HOUSE BILL NO. 243                                                                                                              
                                                                                                                                
"An Act relating to taxes on motor fuel used in or on                                                                           
boats and watercraft; and providing for an effective                                                                            
date."                                                                                                                          
                                                                                                                                
KEVIN HAND, STAFF, HOUSE TRANSPORTATION COMMITTEE AND                                                                           
REPRESENTATIVE HALCRO testified in support of the                                                                               
legislation on behalf of the sponsor. He observed that the                                                                      
State of Alaska has currently been attempting to divest                                                                         
itself of the ownership and maintenance and operation                                                                           
obligations for many of Alaska's harbors. He maintained that                                                                    
the legislation encourages local governments to assume that                                                                     
responsibility. The legislation generates revenue for                                                                           
municipalities that assume local responsibility of ownership                                                                    
for their port and harbor facilities.                                                                                           
                                                                                                                                
Mr. Hand emphasized that the bill reduces the state marine                                                                      
fuel tax in a qualified municipality to 2 cents from the                                                                        
current 5 cents, and allows the local governing body to                                                                         
impose their own 3 cent tax, the revenue from which could                                                                       
then be used for maintenance and operation obligations.                                                                         
                                                                                                                                
Mr. Hand observed that this process comes with specific                                                                         
caveats required of the local entity. A qualified                                                                               
municipality must:                                                                                                              
                                                                                                                                
- Assume possession and responsibility for operation                                                                            
and maintenance of all state port and harbor                                                                                    
facilities within its boundaries - except those                                                                                 
owned by a public corporation or a state agency and                                                                             
used for state purposes: the Alaska Marine Highway                                                                              
System and the Alaska Railroad corporation (both                                                                                
operate dock facilities around the state).                                                                                      
                                                                                                                                
- The state shall not retain any maintenance and                                                                                
operation obligation or liability for the operation                                                                             
of these facilities                                                                                                             
                                                                                                                                
- The local government must adopt municipal ordinances                                                                          
that dedicate these revenues to be used in their                                                                                
harbors.                                                                                                                        
                                                                                                                                
Mr. Hand asserted that the legislation represents an                                                                            
efficient  "user-pay" system since part of the revenue                                                                          
generated from fuel purchases will return to benefit the                                                                        
harbor where the fuel was purchased. The tax on the consumer                                                                    
remains constant; the effective 5-cent tax per gallon will                                                                      
remain consistent throughout the state.                                                                                         
                                                                                                                                
Mr. Hand maintained that the implementation of HB 243 would                                                                     
encourage small communities around the state to gain local                                                                      
control of their harbors and free the Department of                                                                             
Transportation and Public Facilities of maintenance and                                                                         
operation obligations. He acknowledged that the legislation,                                                                    
in its current form, has some working difficulties. He                                                                          
suggested that the bill be placed in a subcommittee to hash                                                                     
out the remaining problems.                                                                                                     
                                                                                                                                
Co-Chair Therriault noted that the legislation only pertains                                                                    
to maintenance and operation. He observed that the intent                                                                       
has been to turn facilities over to municipalities and asked                                                                    
that the subcommittee consider if there is a way to dedicate                                                                    
a revenue stream for local municipalities to pay for                                                                            
improvements, in order to remove the state from the process                                                                     
a step earlier. He noted that Co-Chair Mulder has expressed                                                                     
concern over the loss of revenues to the state of Alaska and                                                                    
noted that revenue loss needs to be balanced with a                                                                             
reduction in responsibility.                                                                                                    
                                                                                                                                
In response to a question by Representative Foster, Mr. Hand                                                                    
observed that there is an indeterminate fiscal note. The tax                                                                    
is imposed at the local level. The department estimates a                                                                       
possible loss of $3.7 million dollars.                                                                                          
                                                                                                                                
Co-Chair Therriault appointed a subcommittee consisting of                                                                      
Representative Mulder as chair and Representatives Phillips                                                                     
and Grussendorf.                                                                                                                
                                                                                                                                
HB 206 was heard and HELD in Subcommittee for further                                                                           
consideration.