SENATE TRANSPORTATION COMMITTEE February 18, 1997 1:40 p.m. MEMBERS PRESENT Senator Jerry Ward, Chairman Senator Gary Wilken, Vice Chairman Senator Lyda Green MEMBERS ABSENT Senator Rick Halford Senator Georgianna Lincoln COMMITTEE CALENDAR Presentation of Findings: Senate Task Force of the Alaska Marine Highway System SENATE BILL NO. 21 "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 SENATE JOINT RESOLUTION NO. 12 Relating to reconstruction and paving of the Alaska Highway. - HEARD AND HELD PREVIOUS SENATE ACTION No previous Senate action to record. WITNESS REGISTER Senator Taylor, Chairman Task Force on the AMHS State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Presented findings of AMHS Senate Task Force. John Hunnewell, Chief Engineer Matanuska Alaska Marine Highway System Seattle, Washington POSITION STATEMENT: Discussed concerns with the AMHS management. Tom Moore, Second Mate Taku Alaska Marine Highway System PO Box 9317 Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed concerns with the AMHS management. Leif Jenkinson, Deckhand Alaska Marine Highway System Patrolman, Inland Boatman's Union PO Box 6300 Ketchikan, Alaska 99901 POSITION STATEMENT: Stated that the IBU was neutral on SB 21, but discussed concerns with the AMHS. Ed Marksheffel, Chief Purser Taku Alaska Marine Highway System PO Box 9324 Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed zoning scheduling problems. Lew Williams, Retired Journalist 755 Grant Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed the need for new AMHS management. Stephanie Rainwater, Second Steward Alaska Marine Highway System 926 Jackson Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed the IBU Labor Management Advisory Board recommendations and rejections. Andrea Barkley Alaska Marine Highway System PO Box 1037 Ward Cove, Alaska 99928 POSITION STATEMENT: Discussed the closure of the bars. John Ritterbach, Senior Assistant Purser Alaska Marine Highway System PO Box 9420 Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed problems with the AMHS. Will Petrich, Relief Mate Alaska Marine Highway System 280 Bunchberry Lane Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed the reservations system. Eric Gucker, Steward Alaska Marine Highway System PO Box 8073 Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed concerns with the current AMHS. Bob Pickrell 8339 Snug Harbor Lane Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed the Hickel Administration's attempts with the Marine Highway Authority. Mayor Jack Shay Ketchikan Gateway Borough 344 Front Street Ketchikan, Alaska 99901 POSITION STATEMENT: Discussed the AMHS. Stan Hjort Petersburg Transportation Committee PO Box 828 Petersburg, Alaska 99833 POSITION STATEMENT: Agreed with previous testimony. Senator Randy Phillips State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Discussed SJR 12. John Cormie, Deputy Minister Community and Transportation Services Yukon Government Canada POSITION STATEMENT: Reviewed the history of the Shakwak agreement. Robin Walsh, Director Transportation Engineering Yukon Government Canada POSITION STATEMENT: Answered questions. ACTION NARRATIVE TAPE 97-4, SIDE A SB 21 ALASKA MARINE HIGHWAY AUTHORITY  Number 001 CHAIRMAN WARD called the Senate Transportation Committee meeting to order at 1:40 p.m. and introduced SB 21 as the first order of business before the committee and invited Senator Taylor to come forward and report the findings of the Senate Task Force on the Alaska Marine Highway System. SENATOR TAYLOR , Chairman of the Senate Task Force on the Alaska Marine Highway (AMHS), informed the committee that the task force held hearings in Ketchikan, Seward, and Sitka. He noted that the report includes testimony, letters, and other documents forwarded to the task force. Senator Taylor read the report into the record: Based upon the written and oral testimony, the Senate Task Force on the Alaska Marine Highway System, has identified several key management policies and decisions the Task Force feels are representative of the type of policies that bring the current management of the AMHS into question. Current management practices have 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. It is the recommendation of the Senate Task Force on the Alaska Marine Highway System that the Twentieth Alaska State Legislature consider moving AMHS management from DOT/PF to a semi-autonomous Marine Highway Authority. The key issues examined by the Task Force include: *Arbitrary and repeated changes in the days crew rotate on the fleet. The decisions are estimated to have cost the system more than $250,000 in unnecessary overtime and other expenses. *Scheduling and passenger fare policies that discourage ridership, despite constant recommendations from the communities served by the system and from the crews and line officers who are responsible for the actual operation of the fleet. *A reservations system that has been an abject failure and what appear to be a wasted attempt to computerize vessel maintenance. *The decision to close the cocktail bars and eliminate a revenue source. This came despite recommendations from the employee/management committee which would have led to the same cost savings without elimination of the revenue generating positions and the passenger service connected with operation of the bars. *Continued additions to the staff at the Juneau Central Office, despite a strong and critical public perception that AMHS management is already top heavy. As a side note, Senator Taylor stated that the bar closure also impacts the revenue of food and other beverages. When the bars are open more food, snacks, and other items are sold. Further Senator Taylor informed the committee that in comparison to now in 1977, one more vessel was running with more trips per boat per year and several more employees on the system. In 1977, AMHS operated with 17 people and Bill Hudson. Currently, there are about 155 full- time employees in Juneau. Senator Taylor believed that the AMHS is in trouble. By moving the AMHS management to a more professional group of managers with some tenure within the system, with continuity and historic perspective, the AMHS management should stabilize. Number 125 JOHN HUNNEWELL , Chief Engineer of the Matanuska, reiterated the growth of the shoreside management of the AMHS. Mr. Hunnewell cited the lack of maritime background in the senior management as a major concern. He did not understand why input from the senior officers from the vessels seem to be ignored. For example, the marine engineering department solicits crew input which is then ignored and then there is a problem. Mr. Hunnewell pointed out that most projects can utilize federal funds, but if the input is ignored and future problems arise - state funds must be used for the upgrade or improvement. SENATOR WILKEN inquired as to what a Chief Engineer does on AMHS. JOHN HUNNEWELL clarified that he was the engineer out of the engine department and is responsible for all the mechanical equipment aboard the vessel. The Chief Engineer is the second most senior officer and he reports to the Master directly. SENATOR GREEN asked if anyone testifying would be in harms way. CHAIRMAN WARD replied, no. Number 200 TOM MOORE , Second Mate on the Taku, addressed the changes in the days crew rotate. It costs the state $25,000 per ship per day every day that the crew rotation is changed. These changes reflect that the management has no consideration for passengers and crew. Such changes in the crew rotation result in overtime pay for the crew working and regular pay for the crew that is being short changed in their work day. This change in crew rotation also effects the credibility of the state. Mr. Moore stated that the AMHS has lacked stability in the last few years. Since Director Ayers left the AMHS, the system has been in "a death spiral." The system directly reflects upper management, the commissioner and director. He said that the department heads' hands are tied most of the time. Mr. Moore echoed comments regarding the increase in shoreside management staff over the years. Since the zone system has been implemented there has been a decrease in travelling paying customers and services, while costs have increased. It is an inconvenience for passengers to have to change ships as well as the schedule which stops in major towns in Southeast Alaska after business hours. Local economies are effected by such scheduling. The closure of the bars on the ferries was a slap in the face to the public. The IBU was told by the director that the bars could remain open if a cost effective alternative was presented, however the bars were closed. Mr. Moore cited other examples of problems with the system such as the ferries following each other around Southeast Alaska and the lack of service to Petersburg. Further, elder hostel groups are given a reduced rate for passage, state rooms, and food while Alaskans are not given such. Mr. Moore believed that those in Southeast Alaska have valid grounds for a lawsuit against the Administration, DOT/PF, and AMHS for the misappropriation of public funds and fraud. These people are doing the exact opposite of the purpose of their positions: to serve the people and make transportation easier for people travelling in Alaska. Mr. Moore indicated that the Malaspina - Goldbelt connection should be reviewed in depth. Number 309 LEIF JENKINSON informed the committee that he was a 13 year Deckhand with the AMHS and three and one-half years as Patrolman with the IBU. The IBU remains neutral on SB 21. However, Mr. Jenkinson pointed out that the present problems with the AMHS are so long standing and severe that extraordinary efforts would be required to solve them. This does not seem possible under the present organization. Further, the IBU believes that the Marine Highway Authority would not create another layer of bureaucracy. Mr. Jenkinson informed the committee that Commissioner Perkins had stated that it would be counter productive for the AMHS to compete for funds with other statewide transportation needs. Currently, AMHS cannot compete because those who make the ultimate decisions are all road and airport engineers and builders. Perhaps, an authority would create equity for marine transportation. Mr. Jenkinson acknowledged that there are good people working for the AMHS in Juneau, however they must not be making the decisions. The IBU believes that the AMHS fleet could run at or beyond capacity for a full year, bringing in a much higher percentage of its operating cost while providing better service. ED MARKSHEFFEL , Chief Purser aboard the Taku, addressed zoning scheduling which has been a problem for the Taku. Mr. Marksheffel said that his traffic reports would support that assertion. For example, one day last June only 38 people and 12 vehicles came into Juneau by the ferry; this is the busy season. The proposed authority may solve the scheduling problems. In response to Chairman Ward, Mr. Marksheffel said that he had been with the system for 30 years. SENATOR TAYLOR asked Mr. Marksheffel if he had any information regarding the cost of crew shift change days. ED MARKSHEFFEL said that he had forwarded that information to Mr. Moore, but offered to forward it to the committee. Number 373 LEW WILLIAMS , Retired Journalist, informed the committee that he was one of the founders of the Southeast Conference in the 1950s which promoted a bond issue to begin the ferries. Mr. Williams said that he had listened to the crew's complaints over the years. Mr. Williams noted that he had written a letter to Mr. Hayden and had spoken with him regarding some of the complaints. Mr. Williams emphasized the need for better management which SB 21 offers. Mr. Williams informed the committee that he had served on the Board of Governors for the Alaska Bar Association, the Alaska Judicial Council, and currently serves on the Board of Regents for the University of Alaska. All those organizations are operated by boards and the board members have overlapping terms which allows continuity. Usually, the president or executive director is hired based on experience. Those organizations, albeit not perfect, are better organized than the AMHS. Mr. Williams pointed out that the need for better management is critical due to the upcoming negotiations in 1999, for many of the labor contracts. During that time, there will be another election which may result in much change in the AMHS management who will be facing these employee negotiations. Mr. Williams believed that the Advisory Committee of Mayors with whom Mr. Hayden serves does not provide any continuity. In conclusion, Mr. Williams said that he would forward a copy of his letter to Mr. Hayden and his responses. SENATOR TAYLOR noted that the crew rotation costs were in the report and he requested that if Mr. Marksheffel and Mr. Moore had any supplemental information to forward it to the committee. Number 433 STEPHANIE RAINWATER , Second Steward, informed the committee that she has been an employee of the AMHS since 1987. The IBU Labor Management Advisory Board was formed in the summer of 1996 in order to open lines of communication between the AMHS administration and ferry employees. The intent was to work together to find solutions to the revenue problem. The ensuing meetings of the advisory board discussed the procurement cost savings of the purchase of food, paper products, janitorial supplies, laundry service, soda pop and candy. The suggestions would result in a savings of $100,000 in food in the first year alone. Increasing the hours of the cafeteria and the gift ship were suggested. A shadow training program for upper management was suggested in order to eliminate overstocking of the storeroom. Ms. Rainwater reviewed other suggestions from the advisory board which would have resulted in no cost to the state for implementation and offered an immediate increase in revenue. All the cost savings measures were found to be unacceptable and that positions must be cut. Reluctantly, the labor committee worked out a job sharing concept, but the proposal was rejected and the bars were closed. Ms. Rainwater pointed out that the management crew meeting on the Columbia in November of 1996 revealed the depth of the deception. At that meeting, Mr. Hayden stated to the crew that the bar closure was a nonnegotiable item long before the labor management meetings. Further, Mr. Hayden stated that the suggestions for job elimination would be used to offset the coming year's budget cuts. Why would labor ever cooperate with this management after this? Ms. Rainwater recommended that a major restructuring of the administration and management of the AMHS is necessary this legislative session. Ms. Rainwater submitted a resolution of support, 9709, for SB 21 from the Ketchikan Indian Corporation. She urged support and passage of SB 21. In response to Senator Ward, Ms. Rainwater agreed to forward the resolution. ANDREA BARKLEY , employee of the AMHS, said that she would be addressing the closure of the bars. She was a bartender for the AMHS for 18 years until the closure of the bars. The closure of the bars was never about the loss of revenue which the following points will indicate. First, the employee position savings did not occur because that employee was placed elsewhere on the same ship and crew. No employee cost was saved, only revenue was lost. Further, Mr. Hayden told the IBU that if solutions resulting in the same cost saving could be presented the decision to close the bars would be reconsidered. Second, the IBU held extensive labor management meetings which offered many suggestions to increase bar revenue. All suggestions were ignored. The Matanuska implemented the suggestions without management direction and experienced an increase in revenue in the bar. The Juneau office was not interested in this. Third, the state announced that the Columbia bar did make money and would remain open. However as soon as the bars on the other vessels were closed, the hours on the Columbia bar were decreased to six hours a day. What businessman worried about losing money, would close down the only profitable business venture for half the hours? Alaskans and visitors want the cocktail services on the AMHS open. Ms. Barkley informed the committee of the 658 comment cards requesting that the bars reopen. Only nine comment cards have been received in support of the closure of the bars. The AMHS management is refusing a mandate of the people. If SB 21 does not pass this legislative session, the AMHS will not survive. Ms. Barkley urged support of SB 21 and thanked the task force for their work. Number 532 JOHN RITTERBACH , Senior Assistant Purser on the Matanuska, did not foresee a future for the AMHS under the present administration. He supported SB 21 and stressed the need to act now. The management of AMHS is inept with little or no maritime experience. Leaders with experience are needed. In order to grow and prosper in times of economic shortage, more must be done with less; more reasons for the public to use AMHS should be offered not increased prices with reduced service. Mr. Ritterbach emphasized that more revenue could be generated with reduced appropriations by providing the public with a reliable service at a reasonable price. In comparison to the AMHS, the Canadian system has lower prices with better onboard services and a user-friendly schedule. Mr. Ritterbach said that price, poor scheduling and lack of service have resulted in the lack of revenue. Management is top heavy. For example, during the winter reduction the number of employees at the Juneau central office almost equal the number of employees working on all three ships in use. About 60 percent of ship employees lose their jobs in the winter months. It takes an new employee hired in the IBU about six years to become a year round full-time employee, however the employees of the Juneau central office are year round full-time employees from the beginning. He believed the Juneau central office staff should be reduced by 30 percent or more. Mr. Ritterbach recommended that people look at the nice offices and terminals that support the shabby ships. Mr. Ritterbach discussed the Malaspina and its lack of maintenance that has resulted in its current situation. The Malaspina could be used and produce revenue while SOLAS upgrades are being made. In closing, Mr. Ritterbach urged the support of SB 21 in order to abide by the AMHS motto, "A proud tradition." WILL PETRICH , Relief Second and Third Mate, said that the reservations system has been a failure. TAPE 97-4, SIDE B An inhouse reservation system is by its very nature, limiting. No public carriers rely on an inhouse reservation system. The $1.5 million on this inept inhouse reservations system could be used to keep the vessels running. This is merely another example of cause and effect of the lack of professional maritime competence of the administration. Mr. Petrich believed the only solution at this time is a ferry authority. He mentioned that issues of reservations, scheduling, and yard layup are intertwined. The issue is the present dysfunction of the management of the AMHS; there is no accountability in the present administration. Mr. Petrich believed that the present AMHS administration is unwilling and incapable of change and therefore, he urged support of SB 21. Number 566 ERIC GUCKER informed the committee that he was a third generation Alaskan and Steward on the AMHS for over nine years. He said that the reservations system is a problem. As far as Mr. Gucker knew, every other transportation business in Southeast Alaska has increased revenues. It makes no sense that the AMHS is experiencing a loss in revenues. With regard to the computers, less efficiency and increases in the Juneau staff have resulted. Mr. Gucker discussed the ill communication between the employees and management as well as the lack of administrative support. There should be a positive forum for the exchange of ideas. As a steward, Mr. Gucker pointed out that many beer bottles and liquor bottles are gathered from staterooms at every port. This exemplifies the loss of revenue from the closure of the bars. Further, other staff is left to deal with the drinking instead of a bartender with experience regulating problem drinkers. He mentioned that scheduling is a problem and has resulted in the Prince of Wales ferry concept. Mr. Gucker emphasized that the AMHS brings in approximately 65 percent of its operating revenue. No hard link road in Alaska brings in any money for its operation. There have been numerous studies that all report that the administration of the AMHS is top heavy. He identified the bureaucratic nature of the AMHS as the main problem. Mr. Gucker supported any effort to bring management and workers together. BOB PICKRELL informed the committee that his first involvement wit the AMHS was during the first Hickel Administration when he was contracted to do a survey. He was on Governor Hickel's MHS Task Force in 1991 whose primary mission was to gain support for the Marine Highway Authority. Mr. Pickrell forewarned the committee that the biggest opposition would come from the bureaucrats, the commissioners. Mr. Pickrell was in support of SB 21. The present system will not take care of the problems. Mr. Pickrell emphasized that the AMHS is a highway which should be subsidized as any other highway in the state. Number 489 MAYOR JACK SHAY , Mayor of the Ketchikan Gateway Borough, reviewed the proposals and resolutions of the Ketchikan Gateway Borough over the past years. Most recently, the Ketchikan Borough Assembly will be considering SB 21. Mayor Shay had no doubt that the measure before the borough would pass. Mayor Shay pointed out that when the Wickersham was running, it was operated under a separate authority. That system worked well and could be analogous to this situation. CHAIRMAN WARD requested that Mayor Shay forward the resolution that would be before the Ketchikan Borough Assembly. STAN HJORT , Petersburg Transportation Committee, informed the committee that he had been a marine engineer for the AMHS for 15 years and an unlicensed oiler the 12 years prior. All the employees that spoke today have identified the problems. Mr. Hjort proposed that a certain amount of crude oil be swapped for finished diesel oil at a reduced price for any state diesel vehicle. SENATOR TAYLOR said that Mr. Hjort's proposal would be reviewed. CHAIRMAN WARD said that he intended to hold SB 21 and take testimony from the Administration at the next hearing of the bill. A fiscal note has not been received. He noted Commissioner Perkins and Director Haydens presence. SJR 12 CONSTRUCTION OF ALASKA HIGHWAY  Number 425 CHAIRMAN WARD introduced SJR 12 as the next order of business before the committee. SENATOR RANDY PHILLIPS thanked the committee for SJR 12 which requests $94 million for the completion of the reconstruction/repavement to the Shakwak project. Senator Phillips pointed out that the Shakwak project is highlighted in the blue on the map in the committee packet. JOHN CORMIE , Deputy Minister for Community and Transportation Services with the Yukon Government, referred the committee to the 1977 agreement signed by Canada and the U.S. which resulted in the Shakwak agreement. That agreement provided for the reconstruction of the Haines Road from Haines, Alaska to Haines Junction, Yukon and the Alaska Highway from Haines Junction north to the border near Beaver Creek. The provision of that agreement was that the right-of-way and the materials for construction would be provided by the federal government of Canada while the construction funds would come from the U.S. Over the past 20 years, much of the work has been done; however, the center portion has not been completed. Mr. Cormie said that the U.S. government would be encouraged to provide the funding for the completion if the project is to be continued. There are safety benefits with this construction project. Mr. Cormie noted that tourists are the main source of traffic and Alaska and the Yukon jointly market tourism. Therefore, any improvement to that highway would be an asset to the Yukon as well as Alaska. Mr. Cormie also mentioned that Alaska does utilize this highway for commercial traffic as well. CHAIRMAN WARD asked how many bridges were part of this section. ROBIN WALSH , Director of Transportation Engineering, said that there are five major bridges in this section. The White River bridge is under construction and will be completed next year. The remaining four bridges are a future phase of the project. The main intent is to get the road surface reconstructed to a modern standard. SENATOR RANDY PHILLIPS commented that the intent is to pass SJR 12 before the annual legislative exchange. CHAIRMAN WARD thanked everyone for their testimony and announced that SJR 12 would be held until the next committee meeting when it would be forward to the next committee of referral. There being no further business before the committee, the meeting was adjourned at 2:55 p.m.