SENATE TRANSPORTATION COMMITTEE March 11, 1997 1:45 p.m. MEMBERS PRESENT Senator Jerry Ward, Chairman Senator Gary Wilken, Vice Chairman Senator Lyda Green Senator Rick Halford Senator Georgianna Lincoln MEMBERS ABSENT All members present. OTHER MEMBERS PRESENT Senator Robin Taylor Senator John Torgerson COMMITTEE CALENDAR Overview by the Port of Bellingham SENATE BILL NO. 27 "An Act relating to the relocation to Ketchikan of certain offices, functions, and employees of the Alaska marine highway system." - HEARD AND HELD PREVIOUS SENATE ACTION SB 27 - No previous Senate action to record. WITNESS REGISTER Jim Darling, Executive Director Port of Bellingham 625 Cornwall Avenue Bellingham, Washington 98225-5017 POSITION STATEMENT: Presented a slide presentation on the Port of Bellingham. Pete Kremen, Executive Whatcom County Washington POSITION STATEMENT: Expressed interest in continuing partnership. Mark Asmundson, Mayor City of Bellingham Washington POSITION STATEMENT: Discussed the promotion of tourism. Jack Meyers, General Manager Maritime Contractors, Inc. Bellingham, Washington POSITION STATEMENT: Stressed the need for competitive bids. Joe Ambrose, Staff Senator Taylor State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Read the sponsor statement. Jan Sande, Captain Master on the Aurora Alaska Marine Highway System Ketchikan, Alaska POSITION STATEMENT: Supported SB 27. Erve Hagerup, Captain Columbia Alaska Marine Highway System Washington POSITION STATEMENT: Discussed the need for better communication. Robert Glenn Alaska Marine Highway System Ketchikan, Alaska POSITION STATEMENT: Discussed problems with the AMHS. ACTION NARRATIVE TAPE 97-7, SIDE A Number 001 CHAIRMAN WARD called the Senate Transportation Committee meeting to order at 1:45 p.m. and invited the Port of Bellingham to provide its overview to the committee. JIM DARLING , Executive Director of the Port of Bellingham, introduced the Port of Bellingham delegation present at the meeting. Mr. Darling then began the slide presentation by saying that Bellingham considers itself the front steps of Alaska in terms of the travelling public. The Alaskan experience begins at the Bellingham ferry terminal. Mr. Darling showed an aerial slide of the Port of Bellingham as well as a slide of the interior of the terminal. Mr. Darling informed the committee that the ferry terminal was constructed in 1989 by the port who floated bonds in order to construct the terminal at a cost of approximately $13 million. The terminal was built specifically for Alaska's ferries, prior to that Alaska's ferries went to the Port of Seattle. In 1988, Alaska went through a competitive process during which Bellingham was selected as the southern terminus. Mr. Darling pointed out that the terminal has developed into more and has become a focus for the community. Mr. Darling discussed the growing market for local cruises/tours from the terminal. The terminal is a 10 minute drive from Bellingham International Airport which is a port of entry. Currently, Bellingham International Airport serves SEA-TAC with commuter flights, but during tourist season there are flights to Canada and the interior of Alaska. Mr. Darling informed the committee that the reinstatement of train service was the most recent addition at the terminal. AMTRAK markets the Northwest, the train can be taken to Bellingham and then the ferry to Alaska. Mr. Darling noted that the State of Washington is working with AMTRAK regarding an additional train. Mr. Darling showed a slide of the interior of the train station to once again highlight the quality of the train station and the ferry terminal. The train station also houses Greyhound which also serves the Northwest and is also able to do intermodal transfers. Number 140 Mr. Darling informed the committee that the Bellingham run began in 1989 with a ridership of 38,000-42,000. In 1992 and 1993, the port served about 40,000 passengers and 10,000 vehicles. During that time the MV/Taku was running twice a week in the summer and the port experienced 73 and 69 sailings respectively. Due to repositioning issues in Southeast Alaska in 1994, single sailings began and the ridership fell to 30,000 for the year. Ridership has since increased and continues today. Mr. Darling showed a slide of the terminal under construction in 1989 when emphasizing the amount of investment from Bellingham and Whatcom County. This represents the communities commitment. Mr. Darling reviewed the financial terms between Alaska and the Port of Bellingham. The terminal building is on a 20 year lease which is a flat charge of $100,000 per year; there are no inflationary adjustments included. Further, operating charges help pay for operations. The port does all the ticketing and reservations for the southern terminus with the Port of Bellingham's employees. The services agreement and the operating charges have remained flat over the past two years due to efficiencies in the ticketing operation. Mr. Darling indicated that Alaska is receiving a bargain with regards to ticketing. There are also ramp charges that are paid for by the marine highway. Mr. Darling did not anticipate a substantial change in the operating costs which may experience some inflationary pressure. In conclusion, Mr. Darling informed the committee that about 40 percent of the traffic on the ferry from Bellingham goes to the Interior of Alaska. Number 232 CHAIRMAN WARD asked what the Port of Bellingham was politically. JIM DARLING informed the committee that there are 78 ports in Washington. The ports are special purpose municipal government agencies. There are six ports in Washington that are countywide, of which the Port of Bellingham is included. The port has three elected commissioners, elected by geographic district. The port has the ability to levy a tax and the Port of Bellingham accounts for about 3.5 percent of the tax in Whatcom County. Mr. Darling noted that decisions are made with regard to rate of return on investments. The port can issue tax exempt financing. Further, the port has the power of eminent domain just as a municipality. SENATOR LINCOLN asked if Alaskans were hired for reservations and ticketing and also are brochures on Alaska placed in the terminal. JIM DARLING said that the port is not required to hire Alaskan residents or persons who have lived in Alaska. However, all employees are sent to Alaska on the ferry. Also the local convention bureau hosts an information booth about Alaska all day which provides hundreds of brochures on Alaska. Mr. Darling noted that there is also a program which encourages people waiting for the ferry to visit Fairhaven, the historic district of Bellingham. Through the Merchants Association, training about Alaska occurs. Mr. Darling emphasized the need to receive advanced ticket lists for the ferry in order to send information about Alaska and Bellingham to travellers before making all their plans. Number 298 CHAIRMAN WARD believed that when a person calls the 800 number for Alaskan information on driving the Alcan, the person also receives information regarding the marine highway system. Perhaps, that list should be available as well. SENATOR LINCOLN inquired as to the number of employees in the ticketing and reservation office. JIM DARLING said the office employs about 4.5 employees, and noted that some are part-time employees in the summer. SENATOR LINCOLN encouraged the port to hire some Alaskans, especially in the ticketing and reservation positions. JIM DARLING pointed out that there is a low turn over rate for those positions. PETE KREMEN , Whatcom County Executive, appreciated that Bellingham is the southern terminus for the AMHS. Mr. Kremen hoped to develop a working partnership with Alaska for many years. CHAIRMAN WARD asked if an expanded marketing program for the terminal had been undertaken. PETE KREMEN clarified that Whatcom County is not charged with fostering or improving the usage of the ferry system. However the City of Bellingham, Whatcom County, the Port of Bellingham, the Chamber of Commerce and Industry, the Economic Development Council, and the private sector are working together in order to promote Bellingham and its tie to Alaska with the marine highway system. This collaborative effort can improve the usage. Number 347 MARK ASMUNDSON , Mayor of Bellingham, noted Bellingham's long standing relationship with Alaska. Mr. Asmundson acknowledged the benefits to Bellingham from the traffic to Alaska. Mr. Asmundson said that an important part of Bellingham's future is tourism, therefore it is in the city's interest for the ferry to succeed. Perhaps, the tourist angle for the ferry has not been explored enough, particularly with regard to the shoulder seasons. SENATOR LINCOLN inquired as to who Mr. Asmundson is working with to promote tourism. MARK ASMUNDSON informed the committee that part of the reason for this trip was to determine who to work with on tourism. Mr. Asmundson indicated the need to be consistent with the work and the promotions of the AMHS. Furthermore, combined marketing between Bellingham and Alaska for shared interests would expand efficiencies with limited resources. CHAIRMAN WARD offered to work with Mr. Asmundson and noted that Senator Taylor may have some thoughts on the marketing. JACK MEYERS , General Manager of Maritime Contractors, Inc., understood that much work is going to the Ketchikan shipyard without competition. The Maritime Contractors, Inc. have just completed a SOLAS upgrade on the Aurora. Mr. Meyers did not believe that Ketchikan could have done the same job in the same amount of time as the Maritime Contractors, Inc. did due to the complexity and time constraints of the job. Mr. Meyers believed that more for one's money would be received with competitive bids. JIM DARLING thanked the committee for its time. He noted that the port does work with AVA and the AMHS on tourism issues. Number 417 SENATOR TAYLOR explained that Bellingham is present due to the problems with Seattle. Seattle provided one of the poorest facilities and failed to maintain the facility and charged more money than Bellingham currently charges. When this was put out to bid, the Port of Seattle offered the same lease terms as in the previous year while the Port of Bellingham and the Port of Tacoma had fairly competitive bids. The Port of Bellingham was chosen and the port has been wonderful to work with. Senator Taylor was frustrated with Mr. Meyers comments. The State of Washington does not send any of its ferries outside its borders to be worked on. Senator Taylor emphasized that Alaska would like to bid on that work. CHAIRMAN WARD noted that there would be future contact with the Port of Bellingham regarding the operations and the possibility of using Bellingham as a model for Alaska. Chairman Ward thanked the Port of Bellingham for coming. SB 27 FERRY SYSTEM HEADQUARTERS IN KETCHIKAN  Number 463 CHAIRMAN WARD announced that SB 27 was the final order of business before the committee. JOE AMBROSE , Staff to Senator Taylor, read the following sponsor statement into the record: Ten years ago, Acres International, a Canadian firm contracted to study the Alaska Marine Highway System, reported what it termed "an extraordinary degree of mistrust between ship and shore that has its root in the overall relationship between management and staff". Acres stated flatly that "ship systems and operations cannot function in isolation from the shore, both are interdependent. There must therefore be an effective dialogue between the two, outside union contract negotiations. Planning forums for the ship to understand management's prerogatives, and the shore to respond to ongoing needs of each vessel are essential". In the decade since the Acres Report, little has happened to end the isolation between ship and shore and many believe the situation described 10 years ago is worse today. SB 27 has been called a "jobs grab" bill, intended to help Ketchikan's ailing economy. Such charges are untrue. Senate Bill 27 is intended to end the isolation between the fleet and the administration. Locating some or all of the administrative offices on state-owned property adjacent to the Ketchikan terminal would end that isolation and put the administration within walking distance of the fleet. It is apparent the administration of the Marine Highway feels threatened by even consideration of this move. At the end of November, in reaction to media reports that a bill would be introduced addressing this issue, the Marine Highway director prepared a request for proposals. That RFP called for an economic analysis of relocating the AMHS administrative office to Ketchikan. The RFP had an ambitious timeline. It was released on December 2, 1996 with a proposal deadline three days later, on December 5. The RFP originally called for completion of this $25,000 study by January 15. That deadline has now been extended and a draft report is due by March 15. The system director told the Finance Sub-Committee on the DOT/PF budget that he had received an initial draft, which has been returned to the contractor for further review. AMHS has declined to provide the Senate Transportation Committee with a copy of that draft. The relocation of some or all of the administrative offices to Ketchikan is not a new idea nor was it prompted by concerns over the Ketchikan economy. It was prompted by a valid concern over the continued isolation of the Marine Highway administration from the very fleet they are hired to manage. In response to Senator Lincoln, CHAIRMAN WARD confirmed that SB 27 would not be passing out of committee today. SENATOR LINCOLN inquired as to Senator Taylor's response regarding the lack of vacant office space in Ketchikan and the need to construct a building for this purpose. How much would such a building cost? SENATOR TAYLOR believed that there is available office space, but those offices are about a mile from the terminal. Senator Taylor emphasized the need to have the offices on the site of the terminal which will require a new building. Senator Taylor informed the committee that the Ketchikan Borough may be willing to provide some, if not all of the finances and lease the building to the state. In response to Senator Lincoln, Senator Taylor indicated that the employees would be given the opportunity to transfer. He believed that it would be the state's responsibility to pay for the moving costs, if the employee decided to transfer. However, Senator Taylor pointed out that it would be an insignificant one time expenditure. Senator Taylor believed that Mr. Hayden could inform the committee to the cost of the move. CHAIRMAN WARD interjected that SB 27 was being held so that the Administration could provide the committee with a report that is not quite final. Mr. Hayden would not be testifying today, but he could provide that at the next hearing on SB 27. SENATOR LINCOLN asked if some of the offices would remain in Juneau, and if so which positions and what would the additional travel costs be. Senator Lincoln also inquired of the cost of travel for face to face discussions between the government and the AMHS if located in Ketchikan. CAPTAIN JAN SANDE , Master on the Aurora, concurred with Mr. Ambrose's comments regarding the Acres' report. Captain Sande discussed the great communication between the crew and the administration in the 1960s when the offices were located in downtown Juneau. When the sailings moved to Auke Bay, the communication was lost and the problem has increased every year. Captain Sande believed the move to Ketchikan was important and he supported SB 27. SENATOR LINCOLN asked how the communication would improve by moving the offices to Ketchikan. CAPTAIN JAN SANDE believed that person to person communication has an aspect not found through communication on the phone or through writing. The proximity of a building on the property allows better communication. TAPE 97-7, SIDE B Captain Sande indicated that personal contact is imperative, there is not time for all the written communication. Number 580 CAPTAIN ERV HAGERUP , Columbia, echoed Captain Sande's sentiments regarding the lack of communication between the ship and the shore. The ships and shoreside should be in proximity to have a dialogue. Currently, the ships are ignorant about the goings on with the fleet and often rumors are heard from the Stewards Department. Captain Hagerup recalled that during his 30 years, there have only been three masters meetings with the office. What other agency has the main people in the field only meet once every 10 years? In conclusion, Captain Hagerup emphasized the need to address the problems with communication regardless of where the office is located. In response to Senator Taylor, Captain Hagerup informed the committee that he had been with the AMHS for about 31 years. In response to Chairman Ward, Captain Hagerup reiterated that not much communication is received from the office. Captain Hagerup noted that he did have good communication with the port captain to whom he called to determine which rumors were valid. Better communication is necessary. CHAIRMAN WARD asked if anyone else wished to testify. ROBERT GLENN , 15 year AMHS employee and union representative on the Executive Board, agreed with Captain Sande's, Captain Hagerup's and Mr. Ambrose's testimony. Mr. Glenn believed it logical to have at least some of Juneau's Central Office (JCO) personnel in Ketchikan due to the other facilities located there. Mr. Glenn agreed with Mr. Ambrose's comments regarding the Acres report and hoped the committee would address the concerns presented in that report. Mr. Glenn said that he had given Senator Taylor a brief report. Communication is a problem. Mr. Glenn said that dispatching would be an appropriate area to move to Ketchikan in order to better communication regarding grievances. Mr. Glenn emphasized the need to downsize the support services of JCO no matter its location. The JCO positions should be reviewed and determinations regarding the importance, efficiency and money made from the positions should be done. The managers on the AMHS have done just that on the ship for years. Mr. Glenn noted the growth of the JCO. Mr. Glenn stressed the importance to know from where the money to move the facility to Ketchikan would come. Taking money from the operating budget for that purpose would be unacceptable. Mr. Glenn discussed a scenario in which the ferries' schedule is not amenable, services decrease and the prices rise which result in less riders. Mr. Glenn also pointed out that JCO does not participate in the winter reduction that the ferry crew experiences each year. CHAIRMAN WARD noted that Senator Taylor had shared the report with the committee. With regard to the money being taken from the operations budget, Senator Taylor has shared that concern with the committee as well. Chairman Ward asked if anyone else wished to testify. Hearing none, Chairman Ward held SB 27 at the request of the Administration. JOE AMBROSE requested that the initial draft of the report be submitted to the committee by Mr. Hayden in order to track the changes requested by DOT. CHAIRMAN WARD stated that Mr. Hayden agreed to provide that initial report. There being no further business before the committee, the meeting was adjourned at 2:45 p.m.