SENATE BILL NO. 129 "An Act relating to the Alaska marine highway system vessel, M/V Malaspina; and providing for an effective date." This was the first hearing for this bill, which was sponsored by the Senate Finance Committee. Co-Chair John Torgerson said he reviewed the legislation with Captain Doll of the Marine Highway System over the weekend and had concerns with the capital improvements fund provisions. He detailed the language deletions he felt should be made. He wanted a correction made to ensure that capital improvements were made through the regular capital budget process. Tape: SFC - 99 #96, Side B 9:51 AM Senator Sean Parnell asked for an explanation of the purpose of the bill. Co-Chair John Torgerson said it was to set up a separate accounting for the M/V Malaspina. It would direct the department to maintain the gross revenues generated by that ferry separately. An underlying reason was the intent of the Legislature to continue to subsidize the M/V Malaspina in its dayboat operation. That was clear in the original legislation that established the route and this bill would lay the groundwork. He noted language that allowed the Legislature to continue to appropriate funds if it desired. There was front section language in the FY00 Operating Budget bill that would relate to this. Senator Sean Parnell moved to amend page 1 line 12 and page 2 line 7 to delete the language relating to capital improvements. The amendment would direct the bill drafters to reword the language in an appropriate manner. There was no objection and it was ordered. ROBERT DOLL, General Manager, Ferry Operations, Department of Transportation and Public Facilities, testified to the bill. He spoke of the intensive discussion with the sponsor to clarify the language. The bill would segregate the revenue generated by the M/V Malaspina and direct the department to use those funds to operate the vessel. The department estimated expenditures of $3,900,000 for the upcoming summer season. Revenues were estimated at $3,057,000. The $33,000 difference was close enough that the department could manage the ship and ensure its operation. The amendment continued the current practice of allowing the department to make annual maintenance repairs on the vessel using capital funds. He explained that the extent of repairs was never known until the ship was dry-docked and examined. That annual process had always been addressed using a single capital appropriation. Senator Loren Leman noted that under this the ferry would not be operating in the black. Robert Doll agreed that the $33,000 difference would be a separate allocation. This was due in part to the expected higher maintenance costs this year. He speculated that the route would generate surplus revenue once it reached its full schedule of operation. Senator Loren Leman wanted to know if it would become closest ferry in the system to breaking even. Robert Doll said the M/V Columbia was the first, the M/V Malaspina was second. Both ferries operated in high revenue segments. Senator Gary Wilken asked how Captain Doll felt about the sponsor statement. He read, "we are sending a strong message that the Legislature does not intend to subsidize the operation of dayboats." Robert Doll commented that it was an ambitious statement that the department would be working towards in the long term. He discussed the different routes and the expected revenue they could generate in relation to the cost of operation. Senator Sean Parnell offered a motion to moved SB 129 as amended from committee. Senator Al Adams objected. He felt this legislation would set poor precedent in the establishment of separate accounting systems for certain services. He felt this was micro-management. He stressed that the Marine Highway System was Southeast Alaska's highway. He wondered if the intent was to someday micro- manage other highways in rural areas of the state. Co-Chair John Torgerson noted the M/V Malaspina was supposed to have been surplused with the launch of the M/V Kennicott. This expanded the service. It was his intent for the marine transportation system to break even. The system of separate accounting would help ensure that. Senator Loren Leman wanted to know about overhead costs such as administration and the reservation system and if those costs would be broken out of the program. Co-Chair John Torgerson said that if those costs were charged to the M/V Malaspina, the department could not afford to operate the ferry. Therefore, those costs would not be accounted for under the bill. The bill was reported from committee by a vote of 7-1-1. Senator Al Adams cast the nay vote and Senator Randy Phillips was absent.