CS FOR SENATE BILL NO. 59(CRA) "An Act relating to awards of federal funds to municipalities for road projects; and providing for an effective date." This was the second hearing for this bill in the Senate Finance Committee. MARY JACKSON, Staff to Senator John Torgerson, the bill's sponsor, informed the Committee that this bill would establish a new program that would direct approximately $20 million in non-National Highway System (NHS) federal transportation funds annually to municipalities rather than to State agencies. She continued that the proposal specifies an annual limit of $3 million be allotted per municipality; that the recipient municipality must possess the power and authority to use the funds to construct roads; and that the municipality must provide matching funds as detailed in the bill's fiscal note. She explained that the focus of the bill is to provide municipalities with the ability to expedite road construction projects within their boundaries, and furthermore, she stressed, the State would save approximately $1.5 million in general funds because the municipality, rather than the State, would provide the required matching funds. TIM ROGERS, Legislative Program Coordinator, Municipality of Anchorage, testified via teleconference from Anchorage to voice support for this legislation as it would enable the City to undertake ownership of seven identified road projects. He noted that only one of these projects is under the current program threshold of $350,000 and that the average project ranges between $4 million and $5 million with a total cost for all seven projects being $30 million. He urged the Committee to consider elevating the threshold level to allow Anchorage the ability to assume responsibility for these road projects. JEFF OTTESEN, Statewide Planning Chief, Division of Statewide Planning, Department of Transportation and Public Facilities asserted that current practice allows funding to be appropriated to local governments through the Statewide Transportation Improvement Program (STIP) that annually provides approximately $75 million to local road projects. Mr. Ottesen continued that while the alternate funding process proposed in this bill would allow local governments to execute road projects and administer funds on a local level, he contended that the technicalities of the federal aid process are extremely complex. He declared that Department "staff have spent their entire careers learning how to work within those rules, they undergo constant training and re-training to stay abreast of the changes in those rules. It is not a trivial body of knowledge they that have to work within and to assume that local officials, already immersed in their day-to-day routines and responsibilities of local government, can automatically just step in and learn all this is our worry." He showed the Committee a large manual that contains overviews of the federal program, and he stated that a multitude of similar manuals would be required reading. Mr. Ottesen stressed that this federal aid is a reimbursement program rather than a grant program as incorrectly perceived by many people. He expressed that communities would be required to "float the cash" for a project in adherence to federal rules and regulations, and then request reimbursement for the expenditures. He asserted that, if the project were determined to be non- compliant with the federal regulations, the money would not be forthcoming. He reiterated the difficulties associated with the process. Mr. Ottesen informed the Committee that, in addition to receiving regular STIP funding, some communities, including Anchorage, receive additional STIP funding that is available to support administrative expenses. Mr. Ottesen stressed that, were this legislation enacted, the local community projects would continually require State involvement. He stressed that in a situation where a local project fails to comply with federal rules and "gets into financial trouble," the State would be required "to bail them out" because the State is "obligated under the relationship with the Federal Highways Administration (FHA) to take that responsibility." Mr. Ottesen furthered that because the Department is ultimately responsible for this funding, the "management of these projects would require a high level of oversight by DOT staff." He detailed the multitude of procedures and documentation mandated by the FHA that the communities would be required to perform in order to receive the federal aid. He stated, "that the technical realities of the legislation are sobering." Mr. Ottesen pointed out that, although it is separate federal st legislation, the Transportation Equity Act for the 21 Century (TEA-21), identified many transportation projects for communities in the State; however because of the complexity of the federal guidelines, the risks that would be assumed, and the multitude of procedural requirements, only one has been pursued by local governments. He commented that the federal requirements of this legislation would be similar. Co-Chair Kelly asked the Municipality of Anchorage representative to respond to the Department's position that the technicalities of this endeavor are too much for a local government to undertake. Mr. Rogers informed the Committee that the program proposed by this legislation is optional rather than mandatory, and he reiterated that this legislation would provide communities with the ability to further their priority road projects. He countered that the Municipality of Anchorage does not perceive the federal regulations and requirements to be an issue, and he attested that Anchorage and other municipalities in the State are capable of handling the projects independently from the State. Amendment #2: This amendment raises the maximum amount of federal highway funds awarded to a single municipality from $3 million to $7 million per year. Co-Chair Donley moved for adoption of Amendment #2. Senator Austerman objected. He voiced concern that raising the award level might be beneficial to large communities such as Anchorage that have big projects; however, because the funds are limited, raising the level would reduce the funding amount available for other communities' projects. Senator Green voiced that, to address Senator Austerman's concern, the Committee should consider increasing the total amount of available funding. Ms. Jackson verified that federal funds could be available to provide for an elevated level. Senator Green asserted that increasing the total amount of funding awarded would be beneficial because there are multiple levels of funding needs in the State. Senator Green moved to amendment the amendment to increase the total amount awarded in a fiscal year from $20 million to $40 million, and increases the maximum amount of federal highway funds awarded to a single municipality to $6 million per year. Co-Chair Kelly objected then removed his objection. Senator Hoffman asked the sponsor's representative to comment on what he (Senator Hoffman) characterized as "double-dipping;" whereby some municipalities, such as Anchorage with its AMATS Anchorage Metropolitan Area Transportation Study (AMATS) program, receive transportation funding from multiple sources. Ms. Jackson responded that she "heard that and noted it, and frankly I was a little surprised to hear it because the Department would have the authority to establish the regulations for the program" to ensure against such double-dipping. Senator Hoffman asked whether this "would be the intent of the sponsor." Ms. Jackson replied, "Certainly." A roll call was taken on the motion to amend the amendment. IN FAVOR: Senator Ward, Senator Green OPPOSED: Senator Wilken, Senator Austerman, Senator Hoffman, Senator Leman, Senator Olson, Co-Chair Donley, Co-Chair Kelly The motion FAILED (7-2) The amendment FAILED to be amended. Co-Chair Kelly announced that Amendment #2 is before the Committee. Co-Chair Donley avowed that the AMATS program that was incorporated under the Municipal Planning Organizations (MPOs) program initiated by TEA-21 "has been a curse" to Anchorage and other nation-wide metropolitan areas nationwide that have populations exceeding 200,000, because completion of the various components required by the study, particularly the major investment study, is tedious. He stated that because of AMATS, the federal STIP program has "intentionally discriminated" against Anchorage for many years and has resulted in less funding being provided to the City because roads could not be constructed without a completed study. Co-Chair Donley stated that because most of the projects in Anchorage exceed $7 million, this amendment would allow Anchorage to participate in receiving some of the funding proposed in this legislation. He contended that with 42 percent of the State's population, Anchorage would be entitled to $8.4 million if the distribution of funds were determined on a per capita basis. He asserted that the Municipality of Anchorage expends "more per capita for road maintenance than any other community in the State." He argued that to limit the allotment per community to $3 million would be "really unfair to the people of the Anchorage community," as it makes it difficult for the community to access the money. Senator Wilken reminded the Committee that in previous hearings, a $10 million maximum per community was discussed, and he asked the witness how the sponsor views that level of funding. Ms. Jackson advised that Senator Torgerson would not support an amendment that would substantially increase the funding level. She contended that numerous communities in the State might have projects in the $7 million range; however, she stressed, the goal is to distribute the money around the State. She stated that, "the practical application would be to break a project into components" to fit within the specified levels of the bill. A roll call was taken on the motion. IN FAVOR: Senator Leman, Senator Ward, Co-Chair Donley, Co-Chair Kelly OPPOSED: Senator Wilken, Senator Austerman, Senator Green, Senator Hoffman, Senator Olson The motion FAILED (4-5) Amendment #2 FAILED to be adopted. Amendment #3: This amendment changes the bill's effective date to July 1, 2002. Senator Leman moved for adoption of Amendment #3. Without objection, Amendment #3 was ADOPTED. Senator Ward made a motion to report "committee substitute for Senate Bill Number 59 out of committee with individual recommendations, as amended, and accompanying notes." Co-Chair Donley objected. He stated that this bill "perpetuates a decade of unfair, unreasonable discrimination against the road needs of the Anchorage Bowl, and that the rest of the State has benefited by the shortchanging of the Anchorage community through the STIP and the unreasonable redistribution of that money to the rest of the State, with promise after promise that eventually the money would be coming to our community to deal with the problems that we have with just basic traffic." He continued that the State receives most of its revenue from motor fuel taxes and licensing fees from Anchorage's residents, who comprise 42 percent of the State's population, and he contended that Anchorage residents are entitled to some funding. He stated that the criteria for this distribution is biased against any urban area and has resulted in "severe discrimination" against the Anchorage community. Senator Hoffman also objected. He stated that although this bill might be well-intentioned, the problems that communities would have in adhering to the federal regulations and guidelines, as identified by the Department of Transportation and Public Facilities, would prevent the majority of small rural areas from accessing this funding because they do not have the necessary expertise or capability to participate in this program. A roll call was taken on the motion. IN FAVOR: Senator Green, Senator Austerman, Senator Olson, Senator Wilken, Senator Ward, Senator Leman, Co-Chair Kelly OPPOSED: Co-Chair Donley, Senator Hoffman The motion PASSED (7-2) CS SB 59(FIN) was REPORTED from Committee with a new Department of Transportation and Public Facilities zero fiscal note, dated April 23, 2002. At EASE 6:02 PM / 6:05 PM