HOUSE BILL NO. 478    "An Act relating to the municipal harbor facility grant program; and providing for an effective date." MOVED to ADOPT Work Draft 24-LS1694\I, Cook, 3/15/06 Representative Stoltze MOVED to ADOPT Work Draft 24- LS1694/I, Cook, 3/15/06. There being NO OBJECTION, the Committee Substitute was ADOPTED. 2:35:38 PM REPRESENTATIVE BILL THOMAS, SPONSOR, stated that this was a companion bill to SB 291 (Sen. Steadman). He noted that the bill had been introduced to respond to the State process of transferring harbors to municipalities, and discovering funding shortfalls needed to complete necessary repairs. The bill developed through comments from the Alaskan Association of Harbormasters throughout Alaska. The bill will create a harbor facility grant fund, using funds such as fisheries business tax or fuel tax and other taxes. The Department of Administration would administer the grants. He pointed out the requirement of a 50/50 grant match from municipalities, requiring commitment on the local level. The funding would provide repair or major maintenance in communities, and be limited to one grant per year per facility. Some communities may have more than one harbor, but would be limited to a $5 million aggregate cap. 2:38:08 PM Representative Thomas noted that to qualify for a grant, a municipality must demonstrate the ability to operate independently of state aid in the future, and noted that several communities were making this adjustment by increasing harbor rates. He pointed out that new construction received the lowest priority in the project list. The proposed effective date of the legislation is July 1, 2006. 2:39:33 PM IAN FISK, STAFF, REPRESENTATIVE THOMAS, noted the change in the grammer on Page 2, line 14, from "should be" to "is". He also noted that on lines 19 to 23, language was inserted to clarify the types of funds that could be used for the municipal match, especially the shared portions of the fisheries business tax. He also pointed out that language regarding municipal revenue sharing was also included in case those monies became available in the future. He noted that previous language added by the Community and Regional Affairs Committee had prohibited any state funds from being used in the municipal match, and stated the Sponsor's desire that certain state funds be excepted. 2:40:52 PM Representative Kerttula observed that Page 3, line 5, limited municipalities to only one grant. She asked if this referred to just this program, or any programs, and suggested the need for a technical amendment. Mr. Fisk responded that this limitation pertained only to the program, and conceded that an amendment might be helpful. Representative Kerttula asked for the reason of the program limitation to one grant. Mr. Fisk responded that the program was limited to address the deferred maintenance needs carrying over from the State transfer. He noted that they wished to ensure that a municipality was able to meet those needs not properly addressed by the State. 2:42:54 PM Representative Hawker observed that if one grant was received, another grant could not be obtained. He asked hypothetically if during a granting period, all requests except one were minimally funded, this would leave all funding available for the unfunded project in the subsequent year. Representative Thomas stated that projects would be prioritized by community need. He noted that some communities had more than one harbor, and could apply for one harbor per year. He conceded that some projects may have to wait a few years to receive funding. He gave the example of Yakutat, when a transferred harbor experienced a shortfall in maintenance funding. Representative Hawker acknowledged the intent, but suggested more work on the language to close a potential loophole. Vice-Chair Meyer expressed his intent to HOLD the bill in order to receive more testimony and potential amendment. Representative Kelly asked if the list of transferred habors was all-inclusive. Representative Thomas replied that there could be other harbors being transferred this year that were not yet on the list. 2:47:15 PM JOHN STONE, PRESIDENT, ALASKA ASSOCIATION OF HARBOR MASTERS AND PORT ADMINISTRATORS testified in support and gratitude for the bill. His organization represents 27 municipal harbor systems throughout the state. He noted that they had been working on this problem for many years. He expressed support of the bill and the matching grant program. He noted that he had provided the committee with written comments (copy on file.) Mr. Stone pointed out that much of the harbor structure being transferred to municipalities had been built in the 1960's through 1980's. He showed the Committee an outdated power cable from Harris Harbor in Juneau that fed 40, 30-amp shore power services. The cable was indicative of the electrical code of the 1960's. He compared it to the newly installed cable. He emphasized the expense involved in trying to recapitalize the infrastructure. Mr. Stone referred to a question about page 3, regarding the one-time grant. He explained that the intent of the Harbor Masters was to ensure that grants were used for rebuilding a facility on a one-time basis. 2:52:26 PM Representative Kelly asked about the transfer of the facilities and the amount of funding that accompanied the transfer. Mr. Stone replied that the purpose was to bring the harbors to good condition. He stated that the funding was far short of what was needed to restore facilties, even in terms of code requirements. He also noted that user needs had also changed, with larger float systems now required. The money provided was only one quarter to one third of what the communities actually needed. Representative Kelly asked how the amount of funding had been determined. Mr. Stone replied that the formula used was consistent, but overall quite low. Representative Holm asked whether, when the transfer occurred, there was a misunderstanding about the facility requirements. Mr. Stone stated that the money was intended to restore facilities to good condition, but it that it fell far short. He suggested that this may have been because many facilities were at the end of their useful life, requiring more than simply maintenance. He also noted a difference in code, rather than a depreciation of an investment. Representative Holm asked if the intent was to build new facilities. Mr. Stone confirmed that this may be what occurs, although various communities will try to refurbish as they can. Representative Holm expressed concern over the matching funds, and wondered if a better formula was now in place to determine the amount of funding needed. Mr. Stone explained that a consulting engineer would be hired to develop a cost estimate to be used to apply for the grant. Representative Kerttula asked how much funding per year was spent by the City and Borough of Juneau to maintain harbors, and how much would be saved by the State by transferring this maintenance to communities. Mr. Stone replied that the operating cost for maintaining the float system in Juneau was approximately $2 million a year. Representative Kerttula observed that this did not cover all of the costs, and only represented one community. 2:59:45 PM Representative Kelly asked how it could be prevented that a grant accompanying a transfer was not being wasted on maintenance that would eventually be replaced in a rebuild. Mr. Stone stated that DOT would watch for this during the grant process, but that in each case the most economical rebuild would be considered. 3:01:01 PM KURT REYNERTSON, MANAGER, CITY OF SELDOVIA, testified in support of the legislation. He noted that they had recently passed a resolution through their city council. He explained that when they took over from harbormasters, they received $2.6 million from the State. After an engineer's estimate of $3.4 million, they discovered an $800-900 thousand shortage in order to provide good harbor standards. He stated that this amount was insurmountable for a community of their size. He commented that the bill would help to provide needed municipal services. 3:02:55 PM Representative Kelly asked if the $2.6 million for refurbishment was included in the amount for the rebuild of the harbor. Mr. Reynertson replied that engineering designs cost approximately $250 thousand, and the remaining funding would be utilized to complete the actual harbor rehabilitation. 3:03:50 PM GARY HENNIGH, MANAGER, CITY OF KING COVE, testified via teleconference. He expressed support for the bill and for the harbormasters for their work on the topic. He explained that their community was one of the first to take over management of their harbor from the State. He noted that the management has been more difficult than anticipated. He explained that the harbor was in poor condition, affecting the local residents who use the harbor. He stated his opinion that dedicating the fisheries tax as a funding source was a good idea. He noted that between $4 and $5 million had been paid into harbor repair by local fishers. He observed that linking this income to solving the harbor problem spoke well of legislators working with local harbormasters. He suggested that on page 2, lines 17 and 18, language be changed so that State Revenue funds from revenue sharing or a legislative grant could be used as a match. He suggested that these sources of municipal funding would be driven predominately by oil and gas revenues experienced by other areas of the state. 3:07:41 PM He also suggested that on Page 3, lines 1 and 2, to add a provision allowing those communities that first accepted harbor transfers receive a small "head start" in applying for funds, allowing for some portion of the funding in the first two years to be set aside for communities which had initially taken over harbor management. He emphasized that in past years, DOT had no formula to assist municipalities in determining the amount needed to bring the harbor up to reasonable standards. He noted that $352 thousand received in the early 1990's did not make a legitimate contribution. 3:09:05 PM Representative Kelly commented that Hooonah, Juneau and Valdez had implemented significant fee increases in their harbors, and asked what fee increases had been experienced by their community. Mr. Hennigh responded that for fifteen years the fee for moorage had increased by only 25 percent. He noted the need for a local fee increase, but observed that currently the residents might be unwilling to pay increased fees on a harbor that was in ill repair. He proposed that support for fees would increase when they could be assured that there would be building improvements. 3:10:31 PM Representative Kelly asked how many were on the waiting list for slips. Mr. Hennigh responded that there was no waiting list, since unless one was a commercial fisher, they would not be docking there. He noted that their waterfront was very busy, although the community was often overlooked. He stated they were the largest per capita fish producing area in that part of the state of Alaska. 3:11:42 PM Vice-Chair Meyer stated that HB176 would not be heard; likewise he stated that HB271 would not be heard in the meeting. Public Testimony continued. 3:12:59 PM GREG MEISSNER, HARBORMASTER, CITY OF WRANGELL, testified in support of the bill. He voiced concern over page 3, line 9, regarding the one time only nature of a grant per facility. He asked what qualified as a "facility"; he pointed out that perhaps each float would be considered a facility within a single harbor, and suggested that it might make sense for a community to refurbish one float at a time. Mr. Meissner then referred to Line 16 of the bill and noted that a replacement cost for a concrete float would be $5 million, vs. $3 million for a repair, and suggested that it would be more cost effective to replace rather than repair. 3:15:04 PM Mr. Stone responded that the definition of facility was an issue being addressed with the Department of Transportation and Public Facilities. He suggested that the cases would be addressed on an individual basis. He stated that he would be glad to speak directly with Mr. Meissner regarding his questions. 3:16:02 PM VALERY MCCANDELESS, MANAGER, CITY OF WRANGELL, testified via teleconference in support of the bill. She expressed her pleasure that the bill was addressing specific work on each harbor. 3:16:49 PM ALAN SORUM, HARBOR MASTER, CITY OF VALDEZ, testified via teleconference in support of the bill. He noted that many of the boats harbored in their city were from the city of Fairbanks. He voiced his support for working with the Department of Transportation and Public Facilities, with whom they've worked on grants for harbor projects. 3:18:25 PM SCOTT RANSOM, HARBOR MASTER, CITY OF SEWARD, testified via teleconference in support of the bill. He noted that his community had taken over the management of their harbor in 1999, and currently had over $6 million in deferred maintenance. He noted that these were the oldest floats in the harbor, installed after the earthquake. He stated that they had two rate increases to support the harbors. The bill will help with the deferred maintenance. 3:19:31 PM RAY MAJESKI, HARBORMASTER, CITY AND BOROUGH OF SITKA, testified via teleconference, in support of the bill. He explained that the city had taken over three harbors from the State, and after doing so discovered that Thompson Harbor needed to be replaced, at a cost estimated at $6.7 million. He stated that $3 million of $4.4 million from the State was spent on the other two harbors, with $1 million remaining to replace Thompson Harbor. He noted that repairs had added 15 more years to the other two harbors, but stressed that Thompson Harbor was beyond repair. He expressed concern regarding the statement that grant applications must be filed in the fiscal year immediately preceding February 1. He pointed out that they were currently replacing the harbor and receiving bids, beginning construction by mid-August. He hoped that the bill, if passed, would cover their current process. He noted that in the past six years, they'd raised moorage rates more than 100 percent. The bill would help the community members. 3:22:25 PM He noted that to be able to take the burden off of harbor users in his community, the bill would allow them to raise them to raise rates at an acceptable level. He concluded that the bill was a positive step. 3:23:08 PM There being no further testimony, public testimony was closed. JOHN MAKINNON, DEPUTY COMMISSIONER, TRANSPORTATION AND PUBLIC FACILITIES, responded to a question by Representative Kelly regarding the original formulation of funding when harbors were originally transferred from the State to municipalities. 3:25:07 PM He explained that most of the harbors discussed as "underfunded" were part of the November 2002 statewide bond issue, allocating $30 million to ten communities and 26 facilities. The numbers used for allocations resulted from a 1992 Core of Engineers' condition survey of all boat harbor facilities in Alaska. In 2002, the Department was asked to develop a list of harbors for repair and amounts for deferred maintenance. The numbers from the 1992 study were adjusted for inflation and also for additional deferred maintenance. He stated that it was unclear as to whether those numbers were accurate. He conceded that the level to which they aspired was not that which was desired by many communities. He referred to testimony by Mr. Stone regarding changes in codes, but noted that community changes also resulted in different harbor user needs. Some harbors had changed from working harbors into recreational harbors. He stated that changes in community expectations were not reflected in the numbers devised by the harbor engineer involved in the bond study. He concluded that this accounted for the discrepancy between the estimates. 3:27:39 PM Responding to another question by Representative Kelly, Mr. Makinnon noted that some harbors were very difficult to transfer due to a difference in expectation. He noted that communities were reluctant to raise rates to pay for improvements. 3:28:45 PM Representative Hawker noted his experience with the transfer of the harbor at Whittier, stating clearly that there was no State responsibility following the transfer of the harbor. However, he noted the significant need at some of the harbor facilities. He also proposed that harbors should be in "excellent" condition rather than "good" as is stated in current policy, along with the transfer of harbor responsibility to local authorities. 3:30:42 PM Representative Kelly observed that harbor masters found it difficult to balance the amount of repairs needed with funds available. He asked how the Legislature could avoid another problem with deferred maintenance in the future. Mr. Makinnon recommended a change in the definition of "facility", including "portion thereof". A facility might decide to improve a separate finger each year, and that could be considered a separate facility. The intent is that once the various portions are completed, it becomes the responsibility of the community to collect adequate fees for maintenance so as not to approach the State in another 15 years for replacement costs. He stressed that communities need to take on the responsibility. HB 478 was HEARD and HELD in Committee for further consideration.