SENATE BILL NO. 216 An Act relating to international airports revenue bonds; and providing for an effective date. MICHAEL BARTON, COMMISSIONER, DEPARTMENT OF TRANSPORTATION & PUBLIC FACILITIES, explained that the bill would increase the cumulative authorization for international airport revenue bonds to support capital improvement projects at the Ted Stevens Anchorage International Airport & the Fairbanks International Airport. The bill would authorize the issuance of $76 million dollars in revenue bonds. Those two airports are jointly managed as part of the Alaska International Airport system. The costs and revenues are pooled. The system is operated through the airport operating agreement, a contract between the airport and the airlines. It establishes the business relationships at the airport, obligates the airlines to pay for the cost of running & maintaining the airport, including capital projects and bonded indebtedness through the rates and fees charged at the airports. It also obligates the airports to secure agreements on costs with the airlines. The airlines agreed in 1997 to the terminal redevelopment project. The bonds requested through the legislation are revenue bonds. There were two previous issues in 1999 & 2002. The current issue would constitute no obligation of the State. The bonds would be insured and there would be no general fund money involved. There are three reasons for the need for additional funds: · Transportation Security Administration (TSA) security requirements; · Added square footage requested; and · Design problems, which caused delays. Commissioner Barton noted the Department had been negotiating with the airlines since January 2003 regarding how to cover the cost overrun. An agreement in some areas was reached acknowledging that Concourse C needs to be completed. Completion is scheduled for about in about one year. Another concern is the deferral of the $60 million dollars in capital projects; project will continue using federal money. Commissioner Barton referenced the two handouts. (Copies on File). Page 18 of the "Business Planning Information"  outlines the bonding requirement. Approximately $48 million dollars is estimated for the completion of Concourse C; $10 million dollars needed for the match money for federal funds on the capital project in Anchorage; $3.5 million dollars needed for capital projects in Fairbanks; $15 million dollars for the bond issuance costs. Commissioner Barton stated that the Asian Pacific markets have produced the most revenue. Representative Hawker asked if the Airport Fund was out of cash. Commissioner Barton responded that only the project needs funds. Representative Hawker stated that there was a balance of $81.8 million dollars as of June 30, 2002 in that fund. He asked if some of that fund balance could be used to address this concern. Commissioner Barton noted that it was agreed to use some of those funds for the portion from the terminal to Concourse C. In order to lessen the impact on airlines in future years, the Department has agreed to contribute $1 million per year from that fund, as well as $2 million dollars per year from patent facility charges. He pointed out the impact on rates and fees listed on Page 20. The projection has been made for the completion of the entire terminal and not just Concourse C. Representative Hawker asked if the number included the increase required to meet the debt service. Commissioner Barton responded that it had been included in those numbers. Representative Hawker asked the rationale, commenting that "to an extreme"; it could be funded entirely out of that fund balance. Commissioner Barton did not believe that it could be cash funded entirely as the State is required to retain 1.25 times the debt service, necessary from the previous bond issuance. There are additional on-going costs. The airport is not designed to make money but instead to break even and the fees reflect a break-even situation. Representative Hawker maintained that the cash reserve numbers were unclear. Representative Stoltze asked what concerns had been voiced by Senator Olson. Commissioner Barton stated that the House Transportation Committee had reviewed the plan and added that Senator Olson's concerns were related to general aviation parking and not related to completion of the concourse base. Co-Chair Harris asked if the new concourse would exclusively be used by Alaska Airlines. Commissioner Barton responded that they would be the major occupants. Co-Chair Harris asked if there would be increased fees for some of the airlines to help cover the costs. Commissioner Barton replied that the airlines through rates and fees would pay the entire bond. Co-Chair Harris inquired if the Department was asking for an increase. Commissioner Barton stated they were and that all occupants agree that Concourse C should be completed. Representative Berkowitz inquired if there were any side- boards on the initial bonding authority. Commissioner Barton responded that the proposed bill was the same as an earlier proposed bill, authorizing the bonds. Representative Berkowitz commented on some of the issues, which have given rise to increasing the number. These have been questioned by other legislators who would like to see some insurance that the problem will not repeat itself. Commissioner Barton stated that the urgency exists because the project will run out of cash in September 2003. After that emergency is resolved, then the entire situation will be analyzed. Representative Berkowitz asked if there would be only one staircase operator at the airport. Commissioner Barton offered to check into that. Vice-Chair Meyer MOVED to report SB 216 out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. SB 216 was reported out of Committee with a "do pass" recommendation and with fiscal note #1 by the Department of Revenue.