SENATE BILL NO. 249 "An Act establishing the Alaska capstone avionics revolving loan fund and relating to the fund; and providing for an effective date." Co-Chair Stedman introduced the initial hearing for SB 249, sponsored by the Governor. FRANK RICHARDS, DEPUTY COMMISSIONER OF HIGHWAYS & PUBLIC FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, explained that SB 249 would create the Alaska Capstone Avionics Revolving Loan Fund within the Department of Commerce, Community and Economic Development (DCCED). The purpose of the project is to increase the safety of aviation transportation within Alaska by providing low interest loans for the purchase and installation of Capstone avionics equipment. Capstone avionics is the next generation of technology and will improve both flight safety and community access in Alaska. The technology is called "Automatic Dependent Surveillance-Broadcast" (ADS-B) and allows equipped aircraft to interact with ground infrastructure and satellite stations to provide pilots with essential information, including: exact location, airspeed, rate of accent and descent, surrounding terrain, other aircraft and real time weather. The Federal Aviation Administration (FAA) sponsored the technology and tested it in rural Alaska. Mr. Richards stressed that the aircraft equipped with the new avionics experienced a 47% reduction in accidents and a 33% reduction in fatalities. He said FAA wants to expand this technology statewide and has funding to build the necessary infrastructure. The FAA has determined that over 4,000 aircraft need to be equipped with the avionics. Senate Bill 249 creates a low-interest loan program through DCCED for aircraft owners unable to shoulder the initial purchase cost out-of-pocket. He emphasized that the Department of Transportation and Public Facilities supports SB 249. 9:13:43 AM GREG WINEGAR, DIRECTOR, DIVISION OF INVESTMENTS, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, described the loan program. He explained that the Division of Investments has been administering state loan programs since the early 1970s and has experience, expertise and loan related infrastructure in place to successfully operate the program proposed by SB 249. Many of the provisions contained in the bill were patterned after other programs administered by the Division. Mr. Winegar explained that the loan fund would allow aircraft owners who log a substantial number of flight hours in Alaska to purchase and install the necessary Capstone avionics. The program would be set up as a revolving fund. Repayments into the fund would finance loans to additional participants and the operating costs of the program. Mr. Winegar said SB 249 stipulates that the program can loan up to 80% of the cost to purchase and install the avionics, the interest rate cannot be less than four percent, and the term may not exceed ten years. He described an average loan for the program of $12,000, which would mean payments of approximately $122 each month or $1480 annually. The Division's goal was to provide loan terms that resulted in a manageable repayment plan for aircraft owners, while providing sufficient cash flow to cover expenses, provide loans to future participants, and return capital to the General Fund (GF). Mr. Winegar referred to the fiscal note, which capitalizes the loan fund with a $4.8 million appropriation. The amount would allow the Division to provide approximately 400 loans during the first year and around 60 additional loans each year thereafter. The program would sunset in 2020, at which time the money in the fund as well as all future earnings would revert back to the GF. Senate Bill 249 requests two positions, one loan officer and one loan closer to handle the increased workload; however, the positions would be filled only if loan demands required them. The Division plans to absorb accounting-related work. 9:15:29 AM Senator Olson wondered if the State would save search and rescue money that would not be needed because of the new technology. Mr. Richards thought there would be savings. 9:16:13 AM Senator Thomas noticed that the fund would be available to individuals, corporations, limited liability partnerships, and so on. He understood the cost to equip an aircraft would be in the range of $15,000 to $25,000 and wondered if this was for small planes and small carriers rather than large planes. 9:17:01 AM Mr. Winegar answered that the loan program is set up for commercial operators to have access to the funds. Senator Thomas was concerned that the funds in the program would be available to larger carriers that would be more able to afford the avionics. Mr. Winegar replied that the loan is first-come, first-served, and would be for commercial carriers or individual, private pilots. 9:18:27 AM Senator Elton wondered if the loan fund would be accessible to people who have already installed the Capstone avionics and are paying off a loan at a higher percentage rate. Mr. Richards thought that would be determined through regulations. In other programs, most loans are set up for new loans, although there are provisions to pay off interim financing. Senator Elton wondered if the loan would be available to non-Alaskan residents, such as a big game guide who resides in another state. Mr. Richards responded that eligibility relates not to residency but to the number of flight hours logged in Alaska. The number of flight hours required would be determined by regulation. Senator Elton wondered what "substantial percentage" of flight hours in the state meant. Mr. Richards guessed the number would be 90%. 9:20:27 AM Mr. Winegar explained that there are about 10,000 aircraft in Alaska, of which 6,500-7,000 are operable. FAA chose 4,000 as the number of aircraft that they felt needed to be equipped because those aircraft represented around 90% of the flight hours logged in the state. Senator Elton referred to the provision regarding the loan term of ten years and wondered if it were possible to extend the term of the loan. Mr. Richards replied that there is some flexibility. 9:23:21 AM MIKE STEDMAN, DIRECTOR OF OPERATIONS, WINGS OF ALASKA; VICE- PRESIDENT, ALASKA AIR CARRRIERS ASSOCIATION, testified in support of 249. He spoke as a pilot with thirty years of experience in Alaska. He piloted 24 of those years without Capstone avionics. He described the safety benefits of having an aircraft equipped with the avionics. Before Capstone was available, there was an accident approximately every 29 days in the Yukon-Kuskokwim Delta. More recently, there was a 29 month period between accidents. Capstone enhances situational awareness substantially. He emphasized the importance of real time weather information. Wings of Alaska currently has 12 airplanes with the equipment and the pilots fully embrace it. 9:26:25 AM Mr. Stedman demonstrated what a pilot sees in an airplane equipped with Capstone avionics. He projected onto a drop screen in the Committee room what currently operating aircraft could see. Green, moving diamonds showed the position of aircraft in the area. The program gave identification, altitude, and relative position of the different aircraft. 9:30:45 AM Co-Chair Stedman asked if there had been a decrease in accidents and fatalities in other areas around the state. Mr. Stedman said generally yes, although data is still being collected. Co-Chair Stedman asked if the industry supports the amount of allocation and the time frame recommended by SB 249. Mr. Stedman thought the proposed revolving loan program is a good start. He explained that Alaska would need to equip 4,000 within five years to get the full funding from FAA. Senator Thomas wondered if the appropriation were sufficient to cover equipping 4,000 planes. Mr. Stedman answered that the amount would cover approximately 90 airplanes the first year. Over the five years the amount would be around $34 million to equip 4,000 planes. Co-Chair Stedman asked for an overview of the federal government's participation. Mr. Stedman replied that the federal government has committed $497 million to this point and if Alaska does not equip 4,000 planes, $187 million of that will be lost. 9:33:19 AM JERE HAYSLETT, PROJECT MANAGER, SURVEILLANCE BROADCAST SERVICES AND CAPSTONE PROGRAM, FAA (TESTIFIED VIA TELECONFERENCE), clarified that FAA currently has a commitment of $493 million for infrastructure. If the 4,000 aircraft are not equipped in five years, FAA would only commit to $306 million. 9:34:51 AM Senator Olson wondered how far off shore the Capstone coverage went. Mr. Stedman thought it went around 30 miles, although it depends on the altitude of the aircraft. Senator Olson asked how rapidly the data is updated. Mr. Stedman replied that the information is real time. Senator Olson wondered what kind of commitment has been secured from the general aviation community. Mr. Stedman said the Alaska Airmen's Association has conducted a survey to see how many aircraft owners would equip their planes and how much they would be willing to pay for it. There is general support. Senator Elton asked if the Air Carriers Association had a position regarding whether re-financing should be available for aircraft that already have the system, or should the priority be to add equipment to additional aircraft that have none. Mr. Stedman thought that the more airplanes equipped the better. 9:38:51 AM Senator Olson pointed out that he did not see letters of support from the Alaska Airmen's Association and wondered if the program would be more attractive if the loan structure was better. Mr. Stedman thought it would be difficult to equip 4,000 air planes within five years and any incentive to help the general aviation pilot would help immensely. 9:40:13 AM Senator Dyson realized how prohibitive it was for general aviation pilots to carry insurance, and wondered if insurance carriers would drop rates for aircraft equipped with avionics. Mr. Stedman thought that as the accident rate went down, premiums would go down as well. Senator Dyson asked if the insurance carriers would only respond to the accident rate. Mr. Stedman did not know. 9:41:44 AM LEONARD KIRK, UNIVERSITY OF ALASKA (TESTIFIED VIA TELECONFERENCE), spoke in support of SB 249. He said the University of Alaska (UA) has been part of the safety evaluation of the Capstone system in the Yukon-Kuskoskwim Delta. The University has also been involved in pilot training. Mr. Kirk answered Senator Olson's question about how far ADS-B reaches: approximately 120 nautical miles line-of- sight. A ground-based transceiver located at Sitka could see an aircraft 120 miles out over the ocean. He said the information is updated every second. WILFRED RYAN, ALASKA AIR CARRIERS ASSOCIATION (TESTIFIED VIA TELECONFERENCE), spoke in favor of HB 249 and gave further answers to Committee members' questions. Regarding Senator Elton's question about the position of the Association on refinancing, he said the official position is that operators should have the opportunity to refinance their equipment. He added that the Alaska Airmen's Association does support the program fully. He said there has been approximately a 20% reduction in insurance rates since the program's inception. 9:46:15 AM Mr. Ryan said Alaska has been on the forefront with research and development for the ADS-B program. Currently Alaska is competing against the rest of the nation in receiving ground-based transceivers. Mr. Ryan gave testimony in support of SB 249, representing the Alaska Air Carriers Association, the Alaska Airmen's Association and the Alaska Aviation Safety Foundation. These groups represent nearly all commercial and general aviation constituents in Alaska. Because more than 90% of Alaska is accessible only by air, Alaska has the highest aviation accident rate in the nation. The expedited state-wide implementation of proven Capstone safety technologies is essential for the future of flying safety. During a ten year period from 1997 to 2006, there were 124 fatal aviation crashes in Alaska. Many of these pilots were mid-career. The National Institute for Occupational Safety and Health has determined that based on their annual salaries, the total loss in earnings exceeded $226 million. 9:49:41 AM Mr. Ryan noted that the five-year plan includes 4,000 Alaskan-based aircraft, approximately 1,000 commercial aircraft and 3,000 general aviation aircraft. The safety incentive program will enable Alaskan operators to install the safety equipment. Once implemented statewide, FAA anticipates a 33% reduction in fatal accidents, more effective search and rescue operations, and a public benefit of approximately $824 million over the next 27 years. 9:51:34 AM Senator Olson asked if Mr. Ryan could think of any other incentives the State could use to entice people to use the program. Mr. Ryan thought it would be extremely challenging to bring the general aviation group into the incentive program. Research has indicated that the population is only willing to spend about $2,500 each to equip their airplane, and the avionics package costs about $12,000. Alaska Airmen's Association currently has about 180 people interested in the program, but feel it would be difficult to attract 3,000 equippers from the general aviation group unless there is financial incentive. 9:52:44 AM PUBLIC TESTIMONY CLOSED. Co-Chair Stedman reminded the Committee that the implementation of SB 249 would open up another fund. He wanted to critically look at the $120,000 for travel and supplies in the fiscal note. SB 249 was HEARD and HELD in Committee for further consideration. AT EASE 9:54:15 AM RECONVENE 10:04:05 AM