HB 329-DEDICATED TRANSPORT FUND/PUB TRANSPORT  CHAIR P. WILSON announced that the final order of business would be HOUSE BILL NO. 329, "An Act relating to the transportation infrastructure fund, to local public transportation, to motor fuel taxes, and to the motor vehicle registration fee; and providing for an effective date." REBECCA ROONEY, Staff, Representative Peggy Wilson, Alaska State Legislature, stated that she would not discuss reasons for the dedicated transportation fund since she previously outlined them. She offered to provide a section-by-section analysis, on behalf of the prime sponsor of HB 329, Representative Peggy Wilson. She stated that HB 329 would define the Alaska Transportation Infrastructure Fund (ATIF), including management of the fund and expenditures from the fund. Section 1 would provide legislative intent to appropriate $1 billion in seed money. She referred to two graphs in members' packets that depict what the proposed Dedicated Transportation Fund would look like over time. The first graph shows the potential growth for the fund with a $1 billion appropriation, the second graph also includes anticipated revenue from the state's motor fuel tax. MS. ROONEY stated that Section 2 would amend AS 28.10.421 (g), and would deposit motor fuel fees collected by the department into the proposed dedicated transportation fund, the Alaska Transportation Infrastructure Fund (ATIF). Fees from the special license plates, as previously discussed, would continue to be deposited to the general fund. Three percent of the fees destined for the ATIF will be deposited to the general fund for administration of the Alaska Mandatory Insurance Act. The goal of this section is not to divert funding from programs currently funded by vehicle registration fees. Under Section 3, the Watercraft Fuel Tax Account reference was removed since this tax is being used to help fund the proposed ATIF. However, a mechanism that makes appropriations to the Municipal Harbor Grant Fund still exists, but the legislature may also appropriate money to the fund from the fisheries business tax. The ATIF can appropriate 8 percent of the ATIF to the Municipal Harbor Grant Fund, which is detailed in a provision contained in Section 4. 2:01:01 PM MS. ROONEY stated that Section 4 would provide technical corrections to the statutes. Section 5 details the description of the proposed ATIF, which will consist of appropriations made to the fund. Secondly, any revenue derived from the motor fuel tax after April 1, 2011, and from vehicle registration fees collected after April 1, 2011 will be deposited to the fund. The Alaska Department of Revenue (DOR) will manage the fund as an endowment, and will invest funds to yield at least a 6 percent return on investment over time. Funds remaining in the account at the end of the fiscal year will remain in the ATIF. The DOR will report on the health of the fund and the amount available for appropriation, which is 6 percent of the average of the percentage of market value over the previous five years. The appropriation will be used for capital projects for transportation. Appropriations will not be made for federal match unless the total match does not exceed 10 percent of the amount available for appropriation. This provision was inserted to help insure that the funds would not be used for projects using the arduous federal construction processes. The goal is to fund projects using state guidelines, which are faster and less costly to construct. 2:02:25 PM MS. ROONEY outlined the guidance for appropriations from the fund detailed in Section 4, including that 60 percent of the appropriations from the fund are designated for highway projects, 13 percent for aviation projects, 12 percent for the Alaska Marine Highway System (AMHS), as previously mentioned 8 percent can be appropriated for harbor facilities and state- owned marine facilities, 5 percent for transit, and 2 percent for projects related to roads and trails. MS. ROONEY explained that a Transportation Infrastructure Fund Advisory Council (TIFAC) is established and consists of 8 members: the chairs of the House and Senate Transportation Committee; one legislator appointed by the House Transportation Committee; one legislator appointed by the Senate Transportation Committee, the Commissioner of DOT&PF, and three regional directors of the DOT&PF. Of the legislators appointed to the TIFAC, two legislators must represent a rural area, and two must represent an urban area. The DOT&PF will develop criteria and report its recommendations to the legislature by December 31 of each year listing transportation projects that should be funded by the ATIF. 2:04:05 PM MS. ROONEY explained that Section 6 refunds 60 percent of the aviation fuel back to municipalities owning and operating an airport in proportion to the revenue collected at the airport. All other proceeds collected on aviation fuel will be deposited to the ATIF. Section 7 would provide that all motor fuel tax receipts shall be paid into the ATIF. Section 8 would remove the exception in AS 43.40.010 (j) since it is repealed in Section 12 of the bill. Section 9 refers to motor fuel refund checks, which will be made from the ATIF instead of the highway fuel tax account. Section 10 amends the list of DOT&PF responsibilities, including that the department will promote and support methods or modes of local public transportation and transit, and develop criteria to determine eligibility of projects for use by the advisory committee. Section 11 removes a reference to a deleted statute, and Section 12 is a technical amendment to repeal the Watercraft Fuel Tax Account, the Special Highway Fuel Tax Account and the Non-Public Highway Use Account since those accounts would not be necessary as the fuel taxes will be deposited to the ATIF. MS. ROONEY stated that Section 13 would establish the transition language for calculating the amount of the ATIF values. During the first five years since the DOR will not have a five-year average to use for its calculations, the transition calculation will be to use five percent of the POMV in the first year, as of July 1, 2011. Subsequently, the appropriation will be five percent of the average market value of the ATIF fund as of each year through June 30, 2015. The DOR will file a report on October 1 of each of the first five years to provide the funds available for appropriation. Section 14 would provide a contingency, that the change to Alaska's constitution must be approved by the voters before April 1, 2011 before this bill can take effect. Section 15 would direct the DOT&PF to initiate its work to develop the criteria for prioritization of proposed DOT&PF projects. Section 16 would direct the motor fuel taxes into the ATIP commencing April 1, 2011. 2:06:39 PM REPRESENTATIVE PETERSEN referred to Section 5 and to revenues received after April 1, 2011. He asked whether July 1 would be a better date to use. MS. ROONEY offered that the end of the first quarter date was selected to allow the DOR to work out any issues before the end of the fiscal year. REPRESENTATIVE PETERSEN asked whether this would create any problems to budget three-fourths of a year of revenue since the DOR would likely need to make adjustments. 2:07:47 PM REPRESENTATIVE PETERSEN, in response to Representative Johansen, provided the reference as page 2, line 22 of HB 329. CHAIR P. WILSON related that she would research the matter with DOR. REPRESENTATIVE JOHANSEN asked for the effective date of the bill. CHAIR P. WILSON related that HB 329 is contingent upon HJR42 passing, and the ballot proposition requiring a vote of the people for passage so she was unsure of the effective date. 2:09:29 PM REPRESENTATIVE GRUENBERG related that he has held a long standing interest in the legal aspects of a cruise ship head tax, which is currently under litigation. He related a line of cases of constitutional issues help define what the cruise ship head tax can be used to fund. He said the funds can be used for projects directly related to cruise ships. He suggested that funding can be spent on piers, or dredging harbors, but probably not for projects in Interior Alaska. He suggested that since this bill considers transportation funding, that the committee might also consider the head tax itself, including specific permissible uses of the taxes in HB 329 that could help bolster it against future challenges. He offered that it would not need to amend the constitution but could provide a dedicated fund that is allowable under federal law. This approach would not require a constitutional amendment, but could provide a perpetual source of constitutionally permissible projects in the coastal communities. He envisioned such a fund could also be used by future coastal communities for projects as the Northwest Passage opens up, noting that coastal communities would also include the Aleutians and Anchorage. 2:11:50 PM REPRESENTATIVE JOHNSON offered that funds need to be used for tourist-related activities. He said, "I think we're way down a rabbit hole on that one." REPRESENTATIVE GRUENBERG understood. However, he said he thought the proposed dedicated transportation fund could be sequestered until that happens. By that time the state would have time to build up a real endowment, he surmised. REPRESENTATIVE JOHNSON remarked that would assume that members support the imposition of a head tax in the first place. 2:12:45 PM REPRESENTATIVE MUNOZ referred to page 4, lines 12 - 28, to the composition of the Transportation Infrastructure Advisory Council. She asked whether it would be better to use the current team of DOT&PF members to determine which projects to fund to avoid political decisions. MR. RICHARDS related that the composition of the proposed board closely mirrors the DOT&PF's internal team. He also mentioned that the ATIFAC would develop the criteria and the projects would be ranked in a consistent and fair manner. 2:14:33 PM MR. RICHARDS, in response to Representative Munoz, responded that legislators do not serve on the current DOT&PF criteria team, just DOT&PF employees. He listed the group, including regional directors. CHAIR P. WILSON stated that legislators were added to assist the perception of neutrality and to shift away from the sense that the DOT&PF makes the decisions to one that is more evenly balanced. 2:15:39 PM REPRESENTATIVE MUNOZ expressed concern to politicize in the decision-making process for projects. 2:15:58 PM REPRESENTATIVE GRUENBERG asked for the reason that the ATIFAC does not include a public member or industry to bring the consumer perspective. CHAIR P. WILSON agreed. She stated it is similar to the State Transportation Improvement Plan (STIP) process. REPRESENTATIVE GRUENBERG asked for the department's position on the ATIFAC composition. MR. RICHARDS related his initial reaction would be that the legislator represents the public. The criteria will be set and the scoring will determine which projects will be selected, and the projects will be approved by the legislature for appropriation. He related this ad hoc council could be large and unwieldy to obtain transparency. He mentioned that the current DOT&PF's structure is open and in fact, Chair Wilson attended the scoring process last spring. He remarked that the DOT&PF provides the technical expertise and the legislative branch can provide the public process. 2:17:59 PM MR. RICHARDS, in response to Representative Gruenberg, stated that he was not certain if the DOT&PF's meetings are subject to the Open Meetings Act. However, the DOT&PF does public notice their processes. He deferred to the Department of Law for a more definitive answer. 2:18:19 PM MR. KANE, in response to Representative Gruenberg, answered that he was not certain if the ATIFAC would be subject to the Open Meetings Act. He offered to research and report back to the committee. CHAIR P. WILSON asked Mr. Kane to provide the committee with the results. 2:19:11 PM REPRESENTATIVE JOHANSEN asked whether the current DOT&PF's Project Evaluation Board (PEB) process is in Open Meetings Act. MR. RICHARDS deferred to the Department of Law. REPRESENTATIVE JOHANSEN asked if Mr. Kane could also report on whether the current PEB process falls under the Open Meetings Act. 2:19:58 PM REPRESENTATIVE JOHANSEN asked about the current PEB board and whether the AMHS has been part of the process. MR. RICHARDS explained that the AMHS projects are funded primarily from the FHWA funds, which would fall under the purview of the DOT&PF Commissioner. The needs of the AMHS are met through planning and are driven by the U.S. Coast Guard regulations. Thus, the DOT&PF has statutory or regulatory requirements that it must meet. 2:21:26 PM REPRESENTATIVE JOHANSEN referred to page 4, line 25 of HB 329, and asked whether urban and rural terms are defined. MS. ROONEY answered that the terms are not specifically defined, but surmised the bill drafters used standard definitions. 2:22:33 PM REPRESENTATIVE GRUENBERG asked for time to ask questions at the next meeting. CHAIR P. WILSON agreed. 2:23:11 PM REPRESENTATIVE T. WILSON asked for the scoring process that DOT&PF uses in determining projects. CHAIR WILSON offered to provide the information. 2:23:25 PM REPRESENTATIVE JOHANSEN referred to page 5, line 20, of HB 329, and explained his understanding that an endowment would be created and would be managed by the Department of Revenue (DOR). He asked whether the fund will be structured to allow enough liquidity to refund claims. He recalled that funds are often invested and not available for use. MS. ROONEY related that the bill addresses that since the DOR must manage the fund with the knowledge it must pay out 6 percent of the percentage of market value (POMV). She explained that she has not held a specific conversation, but will do so. 2:25:20 PM CHAIR WILSON stated that she would leave the public testimony open on HB 329 to allow for further public comments. 2:25:28 PM REPRESENTATIVE GRUENBERG referred to page 2, lines 22 - 26, which read, "..."from any state tax on fuel used for the propulsion of motor vehicles, aircraft, and watercraft..." would be deposited to the fund, as well as registration fees. He asked whether any taxes relating to transportation would be excluded by the previously mentioned phrases. 2:26:31 PM CHAIR P. WILSON commented that the goal is to use state funds, although some funds may be used on federal projects. She stated that she did not want to deplete the general funds since the DOT&PF will still want to fund some projects outside of the dedicated transportation fund. MR. RICHARDS, in response to Representative Gruenberg, stated that the DOT&PF would like to review the various funds and will work with the DOR to provide a response. CHAIR P. WILSON projected that revenues for the vehicle registration fees would generate about $40 million, and the Motor Fuel Tax would raise about $40 million annually. Thus, the ATIF would receive $80 million each year. She suggested taking a cautious approach since it is important not to supplant federal funding. 2:28:20 PM REPRESENTATIVE GRUENBERG referred to page 1, line 8, of HB 329, and read, "on establishment of the fund." He asked whether this sum would be a lump sum from the general fund or if a ceiling of $80 million per year would fund the dedicated transportation fund. CHAIR P. WILSON related that $1 billion in seed money will be included in an appropriation bill as the mechanism to fund the endowment. REPRESENTATIVE GRUENBERG asked whether the seed money was in addition to the $80 million from taxes. CHAIR P. WILSON answered yes. In further response to Representative Gruenberg, she answered that a provision was not made for any repayment plan. 2:29:38 PM JOHN MCKINNON, Executive Director, Associated General Contractors (AGC), said he spoke previously on encouraging the use of state funds for construction projects. He remarked that it does not get any better than this. This proposed ATIF is multi-modal and while he was unsure about the percentage of allocation in the bill, he understood the methods used. This bill will create jobs, but more importantly, will also create transportation improvements. He reviewed bond issues approved by voters between 1960 - 1982 and as many as four or five bond issues, with at least one each year related to transportation issues, and they all passed. During 1982 - 2002, the state had ample general funds and did not need bonds. In 2002, GARVEE bonds and road improvement bonds passed with good solid support of the voters. In 2008, $315 million transportation bond issue passed with 63 percent of the vote, without any organized group advertising its passage. He said that Alaska loves transportation projects. This bill can do a lot for citizens to reduce congestion. He recalled an informal calculation done during his time with the DOT&PF that congestion caused a daily sum total of $60 million per year. 2:33:16 PM MR. MCKINNON further recalled the calculation was based on the cost of people and businesses waiting due to traffic congestion. The rate used was an hourly rate of $100 per hour for a commercial truck, and $15 per hour for citizens, but the sum total added up to $60 million. This can go a long way to improve the safety improvements. He recalled during a six year period, from 1996 - 2002, the highway authorization bill that the federal government required the DOT&PF to spend a certain amount for non-highway transportation projects like trails. Thus, the DOT&PF was required to spend $40 million over 6 years. The politics at the time resulted in over $160 million on those projects. He stated that the $120 million diverted to those non-highway projects could have been spent on safety improvements and lives could have been saved. He stated the proposed ATIF could be used for safety improvements, new routes and connectivity, which could result in some spin off. Some rural villages could be connected to share airports and reduce the necessity of having to build airports and clinics to serve small communities. The proposed fund could add ferries, similar the M/V Lituya which serves Metlakatla. This could help improve access to transportation and could lower transportation costs. 2:35:35 PM LOIS EPSTEIN, Professional Engineer; Director, Alaska Transportation Priority Project (ATPP), stated that the ATTP works with conservation organizations, transit advocates, community and governmental leaders, neighborhood organizations, engineers, and the public to promote sensible transportation systems and policies in Alaska. She stated that ATPP believes it is a good idea to address the upcoming decline in federal transportation funds. However, some problems exist and it is limited in overall effect. This bill does not include money for maintenance and preservation, which is roughly $500 million per year for highways and bridges, and $100 million for preserving and operating ferries. She cautioned the state should not build projects it cannot maintain and this dedicated transportation fund approach does not address maintenance issues. MS. EPSTEIN discussed the allocation between modes, including that 60 percent is designated to major roads and bridges, and only 5 percent for community roads and public transit. These allocations may not be the right allocations. She related that since HB 329 provides for an advisory council, that it does not need to bind the decision making process so tightly. She offered that she would not be opposed to a maximum amount to be spent on roads between 40 to 60 percent to ensure that other modes are appropriately funded. She related that she also serves on the Anchorage Metropolitan Area Transportation Solutions (AMATS) Advisory Committee, which uses ranges for funding. Today's approach does not address the high amounts on questionable projects like the road to Juneau or Nome road or Gravina Bridge. There is not enough money for these projects; but the state continues to fund studies on them at the level of millions of dollars each year, regardless of the overall cost. The FHWA and Federal Transit Administration recently sent a letter dated November 2009 to the DOT&PF, which read, "Alaska will be over-programmed in the long term and sufficient funds are not available from current recognizable sources to complete a number of large projects contemplated by the state's program." The projects she just identified cost between $400 million to $2.5 billion and would not be affected by HB 329 since the projects would require federal dollars. She urged the legislature and the Governor to show fiscal leadership and cancel one or more of the projects rather than spending millions of the state's transportation dollars each year pursing them without any financial plan. None of those projects mentioned have a financial plan in place. She suggested holding another hearing. 2:39:56 PM CHAIR P. WILSON offered to contact her to obtain information on using ranges between modes. She expressed her willingness to work on establishing ranges rather than have specific percentages between modes. In response to Representative Gruenberg, she related that it may work out to hold a conference call. 2:40:51 PM KATHIE WASSERMAN, Executive Director, Alaska Municipal League (AML), stated that she is very thankful to the sponsor for introducing the resolution and the bill. She stated that while she has not analyzed the specifics of the proposed dedicated transportation fund, she believed that conceptually the bill addresses the AML's questions on how the state will address decreasing federal funds. During the AML trips to Washington D.C., Alaska's Congressional delegation has often acknowledged the difficulties in obtaining federal highway funds. She explained that the AML prepared a report, the "Alaska Transportation Finance Study," which members have in their packets. She related that SAFETEA-LU has been extended month- by-month and is not any way to approach transportation funding planning. She attended a transportation discussion at the White House, and every time transportation was mentioned it was in conjunction with transit. She asked how this would affect Alaska, and the answered was that even small communities could benefit from mass transit. Thus, she surmised that the administration may not understand Alaska's transportation needs. MS. WASSERMAN referred to a table that provides the per capita to transit, stating that Wyoming receives $8.32 per capita for mass transit, while Alaska receives $54.74 per person. Since Alaska receives so much and pays in so little, other states object. She stated that she serves on the National Association of Counties Transportation Committee, and other members complain that their potholes could be filled if Alaska did not receive so much money. Thus, AML supports the concept that Alaska must find ways to fill the funding gap due to reductions in federal transportation funding. She said the AMLS realizes that a billion dollars is a lot of money, but Alaska has many needs. Transportation is one of the basic tenets that government does and should provide. 2:45:51 PM REPRESENTATIVE GRUENBERG asked what the committee can do to maximize the capture of federal funds for urban areas in Anchorage and Fairbanks. MS. WASSERMAN said she did not know. REPRESENTATIVE GRUENBERG acknowledged Ms. Wasserman's expertise and experience in Washington, D.C. and asked her consider how Alaska could obtain maximum federal dollars since Alaska is clearly eligible to receive, noting that it is also important to consider rural needs. REPRESENTATIVE JOHNSON remarked that the purpose of HB 329 is to avoid using federal dollars. He thought it would be counterproductive to work to obtain federal dollars for mass transit in HB 329. This bill is intended to provide general fund dollars for transportation projects that can be completed much more quickly than using federal funding, he stated. He suggested that attempting to leverage federal funding in this bill would be ill advised. CHAIR P. WILSON offered her goal is to maintain the current DOT&PF budget, including obtaining FHWA funding for projects, but to use the dedicated transportation fund to complete additional projects more quickly, to create jobs, and enhance access to Alaska's natural resources. It is not the intention of this bill to supplant transportation funding in the state. She recalled other states established specific funds for education, only to discover that their dedicated funds became the only source of funding for education. She maintained she did not want that to happen in Alaska, in terms of transportation funding. 2:48:40 PM REPRESENTATIVE T. WILSON remarked that completing projects more timely will also save money in long run since the roads would not deteriorate as quickly. MS. WASSERMAN agreed. However, she said she thought the DOT&PF and municipalities work as fast as possible to complete the permitting process, but money is the driving factor. REPRESENTATIVE T. WILSON offered her belief that all communities in Alaska are affected by delays. She asked whether AML has obtained similar feedback from communities on problems. She stated that Alaska must collectively work to obtain and complete projects. MS. WASSERMAN stated that the AML is comprised of members from every single community in Alaska. She suggested she is well aware of problems statewide, especially the importance of transportation to small communities. 2:50:11 PM REPRESENTATIVE GRUENBERG conveyed that he also supports needs in rural areas. He acknowledged that members are also aware of transportation problems in his district in Mountain View. He stated that many of his constituents do not own cars, must push shopping carts on sidewalks, and cannot easily navigate Anchorage without buses. He expressed concern with language in HB 329. He referred to page 3, lines 10, which read: "...capital projects for transportation and related facilities." He noted that phrase also appears on page 3, lines 15 -16. He suggested that the phrase should be defined to include public transportation and facility maintenance, as well as general maintenance. He recalled the Governor stating that Alaska must maintain what it owns or the state will continually be replacing its infrastructure. He asked if Ms. Wasserman disagreed. MS. WASSERMAN stated no, she did not disagree. [HB 329 was held over.] 2:53:40 PM ADJOURNMENT  There being no further business before the committee, the House Transportation Standing Committee meeting was adjourned at 2:53 p.m.