HOUSE TRANSPORTATION STANDING COMMITTEE March 12, 1997 1:11 p.m. MEMBERS PRESENT Representative Bill Williams, Chairman Representative Beverly Masek, Vice Chairman Representative John Cowdery Representative Bill Hudson Representative Jerry Sanders Representative Kim Elton Representative Al Kookesh MEMBERS ABSENT All members present COMMITTEE CALENDAR PRESENTATION: PORT OF BELLINGHAM *HOUSE BILL NO. 88 "An Act relating to ferries and ferry terminals, establishing the Alaska Marine Highway Authority, and relating to maintenance of state marine vessels; and providing for an effective date." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 88  SHORT TITLE: ALASKA MARINE HIGHWAY AUTHORITY SPONSOR(S): REPRESENTATIVE(S) WILLIAMS JRN-DATE JRN-PG ACTION 01/24/97 137 (H) READ THE FIRST TIME - REFERRAL(S) 01/24/97 137 (H) TRANSPORTATION, FINANCE 03/07/97 (H) TRA AT 1:00 PM CAPITOL 17 03/07/97 (H) MINUTE(TRA) 03/12/97 (H) TRA AT 1:00 PM CAPITOL 17 WITNESS REGISTER MARK ASMUNDSON, Mayor City of Bellingham City Hall 210 Lottie Street Bellingham, Washington 98225 Telephone: (907) 398-2600 POSITION STATEMENT: Presented the port of Bellingham's staff. JIM DARLING, Executive Director Port of Bellingham 625 Contiwall Avenue Bellingham, Washington 98225 Telephone: (907) 676-2500 POSITION STATEMENT: Presented the slide presentation. PETER ECKLUND, Legislative Assistant to Representative Bill Williams Alaska State Legislature Capitol Building, Room 424 Juneau, Alaska 99801 Telephone: (907) 465-3424 POSITION STATEMENT: Read the Sponsor Statement. JOE AMBROSE, Legislative Assistant to Representative Robin Taylor Alaska State Legislature Capitol Building, Room 30 Juneau, Alaska 99801 Telephone: (907) 465-4906 POSITION STATEMENT: Testified on HB 88. JOE PERKINS, Commissioner Department of Transportation and Public Facilities 3131 Channel Drive Juneau, Alaska 99801 Telephone: (907) 465-3900 POSITION STATEMENT: Testified against HB 88. MIKE MCMULLEN, Personnel Manager Division of Personnel Department of Administration P.O. Box 110201 Juneau, Alaska 99811 Telephone: (907) 465-4431 POSITION STATEMENT: Testified on HB 88. DOUG WARD, Project Manager Alaska Ship and Dry Dock P.O. Box 7552 Ketchikan, Alaska 99901 Telephone: (907) 225-7199 POSITION STATEMENT: Testified on HB 88. JOHN RITTERBACH, Purser M/V Matanuska 1325 Peyton Place Ketchikan, Alaska 99901 Telephone: (907) 225-9459 POSITION STATEMENT: Testified in support of HB 88. JAN SANDE, Captain M/V Aurora P.O.Box 5395 Ketchikan, Alaska 99901 Telephone: (907) 247-0321 POSITION STATEMENT: Testified on HB 88. TOM MOORE, Second Mate M/V Taku P.O. Box 9289 Ketchikan, Alaska 99901 Telephone: (907) 225-5735 POSITION STATEMENT: Testified in support of HB 88. ANDREA BARKLEY, Ferry Worker and Labor Management Committee Member P.O. Box 1037 Ketchikan, Alaska 99901 Telephone: (907) 225-3405 POSITION STATEMENT: Testified in support of HB 88. ACTION NARRATIVE TAPE 97-15, SIDE A Number 001 CHAIRMAN BILL WILLIAMS called the House Transportation Standing Committee to order at 1:11 p.m. Members present at the call to order were Representatives Williams, Cowdery, Sanders, Elton and Kookesh. Representative Hudson arrived at 1:15 and Representative Masek arrived at 1:20. PRESENTATION: PORT OF BELLINGHAM Number 034 CHAIRMAN WILLIAMS announced the first order of business to be a presentation by the port of Bellingham. Number 081 MARK ASMUNDSON, Mayor, City of Bellingham, expressed his gratitude to the state of Alaska for its partnership with the port of Bellingham in providing marine highway services. He introduced his staff: Pete Kremen, Whatcom County Executive; Jim Darling, Executive Director, Port of Bellingham; Fred Sexton, Director, Bellingham Economic Development Council; Mike Brennan, Director, Bellingham Chamber of Commerce; Drew Pettis, Bellingham Chamber of Commerce; Fred Haskell, President, Haskell Corporation; Scott Walker, Commissioner, Port of Bellingham. Number 169 JIM DARLING, Executive Director, port of Bellingham, gave a slide presentation regarding the transportation center in Bellingham as it is the southern terminus of the Alaska Ferry. He stated that the ferry terminal is built with revenue bonds supported by the general revenue for the port of Bellingham. It cost $13 million to build. The building has won a number of awards for its masonry work. He stated that Amtrack is now running between Seattle and Vancouver. He stated that Greyhound also comes into the train station. Number 751 MR. DARLING stated that commitment from the community of Bellingham is very strong, there are cultural and economic ties with Alaska as well as transportation ties. He stated that they consider themselves the front door to Alaska because of the ferry terminal. He stated that it was not an inexpensive process, the debt service is $750,000 a year on the building, and the contract with Alaska is for $100,000 a year. He stated that there is a very strong commitment with the Bellingham community to support the terminal with tax dollars. Number 819 MR. DARLING stated that there is a base lease with Alaska to provide the docks, warehouse, ticketing office, the terminal and the waiting areas which is $100,000. It started in 1989 for twenty years without an inflationary index. He stated that there are two operating contracts. One is for $63,000 a year for light and maintenance of the waiting area and a services contract for $221,000 a years for ticketing and loading of the ferry. Number 946 REPRESENTATIVE JOHN COWDERY asked how long the ferry stays in Bellingham. Number 861 MR. DARLING replied it typically arrives in the morning and will leave between six and eight in the evening. Number 972 REPRESENTATIVE COWDERY asked of the crew is a stay aboard crew. MR. DARLING replied that he thinks the vessel is always manned. Number 1009 REPRESENTATIVE BILL HUDSON stated that Bellingham was willing to put in a real gateway into Alaska, at their expense and charge it back to Alaska at less then we were paying in Seattle. He stated, "We have better working relationships with the port of Bellingham then we have anywhere else, it has just been outstanding." Number 1075 MR. DARLING stated that it is much nicer to get off the ferry in Bellingham and drive a mile and a half to the interstate, rather then to be unloaded in downtown Seattle and have to fight the congestion. CHAIRMAN WILLIAMS thanked everyone from Bellingham for coming to the meeting. Number 1118 REPRESENTATIVE HUDSON stated that it is a beautiful city and a wonderful place and it would be worth going to. UNIDENTIFIED MALE SPEAKER stated that the city of Bellingham wanted to make the southern terminus of the marine highway system a viable and thriving one. He stated that he is looking forward to nurturing and cultivating a more productive and meaningful working relationship with the state of Alaska and invited everyone to come and visit the community. Number 1225 CHAIRMAN WILLIAMS called a brief at ease at 1:30. Number 1225 CHAIRMAN WILLIAMS called the House Transportation Standing Committee back to order at 1:35. HB 88 - ALASKA MARINE HIGHWAY AUTHORITY  Number 1233 CHAIRMAN WILLIAMS announced the next order of business to be HOUSE BILL NO. 88 "An Act relating to ferries and ferry terminals, establishing the Alaska Marine Highway Authority, and relating to maintenance of state marine vessels; and providing for an effective date." He stated that he planned on getting as much public testimony as he could today and he did not plan on moving HB 88 at this meeting. Number 1272 PETER ECKLUND, Legislative Assistant to Representative Bill Williams, read the following Sponsor Stat ement into the record: "House Bill 88 would establish an Alaska Marine Highway Authority to assume management of the Marine Highway System from the Department of Transportation and Public Facilities. "The authority would be a public corporation of the state as an instrument of the DOT/PF, but would have a legal existence independent and separate from the state. The new authority would be comparable to the Alaska Housing Finance Corporation or the Alaska Industrial Development and Export Authority. "The powers of the authority would rest with a seven member board, appointed by the Governor. One member would be the Commissioner of Transportation. The six other members would be required to have experience in maritime affairs and would serve staggered five year terms. The board would hire the system director. "Establishment of such an authority board would bring maritime experience and continuity to the management of the Alaska Marine Highway System (AMHS). "Based on information gathered at public hearings over the interim, the Senate Task Force, 'which you will hear a report on in a few minutes', on the Alaska Marine Highway System concluded that the legislature should consider creation of such an authority. "Testimony received by the Task Force indicated that DOT/PF management of the Marine Highway lacks focus and that AMHS administration under DOT/PF lacks maritime experience. "Management under DOT/PF has become insular and is unresponsive to input from vessel employees and the general public. Scheduling is often chaotic and the fare structure has discouraged ridership. The reservation system has not been user friendly or accurate. "While concerns over funding levels are valid, the naturally bureaucratic mind-set of the Department has tightened what former director Jim Ayers termed a 'death spiral'. Establishment of the Alaska Marine Highway Authority may not provide all of the answers needed for our ferry system, but will give the system a new perspective. "We ask for your support of House Bill 88." Number 1413 JOE AMBROSE, Legislative Assistant to Representative Robin Taylor, stated that Robin Taylor is the sponsor of the companion bill on the Senate side. He stated the Senate Task Force on the Marine Highway System was established by Senator Drue Pearce. It had three public hearings; in Ketchikan on July 19, in Seward on August 19 and in Sitka on October 14. He stated that in the October meeting, Senator Taylor stated that the record would be keep open to allow for written testimony and it was based upon that written and oral testimony that the task force identified several key management policies and decisions that brought the current management into question. He stated that current management's practices resulted in a growing lack of confidence in the Alaska Marine Highway System on the part of elected officials and the general public they represent. He stated that the only recommendation from the task force was that this legislature consider moving the management of the Alaska Marine Highway to a semi-autonomous board. He stated that there were five key elements that the task force focused on. He stated, "First was what they termed arbitrary and repeated changes in the days that crews rotated on the fleet. Those decisions have estimated to cost the system in excess of a quarter of a million dollars in unnecessary overtime and expenses over the past year." He stated that scheduling and passenger fare policies were identified as tending to discourage ridership despite constant recommendations from the communities served by the system and from the crews and the line officers, who were actually responsible for the operation of the vessels. The reservation system was deemed an abject failure and the task force also expressed its concerns on what appears to be a waste of an attempt to computerize vessel maintenance. He stated that the decision to close the bars came despite the recommendations of an employee management committee that actually identified other non revenue generating staff positions that could have been eliminated and despite the effort by the employees the bars remained closed. He stated that the fifth concern is what appears to be continued additions to the staff at the Juneau Central Office despite a strong and critical public perception that the management of the Marine Highway System is already top heavy. He stated that in his office he has all kinds of written letters regarding this issue. He stated that there is a real concern from ferry employees and from the private sector. He stated that there is the tendency on the part of the Alaska Marine Highway System to say that this is the result of disgruntled employees. He stated that Lew Williams, Jr., was a founder of the Alaska Marine Highway System and he supports the idea of the creation of the Marine Highway Authority. CHAIRMAN WILLIAMS stated that he did not want to get into a debate over the bill today, he would like to get in as much public testimony as possible. Number 1693 REPRESENTATIVE COWDERY stated that he read the board will receive $300 a day plus a per diem and asked what the per diem would be. Number 1702 MR. AMBROSE stated that he did not know what the current per diem would be. Number 1714 REPRESENTATIVE COWDERY asked what the Executive Director's salary is. Number 1735 MR. AMBROSE stated that he believed the current director is getting $119,000 with benefits and he would be surprised if the Marine Highway Authority Board would pay much more than that. Number 1759 JOE PERKINS, Commissioner, Department of Transportation and Public Facilities (DOT/PF), stated that the DOT/PF has some problems with HB 88 and read the following testimony into the record: "Under the present system that we have, the Marine Highway System Management is accountable to the public. Concerns and requests are responded to quickly and completely, they have to be. Elected officials are responsible for the management of the Marine Highway System, and elected officials have to be responsible to the public they serve, sometimes it is time consuming and cumbersome, but it is the most responsible way to handle the people's business. The establishment of an authority will diminish the public accountability of marine highway management by inserting an appointed board between the management and the people. Marine highway management will no longer work directly for the elected governor or for any other elected representatives. Management decisions will be made by the board, and not the governor nor the legislature. Once appointed, board members will not be accountable to the public. A board member, under this bill, can be removed only for cause. The accountability of marine highway management to the communities they serve, in my opinion, will be substantially reduced. We don't think this is desirable. "We feel that the bill lessens public influence on decision making. Alaskan's, for better or for worse, now know who is in charge of the Marine Highway System. When things are running well, they know who to compliment, when things aren't going so well, they know who to blame. This bill will change all of that. When accountability of elected officials changes, public access to the decision making process also changes. Although a person or community may still ask the executive director or the board of directors of the system for a schedule change or special run to haul kids around for basketball games, there may be little or no pressure on this board or on the Executive Director to respond. The manager is insulated from the effect of public pressure. We believe that Alaskans appreciate direct access to the public systems that most affect their lives, and this bill will have a substantial negative impact on that access. "We don't feel that the Marine Highway System is broken, nor do we feel that the Marine Highway System is in a death spiral. There is a lot that is right about the marine highway system. The ships have a fine safety record, have we heard anybody talking about that, they generally run on time and they provide simple, economical, comfortable and reliable transportation services to the traveling public. The state's economy receives approximately $170 million a year in benefits from the operation of the system. Of course some mistakes are made, they are inevitable in an operation that is as vulnerable to as many variables as is the Alaska Marine Highway System. It is a system that has a large and varied constituency, and everybody has an opinion as to what should be done and how it should be operated. But overall, the system is doing what it was designed to do, transporting people in the Southeast and Southwest Alaska in the context of an intermodal transportation network. "Past legislatures have determined that the Marine Highway System is an essential part of the state transportation system that warrants continued and predictable state support. Many communities' economies are dependent on its steadiness and stability, and the state's tourism industry is greatly enhanced by the system. These advantages are evident when the whole story of the system is told. But when only the mistakes and the difficulties are discussed, when only the negatives are emphasized, when legislature funding levels are reduced each year and when the future of the system is under siege these advantages are not discussed. The perception of an insecure future becomes a reality for employees whose lives are intricately woven into the system's future. The perception of a shrinking system is a source of considerable anxiety for communities and for Alaskan's whose economies and way of life have been partially dependent on the regular arrival of the ships. The perceived unwillingness of the legislature to commit sufficient state resources to insure an adequate future for the system, can't help but undercut morale, performance and hope of the employees and those we serve. This unfortunately has happened and it is sad. "We think the bill is a bad idea, it sets up a layer of administration over which neither the governor nor the legislature will have control. As I have said, we believe that is bad public policy. But even worse, it doesn't fix anything, there is nothing in the bill that encourages stability or financial support by the legislature. There is nothing in the bill that addresses the increasing capital needs of an aging fleet. "If there are major problems at the marine highways, and I think there are, they can be solved and handled. One of the biggest problems that you can help relieve is the time and energy that now is being spent controlling the damage caused by anxiety about the future. That is a problem that you can materially affect, by telling the whole story of this very successful state adventure, by demonstrating your support for its future and helping us fix the problems. The system is 35 years old, the ships are aging, the system is running the same kind of service as it did 35 years ago, in 1976 Sitka was provided with 268 trips and in 1996, twenty years later, the number was 311. Today we are responding to the challenges of shrinking funding and increasing regulatory demands. The employees who you heard from are experiencing the impacts of these dynamics. People are being affected and jobs are being impacted. However, I believe a firm foundation is being laid for future statewide transportation services to include the essential service of the Marine Highway System, costs are being contained, vessels are being upgraded, the services are being used. In fact, we are now examining, with the Southeast Alaska mayors, the Marine Highway employees and the legislature, the potential to dramatically change the way the system is operated and to offer improved and expanded service. In this endeavor we need your support. "The Marine Highway system is presently managed by DOT/PF as an integral part of Alaska's intermodal transportation system. The majority of the routes have been designated by Congress as part of the National Highway system. As an operating arm of the department, the system receives federal highway aid funds from the department. By separating the system from DOT/PF, as an authority, operating independently from the rest of the department, the debate for funding the Marine Highway System capital improvement programs could conceivably shift more toward the legislature for resolution. This bill will force the Marine Highway System to compete with individual communities throughout the state, other DOT/PF regions, and other agencies for its share of federal highway funds, rather than sharing them as they do now as one component of Alaska's Intermodal Transportation System. "While the commissioner of DOT/PF would serve on the board of directors of this new authority, I think it is unrealistic to think that an organizational component which is separated from the rest of the agency, and from which the commissioner no longer has primary responsibility, will receive the same level of consideration as it receives currently. "A big thing in this legislation is that I don't feel an authority provides any kind of a mechanism or vehicle to reduce the subsidy. Although not expressly stated in the proposed legislation, an implicit purpose for an authority is apparently to insulate the Marine Highway System from inexperienced managers appointed through the political patronage process. It should be noted, that we have, in our headquarters, 16 employees that have over 290 years of maritime experience, they're working in the administration and management of the system, I think it is a great disservice to these employees to say that the management of the Marine Highway System does not have marine experience. As I've already noted, insulation also isolates the system from a direct accountability from the public. This might be acceptable if the authority was established to run the system as a business designed to be self-supporting through revenues. However, this is not the case. "The Marine Highway System presently, and in looking to the future I think this is going to be true, derives about 60 percent of its total operating money from revenues, the remaining 40 percent of the operating budget is now and will in my opinion, continue to be appropriated from the general fund by the legislature. Nothing in this bill is directed toward changing that funding relationship. The proposed authority is not designed to be self sufficient. It will continue to require annual legislative appropriations for operations and capital improvements. What then is the justification for establishing it as a state corporation? An authority will require additional subsidy to fund its increased overhead costs. "The Marine Highway System is already unfairly criticized for the large size of its central office staff. However, if the Marine Highway System is split from the rest of DOT/PF into an quasi- independent authority, it will lose the administrative support, currently provided by DOT/PF and administrative costs will, most certainly increase. Personnel and accounting services which are now provided in part by headquarters DOT/PF would fall entirely on the authority. So would engineering services which are now being provided by Southeast Region of the DOT/PF. The system would be further removed from the Federal Highway Administration. The relationship with DOT/PF and Federal Highway Administration would be complicated since CFR title 23 for the administration of all federal highway funding programs is the responsibility of the state highway agency which is DOT/PF. "I don't think authority will solve the systems labor costs. Labor Agreements for Marine Highway System employees are currently negotiated and administered as a part of the state's overall labor relations program. Although vessel employees were ten years ahead of their shoreside peers in collective bargaining, economic settlements in the last two decades have been reasonably uniform an consistent for all state employees. "As proposed, all employees of the authority would be placed into the exempt service but remain subject to the terms of existing labor agreements until their expirations. The authority is then authorized to negotiate new labor agreements, although it is somewhat unclear whether or not the terms of these agreements must be consistent with those of other executive branches of the state. Since the authority's employees will be in the exempt service, they are prohibited by bargaining regulations from remaining in the same classified employee bargaining units from whence they came. What this means is the addition of probable four more bargaining units and contracts for just authority staff. These units could be general government, supervisory, confidential, and labor, trades and crafts. "Some of these units would be composed of only a handful of employees, but each small group has the same rights to negotiate as larger employee groups. Each requires the authority's resources to negotiate new contracts, and each has the right to engage in a strike if those negotiations fail. The economic leverage which could be exerted by these small groups of employees would be considerable. Each has the potential to shut the system down in the event an impasse is reached. "Small bargaining units can be problematic for just these reasons. Every small group requires a large expenditure of labor relations resources, which now would come from the authority and each of these groups has leverage out of proportion to its size, there is no reason that I can come up with, to believe that an authority has any greater ability to negotiate reasonable contracts then the state. If anything, I think the reverse may well be true. "Another problem that I see which is going to happen, no matter what, is that this authority will not be created over night it will take a considerable time to implement the authority, appointing board members. The Senate Bill I think is also going to include the discussion of it including a confirmation by the legislature. Hiring of Executive Director, hiring of the staff, getting new buildings for them to be in, all of these things are going to take a considerable time. I would estimate it would take a minimum of six months to a year and a half to get this organization operational. During this time we are going to have a new ferry come on board, we are going to have to make major decisions concerning the Malaspina and this is a very very poor time to have complete and almost total confusion within the ranks of who runs this system. "As a summary I would like to go back a little bit in history. Alaska's long term historical experience with creating and operating authorities and public corporations has not been entirely positive. Consider the Alaska Power Authority, of which I spent three years in. At the time of its creation, the APA was billed as the answer to Alaska's need for cheap and abundant energy. Visions were for hydroelectric and other power projects throughout the state, with modern power grids serving the majority of Alaska. After numerous legislative changes to the authority over several years, it was finally closed down by the legislature as an operational agency. The Alaska Railroad Corporation is another example. It was formed by the legislature just over a decade ago. Today, the legislature is considering restricting the operations or potentially selling that corporation. Could these examples be applicable to a marine highway authority? TAPE 97-15, SIDE B Number 005 "The answer is yes because this legislature cannot bind what happens in future legislative actions. "The proposed authority, in my opinion, would be a move in the wrong direction as far as transportation in Alaska is concerned. Six years ago, the U.S. Congress initiated major changes in the National Transportation Industry with the enactment of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). That act provides us with $200,000 million plus a year for our highway program. In ISTEA the 'I ' stands for 'Intermodal'. The simple genius of ISTEA is its premise that transportation choices cannot be effectively or economically made in isolation from one another. This is the concept we call intermodalism. "A decision to invest public money in roads, or in airports or in ferry vessels, requires a balancing of public policy issues that cannot be completely balanced if one transportation mode is somehow treated differently. Nationally, the trend is to bring these modes together to provide more efficient transportation services. As I travel to other states and discuss transportation issues with my peers, it is clear that this intermodalism is not a passing fad. It is here to stay and it makes sense. ISTEA will be reauthorize this year and it is going to be reauthorize either by being called ISTEA II or NISTEA, but the 'I' is still going to be in the reauthorization of this act. "We all recognize that the Marine Highway System cannot continue to operate as if it were still the 1960's. Times have changed, and the needs of Alaska's communities and the traveling public have changed, the transportation network along Alaska's coastline has also changed. The changes needed in the Marine Highway System may well be dramatic. However, HB 88 takes us in the wrong direction. With the help of the legislature, we need to work to insure that the Marine Highway System truly functions as an integral element in a well designed state wide transportation system. This administration and myself will change and improve the system but these changes must be well thought out and have the support of the people of Alaska. This takes time and the worst action we can take now is to make changes such as this bill does without thoughtful and deliberate considerations of its short and long term consequences. The administration and myself therefore, do not support this legislation." Number 150 CHAIRMAN WILLIAMS asked for a copy of the Commissioner's Perkins testimony and asked if he got a copy of the Senate Task Force report on the Alaska Marine Highway system. COMMISSIONER PERKINS stated that they had a copy of the report and provided the committee with copies of his testimony. Number 183 CHAIRMAN WILLIAMS stated that he did not want to debate the issue but stated that he planned on having another hearing on this, next week and asked Commissioner Perkins if he would be available to answer questions on his testimony. COMMISSIONER PERKINS stated that he would be available. CHAIRMAN WILLIAMS stated that the problem in the system has been ongoing for quite some time and it didn't just happen. He stated that the legislature did not just decide that an authority was needed, it was well thought out on the reasons why the legislature decided to go this way. Number 235 MIKE MCMULLEN, Personnel Manager, Division of Personnel, Department of Administration, stated that Commissioner has understated the complexity of the collective bargaining issue that this bill presents. In 1992 the legislature moved a program from the Department of Community and Regional Affairs, the classified service of the Executive Branch, to the Alaska Housing Finance Corporation. He said. "In 1996 the supreme court heard the issue and remanded it back as far as the Alaska Labor Relations Agency into the superior court and at this point almost five years later the question of those units is still unresolved." He stated that they see the same potential problems with this bill in the current form, and the issue is with the creation of the authority and the expiration of the contracts. It is unclear as to what happens to the bargaining unit as it currently exists with this representative in place. It appears that the unit will then span both the classified and the exempt service, have a single representative for the unit but have two employers, the authority and the Executive Branch Proper as employers bargaining over the same people, we think that would lead to considerable chaos and the potential for five years of potential court resolution to figure that out. He stated that they don't have a solution at the moment but they have committed to the senate committee to work on the solution, and will be glad to provide it to this committee as soon as they have it. Number 325 DOUG WARD, Project Manager, Alaska Ship and Dry Dock, located in Ketchikan. He stated that he is going to speak to Section 21 of the bill, that requires the state to basically have Alaska owned vessels maintained and repaired in Alaskan shipyards. He stated that this section was put into this bill initially in an effort to repatriate jobs and dollars that were being exported out of the state of Alaska to out of state shipyard contractors up and down the West Coast. He stated that we think that was an important part of that bill and is an important part of this bill and it is needed. He stated that unlike other DOT/PF projects that were performed in this state, for instance a bridge painting contract, when that bridge contract is lent to an out of state contractor in a competitive situation, we don't sent the bridge out to be painted, the contractor comes to Alaska, to spend his contract dollars in Alaska. He stated that the Alaska Marine Highway System projects can be sent to an out of state shipyard, and when this happens Alaska loses jobs and dollars. He stated that this is the reason Section 21 is in this bill, particularly in respect to keeping Alaska shipyards healthy. He stated that this section will benefit any shipyard in the state of Alaska. Number 428 MR. WARD stated that Representative Williams will be proposing an amendment to the bill that strengthens Section 21, by addressing the inter-port differential. The inter-port differential is a way of measuring the costs of transporting the vessel to an out of state shipyard, it is a fairly common calculation done by private fleet operators whenever they take bids on maintaining their vessels. They will note the location of the various yards and then they will accurately calculate the costs that it takes to transport that ship to that site, and then they will evaluate all the bids by adding the inter-port costs to the various sites and evaluating the bids on that basis. He stated that the amendment would require that the state consistently account for all of the costs associated with transporting these state owned vessels out of the state. He stated right now it does not appear that all of the costs are being included, such as crew payroll when the vessels are being transported. Crew salaries should be part of the inter-port differential and we would like to see a standardization of that formula for determining those inter-port costs that does consider all of the costs. He stated that the method of how the inter-port differential is used in the evaluation is also a concern in the amendment which will address that. In the instance of a competitive bid situation we will see a lengthy list of contingency items within the bid because the state doesn't know what has to be done to the vessel until they get it up in dry dock and can take a look at the underwater portion of the vessel to determine that. The contingency items are done to anticipate every conceivable condition of the boat haul and there is no expectation that all of those contingency items will be activated. He stated that the net result of that is that the total bid amount is inflated over the actual budgeted, anticipated contract amount. A bid of $800,000 could have the project value of $500,000. He stated that when this is evaluated with a $50,000 inter-port differential to a $800,000 bid value and then compare $50,000 to a $500,000 contract value, the impact of the inter-port differential is much greater to the lesser amount. By evaluating the bid amount for the inter-port differential there is a delution of the inter-port value and of the intent of the entire process. He stated that it lessens the competitive opportunity for Alaskan shipyards to repatriate those jobs and dollars back to Alaska. Number 606 MR. WARD stated that the amendment does not require any expenditure of tax dollars and will result in a savings to the state. He stated that in the Alaskan shipyards, there are Alaskans working on Alaskan boats, and are familiar with the vessels. He stated Alaskan Ship and Dry Dock was the low bidder on the $3.5 million SOLAS upgrade to the Matanuska ferry. He stated that the inter- port differential for that project was $40,000 and the bid was won by $31,000. The inter-port differential brought $3.5 million of state dollars back to the state. Number 665 REPRESENTATIVE KIM ELTON stated that at the point the amendment comes forward he would hope there would be some discussion on why we should codify that in statute when later on in the bill it allows the authority itself to set up procurement rules and under that authority they could do that by regulation. Number 707 CHAIRMAN WILLIAMS stated that it will be taken up at the next meeting. Number 717 REPRESENTATIVE COWDERY asked if the company was capable of doing all the maintenance on the ferries that comes into Ketchikan. MR. WARD replied that they are capable of doing the maintenance and that they are capable of doing it better. Number 732 REPRESENTATIVE COWDERY asked how much time the average vessel is in the yard. Number 738 MR. WARD replied the average state ferry is probably in the yard between three and five weeks. Number 750 REPRESENTATIVE COWDERY asked what happens to the crew members on the vessel, do they stay or do they leave. Number 758 MR. WARD responded that it varies with every project, depending on what the particular maintenance projects are. He stated that there are two activities that occur to the state ferries while they are in the yard. One is lay up, which is a budgetary requirement to lay up the ferries so that they are not operating for a period of time in effort to reduce the operating budget. The second is the active repair period which occurs at both pier side and dry dock repair periods. He stated that the actual repair contracts are from three to five weeks, lay ups can last from 30 days to 90 days, and it seems to be increasing. Number 824 REPRESENTATIVE ELTON asked if the shipyard was non-union. Number 833 MR. WARD replied that was correct. He stated that the first inter- craft labor agreement in the shipyard industry has been negotiated in Oregon recently. The reason to do so is to increase the efficiencies in ship repair and make domestic shipyards competitive with foreign shipyards. Number 892 JOHN RITTERBACH, Purser, M/V Matanuska, testified via teleconference from Ketchikan, and read the following statement into the record: "As I have stated before, it is not easy to speak against your employer, however I see no future with the Alaska Marine Highway with the present administration. I came here today because I care about the system and the people that we serve. I come before this committee to plead the case of a dying patient and that patient is the Alaska Marine Highway and we are in a dire need of a dose of common sense. I support House Bill 88 to establish a Marine Highway Authority. As you look at this bill it may not be the perfect cure for the woes of marine transportation but without action soon the system, itself will surely die. The time to act is now, gentlemen, before there is nothing left to save. It is time to stop playing politics with the Alaska Marine Highway. The people of Alaska deserve better and they can have better if you will act. "The management of the Alaska Marine Highway System is inept at best. The vast majority of central office management from the Director, Mr. Hayden on down have little or no maritime experience. Internal decisions are being made from the commissioner of transportation's office with no rational basis. The commissioner of transportation and the director of the Alaska Marine Highway have been caught in lies to the public and the employees of the Alaska Marine Highway. The Alaska Marine Highway has no leadership because there are no leaders. Only the tired old minds of politically appointed commissioners and directors. We need leaders with experience not someone who is popular with the Governor. As I said to Mr. Perkins recently, in order to grow and prosper in times of economic shortage we must pull together to do more with less. The employers of the Alaska Marine Highway understand this and we must find more reasons for the public to use our services and not raise prices and cut services at every turn. Not only is the Alaska Marine Highway just a highway but is a vital way to stimulate the economy of communities that we serve. I believe that the way to generate more revenue and reduce the amount that you have to appropriate each year to give the public what we were meant to be and that service that we can rely on at a reasonable price. "Compare the Alaska Marine Highway System with our friends in Canada, the prices are lower, their out of work services are better and their schedules are user friendly. At a recent meeting it was suggested to Director Hayden that we needed to cut prices, his answer was if we cut prices and we don't increase our revenue, then what. My reply is that it is price or schedule and lack of services that have caused our lack of revenue. We are in a spiral of destruction. Managements only solution to any problem is to cut service and raise prices. I believe we are not getting much bang for our buck. I believe we would be much more effective even with the level of funding that is now provided. If I think that I have ideas to bring 30 percent more effective imagine what real effective management that is not afraid to listen to its employees and suggestions for what the public could do. Management is so top heavy it is hard to believe, during the winter reduction force the number of people working in the Juneau Central Office almost equals the number of employees left, working on the three ships that are still running. About 60 percent of ship employees lose their jobs in the winter months and it takes a new employee hired this year in the Inland Boatmen's Union about six years to become a full time year round worker. If you are hired in the Juneau Central Office, however, you are full time right from the start, in fact not one employee in the Juneau Central Office loses one hour of one weeks pay during the winter reduction period. Is there something wrong with this picture? Mr. Hayden makes the lame reply that some reservation agents have reduced hours in the winter. It is my belief that the Juneau Office Staff could and should be reduced by 30 percent or more. "Representatives take a tour of the Juneau Central Office some time, it has bright new equipment and it is fully staffed. Take a look at our shiny new terminal building and then take a tour of the ships of the Alaska Marine Highway that they support. Tired, shabby and in dire need of a face lift. For years the motor vessel Malaspina has been neglected by the Alaska Marine Highway System. We have been told there is no money, not even for basic items like paint. Yes the Marine Highway System Staff would have you believe that motor vessel Malaspina isn't worth much and would be better off sold. The question is what a new ship of that size would cost compared to the cost of upgrade of the Malaspina. An important question might be, can the management the Alaska Marine Highway System can be trusted to tell the truth about the Malaspina. The Alaska Marine Highway System has a motto and that is a 'Proud Tradition', that tradition of service has been allowed to tarnish and I urge you to embark on a course that would restore that tradition and I urge you to embark on a course that would restore that tradition and I urge you to support House Bill 88. And lets make the ships of the fleet something to be proud of something new and alive and a fleet that we can be proud of." Number 1199 MR. RITTERBACH stated that he did want to reply to a statement that Commissioner Perkins made regarding having experienced people in the Juneau Central Office, that there are sixteen people there that have 290 years maritime experience. He stated that just in this room in Ketchikan, there are seven employees that have almost 200 years of maritime experience. He stated that the members of the Alaskan Marine Highway have probably 10,000 years of experience all together, and nobody listens to us which is part of the problem. Number 1250 CHAIRMAN WILLIAMS stated that if any of the people testifying wish to submit written copies of their testimony they are welcome to do so. Number 1263 JAN SANDE, Captain, M/V Aurora, testified via teleconference from Ketchikan, stated that he did not agree with most of Commissioner Perkins' statement. He stated that at best the departments within the Juneau Central Office do not communicate and they certainly do not communicate with the directors. He stated that he has had two directors come down to talk with him about problems and stated that they could not get any information out of the department heads. He stated that there is almost no one in middle and upper middle management that is accountable in Juneau's Central Office. He said, "I feel that this bill will get accountability back because of the board which is appointed by the governor having maritime personnel." He stated that the current employees do not know enough about maritime issues to know when the truth is being told. He stated, "I feel that one other person needs to be added to this list of people, that happens to be the Govonor's Chief of Staff, all of those upper people are part of the problem." Number 1370 MR. SANDE stated that the Aurora was in Bellingham for four months undergoing a federal project. The last three weeks of this period the Chief Engineer and himself were working 12 to 15 hours a day without receiving overtime. He stated that the last week of work he did not receive a purser, which meant that he had purser duties along with his other duties. He stated he received a department head that was not up to the job and disciplinary action had to taken. He stated that middle management's response was to laugh at him. He questioned were the accountability is. He stated that the bill is the only solution for a system which is almost totally dead. Number 1482 TOM MOORE, Second Mate, M/V Taku, testified via teleconference from Ketchikan, asked if Commissioner Perkins was still present. CHAIRMAN WILLIAMS replied that he was not. MR. MOORE asked if it was correct that Commissioner Perkins left before public testimony. CHAIRMAN WILLIAMS replied, "yes." Number 1498 MR. MOORE stated that he is in favor of the Marine Highway Authority. He stated that the Federal Highway Administration has threatened to cut $200 million from Alaska road construction because they feel that the state isn't doing enough to maintain the existing roads. He stated that all one has to do is look at the roads in Southeast Alaska and the Alaska Marine Highway System to see what the administration is referring to. He stated that the ferry system is losing money and driving away passengers. He stated that Marine Authority would provide stability in the Marine Highway System. He stated that the only stability in the last 20 years has come from the Core Captain's office. He stated that the zone system is an inconvenience and an hassle to repack and change ships three or four times to get to the final destination. The zone system reflects complete disregard for the traveling public, the present administration lack of compassion for travelers and masked hidden agenda at the expense of the people in Southeastern Alaska. He stated that none of the communities would be looking towards the privatization of the ferries if they were still receiving the adequate service they have received from past administrations. Number 1734 ANDREA BARKLEY, Ferry Worker and Labor Management Committee Member, testified via teleconference from Ketchikan. She stated that she had submitted a statement on the Senate Bill where she addressed the big lie of the bar closure and that it was not related to revenue. She stated that she also submitted another statement regarding the hospitality of the bars. She stated Commissioner Perkins has stated that the unwillingness of the legislators to commit sufficient funding and resources have undercut moral performance and health of the employees. She stated that the implication is that it is the legislature's fault and the Alaska Marine Highway System has no accountability in the situation before the legislature today, and that she does not believe this is the case. She stated that the administration makes it sound as if this situation has occurred overnight and that the employees of the Marine Highway System have not gone through the proper channels to work out the problems. She stated that this situation has occurred over years of employees trying to deal with management and not being heard resulting in a major event in which employees as well as concerned citizens have pulled it into the political arena feeling that business can no longer be conducted this way. She stated that the Marine Highway Authority will be an improvement. Accountability is not present under the current system. She stated that she does not agree with Commissioner Joe Perkins that accountability and direct public access is there. 668 public comments heard wanted the bars to the Marine Highway System opened again and 9 people said they didn't, therefore 668 people received no accountability, and no redress for any of there concerns. She stated that citizens have been saying that we might be getting some decent ferry service if the bill goes through. She stated that she supports the bill very strongly. Number 1954 CHAIRMAN WILLIAMS stated that he did receive Ms. Barkley's letter and it was passed on to Gary Hayden. He stated that in the near future there will be a meeting with Mr. Hayden to present his written comments on the issue. Number 1994 MR. RITTERBACH stated that all of the people here listened to Commissioner Perkins testimony but he left the room before any public comment was made because he does not want to hear it. He stated that isn't it also strange that a director is paid $119,000 a year with benefits is not testifying in front of the committee, if he is supposed to be accountable for what is going on. Number 2096 CHAIRMAN WILLIAMS asked if there was anyone else who wanted to testify. He stated that this will be brought up again at the next meeting. ADJOURNMENT Number 2103 CHAIRMAN WILLIAMS adjourned the House Transportation Standing Committee at 2:45 P.M.