTHER HOUSE MEMBERS PRESENT Representative Joe Green COMMITTEE CALENDAR *HOUSE BILL NO. 95 "An Act relating to motor vehicle registration, licensing, and insurance; and providing for an effective date." - HEARD AND HELD OVERVIEW: ALASKA MARINE HIGHWAY SYSTEM HOUSE BILL NO. 55 "An Act relating to the fiscal operations of the Alaska Railroad Corporation and to land acquired by the State of Alaska under the Alaska Railroad Transfer Act of 1982 or otherwise acquired for railroad purposes; and providing for an effective date." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 95 SHORT TITLE: MOTOR VEHICLE INSURANCE & LICENSING SPONSOR(S): REPRESENTATIVE(S) GREEN,Bunde,Rokeberg JRN-DATE JRN-PG ACTION 01/29/97 168 (H) READ THE FIRST TIME - REFERRAL(S) 01/29/97 168 (H) TRANSPORTATION, JUDICIARY 02/05/97 252 (H) COSPONSOR(S): BUNDE 02/10/97 297 (H) COSPONSOR(S): ROKEBERG 02/19/97 (H) TRA AT 1:00 PM CAPITOL 17 BILL: HB 55 SHORT TITLE: ALASKA RR BUDGET AND LAND SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE BUDGET AND AUDIT JRN-DATE JRN-PG ACTION 01/13/97 42 (H) READ THE FIRST TIME - REFERRAL(S) 01/13/97 42 (H) TRANSPORTATION, FINANCE 01/15/97 78 (H) STA REFERRAL ADDED 02/05/97 (H) TRA AT 1:00 PM CAPITOL 17 02/05/97 (H) MINUTE(TRA) 02/10/97 (H) TRA AT 1:00 PM CAPITOL 17 02/10/97 (H) MINUTE(TRA) 02/17/97 (H) TRA AT 1:00 PM CAPITOL 17 02/17/97 (H) MINUTE(TRA) 02/19/97 (H) TRA AT 1:00 PM CAPITOL 17 WITNESS REGISTER KRISTY TIBBLES, Legislative Secretary to Representative Joe Green Alaska State Legislature Capitol Building Room, 118 Juneau, Alaska 99802 Telephone: (907) 465-4831 POSITION STATEMENT: Sponsor testimony on HB 95. JUANITA HENSLEY, Chief Driver Services Division of Motor Vehicles Department of Public Safety P.O. Box 20020 Juneau, Alaska 99811 Telephone: (907) 465-4361 POSITION STATEMENT: Testified in support of HB 95. JOE YOUNG 3126 Bettles Bay Loop Anchorage, Alaska 99515 Telephone: (907) 277-0515 POSITION STATEMENT: Testified on HB 95. RICH KASTELLER, representative Insurite address and telephone number not provided JOHN GEORGE, National Association of Independent Insurers 3328 Fritz Cove Road Juneau, Alaska 99801 Telephone: (907) 789-0172 POSITION STATEMENT: Testified on HB 95. MICHAEL LESSMEIER, State Farm Insurance Company One Sealaska Plaza Suite 303 Juneau, Alaska 99802 Telephone: (907) 586-5912 POSITION STATEMENT: Testified on HB 95. GARY HAYDEN, Systems Director Alaska Marine Highway System Department of Transportation & Public Facilities 3132 Channel Drive Juneau, Alaska 99801 Telephone: (907) 465-8827 POSITION STATEMENT: Presented the marine highway overview. JOE PERKINS, Commissioner Department of Transportation & Public Facilities 3132 Channel Drive Juneau, Alaska 99801 Telephone: (907) 465-8827 POSITION STATEMENT: Spoke on the marine highway overview Testified against HB 55. CHRIS KNIGHT, Researcher to Representative Terry Martin Alaska State Legislature Capitol Building, Room 502 Juneau, Alaska 99901 Telephone: (907) 465-3783 POSITION STATEMENT: Testified on HB 55. JIM BALDWIN, Assistant Attorney General Governmental Affairs Section Department of Law P.O. Box 110300 Juneau Alaska 99811 Telephone: (907) 465-3600 POSITION STATEMENT: Testified on HB 55. ACTION NARRATIVE TAPE 97-9, SIDE A Number 001 CHAIRMAN BILL WILLIAMS called the House Transportation Standing Committee to order at 1:08 p.m. Members present at the call to order were Representatives Williams, Masek, Cowdery, Sanders and Elton. Representative Kookesh arrived at 1:15 p.m. Representative Hudson was absent. HB 95 - MOTOR VEHICLE INSURANCE & LICENSING Number 056 CHAIRMAN WILLIAMS announced the first order of business was HB 95, "An Act relating to motor vehicle registration, licensing, and insurance; and providing for an effective date." Number 088 KRISTY TIBBLES, Legislative Secretary to Representative Joe Green, read the following sponsor statement into the record: "HB 95 will allow the Department of Public Safety to create and maintain an insured motorist identification database for the purpose of verifying compliance with the mandatory motor vehicle insurance provisions of AS 28.22. The program will cross-index drivers licenses and vehicle registrations with insurance policy records, provided monthly by all insurance companies doing business in Alaska. Using this database, a statewide list of uninsured motorists will be generated and warning letters will be mailed, requiring motorists to provide proof of insurance or to obtain insurance. The database system will allow peace officers making routine traffic stops to electronically verify that a person has valid auto insurance. "The Department will contract with a third party agent to establish the insured motorist identification database. To provide confidentiality of records, a provision in the bill prohibits public disclosure of the information in the database. The cost for maintaining the database will be covered by a surcharge on all vehicle registrations. "The uninsured motorist database has had a significant impact on the uninsured motorist population in Utah. Since its implementation in 1995, statistical data show that Utah's uninsured motorist population 322,898, 23.18 percent of all Utah registered vehicles have been reduced by 43 percent to under 140,000 motorists. If we apply Utah's percentages to Alaska's 630,423 registered vehicles, 145,000 may be uninsured. A 43 percent reduction like Utah had would result in 64,298 fewer uninsured motorists on Alaska's highways." Number 267 REPRESENTATIVE JOHN COWDERY asked if his understanding was correct that existing law requires mandatory insurance but unless there is an accident it is unknown as to whether the driver is insured. MS. TIBBLES replied that was her understanding. Number 307 JUANITA HENSLEY, Chief Driver Services, Division of Motor Vehicles, Department of Public Safety, stated that there is a self certification mandatory management program in the state of Alaska. She stated it allows a person to self certify that they have liability coverage of their vehicle at the registration but does not require proof. She stated that it requires the division to suspend the drivers license of anyone who is involved in a motor vehicle accident of over $500, if the driver can not prove that they are insured. She stated that it is an after the fact situation as opposed to showing proof of insurance at the point of registering the car. Number 372 REPRESENTATIVE COWDERY asked if his understanding was correct that the existing law states that everybody is supposed to be insured but it is not found out until after a tragedy the person was not insured. Number 394 MS. HENSLEY replied that is correct, we do not verify that the person is insured until they have had an accident. Number 422 CHAIRMAN WILLIAMS asked for a motion to accept the proposed committee substitute. Number 436 REPRESENTATIVE BEVERLY MASEK moved to adopt CSHB 95(TRA) Version E as a working draft. There being no objection, CSHB 95(TRA), Version E was adopted. Number 465 MS. HENSLEY stated that the reason the Department of Public Safety supports the bill because it is an efficiency measure, if the department is able to verify on line, that the vehicle is insured it would save the department an immense amount of paper work. Number 531 REPRESENTATIVE COWDERY asked if the bill addresses a person who owns multiple vehicles and suspends the insurance at certain times. Number 559 MS. HENSLEY replied if it is a situation like a motor home that would be registered on a seasonal basis than the vehicle would only need to verify insurance only for that period of time that you would be driving it. She stated that the department does issue a seasonal registration for vehicles. Number 628 REPRESENTATIVE COWDERY asked if liability would be an issue, since he has four vehicles and he suspends the insurance only for six or eight months while he is not driving. Number 686 MS. HENSLEY replied that it would not be any different then what is being done today, if before the vehicle was driven the insurance was reinstated. She stated that she did not think that it needs to be spelled out in statute but would not be adverse to adopting regulations to handle that. Number 731 REPRESENTATIVE COWDERY stated that he thinks it is a good bill but he does not want it to cause problems. Number 772 MS. HENSLEY replied that it is not unlike owners of airplanes that suspend the insurance in the winter months. Number 787 CHAIRMAN WILLIAMS asked if there was a fiscal note with the bill. Number 804 MS. HENSLEY replied that once the amendments are adopted and a committee substitute is developed than the division will have a fiscal note for the committee. Number 851 REPRESENTATIVE COWDERY moved to adopt Amendment 1. Number 883 MS. HENSLEY stated that Amendment 1 would increase the registration surcharge fee from $1 to $2 but it will still be $1 a year because the registration would be for two years. She stated that it would be cost effective to register for two years and charge the fee for the two years. She stated that by contracting with a third party agent it will go through a bidding process and a $1 a year will not be enough to support the 630,000 vehicles registered in Alaska. Number 927 REPRESENTATIVE KIM ELTON stated that it was his understanding that motor vehicle registration fees are not reappropriated to the Division of Motor of Vehicles. He asked if the division is not getting the full amount now what makes the division think that it will get the full amount plus $2. Number 966 MS. HENSLEY replied that the Division of Motor Vehicles collects about $36 million a year of which $29 million is deposited in the general fund, the remainder $7 million is collected for municipality taxes and remanded back to the municipalities. She stated that we are collecting $29 million a year and have a budget of $8.1 million. She stated that the division collects four times the amount that they are appropriated back. She stated that the division is at the mercy of the legislature and that the division tries come up with a mechanism for it to pay for itself so that those funds can be reappropriated back in general funds. Number 1029 REPRESENTATIVE ELTON stated "I'll probably vote for the amendment. It probably means nothing, I mean we could pay for several of these systems if we would just reappropriate to them the money that they are bringing in and I think it is kind of foolish that we are doing this because I think it just means that we are going to increase revenues to the general fund and I just like to remind all my majority colleagues that this is essentially a tax that we're adding, this isn't a user fee because the user fees are already put in the general fund for expenditure elsewhere." He stated that he would imagine that most of the costs are front-end costs for establishing the hardware and software system, and asked that if this was correct does the division anticipate the fee going away or being reduced. Number 1079 MS. HENSLEY replied that she did not see the fee going away because it is a fee to maintain the database. She stated that according to the bill, the insurance industry is required to submit to the division on a monthly basis, updates of any new vehicles or policies being added or any changes in existing policies. She stated that it would also require that the company maintains current technology. Number 1141 CHAIRMAN WILLIAMS asked if there was an objection to Amendment 1. Number 1151 REPRESENTATIVE ELTON stated that he objected to Amendment 1. He stated that we are collecting more than enough money to accomplish the program and this is essentially a tax increase because it will go into the general fund and the same amount of money will be reappropriated as in the past. He said, "I don't think this is going to kill the bill if we deny this hidden tax." Number 1190 REPRESENTATIVE COWDERY stated that we won't appropriate as much in the future because the workload in the department will diminish. He stated that he does not look at Amendment 1 as a tax and the bill assures responsibility for the public. Number 1279 REPRESENTATIVE ELTON stated that he is in total support of the bill but he does not support paying four times more to register his vehicle than it takes to operate the program. He stated that Amendment 1 is not going to go to establish this system. Number 1321 MS. HENSLEY stated that it is correct that the division does collect a lot more taxes or fees than allowed in the budget. She stated that last year the division had to delete 13 positions from the budget, four were within the drivers services unit that processes accidents for at fault drivers to make sure that the victims are paid. She stated that the program was eliminated due to budget under funding, the bill will create the efficiencies to add part of that program back. Number 1402 CHAIRMAN WILLIAMS asked if the fiscal note that will be presented if the bill is passed out will be positive or negative. Number 1412 MS. HENSLEY stated that it would probably be a wash, in that it will show program receipts coming in and then out to pay for the maintenance of such programs resulting in a net end of zero. Number 1440 CHAIRMAN WILLIAMS stated that the bill is not going to the finance committee. Number 1450 MS. HENSLEY replied that is correct it is not referred to the finance committee and with the fiscal note it would have to be referred to the committee. Number 1453 CHAIRMAN WILLIAMS called for a role call vote. Voting for Amendment 1 were Representatives Cowdery, Sanders and Williams. Voting against Amendment 1 were Representative Kookesh, Elton and Masek. Chairman Williams announced that Amendment 1 failed. Number 1525 REPRESENTATIVE ELTON made a motion to adopt Amendment 2. Number 1545 MS. HENSLEY stated that Amendment 2 is a technical amendment of Section 5, where it allows the division to verify if a person has insurance. She stated that if the license was suspended under the point system and then reinstated it could be verified electronically. Number 1570 CHAIRMAN WILLIAMS asked if there was an objection. Hearing none, Amendment 2 passed. Number 1580 MS. HENSLEY stated that the fiscal note will reflect because of Amendment 1 failing, approximately $300,000 coming in general fund revenues because it still maintains the $1 processing fee but it will also show an additional $300,000 needed for the program itself. She stated that the fiscal note will be for $300,000. Number 1601 REPRESENTATIVE MASEK asked that on page 1, Line 7, it states that every month the insurance agencies have to report to the Department of Public Safety. Number 1624 MS. HENSLEY replied that the seventh day of each calendar month the insurance industry will provide to the division a form that a person has insurance on the vehicle. Number 1647 REPRESENTATIVE MASEK asked if she could tell what the reporting period is currently under statute. Number 1655 MS. HENSLEY stated that there is no reporting requirement other than the fact that a person just signs their registration indicating that they have insurance. REPRESENTATIVE MASEK asked if the system has been working. MS. HENSLEY stated that it is a system that is labor intensive and it is not efficient for the state to operate, it would be faster and more accurate to get information electronically. Number 1696 REPRESENTATIVE MASEK asked if it puts a big burden on private industry and the insurance companies to have to report once a month. Number 1705 MS. HENSLEY stated that she could not address what the burden would be but because there is going to be more drivers being insured, the uninsured motorists claims will lessen. Number 1735 REPRESENTATIVE COWDERY said "You said it is a monthly reported requirement by the insurance industry but say I am financing homes or something like that, they issue a policy and there is no more -- say for a twelve month period and then if the policy is cancelled or something like that for whatever reason or the premium is not paid to renew the insurance companies generally are required to notify the lender of this circumstances. Would that be more appropriate or is that what we got -- that you're proposing the same thing." Number 1775 MS. HENSLEY replied that if a person is required to file a certificate of SR22 insurance, it requires a piece of paper to be sent to the division. She stated that under the bill it would be reported under a electronic format and it can be verified electronically that they have the SR22 insurance and the paper slip does not need to be maintained by the division. She said that if a person cancels it, the statute requires them to report it within ten days after cancellation through the submission paperwork, under the bill, the database would just have to be updated. Number 1842 JOE YOUNG, testified via teleconference from Anchorage, that he is a licensed driver for 28 years and his wife has been a licensed driver for 14 years, during which time they have been involved in 10 accidents, six of which were uninsured drivers. He stated that he can not afford not to have insurance and being that 60 percent of the people he has been in accidents with have been uninsured, he pays the extra for the premiums and deductibles. He stated that uninsured motorists are not responsible drivers and would like drivers to have insurance and be required to show proof of insurance. Number 1957 RICH KASTELLER, representative, Insurite, the vendor that runs the Utah uninsured motorist database, testified via teleconference from Salt Lake City, that he would and answer any questions. Number 2005 REPRESENTATIVE COWDERY asked what his affiliation was. Number 2016 MR. KASTELLER stated that Insurite is a private industry that has been contracted with the state of Utah to administer and oversee the uninsured motorist database. Number 2062 JOHN GEORGE, National Association of Independent Insurers, a property casualty trade association, stated that Allstate, USAA and Geico, that write a considerable amount of automobile insurance are members. He stated that his clients are concerned because a renewal date on an insurance contract is an asset. He stated, "If you know that someone's insurance is going to expire on June 1st, and you want to write insurance, if you can find out that information than I am going to go out and solicit your business." He said that the bill states there would be confidentiality but if it is in a computer database, hackers can go in and get the information out. He stated that employees could print out and sell the information to a third party. Number 2123 MR. GEORGE stated that it costs about $6 per policy for them to obtain this information separately and report it to the state or to the private database. He stated that the cost has to be passed on to the policy holders, and adding $6 dollars makes the cost even more unaffordable to the insurers. He stated that they are currently having trouble convicting people who commit felonies, therefore how could we expect to prosecute uninsured drivers. He stated that people ought to have insurance but he does not think this bill is the answer. Number 2218 REPRESENTATIVE COWDERY stated that enforcement would have the ability to suspend drivers licenses and asked what would be a better way to require responsible drivers. Number 2253 MR. GEORGE replied that without creating a big bureaucracy it probably could not be done. He stated that there are people driving with suspended licenses. He stated that he did not think there is a law that could be passed to make a substantial difference beyond what is done now and he does not feel that Alaska has a rampant uninsured motorist problem. Number 2322 MS. HENSLEY stated that the insurance companies currently maintain their information on computer systems so if hackers were out to get into the database they would be able to get into the insurance companies computers. She stated this bill will create efficiencies for the division. Number 2385 MICHAEL LESSMEIER, State Farm Insurance Company, stated that he was involved in the mandatory insurance debate in Alaska in 1983. He stated that the issue of the uninsured driver is not an easy issue to solve. He stated that in practice a lot of the solutions do not work because not matter what is done a percentage of the public is not going to be forced to buy insurance. He questioned how much money should be spent to change the percentage of insured drivers by a small amount. He stated that the solution that the legislature came up with in 1983 was the Motor Vehicle Responsibilities Act which would suspend an irresponsible person's drivers license. He stated that the division does not enforce this anymore. He stated that it was required to have two points of proof for the mandatory insurance. TAPE 97-9, SIDE B Number 006 MR. LESSMEIER stated that it was required that if some one was uninsured that the license was supposed to be suspended for 90 days. He stated that there was a requirement of mandated offers of uninsured and underinsured motorist coverage. He stated that no matter what is done there will be people that are uninsured and if the division is not even enforcing the present law, how can it be expected to enforce the new law. He stated the bill will not change the number of uninsured drivers very much. He stated that he would encourage the committee not to pass a law that imposes significant burdens on private industry just to computerize the state. Number 113 CHAIRMAN WILLIAMS stated that it is his intention to hold the bill until Wednesday of next week. # OVERVIEW: ALASKA MARINE HIGHWAY SYSTEM Number 306 GARY HAYDEN, Systems Director, Alaska Marine Highway System, Department of Transportation & Public Facilities, stated that the economic impacts of the Marine Highway System are both statewide and regional. He stated that the Marine Highway System returns $171 million into the state's economy as a result of the $28 million state general fund support appropriated into the Marine Highway System. He stated that the Alaska Marine Highway System employs 860 Alaskans with a payroll of $45 million dollars. He stated that there are a lot of demands by the different constituent groups that the department strives to meet the needs of and sometimes they fall short. Number 372 MR. HAYDEN stated that the DOT/PF's objective is to provide service to the traveling public but in providing the service they are affected by numerous factors. He said, "Labor contracts set 75 percent of our operations, those are on a three year cycle, and then our asset management because the aging of the fleet the increase regulatory environment that we are operating on. The fact that we bring the boats out to do increasing maintenance with age. Those affect how much service we can provide." He stated that the way the vessels are run affects the employees, public and the service. He stated that the DOT/PF receives general fund support appropriation of 40 percent of the expenditures and the other 60 percent is generated by the revenues from sales and tariffs. He stated that if costs and revenues are kept in balance the service will fluctuate depending on what the level of the two vectors are. He stated that in the process of trying to balance it the public can be affected. He stated that the DOT/PF would like to run all the ships 12 months a year, 52 weeks a year to provide the service to the public, however we do not have the revenue to support it and the cost would be way out of budget. Number 475 MR. HAYDEN stated that there are seven labor agreements that affected the operation of the Marine Highway System during the last 12 months. He stated that two near strike occurrences have affected the operations and they are currently at an impasse with the Marine Engineering Beneficial Union. He stated that expenditures have increased as well as the cost of doing business. He stated that currently they are fighting cost containment equal to $1.6 million as a result of risk management and cost of living increases. Number 573 MR. HAYDEN stated that they have had a general fund decrease this year of $346,000 from the department's allocation and $259,00 from the conference committee. He stated that general funds have been reduced by $344,000. Number 586 MR. HAYDEN stated that in the summer time there are 68,000 people traveling versus 11,000 traveling in the winter creating the challenge of capacity to meet the demand. He stated that in the summer, in order to meet the capacity the frequency falls off. He stated in the winter the vessels are out of service because they need to be repaired and the department does not have the money to run them all year and the traffic demand is not there to support a higher frequency rate. He stated that daytime arrivals can be arranged by slowing the vessels down and making fewer port calls. He stated that the public would rather have more ports of call per week than the daylight port calls. Number 840 MR. HAYDEN stated that the most frequent port calls are between Valdez and Cordova, followed by Whittier because the distance between ports are closer. He stated that in the Southwest system, Valdez is the primary destination, followed by Whittier, Cordova and Homer. He stated that traffic was off about 4 percent for 1996 but he is expecting traffic to grow because 1998 is the Gold Rush Centennial. Number 885 MR. HAYDEN stated that the marine highway fund was created in 1991 and it became operational in 1992 at $32 million with a $6 million supplemental appropriation in 1991. He stated that currently the fund is at $28.4 million but the service level has fallen off to be consistent with the funding levels. He stated that the vessel replacement fund and the marine highway fund generated interest for the general fund is over $13.5 million. Number 958 MR. HAYDEN stated that the mainline vessels help support the feeder vessels which as a result have lower tariff rates. He stated that the state has invested $129 million over the last ten years and over the next four to five years it is projected another $100 million will be invested, so there will need to be consideration for having to capitalize the marine highway fund if it is spun off into a separate authority. Number 1000 MR. HAYDEN stated that the public has stated that they would like to have some consistency in the schedule. He stated that last years schedule was run in conjunction with the communities wishes and it will be run again this summer. He stated that the double shuffle in Lynn Canal will continue and in the month of May the North and South bound sailings will be eliminated due to economics. Number 1081 MR. HAYDEN stated that buying a reservation system will not meet the needs of the passengers so the department has decided to create their own. He stated that the system will be pc network based, that will allow access for travel agents to readily use the system. Number 1120 MR. HAYDEN stated that the question with the Malaspina is if the state will make the investment to update ferry with the international requirements to be able to go into Prince Rupert and if not, then what is to be done with the ferry. He stated that meeting the requirements would cost $53 million in capital expenditures, therefore, the department is trying to figure out how to redeploy the ship. He stated "The constraints on eight vessels versus nine vessels is anything that we do for nine vessels, I would consider as an interim solution to the transportation needs in the Southeast and that if there is an expansion in service the vessels will have to change, the capacities will have to grow, there will have to be additional infrastructure of capitalization." He stated that the department has given a day boat contract in Lynn Canal to the unions and are waiting for a response. He stated that the department has suggested bringing the manning levels on the Malaspina from 47 to 18 and having a one crew system. He stated that they have removed the language that would prohibit contracting out and they are deciding whether to cater out or to not provide a food service on that voyage. He stated that the department has requested additional funds in the capital budget request to do additional overhaul and maintenance on the engine, so they will continue to run for a few more years. He stated that in the end the legislature will have part of the decision on what happens to the authorization and on general fund support. Number 1296 REPRESENTATIVE COWDERY asked if the reservation system was going to be improved. Number 1309 MR. HAYDEN replied that Reservation Management System 3 is under design and should be implemented in May, the software would then be purchased over the summer and staff would be trained next fall. Number 1331 CHAIRMAN WILLIAMS asked how long the reservation system has been in the process. Number 1346 MR. HAYDEN stated that he has been working with the department for two years and the contractor was working shortly after that. CHAIRMAN WILLIAMS asked if money had been appropriated. Number 1357 MR. HAYDEN replied that there was money appropriated and it had to be in the stipulation. He stated that it is being funded using federal highway funds. Number 1387 CHAIRMAN WILLIAMS stated, "It seems like before I got here we were talking about the reservation system." He asked if Mr. Hayden could get a copy of the appropriation to the committee to let them know how long it has taken. He stated that it should have been done for this season. MR. HAYDEN stated that he wished he had it on line today as well. CHAIRMAN WILLIAMS stated, "It seems like we were bogged down in the past and we are the ones that are hurt, people call the reservation system and then they are told that the ferries are full and they go down to the dock and they get on anyway and half the ferry is empty." Number 1450 MR. HAYDEN stated that it is because the reservation system is over ten years old and it is difficult to make changes to the program. He stated, "When our reservation agent pulls up an itinerary for someone who is in Haines and they want to go to Prince Rupert, the computer screen that comes up only shows the trips that are the direct routes on the single ship going from Haines to Prince Rupert. However, in the last two years in order to provide more service within the region we have changed some of the ships so they turn in Juneau and go over to Sitka and we provide service to Sitka and back depending on what time of year it is the vessel is either doing it on the north bound leg or the south bound leg. So the reservation agent, being a new reservation agent did not take the next step and look for connecting trips." He stated that once he was made aware of it, the system was corrected by telling the agents how to check the connecting routes. He stated that the new reservation system will show all of the connecting ships and transfers that are available. Number 1574 REPRESENTATIVE ELTON asked if he could explain what community marketing $500,000 meant. Number 1586 MR. HAYDEN stated that in the past the department has not actively pursued tour groups, hotels, or bus companies to use the ferries. He stated that now with nine ships there needs to be a 15 percent increase in traffic to break even. He stated that he does not see this currently existing, therefore, in order to meet the projected 15 percent it may be necessary to meet with the communities that the ferries travel to, to come up with a selling plan. Number 1692 REPRESENTATIVE ELTON asked if the communities are going to pay the $500,000. MR. HAYDEN stated that it is the department's proposal at this point, more capacity would benefit the communities and he would like them to help with the cost of marketing. Number 1722 REPRESENTATIVE COWDERY asked what the plan is for the new ferry's routes. MR. HAYDEN replied that during June, July and August, it would be deployed in the Southeast with probably three different options of either running it out of Prince Rupert, running it parallel with the Columbia out of Bellingham or deploying it in the region between Ketchikan, Juneau and Sitka. He stated that after June of the first year they will provide a trans-gulf sailing connecting Southeast and Southwest Alaska. He stated that the department does not yet know where the ferry would travel in Southwest Alaska. He stated that when the Tustumena is off line in the winter the new ferry would pick up that service. Number 1821 JOE PERKINS, Commissioner, Department of Transportation and Public Safety, stated that when the department starts looking at what to do with the Malaspina and with the new ferry, the Department starts to look at the entire way the ferry system is run. He stated that the new ferry will affect the entire fleet and the marine highway system. Number 1899 CHAIRMAN WILLIAMS asked if Mr. Hayden could give the committee some information on the Marine Engineers Beneficial Association (MEBA). Number 1926 MR. HAYDEN stated currently the department is at an impasse with MEBA, they have taken their strike vote and they can strike at any time they want to. He stated that he has both the state's and MEBA's proposals. He stated that there is a disagreement over wages, sick leave and out of state workers' compensation in relation to the cost of living differential. He stated that on the wage package the state has offered one-half the Consumer Price Index (CPI) starting on July 1, 1997 and one-half of the CPI on July 1, 1998 for a total of 3 percent. He stated, "The Inland Boatmen's Union (IBU) is asking for 4.5 percent in their written proposal and they like for that to go back retroactive to July 1, 1996, their contract expired November 1, 1996. We are not interested in going back retroactively amending the existing contract, or the contract was expired and give them additional funding and they received a pay raise in 1994 that the other two unions did not receive. The next point is sick leave. They are all on a personal leave bank and that conversion was made several years ago in a previous agreement and they have asked us in their written proposal, that I have given you, for us to capitalize at the tune of 131 hours per employee over three years. We have stated that we have already contributed to their sick leave bank and are not interested in recapitalizing it. The third item is out of state and instate pay equity issue, from their prospective, after they watched what was happening in the legislature last year, they were concerned that the legislature was going to do away with the cost of living differential, that was paid to them for living in the state, so they have proposed, on page two of their proposal, to amend Section 172(C) and to give all the instate workers or to give everyone a 5 percent pay raise, per year, for three years and then to help offset that increased cost, they are proposing to decrease the cost of living amount by 5 percent per year for three years. Those two numbers are not in balance and in the other part of that they are proposing to give out of state workers a 5 percent pay raise and we said that we were not interested in doing that either." He stated that is what the impasse is over and the department is scheduled to meet with a federal mediator on March 6, 1997. Number 2195 MR. HAYDEN stated that the cost of the department's proposal is $222 thousand over two years and MEBA's proposal is $2.3 million over the life of the contract. Number 2257 REPRESENTATIVE ELTON stated, "the total cost of the MEBA package is $2.3 million and the total cost of yours is for $222 thousand. Is your's for two years and their's for three years." Number 2287 MR. HAYDEN replied that the both contracts would expire on July 1, 1999. He stated, "the difference is that they want it to be retroactive from July 1, 1996 and have a pay raise for that time period and have another pay raise on November 1, 1996 when that contract expired." Number 2357 CHAIRMAN WILLIAMS stated that the DOT/PF received two letters. He asked if he was familiar with the letter from Lew Williams. Number 2459 MR. HAYDEN stated that he met with Mr. Williams and would reiterate his response to the letter. He stated that the issued is not selling the Malaspina but what to do with it when it can no longer be used to go to Prince Rupert. TAPE 97-10, SIDE A Number 040 CHAIRMAN WILLIAMS stated that the committee would have another meeting at which he would like to have the department's response written out being that the Malaspina is such a hot issue. He asked that Mr. Hayden get a written response to the committee. Number 130 MR. HAYDEN requested that he needs sufficient time to prepare a written response due to his responsibilities. Number 193 CHAIRMAN WILLIAMS stated that there was a letter from Andrea Barkley sent to the Senate Transportation Standing Committee that the committee would like to have a response to. He stated that the ferry system is a hot issue and he would like to get the issues out in the open as to how the system is working. He stated that he wants the system to work and he knows that the department has to run the system. He stated, "I want to give you as much help as I can from this committee be it a forum or questions from the users, I will meet and talk with at least two mayors that are going to be coming to your committee meeting next week." Number 387 MR. HAYDEN stated that he would appreciate the committee's assistance to the Marine Highway System. He stated that he would summarize the issues concerning the Marine Highway System to be cost, revenue and service. He stated that they are trying to be responsive to the public, however in the process of doing so the department is trying to contain the cost which affects employees' jobs. Number 487 CHAIRMAN WILLIAMS stated that he agreed and he would like to talk to some of the employees. Number 522 MR. HAYDEN stated, "I would like to say the Alaska Marine Highway System is live and well, people are being moved, and we are still providing a service to over 400,000 people and transporting their cars through Southeast and in the process there is a struggle at doing that and that is want the discussion is all about is how to improve that service." Number 576 REPRESENTATIVE COWDERY stated that he had never heard a complaint from anyone who had ridden the ferry except that they could not get a reservation. He asked if the department had considered a passenger only ferry. Number 687 MR. HAYDEN replied that the private sector is stepping into the passenger only market and he stated the question is now what the role is for the state transportation system and how can they mirror the private sector's service. Number 750 REPRESENTATIVE COWDERY asked if he thought the private sector is going to take away the business. Number 780 MR. HAYDEN stated that he thought the private sector could compliment the service that the Marine Highway System provides. He stated that there are passengers that the system can not accommodate. He stated "In some corridors we have been asked to totally vacate that corridor and when we do, you have to look at making that decision in the context of the whole region and the rest of the fleet and what that does to your revenue." Number 842 REPRESENTATIVE COWDERY asked if there were other places where the ferry system is operated entirely by the private sector. Number 860 MR. HAYDEN replied that the European ferry market is run by the private sector but it is a volume driven sector in that a high volume of people are always being transported. He stated that the private sector could generate the revenue in the summertime in Southeast Alaska, however, they would not be here in the wintertime so the question is the economics for the private operator. He stated that Alaska Statutes prohibit the Marine Highway System from competing with the private sector. Number 990 REPRESENTATIVE COWDERY asked if the private sector could operate the whole system better than it is operated now. Number 1001 MR. HAYDEN stated that if is difficult to answer. He stated that a foreign crew could be put on the vessels to run them cheaper, however, the state would lose the benefit of having Alaskans employed and having the system run by people who live here and are sensitive to the needs of the communities. HB 55 - ALASKA RR BUDGET AND LAND Number 1116 CHAIRMAN WILLIAMS stated the committee would hear testimony on HB 55. "An Act relating to the fiscal operations of the Alaska Railroad Corporation and to land acquired by the State of Alaska under the Alaska Railroad Transfer Act of 1982 or otherwise acquired for railroad purposes; and providing for an effective date." CHRIS KNIGHT, Researcher to Representative Terry Martin, stated that the committee substitute would place the Alaska Railroad Corporation under the Executive Budget Act. He stated that it would give the legislature and the government the process of open communication with the Alaska Railroad corporation that does not exist currently. Number 1143 REPRESENTATIVE MASEK moved to adopt CSHB 55(TRA) for the purpose of discussion. There being no objection it was so ordered. Number 1164 REPRESENTATIVE COWDERY asked that the railroad land has been increased from 36,000 acres to 44,000 acres of land. Number 1182 MR. KNIGHT replied that the number is 43,000 acres of land. He stated that 50 to 60 percent of that has yet to be transferred to the Alaska Railroad Corporation at this time. Number 1211 CHAIRMAN WILLIAMS asked what is going to be done with the land portion of the bill. Number 1223 MR. KNIGHT replied that it is up to the chairman of the Legislative Audit Committee to work out the land portion of the bill. Number 1288 JOE PERKINS, Commissioner, Department of Transportation & Public Facilities, stated that the administration is not in favor of the bill. He stated that the Alaska Railroad, since the transfer from the federal government, has acted with a deficit for only two of those years. He stated that the Alaska Railroad provides both public and business purposes and in order to function effectively as a business the railroad needs the flexibility to make business decisions unencumbered by yearly appropriation schedules. He stated that the railroad borrows funding from banks and is dependant on this revenue to manage cash flow. He stated that the railroad also enters into long term lease agreements which would be hampered by the uncertainty of legislative approval for repayment on a yearly basis. He stated that at the present time railroad profits would go back into rolling stock and railroad costs. Number 1383 COMMISSIONER PERKINS stated that state ownership of the railroad has been extremely successful, and does not think changes and risks should be made on a successful operation. He stated that there are other ways to provide additional legislative oversight. Number 1506 JIM BALDWIN Assistant Attorney General, Governmental Affairs Section, Department of Law stated that he was employed by the attorney general's office when bill was first enacted many years ago. He referred to a study done by the law firm of Wicwire, Lewis and Shorr on whether the railroad should be subject to the appropriation of the legislature. He stated that the result of the study was that other means of oversight should be adopted which could be found under the Enabling Act of the railroad such as, submission of capitol spending plan, review by the governor on fiscal decisions of the railroad, but not the appropriation of the legislature. He stated that this bill will present legal problems. He stated that the railroad has been in business for a while and has incurred a certain amount of indebtiness. He stated that this was done through commercial banks being the railroad's creditors. He stated that these arrangements are without a non-appropriation risk. He stated that a non-appropriation risk means that when money is lent to a public entity, they have to assume that the legislature may not appropriate funds to pay the obligations, so many of these agreements state that there is no backing of the agreement if the legislature fails to appropriate. He stated that the bill will have to make a provision for this circumstance so that there is not a possibility of a default in any of these agreements or so that the lenders don't become uncomfortable with the arrangement and declare default. Number 1680 CHAIRMAN WILLIAMS asked how the legislature would be liable for what the railroad does. He asked that if the railroad did not make any money would the state be liable. Number 1693 MR. BALDWIN stated that anyone who does business with the railroad is limited to go after only the assets of the railroad. Number 1750 CHAIRMAN WILLIAMS stated, "They would go back to the railroad which the state owns, and take the railroad for whatever it is but we own it. So how do we get around the problem, that if your going to go out and invest money and do anything that you want to do, whenever you want to do it and we are sitting back here letting the railroad run and do anything it wants to do and we have no control." Number 1775 MR. BALDWIN replied that there can be different ways of controlling corporations, some are closely held, having the legislature approve all projects. He stated that the railroad has service contracts and questions would be raised as to what would happen to those contracts under the Executive Budget Act. Number 1857 CHAIRMAN WILLIAMS stated that the legislature feels very uncomfortable in the direction that the railroad is going, we have no control over what happens to the railroad and we have a lot at stake. Number 1877 MR. KNIGHT replied that Mr. Baldwin's concern of getting investors to sign contracts is a little far fetched, the legislature would not nickel and dime their budget. He stated the appropriation would be an aggregate amount and not be detailed as to what the CEO and board of directors could choose to spend it on. Number 1921 REPRESENTATIVE COWDERY asked if Mr. Baldwin thought banks would call the loans that are in existence with the railroad. Number 1851 MR. BALDWIN replied that they probably would not but he would recommend that the bill have a savings provision in it for existing contracts and agreements. Number 1974 REPRESENTATIVE COWDERY stated that in the case of a claim against the railroad all of Alaska looses since it is an asset of the state. Number 2042 CHAIRMAN WILLIAMS asked what happens if a loan can't be repaid. Number 2064 MR. BALDWIN replied that the reason it is set up as a public corporation is to limit any loss to the corporation and not have it be a general debt of the state. Number 2080 CHAIRMAN WILLIAMS stated that a bank will not lend money without collateral. Number 2092 MR. BALDWIN stated that the collateral is usually a stream of revenue. He stated that bond ratings may not drop but this issue was considered in the past and the legislature decided they wanted the railroad to act more like a private business. CHAIRMAN WILLIAMS stated that the committee is out of time and the bill will be taken up at the next meeting. ADJOURNMENT Number 2120 CHAIRMAN WILLIAMS adjourned the House Transportation Standing Committee at 3:15 p.m.