SB 271-MARINE AND RAIL TRANSPORTATION AUTHORITY  CHAIRMAN COWDERY informed members that the Senate Transportation Committee held several hearings on SB 271 and amended it to remove the Alaska Railroad Corporation (ARRC). He pointed out the amendment did not get incorporated into the current version. CHAIRMAN TAYLOR informed members that is why the committee has a work draft before it, labeled Utermohle 4/19/02 (Version C). He asked for a motion to adopt that work draft in lieu of the original bill. SENATOR COWDERY so moved. CHAIRMAN TAYLOR announced that without objection, Version C was adopted as the working draft of the committee. He then asked Senator Ward to testify. SENATOR JERRY WARD, sponsor of SB 271, told members that Version C creates an Alaska Marine Highway Authority with all of the powers of an authority. A companion piece of legislation, SJR 32, addresses the fact that the authority will operate on dedicated funds. The authority is modeled after many other authorities in the "Lower 48." The authority will be given 500,000 acres of state land. He believes the Alaska Marine Highway System (AMHS) has not been on the same footing as the Alaska Railroad Corporation, which would be have operated at a loss for the last eight years without a land base. When the AMHS was formed in 1963, it did not receive a land base. After several attempts to fund the AMHS through endowments and various sources, the funds have been depleted so that agency now receives a decreasing amount of general fund monies each year. SENATOR WARD drew members' attention to a letter from Commissioner Pat Pourchot of the Department of Natural Resources, who said that giving 500,000 acres to the authority will divert a significant revenue stream out of the general fund. Senator Ward submitted that if a half-million acres was generating a significant revenue stream, this legislation would not be necessary. The state has 103 million acres of land that are not being developed; if the Alaska Railroad Corporation had that land, everybody would be working for it. He asked members to consider passage of this legislation to remove 500,000 acres of state land from state control and put it into an authority so that the AMHS can eventually become self-sufficient. He added that the AMHS will not become self-sufficient from day one; it will still need general funds or CBR funds. He said he believes the AMHS is every bit if not more important than the Alaska Railroad. Senator Ward informed members that SB 271 is very similar to legislation introduced in the past by former Senator Lloyd Jones and Chairman Taylor, except that SB 271 gives a land base to the authority. SENATOR THERRIAULT asked if the land would be located around AMHS operations as the railroad land is located along the railroad corridor. SENATOR WARD clarified that ARRC's land base is not located around the railroad corridor. Some of the land was transferred in 1983 upon the sale of the railroad, but about 40,000 acres is also available that has nothing to do with the operation of the railroad. He said he does not care where the state land is located because there is no Alaska land that is not valuable. He said he hopes it is land that could be logged right away so that the AMHS could begin to supplement its operations. SENATOR COWDERY asked if a high percentage of ARRC's profits come from its landholdings rather than from hauling freight. SENATOR WARD said that is the way it should be because when the railroad was built across the Lower 48, it was given every other section of land to supplement the operation of the railroad. He stated: Even though they're not under the Executive Budget Act, that $10 to $11 million per year - that generates the $5 to $6 million worth of profit that they show every year on their books. Without that they would be here asking for a general fund draw, such as we have now put the position of the Marine Highway having to do. It just seems logical to me if it's good enough for the railroad, it's good enough for the Marine Highway System. SENATOR ELLIS asked if the Southeast Conference opposes SB 271. SENATOR WARD said he believes that is correct and that they want to leave it as a "line-item agency." He said that is why he referred to Commissioner Pourchot's letter. The flaw in the system is that the 103 million acres owned by the state is not generating any revenue, which is why the commissioner's statement is incorrect. SENATOR ELLIS asked why the Southeast Conference is opposed to the bill. CHAIRMAN TAYLOR clarified the Southeast Conference has indicated it will be putting a group together to study the concepts of an authority and to see what other states have done. The Conference was not sure if SB 271 is the best design. At times in the past, it has strongly supported an authority without a land grant. SENATOR WARD added the Conference said it does not want to go against the Administration's opposition at this time. CHAIRMAN TAYLOR took public testimony. MS. CAROL CARROLL, Department of Natural Resources, said DNR opposes SB 271 for the following reasons that focus on Section 25, which provides 500,000 acres to the fund. · State land should be managed for the benefit of all Alaskans and the legislature should appropriate revenue from state lands rather than appropriate the land itself. DNR currently manages state land to benefit all Alaskans and makes quite a bit of money doing so. While the state owns more than 100 million acres, DNR has a limited amount of land that can generate revenue. Most of that land has oil and gas deposits. · Transferring land from DNR management to other state agencies does not necessarily lead to increased revenue production to the state. Most of the ability to generate revenue from state land is a function of either world markets for resources, the price of oil or minerals, or having the staff needed to make land available for sale or lease. · Simply transferring land from DNR to the fund will not alone generate more revenue. The bill will be expensive to implement. Any potential increase in the revenue must be weighed against the significant costs required to identify and transfer large acreage from the land from one agency to another and the long term costs to establish another state land management agency that duplicates DNR. The agency will duplicate DNR's functions. The land transfers will cost over $15 million with most of that cost being for land surveys required to transfer land from DNR to the authority. · SB 271 will further complicate land ownership in Alaska making resource development and public access more difficult. It would also compound the difficulty in resolving the current school grant lands litigation or in providing additional lands to the University of Alaska as the fund will no doubt select lands that will be most suitable for a legal settlement if the state is required to transfer land to the University or to reconstitute the school trust or land trust. MS. CARROLL said a staff person from the Division of Lands was available via teleconference to answer specific questions. CHAIRMAN TAYLOR asked if DNR actively opposed the conveyance of 250,000 acres of state land to the University of Alaska. MS. CARROLL said that is correct. CHAIRMAN TAYLOR asked if DNR also actively opposed the conveyance of lands to Alaska's schools and that litigation on that action is pending. MS. CARROLL said she does not know that DNR actively disagreed with the transfer of the land under the public school land. She said she believes DNR is currently undergoing a process to value that land. CHAIRMAN TAYLOR responded: In fact it was the Department of Natural Resources that, back about 25 years ago, that stole all the land away from the Mental Health Trust and we got sued over that one and that cost us - it could have cost us several billions of dollars. In fact what did we do to solve the mental health litigation? We gave them land back, didn't we? And it was land that was given back very reluctantly, I might add, by the Department of Natural Resources who had done such a poor job of managing it that there were not funds available off of that management - giving away lands, selling lands, locking lands up into parks that were designed to be forests and to provide revenue. Sadly it was your department again that put us in that position and we ended up with 3500 families in this state who had purchased land and built houses on it only to find out that it was mental health land that had been conveyed by the Department of Natural Resources in violation of the Mental Health Trust. All of those things are historical things that I think you and I both agree on were probably not the best decisions made in land management by the Department of Natural Resources so when I hear your comment that the Department of Natural Resources must manage for all of the people in the state, I have a hard time conceiving that anybody in their right mind would ever turn over any land to the Department of Natural Resources to manage in light of the track record over there. But that's only a comment on my part. CHAIRMAN TAYLOR then thanked Ms. Carroll for coming forward and said he was not sure that he favored giving an authority 500,000 acres because although he can't imagine a group that could manage it worse than the department, an authority might come close. He then asked Mr. Doll to testify. MR. BOB DOLL, Regional Director for the Southeast Region of the Department of Transportation and Public Facilities (DOTPF), informed members that DOTPF does not support SB 271 for several reasons. First, there is the uncertainty associated with the sale of the land and the amount of revenue it would produce. Second, SB 271 creates a separate authority to perform the function now being performed by the department. TAPE 02-27, SIDE B MR. DOLL said that would be a regressive step regarding the system's ability to respond to public concerns and to general operations. Third, it creates an anomalous position for the marine highway authority with regard to approaching the topic of federal funding for transportation projects in the state. If DOTPF has no responsibility for operating the system and the results obtained, its ability to make an appeal for and gain approval of expenditure of federal funds for transportation on marine highway topics would be impaired. Finally, SB 271 requires a constitutional amendment to set up the fund, which will require a great deal of effort for an administrative change that is within the capability of both the executive and legislative branches of government. There being no further questions or testimony, SENATOR COWDERY moved CSSB 271(TRA) from committee with its accompanying fiscal note and individual recommendations. SENATOR ELLIS objected. The motion to move CSSB 271(TRA) from committee carried with Senators Cowdery, Therriault and Taylor voting in favor, and Senator Ellis voting against.