SENATE BILL 50 Act making appropriations for capital projects; and providing for an effective date. FRANK TURPIN, Commissioner, Dept. of Transportation and Public Facilities, and KEITH GERKEN, Deputy Commissioner, Dept. of Transportation and Public Facilities, came before committee. (Senator Kelly arrived at the meeting at this time.) The Commissioner directed attention to a handout (Attachment A) which he advised contains a collection of information included within the department's six-year plan. Mr. Gerken explained that the first tabulation and accompanying pie chart demonstrates the composition of the department budget by fund type for the current year and six years hence. The capital budget for DOTPF is predominantly funded by federal dollars with a general fund match. The assumption is that the department will be given obligation authority equal to amounts in ISTEA legislation. Airport improvement funds are fairly constant. Federal legislation has been renewed for another year. IARF (International Airport Revenue Funds) are based upon the six-year plan. Amounts set forth for general funds are based on an assumption that need would continue at approximately the same level. Directing attention to page 7 of the handout, Mr. Gerken explained that it demonstrates distribution of the FY 94 capital budget by fund type and function. Mr. Gerken cautioned that the appropriation proposed by the Governor does not necessarily reflect the actual spending plan for a given year. He spoke specifically to what appears to be a great amount of funding for the central region. That perception is partially due to the fact that Anchorage has had a federal planning process for a number of years. AMATS thus had a plan in place, and that plan was incorporated in the FY 94 request. The fact that other boroughs did not have similar ongoing planning efforts appears to inflate numbers for the AMATS area. The department will be amending the Governor's request to include projects for other boroughs that are now in the process of establishing priorities. That will change the distribution of funds. Mr. Gerken stressed that the department annually requests an appropriation to cover both projects it expects to be obligated in a given year as well as alternates. Alternates can then be substituted for projects that develop problems and cannot be undertaken in the current year. Alternates are also utilized in situations where the state receives more funding than planned. Directing attention to the next line graph and tabulation (pages 10 and 11), Mr. Gerken observed that they are specific to federal highway funding and show the historic level of apportionment (the amount of federal funding for Alaska) versus the initial obligation level (the number Congress provides in the budget at the beginning of the federal fiscal year). The last column lists the total obligation (commitments the department actually achieved during the fiscal year). Mr. Gerken noted that the initial obligation level has, with few exceptions, been less than the apportionment. Since 1985, Congress has struggled to keep federal expenditures down. Even though federal dollars, funded through the federal gas tax, have been collected at a rate allowing for full funding of the apportionment, spending from the trust fund is counted against the domestic spending cap. There has, therefore, been pressure at the national level to limit the amount in each budget year. Mr. Gerken further pointed to the fact that the amount the state obligates has always been "somewhat higher than the initial amount" since the state has been fortunate in getting additional funding when it is not utilized by other states. Directing attention to the projected obligation for FY 93, Mr. Gerken said that the state collected additional moneys beyond the $176.1 million shown--approximately $4 million in discretionary ferry moneys for the TUSTUMENA and $8 to $10 million in emergency money for flooding on the Haines Highway and storm damage at Nome. Mr. Gerken noted that funding for 1993 is essentially the same as 1991 (considerably below the high of 1992). The assumption for future years is that funding will reach the apportionment level. That depends upon action by Congress. There is much talk about stimulating the economy through full funding of the federal highway program. The chart on page 13 demonstrates the three elements of federal highway funding under ISTEA: 1. 50% for improvements to the existing core system. 2. 35% for boroughs for local roads. 3. 15% for expansion of the transportation system. Charts set forth on pages 16 and 17 show a breakdown of ISTEA funding for boroughs. Mr. Gerken noted that boroughs have ability to spend transportation enhancement dollars, safety funds, and air quality dollars as well as bridge and planning moneys. Most of the funding to be allocated to boroughs under ISTEA is yet to be prioritized and requested by the boroughs. The department continues to work with the Alaska Municipal League committee on criteria for competitive funding. The tabulation on page 21 demonstrates core system funding by region and by year. It reflects 50% of annual ISTEA funding. Mr. Gerken noted that the amount shown for Southeast appears to double from 1993 to 1999 as a result of needed work on Tongass Avenue in Ketchikan. Tongass Avenue, a core road, is in danger of collapse and will require improvements of $60 to $70 million. Mr. Gerken next directed attention to graphs and tabulations relating to airport improvement funding, which he explained would be relatively stable from FY 94 on. A small amount of funding is available for local airports as well. Legislation funding this activity was renewed for an additional year. Congress will be taking it up again in the current session. There is no great movement to make changes here. Directing attention to page 27, Mr. Gerken said that it presents a tabulation of aviation funding by region. He noted, particularly, the adjustment line and advised that the department is over programmed in the early years, but significant moneys remain "on the table" in later years. The department has begun to develop a new aviation plan. The last plan was done approximately ten years ago. Outer years have thus been kept free so that the department may later reflect the policies of the new plan. Mr. Gerken next directed attention to the final pages of the handout and noted the listing of statewide projects, those for the three regions, and Alaska Marine Highway System funding. He advised of several hundred open projects within the department's capital budget. Senator Frank asked that the department explain how the federal highway match requirement works. Mr. Gerken said that the department requests the annual general fund match as a single appropriation. The request is based on assumptions, including the full federal apportionment, additional moneys at the end of the year (discretionary moneys), and a percentage of non-participating items (right- of-way issues, etc.). Mr. Gerken further attested to savings derived from funding the match on the basis of the state fiscal year rather than the federal fiscal year. Remaining match from a prior fiscal year in taken as a credit against the computation for the current year's match. Mr. Gerken advised that the department could provide a work sheet demonstrating how the requested $23 million match for FY 94 was derived. Senator Kelly inquired regarding the workings of the vessel replacement fund. Mr. Gerken explained that moneys flow to the fund through a separate appropriation. Last year, an appropriation was made from the oil response fund. In response to an additional question from Senator Kelly, Mr. Gerken explained that questioned funding for the Alaska Marine Highway System relates to alternate projects. The department seeks as much as 50% in alternate projects against what it projects it will receive from the federal government. Commissioner Turpin added that both expected and alternate projects are presented to the legislature, and both are listed in the six-year plan. Senator Kelly directed attention to the $354,917.8 listed as federal funds under "Fund Source" information on page 7 and asked if it includes alternate projects. Mr. Gerken answered affirmatively. Review next proceeded to the list of FY 94 projects set forth on pages 30 and 31 of the handout. Mr. Gerken advised that the $5.5 million represents the general fund match for federal-aid to aviation. The $11.7 million request for refurbishment and replacement of the state equipment fleet reflects moneys from the highway working capital fund. The fund is comprised of payments made by state agencies for use of equipment. The proposed appropriation would pay for replacement of equipment that has outlived its useful life. Brief discussion followed between Co-chair Pearce, Mr. Gerken, and Commissioner Turpin regarding projects set forth in the Governor's Executive Budget document. Speaking to the $2.5 million for the corps of engineers program, Mr. Gerken explained that, for the past four years, the state has appropriated a match amount for corps projects throughout the state. Prior to going to that system, it was difficult to know which agency or community would be able to provide match money when Congress decided upon funding priorities for the corps. Department staff meets with representatives of the corps in developing the needed match amount. General funds of $550.0 for the annual planning work program relate to a $3.5 million federal highway appropriation for planning work in support of the capital budget. State moneys cover elements that are not fundable from federal dollars. The $1.5 million for statewide facilities major repair, renovation, and equipment, is an ongoing appropriation for new windows, roof repair, etc., in DOTPF facilities statewide. The $1 million for highway and aviation non-routine maintenance is an emergency fund for washed out bridges, etc. Funding covers items that are generally not significant enough to be eligible for state or federal emergency moneys. Commissioner Turpin subsequently attested to use of approximately $275.0 to repair a washed-out culvert on the Dalton Highway and $150.0 for snow and avalanche problems. Brief discussion followed between Co-chair Pearce and Commissioner Turpin regarding criteria for use of federal emergency funds. The Commissioner pointed to Haines Highway flooding and severe storm damage at Nome as examples of projects qualifying for federal emergency moneys. The magnitude of damage is what leads the state to declare a disaster and request federal moneys. The $650.0 in statewide advanced project definition funding provides for CIP engineering positions to review projects for definition prior to appropriation. Most of the department's technical staff is funded from CIP receipts rather than general funds. The $1 million for ports and harbors non-routine maintenance is similar to non-routine maintenance funding for highway and aviation projects. Last year was the first time such a request was made. The request reflects a recommendation by the harbors' task force. The $8 million for statewide compliance with the American Disabilities Act stems from impact upon both facilities and employment practices. Funding will deal with needed changes in buildings housing state agencies to accommodate disabled persons. The federal act required a preliminary assessment of state facilities. That has been accomplished. There is presently some disagreement over how much compliance will cost. The requested $8 million will, undoubtedly, not be sufficient, but it represents a "good first start" toward dealing with the issue. The $30.0 match for the U.S.G.S. digital mapping program covers state requests to the federal government for remapping of areas within Alaska. It represents good, reasonable leverage of state moneys. The $16.0 in general funds for federal transit administration grants represents a "fairly significant increase" from prior years. That is due to the increased level of transit moneys in ISTEA. Funding flows through the department to transit operators for improvements to their systems, purchase of equipment, etc. In response to a question from Senator Sharp concerning eligibility for the funding, Mr. Gerken voiced his understanding that grants would be available to "anyone who is running a publicly accessible transit program. It thus applies to municipalities, private operators, etc. The $3.5 million for DOTPF maintained facilities energy code upgrade is similar to an appropriation last year. It would allow the department to install such items as energy efficient overhead doors in shops, replace inefficient windows, upgrade heating and ventilating systems, etc. The department has identified projects with as little as one and a maximum of eight to ten year payback in operating savings. The $200.0 in other funds for the federal transit administration metropolitan planning grant reflects grants to municipalities to plan transit projects. The $80.0 shown as general funds for standards manual publishing is actually program receipts. It reflects authorization for the department to receive fees for the sale of various manuals published by the technical section of the department. Receipts continue to fund production of future manuals. The effort is essentially self-sustaining. The $250.0 from the hazardous materials response contingency fund is for cleanup of materials on department property. As dealing with hazardous materials becomes increasingly costly, the department has found that people are disposing of these materials on state property. The $200.0 for statewide surveying and engineering equipment replacement is an appropriation of CIP receipts similar to the $80.0 for the standards manual publishing. The department charges the cost of using surveying and engineering equipment to individual projects. The $500.0 for federal agency service agreements is a new appropriation which allows the department to do work for federal agencies on behalf of a capital program, if the federal agency so requests. This issue is often raised when the department is undertaking a project in an area, and a federal agency wants additional work done. The appropriation would allow the department to receive funds from the federal agency and, in turn, pay the contractor for the work. The $36.0 from the federal railroad administration for railroad planning provides for cooperative planning by the department and Alaska Railroad. The $120.0 for annual bridge inspection and inventory is general fund money that supplements federal dollars. The federal bridge inspection program is becoming more complex than in the past. That is primarily due to the condition of old bridges throughout the United States and catastrophic failures in states other than Alaska. The state is thus being required to spend more time and money on these inspections. Requested funding will allow the department to purchase additional inspection equipment. End, SFC-93 #19, Side 2 Begin, SFC-93, #21, Side 1 Brief discussion followed between Senator Kerttula and Mr. Gerken concerning statewide bridge inspections. Mr. Gerken advised that the department inspects every bridge in the system on "about a two-year frequency." Alaska is probably not in as good a position to compete for bridge dollars as Eastern states with much older bridges. In most national surveys, Alaska's bridges are near the top of the list in general sufficiency. The last statewide appropriation is $500.0 for underground fuel tank replacement. This request is in response to EPA requirements that underground tanks that do not meet new EPA standards be replaced. Half of the ten-year period allowing for replacement has elapsed. The cost of replacement is significantly greater than $500.0 a year. The department has been fortunate in that it has not encountered $1 million cleanup situations. Mr. Gerken next directed attention to projects for the Northern, Central, and Southeast regions, and noted that regional projects share common elements in their deferred maintenance requests. This is the third or fourth year that general funds have been sought for this purpose. Funding has allowed the department to clean out ditches, cut brush, and repave worn-out roads. Each region also has one or more contaminated site cleanups. Cleanup is conducted through a cooperative effort with the Dept. of Environmental Conservation to inventory and evaluate problems. All 300 airports and 78 maintenance sites have experienced many years of use and operating practices that are not up to today's standards. Mr. Gerken next spoke to the $450.0 slated for Governor's Office renovations. He noted that because of its age, the capitol building is often not conducive to present day needs. The requested funding would move some offices and provide for electrical upgrades and remodeling. Speaking to projects within the Alaska Marine Highway System, Mr. Gerken explained that the $4.5 million in general funds for AMHS improvements and overhaul reflects the same amount as requested in prior years. This type of work does not qualify for federal funds. The $6.4 million for the multi-purpose replacement vessel is part of the funding for the new ferry. It will be added to federal dollars for this effort. The $1.2 million for reservations and marketing computer upgrade would purchase a new computer system to replace the present slow, inflexible, system that does not adequately track ferry traffic. In response to a question from Senator Sharp, Mr. Gerken advised that information set forth in the department handout applies to FY 94. The $2 million for dust abatement in the Mendenhall Valley would be spent in federal FY 93. That expenditure, with the local match, is expected to solve the present unpaved road problem. Responding to a further inquiry from Senator Sharp, Mr. Gerken said that the $5 million in congestion mitigation/air quality funding would be divided between Anchorage and Fairbanks per the formula for disbursement of borough funds based on population and vehicle registration. Co-chairman Pearce advised that the meeting would be briefly recessed prior to review of projects within DOTPF headquarters as set forth in the capital budget bill (SB 50). RECESS - 10:20 A.M. RECONVENE - 10:30 A.M. Co-chair Pearce directed attention to requests listed under the statewide federal highway program commencing on page 12 of SB 50. Mr. Gerken explained that federal funding of $30.0 for the experimental features program allows for incorporation of specific technical advances into projects. These advances are experimental in nature and "not necessarily . . . known to work." The program is a method of encouraging the department to try new things. The department is required to conduct follow up for five years after incorporating an item in a project. Experimental items include such things as a new surface for bridge decks in arctic environments. The new processes are intended to save costs or improve quality. Co-chair Pearce inquired regarding flexibility in federal funding. Could the department elect not to conduct an experimental program and place funding elsewhere? Mr. Gerken explained that because projects listed under the statewide federal highway program represent allocations within an appropriation, the department can "do a revised program to move money from one place to another within the appropriation." That is generally not the result of the department changing its spending priorities but the fact that cost estimates or bids came in differently (higher or lower) then expected. Co-chair Pearce noted the mandatory nature of the $250.0 expenditure for storm water pollution control. Mr. Gerken observed that most of the items listed under the statewide federal highway program reflect "things which we are required to do at some level." He acknowledged that the level may be somewhat discretionary. Efforts relating to storm water control relate to EPA requirements that the quality of runoff be raised to a higher standard than that of today. Mr. Gerken noted that for Alaska, the standard is that of drinking water. It will be extremely difficult to achieve. Speaking to the internal review audit program, Mr. Gerken explained that the department is required to have such a program. The $215.0 funds employees within the department who conduct internal review to provide a second opinion on issues. The employees review specific projects and expenditures and conduct program audits to ensure that file materials are in proper order in accordance with state and federal regulations. The $370.0 for minority and women contractor participation funds the external DBE program for training and costs of operating the DBE system required by the federal act. The $80.0 for the national highway institute training program allows the department membership in the national organization and participation in training, when offered. The $600.0 for the statewide safety management system relates to ISTEA. That legislation requires that, in exchange for flexibility given to states, each state be more systematic in managing its facilities. Alaska is required to have a safety management system, a pavement management system, a bridge management system, a congestion management system, a transit management system, etc. The theory is that the state must have some way of identifying these elements and putting them through an inventory and prioritization process. The systems are primarily computer data bases with selection and sorting ability. As an example of usage, Mr. Gerken advised that the department could compile data in support of its plan for expenditure of federal highway safety dollars. Under ISTEA, safety represents 10% (approximately $11 million annually) of the surface transportation program. The $600.0 reflects a one- time cost for establishing the safety management system. Speaking to the $6.2 million for statewide scenic travel and transportation enhancements, Mr. Gerken noted that 10% (approximately $11 million) of ISTEA funding is to be spent on enhancements. The department does not yet know what all is entailed by this designation. Efforts to define are ongoing with municipalities, the state division of parks, and the department in concert with tourism interests, chambers of commerce, etc. The appropriation will be available for all groups to use for qualifying projects. The $1.1 for statewide research reflects another change resulting from ISTEA. The federal act places a minimum level of spending on research relating to surface transportation. The department has established a cooperative board with the University of Alaska, Fairbanks, in order to prioritize research needs. This effort is working well. The University has expanded its process to include public transportation to assist in directing expenditure of research moneys in the future. The statewide safety improvement program is similar to the enhancement program. The $4 million is a general appropriation to make use of safety projects identified by the safety management system. The $385.0 for strategic highway research program asphalt test equipment reflects funding for a research program established at the federal level, several years ago, in response to the national problem of premature failure of road surfaces. Much work has been done in reviewing efforts in Europe and looking at the chemistry and installation of asphalt. New methods require different testing equipment to determine whether the asphalt meets specifications. The above-funding would allow the state to purchase that equipment. Federal highway funds are not normally eligible for such purchases, but since Congress has placed great importance on this issue, moneys are available. The $200.0 for statewide total quality management funds a program covering value engineering and peer review processes to conduct life-cycle cost analysis to improve the quality of products. The $200.0 for U.S.G.S. flood analysis is made available each year. The U.S.G.S. does much data collection and receives moneys from a number of agencies. The federal agency provides needed information for department design of culverts, bridges, road improvements, etc. The $725.0 for statewide urban area planning will be passed through to municipalities for preparation of local transportation plans. Anchorage and Fairbanks are the two largest recipients. Discussion followed between Senator Sharp and Mr. Gerken regarding the research arrangement with the University of Alaska, Fairbanks, and purchase of asphalt test equipment. Mr. Gerken advised that one set of test equipment would be available for use by all regions and the university. Additional discussion followed between Senator Rieger and Mr. Gerken regarding use of general funds rather than 470 funds for underground fuel tank replacement. Mr. Gerken acknowledged that the department had access to 470 fund moneys for site cleanup of hazardous materials. The underground tank problem has been viewed as a state agency issue. Commissioner Turpin added that the tanks in question belong to the department. Other departments may be utilizing 470 moneys for "non-ownership tanks." The Commissioner voiced his understanding that the tank owner must sponsor the cleanup. ADJOURNMENT The meeting was adjourned at approximately 10:40 a.m.