HOUSE BILL NO. 70 "An Act making appropriations, including capital appropriations, reappropriations, and other appropriations; making supplemental appropriations; making appropriations to capitalize funds; and providing for an effective date." 1:34:11 PM ROB CARPENTER, DEPUTY COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, introduced a PowerPoint presentation titled "Alaska Department of Transportation and Public Facilities: House Finance Committee Capital Program and FY2022 Request Overview," dated May 5, 2021 (copy on file). He addressed a brief presentation outline on slide 2. Mr. Carpenter moved to slide 3 and reviewed the Department of Transportation and Public Facilities (DOT) capital budget funding summary. He highlighted that there was a total capital request of $1.12 billion, with approximately $950 million of federal receipts, $19 million in Unrestricted General Funds (UGF), $1 million in Designated General Funds (DGF), and other state funds totaling $144.7 million. He pointed out the funding sources listed to the left including sources that comprised 'other' funds including highway working capital funds that funded the state equipment fleet, international airport funds, statutory designed program receipts, Alaska Housing Finance Corporation (AHFC) bonds, and a small portion of UGF. 1:37:05 PM DOM PANNONE, ADMINISTRATIVE SERVICES DIRECTOR, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, OFFICE OF MANAGEMENT AND BUDGET, OFFICE OF THE GOVERNOR, addressed state capital appropriations on slide 4. He reviewed programmatic and recurring requests on the left of the slide. Items included mental health coordinated transportation and vehicles, the Alaska Marine Highway System (AMHS) vessel overhaul, the state equipment fleet, federal-aid highway match credits, and federal program match. He elaborated on each of the items. He noted that the AMHS overhaul was a capital investment to keep the ships running and improve short-side infrastructure. He discussed the department's use of the highway equipment working capital fund, through which it paid a rate on depreciating assets and received credits. He discussed the federal highway match credits, through which the department used the authority to request match credits for earnings from a capital project for items such as selling a right- of-way. He would address the federal program match on slide 5. He moved to the right of slide 4 and reviewed single, one-time items including a computerized maintenance management system and weigh station scale repairs. He noted that there was a significant list of needs to extend the life of several weigh stations. 1:40:43 PM Vice-Chair Ortiz looked at the programmatic/recurring annual requests on slide 4. He asked if the figures were constant or changed annually. Mr. Pannone answered that the figures varied occasionally. He used the example of the current year's request of $15 million, with prior year's requests of $18.5 million and $14.9 million. He continued that the state equipment fleet had been steady, with the current year's appropriation at $15 million, and an increase of $7 million proposed for FY 22 as the replacement list had grown. He stated that the amount varied but hovered around the amounts listed. Representative LeBon looked at the weigh station scale repairs item on slide 4. He asked about the relationship between weigh station repairs and federal highway dollars. Mr. Pannone replied that there were requirements for the state to ensure the integrity of its assets, which was the reason that measurement standards and commercial vehicle compliance was housed in DOT. He continued that there was a specific set of funding that could be in jeopardy if the state wasn't protecting its assets from overweight vehicles or certifying that the roads were used without damage. Representative LeBon pointed out that the purpose of the weigh stations was not to harass truckers but to maintain and protect roads to qualify for federal highway dollars. 1:43:53 PM Representative Thompson believed there were portable, temporary weigh scales around the state to put in areas temporarily. He asked if the portable scales were included in the funding request. Mr. Pannone answered that the scales were permanent and not temporary. The fixed weigh station scales were in seven locations. Co-Chair Merrick asked for some examples of what might qualify for the Mental Health Coordinated Transportation Vehicles Grant. Mr. Pannone replied thought there was a community transportation transit agency in Juneau and knew there was one in Anchorage. He deferred the question to a colleague. JAMES MARKS, PROGRAM DEVELOPMENT, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES (via teleconference), agreed with the remarks by Mr. Pannone. He explained that the Alaska Mental Health Trust Authority (AMHTA) was part of the rural transit agency for granting out for people with disabilities across the state. He would need to follow up with a more comprehensive list. 1:45:46 PM Mr. Carpenter addressed federal programs and state match on slide 5. He mentioned the Federal Highway Administration (FHWA) funding, which funded road construction, reconstruction, design and engineering. There was a 10 percent state match for a total of $71.2 million for surface transportation program. The Airport Capital Improvement Program (ACIP) had $269 million in federal receipts with a 6.25 percent match of approximately $14.7 million. The funding was guided by the Airport Capital Improvement Plan. He mentioned that the state was federally required to provide a document called the Statewide Transportation Improvement Program (STIP), which showed planning for all the state's federal highway construction. Mr. Marks provided a primer on the STIP on slide 6. The STIP was a four-year plan required by federal regulations that listed out all the federally funded and regionally significant surface transportation projects within the state. The STIP had to be fiscally constrained and was required to be developed with a public process. The STIP was approved by FHWA or the Federal Transit Administration (FTA). He explained that a failure to comply with federal regulations and requirements would jeopardize federal funding for transportation infrastructure in Alaska. 1:48:58 PM Mr. Marks advanced to slide 7 and reviewed a handful of illustrations showing the STIP process. He read from prepared remarks. He highlighted a box entitled 'Needs' Sources' that showed how project needs were identified and where the needs came from, including sources such as performance data, condition data, local needs, and military and defense needs. He spoke to the yellow box entitled 'Needs Evaluation and Management," which showed a process flow chart. The department utilized a needs database that was routinely evaluated and was intended to be a comprehensive list notwithstanding funding availability. Mr. Marks continued to speak to slide 7. The red box showed a flow chart depicting the process of the call for projects, which was fed by the needs list and happened periodically every one to two years. When the need for more projects was identified, project scoring and public comment was engaged. He discussed the public comment process. He discussed the project selection process by which other regional entities and partners were solicited for input. Project packages were formed and evaluated. He cited that the Project Evaluation Board (PEB) scored, ranked, and prioritized projects. The PEB process was a public meeting open to participation from the public, and the department hoped to host future events virtually. The PEB process submitted scoring to the commissioner's office. He noted that the icon depicting little yellow people indicated times at which the department actively engaged with the public for input on the STIP. Mr. Marks addressed the STIP Cycle illustrated by the flow chart in the blue box. The STIP cycle was a four-year program that was updated every two years. He discussed the activities of the department including establishing parameters, soliciting regional input, and balanced the projects' fiscal considerations before putting the STIP out for public notice. The process was federally required, highly public, and usually took about 45 days. Public notice comments were directed to those close to the project. After public notice, the department engaged in getting the approval of the FHWA and the FTA, after which the department would publish its fully approved and executed STIP. 1:54:40 PM Mr. Marks continued reading from a prepared statement related to the STIP process. He reminded that the blue box showed a single STIP cycle that typically took 2 years. He noted that sometimes updates were needed due to contingencies. He discussed changes to the STIP in two categories: minor changes that could be an administrative modification, and larger changes including adding, deleting, or changing the scope of work required a STIP amendment that required the full STIP process including federal approval. Developing a STIP could take up to two years and amending a STIP could take up to 220 days. Co-Chair Merrick noted that Representative Carpenter had joined the meeting. Vice-Chair Ortiz looked at needs' sources on the upper left of the slide and asked for a brief description of condition and performance data. Mr. Marks replied explained that the department monitored and measured all its condition and performance of facilities and assets, which was required federally. Some of the performance measures could include monitoring vehicle miles travelled or data on average daily traffic. Condition data could include an actual condition of an asset such as rutting or cracking. The data were published on the federal score card not only the asset, but any correlated assets. 1:57:38 PM Vice-Chair Ortiz looked at the STIP cycle on slide 7 and observed that it required commissioner approval. He asked if the commissioner could modify the STIP as much as desired after the entire process. Mr. Marks replied in the negative. He clarified that in practice the commissioner would approve what had already been approved and public noticed. Any changes after federal approval would require going back to the public. Vice-Chair Ortiz asked what the arrow showing administrative modification meant (shown to the left of the commissioner's approval box under the STIP cycle). Mr. Marks answered that administrative modifications were changes that small in nature, such as a shifting a project schedule or a change order. Additions or changes to projects or phases would have to go through an amendment and the full public involvement process. Vice-Chair Ortiz asked if it was common for a project to stay on the STIP for longer than four years. He asked if it was not uncommon for projects to remain on the STIP for six to eight years. Mr. Marks answered in the affirmative. He explained that project delivery ranged from three to seven (or more) years. The longer view items remained on the STIP. 2:00:44 PM Representative LeBon referenced an intersection in Fairbanks that connected his district with Representative Thompson's district. He believed there needed an overpass for safety and efficiency reasons. He asked if safety and efficiency factored into the department's decisions. He thought the intersection being proposed was unique and cheaper than other designs. He thought traffic was increasing in the area. Mr. Carpenter asked Mr. Marks to talk about how projects were scored. Mr. Marks asked for clarification. Representative LeBon was not sure whether his question about a specific project was fair. He was concerned about an intersection in Fairbanks and thought an overpass would be prudent for safety. Mr. Marks responded that there were a number of criteria including safety, project cost, economic benefit as well as other factors. He did not know how the particular project was scored and he could follow up with information. Representative LeBon referenced the needs sources and asked about military and defense needs. He noted that the intersection he mentioned was at the entrance to Fort Wainwright, and reiterated his expectation of increased traffic in the area. Co-Chair Merrick asked if it would be fair to say that legislators had no say in which projects were on the STIP and the order in which the projects were listed. Mr. Marks did not believe it was necessarily true to say legislators had no say in which projects were on the STIP. He explained that it was a public process, and the department was engaged with all parties including the legislature. He noted that there were staff dedicated to working with the legislature, and the department actively solicited input. He shared that he and Mr. Carpenter had discussed ways to improve the collaboration. 2:05:49 PM Mr. Carpenter emphasized the public portion of the process. He referenced the layout showing a group of people on slide 7 reflecting public participation and solicitation of comments. Co-Chair Merrick was trying to illustrate that legislators did not create the list and there was a public process. Representative Wool assumed that not every DOT project was on the STIP. Mr. Carpenter clarified that virtually all of the DOT projects were included on the STIP. He noted that almost all of the department's capital program ran through the federal program. He cited that every phase of projects from design to construction ran through the STIP. Mr. Pannone elaborated that some small projects could be paid for out of DOT's maintenance and operating budget. He reiterated that federal dollars, which was almost all of the department's surface transportation program, came from the STIP. Mr. Marks added that there were a number of projects and programs in the STIP. He used the example of the statewide regional maintenance project was comprised of a whole host of smaller projects during the year. 2:08:54 PM Representative Wool referenced public input in the STIP process. He acknowledged that the department took public input into account. He referenced a roundabout project that had been done near Chena Hot Springs that had received public opposition but had been constructed anyway. He noted that a previous legislator had de-funded the item in the budget. He thought the only supporters were from DOT. He wondered how effective public input was when there was a divergence of opinion. Mr. Carpenter appreciated Representative Wool's points. He noted that decisions often came down to safety, which could outweigh public input. He cited that the department encouraged public input and often changed or amended routes. He offered to provide more detail on the roundabouts. Representative Wool asked for detail on socioeconomic needs included in the STIP needs' sources box on slide 7. Mr. Marks answered that the items were identified internally or through collaboration with local official partners which identified projects of economic importance or things that might boost the economy such as improving congestion in particular freight corridors. Representative Wool recalled a proposition for a road improvement in Fairbanks which had caused a great deal of uproar, and he believed the department had listened to the public input. Co-Chair Merrick considered ongoing programs in the STIP. She asked if the Glenn Highway fell into the category. Mr. Marks answered in the negative. He explained that the Glenn Highway and other large highways would be distinct projects in the STIP in which work was done on one chunk at a time. 2:14:13 PM Mr. Marks moved to slide 8 titled "STIP: Federal Limitation Over Time." He reviewed the slide with prepared remarks. He noted that federal funding was either portioned via a formula or allocated to the department. He continued that FHWA placed a limitation on programming. He noted that the department was currently in federal FY 21, so the numbers could change before the year was complete. He pointed out that the projections for FY 21 appeared larger, chiefly due to the off-funding signified by the grey bars on the chart, and represented preparation of Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) funding that could be available for the capital program. Mr. Marks turned to slide 9 titled "STIP: Federal Obligations by Year." He explained that an obligation occurred when the department executed a federal aid agreement with the FHWA for a specific phase of a project in the STIP. He pointed out the bars representing different regions and noted that the bar graph did not evenly line up with the graph on the previous slide, because of two factors - the lifespan of funds, and project delivery life cycle. The life cycle could take from three to seven years to design and construct the project. He pointed out the FY 13 through FY 15 showed higher amounts due to projects developed under American Recovery and Reinvestment Act (ARRA) coming into the construction phase of work. Mr. Marks pointed out that AMHS was represented by the yellow bar and the distribution might appear disproportionately low, due to confounders in the data. He discussed account variation that allowed for flexibility in funds management. He cited accounting conversions in certain years, as well as a significant overlap in regional efforts that could also confound the data. He cited $90 million in funding obligated the previous year for the Ketchikan Gateway Borough under the south coast region. He noted that a large portion of total AMHS funding was found in the operating budget and what was seen on the graph was only federal capital obligations. Obligations were currently underway for the year, and the graph broke out CRRSAA funds. 2:18:15 PM Representative LeBon looked at the colored bars showing two shades of blue for northern areas and statewide areas. He wondered if DOT viewed the Dalton Highway as a statewide highway or a northern region highway. Mr. Marks replied that the Dalton Highway fell under northern region projects. Representative LeBon suggested that the Dalton Highway benefitted the entire state, and the northern region should not be solely responsible for funding the project. Mr. Carpenter agreed with the comment related to the statewide significance of the Dalton Highway. He thought that the Legislative Finance Division considered the impact of projects versus its geographic classifications. He noted the statewide bar covered programs in the STIP that were truly statewide geographical programs. Representative Wool believed in the geographic distribution of assets. He mentioned the Port of Anchorage, which many people called the Port of Alaska because of the large distribution of goods. 2:21:00 PM JOHN BINDER, DEPUTY COMMISSIONER, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES (via teleconference), turned to slide 10 titled "Airport Project Evaluation Board (APEB)." He discussed the ACIP, which mirrored the STIP in many ways. He explained that there were differences in how the Federal Aviation Administration (FAA) handled things compared to the FHWA. The FAA did not require public approval or public notice of the spending plan but engaged with the public during project development. Needs were developed in close involvement with stakeholders, then evaluated by APEB. He mentioned the Statewide Division of Aviation, and the ACIP, which scored projects based on specific criteria. The criteria were related closely with the FAA's nationally required criteria. There were needs varying from the FAA standard in different states. The projects were prioritized on a statewide basis, and then fit into the FAA's national priority ranking. The ACIP development was a five-year rolling plan that included scored projects from the APEB. The department tried to hold projects harmless once within two years of project construction. The department was able to insert projects in the event of an emergency or natural disaster. 2:24:53 PM Mr. Binder addressed slide 11 titled "Airport Improvement Program (AIP) for DOT & PF Airports in FFY 2020." He pondered the question of how funds got to Alaska and informed that Alaska was its own FAA region, which benefitted the state tremendously. The funding amounts were formula-driven with consideration of several factors including numbers of passengers and cargo. There were approximately 25 airports in Alaska that were designated as "primary" based on the number of passengers. The state apportionment was based on the size of land mass and the population. Due to the lack of infrastructure in Alaska, Congress established the Alaska supplemental, which was a special additional federal appropriation for projects selected by the FAA. After nationwide allocation, the FAA had a remaining pot of discretionary funds for projects ranked in priority. In addition, funds unused by other states that were not able to use their entitlement were rolled into the discretionary fund. Representative Edgmon shared that his district experienced high airport traffic volumes in the summer. He asked how the department estimated airport traffic. Mr. Binder answered that the FAA based the funds on reported passengers from the prior year. Some airlines were good about reporting the figures to the FAA, while others were not. The numbers were rolled into the formulas for the following year. Representative Edgmon referenced RAVN Air and thought the FAA should have good numbers. He stated that a small place like Bristol Bay could get upwards of $100,000 people per year. He thought it would be interesting to get a better sense of the airport reports. He mentioned airport and cargo volume in Bethel and Nome. He asked if it was possible to get the information. 2:29:32 PM Mr. Binder answered that the department could pull up the reported data from previous years. The department would work with the air carriers for passenger estimates for the present and future. Representative Edgmon asked if the information went to the Department of Labor and Workforce Development for statistical purposes, or if the information only went to DOT. Mr. Binder replied that the number was reported to the United States Department of Transportation's T100 data, which tracked passenger and cargo volumes at airports nationwide. Co-Chair Merrick looked at cargo entitlements at the top of slide 11. She asked about the landed weight for the Anchorage International Airport. Mr. Binder would follow up with the information. Co-Chair Merrick was curious about the number because she believed the Anchorage airport was one of the top cargo airports in the world. Mr. Binder moved to slide 12 and addressed the Alaska International Airport System (AIAS) capital funding based on FY 20. He noted that AIAS was an enterprise fund system, were self-sustaining (per statute), and did not use any state dollars. He continued that AIAS generated about $40 million in ACIP funding each year. He pointed out that the amount was a little low in FY 20 due to no large projects at the time. He reiterated that the funds could be rolled over to future years. He pointed out the close to $40 million in anticipated funds for FY 21, which were broken down into amounts for discretionary funds and entitlements. He noted that the FAA authorization bill, typically passed on a three-year or five-year basis, covered most of the ACIP, but Congress would typically insert aviation funds into other bills, which was called supplemental funding. 2:33:08 PM Representative LeBon asked about the formula for dividing money between the Fairbanks International Airport and the Anchorage International Airport. He considered the FY 20 amounts and acknowledged that Anchorage had greater numbers and more activity, but observed that in FY 21 the spread between the airports was huge. He asked if Fairbanks had been overlooked. He did not think it made sense. He did not see any supplemental funds for the Fairbanks airport. Mr. Binder clarified that the funds went to the owner and operator of the airports, and both Anchorage and Fairbanks international airports were owned by an international airport system. The funds went as a whole to the system, to be allocated each year based on capital needs. He noted that Fairbanks had a large runway rehabilitation project that had recently started, which was reflected by the larger chunk from FY 20. The capital needs on both airports were funded in large part by ACIP dollars, and the rest was funded by the carriers operating in each airport. Mr. Binder advanced to slide 13 and reviewed the rural system capital funding FFY 2016 through FFY 2020. He commented that FY 20 funds were significantly higher as unused international funds had rolled over to the rural system. In addition, there were approximately 7 local airports in the state that also had a very low capital year. Typically, rural airports had a 6.25 percent match for federal dollars. Due to Coronavirus Aid, Relief, and Economic Security (CARES) Act and American Rescue Plan Act (ARPA) funding for FY 20, there was no required state match for federal funds. Co-Chair Merrick asked if Mr. Binder had defined what a rural airport was. Mr. Binder answered that he had not, and stated the term was used freely. He explained that DOT considered the Anchorage and Fairbanks were part of the international system, and the rural airports were everything else. The international system was the owner of the two airports, and DOT owned the rest. Representative Wool asked if the other municipally owned airports such as Palmer, Wasilla, and Juneau were in a category or if the airports were in their own group. Mr. Binder answered that most locally sponsored airports compared to rural airports, except Juneau which was close to the size of the Fairbanks airport. He explained that for specific capital projects, the municipally owned airports worked directly with the FAA. He noted that DOT included the airports in its planning. 2:38:23 PM Mr. Binder moved to slide 14, "Major Rural System AIP Construction Projects Expected to be Funded in FFY 2021 & 2022," which gave an example of some of the project construction for the current and following year. He noted that typically FAA dollars were not freed up until late spring or summer which meant most projects went to construction the year following the grant. The FAA broke down projects into four main categories: safety, payment rehab, rural access, and buildings. He offered to follow up after the meeting with greater detail. Vice-Chair Ortiz asked where the Ketchikan airport fell into the category in relationship to other airports. He thought the airport was managed by the borough but owned by the state. Mr. Binder answered that the Ketchikan airport was considered one of the rural airports and was owned by the state with an operating agreement in place with the borough. All the revenue generated covered the cost of operations, which usually ended up a little short. A small part of the south coast region's budget was allocated to Ketchikan. He thought that since the FAA broke out the CRRSA and ARPA funds specific to airports, Ketchikan was receiving the full allocation of federal funding through DOT. 2:41:18 PM Mr. Carpenter addressed federal program project allocations on slide 15. He noted that the two largest projects were appropriation with no allocations for the surface transportation program and the ACIP covering all the FAA funding. Prior to FY 18, the two major federal programs were broken out into individual project allocations in the capital budget. He addressed the pros and cons of the method. The pros included that the method had provided the legislature with additional clarity and allowed for the Legislative Finance Division House district reporting to give an understanding of the geographic balance and significance of statewide projects. The cons included the challenge to manage the individual allocations because of project cost increases and slippage. Representative Wool surmised that prior to FY 18 every project would be listed in an appropriations bill. He saw how the practice could be very political and asked if that had been a challenge for the department. Mr. Carpenter emphasized that the STIP process guided where the funding went, so for the purpose of the legislature, the individual project allocations were simply a guide as to where the funds went. Other than the public process, there was not really an opportunity to change items. Representative Wool was not sure the process was a bad thing. Mr. Carpenter addressed slide 16 titled "Potential Solution": Working with the other body to address the two primary challenges of: ?Project Cost Increases ?Project Slippage Solution -Create Additional Allocations: ?Project Contingency ?Project Acceleration Mr. Carpenter read slide 17, "New Allocations": Project Contingency Allocation: ?Provides a federal authority "pot" when projects incur cost over-runs. Project Acceleration Allocation: ?Provides a federal authority "pot" for when projects are delayed ?Allows for the advancement of a project in the STIP that is ready that may not be listed in the appropriation bill HB 70 was HEARD and HELD in committee for further consideration. 2:46:27 PM AT EASE 2:57:03 PM RECONVENED