SB 59-FEDERAL FUNDS TO MUNICIPALITIES FOR ROADS  MARY JACKSON, staff to Chairman Torgerson, introduced the bill for Chairman Torgerson, the prime sponsor. MS. JACKSON told members that SB 59 establishes a new Municipal Road Projects Program (MRPP) that directly awards up to $20 million in federal funds to municipalities for re-construction or construction projects that are eligible for federal funding. The Department of Transportation and Public Facilities is responsible for developing a project application that sets out all information that will be requested by the department. The municipality is required to provide the federal match and the project must qualify for federal funding. The municipality must comply with all federal requirements for receipt and expenditures of the funds. Municipal road projects are prioritized and higher priority is given to reconstruction projects where the municipality agrees to accept maintenance responsibility once the project is completed. The state's road maintenance costs will decrease when roads are transferred to a municipality. SENATOR PHILLIPS asked whether Anchorage supports the legislation. MS. JACKSON said there isn't anything official from the Municipality of Anchorage. SENATOR AUSTERMAN asked if the $20 million is per municipality or total. MS. JACKSON said it was the total amount awarded statewide. SENATOR AUSTERMAN thought it should be clarified because the language leaves a question in his mind. CHAIRMAN TORGERSON pointed out that ranking or prioritization is addressed on page 2. TOM BRIGHAM, Director of Statewide Planning for the Department of Transportation and Public Facilities, responded to Senator Austerman's question by saying the department interprets the language to mean there is $20 million allocated statewide. That could be one large project or several smaller ones. CHAIRMAN TORGERSON pointed out that adding the word "statewide" wouldn't preclude all the money going to one district. SENATOR PHILLIPS asked how the priorities would be set to determine where the $20 million goes. MR. BRIGHAM replied that this would constitute a piece of the community transportation program. SENATOR PHILLIPS asked if it would be like Alaska Metropolitan Area Transportation Plans (AMATS). MR. BRIGHAM said not exactly, this would be a piece of the program that goes to fund local community projects. They would develop selection criteria to prioritize community projects where communities would take ownership after the project is finished. SENATOR PHILLIPS asked what would happen if the project cost was $20 million. MR. BRIGHAM said there are a number of prioritization factors such as health and safety and quality of life. If the intent of the sponsor and legislature was to spread the amount over a number of small projects then the department would develop criteria to give points to small projects. CHAIRMAN TORGERSON said that although the probability is low, all the money could go to one project so perhaps it would be beneficial to put a cap on any one project. SENATOR AUSTERMAN was interested in assuring that all the money would not go to just one project as it did with the Whittier Tunnel.   CHAIRMAN TORGERSON suggested inserting "statewide" on page 1, line 8 after the word "awarded" as amendment #1. SENATOR AUSTERMAN moved amendment #1. SENATOR KELLY objected for the purpose of discussion asking whether they'd limited it enough.  CHAIRMAN TORGERSON said he wasn't sure they had. SENATOR KELLY said there could still be three large projects. He then removed his objection. CHAIRMAN TORGERSON agreed. SENATOR LINCOLN thought it was still confusing. She asked whether this meant that we couldn't accept any more that $20 million from the federal government. CHAIRMAN TORGERSON said that of the total given by the federal government, $20 million would be earmarked for these projects. SENATOR LINCOLN asked why the limit was $20 million. CHAIRMAN TORGERSON said he'd be happy with a larger number but wasn't sure "how you'd get from here to there." SENATOR LINCOLN pointed out that on page 2, line 2 it says the municipality must agree to match federal funds if required by federal law. CHAIRMAN TORGERSON said this isn't a give away program. He asked Mr. Brigham if there is an average cost range for community transportation programs (CTP). MR. BRIGHAM estimated they run between two and three million dollars. CHAIRMAN TORGERSON asked whether a $3 million cap should be placed on individual projects. MR. BRIGHAM responded that it would depend on the objectives but that a three-mill cap on individual projects would spread the money around. With the match requirement and the fact that large projects require more complex engineering, larger communities will be the first to apply for these projects because they have the money and the capability. Anchorage could easily use the entire $20 million in one year. If the intent is to make the funds available to a number of communities across the state then a cap is reasonable. A cap of three to four million dollars would catch about 75 percent of the projects in the state. SENATOR PHILLIPS suggested inserting "The maximum amount for any single municipality shall not exceed $3 million." on page 1, line 8, after "$20,000,000." as amendment #2. CHAIRMAN TORGERSON said amendment #2 would be held until committee members had a written copy to examine. MR. BRIGHAM wanted to say that the following concerns aren't philosophical; they have had a number of prior conversations with the Chairman and other Senators around the basic concept. They have no problem with local governments taking additional responsibility for the design and delivery of local projects. They currently have a number of small local projects and they have been prioritizing spending federal funds on local streets. He explained there's a great deal of difference between the administration of a federal and a state project. A local community can take state money and design and implement their project in the best way they are able. DOT oversight on this type of project is virtually nonexistent. Federal projects differ greatly. First, the Code of Federal Regulations must be followed on any federal project. Although small communities are frequently able to design and implement their projects, adhering to the federal environmental and right of way requirements is more that many small communities can do. DOT consequently spends much time helping these communities understand and comply with the regulations. Therefore there is project management time spent at both the local and the state level. The state is ultimately held responsible for community compliance with the federal regulations. Number 548 CHAIRMAN TORGERSON said they'd had this discussion before and he's waiting for the department to bring him written suggestions to draft an amendment. SENATOR LINCOLN asked why the oversight expenses aren't included as part of the fiscal note. MR. BRIGHAM said it's impossible to quantify exactly because it's not an out of pocket cost. It's using more money for administration and less for construction. SENATOR LINCOLN said it is difficult if a figure for additional project management isn't quantified. She suggested following up on Chairman Torgerson's request for language for an amendment. MR. BRIGHAM said that if $15-20 million in funding is moved from state administration to locally administrated projects, then that reduces some of the state administrative burden. However, there is still a great deal of state responsibility and therefore additional cost for those projects that get into trouble and need state administered oversight. The savings probably cancels the additional cost. SENATOR AUSTERMAN observed that it would be difficult to determine administrative costs because the size of the community receiving the project monies might influence whether there is additional administrative cost or not. Larger communities have more personnel and resources and would be less likely to need more state oversight. MR. BRIGHAM said that under perfect conditions, one project manager could easily handle a years worth of projects but when project problems occur effort multiplies. SENATOR LINCOLN asked what impacts, if any, this bill would have on small communities. MR. BRIGHAM said that medium to large communities generally have the capability to manage federal projects so it would be more difficult for small communities to compete. SENATOR TORGERSON said this is so unless they hire an engineering firm like the large communities do. He asked whether Anchorage has experts on the payroll that can do large federal highway projects. MR. BRIGHAM said he believes they're able to do that in house. CHAIRMAN TORGERSON pointed out that small communities do lots of projects with federal money without in house expertise. In fact they're not expected to have the expertise, they hire an engineering firm for that. MR. BRIGHAM agreed. SENATOR AUSTERMAN asked if DOT envisions the funds going through the borough or directly to the community. MR. BRIGHAM said the money certainly could go through the borough. They usually have the road powers and would be the recipient and responsible party. This makes particular sense for small communities and villages. CHAIRMAN TORGERSON asked if there were any objections to amendment #1. (Inserting "statewide" on page 1, line 8 after the word "awarded") SENATOR KELLY removed his objection. There were no other objections to amendment #1. SENATOR PHILLIPS moved amendment #2. There were no objections. SENATOR AUSTERMAN asked whether the Chair knew that municipalities paid up front then received federal reimbursement. CHAIRMAN TORGERSON said he did know that was the process. Payments are incremental on larger projects but he wasn't sure about small projects. SENATOR PHILLIPS moved CSSB 59 (STA) and fiscal note from committee with individual recommendations. There were no objections.