Legislature(2001 - 2002)

01/23/2001 01:35 PM Senate TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     ALASKA STATE LEGISLATURE                                                                                   
                  SENATE TRANSPORTATION COMMITTEE                                                                             
                         January 23, 2001                                                                                       
                            1:35 p. m.                                                                                          
MEMBERS PRESENT                                                                                                               
Senator John Cowdery, Chair                                                                                                     
Senator Jerry Ward, Vice Chair                                                                                                  
Senator Robin Taylor                                                                                                            
Senator Gary Wilken                                                                                                             
Senator Kim Elton                                                                                                               
MEMBERS ABSENT                                                                                                                
All Members Present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 36                                                                                                              
"An Act relating to international airports revenue bonds; and                                                                   
providing for an effective date."                                                                                               
     HEARD AND HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
SB 36 - No previous action recorded.                                                                                            
WITNESS REGISTER                                                                                                              
Kurt Parkan, Deputy Commissioner                                                                                                
Department of Transportation &                                                                                                  
  Public Facilities (DOTPF)                                                                                                     
3132 Channel Dr.                                                                                                                
Juneau, AK  99801-7898                                                                                                          
POSITION STATEMENT:  Supports SB 36                                                                                           
Cliff Augue, Vice-President Alaska Airlines Properties & Facilities                                                             
Alaska Airlines                                                                                                                 
P.O. Box 68900                                                                                                                  
Seattle, WA 98168                                                                                                               
POSITION STATEMENT:  Supports SB 36                                                                                           
Bill O'Leary                                                                                                                    
Comptroller Alaska International Airport System                                                                                 
P.O. Box 196860                                                                                                                 
Anchorage, AK 99519                                                                                                             
POSITION STATEMENT:  Supports the bill                                                                                        
Mort Plumb                                                                                                                      
Director, Anchorage Airport                                                                                                     
P.O. Box 196860                                                                                                                 
Anchorage, AK 99519                                                                                                             
POSITION STATEMENT: Supports SB 36                                                                                            
Dave Eberle                                                                                                                     
PE Regional Director                                                                                                            
Department of Transportation & Public Facilities                                                                                
P.O. Box 19600                                                                                                                  
Anchorage, AK 99519-6900                                                                                                        
POSITION STATEMENT: Supports SB 36                                                                                            
ACTION NARRATIVE                                                                                                              
TAPE 01-2, SIDE A                                                                                                             
Number 001                                                                                                                      
CHAIRMAN  JOHN COWDERY called  the Senate  Transportation  Committee                                                          
meeting  to order at  1:35 p.m.  Senators Elton,  Ward, Wilken,  and                                                            
Chairman Cowdery  were present.  The first order of  business was SB
            SB 36-INTERNATIONAL AIRPORTS REVENUE BONDS                                                                      
CHAIRMAN  COWDERY invited  Kurt Parkan,  Deputy Commissioner  DOTPF,                                                            
forward to testify and answer questions.                                                                                        
KURT PARKAN  introduced Bill O'Leary  and Mort Plumb.  He  explained                                                            
that  SB 36  is a  bill that  increases  the authorization  for  the                                                            
International  Airport Revenue Bonds to support capital  improvement                                                            
projects  (CIP).  DOTPF is  negotiating a  5-year CIP business  plan                                                            
with  the airlines  operating  out of  the Anchorage  and  Fairbanks                                                            
airports.   Currently CIPs  are funded on  a cash basis rather  than                                                            
bonded and projects  are planned every year rather  than over a five                                                            
year  period.   The  bonds  would  be paid  back  over a  period  of                                                            
approximately twenty-five years.                                                                                                
Most airports  sell bonds  for large projects.   The current  Alaska                                                            
system of funding  capital projects annually and on  a cash basis is                                                            
somewhat  unique.  Funding  large  projects on a  cash basis  causes                                                            
wide fluctuations  in the rate base  for the airlines on  a year-to-                                                            
year basis.  Developing  a 5-year CIP plan and funding  the projects                                                            
through the sale  of bonds would allow the airlines  more continuity                                                            
in their expense projections.                                                                                                   
MR.  PARKAN  said  that  Mort  Plumb  was  present  to  discuss  the                                                            
specifics  on the  projects and  Devin  Mitchell was  there to  talk                                                            
about  the bonding.   He said  SB 36  is a fairly  simple bill,  the                                                            
airports,  the  airlines  and the  state  worked  cooperatively  and                                                            
mutually agreed on the approach they are taking.                                                                                
SENATOR ELTON  said that he understood that the bonds  would be paid                                                            
off through  passenger landing fees  and concessionaires  but he was                                                            
unsure how funding with bonds would affect the concessionaires.                                                                 
MR. PARKAN  said that concessions  - parking and various  other fees                                                            
are a separate source of  revenue. Although there is a relationship,                                                            
the landing  fees provide  the bulk of the  monies for repayment  of                                                            
the bond. [PORTION OF TAPE INDISCERNIBLE.]                                                                                      
SENATOR ELTON  wanted to know what percent of the  bond indebtedness                                                            
would be paid  with landing fees and what part with  other revenues,                                                            
such as tie downs.                                                                                                              
MR. PARKAN  said that  Bill O'Leary  could help  with specifics  but                                                            
basically  the CIPs  directly  affect  landing fees  and  indirectly                                                            
affect  concessionaires  and  others  paying  fees to  the  airport.                                                            
After all  sources of revenue  are determined  for the year  and the                                                            
net  need  is  set,  the  landing  fees  are  adjusted  up  or  down                                                            
SENATOR   ELTON  asked  what   he  should   tell  a  (hypothetical)                                                             
concessionaire  approaching  his office  and asking  whether or  not                                                            
this would put upward price pressure on his rental fees.                                                                        
MR. PARKAN  said that  everyone shares  in payment  of the costs  of                                                            
operating the  airport.  Concessionaires  are a cost center  that is                                                            
looked at frequently  but he couldn't say whether  or not this would                                                            
affect specific concessionaire fees.                                                                                            
SENATOR  COWDERY   followed  up  by   asking  what  the   impact  to                                                            
concessionaires  would be  if the  projects were  not funded  with a                                                            
bond package but on a cash basis instead.                                                                                       
MR. PARKAN said that the  impact to concessionaires would be similar                                                            
either way.  The biggest impact variation  would be to the  airlines                                                            
because they make up the  difference in the annual cost of operation                                                            
of the  airport.   Cash  funding translates  to  large increases  in                                                            
landing fees when large  projects are undertaken.  With bond funding                                                            
those costs are spread out over time.                                                                                           
Number 759                                                                                                                      
SENATOR WARD  wanted to know whether  any of the additional  bonding                                                            
authorization  would  go toward  paying  for  the extension  of  the                                                            
railroad to the airport for parking.                                                                                            
MR. PARKAN said  it would not.  The railroad is funding  that entire                                                            
project  through its  own sources  of revenue.    DOTPF has  nothing                                                            
included in this 5-year CIP for that project.                                                                                   
SENATOR WARD  wanted reassurance  that there  were no state  dollars                                                            
for the extension of the railroad.                                                                                              
MR. PARKAN said the extent  to which they are spending money on that                                                            
project is mostly  in review of the building permit,  establishing a                                                            
lease with the railroad  and costs incurred by anybody that wants to                                                            
do business at the airport.                                                                                                     
SENATOR  COWDERY asked  if there would  be employee  parking  if the                                                            
railroad is  extended or if it is  anticipated that employees  would                                                            
park elsewhere.                                                                                                                 
MR. PARKAN was  not prepared to talk about the railroad  project but                                                            
said that  employees  would need  a fair size,  designated  employee                                                            
parking area.                                                                                                                   
SENATOR WILKEN wanted clarification  on the 2-3 provisions in the 5-                                                            
year plan.   To his understanding,  a 5 year  plan is decided  upon,                                                            
bond  authorization  is received  for 2  years, and  then  something                                                            
happens so that DOTPF comes  back for authorization for 3 more years                                                            
of bonding.  He wanted  to know when DOTPF comes back for the 3 year                                                            
authorization and whether  approval starts another roll of projects.                                                            
Number 939                                                                                                                      
MR. PARKAN said  DOTPF would be coming back in 2 years  for the next                                                            
3-year proposals.  This  would provide a series of revenue bonds and                                                            
is an  approach  that was  negotiated with  the airlines.   It's  an                                                            
approach  most airlines use.   DOTPF would  be returning for  future                                                            
CIPs for bond  financing forms so it would be a continual  series of                                                            
revenue bonds to fund projects and would be paid off over time.                                                                 
SENATOR  WILKEN asked  if this was  a 2-year request  with a  3-year                                                            
window before looking at another 2 years.                                                                                       
MR. PARKAN  said  no, the  operating agreement  would  end and  they                                                            
would negotiate  with the airlines  well in advance of that  so that                                                            
there would be no gap.                                                                                                          
SENATOR  WILKEN asked  why they didn't  use a  6-year plan and  fund                                                            
every 2 years.                                                                                                                  
MR. PARKAN said  this is the plan that had been worked  out over the                                                            
period of about a year with much discussion.                                                                                    
SENATOR WILKEN  asked what  the effect would  be on landing  fees if                                                            
the facility was all built.                                                                                                     
Number 1079                                                                                                                     
MR. PARKAN asked Bill O'Leary to answer.                                                                                        
BILL O'LEARY,  financial  comptroller for  the Alaska International                                                             
Airport  System, said  the projected  landing  fees for  the next  5                                                            
years are in the  $.60 to $.90 range.  Currently the  landing fee is                                                            
$.89 per 1000 pounds certified  maximum gross take-off weight, which                                                            
is the measure used to calculate landing fees.                                                                                  
SENATOR WILKEN wondered where he had gotten the $1.40 rate.                                                                     
MR. O'LEARY said it is  currently $.89.  It had been lower than that                                                            
in previous  years but, to  his knowledge,  it had never been  above                                                            
that rate.                                                                                                                      
SENATOR WILKEN  asked if the effect of that 5-year  bond would be to                                                            
drive those fees down.                                                                                                          
MR. O'LEARY's response was inaudible.                                                                                           
SENATOR WILKEN said that  the bill's impact on landing fees would be                                                            
revenue neutral.                                                                                                                
MR. O'LEARY  said that, based  on their projections,  they  will max                                                            
out at close to what the landing fees are at this time.                                                                         
SENATOR TAYLOR  asked for comment on an Anchorage  newspaper article                                                            
that said it appeared that  the $204 million that was authorized and                                                            
unspent has been earning  interest.  That interest is being used, in                                                            
part, for the  cost overruns as DOTPF and Anchorage  argue about how                                                            
earthquake-proof the structure is.                                                                                              
He noted that  if the legislature gave the additional  authorization                                                            
and DOTPF sold the additional  bonds, there would be leveraging at a                                                            
higher rate in working  the capital and there would be an additional                                                            
income  stream to use  until that  money is  used for construction.                                                             
DOTPF is making money off  the bonds already issued, yet the cost of                                                            
those bonds is factored  into the revenue stream.  He then said that                                                            
landing  fees would have  to go  down if they  never built  anything                                                            
because they  would be making more  on the investment return  on the                                                            
bonds than the rate payment of the bonds.                                                                                       
SENATOR  TAYLOR  wondered  why they  were  even talking  about  this                                                            
because he thought  authorization to build something  had been given                                                            
almost  3  years  ago and  not  much  had  happened.  Some  building                                                            
materials sitting in paid  storage were to be used in a building for                                                            
which there was not even a building permit issued.                                                                              
MR. PARKAN  said that Senator Taylor  was referring to the  terminal                                                            
project that  they had gotten bond  authorization for and  for which                                                            
they are  now collecting  and using interest  monies.  The  proposal                                                            
before the  legislature currently  is related to the ongoing  annual                                                            
CIP program, whether  it be a ramp, taxiway, environmental  work, or                                                            
maintenance  facility  work.   It  is  for normal  projects  and  is                                                            
largely unrelated to the terminal project.                                                                                      
Number 1377                                                                                                                     
SENATOR WARD thought  it might be beneficial to discuss  the related                                                            
projects all at once.                                                                                                           
SENATOR TAYLOR  said that he understands that DOTPF  is always going                                                            
to  need a  certain amount  of  bonding authority  to  take care  of                                                            
ongoing  capital  needs  at  the  airport.  From  Senator   Wilken's                                                            
question,  he understands  that  bonds  are paid  off  and then  the                                                            
department  asks to issue new bonds.    He asked if it is  necessary                                                            
to return to  the legislature every  time additional bond  authority                                                            
is needed.                                                                                                                      
MR. PARKAN  said DOTPF  needs legislative  authorization every  time                                                            
additional bonding  is needed.  DOTPF is looking to  stabilize costs                                                            
to the system  and therefore to the public, who ultimately  pays for                                                            
airline tickets.   Without  bonding there would  be large spikes  in                                                            
landing fees  that would  have a more immediate  negative impact  on                                                            
the flying  public.   Bonding  allows the  cost  fluctuations to  be                                                            
spread out over time.                                                                                                           
SENATOR  TAYLOR  said he  understood  that,  but since  the  bonding                                                            
authority  given for  the terminal  was apparently  being  separated                                                            
from the  ongoing bonding  needs, is  this what was  meant by  the 2                                                            
year and  5 year plan  so DOTPF  could see what  would be done  over                                                            
MR. PARKAN  said that is essentially  correct.  DOTPF has  authority                                                            
over the  terminal  project and  will need additional  authority  to                                                            
cover  the specifically  identified  projects for  the new  package.                                                            
The specific  projects  on the list  have been  negotiated with  the                                                            
airlines in advance.                                                                                                            
SENATOR TAYLOR  said this is different  than a normal DOTPF  capital                                                            
budget  where   you're  working  off   a  Statewide  Transportation                                                             
Improvement Program (STIP)  list.  When DOTPF sells bonds, it has to                                                            
do those projects outlined by the bonding authority.                                                                            
MR.  PARKAN said  DOTPF  is  compelled to  use  the monies  for  the                                                            
projects specifically listed  in the bonding authority. There can be                                                            
no deviation.                                                                                                                   
SENATOR COWDERY wanted the two original bond packages explained.                                                                
MR. PARKAN said  the previous revenue bond authority  bills were for                                                            
$179  million  and  (he believes)  $25  million  for  the  Anchorage                                                            
terminal  project.   Those bonds  have  been sold  and some  federal                                                            
funds  have   been  received  through   a  letter  of  intent   that                                                            
contributes to the project.                                                                                                     
Number 1595                                                                                                                     
SENATOR COWDERY  asked whether or  not the $25 million bond  had any                                                            
impact on the  landing fees or whether  the bond would be  paid with                                                            
federal funds in the future.                                                                                                    
MR. PARKAN  said there was  an offset to the  extent that DOTPF  can                                                            
use the  federal funds.   He didn't think  the bonds themselves  are                                                            
directly  paid from the  federal fund.   The debt  is paid from  the                                                            
international  airport revenue fund; the federal funds  received are                                                            
an offset to the total cost.                                                                                                    
SENATOR WARD asked  whether the terminal would be  paid for with any                                                            
new bond funds.                                                                                                                 
MR. PARKAN referred the question to Mr. Plumb.                                                                                  
MR. MORT PLUMB, director  of the Ted Stevens Anchorage International                                                            
Airport, said some items  overlapped, such as asbestos abatement and                                                            
relocation costs of regional airlines.                                                                                          
SENATOR COWDERY  asked that  DOTPF get the  specific information  to                                                            
Senator Ward and they agreed to do so.                                                                                          
Number 1780                                                                                                                     
SENATOR  TAYLOR asked  if the  cost overruns  were  included in  the                                                            
additional  authority requested on  the second bond package  so that                                                            
funds from both authorities could be used to build the terminal.                                                                
MR. PLUMB said  he wouldn't characterize it that way  exactly.  Some                                                            
areas have  changed from the original  to the final design  so there                                                            
are probably areas that overlap.                                                                                                
SENATOR  TAYLOR said  that  means yes,  meaning there  isn't  enough                                                            
money in the original bond package to build the terminal.                                                                       
MR. PARKAN  said that  the items  listed are additional  items.   An                                                            
example given was the relocation  of regional airlines.  Although it                                                            
was in the  original proposal, the  actual relocation was  much more                                                            
extensive  and expensive so  additional funding  is needed  to cover                                                            
those costs.                                                                                                                    
SENATOR  TAYLOR again referred  to the  Anchorage newspaper  article                                                            
that  said  that there  were  significant  increased  costs  to  the                                                            
terminal itself. He wondered  whether the article was completely off                                                            
base or not.   He wanted to know where  the authority or  money came                                                            
from  to pay the  cost  overruns if  indeed there  were significant                                                             
increased costs.                                                                                                                
MR. PARKAN  replied that  DOTPF does not know  what the full  impact                                                            
will  be for  the  delay in  obtaining  a  building permit  for  the                                                            
terminal project.  The  department has an insurance policy, which it                                                            
will use to recover some  of the costs of the delay.  At this point,                                                            
the only  thing  that is  impacted by  the delay  is the  foundation                                                            
work.  The foundation contract  will be followed by the construction                                                            
of the  C Concourse.   As a result  of the  separate contracts,  the                                                            
cost impact of the delay is less.                                                                                               
Number 1953                                                                                                                     
SENATOR TAYLOR wondered  about accountability within DOTPF since the                                                            
department decided on the  design and then accelerated the schedule.                                                            
When the  city pointed  out problems  and didn't  issue the  permit,                                                            
cost overruns  occurred. Senator Taylor thought that  the department                                                            
should bear part  of the responsibility for those  cost overruns and                                                            
serious delays.                                                                                                                 
MR.  PARKAN said  that  in  a project  of  this size,  the  problems                                                            
experienced  so  far are  not  unusual.   He  didn't want  to  speak                                                            
specifically about  which person or persons are responsible  for the                                                            
design problems. The department  is pleased that the Municipality of                                                            
Anchorage  found  the  design  problems  and  that  they  are  being                                                            
SENATOR TAYLOR  said that  when DOTPF files  an insurance claim  for                                                            
between  5 and  10 million  dollars for  the delays,  the  insurance                                                            
company would  probably turn around  and try to recover some  of its                                                            
costs from the design engineer.   He felt that there must be someone                                                            
at fault for  the insurance company  to pay out such a large  sum of                                                            
MR. PARKAN said that attorneys  would determine the answers to those                                                            
SENATOR TAYLOR  wanted assurance that  there would be some  level of                                                            
accountability  for the $10 million payout and that  the legislators                                                            
would be informed of the particulars.                                                                                           
MR. PARKAN said  that insurance is purchased for situations  such as                                                            
this. Premiums are paid and the insurance is secured.                                                                           
SENATOR  COWDERY   asked  whether   a  contingency  was   originally                                                            
calculated in for cost overruns.                                                                                                
MR. DAVE EBERLE, program  manager for the terminal project, answered                                                            
via teleconference saying  that the original project had about a $19                                                            
million contingency for the $230 million project.                                                                               
SENATOR COWDERY asked if all contingency funds had been used.                                                                   
MR. EBERLE said there are  remaining funds but that the budget is in                                                            
need of updating so he doesn't have an exact figure.                                                                            
SENATOR  WARD  asked  for  the  original  completion  date  for  the                                                            
MR. EBERLE  said that  the original  completion date  for the  new C                                                            
concourse  was 2002  and now  it is projected  to be  late April  or                                                            
early May 2003.                                                                                                                 
SENATOR WARD  then wanted to know  the name of the original  project                                                            
MR.  EBERLE said  that  Rides Alaska  was involved  in  some of  the                                                            
original  concept  development  and is  now providing  some  project                                                            
management reports,  cost schedulers and secretarial  services. They                                                            
are not the lead program manager at this time.                                                                                  
MR. PARKAN  added that  the performance measure  of overall  success                                                            
and the  ability to  complete the  project by  September 2004  is on                                                            
SENATOR WARD then asked  about the current status on permitting from                                                            
the city.                                                                                                                       
MR. EBERLE explained  that the permit is being issued  incrementally                                                            
as DOTPF provides  design information that is reviewed  by the city.                                                            
A permit  for the bulk  of the remaining  foundation is expected  on                                                            
February 6, 2001 and all  foundation permits would be in hand by the                                                            
end of March.   There will also be a similar permitting  process for                                                            
the structure  and steel itself. The  first approval is anticipated                                                             
on February 19, 2001, with  final approval by the end of March 2001.                                                            
This is  the rough  schedule for the  first phase  contract.   It is                                                            
anticipated that the permit  for the second phase will be in hand by                                                            
the end of April and before the bids are opened.                                                                                
SENATOR  WARD wanted to  know which  city permits,  if any,  were in                                                            
MR.  EBERLE said  they  have  permits covering  about  one-half  the                                                            
foundation work that has been done.                                                                                             
SENATOR COWDERY  asked Cliff Argue,  Alaska Airlines representative                                                             
for  both  Anchorage  and  Fairbanks,  to  come  forward  to  answer                                                            
SENATOR ELTON asked Mr.  Parkan to clarify the accountability issue.                                                            
It's his  understanding that  the first level  of accountability  in                                                            
the new  bonding authorization  is that the  carriers have  approved                                                            
the list of  projects for the Anchorage  and Fairbanks airports.  He                                                            
asked Mr. Parkan to talk about that process and approval.                                                                       
MR.  PARKAN  said that  the  project  list was  developed  with  the                                                            
airlines  at the Anchorage  and  Fairbanks airports.   Although  the                                                            
agreement hasn't  been finalized,  they are comfortable enough  with                                                            
the negotiating teams to present the full package now.                                                                          
SENATOR ELTON  asked what would happen if the industry  said that it                                                            
wasn't comfortable  with the list  as presented and whether  amounts                                                            
or projects would change.                                                                                                       
MR. PARKAN said an agreement  is an agreement and they will agree on                                                            
all components  including  the  CIP.  To  the extent  that there  is                                                            
disagreement, changes would be made.                                                                                            
Number 2380                                                                                                                     
SENATOR ELTON  said that hearing that  industry is comfortable  with                                                            
the list would be about the best accountability possible.                                                                       
SENATOR COWDERY asked for testimony from Cliff Argue.                                                                           
MR. ARGUE,  staff vice-president  of properties  and facilities  for                                                            
Alaska Airlines  and chair of the  Anchorage and Fairbanks  airlines                                                            
airport affairs  committee, came forward.  He said  that the affairs                                                            
committee consists of all  the carriers at the two airports that are                                                            
currently signatory  to the operating  agreement. He noted  that the                                                            
committee  has spent almost  2 years negotiating  the new  operating                                                            
agreement; one of the primary objectives was to come up with a 5-                                                               
year business  plan.   Part of that  business plan  was the  list of                                                            
approved capital  projects.  Prior to this they operated  on a year-                                                            
to-year basis,  which caused a fair  amount of economic uncertainty                                                             
to  the  carriers.   The  5-year  program  provides  an  ability  to                                                            
forecast cost exposure over time.                                                                                               
The  current  bill   represents  the  natural  progression   of  the                                                            
negotiations.    Throughout,  the state  was  asked for  the  5-year                                                            
business plan  and to maximize the  use of revenue bonds  to finance                                                            
that plan.   Given the size of the  current project and the  size of                                                            
the additional  5-year capital program, the airlines  didn't feel it                                                            
appropriate or prudent  to try to finance with cash. This is exactly                                                            
what the carriers  are asking for.   The actual list of projects  on                                                            
the 5-year  capital  improvement program  represents  many hours  of                                                            
negotiations  between the  state and  the airlines.   It reflects  a                                                            
compromise position that  the negotiating committee for the airlines                                                            
feels very comfortable  with and has recommended for approval to the                                                            
full body of airlines.                                                                                                          
There is a  provision in the agreement  that if projects  need to be                                                            
added later on, that can happen through another voting process.                                                                 
MR. ARGUE  said that the  use of revenue bond  debt is common  among                                                            
most airports throughout  the United States.  Getting the additional                                                            
bond  authority  is the  first  step so  that  DOTPF can  begin  the                                                            
process  of funding  these projects,  which are  separate and  apart                                                            
from the  terminal project  currently  underway.   There is a  small                                                            
amount  of overlap  but, for  the most part,  the money  is for  new                                                            
projects needed at both  the Anchorage and Fairbanks airports.  This                                                            
approach is  good solid public.  On  behalf of the airlines  serving                                                            
these two airports,  he urged the committee to pass  the legislation                                                            
because it is important  to provide the additional infrastructure at                                                            
both airports.                                                                                                                  
SENATOR TAYLOR  asked for specific  examples of things the  airlines                                                            
wanted but didn't get.                                                                                                          
MR. ARGUE said  that there were many compromises over  the course of                                                            
the two years.   However, he didn't have anything  specific to cite.                                                            
SENATOR  TAYLOR couldn't  understand why the  negotiations  would be                                                            
difficult  when  the air  carriers  are the  ones funding  the  bill                                                            
through landing  and other fees.   It would seem that if  that group                                                            
wanted to pay  for something, there wouldn't be much  argument about                                                            
it.    He  noted  that   the  project  has  over  $12   million  for                                                            
environmental  compliance  and  clean up  and  over $14  million  in                                                            
security related items.  He wondered whether those were the kinds of                                                            
items that caused difficulty in negotiations.                                                                                   
MR. ARGUE  said that  it was actually  somewhat  the opposite.   The                                                            
state presented  its list of capital  projects that they  saw needed                                                            
over the  next 5-years and  the airlines  questioned each and  every                                                            
one of those as to whether  it was needed at all and what the timing                                                            
for that item  would be. A great deal  of time was spent  looking at                                                            
the  state's  original  list,  cutting  items  from  that  list  and                                                            
reaching a time frame for items left on the list.                                                                               
SENATOR TAYLOR said he  understood.  He then noted, according to the                                                            
newspaper  article,  the  300-foot  walkway   to assist   passengers                                                            
through the  terminal and the tour  group baggage facility  might be                                                            
cut.  He observed  that the things  the public might want  most were                                                            
the first  to be cut.   He is concerned  that the traveling  public,                                                            
those paying  for the  facility, don't  have a  role in determining                                                             
which items will be cut.                                                                                                        
MR. ARGUE said  that the airlines  were very much involved  with the                                                            
state in  determining which  items would be  cut. The features  just                                                            
mentioned  were prioritized  and,  as mentioned  earlier, the  exact                                                            
list is not established.   The walkway is recognized as being a very                                                            
important customer  service feature  but the tour group baggage  are                                                            
could be deferred.   The airlines  and the airport are sensitive  to                                                            
the traveling  public and that's why  this project moved  forward in                                                            
the first place. They are  trying to minimize the impact of any cuts                                                            
that have to be made.                                                                                                           
SENATOR COWDERY  asked if  the cut items could  be put back  at some                                                            
time and where the money would come from.                                                                                       
MR. PARKAN said that some  items, such as the moving sidewalk, could                                                            
be added later.  Mr. Eberle could speak to that.                                                                                
Number 1985                                                                                                                     
MR.  EBERLE said  that  three  alternates  have been  identified  as                                                            
distinct  pieces of  work that  could be  added at  a later date  if                                                            
funding  comes available.   Some projects  in the  terminal must  be                                                            
done now  or the  opportunity will  be lost. Examples  of those  are                                                            
adding  a basement,  widening  the  concourse,  or making  the  gate                                                            
concourse area  wider.  Those need to be done as a  part of original                                                            
construction or  not at all.  These types of items  were prioritized                                                            
in the  base contract while  elements that  can be added later  were                                                            
SENATOR COWDERY  asked where the additional funding  would come from                                                            
and whether more bonds would be necessary.                                                                                      
MR. EBERLE said  that they would have to sit down  with the airlines                                                            
and determine when items would be put back into the program.                                                                    
SENATOR  WILKEN said  it sounded  as though  there  were really  two                                                            
levels  of negotiations.  First, the  negotiating  team had to  meet                                                            
with the state  and then it went back to all the airlines  to advise                                                            
them of any issues or potential changes.                                                                                        
MR. EBERLE said yes, the  negotiating committee consists of just six                                                            
airline representatives  and there are about 26 airline signatories.                                                            
During the  process, the  team had  to go back  and advise the  full                                                            
group of issues being discussed  with the state.  This isn't unusual                                                            
in negotiations  between  airlines and  airports.   There are  other                                                            
issues,  such as  access and  how the  cash would  flow through  the                                                            
airport, and each takes time to discuss and negotiate.                                                                          
SENATOR  WILKEN   asked  about  the  dynamics  of   the  26  airline                                                            
signatories and  whether it takes a simple majority  vote to approve                                                            
the new plan.                                                                                                                   
MR. ARGUE  said it's an  interesting dynamic  because four  distinct                                                            
types of  airlines serve  the two airports:  the regional  carriers,                                                            
domestic  airlines   serving  the   lower  48  from  Anchorage   and                                                            
Fairbanks, international  carriers, and the cargo  carriers, such as                                                            
UPS and FedEx.   Each has different  issues, wants and desires  and,                                                            
for the most  part, there has to be  much give and take.   In voting                                                            
they  try to  reach  a  consensus.   When  a  critical mass  of  the                                                            
carriers agree then that becomes the airline position.                                                                          
SENATOR  WILKEN  asked  Mr.  Parkan  for the  name  of  the  general                                                            
MR. PARKAN said that for  the terminal project, Kewitt is performing                                                            
the  foundation   work  and  Parsons  Brinderhoff   is  the  program                                                            
management for the entire project.                                                                                              
SENATOR  COWDERY  wanted  clarification  of  the  vote as  asked  by                                                            
Senator Wilken as it sounds like a negative type of voting.                                                                     
MR. ARGUE said that's correct  for the new project, but the question                                                            
Senator  Wilken  asked was  about  voting among  the  airlines on  a                                                            
particular issue. With  respect to project voting, 66 2/3 percent of                                                            
the total airline  signatories must  vote no on a project  for it to                                                            
be deferred.                                                                                                                    
SENATOR WARD  asked if it took a consensus  to come up with  the new                                                            
MR.  ARGUE said  the  list was  arrived  at through  negotiation  as                                                            
mentioned previously.   The airlines started with a longer list that                                                            
had been presented by DOTPF.                                                                                                    
SENATOR WARD said  that he had received calls from  smaller carriers                                                            
and  he  wondered  where they  fit  into  the  list decision-making                                                             
MR.  ARGUE  said that  the  list  was  developed  and agreed  to  by                                                            
consensus  of the negotiating  committee and  then presented  to the                                                            
full  group  on  a  no  objection  basis.    He  didn't  recall  any                                                            
particular  objections  from  a  specific  carrier  on the  list  of                                                            
capital  projects. This  can best  be described  as consensus  or no                                                            
objection from the carrier  group.  It should be noted that everyone                                                            
doesn't respond every time.                                                                                                     
SENATOR WARD  asked for permission  to hold the bill until  he could                                                            
talk to the Municipality of Anchorage about it.                                                                                 
SENATOR COWDERY  announced that the bill would be  held, noting that                                                            
more questions need to be answered.                                                                                             
SENATOR TAYLOR  noted that the bill  is structured in such  a way as                                                            
to take effect  immediately.  With  this in mind, he asked  what the                                                            
timeline  is for authorization  and  issuance of  the bonds and  how                                                            
critical that might be to the projects.                                                                                         
MR. PARKAN said  that the FY02 fiscal year projects  are included in                                                            
this bill so it  is critical that this measure pass  so that funding                                                            
is available for next year's capital programs.                                                                                  
SENATOR TAYLOR  said he wanted to know when they anticipate  getting                                                            
it passed  and having  authority to  issue the bonds.   He wanted  a                                                            
specific date.                                                                                                                  
MR. PARKAN said  they anticipate that the bill will  pass during the                                                            
present legislative  session.   DOTPF could  then sell the  bonds in                                                            
the fall as it has done with the two previous bond bills.                                                                       
SENATOR COWDERY  said that the last time bonds were  sold the market                                                            
was very  favorable.   He wanted  to know what  is anticipated  this                                                            
time if the bill passes in the next month or two.                                                                               
MR. O'LEARY thought the  interest rate projections are between 6 and                                                            
6.5 percent.                                                                                                                    
There being  no further discussion,  CHAIRMAN COWDERY adjourned  the                                                            
meeting at 2:45 p.m.                                                                                                            

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