Legislature(2019 - 2020)SENATE FINANCE 532
03/21/2019 09:00 AM Senate FINANCE
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| Audio | Topic |
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| Start | |
| Port of Anchorage: Importance, Status Update, and Challenges | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 21, 2019
9:02 a.m.
9:02:34 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Lyman Hoffman
Senator Peter Micciche
Senator Donny Olson
Senator Mike Shower
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
William D. Falsey, Municipal Manager, Municipality of
Anchorage; Steve Ribuffo, Director, Port of Alaska; Senator
Cathy Giessel; Senator Shelley Hughes; Senator Jesse Kiehl.
SUMMARY
^PORT OF ANCHORAGE: IMPORTANCE, STATUS UPDATE, and
CHALLENGES
9:04:02 AM
WILLIAM D. FALSEY, MUNICIPAL MANAGER, MUNICIPALITY OF
ANCHORAGE, discussed the presentation, "Port of Alaska
Modernization Program History and Status" (copy on file).
9:04:33 AM
Mr. Falsey highlighted Slide 2, "Why Care about the Port?"
9:04:38 AM
Mr. Falsey looked at Slide 3, "Critical: Alaska's premier
inbound cargo port":
? Half of state's inbound, marine freight
? Half of Port freight delivered outside of Anchorage
? DOD-designated National Strategic Defense Port
9:05:08 AM
Mr. Falsey addressed Slide 4, "Old: Time is running out":
Half-century old docks are failing due to corrosion
Docks will start closing in about 10 years
regardless of seismic activity or anything else
9:05:35 AM
Mr. Falsey discussed Slide 5, "Short of Funds":
? First replacement facility is 100 percent designed:
Petroleum /Cement Terminal
Total funding is not enough to complete shovel-ready
construction
9:05:54 AM
Mr. Falsey highlighted Slide 6, "In the beginning (pre-
Port Expansion")." The slide showed a 2004 photograph that
reflected two large areas of mud on either side of the
cargo terminals. He said that it was known in 2004 that due
to the mud on either side of the terminals that the
facility would eventually need to be replaced.
9:06:32 AM
Mr. Falsey addressed Slide 7, "The Port of Anchorage
Intermodal Expansion Project (PIEP) Vision." He said that
the grand vision on the new land would have allowed for
various updated facilities and terminals. He said that open
cell sheet piles would have been used over standard
construction techniques.
9:07:02 AM
Mr. Falsey looked at Slide 8, "Not standard "piles"."
Mr. Falsey highlighted Slide 9, "1976 construction of
Terminal 3."
Mr. Falsey looked at Slide 10, "Open Cell Sheet Pile
Construction."
9:07:27 AM
Mr. Falsey turned to slide 11, "The Port of Anchorage
Intermodal Expansion Project (PIEP) Construction," which
showed how the mud would be converted into new land: The
Barge Births and Northern Extension, and the South
Backlands. He relayed that this project ended in calamity
due to sheet pile failure.
9:07:36 AM
Mr. Falsey highlighted Slide 13, "The Port of Anchorage
when PIEP was Stopped." He stated that when the project
stopped in 2012, the state had successfully converted the
old mud into the seismically unstable South Backlands and
Northern Extension and had not reached any of the
facilities that needed to be replaced.
9:07:57 AM
Mr. Falsey discussed Slide 14, "Vision After 2013 Concept
Design Study." The intent had been to salvage some of the
work that had already been done by building a new cargo
terminal at the North Extension.
9:08:15 AM
Mr. Falsey addressed slide 15, "2013 CH2MHill Concludes
Design Not Suitable." He turned to Slide 16, "Dry Barge,
Wet Barge, NE 1, NE 2." Slide 16 showed several designs
that were generated to salvage some of the work that had
already been done. Professional geoengineers had reviewed
the revision to determine seismic stability.
9:08:38 AM
Mr. Falsey addressed Slide 17, " 2013 CH2MHill Concludes
Design Not Suitable":
? Dry barge berth can be used
? Wet barge berth has "major defects" and its "factor
of safety" for "static global stability" is inadequate
? North Extension 1 has "even lower [factor of safety]
for static global stability"
? North Extension 2 has "most dramatic construction
defects" and is globally unstable
Mr. Falsey discussed Slide 18, "Dry Barge, Wet Barge, NE 1,
NE 2." He lamented that the facility had not only be
improperly constructed but was also dangerous. He relayed
that the Dry Barge could be salvaged, but that the other
three would need to be removed.
9:09:31 AM
Mr. Falsey highlighted Slide 19, "Anchorage Daily News."
The slide contained a picture from the November 30, 2018
Anchorage earthquake. He noted that the land in the photo
was the same land that was under the Dry Barge area, which
offered cause for concern.
9:09:38 AM
Mr. Falsey looked at Slides 20 and 21, "Dry Barge, Wet
Barge, NE 1, NE 2."
9:09:46 AM
Mr. Falsey highlighted Slide 22, "Modernization - Not
Expansion, Just Replace what we have." He said that this
concept moved away from any delusions of grandeur to the
idea of modernizing the port as it exists.
9:10:08 AM
Mr. Falsey addressed Slide 23, "2014 Charrette Stakeholder
Representation":
? Municipality of Anchorage (MOA)
Geotechnical Advisory Commission (GAC)
Port of Alaska (POA)
Totem Ocean Trailer Express (TOTE)
Horizon Lines (Now Matson)
ABI Cement
Southwest Alaska Pilots Association
Cook Inlet Tug and Barge
US Army Corps of Engineers Alaska District (USACE)
Alaska Railroad Corporation (ARRC)
CH2M HILL/HDR Program Team
9:10:38 AM
Mr. Falsey looked at Slide 24, "ModernizationNOT Expansion
(Just replace what we have)." He stressed that the 2014
concept set the project on the path that it was currently
on, with a new significant cost to modernize the facility
by attending to the leftover problem created by the old and
failed federal project. He added that replacement of the
cargo terminals, while keeping them in operation, would be
a challenge.
9:11:01 AM
Co-Chair von Imhof looked at Slide 17. She understood that
the Dry barge berth could be used, but the other areas were
unstable. She asked what would be done with the unusable
areas under the 2014 concept design study for
modernization.
9:12:40 AM
Mr. Falsey replied that parts that could not be repaired
would be removed and paired back to be structurally stable.
Those areas would not be used for new facilities.
9:13:29 AM
Co-Chair Stedman queried possible future demolition and the
accompanying cost.
9:13:42 AM
Mr. Falsey looked at Slide 25, "Post-2015 Direction and
Changes":
? Begin with design and $128 million
? Prioritize construction of useful facilities
deferring second portion of North Extension
Stabilization
? Advance Design
? Secure Funding
Mr. Falsey said that the priority would be the construction
of useful facilities and the stabilization portion of the
Norther Extension would be deferred. He noted that there
was not yet funding for the program. He shared that the
start would be to carve off the "nose" of the Northern
Extension and then the rest would be removed over time. He
said that the core mission was to advance the design of the
useful facilitates. The first of those facilities was the
Petroleum Cement Terminal, which had to be moved south in
order to make room for all the cargo construction. He
stressed that the project was not one big project but,
rather, a series of small projects - the only portion of
which was ready now was the Petroleum Cement Terminal. He
said that the city had inherited the problem and now had to
determine where the money would come from for the necessary
changes.
9:15:29 AM
Co-Chair Stedman addressed the history of the project as it
had been discussed in committee. He expressed concern that
money was being wasted on demolishing structures the state
had made previous appropriations to build.
9:16:21 AM
Mr. Falsey agreed that there was a significant demolition
cost. He related that now, each phase of the project was
expected to pay for itself. He said that the demolition
cost would be approximately $250 million and would largely
be recouped in federal dollars. He admitted that expenses
for demolitions had a tangential relationship to past
appropriations - but requests for new money to fix problems
created by past appropriations would not be submitted. He
stressed that the problems at the port were largely the
fault of the federal government and sights were set on the
Untied State Maritime Administration for recompense.
9:17:23 AM
Co-Chair Stedman asked about past appropriations to the
project: $10 million in 2007, $15 million in 2009, $30
million in 2010, $30 million in 2012. He asked whether any
of those appropriations were targeted for demolition.
9:18:09 AM
Mr. Falsey responded that some of the funds was used for
design and was not a significant fraction of the overall
expense. He insisted that the priority had been to use the
appropriations for functional facilities. None of the
remaining $128 million had been slated to go towards the
demolition of the Northern Extension.
9:18:41 AM
Co-Chair Stedman requested documentation of how state
dollars had been spent for the project since 2006.
9:18:43 AM
Mr. Falsey agreed to provide the information.
9:20:14 AM
Co-Chair von Imhof looked at Slide 5. She noted that the
project was sort on fund by $110 million. She wondered who
had done the cost base analysis for the slide, and how much
federal funding was expected.
9:21:02 AM
Mr. Falsey asked Co-Chair von Imhof to repeat the question.
9:21:06 AM
Co-Chair von Imhof pointed to the upper right corner of the
slide that listed current funding sources and the total.
She understood that the total funding amount for the
project was $157,796,015 - plus the figure in the lower
right-hand corner of $110,693,123.
Mr. Falsey responded that the numbers in the upper right
corner were the different funding sources for the $157
million and the chart below that reflected the cost of
completing the Petroleum Cement Terminal. He said that the
chart was showing that there would not be enough money to
complete what had already been designed.
9:22:41 AM
Co-Chair von Imhof asked whether work had begun on the
Petroleum Cement Terminal phase of the project.
9:22:44 AM
Mr. Falsey replied in the affirmative. He said that
transitional dredging had been done to change the undersea
surface, stabilization of the South Backlands had been
done, and a south floating dock had been relocated. He
added that all necessary permitting and design work had
been completed. He said that the port was on the cusp of
starting the actual construction work and had the funds to
build the trestle out to the future platform, but not to
build the platform itself.
9:23:29 AM
Co-Chair von Imhof asked whether assurances had been given
that federal dollars would be made available to finish the
project.
Mr. Falsey said that there was not guarantee of federal
dollars to finish the Petroleum Cement Terminal. He said
that if each portion of the project was supposed to pay for
itself it was expected that the federal money received
through litigation would be used to clean up the Northern
Extension. It was not expected that there would be funds
left over to build the Petroleum Cement Terminal. He said
that there were no assurances that federal grants would be
received.
9:24:53 AM
Co-Chair von Imhof spoke to a February 18, 2019 article in
the Anchorage Daily News that discussed the port's hopes to
have tariffs on cement and fuel. She asked whether the port
commission, or the Anchorage Assembly, had conducted a
study on how the tariff would impact potential users.
Mr. Falsey said that the process was in its infancy. He
said that the tariffs had to be changed in order to ensure
a future for the port. He warned that if tariffs were the
only revenue generator for the port it would affect all
users on the docks.
9:26:53 AM
Senator Bishop appreciated the tariff conversation.
9:27:29 AM
Senator Wilson expressed concern that users would just move
to different ports if the Port of Anchorage tariffs became
too prohibitive.
Mr. Falsey said that he would provide further information
on the tariffs. He noted that use of other ports would be
logistically unattractive to users.
9:28:57 AM
Co-Chair Stedman queried the ownership of the port.
Mr. Falsey replied that the port was owned by the
Municipality of Anchorage.
9:29:04 AM
Senator Micciche noted that he was the president of the
management team of the Coast Guard's Cook Inlet Harbor
Safety Committee. He mentioned that port director was also
a member.
9:29:31 AM
Co-Chair Stedman asked whether there were ways other than
roads to get materials to the Railbelt.
9:29:45 AM
Mr. Falsey replied that trains could be an option. He said
that trains were not an attractive alternative because of
the additional cost, congestion on highways, and transit
times. He a cost benefit analysis was currently being
updated. He said that implementation of a tariff would not
move significant volumes away from the port.
9:30:31 AM
Co-Chair Stedman asked how the committee could analyze how
much the facility would cost when the target cost was
constantly moving.
9:31:05 AM
Mr. Falsey responded that the plan consisted of a series of
projects and that $2 billion was the number being used as a
result of the information at hand. He said that he hoped
that the cost would be less overall. He reiterated that the
only portion of the project that was shovel ready was the
Petroleum Cement Terminal, which was at 100 percent design,
the other portions were at 30 percent design level.
9:31:52 AM
Co-Chair von Imhof spoke to the economic analysis being
done on a potential tariff. She wondered whether, if the
economic analysis proved that cargo would bypass Anchorage,
there was a threshold for the tariff.
Mr. Falsey responded that if the unmet need for the
terminal was $200 million, assuming current volumes, it
begged the question of what kind of debt service coverage
ratio would be necessary to borrow $200 million. He said
that the assumed demand was critical; if other facilities
were going to be used the port would be forced to consider
raising the tariff. He hoped that users would help the
municipality to understand the level of elasticity in the
tariff level but that the municipality had no other option
but to generate revenues off the facility enough to meet
the debt service needs.
9:33:20 AM
Co-Chair von Imhof noted that there were some states that
had a statewide focused sales tax for specific projects,
which had worked to various degrees of success. She
remarked that there was discussion of a public/private
partnership. She noted that the tariff idea, was not the
only idea. Rather, there were different port ownership
structures that had worked successfully. She asked Mr.
Falsey to comment the issue.
Mr. Falsey stated that the port had been approached by
Macquarie Infrastructure Corporation. He said that the
municipality had proactively approached all users to ask
whether they were interested in a public/private
partnership. He said that no hard offers had been received.
He stressed that he was open to any alternative that kept
the port in operation into the future. He stated that the
public/private partnership had many advantages but would
not change the underlying economics. He said that a
public/private partnership could result in a tariff and
even a tollbooth.
9:36:49 AM
Senator Bishop asked about the design construction on the
shovel-ready project from the piling standpoint.
Mr. Falsey stated that the design was for plain platforms,
supported by cylindrical piles.
9:37:28 AM
Senator Wilson agreed with Co-Chair von Imhof about
different ways of funding. He lamented the large amount of
money that had already been spent on the project. He
suggested that if the municipality could not fund the
project it could move to a port authority model.
9:38:35 AM
Mr. Falsey reiterated that he was open to all options. He
stressed that the municipality was not asking for $
billion, only $200 million for the Petroleum Cement
Terminal.
9:39:32 AM
Co-Chair Stedman interjected that the whole port was under
discussion and not only the one terminal.
9:39:39 AM
Senator Wilson aske how projections were being made without
an economic analysis.
Mr. Falsey stated that what had been projected was the
amount of revenue that would need to be taken off the cost
of the terminal to cover the amount of money that would be
necessary to finish building the terminal. He repeated that
he was open to finding a solution other than a tariff.
9:41:23 AM
Senator Micciche felt that the presenters were sitting
before the committee prematurely. He was concerned that the
municipality had not reached out to the user groups of the
port facility in a way that demonstrated that users had
been adequately involved in the process.
9:43:35 AM
Mr. Falsey admitted that there was no plan for an overall
rebuild the port. He insisted that the municipality was
actively reaching out to users and important conversations
were occurring. He believed that this portion of the
project was ready to implement.
9:45:18 AM
Co-Chair von Imhof shared that she had invited the
presenters because the port served the entire state and was
an important piece of infrastructure. She hoped that
potential solutions could be reached. She hoped that the
municipality did not believe that a tariff was the only
option. She urged the presenters to keep investigating
other potential options for keeping the port operating. She
warned against attempting any construction without first
securing funding.
9:48:03 AM
Senator Olson felt that the conversation was in danger of
becoming tense. He called for civility throughout the
remainder of the presentation.
9:49:05 AM
Co-Chair Stedman acknowledged the strong differing of
opinions at the table. He said that talking about a
statewide sales tax to generate revenue for a particular
port would be met with differing opinions. He warned
against underestimating the indigestion caused by
appropriating hundreds of millions of dollars for a
shortsighted project, only to have the municipality come
back and ask for more partial funding.
9:51:17 AM
AT EASE
9:52:16 AM
RECONVENED
Mr. Falsey stated that he appreciated the direct questions.
He stressed that the facility was critical to the entire
state and that the appropriations made to-date had been
used on the necessary permitting and testing work to get
projects done. He turned to Slide 26, "The Path We Are On
Now," which showed an aerial image of the Anchorage Port
Modernization Program. He said that the first thing that
needed to be done was to move the Petroleum Cement Terminal
to the and the south floating dock further south. He
discussed the plan to move the terminal. Slides 27 and 28
showed the project as it would evolve over the next two
seasons.
9:54:01 AM
Mr. Falsey highlighted Slide 27, "Two Seasons: PCT2020
Construction Scope":
Access trestle up to top of deck, no piping or
utilities
Platform piles
Temporary bracing of platform piles
Temporary impressed current cathodic protection
Mr. Falsey addressed slide 28, "Season 2: PCT2021
Construction Scope":
Complete platform
Mooring and breasting dolphins
Petroleum piping and utilities
Hose tower and control building
Impressed current cathodic protection
Mr. Falsey highlighted slide 29, "Short of Funds":
First replacement facility is 100 percent designed:
Petroleum/Cement Terminal
Total funding is not enough to complete shovel-ready
construction
9:54:52 AM
Co-Chair Stedman interjected that the committee had two
choice for funding any Capital project: reducing the
permanent fund dividend payout or using already depleted
savings. He stated that there was no reoccurring revenue
for Capital projects; all reoccurring revenue was being
used for the Operating Budget.
9:55:28 AM
Mr. Falsey appreciated the conundrum. He thought that
further conversations should be about the best way to
mitigate the cost of the port being shifted to Alaskans.
9:55:56 AM
Mr. Falsey addressed Slide 30, "2016 State Legislative
Program."
Mr. Falsey highlighted Slide 31, "Priority Capital
Request."
9:56:11 AM
Co-Chair von Imhof looked at Slide 26. She asked whether
user groups needed all the capacity shown on the slide. She
wondered whether it would be better to use one terminal
more efficiently.
9:57:35 AM
Mr. Falsey replied that the users liked the design built
did not want to pay for it. He believed that if users had
to pay for it the design could be significantly downsized.
He said that conversations on which parts of the project
were critical would be occurring.
9:59:20 AM
Co-Chair von Imhof hoped that further discussions moving
forward should involve a public/private collaboration for
financing and ownership of the project.
10:00:28 AM
Senator Micciche though that a more comprehensive plan,
using all the available alternative ports, should be
considered.
10:02:05 AM
Mr. Falsey addressed Slide 32, "Designated Legislative
Grant Program."
10:02:14 AM
Mr. Falsey looked at Slide 33. He shared that the port had
applied for two federal grants and would pursue all
possible federal funding.
Mr. Falsey highlighted Slide 34, "Public/Private
Partnership?: RFP." The slide listed information for the
bidding process.
10:02:57 AM
Mr. Falsey addressed Slide 35, "Port of Alaska
Modernization Program Financial Advisory Services."
10:03:04 AM
Mr. Falsey highlighted Slide 36, "Public-Private
Partnerships."
• Use if one or more P3's, likely combined with some
public sector capital, is an alternative financing
strategy to consider depending on the MOA's risk
preferences and priorities.
• Unless "guarantees" can be secured to support use of
public finance; pursuing a P3 Strategy may not
necessarily impact the timeline of the PAMP or cost
end users any more than using revenue bonds to fund
one or more phases of the program.
10:03:09 AM
Mr. Falsey discussed slide 37. The slide showed the
different users of the port. He said that conversations
with users on how to fund the port projects had been
comprehensive.
Mr. Falsey highlighted slide 38, "Tariff Update."
10:03:22 AM
Mr. Falsey looked at slide 39, "Goals For Setting Tariff
Rates for Port":
Rates set to achieve revenue requirement, meaning
1. meet its debt service coverage ratio of 1.3 or the
ratio set by lender.
2. meet its fiscal policy for operating reserves set
at a minimum of 60 and maximum of 90 days coverage of
operating expenses following GFOA best practices.
3. meet its fiscal policy for capital reserves set a 2
percent of plant in service for coverage of unexpected
events (earthquake, fire or catastrophic failure of
facilities).
4. meet is fiscal policy for debt reserves when
revenue bonds are issued for capital improvements
consistent with bond covenants.
5. each project pays for itself.
10:04:05 AM
Co-Chair Stedman requesting further information on the
tariff structure and impact.
Mr. Falsey showed Slide 39, "Goal For Setting Tariff Rates
for Port":
Rates set to achieve revenue requirement, meaning?
1. meet its debt service coverage ratio of 1.3 or the
ratio set by lender.
2. meet its fiscal policy for operating reserves set
at a minimum of 60 and maximum of 90 days coverage of
operating expenses following GFOA best practices.
3. meet its fiscal policy for capital reserves set a
2% of plant in service for coverage of unexpected
events (earthquake, fire or catastrophic failure of
facilities).
4. meet is fiscal policy for debt reserves when
revenue bonds are issued for capital improvements
consistent with bond covenants.
5. each project pays for itself.
10:05:37 AM
Co-Chair Stedman interjected that if a member asked a
question that was better answered on the previous slide,
the committee could hold questions so the presenter could
stay in sequence.
10:06:00 AM
Mr. Falsey highlighted Slide 40, "The 'All in' PCT Price
Tag 95 percent Design." The slide contained the revised
cost estimate for the Petroleum Cement Terminal of
$223,117,951; minus pro-rate portion of prior cash on hand
and state grants of $20,895,331 - resulting in an
outstanding need of $200 million.
10:06:28 AM
Mr. Falsey addressed slide 41, "Municipality of Anchorage
Port of Alaska." The slide contained the Port of Alaska
tariff rate projections based on Parish Blessing and
Associates analysis on borrowing of $200 million. He
discussed the increase on the petroleum and cement tariffs
over the next 6 years.
Mr. Falsey discussed slide 42, "Anchorage Daily News:
Study, Much higher import fees needed to pay for Anchorage
port work."
10:07:42 AM
Co-Chair von Imhof understood that cement and fuel were two
very different commodities. She thought that $.03 or $.04
cents could make a big difference in the per gallon price.
She asked whether the port had explored different federal
programs that specifically target ports and railways. She
wondered whether the program could qualify for funds under
the federal Community Reinvestment Act.
10:09:21 AM
Mr. Falsey replied that the he would provide information
about the federal monies that the port had applied for and
get back to the committee.
10:09:46 AM
Senator Wilson asked whether the state's credit rating
affected any of the projections.
10:09:54 AM
Mr. Falsey did not believe so.
10:10:35 AM
Senator Bishop queried the number of years expected to
phase in the proposed tariff increases.
Mr. Falsey said 6 years.
10:12:08 AM
Senator Shower asked about military use of the port and
whether options for funding sources through the military
had been explored.
10:12:40 AM
Mr. Falsey replied in the affirmative. He felt that the
federal delegation was aware of the importance of the port
as a national strategic defense seaport. He said that the
Department of Defense did not have a program that offered
financial support to fund the critical infrastructure of
the port. He felt that if the port was to incur the $300
million in additional cost to support the official seaport
designation the federal government should play a role in
funding the facility.
10:14:10 AM
Senator Hoffman aske who had the authority to set the
tariff timeline of 6 years. He wondered about the impact of
the tariff on the international airport cargo system.
10:14:37 AM
Mr. Falsey replied that the Anchorage Assembly had the
authority to set the tariff. He described the assembly's
process. He asserted that Alaska would pay for the project
somehow, someway; the hope was to find the least damaging
way to fund the project.
10:16:47 AM
Senator Micciche wondered whether there was a way to get
contractual commitments from the private sector. He felt
that private industry was continually seeking more
efficient ways to do business.
10:17:42 AM
Mr. Falsey replied that a preferential user agreement had
been discussed that would guarantee a volume of use, which
was in place for cargo. He stated that such an agreement
was not yet in place for cement and fuel users. He
suspected that no one would be ready to sign such an
agreement at the tariff rates previously published.
10:19:01 AM
Co-Chair Stedman asked about the enterprise fund. He
queried why the municipality did not have a sustaining
structure in an enterprise fund for the port.
10:19:42 AM
Mr. Falsey responded that there were 2 enterprises and 3
utilities in the municipality. He said that the self-
sustaining enterprise fund spun off $10 million in revenue
per year and paid a small dividend to the municipality
yearly. He lamented that what the fund had never done was
collect enough money to rebuild the port once it reached
the end of its useful life. He felt that the port had
likely been predicated on the notion that federal or oil
dollars would fill the financial void.
Co-Chair Stedman probed the tariff changes against an
artificially low base rate. He requested a tariff
comparison of the municipalities number and what other
Alaskan's were paying in shipping tariffs. He thought that
the disparity in energy costs throughout the state would
inform the comparison.
10:22:41 AM
Mr. Falsey agreed to provide the information. He shared
that Anchorage was beginning to investigate significant
tariff adjustments because it was being forced to raise the
funds to rebuild the port. He suspected that none of the
other facilities in the state were facing the same issue.
10:23:29 AM
Co-Chair Stedman thought that more investigation should be
done into the comparison.
10:23:52 AM
Co-Chair von Imhof asked about the realistic timeframe for
a workable plan based on state holder engagement, port
ownership and management, and a realistic financial plan of
the different funding sources.
10:24:50 AM
Mr. Falsey replied that information for the Petroleum
Cement Terminal could be available in 2019. He felt that by
summer 2019, the port commission process would have
advanced and the financial plan for that terminal would be
finalized. The plan for the remainder of the facilities at
the port remained under discussion. He thought that
cleaving the projects into its various components was a
smart way to move forward.
10:25:45 AM
Senator Wilson understood that the port had no request for
funds for FY 20.
10:25:54 AM
Mr. Falsey replied no. He said that in FY 19 the port had
received $20 million in grants and had expected the same
funding in FY 20. He stated that because the port had
enough money to build half of the Petroleum Cement
Terminal, it was looking for assistance to finish the
remainder of the facility.
10:26:47 AM
Senator Bishop asked whether the city had considered a
time-limited sales tax.
10:26:57 AM
Mr. Falsey replied no. He said that such a tax would be a
mismatch in burden; 85 percent of the state benefited from
the port, half of the cargo received left Anchorage and
went to other areas of the state. If a local tax were to be
imposed, the residents for the municipality would be paying
for a new port that benefitted the entire state.
10:28:13 AM
Co-Chair Stedman understood that it would be difficult for
the Municipality of Anchorage to pass a sales tax to fund
the Port of Anchorage because other areas of Alaska had
goods and services come across the port. He wondered how a
statewide sales tax would be beneficial to Southeast
Alaska, who did not benefit from the Port of Anchorage.
Mr. Falsey said that a statewide sales tax was not under
discussion.
10:28:59 AM
Co-Chair Stedman recalled that it had been mentioned
earlier in the meeting.
10:29:22 AM
Mr. Falsey rebutted that he had not mentioned a statewide
sales tax.
Co-Chair Stedman thought that the record would speak for
itself.
10:29:45 AM
Senator Micciche asked whether maintenance on the port had
been deferred in the hope that additional funding would be
appropriated by the legislature.
10:31:05 AM
STEVE RIBUFFO, DIRECTOR, PORT OF ALASKA, said that the port
had not been deferring maintenance. He said that the port
budgeted for, and executed on an annual basis, all the
required marine terminal facility maintenance needed to
keep it capable of supporting operational loads.
10:32:43 AM
Mr. Falsey highlighted Slide 43, "Municipality of Anchorage
Port of Alaska." The slide showed the expenses and revenues
related to Port of Alaska tariff rate projections based on
Parish Blessing and Associates analysis on borrowing $200
million.
Mr. Falsey discussed Slide 44, "Journal of Commerce." The
slide showed and article with the headline, "Users say fuel
tariff hikes would impact cargo operations at airport."
10:32:48 AM
Co-Chair von Imhof asked whether the port currently paid
for its own daily operations and was there ever a surplus.
She wondered whether other expenses could be offset by left
over funds.
10:33:23 AM
Mr. Falsey replied that the port did pay for itself, with
money left over. He said that $11 million of the port's
equity had just been used for keeping the program alive,
and that the equity could continue being used going
forward. He added that the funds from the equity would not
be enough to fund the entire project.
10:33:49 AM
Senator Wilson asked about dividends that the port paid to
the municipality. He wondered whether the dividends would
continue, given the ports financial struggles.
10:34:08 AM
Mr. Falsey relayed that "everything is on the table." He
shared that the general government of the municipality was
not looking to get rich off the port, only to keep the port
in operation.
10:34:48 AM
Senator Wilson queried whether the municipality was looking
to end the distribution of dividends, effective
immediately.
10:34:56 AM
Mr. Falsey said no. He related that a vote had not been
taken to end the dividend process immediately; the
approximately $1.5 million in the dividend account would
not be enough get the project through the first phase of
construction. He warned that turning the dividend off would
decrease funding for municipal government by $1.5 million,
which would result in a rise in property taxes.
10:35:30 AM
Senator Wilson likened the Alaska Permanent Fund Dividend
to the port dividend and wondered why the port would pay
dividends if it did not have money to cover operating
expenses.
10:36:03 AM
Mr. Falsey clarified that what the port paid the
municipality was the equivalent of the property tax share
that they would bear if they were in private ownership.
10:36:51 AM
Co-Chair Stedman thought that the dividend structure was
"bizarre."
10:37:06 AM
Co-Chair von Imhof wondered whether new users for the
cement dock had been identified.
10:37:34 AM
Mr. Falsey said that one company had made overtures about
building land site facilitates and could become a new user
of the cement terminal, but that nothing meaningful had so
far been established.
10:38:30 AM
Mr. Falsey highlighted Slide 45, "Anchorage Daily News."
The slide showed a headline, "Cost doubles to $2 billion to
fic port."
Mr. Falsey looked at Slide 46, "PCT Cost Extrapolation
across the Program":
Analogous Method
? Apply percentage increase of PCT to all remaining
projects
? Least precise method due to variations between
project components
Selective Parametric Method
? Adjust major cost driving elements based on PCT unit
costs
? Provides a reasonable "order of magnitude" estimate
with limited effort and information
Deterministic Method
? Requires updates to the preliminary designs based on
lessons learned from PCT
? Most precise method to determine costs
? Quantify the revised design and estimate using cost
information learned from PCT construction
All estimates are highly sensitive to funding
availability (escalation) and marine mammal
restrictions or requirements
Mr. Falsey addressed Slide 47, "Total Program Costs
Extrapolated from 65 percent PCT Construction Cost
Estimate."
10:40:51 AM
Mr. Falsey highlighted Slide 48, "Major Cost Drivers":
1. Risk Contingency
? $298M included in the cost estimate (15 percent of
total program cost)
? Marine Mammal Impacts construction means and
methods
2. Escalation
? $202Mincluded in the cost estimate (10 percent of
total program cost)
? 3 percent annual rate used in the cost estimate
? Directly influenced by funding availability
3. Design requirements
Seismic design criteria
? 75-year Design Life
Tenant Requests
Mr. Falsey expounded on the cost drivers listed on the
slide.
10:41:12 AM
Mr. Falsey addressed Slide 49, "Anchorage Port
Modernization Program." He said that the cement terminal
was seismically robust and had a long design life, but that
not many tenant requirements had affected the projected
cost. He reiterated that no other part of the overall
modernization project was design ready. He asserted that
all current design assumptions were subject to change.
10:42:48 AM
Co-Chair Stedman asked about how the proposed tariff would
affect the shipping of cement around the state.
10:43:54 AM
Senator Hoffman thought that Bethel received most of its
goods directly from Seattle, bypassing Anchorage. He spoke
of using bonds to build infrastructure in Anchorage. He
assumed wondered whether the municipality could use bonds
for the project that could be paid back by revenue
generated from the tariff.
10:46:24 AM
Mr. Falsey replied that the proposal was not for a general
obligation bond, but rather to issue revenue bonds. Those
would be 40-year bonds, financed by tariff revenue.
10:46:51 AM
Senator Hoffman requested further information on the
revenue bonds.
10:46:55 AM
Mr. Falsey agreed to provide that information.
Co-Chair Stedman said that the committee needed someway of
comparing the cost of moving cement from the source to
various parts of Alaska.
10:48:25 AM
Co-Chair von Imhof understood that many commodities would
travel through the suite of docks. She asked about using a
lower, and broader, excise tax; one that was implemented
when the whole project, in phases, began and extended over
30 years.
10:49:25 AM
Mr. Falsey said that the proposal had been investigated,
but it had been found that there would be cross-
subsidization; somebody would be helping to shoulder
somebody else's costs.
10:50:41 AM
Co-Chair von Imhof understood that the municipality did not
know what the different phases would look like, or cost, so
an excise tax to cover the entire project would pose some
risk. She expressed consternation with the notions of
"winners and losers" when it came to who benefitted from
the port, versus how it was financed.
10:51:52 AM
Mr. Falsey clarified that if the tariff was raised across
the board, the cargo users would be paying for some of the
cement dock, which they would not use, or vice versa. He
thought this could cause an unnecessary market distortion.
10:52:20 AM
Co-Chair Stedman announced that there were several minutes
left in the meeting, some of which would be used for
closing statements from the presenters.
10:52:34 AM
Mr. Falsey looked at Slide 50, "MARAD Lawsuit." He lamented
that a resolution of the lawsuit on the state's behalf
would not pay for the entire project.
10:53:43 AM
Senator Wilson asked Mr. Falsey to discuss the lawsuit.
10:53:53 AM
Mr. Falsey replied that the thrust of the lawsuit was that
the previous port expansion project was managed by the
federal government in the form of Maritime Administration.
He said that what the Maritime Administration did was to
take the cash that was on hand and "set it on fire and
leave us with a giant mess." He said that the mess would
cost the state hundreds of millions of dollars. The federal
government held that the state was owed no money.
10:56:17 AM
Mr. Falsey highlighted Slide 51, Port of Alaska
Modernization Program (PAMP)." The slide listed the
details, projected costs, and percentage of the overall
modernization program for the following:
• Port Intermodal Expansion Project
• Proposed Replacement Docks
• Resiliency Premium
• Department of Defense - Department Strategic Port
Premium
• Total PAMP
Co-Chair Stedman discussed housekeeping.
ADJOURNMENT
10:59:30 AM
The meeting was adjourned at 10:59 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 032119 PoA_Brief_Sen Finance_3_21_19_FINAL_PDF_TO PRINT AND POST.pdf |
SFIN 3/21/2019 9:00:00 AM |
Port of Anchorage |
| 032119 State Funded Port of Anchorage Capital Projects.pdf |
SFIN 3/21/2019 9:00:00 AM |
Port of Anchorage |