Legislature(2011 - 2012)BARNES 124

02/08/2011 01:00 PM Senate TRANSPORTATION


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Audio Topic
01:02:11 PM Start
01:03:47 PM Presentation: Marine Transportation Advisory Board
01:31:44 PM Update: Alaska Marine Highway System
02:34:42 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Joint with House & Senate Transportation Cmte TELECONFERENCED
Overview: Alaska Marine Highway System and the
Marine Transportation Advisory Board
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
            SENATE TRANSPORTATION STANDING COMMITTEE                                                                          
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
                        February 8, 2011                                                                                        
                           1:02 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                            
                                                                                                                                
SENATE TRANSPORTATION                                                                                                           
                                                                                                                                
 Senator Albert Kookesh, Chair                                                                                                  
 Senator Joe Thomas, Vice Chair                                                                                                 
 Senator Dennis Egan                                                                                                            
 Senator Charlie Huggins                                                                                                        
 Senator Linda Menard                                                                                                           
                                                                                                                                
HOUSE TRANSPORTATION                                                                                                            
                                                                                                                                
 Representative Peggy Wilson, Chair                                                                                             
 Representative Eric Feige                                                                                                      
 Representative Cathy Engstrom Munoz                                                                                            
 Representative Max Gruenberg                                                                                                   
 Representative Pete Petersen                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
SENATE TRANSPORTATION                                                                                                           
                                                                                                                                
 All members present                                                                                                            
                                                                                                                                
HOUSE TRANSPORTATION                                                                                                            
                                                                                                                                
 Representative Lance Pruitt, Vice Chair                                                                                        
 Representative Craig Johnson                                                                                                   
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION: MARINE TRANSPORTATION ADVISORY BOARD                                                                              
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
UPDATE: ALASKA MARINE HIGHWAY SYSTEM                                                                                            
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MIKE KORSMO, Chair                                                                                                              
Marine Transportation Advisory Board (MTAB)                                                                                     
POSITION  STATEMENT:   Delivered  a  presentation  on the  Marine                                                             
Transportation Advisory Board.                                                                                                  
                                                                                                                                
CAPTAIN JOHN FALVE, General Manager                                                                                             
Alaska Marine Highway System (AMHS)                                                                                             
POSITION STATEMENT:   Delivered  an update  on the  Alaska Marine                                                             
Highway System.                                                                                                                 
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:02:11 PM                                                                                                                    
CHAIR PEGGY  WILSON called  the joint meeting  of the  Senate and                                                             
House Transportation  Standing Committees  to order at  1:02 p.m.                                                               
Present  at  the  call  to order  were  Senators  Huggins,  Egan,                                                               
Thomas,  and   Kookesh;  and  Representatives   Feige,  Peterson,                                                               
Gruenberg, and Wilson. Representative Munoz arrived shortly.                                                                    
                                                                                                                                
^Presentation: Marine Transportation Advisory Board                                                                             
       Presentation: Marine Transportation Advisory Board                                                                   
                                                                                                                                
1:03:47 PM                                                                                                                    
CHAIR PEGGY  WILSON announced the  first order of  business would                                                               
be a presentation by the Marine Transportation Advisory Board.                                                                  
                                                                                                                                
1:04:03 PM                                                                                                                    
REPRESENTATIVE MUÑOZ joined the committee.                                                                                      
                                                                                                                                
1:04:50 PM                                                                                                                    
MIKE KORSMO, Chair, Marine  Transportation Advisory Board (MTAB),                                                               
said  he is  also a  professional mariner.  He related  that this                                                               
board is  a diverse  group of Alaskans  who take  seriously their                                                               
responsibility  to advise  the Department  of Transportation  and                                                               
Public  Facilities (DOTPF)  and the  governor on  improvements to                                                               
the marine transportation system.                                                                                               
                                                                                                                                
He explained that MTAB was  established in 2003 by Administrative                                                               
Order  and it  works closely  with Alaska  Marine Highway  System                                                               
staff on  planning and  scheduling. It also  serves as  a conduit                                                               
from the public to the administration.                                                                                          
                                                                                                                                
1:06:45 PM                                                                                                                    
A  year ago  the  MTAB recommended  three  short-term goals.  The                                                               
first  was to  operate  the  Kennicott on  a  full schedule,  May                                                               
through  September. Because  of  this funding  change there  have                                                               
been some changes  to how the Kennicott will operate  in the next                                                               
few  years. This  will  also provide  more  service for  military                                                               
families getting to bases in the Interior.                                                                                      
                                                                                                                                
The  second goal  was to  operate  the fast  vehicle ferry  (FVF)                                                               
Fairweather on  a full schedule in  the spring. This has  been an                                                               
important  service to  Sitka and  the  northern panhandle.  There                                                               
have been  issues with  the fast  ferries and  he would  defer an                                                               
explanation  to AMHS  staff. MTAB  understands the  importance of                                                               
these ferries  and last  year requested  setting money  aside for                                                               
new  engines.  There  are  ongoing   problems  with  this  ferry;                                                               
however,  having this  ferry operate  in  the spring  is still  a                                                               
focus.                                                                                                                          
                                                                                                                                
The third goal was to add  money into the Vessel Replacement Fund                                                               
to move forward with the  "Alaska-Class Ferry Project." Thanks to                                                               
the efforts  of the  Legislature there  is currently  between $50                                                               
million to $60 million in the  fund. An additional $60 million is                                                               
still needed  to build the  first vessel. The  administration has                                                               
requested  the additional  $60 million  in  federal funding,  but                                                               
federal money may no longer be available to this project.                                                                       
                                                                                                                                
One of  MTAB's most important goals  is to keep the  state moving                                                               
forward to build  needed new, fuel efficient  vessels. Every year                                                               
it costs  more to maintain  and update  the older vessels  in the                                                               
fleet. Fortunately,  a significant  portion of  these maintenance                                                               
costs are paid through federal  programs, but those can no longer                                                               
be relied on.                                                                                                                   
                                                                                                                                
1:13:16 PM                                                                                                                    
At  the   Ketchikan  meeting,  the  MTAB   discussed  methods  of                                                               
designing  and   building  new  ferries.   This  resulted   in  a                                                               
resolution  recommending   the  state  pursue   the  construction                                                               
management  general  contractor  procurement method  modified  to                                                               
suit  the activity  of shipbuilding,  maximize the  Alaska bidder                                                               
preference,  and  continue to  look  toward  building the  Alaska                                                               
class vessel as soon as  prudently possible. Benefits of building                                                               
the vessel  in-state are numerous  and positive. By  building the                                                               
infrastructure and  training the  labor force to  take on  such a                                                               
project the state  would put itself in the position  to develop a                                                               
much needed manufacturing base.                                                                                                 
                                                                                                                                
1:14:44 PM                                                                                                                    
CHAIR P. WILSON announced that  Senator Menard and Representative                                                               
Gruenberg had joined the meeting.                                                                                               
                                                                                                                                
MR.  KORSMO further  noted  that  AMHS has  seen  an increase  in                                                               
ridership  as  a  result  of  better  scheduling.  He  said  MTAB                                                               
believes  that  the  current approach  using  the  limited  funds                                                               
available is  the right one.  It has  proven that an  increase in                                                               
marketing funding has  a direct impact on  ridership and revenue.                                                               
They  continue to  look for  efficiencies in  maintenance, labor,                                                               
and operational costs system-wide.                                                                                              
                                                                                                                                
1:17:28 PM                                                                                                                    
He said  that MTAB has  also looked at  connecting transportation                                                               
systems throughout  the state,  and how they  can be  improved to                                                               
take advantage of what the system  has to offer. For example, for                                                               
the  board meeting  in Cordova  in September,  the board  flew to                                                               
Anchorage  and took  the Alaska  railroad to  Whittier, and  then                                                               
took the  fast ferry  Chenega to Cordova.  After the  meeting the                                                               
next day, everyone  was able to catch their  flights to Anchorage                                                               
or Juneau.                                                                                                                      
                                                                                                                                
1:17:34 PM                                                                                                                    
Another long-term  goal is to look  at the impacts of  the system                                                               
on   coastal   communities   and  their   connection   to   urban                                                               
distribution  hubs.  Because  of twice  monthly  Aleutian  Island                                                               
service,  seven   communities  can  take  advantage   of  Alaskan                                                               
businesses  in Anchorage,  Homer, and  Kodiak instead  of barging                                                               
from Seattle.  Due to  the impact of  regular ferry  service, and                                                               
particularly  fast ferry  service,  residents of  Cordova can  do                                                               
most of their  purchasing in Anchorage instead of  having to rely                                                               
on  expensive barge  service out  of Washington  state. This  has                                                               
also  had  a huge  economic  impact  on lodges  and  recreational                                                               
activities in Prince William Sound.                                                                                             
                                                                                                                                
MTAB is  working with  the AMHS  staff on ways  to make  sure the                                                               
public can have input outside  the normal meeting schedules. They                                                               
have launched  a website  to provide the  public with  the latest                                                               
information.                                                                                                                    
                                                                                                                                
Last,  MTAB is  working with  the  new DOTPF  commissioner in  an                                                               
advisory  role to  help  select a  new  deputy commissioner.  Mr.                                                               
Korsmo then  acknowledged the work  that Deputy  Commissioner Jim                                                               
Beedle  did on  the  AMHS. He  will be  missed  and difficult  to                                                               
replace.                                                                                                                        
                                                                                                                                
1:21:49 PM                                                                                                                    
                                                                                                                                
Mr. Korsmo thanked the Legislature  for its support and concluded                                                               
his remarks.                                                                                                                    
                                                                                                                                
CHAIR  P. WILSON  asked for  a  copy of  what maritime  accidents                                                               
happened in 2010 where AMHS was able to respond.                                                                                
                                                                                                                                
1:23:11 PM                                                                                                                    
SENATOR HUGGINS asked  for examples of the  advisory board making                                                               
a difference.                                                                                                                   
                                                                                                                                
MR. KORSMO replied the first  is scheduling; MTAB was the conduit                                                               
for more stable  scheduling. Basically it brings  what the public                                                               
wants before  the AMHS.  It's been  a good  working relationship.                                                               
They are trying to expand service statewide.                                                                                    
                                                                                                                                
REPRESENTATIVE MUÑOZ asked  what the budget is  for marketing and                                                               
suggested that there may be  opportunities to work with DCCED and                                                               
the division of tourism.                                                                                                        
                                                                                                                                
MR. KORSMO  agreed that was  a good  idea, and said  that tourism                                                               
marketing is paying off.                                                                                                        
                                                                                                                                
REPRESENTATIVE MUÑOZ said  she hopes not to  lose the opportunity                                                               
to have staterooms on the fast ferries.                                                                                         
                                                                                                                                
MR. KORSMO deferred to Captain Falvy.                                                                                           
                                                                                                                                
1:28:24 PM                                                                                                                    
CATHIE ROEMMICH,  past Chair of MTAB,  provided information about                                                               
listening to the people.                                                                                                        
                                                                                                                                
1:29:15 PM                                                                                                                    
SENATOR EGAN  emphasized that the  Marine Highway is  the highway                                                               
system  in Southeast.  He  asked about  the  regulation from  the                                                               
DOTPF about handicap  access adopted January 3, 2010,  and if the                                                               
Marine Highway is in compliance.                                                                                                
                                                                                                                                
At ease from 1:30 p.m. to 1:31 p.m. to set up the PowerPoint.                                                                   
                                                                                                                                
^Update: Alaska Marine Highway System                                                                                           
              Update: Alaska Marine Highway System                                                                          
                                                                                                                                
CHAIR P. WILSON announced the next  order of business would be an                                                               
update on the Alaska Marine Highway System.                                                                                     
                                                                                                                                
1:31:44 PM                                                                                                                    
CAPTAIN  JOHN  FALVE,  general  manager,  Alaska  Marine  Highway                                                               
System, introduced Jesse McCarron, AMHS publications specialist.                                                                
                                                                                                                                
The mission  of the  Alaska Marine Highway  System is  to provide                                                               
safe, reliable,  and efficient  transportation of  people, goods,                                                               
and  vehicles among  Alaska communities,  Canada, and  the "Lower                                                               
48"  while  providing opportunities  to  develop  and maintain  a                                                               
reasonable  standard   of  living  and  high   quality  of  life,                                                               
including social, education, and health needs.                                                                                  
                                                                                                                                
CAPTAIN FALVE  said the overview would  include achievements, and                                                               
challenges, and the Alaska Class Ferry.                                                                                         
                                                                                                                                
1:34:04 PM                                                                                                                    
Achievements:  AMHS is  doing well.  The benchmark  is 1999  when                                                               
AMHS also served Prince of Wales. The chart reflects that 2007-                                                                 
2010 passenger traffic  has increased. In fact 2009  and 2010 are                                                               
all-time  record  highs,  because   the  schedules  were  stable.                                                               
Similarly, vehicle traffic  is a strong example  of success. AMHS                                                               
is proud of this and is already ahead in 2010 going into 2011.                                                                  
                                                                                                                                
1:38:10 PM                                                                                                                    
Further, AMHS  is managing with  the budget it is  given. Another                                                               
achievement is early  scheduling in the past two  years. This has                                                               
contributed to  increased traffic. He thanked  the administration                                                               
for help  in getting the  schedule out  in a timely  manner. This                                                               
has resulted in a great increase in tourism revenue.                                                                            
                                                                                                                                
CHAIR P.  WILSON said she is  very pleased with this  change. She                                                               
asked if  the increase  in ridership  is from  the U.S.  or other                                                               
countries.                                                                                                                      
                                                                                                                                
CAPTAIN FALVE said  it's a combination, but they  are also moving                                                               
record   numbers   of   Alaskans.  Reasons   include   round-trip                                                               
discounting  and targeted  specials. Another  achievement is  on-                                                               
time departures  and customer satisfaction. He  displayed a chart                                                               
that  shows a  small downward  trend in  the last  several years.                                                               
This  is because  the fast  ferries are  not as  reliable as  the                                                               
steel boats, especially during the winter months.                                                                               
                                                                                                                                
1:43:16 PM                                                                                                                    
Another achievement is vessel  satellite communications. Now they                                                               
are installing  these systems on  the ships using  federal funds.                                                               
Seven have  been installed to  date. Commissioning  these systems                                                               
is  a process  that takes  time. They  are looking  to have  24/7                                                               
communications  with the  ships. They  need sufficient  broadband                                                               
for  each   ship.  With  this   the  ships  will   have  hands-on                                                               
reservation service. With respect to  vessel tracking he said Mr.                                                               
McCarron has been tasked with  this project. They are integrating                                                               
a  tracking system  on the  website. It  will also  be used  as a                                                               
marketing tool. They're also working  with the 511 system and the                                                               
smart phone system so as to offer more to the public.                                                                           
                                                                                                                                
Putting  laptops on  the boats  is another  project that's  under                                                               
way.  This  requires sufficient  broadband  and  it isn't  cheap.                                                               
They're still  looking into this  because technology  is changing                                                               
but  they  are committed  to  providing  customers with  Internet                                                               
access.                                                                                                                         
                                                                                                                                
1:49:36 PM                                                                                                                    
Fuel  efficiency  infrastructure  is  another  achievement.  They                                                               
found  there  are  complex satellite-driven  systems  that  track                                                               
different  savings.  Currently they  are  tracking  this on  five                                                               
ships.  The  current savings  is  12  percent, which  potentially                                                               
translates to a $4.5 million savings. Data collection continues.                                                                
                                                                                                                                
1:52:32 PM                                                                                                                    
Use of  the online reservation  system has increased in  the last                                                               
several years.  Now the usage  is over 30 percent.  They estimate                                                               
it will  climb to 40  percent. The current reservation  system is                                                               
old and will be replaced soon.                                                                                                  
                                                                                                                                
Marketing  is another  achievement.  About three  years ago  they                                                               
received an increased  marketing budget. The AMHS is  now on Face                                                               
book and UTube. They are  branding the system aggressively, which                                                               
is creative marketing. They want  customers to see this brand and                                                               
identify it with  a unique experience. They are  doing this right                                                               
down  to the  business cards  they carry  and the  items sold  in                                                               
their gift shops.                                                                                                               
                                                                                                                                
CHAIR P. WILSON noted that AMHS had 68 million hits in 2010.                                                                    
                                                                                                                                
CAPTAIN FALVE answered they are at an all-time high.                                                                            
                                                                                                                                
REPRESENTATIVE MUÑOZ  asked if they've worked  with Alaska Travel                                                               
Industry Association (ATIA).                                                                                                    
                                                                                                                                
CAPTAIN FALVE answered yes and  with communities as well. They do                                                               
cooperative marketing but  they want control over  that. They are                                                               
currently marketing to the shoulder  seasons. The Sea News Letter                                                               
is  put  out monthly  talking  about  what's happening  with  the                                                               
Alaska Marine Highway System.                                                                                                   
                                                                                                                                
1:58:40 PM                                                                                                                    
New service has  started to Gustavus and will  run throughout the                                                               
winter.  Another  attractive route  will  be  from Bellingham  to                                                               
Whittier.  This   will  help  the   military  families   who  are                                                               
relocating  to bases  in the  Interior. It  will also  bring more                                                               
tourists  into  the  Interior. They  believe  this  will  provide                                                               
additional revenue, without taking passengers from other routes.                                                                
                                                                                                                                
2:01:05 PM                                                                                                                    
CAPTAIN FALVE  said the system  also has challenges.  The concept                                                               
of consistent schedules  on a year-to-year basis  continues to be                                                               
a problem, and  they try to work with  communities on scheduling.                                                               
There  is uncertainty  surrounding the  fast ferries  Chenega and                                                               
Fairweather.  Also  they  are continuing  to  work  on  improving                                                               
vessel dependability.                                                                                                           
                                                                                                                                
In  terms  of  revenue  enhancement,  the  goal  is  to  increase                                                               
passenger and vehicle traffic to  all ports. To achieve this AMHS                                                               
must release schedules early, use  travel agents, and continue to                                                               
work on Internet tools for marketing.                                                                                           
                                                                                                                                
2:05:36 PM                                                                                                                    
CHAIR P. WILSON asked if travel  agents will be able to work with                                                               
the system better.                                                                                                              
                                                                                                                                
CAPTAIN FALVE  said yes, but we  need to be smart  about how they                                                               
can help the system.                                                                                                            
                                                                                                                                
CAPTAIN  FALVE said  that operating  cost containment  is another                                                               
challenge;  62 percent  of  the  cost is  in  payroll. Costs  are                                                               
determined in collective bargaining  with the exception of health                                                               
care and  the unfunded pension.  They must maintain  an effective                                                               
crew size  in order  to minimize costs.  Fuel cost  represents 21                                                               
percent of total operating costs.                                                                                               
                                                                                                                                
2:10:17 PM                                                                                                                    
CHAIR P.  WILSON noted that payroll  used to be the  biggest cost                                                               
then it went to fuel and now it's back to payroll.                                                                              
                                                                                                                                
CAPTAIN FALVE acknowledged that  it does move around. Continuing,                                                               
he said insurance  is another factor. They are  looking at safety                                                               
more closely to control this  cost. Rates have actually come down                                                               
when  considering  the  combination  of being  self  insured  and                                                               
buying insurance.                                                                                                               
                                                                                                                                
2:12:40 PM                                                                                                                    
Fuel efficiency  infrastructure is another challenge.  Within the                                                               
next  year  eight  ships  will  be equipped  with  the  new  fuel                                                               
tracking system. The cost of  fuel fluctuates but if it's trucked                                                               
it is  an Anchorage oil  price information service (OPUS)  and if                                                               
it's barged it's a Seattle OPUS.                                                                                                
                                                                                                                                
Vessel  retirement  is  another   challenge.  Four  vessels  were                                                               
constructed in the  early 1960s and are nearing the  end of their                                                               
useful lives. He  noted the different routes  that the Matanuska,                                                               
Malaspina,  Taku,  and  Tustumena  run. In  the  near  term  they                                                               
estimate the  need for three  Alaska Class Ferries  replacing two                                                               
main line ferries.  He said he is looking for  a SOLAS (safety of                                                               
life at sea) waiver for  the Malaspina and/or Columbia to operate                                                               
in and out of Prince Rupert, Canada.                                                                                            
                                                                                                                                
Another challenge  is mid-life engine replacement.  The Columbia,                                                               
Malaspina, and the Aurora are  past midlife and need new engines.                                                               
They each have two engines.                                                                                                     
                                                                                                                                
Another challenge  is the mainframe  reservation system.  The new                                                               
system  is more  user-friendly,  efficient,  and compliments  the                                                               
AMHS  marketing  efforts.   Furthermore,  they've  rewritten  the                                                               
customer policies and procedures book.  Also, they've bid out for                                                               
a  new  project  manager.  The   system  should  be  complete  by                                                               
September 2012.                                                                                                                 
                                                                                                                                
2:23:26 PM                                                                                                                    
Funding recap:                                                                                                                  
                                                                                                                                
Operating   budget:   Maintain   current   levels   of   service.                                                               
Approximate required general fund  appropriation is $100 million.                                                               
Capital  requirements   include  $22   million  to   $25  million                                                               
annually,  which  comes from  federal  highways,  FTA, and  state                                                               
matching funds.                                                                                                                 
                                                                                                                                
2:24:49 PM                                                                                                                    
Alaska Class  Ferry: The governor supports  construction. Initial                                                               
state funds  are $60  million. Without federal  funds it  is more                                                               
flexible. There is  potential for 250 new jobs. Phase  1 has $3.4                                                               
million from  AIDEA as  part of  the functional  replacement. The                                                               
administration supports a competitive bidding process.                                                                          
                                                                                                                                
The preliminary  design for  the Alaska  Class Ferry  is complete                                                               
after a very public process.  The functional design including the                                                               
details  of ship  systems  is  in process  and  about 10  percent                                                               
complete. This  stage will take  about 10-12 months  and building                                                               
will  take  another  three  to four  years.  They  are  currently                                                               
working on  the procurement process.  The estimated cost  at this                                                               
point is $120 million.                                                                                                          
                                                                                                                                
Staterooms:  The new  Alaska  Class Ferry  will  have five  quiet                                                               
rooms. These  will have bunks and  perhaps a toilet, and  will be                                                               
handicap accessible. The intention is  to stay within the 12 hour                                                               
envelope of a day boat even though  the crew is on 24/7. He noted                                                               
that  federal  Americans with  Disability  Act  (ADA) rules  have                                                               
recently  changed,   and  AMHS  works   very  hard  to   stay  in                                                               
compliance. Consultants help with this.                                                                                         
                                                                                                                                
CHAIR P. WILSON thanked the presenters.                                                                                         
                                                                                                                                
2:34:42 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair P. Wilson adjourned the meeting at 2:34 p.m.                                                                              

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