HOUSE BILL NO. 30 "An Act relating to the transportation infrastructure fund, to local public transportation, to the municipal harbor facility grant fund, to motor fuel taxes, to the motor vehicle registration fee, to driver's license fees, to identification card fees, to the studded tire tax, and to the vehicle rental tax; and providing for an effective date." HOUSE BILL NO. 31 "An Act making a special appropriation to the transportation infrastructure fund; and providing for an effective date." 2:40:52 PM REPRESENTATIVE PEGGY WILSON, SPONSOR, addressed HB 30. She offered her sponsor statement: HB 30 will define the Alaska Transportation Infrastructure Fund (ATIF), how it will be funded and where the funds will be spent. The roads, bridges, airports, ferries and other transit systems that make up our state's transportation system are essential to mobility, commerce and economic development. These systems increase safety, enhance economic competitiveness, and lead to a better quality of life. To ensure Alaska has the infrastructure necessary to develop our resources as well as improve the living conditions for our citizens we must commit to funding transportation. Having a dependable revenue stream from year to year will allow Alaska to manage current congestion and maintenance projects as well as develop access to needed resources and energy. Additionally the use of state funds for construction means we will have greater control and funding will go towards completing projects as opposed to the expensive and lengthy federal process. Anchorage has benefited from the use of state funds and has seen projects such as the McGraw Intersection and Dowling Street Extension get done faster and cheaper than they would have using the federal guidelines. In FY10, 87 percent of our transportation budget came from the federal government. There have been several major deposits to the Federal Highway Fund to keep the expired federal transportation reauthorization program going. After 2 years we are still operating under the old reauthorization guidelines. All indicators show that the new reauthorization bill will be unfavorable for states with small populations due to an emphasis on mass transit and green transportation. It favors toll roads and bridges and other transportation that pays for itself or that can be supported with a public private partnership. Our own DC delegation have told the legislature that Alaska needs to rely less on the federal government and start shouldering some of the burden of improving our transportation infrastructure. HJR 4 will put an initiative before the voters to change the Alaska State Constitution to allow a dedicated fund for Transportation Projects. With passage of the initiative, HB 30 will define the fund. It will outline how the fund will be managed, how the earnings will be spent and who will decide which projects will be funded each year. The fund will be seeded with a $1B endowment. In addition to the endowment ATIF will receive the revenue generated from fuel taxes, vehicle registrations, driver's license and identification card fees, studded tire tax, and vehicle rental taxes. One half of these revenues will be available each year for appropriation. The other half will be deposited into the fund to both grow the fund and inflation proof it. In addition, six percent of the market value (POMV) of the fund will be available for appropriation. The Department of Revenue will be charged with administering the fund. The Legislature should be able to appropriate approximately ~$100M the first year and then grow the appropriation about $1.5- 2M per year after that. HB 30 will create an advisory council to evaluate the project submissions. The council is comprised of 17 voting members, 1 Department of Transportation /Public Facilities employee, 11 from transportation affiliated associations and 1 from native organization and 4 public members and 2 non-voting members of the legislature. The four members of the public will be appointed by the governor. The members representing organizations will be appointed by their respective organizations. Alaska DOT/PF will be required to create a set of criteria to rank the projects. The panel will use these criteria to give each project a numeric score to be used in prioritizing the projects. These prioritized projects will go through the normal budgetary cycle each year for final authorization. The bill defines how the funds shall be appropriated. Not more than 1. 80 percent of the funds may be used for roads and surface transportation both state and municipal, 2. 25 percent may be used for aviation, 3. 25 percent may be used for the Alaska Marine Highway, 4. 20 percent may be used for harbor facilities, state owned marine facilities and for deposit into the municipal harbor facility grant fund, 5. 20 percent may be used for local community transportation and transit. 6. 15 percent may be used for trails and bike- paths. These percentages will provide the flexibility needed to focus on one mode one year and switch to another the following year as needs dictate. Besides the above appropriations, the fund will pay for all fund administration costs and for the operations of the Department of Motor Vehicles. Alaska is geographically the largest state in the country, and the future of the economic and social well being of its citizens is critically dependent on a reliable transportation system. This fund is one of the tools needed to create a modern, reliable transportation system. The CS from House Transportation reduced the size of the Advisory Council by 5 members and removed the revenue stream from airport leases and airspace leases. It also made all the provisions of HB 30 contingent upon the voters passage of the initiative to change the constitution to allow this dedicated fund. Representative Peggy Wilson offered to provide any further details to the committee. She stated that public testimony had not been solicited out the desire for brevity. Vice-chair Fairclough asked if the October 1st report date listed on page 3 of the bill was meant to coincide with the end of the federal fiscal year. REBECCA ROONEY, STAFF, REPRESENTATIVE PEGGY WILSON, explained that October 1st had been selected to allow for the governor to examine the report before it passed to the legislature. Vice-chair Fairclough pointed out that on October 1st local municipalities had to obligate all funds for spending. She expressed concern that the project line up could be affected. Vice-chair Fairclough thought that the 6 percent payout was aggressive and that 5 percent was a more conservative number. She wondered why 6 percent had been chosen. Ms. Rooney replied that 6 percent had been chosen because it was the going rate at the time. She shared that the payout number was to be chosen by the finance committees and that a payout table could be found in the committee member files that evaluated the payout from 4.5 percent up to 6 percent. 2:51:48 PM Representative Peggy Wilson added that the constitutional budget amendment read "up to 6 percent." She explained that the payout percentage could be adjusted by statute as needed by the legislature. Co-Chair Stoltze wondered if writing an assured payout into the constitutional amendment could be helpful in persuading the public. Representative Doogan recalled that previous testifiers from the financial community had expressed comfort in calculating percent of market value at 4.5 percent. He agreed that 6 percent was an aggressive number to try to maintain year after year without diminishing the value of the fund. Vice-chair Fairclough added that a 6 percent payout could be acceptable provided that it did not diminish from the corpus of the fund. Representative Gara noted that $1 billion was a lot of money. He believed that there would be less money appropriated for transportation at 4.5 percent. He recommended deducing the average appropriation to department over the last five years. He suggested that if the state was going to invest in a transportation fund it would be prudent to investigate the amount of political will available to push for enough spending to meet the desired infrastructure needs. 2:56:14 PM Representative Peggy Wilson explained that the bill was not meant to replace what transportation was currently doing. The department had a back log of over $1 million in maintenance projects across the state. She stressed that the fund was meant to enhance current operations. Representative Hawker shared that there was recorded testimony of the discussion concerning the prohibition of dedicated funds during the constitutional debates. He asked how the legislature was expected to respond to testifiers in the recording who referred to the dedication of funds as an "inherent evil" and that each budget year every competing need in the state should be able to compete on equal standing for the scarce amount available revenue. Representative Peggy Wilson responded that drafters of the constitution had grandfathered in three different funds. Two of the funds were dedicated transportation funds; one for land and one for water. The legislation would be reinstating a fund that had already existed during the time that the Alaska State Constitution was put in place. Co-Chair Stoltze queried why the dedicated funds should be for transportation and not education. Representative Peggy Wilson answered that the third dedicated fund was related to education. She assumed that through the years past legislators had decided the dedicated funds were unnecessary. She stated that she chose the issue of transportation because that was where she believed the state had the greatest need. Co-Chair Stoltze noted that the closest the legislature had come to establishing a dedicated that fund for education was in 1989; Governor Cowper had pushed for the legislation, which failed in the Senate. 2:59:52 PM Representative Peggy Wilson explained that the bill would help with economic development in the state. Representative Guttenberg though that the argument for dedicated funds for education was still compelling. He wondered whether the yearly analysis suggested by Representative Gara would be beneficial. He understood that a steady source of income for transportation projects was necessary, but opined that the issue was perpetual. Ms. Rooney responded that the department was currently funded at 6 percent of market value, at $100 million per year. She asserted that the numbers were close to what had been seen historically. Representative Guttenberg surmised that the legislature should continue to fund the department just as it had been doing. He thought that dedicating funds would be confusing to the public. Representative Peggy Wilson remarked that the state needed to be looking at the future and not just the present. She said that there was no guarantee that the oil pipeline was not going to shut down next year. She stressed the importance that the state determine what would be done in the event of declining revenue. 3:03:35 PM Representative Doogan believed that the legislation was much more sophisticated than it had been in its past form. He felt that the problem with the proposal was related to the cost and had been compounded by the decisions of the House of Representatives concerning taxes for oil companies. He explained that the legislation was in a suite of bills that had been introduced that would take a significant amount of money from the state. He expressed concern that state funding would be distributed on a first come-first served basis. He wondered why the proposed legislation should be the first choice in terms of allocating funds for a single purpose. Representative Peggy Wilson reiterated that the state needed to plan for the future. She said that the state had $8 billion in projects that were not being addresses. She believed that because the state was currently experiencing a time of a slight financial surplus; this would be the best time to dedicate the funds. Co-Chair Stoltze stated that the vetting of HB 30 and HB 31 would be done in a subcommittee consisting of Vice-Chair Fairclough, Co-Chair Thomas, Representative Costello, Co- Chair Stoltze, and Representative Doogan. HB 30 was HEARD and HELD and referred to subcommittee that consisted of Vice-chair Fairclough, Co-Chair Thomas, Representative Costello, Co-Chair Stoltze, and Representative Doogan for further consideration. HB 31 was HEARD and HELD and referred to subcommittee that consisted of Vice-chair Fairclough, Co-Chair Thomas, Representative Costello, Co-Chair Stoltze, and Representative Doogan for further consideration.