Legislature(1993 - 1994)
02/15/1993 11:20 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
February 15, 1993
11:20 a.m.
TAPES
SFC-93, #20, Side 2 (561-001)
SFC-93, #22, Side 1 (001-561)
SFC-93, #22, Side 2 (561-120)
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 11:20 a.m.
PRESENT
In addition to Co-chairs Pearce and Frank, Senators Kelly,
Rieger, and Sharp were present. Senator Kerttula arrived
while the meeting was in progress. Senator Jacko was not
present.
ALSO ATTENDING:
Gina Marie Lindsey, Director, Anchorage International
Airport; John Unger, Controller, Alaska International
Airport System; Robert Bullock, Manager, Fairbanks
International Airport; and D. Randy Simmons, Deputy
Commissioner, Department of Transportation and Public
Facilities; Mike Greany, Director, and Karen Rehfeld, Fiscal
Analyst, Legislative Finance Division; and aides to
committee members.
SUMMARY INFORMATION
SB 50 - An Act making appropriations for capital
projects; and providing for an effective
date.
Budget Overviews were conducted for the following
department:
Department of Transportation & Public Facilities
Anchorage and Fairbanks International Airports
Overview by the Department of Transportation & Public
Facilities
Anchorage and Fairbanks International Airports
C0-CHAIR DRUE PEARCE invited Gina Marie Lindsey, Director,
Anchorage International Airport, Robert Bullock, Manager,
Fairbanks International Airport, D. Randy Simmons, Deputy
Commissioner, and John Unger, Controller, Alaska
International Airport System, Department of Transportation &
Public Facilities, to join members at the committee table
and proceed with their presentation.
GINA MARIE LINDSEY, Director, Anchorage International
Airport offered to give the committee an overview of the
airport systems. She said that counter to the rest of the
country, Alaska's domestic passenger traffic for both
airports was up about eight percent. Cargo has been up a
couple of percentage points but in the last four to six
months there has been a bit of a downturn. She projected a
flat cargo outlook in general because of the world economy,
and, in part, to the cancellation of several Federal Express
flights. She stated 1993 was to be a low point for both
airports with a projected 65 percent downturn. This year,
international passenger traffic was down about 58 percent
from 1988, the highest year.
Ms. Lindsey said the master plan for the Anchorage airport
will help with more current forecasts. She indicated
Fairbanks' plan was still in work. The land use plan was
being revised and a comprehensive development plan was being
formed for the Anchorage airport. Low cost alternatives
were being identified to manage the general aviation side of
the Anchorage airport with the decision not to move ahead
with expansion. Marketing continues to center on cargo
development, and alternatives were being sought for
international carriers to make transfers to domestic
carriers in Anchorage. Other efforts were being made to
reinstate service for direct Europe and Asia passenger
service out of Alaska. The economic conditions of all the
carriers made this a slow process.
Ms. Lindsey said the airline industry was in a crisis
internationally but especially in the U.S. The airports
were receiving pressure from carriers to reduce costs. She
said that the airport system was trying to be sensitive to
this situation without being reactionary. It wanted to
maintain a safe and efficient operation. Industry-wide, for
the last 10-15 years, airport costs have remained about
three to four percent of a carriers operating costs. She
stated, in relation to the operating and capital budgets,
requests are intended to be frugal without letting the
economic woes of 1992 compromise the future of the airports
and the traveling public.
SENATOR TIM KELLY asked what the long range plan was for the
international terminal in Anchorage. He wondered if,
instead of building expensive additions to the domestic
terminal, if the international terminal could be used for
domestic traffic. Ms. Lindsey said a task force had been
looking at that issue. She agreed that the international
wing of the terminal is under utilized. A decision must be
made to do a major modification for domestic carriers or
leave it in hopes that international travel will increase.
A modification would leave four gates for international
traffic, and would allow domestic use for the other four
gates. She explained the international terminal was
designed for wide-body aircraft so there is inadequate
baggage facilities. The modification would run between $18-
20M. Final judgement would not be made until an engineering
evaluation of C concourse in the old terminal was completed
and reviewed.
Ms. Lindsey said that there were quite a few requests in the
capital budget for terminal projects. She stated C
concourse is in major disrepair. The choices are to make a
large investment in C concourse to keep it operational,
rebuild it, or demolish it, and refigure the north
international terminal for domestic flights. Again, the
missing piece of information was the engineering evaluation
which will be completed in the next three or four months.
Ms. Lindsey, in answer to Senator Kelly's question, said C
concourse was built in the late 1950s. Discussion followed
between Senator Kelly, Ms. Lindsey and John Unger regarding
operating costs and revenue funding procedures.
Co-Chair Pearce asked Ms. Lindsey to describe the process
regarding the operating agreement with carriers in terms of
projects and their priorities. Ms. Lindsey said that each
year a capital budget request was sent to the carriers in
early July for review. In mid-July, those projects outlined
in the capital budget were discussed. In thirty days, the
carriers have a right to vote on each of the projects. If
67 percent of the signatory carriers vote against a project,
the airport system will delay the project for one year. The
following year, the airport system may bring that project up
again. Even if the carriers vote the project down again,
the airport system may decide to go ahead with the project
the next year. She indicated that signatory carriers do
change from time to time. Each carrier has one vote no
matter how many passengers they carry. There are about 25
signatories in the system at present. She said that
carriers contract airport space for five year terms, and,
even if a carrier leaves, they pay for the space they rented
unless another carrier takes over that space, and,
theoretically, still have a vote.
SENATOR STEVE FRANK asked if a balance was maintained in the
international airport fund and the amount. JOHN UNGER,
Controller, Alaska International Airport System, said there
was approximately $70M in the fund. He explained $40M was
set aside for capital projects underway that had been
appropriated over the years. He said there were minimum
requirements for balances that had to be maintained.
Senator Frank asked how the $40M in capital appropriations
would be funded. Mr. Unger said a bulk of the projects were
eligible for federal funds. Ms. Lindsey went on to explain
that Anchorage and Fairbanks airports have both passenger
and cargo entitlements resulting in $7M for Anchorage and
almost $1M for Fairbanks. Every year the airport system has
access to at least that amount of money. The capital budget
request identifies projects in excess of that amount. On a
national level, there is a discretionary pot of FAA money
that could be competed for, on a project for project basis,
over and above the $8M. He said timing was a factor in
receiving any of that federal money.
Senator Frank asked if this $8M was just for international
airports and separate from other federal funding. Ms.
Lindsey said $4M of the passenger entitlements would be able
to be applied to other smaller airports. But, because air
carriers were supporting the other costs of the airports
through their rates and fees, the airport system agreed that
all money earned at Anchorage and Fairbanks would be spent
at those airports.
In answer to Senator Frank's question, Ms. Lindsey said that
the request for Anchorage airport was a little higher this
year. She said the airport cut the revenue fund portion of
the capital budget last year by about 50 percent. This year
terminal design and modification money is making it higher.
$3M is slated for the repair and rehabilitation of C
Concourse.
Senator Frank asked about the largest appropriation, $11M
for Old International Airport Road reconstruction. He asked
if this road project was contingent on federal funds. Ms.
Lindsey said this project would be phased over several years
but legislative authorization was being sought this year.
She said this project was expected to be funded at 93.7
percent with federal funds. She indicated a lot of utility
work would have to be done in connection with the road
project.
Senator Kelly asked who makes the decision to bond debt.
Ms. Lindsey said the carriers in the contract process want
as much bond debt as possible since it delays their
obligation. The airport system takes the opposite, more
conservative approach and wants cash funding. So far it has
worked out for fair and equitable rates for the carriers.
John Unger added that bonding projects in the past were big
projects. Examples were the $6M parking garage and the
international terminal for $23M. He said that the C
concourse rebuild might qualify for a bonding project.
Senator Kelly asked what the debt service was every year for
the airports. Mr. Unger said that it ran about $7M and came
out of the international revenue fund. Last year it came
down and because of refinancing, it may go down as low as
$4.3M this year. Senator Kelly felt that was a high debt
service. Mr. Unger said that it was relative low compared
to other airports. Senator Kelly asked if expansion was not
predicted why was the airport spending money on expansion
projects. Ms. Lindsey said that the only expansion project
was the north terminal for bag area modification in the
amount of $4M.
Discussion followed between SENATOR STEVE RIEGER, Senator
Kelly, and Mr. Unger regarding revenues, bond revenue,
operating expenses, and debt service for the airport system.
It was determined there were no bond proposals pending for
projects at this time. It seemed none of the proposed
projects were large enough for bond proposals if the airport
system did not receive some of its requested money.
In answer to Senator Kelly's question regarding Federal
Express, Ms. Lindsey felt that even though a flight had been
dropped, the company seemed to be experiencing a steady
business growth.
Regarding the Alaska hanger, Ms. Lindsey said that it has
been cancelled for at least the next five years.
SENATOR JAY KERTTULA asked if there was any bond money in
the construction of the international terminal. Ms. Lindsey
said that she believed it was not funded by bond money. She
also indicated it was not making money. Ms. Lindsey felt
that there would not be any increase in international travel
in the next few years. She explained that the problem with
using the international terminal for domestic traffic was
that it was built about four feet too high for domestic
carriers. The modification was possible but very expensive.
Senator Kerttula suggested that next time an architect might
be able to design a terminal with multi-use in mind.
In answer to Co-chair Pearce's question, Ms. Lindsey said
the airports landing fees were very comparable with
competitors such as Portland or Los Angeles. In answer to
Senator Kelly's inquiry, Ms. Lindsey said passenger facility
charges (PFC's) had been authorized over two years ago.
Carriers are asking the airport system to charge this fee
but the airport system does not want to initiate it until a
specific project is identified that could be tied to the
fee. Hopefully, it would be a project that was visible and
of benefit to the public. Mr. Unger said it would raise
about $300.0 a year and was not sure how much of a bond that
would finance. He indicated, by federal law, PFC's could
only be used for capital projects. In fact, he said, some
federal funds could be lost if PFC's were initiated.
Senator Frank asked for more specific information about
PFC's. Mr. Unger and Ms. Lindsey explained each passenger
could be charged a PFC of $1 to $3, at the first two stops
of a flight. A PFC is an exception to an anti-head tax law
in effect. The PFC could not be charged to just tourists,
for instance. Senator Frank asked why this fee wasn't
charged as a cost and included in the landing fees of the
carrier. Mr. Unger said that landing fees needed to be kept
as competitive as possible. Ms. Lindsey said that landing
fees were determined by the weight of the aircraft not by
how many passengers or how much cargo was on board. Ms.
Lindsey said that gate fees and terminal space rent by
carriers made up the difference for passenger use in the
terminal. Mr. Unger said a PFC could be included in the
ticket price, and then the airline would reimburse a certain
percentage of the PFC back to the airport system.
Senator Kerttula asked if fire stations were built by bond
money and was there more fire support than needed. Ms.
Lindsey said that fire stations were not financed with bond
money. She said the new fire station had made the other two
obsolete. She did not know if they had a 24-hour crew.
Co-chair Pearce directed attention to Fairbanks
International Airport requests. Mr. Unger said both
airports normally submit their capital projects together.
Three capital projects this year were being presented. The
first was for environmental assessment and clean up in the
amount of $1M. This would provide for an environmental
cleanup evaluation, and each airport could then draw on
funds for its projects. After the $1M funding was
exhausted, more money would be requested.
End SFC-93 #20, Side 2
Begin SFC-93 #22, Side 1
The second capital project authorized the airport system to
accept capital contributions and receive reimbursement for
work requested by airport tenants, private citizens, or
other agencies on capital construction projects. In answer
to Senator Rieger's question, Ms. Lindsey said one example
was a soffit project above the ticket counter. Since the
airport system required the carrier to build the soffit, it
reimbursed the carrier the cost of the required project, or,
if the airport system financed a redesign, the carrier could
reimburse its allocated costs to the airport system through
this authorization. She said there were not any specific
projects in mind for the authorization. Discussion followed
between Co-chair Frank, Senator Kelly, John Unger and Ms.
Lindsey regarding this authorization and how it provides a
mechanism for receiving and expending already authorized
funds. Co-chair Pearce asked if the deliberation on this
issue could continue in the operating budget meeting for
central region airports.
Mr. Unger continued with the third capital project in the
amount of $350.0. It will purchase a central processing
unit and UNIX operating system for each airport. The
installation of UNIX will save $50.0 a year to DOA, speed up
response time, and give the system the ability to network
existing MacIntosh and IBM personal computers. Senator
Rieger asked for backup information listing exactly what
this project would fund. Mr. Unger reiterated that the
existing Wang system would be replaced.
Co-chair Pearce directed attention to the Anchorage airport
projects. Ms. Lindsey said the first project would upgrade
and replace the centerline and edge lighting on runway
6R/24L. The cost would be $2,760.0, and would receive
federal funding at 93 percent.
The next project was in the amount of $500.0, and provided
for the construction of an uninsulated shell on a concrete
slab foundation to house sand, urea and other winter
airfield deicing agents. This is also identified with
federal funding in the amount of $450.0.
Senator Rieger asked what determined the percentage of
federal funding. Ms. Lindsey said a terminal project would
be approximately 50 percent federally funded but some
elements would not be funded at all.
The next project was an annual funding request for $650.0 to
meet Anchorage airport needs that arise during the year and
cannot be foreseen during the budget planning process. In
answer to Co-chair Pearce, Ms. Lindsey said that this
request has been the same amount for the past three or four
years.
The auto ramp support column repair request would cost $1M.
It would bring the domestic terminal auto ramp up to current
earthquake and other standards. This is the second phase of
a two year project. RANDY SIMMONS, Deputy Commissioner,
DOT/PF, said existing construction used on this ramp was the
same used on the one that collapsed in the San Francisco
earthquake.
Ms. Lindsey said this revenue fund request of $3.0M had to
do with C concourse repair, rehabilitation, or replacement
pending the engineering evaluation. If there were elements
that could be federally authorized, the request would be
changed to reflect that. At Senator Kelly's inquiry, she
said that federal funds were very restrictive when it came
to terminal projects.
The next project was $100.0 for the CFR boat house
replacement. It will also provide new piling, boat slips,
and snow machine storage for crash, fire, and rescue
missions on the lake.
The next revenue funded project is domestic terminal floor
covering in the amount of $400.0. It will replace carpeting
in Concourse B, Concourse B hex area, and the ticket counter
lobby.
The garage rehabilitation and repair project is a preventive
maintenance project at a cost of $415.0. It will include
interior and exterior painting, sealing of wall cracks,
broken drain repair, canopy for 4th level elevator area,
security fencing, security doors, and elevator glass safety
wall. In answer to Senator Kelly, Mr. Unger said that
parking garage revenues amounted to about $2.3M because of
recently raised rates.
The next project was general aviation improvements, phase I
and II in the amount of $2.0M. Ms. Lindsey said that an
extensive plan for the lakes and relocation of the Lake Hood
strip had been abandoned because of financial and
environmental problems. A variety of improvements are being
prioritized through public meetings and the master planning
process. Federal receipts will pay for most of this
project.
The Lake Hood water and sewer extension is a revenue funded
project in the amount of $325.0. It will provide tenants on
the south side of the lake with public water and sewer. It
will also improve fire protection reducing insurance rates.
The north terminal modification construction is a $4M
project eligible for anticipated federal funding of $3M. It
would provide baggage facilities for the international
terminal. Ms. Lindsey indicated the only planes using that
terminal were the larger ones because of the terminal
design.
The next project is the Old International Airport Road
reconstruction in the amount of $11.0M with federal receipts
expected at $9.9M. Ms. Lindsey said that construction would
not start for another couple of years. In answer to Co-
chair Pearce, Ms. Lindsey said that she did not think any
planes still crossed the road.
Co-chair Frank pointed out that total requests amounted to
over $20.0M in federal receipt authority requests. Ms.
Lindsey said, if the airport system was unsuccessful in
receiving federal receipts, it would have to extend the
projects over a period of several years. John Unger agreed
that the airport system would have to come back to the
legislature if it wanted to change federal receipts to
international airport funds.
The next project is an annual request for operations and
maintenance equipment replacement in the amount of $779.0.
Federal receipts are expected to be $469.0 for several snow
plows.
The runway 14/32 instrument landing system site preparation
is the next project at a cost of $3,775.0. Federal receipts
cover $3,332.0. She said this amount was in addition to a
prior request of $2M. She noted an EIS had received
negative input. Ms. Lindsey did not know if the carriers
were still in support of this project. She felt it would
enhance the airport but the airport system awaited the final
EIS results. Discussion followed between Senator Rieger and
Ms. Lindsey regarding the extent of the site preparation.
The next project is terminal design at $4.5M with a federal
funding receipt estimated to be $1,690.0. This project is
as yet undefined and will be determined after the
engineering evaluation and discussions with the airlines.
Discussion followed between Senator Kelly, Co-chair Frank,
and Ms. Lindsey regarding a mid-field terminal proposal and
the problems with the international terminal modification.
The South Airpark water line construction is the next
project at $900.0 with no federal funding expected. This
also would reduce the fire insurance premiums for the
tenants in this area.
The taxiway Romeo extension and interlinks is an airfield
project that was identified by the carriers and FAA to help
eliminate congestion. It has a cost of $2,265.0 with
federal receipts expected at $2,120.0.
The next revenue project is phase II of the terminal
reroofing in the amount of $1.5M.
The last project for Anchorage was the West Air Park
development in the amount of $1.0M with federal receipts
expected at $900.0. This funding would provide negotiation
and acquisition of land adjoining the west side of the
airport.
ROBERT BULLOCK, Manager, Fairbanks International Airport,
directed attention to the Fairbanks airport projects. He
said that Fairbanks was also seeing about eight percent
passenger growth. The challenge was the increasing demand
on terminal and parking facilities but at discounted
passenger ticket prices. Capital and operating costs are a
major concern for the carriers. The master plan projected a
four to five percent growth. He explained the budget
reflected maintenance and upgrades to the airport.
End SFC-93 #22, Side 1
Begin SFC-93 #22, Side 2
The first project was annual improvements in the amount of
$300.0. Similar to Anchorage, this request meets unforseen
improvements or repairs.
The second project is field lighting upgrades in the amount
of $990.0 with federal receipts at $890.0. This upgrade and
repair is for the main runway.
The third request is for operations and maintenance
equipment replacement for $785.0. It is higher than last
year's request but necessary because of the equipment
needed. Federal receipts are expected to be $197.0. In
answer to Co-chair Pearce, Mr. Bullock indicated that the
only eligible item for federal funding was the snow plow.
The fourth request was a safety area stabilization at a cost
of $300.0 with federal receipts expected to be $270.0. It
would extend the asphalt about 15 feet to help control
erosion along the entire length of the runway.
The last project is a revenue funded installation of water
and sewer mains from Delta Road south to the end of West
Industrial Road at a cost of $1,010.0. The water portion of
this request is a high priority for fire security. It will
provide a close source of water for hydrants for the fuel
farm. The sewer portion is complicated because of
permitting and installation problems.
Senator Kelly asked how Anchorage and Fairbanks airports
divided monies received. Mr. Bullock said that both
airports worked closely together, listened to carrier input
together, and continued to look at the overall needs of both
airports.
Co-chairs Frank and Pearce requested that Legislative
Finance prepare a memo to explain how authority is given to
a department to receive and expend funds.
ADJOURNMENT
The meeting was adjourned at approximately 1:00 p.m.
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