HB 117-ART PUBLIC FACILITIES: EXEMPT ST. FERRIES  1:50:44 PM CO-CHAIR WOOL announced that the final order of business would be HOUSE BILL NO. 117, "An Act relating to the art requirements for certain state ferries; and providing for an effective date." 1:51:08 PM MATT GRUENING, Staff, Representative Louise Stutes, Alaska State Legislature, presented HB 117 on behalf of the House Transportation Standing Committee, on which Representative Stutes is co-chair. He stated that the intention of HB 117 is to create a specific exemption for the two new Alaska Class Ferries (ACFs) and the replacement vessel, Motor Vessel (M/V) Tustumena. He explained that there is a requirement in statute that 1 percent of the construction cost of public facilities be used for the purchasing, administration, and hanging of art. Mr. Gruening noted that currently the state has the M/V Taku - which is in unmanned layup status because the state is trying to sell it - and all the art has been removed and placed in a climate-controlled facility in Ketchikan. He explained that the aforementioned art is available for reuse and refurbishment on the two new ACFs. He added that the two new ACFs are scheduled to be delivered for upper Lynn Cannel operation in 2018. Mr. Gruening mentioned that there is art on the old M/V Tustumena that is going to be removed then put on the new replacement vessel. He stated that there is a zero fiscal note accompanying HB 117. MR. GRUENING noted that the analysis section on the second page discusses the savings to the state by seeking a one-time exemption for the reuse of art. He pointed out that the bill is not opposed by the Alaska State Council on the Arts. He added that HB 117 is not an attack on the program but is a one-time exemption in recognition of the state's current fiscal challenges. Mr. Gruening reiterated the idea to use existing art for refurbishment instead of purchasing new art. 1:53:04 PM REPRESENTATIVE NEUMAN offered his understanding that HB 117 only exempts the two new AMHS vessels. MR. GRUENING answered that HB 117 would exempt the two new ACFs currently being constructed and the replacement Tustumena, which is funded in "this year's budget." REPRESENTATIVE NEUMAN offered that since sometime in the foreseeable future AMHS would need new vessels, the state should consider doing away with the "one percent for art" on the ferries, which he added would eliminate the need to come back to the legislature for another exemption. CO-CHAIR WOOL explained that one of the reasons the Alaska State Council of the Arts is not opposed to HB 117 is because the proposed legislation is not an open-ended exemption. He expressed uncertainty in knowing when the next vessels would need to be replaced in AMHS's fleet, but said he hoped it would not be any time soon. Co-Chair Wool asked for clarification that the exemption in the proposed legislation is for the two new vessels currently under construction and the replacement vessel for the M/V Tustumena. MR. GRUENING responded that is correct. He said that the exemption for the three aforementioned vessels would save the state over $5 million in construction cost. CO-CHAIR WOOL asked the Department of Transportation & Public Facilities (DOT&PF) to address the question of when, if at all, the next round of vessel replacements would take place. 1:55:03 PM MICHAEL NEUSSL, Deputy Commissioner, Department of Transportation & Public Facilities (DOT&PF), stated that the department does not have an exact timeline for further vessel replacement, beyond the M/V Tustumena. He added that the Tustumena replacement vessel has already been designed and, as Mr. Gruening previously mentioned, its construction funding is requested in the 2017 budget. Mr. Neussl noted that the department's vessel replacement plan is very fluid. 1:55:30 PM CO-CHAIR STUTES asked how much the state would save if the proposed legislation passes. She rephrased her question by asking whether the one percent for art is reflective of the total construction cost or if it is based solely on the state's portion of the cost. 1:56:05 PM MR. NEUSSL stated that the "one percent for art" is based on the construction cost of the facility. He noted that AMHS vessels are specifically listed in the statute regarding 1 percent of vessel construction cost be set aside for the purchase of art. Mr. Neussl stated that the two new ACFs are under a $101 million construction contract and 1 percent would have to be set aside for art. He added that the replacement cost for the M/V Tustumena is $237 million, which would mean $2.37 million would need to be set aside for art. He noted that the M/V Tustumena replacement vessel is a federally funded project that would allow the $2.37 million to be a 90:10 split. CO-CHAIR STUTES asked Mr. Neussl to clarify the M/V Tustumena federal/state split. MR. NEUSSL explained that typically federal aid projects are 90 percent federally funded and 10 percent state funded. He noted that the amount varies between projects. CO-CHAIR STUTES offered her understanding that specifically for the M/V Tustumena replacement project, the state would be saving 1 percent of the 10 percent. MR. NEUSSL stated that specifically regarding state funds, Co- Chair Stutes is correct. CO-CHAIR WOOL inquired whether the federal funds could be used for the "one percent for art." He also asked whether that would mean the federal funds would cover 90 percent of the 1 percent. MR. NEUSSL answered that the "one percent for art" set aside would be the same 90:10 split as the total construction cost. 1:58:20 PM REPRESENTATIVE SULLIVAN-LEONARD mentioned that the question and answer handout, included in the committee packet, details state savings. She said that the handout notes a savings of $3.5 million to the state from the construction budget on that particular art. CO-CHAIR WOOL said that the $2.37 million from the M/V Tustumena would be 90 percent paid by the federal match, so the state obligation would be one-tenth of that amount. 1:59:05 PM REPRESENTATIVE CLAMAN asked whether there is a companion federal "one percent for art" match that is required. MR. NEUSSL answered no, not to his knowledge. REPRESENTATIVE NEUMAN offered clarification that the sponsor statement said the two ACFs are 100 percent state funded and the M/V Tustumena is only 90 percent [federally] funded. MR. NEUSSL answered that is correct. He added that the "one percent for art" set aside is not a cost savings and the department does not pocket the saved funds back into the general fund (GF). Mr. Neussl explained that in order to stay within the funding available to award the contract for the two new ACFs, a lot of the critical equipment on board had to be listed as state furnished equipment. He noted that the state would have to come up with the aforementioned equipment, either by other funding sources or by salvaging it from a vessel that is leaving service, in order to fully outfit the two new ACFs. Mr. Neussl stated that instead of 1 percent being applied to art, the money would go for things such as radars and ridged hull inflatable boats, which are outfitting requirements for the vessels. CO-CHAIR WOOL offered his understanding that some of those things are not included in the price when listed and are essentially add-ons. MR. NEUSSL answered that is correct. He added that when the construction contract was negotiated and awarded for $101 million dollars, there were many items listed that would be state furnished equipment. He said that the state-furnished equipment would need to be provided outside of the contract. Mr. Neussl offered to provide the committee with the list of state funded equipment. CO-CHAIR WOOL offered his understanding that the $101 million is the 1 percent state obligation and "the other items are ... extras ..." MR. NEUSSL explained that Alaska Statue requires 1 percent on top of the $101 million awarded for the vessel construction cost. He added that the contract was awarded to Vigor Industrial LLC. at the shipyard in Ketchikan. He said that some of the equipment he mentioned earlier, such as the boats, the radars, and some of the heating, ventilation, and air conditioning (HVAC) equipment, is not funded in the construction contract. He noted that technically the aforementioned equipment is not under the "one percent for art" requirement. 2:01:58 PM REPRESENTATIVE DRUMMOND shared her understanding that the items in discussion are mostly movable items, like furniture, that would not normally be included in construction cost. She inquired why the ACFs are totally state funded and why the state did not ask for the federal share. MR. NEUSSL replied that there is a long history behind that reasoning. He explained that there was a desire to direct the project to Ketchikan, and with a federally aided project, the department would have no discretion of where the ACF project would be steered. Mr. Neussl noted that the department did an innovative procurement for the ACFs called a construction manager/general contractor (CM/GC) process where the state competed for a shipyard to be that CM/GC, then negotiated a best price with that firm directly, instead of bidding it out like on normal projects. 2:03:19 PM CO-CHAIR WOOL announced that HB 117 was held over.