Legislature(2007 - 2008)CAPITOL 120
01/22/2008 01:30 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| State Transportation Improvement Program | |
| Alaska Marine Highway Scheduling | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
January 22, 2008
1:34 p.m.
MEMBERS PRESENT
Representative Kyle Johansen, Chair
Representative Mark Neuman, Vice Chair
Representative Anna Fairclough
Representative Craig Johnson
Representative Wes Keller
Representative Mike Doogan
Representative Woodie Salmon
MEMBERS ABSENT
All members present
OTHER MEMBERS PRESENT
Representative Andrea Doll
Representative Gabrielle LeDoux
Representative Beth Kerttula
Representative Peggy Wilson
COMMITTEE CALENDAR
PRESENTATION BY DOT/PF ON STATE TRANSPORTATION IMPROVEMENT PLAN
(STIP);
- HEARD
ALASKA MARINE HIGHWAY SYSTEM (AMHS) SCHEDULING
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JEFF OTTESEN, Director
Division of Program Development
Department of Transportation & Public Facilities (DOT&PF)
Juneau, Alaska
POSITION STATEMENT: Presented and answered questions on the
STIP plan.
DENNIS HARDY, Deputy Commissioner
Office of the Commissioner
Department of Transportation & Public Facilities (DOT&PF)
Juneau, Alaska
POSITION STATEMENT: Presented and answered questions on the
Alaska Marine Highway System (AMHS).
ACTION NARRATIVE
CHAIR KYLE JOHANSEN called the House Transportation Standing
Committee meeting to order at 1:34:35 PM. Representatives
Neuman, Fairclough, Johnson, Keller, Doogan, Salmon, and
Johansen were present at the call to order. Representatives
Doll, LeDoux, Kerttula, and Wilson were also in attendance.
^State Transportation Improvement Program
1:34:47 PM
CHAIR JOHANSEN announced that the announced that the first order
of business would be the presentation of the State
Transportation Improvement Plan (STIP) and the Alaska Marine
Highway System Scheduling.
1:35:40 PM
REPRESENTATIVE FAIRCLOUGH asked for a status report on questions
generated from the January 17, 2008, committee meeting.
CHAIR JOHANSEN responded that the questions were forwarded to
the commissioner of the Department of Transportation & Public
Facilities (DOT&PF) yesterday at 2:30 p.m.
1:36:22 PM
JEFF OTTESEN, Director, Division of Program Development,
Department of Transportation & Public Facilities (DOT&PF),
advised that he oversees the STIP, and in that capacity is
responsible for managing and producing the STIP. He offered to
expand his presentation, which is included in the committee
packet with any level of detail the committee desires.
1:37:01 PM
CHAIR JOHANSEN noted that his constituents have experienced
frustration with the STIP's complexity, but he acknowledged that
DOT&PF must react to constantly changing federal regulations and
rules.
1:37:42 PM
MR. OTTESEN offered an overarching comment that the STIP is a
technical program and that the stability of the program has
suffered due to changes at the federal level. He outlined four
topics of discussion, 1) General Overview/Federal Transportation
Funding Process and Rules; 2) SHAKWAK Funding; 3) How the
Federal Funding Process Relates to State Funding; and 4) The
State STIP/the STIP Amendment Process.
1:38:53 PM
REPRESENTATIVE NEUMAN asked for an explanation of SHAKWAK.
MR. OTTESEN responded that SHAKWAK is a term for a geological
trench feature in the Yukon, and that Alaska runs through this
feature. SHAKWAK is funded by two programs: one is a long-
standing program, which has been used to build parts of the
highway system in the Yukon Territory and a small piece of the
system in British Columbia [Canada], which has been funded with
federal highway dollars for over 30 years; the second use of the
term is for a more recent provision in federal law that allows
DOT&PF to create a special category of funding for the Alaska
Marine Highway System (AMHS), the Haines Highway, and more
recently roads that lead to ferry terminals.
1:39:49 PM
MR. OTTESEN, in response to a question by Representative Doogan,
stated that the STIP is a legal requirement that the state must
follow to be eligible for federal dollars.
MR. OTTESEN referred to page 2 of his overview labeled,
"DOT&PF's General Overview/Federal Transportation Funding
Process and Rules", and explained that the federal highway
program began in 1916 and is a body of law that has been amended
many times, with the last amendment being the federal Safe,
Accountable, Flexible and Efficient Transportation Equity Act of
2004 (SAFETEA-LU). He stated that, to give the committee an
idea of the complexity of the amendment, it was 1,700 pages in
length. The federal highway program consists of many general
rules, but also has many exceptions with nuances. He offered
that although he has 12 years of experience with the federal
rules, the department has lost through retirement, two people
with in-depth knowledge of the federal process. The
transportation planning process is required for the state to
access funds, is codified in the U.S. code in Sections 134 and
135, and is also codified in regulation. The transportation
planning process must be adhered to for all federal highway
funds Alaska receives, as well as the federal transit funds,
which, he noted, have been increased in the past few years. The
mandate for a planning process goes back to 1934. The planning
process is more complex since rules have been added that require
the state to produce a long-range plan, as well as a short-range
spending plan in accordance with the long-range plan.
Additionally, there are related requirements and documents the
state must produce, such as: data on the condition of roadways,
bridges, and pavement; and an inventory of roads, including the
width, and functional classification, for example, whether it is
a local road or arterial road. The first duty of DOT&PF is to
collect this data which is then delivered annually to the
Federal Highway Administration (FHWA) prior to the state
receiving any federal funding.
MR. OTTESEN stated that DOT&PF is required to have an outreach
process and must consult with other local, state, and federal
tribal agencies. DOT&PF produces the STIP under strict fiscal
discipline and is required to split the duties. Although the
state highway agency, as it is referred to in the act, is
responsible for many of the duties, some duties are shared with
the large Metropolitan Planning Organizations (MPOs) in each
state. Alaska has two MPOs: the greater Fairbanks area,
including the Fairbanks North Star Borough (FNSB), and the
Municipality of Anchorage (MOA). The MPOS are required to
produce their own spending plans, Transportation Improvement
Programs (TIPs), so the decision making authority is actually
held by the MPOs and not by the state. Therefore, the MPOS act
almost like separate entities within the state.
1:45:51 PM
REPRESENTATIVE FAIRCLOUGH asked how soon the Matanuska-Susitna
Borough (Mat-Su) would reach the density and population
necessary to form its own MPO.
MR. OTTESEN related that he expects the Matanuska-Susitna
Borough to reach population density in the 2010 census. It
takes about two years for that process to be documented, which
occurs before an MPO would be mandated. He suggested that the
process would be complete in approximately 2012.
1:46:15 PM
REPRESENTATIVE FAIRCLOUGH clarified that to reach MPO status an
area must have a population density of 50,000 and a population
density per square mile. She asked the percentage of FHWA
funding that is directed to MPOs, and how that funding will be
impacted by the addition of the proposed Mat-Su MPO.
MR. OTTESEN responded that one of the exceptions in law is that
all other states, except Hawaii and Alaska, use a formula set in
law to determine the funding allowable for MPOs. One category
is set at 62 percent, and the formula is based on a strict state
population proportion so the end result is that the proposed new
MPO would receive 10 percent of the 62 percent, or a little more
than 6 percent of that one category of funding. Since Alaska
was not included in the formula and no alterative was provided,
DOT&PF developed a formula by regulation in 2002 and delivers to
the MPOs approximately twice as much funding as the federal
formula would. He stated, in response to a question, that by
subtracting out the MPO funding allotted for Fairbanks and
Anchorage, the proposed Mat-Su Borough MPO would get a sliver of
the remaining funding based on the state formula. He noted that
the state formula takes into account factors, such as the
population, the number of miles of road, and the safety record
on those roads.
1:48:13 PM
REPRESENTATIVE DOOGAN related his understanding that the parts
of the STIP that pertain to the Municipality of Anchorage MPO
stem from the Anchorage Metropolitan Area Transportation
Solutions (AMATS) process rather than from the state process.
MR. OTTESEN noted his agreement, but pointed out that a few
categories of funding spent within Anchorage are from the state
process. The national highway system routes are prepared
cooperatively with MOA. The MOA identifies the routes and the
state decides the funding, although some additional categories
like safety and bridge funding still remain under state
discretion. The bulk of the program is decided by the AMATS
policy board and the state's job is essentially to approve the
AMATS plan as written because the state does not have any veto
power over the plan.
1:49:17 PM
REPRESENTATIVE DOOGAN asked if the process for funding is
limited to the construction portion of projects.
MR. OTTESEN explained that the process is not limited just to
construction purposes because funding could also be used for
buses and for some operational functions. He stated that he
chooses not to characterize it as limited to construction since
funding could be used for planning also. He acknowledged that
the MOA decides what goes into the AMATS plan, and reiterated
that the AMATS plan is not subject to veto by the state.
1:49:55 PM
MR. OTTESEN, referring to the STIP and the 2030 plan, explained
that both are statewide multi-modal plans that must cover a 20-
year horizon, and the eight factors contained in the 2030 plan.
Both plans are prepared in consultation with several
organizations. Mr. Ottesen explained that the process states
use to prepare these transportation plans falls into two
approaches, either to prepare a single plan for the entire state
or to use a tiered plan with top-level policy coupled with more
detailed plans at the regional level and/or system plan level.
In Alaska, the state owns 40 percent of the road system and
there is a complex network of transportation systems including
ferries, aviation, and harbors. About a third of the states,
including Alaska, have used a tiered approach since 1993, such a
strategic plan approach. He opined that the tiered approach is
the best approach for Alaska. The concept of an overarching
plan with more detailed plans is codified in state law. He
speculated that there are at least 15-20 subordinate plans that
help the department flesh out the long-range plan, which
includes the details for aviation, AMHS, corridors, regions, and
the use of technology.
1:53:25 PM
REPRESENTATIVE NEUMAN asked whether the subordinate plans are
available.
MR. OTTESEN responded that all the plans are located on DOT&PF's
web site.
MR. OTTESEN gave an overview of the federal STIP process, which
all 50 states have to produce for a four-year horizon. He noted
that prior to SAFETEA-LU the STIP had required a three-year
horizon. A letter is jointly signed and the STIP is approved
before DOT&PF can access federal funds. He offered that the
state can't work on projects that are not consistent with its
long-range plan.
1:54:51 PM
REPRESENTATIVE FAIRCLOUGH inquired as to who approves the STIP
plan at the state level.
MR. OTTESEN responded that duty is delegated to DOT&PF
commissioner. The plan is then forwarded to two federal
agencies for approval, along with a transmittal letter.
REPRESENTATIVE FAIRCLOUGH asked whether it is a federal
requirement that the STIP approval process stay internal with
the administration or do some states use a legislative process.
MR. OTTESEN answered that a handful of state legislatures
approve the STIP, but in the majority of states the approval
process is done by the executive branch. He added that the
federal law itself specifies the state highway agency which is
the state department of transportation in most states.
REPRESENTATIVE FAIRCLOUGH then asked whether state regulations
require that MPOs pass their transportation plans through the
local assembly.
1:56:04 PM
MR. OTTESEN responded no, the approval is not mandated by state
regulation and each MPO follows its own process, which, he
opined, is a remarkably complex and diverse process nationwide.
The STIP is required to identify the scope, physical boundaries,
schedule, cost, and funding types of all projects. The STIP
undergoes federal review and approval with the fiscal
constraints and requirements increasingly more vigorous. The
STIP is constrained by year and by phase of work. For example,
phases include design and environmental work, right-of-way,
moving utilities, and construction. All phases must be detailed
and must total the maximum number of dollars that DOT&PF
estimates is available. He offered that five or six years ago,
the STIP was over-programmed such that it often showed more
projects than were realistic for the funding. More importantly,
he noted, DOT&PF could not deliver projects due to cost
increases so the STIP was unrealistic. Therefore, DOT&PF is not
allowed to spend beyond the STIP program and must adhere to
strict guidelines.
1:58:08 PM
REPRESENTATIVE SALMON asked whether DOT&PF applies the same
rules to the rural roads in smaller communities.
MR. OTTESEN answered that in 1995, DOT&PF created criteria
designed to allow rural communities to compete with urban
communities, except in Puerto Rico and Alaska where rural roads
are eligible for STIP dollars. He explained that the exception
and the criteria have been focused on achieving sanitation roads
to landfill sites and sewage lagoons to water sites in order to
achieve basic sanitation in rural areas.
1:59:26 PM
CHAIR JOHANSEN stated that when DOT&PF veers away from the STIP
document and cannot complete its projects, it increases public
frustration because the public doesn't understand the process
taken to determine which projects are funded.
MR. OTTESEN reminded the committee that the STIP used to be a
three-year document with a component to project out an
additional three years in order to give communities a glimpse of
future projects. However, the department has vacillated in its
view of the value of projecting projects for six years since the
trend is that costs will go up, additional funding will not be
available, and projects slip, all of which adds to public
frustration and a sense that the planning process is a hollow
process. He opined a preference for a four-year process and
that anything beyond that timeframe is simply too difficult for
DOT&PF to predict.
2:01:08 PM
MR. OTTESEN, referring to the bottom of page 5 of his overview,
explained that federal rules have become more complex and
demanding with about 20 different funding types to consider.
Funding sources are not just general funds, and instead the
funding is by category and sub-category. Therefore, each
project must be evaluated for exceptions to the eligibility
rules. What has further complicated the process is that new
regulations, as a result of SAFTEA-LU, were first public noticed
as draft regulations in the summer of 2006 and were enacted in
2007. He noted that he helped prepare a 50-page letter in
response to the regulations, which outlined concerns that the
American Association of State Highway and Transportation
Official's (AASHTO) two committees had with the regulations.
DOT&PF also authored a 10-page letter that highlighted concerns
that the AASHTO letter did not cover. Other states, including
Alaska, have had ongoing concerns about how the regulations will
affect and apply to individual state programs. He offered his
understanding that the feedback from federal agencies implies
that the regulations are more flexible than states have
interpreted them to be and that state transportation agencies
need to work through local agencies to interpret the
regulations. He opined that the old STIP, prior to 2007, was a
much easier document to use than the new STIP.
MR. OTTESEN, in response to a question from Representative
Fairclough, advised that AASHTO is an organization that works on
behalf of all 50 state transportation agencies.
2:04:26 PM
CHAIR JOHANSEN inquired as to methods that other states use to
navigate the complexity of the new regulations.
MR. OTTESEN responded that one difficult challenge for DOT&PF is
to amend the STIP when there is a change due to funding or cost.
Some states have addressed this issue by forward funding their
federal programs. Those states produce projects with state
funding and then write the STIP for reimbursement of those
projects against a known set of costs. However, he cautioned
that the only way the DOT&PF would be able to do this would be
to forward fund the STIP program with an initial $300 to $400
million of general fund monies. The states in which forward
funding has been successful are those states that already have a
revenue stream from a gas tax or other dedicated funding source.
2:06:10 PM
REPRESENTATIVE FAIRCLOUGH asked if the STIP allows for
reimbursement. She related that when she served on AMATS, under
the SAFETEA-LU, AMATS pre-purchased right-of-way properties and
then requested reimbursement for the advance funded right-of-way
needed for the project.
MR. OTTESEN agreed that process could work. However, he
cautioned that when the state or municipality pre-purchases
right-of-way, and thereby indicates the specific location of a
road, the state runs the risk that the FHWA may determine the
state pre-decided the project and did not follow the prescribed
AMATS process. The FHWA may then determine that the project is
not eligible for reimbursement.
2:07:24 PM
REPRESENTATIVE FAIRCLOUGH agreed and reiterated the importance
for the committee to understand the risks involved for
reimbursement in cases in which the state does not follow the
federal government's continuum and is reimbursed less.
MR. OTTESEN offered that there are instances of low risk
projects, for example buying right-of-way on an existing road
when the goal is to widen the road. In further response to
Representative Fairclough, Mr. Ottesen stated that SAFETEA-LU
expires in 21 months, on September 30, 2009.
2:08:26 PM
MR. OTTESEN referred to the federal policy shifts, including
rescissions. A rescission is essentially funding that the
federal government takes back. Proportional funding means the
state must return the funding in the same ratio that it was
awarded, with no flexibility. He opined that this constraint
forces DOT&PF to build projects that may not be the state's
highest priority, but are within the highest priority in the
particular funding category that fits. He noted that many
federal mandates do not include funding necessary to implement
the required changes, such as a mandate that in 2009 DOT&PF must
give the public "real time" data about weather and traffic.
Another mandate is the concept of "complete streets" which means
that when building a road, DOT&PF must provide for bicycles,
pedestrians, and transit users in all phases of the project.
DOT&PF is also required to coordinate its efforts with wildlife
agencies. In fact, DOT&PF receives some requests for bridges to
allow wildlife to cross roadways. He highlighted that unfunded
mandates mean that ultimately DOT&PF will achieve less.
2:10:54 PM
MR. OTTESEN, in response to a question, responded that the
department has not yet been provided with details with respect
to rural roads and trails or if there is an exception in federal
law for those projects.
REPRESENTATIVE FAIRCLOUGH speculated that in Alaska mandates
could have dire consequences, such that a project that provides
a corridor for snowmobile or four-wheel all terrain vehicles,
could be mandated to provide a bike trail and a sidewalk along
the corridor.
MR. OTTESEN agreed.
2:11:37 PM
CHAIR JOHANSEN asked if rescissions are returned to the general
fund or whether the funding is redistributed to DOT&PF.
MR. OTTESEN responded that the rescissions thus far have been to
take back the non-cash portion of the project, which has a
consequence, but doesn't necessarily take away funding.
2:12:06 PM
MR. OTTESEN referred to the top of page 6 of his overview, and
explained that the new federal STIP rules are the first
regulation changes in 13 years, since 1993. He offered that the
attorney for AASHTO made it clear that most of the regulation
changes were firmly written in the law and were preordained in
the law, and are not at the discretion of the FHWA but were
regulations Congress mandated. An amendment takes a minimum of
90 days to process, but a major amendment can take up to five
months. Since anything that changes the cost, schedule, scope
of the project, or funding source can trigger an amendment,
DOT&PF avoids changes to projects. Changes to projects could
potentially halt construction or accrue damages due to the
delay, expending millions of dollars to solve a problem that
shouldn't happen. He explained that the STIP amendment process
doesn't work well in Alaska, where the construction season is
five months long, whereas in some other states construction
happens almost all year round.
2:15:47 PM
CHAIR JOHANSEN asked whether projects cancelled by the chief
executive have an impact on the STIP.
MR. OTTESEN responded that cancellations, project delays, or the
desire to use funds elsewhere would result in an amendment to
the STIP.
2:16:28 PM
CHAIR JOHANSEN asked more specifically whether the Ketchikan
Gravina Island Access Project had been cancelled.
MR. OTTESEN answered that there has been no STIP amendment as
Alaska's STIP is currently frozen, pending completion of the
state's long-range transportation plan. He explained that the
STIP and the long-range transportation plan are linked. The
department is rushing to finish the long-range plan because the
2008 funding cannot be spent and a STIP amendment cannot be made
until the long-range transportation plan is completed.
REPRESENTATIVE FAIRCLOUGH asked whether the Ketchikan Gravina
Island Access Project was ever included in the STIP.
2:17:31 PM
MR. OTTESEN responded yes, adding that the federal earmarks have
to be shown in the STIP for different phases. However, since
DOT&PF lacked full funding, the project was not shown in the
2008-2009 STIP for the construction phase. Under the STIP rules
the funding must be identified, he noted.
REPRESENTATIVE DOOGAN asked whether the STIP requires DOT&PF to
list construction phases by year. For example, if a multi-
phased project had been included in the STIP he inquired as to
what assurance DOT&PF has that it will be included and approved
in the STIP for its second or third phase.
MR. OTTESEN responded that once the state starts a project, if
the specific project is not approved for subsequent phases, the
state must reimburse the funds. The state is required to
prepare a financial plan, escalate it to the year of
construction, and to update the project annually. He added that
a financial plan had been prepared for the Ketchikan Gravina
Island Access Project, but it showed the need for a great amount
of state funding in order to complete the project.
2:21:11 PM
REPRESENTATIVE FAIRCLOUGH asked whether the planning process
also includes a decision to "build or not build" to give DOT&PF
an option to not move forward with a project.
MR. OTTESEN responded that the National Environmental Policy Act
(NEPA) process provides for exemption from repayment in
instances when a project is not built. He highlighted that he
has only experienced one instance of a "no build" decision in
his career. He indicated that there are many reasons for
project delays, and those delays are allowed, none of that
violates the fundamental decision to go forward on a project, so
long as there is a good faith effort by DOT&PF to complete the
project. He indicated that DOT&PF recently shut down several
projects in order to avoid repayment of federal funds.
2:23:27 PM
MR. OTTESEN gave a status update on the Ketchikan Gravina Island
Access Project and indicated that the record of decision had
been reached, and that some road work and right-of-way work had
been completed on the project.
2:23:33 PM
REPRESENTATIVE NEUMAN offered his understanding that when there
are federal funds involved and a change is required, it's also
necessary to prepare a STIP amendment.
MR. OTTESEN responded yes, and that the minimum processing time
for a STIP amendment would be 90 days. He added that there are
some amendments that can occur within a simpler set of rules,
known as an administrative modification. Most project changes
require the STIP amendment process, he noted.
MR. OTTESEN offered another example of a project that triggered
a STIP amendment, in which a small City of Nome project funded
by a federal earmark required a small amount of utility work
totaling less than 2 percent of the project, approximately
$50,000 of a $3 million project. DOT&PF determined the utility
work would delay the project by an entire year. Therefore,
rather than risk the STIP amendment, the City of Nome paid for
the cost out of city funds.
2:26:03 PM
MR. OTTESEN, in response to Representative Neuman, explained
that the Knik Arm Crossing Project is currently in the public
review process fore the environmental impact statement [EIS],
followed by the record of decision, which is part of the
National Environmental Policy Act review. The project is
currently out for public review, but he predicted it will
require repayment if the project does not move forward. He gave
an overview of the EIS process in which there is a public
review, an agency review, a comment period, and a period when
then the applicant works with the lead agency, the FHWA, who
ultimately controls the decision. The Knik Arm Bridge and Toll
Authority (KABATA) produces the document, but the decision of
record is held by the FHWA.
2:27:19 PM
REPRESENTATIVE JOHNSON asked if funding will need to be repaid
on the Ketchikan Gravina Island Access Project.
MR. OTTESEN indicated that DOT&PF will go back to the community,
review the EIS, and look for alternatives in order to avoid
repayment. In response to a question, he indicated that one
option would be to look at the ferry system.
REPRESENTATIVE JOHNSON asked for figures for repayment, if the
repayment would be necessary.
MR. OTTESEN responded that the state would have to repay about
$55 million.
2:29:13 PM
The committee took an at-ease from 2:29 p.m. to 2:36 p.m.
^ALASKA MARINE HIGHWAY SCHEDULING
2:36:12 PM
CHAIR JOHANSEN announced that the next order of business would
be a presentation by the DOT&PF on AMHS scheduling.
2:36:54 PM
DENNIS HARDY, Deputy Commissioner, Office of the Commissioner,
Department of Transportation & Public Facilities (DOT&PF), began
by introducing other members from DOT&PF that were present.
MR. HARDY noted he supplied a handout for reference, but that he
also had a prepared statement. He indicated that AMHS schedule
is being finalized later than normal and the schedule will be
printed in the Milepost and several other publications. He said
he is working closely with the publications, and anticipates
that the schedule will be available on DOT&PF web site by
January, 31, 2008. Reservation staff is currently logging
requests, he noted. He acknowledged the impacts the late
schedule has on the traveling public, the travel support
industry, the travel agents, tour companies, and hotels. He
stated that next year AMHS will be back on its regular
timetable. The schedule is late this year, he explained, due to
major changes in routes. The AMHS made the decision that all
the vessels could not run the same as last year and as in prior
years. Therefore, a new schedule had to be created, which is a
complex and time consuming matter. Two primary factors entered
into the decision to take this approach, which are fiscal
responsibility and operating costs. In fiscal year (FY 07),
operating costs increased 18 percent with total costs for AMHS
amounting to nearly $100 million per year. He said the schedule
was changed to reduce operating costs, which are escalating
dramatically. The general fund level is approximately $89
million in the current governor's budget, which is only slightly
higher than in FY 08. The system needed to make major changes
to reach fiscal responsibility, but that long-term
sustainability is AMHS's ultimate goal.
2:41:10 PM
MR. HARDY discussed balancing the needs of Alaskans with
Alaska's economy, and said that the debate concerns whether AMHS
serves Alaskans only or tourists as well. He opined that the
proposed plan offers a balance between the two. He reviewed the
major changes. He indicated that AMHS removed the mainliner,
the motor vessel (M/V) Malaspina, from Bellingham where it ran
at 55 percent capacity, but the M/V Malaspina will now provide
the day boat service in Lynn Canal The M/V Columbia will
continue to provide service to Bellingham; and the traffic
displaced from the M/V Malaspina will increase capacity
utilization of the M/V Columbia, except for June and July. He
opined that the overflow traffic in peak season would be
diverted to Prince Rupert instead of Bellingham. In fact, AMHS
will focus its marketing efforts on Prince Rupert. The benefit
of moving the M/V Malaspina to Lynn Canal will be to free up the
fast ferry, the M/V Fairweather, to provide improved day boat
service to Sitka and Petersburg. The M/V Kennicott provides
service to the Aleutian chain, but will be put on a two week on
and two week off schedule as a cost savings measure.
2:43:34 PM
CHAIR JOHANSEN offered that most of the questions and comments
were generated when the proposed schedule was floated.
2:44:13 PM
MR. HARDY, in response to a question from Chair Johansen,
informed members that as the deputy commissioner of DOT&PF, he
answers to Commissioner von Scheben, and serves only AMHS.
CHAIR JOHANSEN recognized the Ketchikan Borough Mayor, Mayor Joe
Williams.
2:45:06 PM
CHAIR JOHANSEN requested that Mr. Hardy cover the areas that the
system covers.
MR. HARDY responded that AMHS serves about 30 communities, of
which Prince Rupert and Bellingham are the southernmost points
of the system. The mainline route continues up through
Southeast Alaska to Haines and Skagway so travelers can go
through Southeast Alaska and into the Canadian Alcan, and
Interior Alaska. The cross Gulf route serves Prince William
Sound, Valdez, Whittier, and Cordova and traffic can continue
into Southcentral Alaska. The Gulf route is used extensively by
the military bases of Eielson Air Force Base and Fort Wainwright
in Fairbanks; and Ft. Richardson and Elmendorf Air Force Base in
the Anchorage area, as well as serving the Coast Guard in
Kodiak. The southwest route serves Kodiak, Homer, Port Lyons,
and continues down the Aleutians to Unalaska.
2:47:54 PM
REPRESENTATIVE NEUMAN asked if AMHS has considered expansion to
serve river systems, such as the Yukon River.
MR. HARDY reminded the committee that Representative Salmon has
introduced a bill to expand the AMHS system to include service
for the Arctic Yukon-Kuskokwim (AYK), but the bill hasn't passed
yet. The AMHS would complete a study, if the bill passes, but
at this time AMHS does not have operating funds to provide
expanded service. He noted, in response to a question by
Representative Salmon, that AMHS has had requests from two
communities, Perryville and Ouzinkie.
2:50:21 PM
MR. HARDY, in response to a question from Representative Doogan,
clarified that the current request in the governor's budget is
$89 million in general fund monies, and another $12 million in
general funds will be used for minor maintenance and overhaul of
the vessels.
MR. HARDY, in further response, related that AMHS generates
revenue of in the amount of $49.3 million a year and the funds
go into AMHS to operate the system.
REPRESENTATIVE DOOGAN asked if the general fund and ferry-
generated revenues are the AMHS budget.
MR. HARDY replied yes, so long as the operating costs remain the
same, however, he advised that there are other variables that
add costs to the system, such as vessel layups, vessels affected
by capital improvement projects, escalating fuel costs, and
negotiations over labor contracts. The AMHS hopes to have
signed three labor contracts this winter. He noted that AMHS
uses a three percent inflation factor when developing its
budget.
2:53:07 PM
REPRESENTATIVE DOOGAN encouraged AMHS to get the schedule
published and to try to increase ridership.
2:53:34 PM
CHAIR JOHANSEN inquired as to how the funding plan was derived.
MR. HARDY answered that it was a combination of determining a
reasonable level of service with fiscal considerations. The
operating costs are escalating and AMHS would like to stay under
a cap of $100 million in general fund operating costs when
preparing the FY 08-09 budget.
2:54:48 PM
CHAIR JOHANSEN asked if AMHS had been given a specific figure to
keep the budget within.
MR. HARDY stated no, but added that the team evaluated many
scenarios when developing AMHS budget.
MR. HARDY, in further response, said that AMHS provided
information to the administration, but was not given a specific
dollar amount. The AMHS defended its budget to the Office of
Management & Budget through DOT&PF.
2:56:01 PM
REPRESENTATIVE ANDREA DOLL, Alaska State Legislature, inquired
as to the historical percentage of cost versus revenue.
MR. HARDY indicated that he did not have the history of the
funding for AMHS, but offered to provide it later. However, he
related that for every $1 generated in revenue, AMHS spends $2
in general fund monies. The aforementioned has escalated due to
fuel costs, labor, and general inflation.
2:56:59 PM
REPRESENTATIVE DOLL opined that the [increased operating costs]
were affected by the choice of runs and choices made in the
past. She indicated she is interested in the proportional
figure of cost versus revenue.
MR. HARDY confirmed that the cost of the system is based on the
vessels and routes selected.
2:57:31 PM
REPRESENTATIVE FAIRCLOUGH inquired as to the number of
passengers served last year and the anticipated numbers of
passengers for this year in the proposed schedule. She then
inquired as to how many vehicles will be moved. She related her
understanding that a second vessel was added in Bellingham, but
the two vessels are running at 50 percent capacity. And thus,
the number of vehicles moved is the same. Therefore it's more
efficient to run one vessel at full capacity. She then asked
whether AMHS generates the most revenue from passengers,
vehicles, or freight.
MR. HARDY responded that revenue is generated from passengers,
vehicles, and freight. Mr. Hardy, after conferring with staff,
specified that the revenue is evenly split between passengers
and vehicles.
REPRESENTATIVE FAIRCLOUGH recalled a hearing last year in which
the DOT&PF commissioner related that more revenue is generated
on the vehicles than the passengers. She inquired as to the
impact of the new schedule will have on the movement of freight,
vehicles, and passengers. She said that she assumed that with
anticipated schedule reductions there will be a corresponding
drop in revenue, and she inquired as to whether AMHS has
forecasted the decrease in revenue. "Have you anticipated that
in the run so that you're developing a model that's more cost-
effective, if you're going to deter service", she asked.
CHAIR JOHANSESN asked to defer that question for the sake of
time, and indicated his staff will compile questions.
3:00:41 PM
REPRESENTATIVE FAIRCLOUGH announced that she has had multiple
inquiries from residents along the coastal communities concerned
about how the schedule change will affect their lifestyle. She
indicated that she has access to a road system, and asked how
many of the communities served by AMHS have access to other
modes of transportation.
3:01:34 PM
REPRESENTATIVE NEUMAN asked whether AMHS's budget request is for
the full commitment or is it a bare bones request.
MR. HARDY responded that AMHS's budget request is not a minimum
budget. He opined that there could be brutal reductions to
service. He then noted that service and operating costs are
synonymous. He related that three legislators have requested
cost information if the M/V Kennicott was not on a two week on,
two week off schedule for the year. He said that the M/V
Kennicott is the most expensive vessel to run, ranging about
$425,000 a week to operate. He noted that the M/V Kennicott is
laid up most of the winter to obtain cost savings. The
following were examined: 1) to run the M/V Kennicott year
round, except for layup and that would cost $4.1 million; 2) to
run the M/V Kennicott full-time during the M/V Tustemena's
layout, and to run the M/V Kennicott the remaining time on a
two-by-two schedule, which totals about $2.3 million.
3:05:42 PM
REPRESENTATIVE NEUMAN asked if AMHS is providing the maximum
service.
MR. HARDY responded that AMHS is not providing full service
under the current budget.
REPRESENTATIVE NEUMAN requested further information [on the cost
to provide full service].
3:06:22 PM
REPRESENTATIVE FAIRCLOUGH asked whether the Ocean Ranger Program
has impacted AMHS's ability to retain or recruit pilots for
AMHS.
3:07:11 PM
CHAIR JOHANSEN related his understanding that the [cruise ship
industry] has contracted out with a private company to fill
Ocean Ranger positions. Therefore, he said he didn't believe
AMHS has been impacted yet.
REPRESENTATIVE JOHNSON inquired as to why the choice was made to
emphasize Prince Rupert versus Bellingham, especially in light
of travel restrictions to Canada and the weakening value of the
dollar.
3:08:33 PM
MR. HARDY said the decision to select this scenario was based on
consensus of AMHS management, after reviewing ridership,
revenue, percentage of capacity being utilized, and operating
cost savings. Furthermore, AMHS moved the M/V Malaspina, which
was utilized on the Bellingham route, to Lynn Canal to provide
additional service needed and for cost savings. With regard to
marketing studies, he deferred to staff.
3:09:47 PM
REPRESENTATIVE JOHNSON requested the criteria used to make the
decision. He indicated his specific interest is the difference
in passenger loads, in order to ensure that a sound business
decision was made.
CHAIR JOHANSEN asked to have this information provided to his
office for distribution. He then asked if this proposed Prince
Rupert schedule will be consistent over the upcoming few years.
MR. HARDY acknowledged the importance of reliable schedules, and
therefore, AMHS proposes that the schedule will remain "pretty
much the same."
3:13:58 PM
CHAIR JOHANSEN returned to the change that directs folks through
Prince Rupert. He inquired as to the plan for the Prince Rupert
terminal and its connection to Ketchikan.
MR. HARDY acknowledged that there are some deficiencies with the
Prince Rupert terminal, and some repairs have been made.
Although the dock is safe, it is old and deteriorating.
Therefore, AMHS has had ongoing discussions with the dock owners
to request that they repair the terminal. The AMHS has also
sent a letter to the owners to outline concerns about terminal
fees. The 2030 plan indicates that AMHS will not expand its
service, but the southern gateway shuttle is in the Southeast
Alaska Transportation Plan. He stated that until AMHS prepares
a master plan for the system, there is not a vessel replacement
plan which includes the southern gateway shuttle.
3:16:50 PM
CHAIR JOHANSEN asked for a status on the latest master plan.
MR. HARDY advised that a reimbursable services agreement (RSA)
with the University of Alaska Southeast Transportation Center
was signed in December. A team of consultants will be working
on the master plan with two deliverable dates. The first phase
includes an as-built condition, a suite of alternatives, and a
framework for making recommendations with a deliverable date of
October 2008. The second phase is scheduled for October 2009.
3:18:11 PM
REPRESENTATIVE NEUMAN asked whether the 2030 plan includes
upgrades for vessels or replacements.
MR. HARDY explained that he meant to say that the 2030 plan says
there will be no expansion of service, but does recognize that
AMHS has an aging fleet and that vessel replacement will be
required. As yet, AMHS is working with the administration to
find revenue sources. He noted that of the fleet's 11 vessels,
4 vessels are 45 years old; with a life expectancy of 60 years,
the vessels will need replacement in 15 years.
3:19:54 PM
REPRESENTATIVE JOHNSON related his understanding that items not
in the 2030 plan cannot be included in the STIP. Therefore, he
opined that the state won't be able to receive federal funding.
3:20:44 PM
MR. HARDY recalled that Mr. Ottesen mentioned the SHAKWAK
funding, which is $10-25 million annually, will no longer exist
as of 2009. Federal funding projections are expected to level
off or reduce. With regard to STIP funding and its interface
with the 2030 plan and AMHS, Mr. Hardy deferred to Mr. Ottesen.
REPRESENTATIVE JOHNSON opined that funding for projects that are
not 2030 plan or STIP that no federal funds in the STIP will be
used for AMHS. Therefore, he surmised that some other fund
source, perhaps the general fund, will have to be utilized.
CHAIR JOHANSEN advised the committee should hold off on that
thread of questioning until Thursday when Mr. Ottesen is back
before the committee.
3:22:48 PM
REPRESENTATIVE DOOGAN referring to the operating plan asked if
during the summer the M/V Columbia will be the only ferry
sailing from Bellingham north once a week.
MR. HARDY responded yes.
REPRESENTATIVE DOOGAN reviewed the proposed AMHS vessel
schedule.
3:24:38 PM
CHAIR JOHANSEN asked if the committee wanted to get into this
minutia, and said that the director of AMHS is capable of taking
care of his business.
REPRESENTATIVE DOOGAN related that at the height of the tourist
season, AMHS is pushing folks north to Prince Rupert. He
inquired as to how AMHS knows that moving people from the
Bellingham north route to the Prince Rupert north route will
work.
3:25:43 PM
MR. HARDY related that AMHS will provide marketing incentives
such as fare reductions. He opined, "We do believe that we can
convince the overflow traffic from Bellingham into Prince
Rupert, yes we do."
3:26:23 PM
REPRESENTATIVE DOOGAN asked if AMHS made an operational decision
to move the sailings to Prince Rupert, and whether the switch is
a commercially viable option. He stated that his understanding
is that AMHS does not have any information to support its
decision for the terminal location change.
MR. HARDY reiterated that AMHS believes it can provide the
appropriate incentives for the overflow traffic to go north to
Prince Rupert.
3:28:17 PM
REPRESENTATIVE DOOGAN stressed that this is not reassuring,
either on the face of it, or for the schedule remaining the same
for the next three years.
3:28:31 PM
CHAIR JOHANSEN asked if the management team agreed on the M/V
Kennicott's schedule too.
MR. HARDY confirmed the M/V Kennicott's schedule was run through
the management team.
3:29:04 PM
REPRESENTATIVE DOLL referring to review figures on the Prince
Rupert run, informed the committee that the embarking traffic
for Prince Rupert has gone down, whereas for the same period the
embarking traffic has increased for Bellingham. Furthermore,
the docking and pier facilities are excellent in Bellingham.
She inquired as to the layup [and maintenance] costs for the M/V
Kennicott, since it is shut down for several weeks.
MR. HARDY offered to provide Representative Doll ridership
information.
CHAIR JOHANSEN asked Mr. Hardy to provide the costs for the two
week layup of the M/V Kennicott.
3:32:01 PM
REPRESENTATIVE SALMON recalled that when he first arrived in
Juneau to serve in the legislature he was opposed to the ferry
system. However, after his fourth session, he said he now
supports the program 100 percent. He opined he did not
understand the ongoing fight for funding, especially in lieu of
the projected increase of revenues from oil. He asked to hear
some positive aspects of the program, and to see a forecast and
plan that was not just gloom and doom. He said he supports
adequately funding AMHS. He opined that the communities, such
as Angoon need this program funded because when it is not fully
funded, the reductions in service cause hardships in the rural
areas served by AMHS.
3:35:47 PM
CHAIR JOHANSEN offered his sense of frustration too as it is a
fight every year to keep the system going. He opined that AMHS
reaches all through the state, "feeding" people into
Southcentral and the Interior. He noted that a recent McDowell
Report related how many embark from Bellingham and later show up
in Anchorage, or Fairbanks. He highlighted the transport of
troops. He opined that it is important to get people moved
throughout the system, and in the wintertime to provide services
from Bellingham to the Aleutian chain. He reiterated his
support for having a budget for AMHS that adequately funds AMHS
so that the legislature can review and appropriate funding. He
then expressed concerns with the diversion to Prince Rupert, and
the lack of a proactive plan to fix the system.
3:39:35 PM
REPRESENTATIVE JOHNSON opined that DOT&PF budget seems like a
piecemeal budget, and that the department is consistently in
crisis management rather than providing a [comprehensive]
budget/plan for the legislature to address. He added that it is
not just the DOT&PF, but all departments. He questioned what it
would cost to provide service, utilize equipment, and maximize
use of routes.
3:42:30 PM
REPRESENTATIVE DOOGAN recalled that last year, DOT&PF
representatives characterized [AMHS] as a Southeast
Transportation Plan that focuses on roads and the ferry as [a
shuttle] to the roads. He questioned whether that's because
it's easier to obtain federal funding for roads. If that's a
problem then the legislature should make the decision whether to
pay for the [vessels].
3:46:09 PM
REPRESENTATIVE NEUMAN asked if the Point McKenzie ferry would be
part of AMHS's overall plan.
MR. HARDY responded no.
3:46:53 PM
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 3:47
p.m.
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