Legislature(2005 - 2006)CAPITOL 17

04/30/2005 01:30 PM TRANSPORTATION


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01:33:39 PM Start
01:37:32 PM HB237
01:59:19 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
* HB 237 INTERNATIONAL AIRPORTS REVENUE BONDS
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
                         April 30, 2005                                                                                         
                           1:33 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Jim Elkins, Co-Chair                                                                                             
Representative Carl Gatto, Co-Chair                                                                                             
Representative Vic Kohring                                                                                                      
Representative Mark Neuman                                                                                                      
Representative Bill Thomas                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Mary Kapsner                                                                                                     
Representative Woodie Salmon                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 237                                                                                                              
"An Act relating to international airports revenue bonds; and                                                                   
providing for an effective date."                                                                                               
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 237                                                                                                                  
SHORT TITLE: INTERNATIONAL AIRPORTS REVENUE BONDS                                                                               
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
03/29/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/29/05       (H)       TRA, FIN                                                                                               
04/30/05       (H)       TRA AT 1:30 PM CAPITOL 17                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KIP KNUDSON, Deputy Commissioner of Aviation                                                                                    
Department of Transportation & Public Facilities (DOT)                                                                          
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Offered information on HB 237.                                                                              
                                                                                                                                
DAVID EBERLE                                                                                                                    
Anchorage International Airport                                                                                                 
Department of Transportation & Public Facilities                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Offered information on HB 237.                                                                              
                                                                                                                                
MICHAEL MARTING, Controller                                                                                                     
Alaska International Airport System                                                                                             
Department of Transportation & Public Facilities                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Offered information on HB 237.                                                                              
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CO-CHAIR  JIM ELKINS  called  the  House Transportation  Standing                                                             
Committee  meeting  to  order at  1:33:39  PM.    Representatives                                                             
Elkins, Gatto,  Neuman, and Kohring  were present at the  call to                                                               
order.  Representative Thomas joined  the meeting while it was in                                                               
progress.                                                                                                                       
                                                                                                                                
HB 237-INTERNATIONAL AIRPORTS REVENUE BONDS                                                                                   
                                                                                                                                
CO-CHAIR ELKINS announced  that the only order  of business would                                                               
be HOUSE BILL NO. 237  "An Act relating to international airports                                                               
revenue bonds; and providing for an effective date."                                                                            
                                                                                                                                
KIP  KNUDSON,  Deputy  Commissioner of  Aviation,  Department  of                                                               
Transportation &  Public Facilities  (DOT), said  the bill  is an                                                               
increase of  $288 million  in the bonding  cap for  Anchorage and                                                               
Fairbanks airport projects.  The  increased bond capacity will be                                                               
used to  sell bonds to pay  for a five-year capital  program that                                                               
was  recently negotiated  with the  carriers, including  terminal                                                               
renovations for  A and B  concourses in Anchorage and  a terminal                                                               
redevelopment in Fairbanks.  He  said the international system is                                                               
a revenue enterprise fund, so all  of the bonds are paid for with                                                               
fees generated  at the airports,  and no general funds  are used.                                                               
"We are an  entity unto our own when it  comes to selling bonds,"                                                               
he  noted.   He  said  DOT signed  contracts  with  the 26  major                                                               
operators  at  the   two  airports.    There   was  a  five-month                                                               
negotiation of what  projects would be included  in the five-year                                                               
program, and  it was approved  in January,  he said.   "Now we're                                                               
just looking  for the legislature to  move our cap upwards  so we                                                               
can sell more debt," he concluded.                                                                                              
                                                                                                                                
1:37:32 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  asked if  Anchorage's new  terminal "C"  used all                                                               
federal money.                                                                                                                  
                                                                                                                                
MR. KNUDSON said a very small portion was federal money.                                                                        
                                                                                                                                
CO-CHAIR GATTO asked if it is used by Alaska Airlines only.                                                                     
                                                                                                                                
MR. KNUDSON  said it is  now, but  if there is  a need for  a new                                                               
carrier, Alaska Airlines would be asked to accommodate it.                                                                      
                                                                                                                                
CO-CHAIR GATTO  said he believed  there was already  an extensive                                                               
retrofit on the "A" and "B" terminals for earthquake proofing.                                                                  
                                                                                                                                
MR. KNUDSON  said he was unfamiliar  with that.  This  project is                                                               
for seismic retrofit for concourses "A" and "B".                                                                                
                                                                                                                                
CO-CHAIR GATTO said  the $140 million spent in  Anchorage will be                                                               
paid by the carriers, which means the traveling public will pay.                                                                
                                                                                                                                
MR.  KNUDSON said  yes,  it will  be paid  by  the traveling  and                                                               
shipping public.  The shippers' portion is 80 percent, he said.                                                                 
                                                                                                                                
1:41:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KOHRING said he is worried about cost overruns.                                                                  
                                                                                                                                
MR. KNUDSON said he is just  as concerned, and there are measures                                                               
now to ensure the outcome.                                                                                                      
                                                                                                                                
DAVID  EBERLE,  Anchorage  International Airport,  Department  of                                                               
Transportation   &  Public   Facilities,   Anchorage,  said   the                                                               
contracting  process  will help  control  the  costs because  the                                                               
contractor  is involved  early  in the  design.   The  contractor                                                               
makes estimates  along the way,  he explained.  Unless  there are                                                               
unknowns, the job  should stay within the projected  price.  This                                                               
time,  DOT hired  a program  manager, and  there is  an oversight                                                               
committee that  meets monthly  regarding costs  and changes.   He                                                               
said  they are  also  working closely  with  the municipality  to                                                               
prevent delays.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  KOHRING asked  if  project  labor agreements  are                                                               
going to be a factor.                                                                                                           
                                                                                                                                
MR. EBERLE said there will be no project labor agreements.  Non-                                                                
union can bid  on the project, but the wages  will be governed by                                                               
federal laws.                                                                                                                   
                                                                                                                                
REPRESENTATIVE KOHRING said  he wants to see  the design, because                                                               
he felt the last project was overdone.                                                                                          
                                                                                                                                
MR. EBERLE said the project is  only 15 percent designed, but the                                                               
design won't be as high as the quality of concourse "C".                                                                        
                                                                                                                                
CO-CHAIR GATTO asked how a  contractor was chosen before a design                                                               
was submitted.                                                                                                                  
                                                                                                                                
MR. EBERLE said  the contractor was picked  through a competitive                                                               
proposal process.   The first  stage was a statement  of interest                                                               
from  experienced  firms,  followed  by a  screening  process  of                                                               
picking the best five firms, he  explained.  Then DOT asked those                                                               
firms to provide a formal  proposal describing staffing, how they                                                               
will  approach the  work, and  their  fee structure.   The  prime                                                               
contractor will  be limited to  20 percent  of the work,  and the                                                               
balance  will  be  a  competitive  bid on  the  open  market  for                                                               
subcontractors,  he  added.   A  great  share  is still  open  to                                                               
anybody, he said.                                                                                                               
                                                                                                                                
CO-CHAIR GATTO asked if any part will be cost-plus.                                                                             
                                                                                                                                
MR. EBERLE  said it is  not cost-plus "in  the true sense  of the                                                               
word,"   but  the   contractor  will   bid  a   mark-up  on   the                                                               
subcontracts.  There  will be an incentive for  the contractor to                                                               
save money, he noted.                                                                                                           
                                                                                                                                
REPRESENTATIVE KOHRING asked the impact on traveler fees.                                                                       
                                                                                                                                
MICHAEL   MARTING,  Controller,   Alaska  International   Airport                                                               
System, Department  of Transportation  & Public  Facilities, said                                                               
the airlines will assume the lion's  share of the costs.  He said                                                               
the  landing fee  is currently  $1.07 and  is expected  to go  up                                                               
about $.55.   The cost of  an operating lease is  generally about                                                               
five percent  of total airline costs,  he said.  The  landing fee                                                               
is the  biggest fee, and  it would go up  by about 50  percent he                                                               
said.  "If you multiply [the]  50 percent increase to them, times                                                               
the 5 percent  component that the airline fee  that airports make                                                               
up--it's  a very  small--it's about  one quarter  of one  percent                                                               
impact."    It   is  a  rough  calculation,  but   it  is  fairly                                                               
insignificant, he said.   On a landing fee, currently  for a 737-                                                               
400 "with  this increase their landing  fee would go up  about an                                                               
extra $78  per landing for  them to  land a typical  size plane."                                                               
That converts  to about a  $.54 increase per passenger,  he said.                                                               
He said it is hard to see what  it will do to a ticket price, but                                                               
"probably very little."                                                                                                         
                                                                                                                                
CO-CHAIR GATTO  said, "You said  it would increase  airline costs                                                               
by 5 percent."                                                                                                                  
                                                                                                                                
MR.  MARTING said  the rates  and  fees at  airports account  for                                                               
about 5 percent of airline operating costs.                                                                                     
                                                                                                                                
CO-CHAIR  GATTO said  if a  ticket  price goes  up by  half of  5                                                               
percent--just 2.5 percent....                                                                                                   
                                                                                                                                
MR. MARTING  said no, "5  percent is  their percentage of  all of                                                               
total costs that  make up their cost base.   There's a 50 percent                                                               
increase in  the landing fee  at this  single airport ...  due to                                                               
this  construction.   So you  would take  50 percent--and  that's                                                               
just  at one  airport, it's  not a  50 percent  across the  board                                                               
impact to  that 5 percent of  their costs--in the worst  case, if                                                               
it were, you would take 50  percent times the 5 percent component                                                               
of their cost and that only converts to .025 percent."                                                                          
                                                                                                                                
CO-CHAIR GATTO  said he is  still not getting it.   One-twentieth                                                               
of 50 percent is not less than  one; it's probably two or two and                                                               
one half.                                                                                                                       
                                                                                                                                
MR. MARTING  said 50 percent times  5 percent is .025;  that is a                                                               
quarter of a percent.                                                                                                           
                                                                                                                                
MR. KNUDSON said  the bottom line is the ticket  increase will be                                                               
negligible.   The carriers  have looked  at these  financial data                                                               
and considered it feasible and acceptable, he said.                                                                             
                                                                                                                                
CO-CHAIR  GATTO said,  "Fifty percent  times  .05 is  2.5, and  I                                                               
don't know how else  to cut it."  With a $500  ticket, he said he                                                               
wants to know the increase to the person buying the ticket.                                                                     
                                                                                                                                
MR. KNUDSON said a $500 ticket could see a $.54 increase.                                                                       
                                                                                                                                
CO-CHAIR GATTO said he disagreed with the numbers.                                                                              
                                                                                                                                
MR. MARTING  said another  calculation is  that an  average plane                                                               
would  pay  another  $78  to  land,  and  by  dividing  that  per                                                               
passenger, the  increase is $.54 per  passenger.  He will  get an                                                               
airline response to this concern, he said.                                                                                      
                                                                                                                                
CO-CHAIR ELKINS announced that HB 237 would be held over.                                                                       
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
1:59:19 PM                                                                                                                    
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Transportation Standing Committee meeting adjourned at 2:00 p.m.                                                                
                                                                                                                                
                                                                                                                                

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