Legislature(2015 - 2016)CAPITOL 17

02/25/2016 01:00 PM TRANSPORTATION

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01:10:18 PM Start
01:10:34 PM HB249
01:36:55 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CS HB 249(TRA) Out of Committee
-- Invited Testimony Followed by Public --
         HB 249-ELECTRONIC TAX RETURNS & MOTOR FUEL TAX                                                                     
1:10:34 PM                                                                                                                    
CO-CHAIR FOSTER announced  that the only order  of business would                                                               
be  HOUSE  BILL  NO.  249,   "An  Act  requiring  the  electronic                                                               
submission  of a  tax return  or  report with  the Department  of                                                               
Revenue; relating  to the  motor fuel tax;  and providing  for an                                                               
effective date."                                                                                                                
[Before the committee was the  proposed committee substitute (CS)                                                               
for HB 249, Version E.]                                                                                                         
CO-CHAIR  FOSTER announced  that the  committee would  be working                                                               
from the proposed  committee substitute (CS) for  HB 249, Version                                                               
29-GH2912\N, Nauman, 2/24/16.  He  explained that the only change                                                               
from Version  E to  Version N, is  that the  House Transportation                                                               
Standing Committee now is listed.                                                                                               
[The committee treated Version N, labeled 29-GH2912\N, Nauman,                                                                  
2/24/16, as the adopted working draft.]                                                                                         
1:11:16 PM                                                                                                                    
REPRESENTATIVE STUTES moved to adopt [Amendment 1], labeled 29-                                                                 
GH2912\E.1, Nauman, 2/23/16, which read:                                                                                        
     Page 2, line 23:                                                                                                           
          Delete "of all descriptions"                                                                                      
          Insert "operating for                                                                                             
               (i)  the  purpose  of commercial  fishing  is                                                                
     five   cents  a   gallon;  in   this  sub-subparagraph,                                                                
     "commercial   fishing"  has   the   meaning  given   in                                                                
     AS 16.05.940;                                                                                                          
               (ii)  a   purpose  other  than   the  purpose                                                                
     described in (i) of this subparagraph"                                                                               
     Page 3, lines 30 - 31:                                                                                                     
          Delete "OF ALL DESCRIPTIONS"                                                                                          
          Insert "OPERATING FOR                                                                                                 
               (i)   THE  PURPOSE OF  COMMERCIAL FISHING  IS                                                                    
     FIVE   CENTS  A   GALLON;  IN   THIS  SUB-SUBPARAGRAPH,                                                                    
     "COMMERCIAL   FISHING"  HAS   THE   MEANING  GIVEN   IN                                                                    
     AS 16.05.940;                                                                                                              
               (ii)    A  PURPOSE  OTHER  THAN  THE  PURPOSE                                                                    
     DESCRIBED IN (i) OF THIS SUBPARAGRAPH"                                                                                     
     Page 5, line 6:                                                                                                            
          Delete "of all descriptions"                                                                                      
          Insert "operating for                                                                                             
               (i)   the  purpose of  commercial fishing  is                                                                
     five   cents  a   gallon;  in   this  sub-subparagraph,                                                                
     "commercial   fishing"  has   the   meaning  given   in                                                                
     AS 16.05.940;                                                                                                          
               (ii)    a  purpose  other  than  the  purpose                                                                
     described in (i) of this subparagraph"                                                                                 
     Page 6, lines 14 - 15:                                                                                                     
          Delete "OF ALL DESCRIPTIONS"                                                                                          
          Insert "OPERATING FOR                                                                                                 
               (i)   THE  PURPOSE OF  COMMERCIAL FISHING  IS                                                                    
     FIVE   CENTS  A   GALLON;  IN   THIS  SUB-SUBPARAGRAPH,                                                                    
     "COMMERCIAL   FISHING"  HAS   THE   MEANING  GIVEN   IN                                                                    
     AS 16.05.940;                                                                                                              
               (ii)    A  PURPOSE  OTHER  THAN  THE  PURPOSE                                                                    
     DESCRIBED IN (i) OF THIS SUBPARAGRAPH"                                                                                     
1:11:27 PM                                                                                                                    
CO-CHAIR FOSTER objected for purposes of discussion.                                                                            
REPRESENTATIVE STUTES stated that  the proposed amendment creates                                                               
an  exemption   for  marine  fuel  tax   and  exempts  commercial                                                               
fisherman from  the proposed increase.   She related that  in the                                                               
governor's fisheries  tax proposal, the commercial  fishing fleet                                                               
would  experience a  1 percent  increase.   She  stated that  the                                                               
current fish  prices are about one  third of their value  from 15                                                               
years ago, and explained that there's  a glut on the fish market,                                                               
the dollar  is very strong, and  the foreign market is  very poor                                                               
for  Alaskan  seafood.    Consequently  it  makes  being  in  the                                                               
fisheries business  cost prohibitive.  She  noted that commercial                                                               
fishermen were  the only user  group that  had stepped up  to the                                                               
plate  and  indicate  a  willingness  to  accept  some  level  of                                                               
taxation in order  to help with Alaska's budget  deficit, but she                                                               
suggested  that the  proposed  tax seems  high.   The  cumulative                                                               
effects  of both  the fish  and  motor fuel  tax proposals  could                                                               
prove to be unbearable for fishermen.                                                                                           
1:13:20 PM                                                                                                                    
REPRESENTATIVE  MILLETT  stated  support  for  Amendment  1,  and                                                               
disclosed her son's involvement in commercial fishing.                                                                          
REPRESENTATIVE  STUTES pointed  out that  a Commercial  Fisheries                                                               
Entry  Commission (CFEC)  card would  be required  to demonstrate                                                               
qualification  for the  exemption.   She  noted that  "commercial                                                               
fisher"  as  defined  by  state  statute  is  referenced  in  the                                                               
1:14:19 PM                                                                                                                    
REPRESENTATIVE HUGHES stated opposition  to the amendment in that                                                               
the  exemption  is  limited  to   a  single  industry  and  other                                                               
industries may be  able to make similar  argument.  Additionally,                                                               
she said, the  proposed fisheries tax legislation may  or may not                                                               
be passed.                                                                                                                      
1:15:03 PM                                                                                                                    
CO-CHAIR FOSTER  withdrew his  objection to  the motion  to adopt                                                               
Amendment 1, and asked if there was any further objection.                                                                      
CO-CHAIR HUGHES objected.                                                                                                       
A  roll call  vote  was taken.    Representatives Ortiz,  Millet,                                                               
Stutes,  and  Foster  voted  in  favor of  the  motion  to  adopt                                                               
[Amendment  1].     Representative   Hughes  voted   against  it.                                                               
Therefore, Amendment 1 was adopted by a vote of 4-1.                                                                            
1:16:00 PM                                                                                                                    
CO-CHAIR  HUGHES  moved  to  adopt  [Amendment  2],  labeled  29-                                                               
GH2912\E.2, Nauman, 2/23/16, which read:                                                                                        
     Page 9, line 15:                                                                                                           
          Delete   "emergency   vehicle,   as   defined   in                                                                    
     AS 11.56.825"                                                                                                              
          Insert    "aircraft,    watercraft,   or    ground                                                                    
       transportation vehicle operated by an entity that                                                                        
     provides an emergency or ambulance service"                                                                                
CO-CHAIR FOSTER objected for purposes of discussion.                                                                            
CO-CHAIR  HUGHES stated  that [Amendment  2] is  a technical  fix                                                               
that would  adjust language  on page  9, line 15,  of HB  249, to                                                               
ensure that  air, water, and  ground emergency vehicles  would be                                                               
covered under the exemption.                                                                                                    
CO-CHAIR  FOSTER removed  his objection.  There being  no further                                                               
objection, Amendment 2 was adopted.                                                                                             
1:17:19 PM                                                                                                                    
NICK  D'ANDREA, Director  of  Government  Affairs, United  Parcel                                                               
Service, Inc.  (UPS) Airlines, related  that UPS  appreciates the                                                               
long-standing history that the company  has had with the state of                                                               
Alaska, where the  company has 1,100 employees, and  where 489 of                                                               
its pilots  are domiciled.  He  explained that Alaska has  had an                                                               
important role  in UPS' global  reach; not only does  the company                                                               
deliver  to  thousands of  customers  daily,  but also  Anchorage                                                               
serves as UPS' gateway to  the Asia-Pacific region.  Mr. D'Andrea                                                               
indicated that Anchorage  is also the training  location for UPS'                                                               
MD-11 and  747 fleets.  He  stated that UPS is  located in Alaska                                                               
because of the excellent business  environment, and has paid $7.3                                                               
million in landing fees and $6 million in taxes.                                                                                
1:18:32 PM                                                                                                                    
MR. D'ANDREA  stated that UPS'  concern with a fuel  tax increase                                                               
is two-fold.   First, if the Trans-Pacific  Partnership is passed                                                               
and ratified  by Congress, there  will be a  significant increase                                                               
in the  volume of cargo being  moved between Asia and  the United                                                               
States.   When  air cargo  companies  are looking  for places  to                                                               
locate,  the  number one  consideration  is  the fuel  tax  rate.                                                               
Behind labor  cost, fuel is  the most expensive budget  item, and                                                               
he clarified  that at  times fuel  costs can  exceed the  cost of                                                               
labor.   He stated that it's  imperative for Alaska to  make sure                                                               
that it's "in the game," and  a tax increase could result in some                                                               
carriers   bypassing  the   region  by   purchasing  longer-range                                                               
aircraft; an  alternative which  at least  one cargo  carrier has                                                               
reportedly  exercised.   Secondly,  if cargo  carriers move  away                                                               
from  Alaska, fewer  dollars  will be  available  to support  the                                                               
airport  systems.   He suggested  that  this would  be a  "double                                                               
whammy"   in  that   the  state   and  the   airports  would   be                                                               
simultaneously  losing revenue.   From  an industry  perspective,                                                               
Alaska has  an opportunity to  grow the aviation industry  in the                                                               
state,  but an  increase in  the aviation  fuel tax  could thwart                                                               
that effort.                                                                                                                    
1:20:26 PM                                                                                                                    
CO-CHAIR HUGHES  asked where Alaska  currently ranks in  terms of                                                               
jet  fuel  pricing, and  whether  that  would change  should  the                                                               
proposed legislation pass.                                                                                                      
MR. D'ANDREA replied that Alaska  is currently ranked 35th in jet                                                               
fuel prices, but  if the tax were implemented the  state would be                                                               
ranked  15th, thus  moving from  the bottom  quartile to  the top                                                               
quartile.  He offered his  understanding that the same sentiments                                                               
have  been   submitted  to  the  committee   by  other  carriers,                                                               
including:   the Cargo Airline  Association, Delta  Airlines, and                                                               
Airlines for America.                                                                                                           
1:21:22 PM                                                                                                                    
REPRESENTATIVE  ORTIZ  asked  what  percentage  of  UPS'  overall                                                               
operating costs are fuel-related.                                                                                               
MR. D'ANDREA offered to provide further information.                                                                            
1:21:50 PM                                                                                                                    
DANA  DEBEL, Director  of Government  Affairs,  Delta Air  Lines,                                                               
Inc.  (Delta), explained  that similar  to  UPS, Delta's  highest                                                               
operating cost  alternates between  labor and  fuel.   She shared                                                               
that over the  last five to six years, Delta  has spent somewhere                                                               
between $10  billion and  $12 billion annually  on fuel  and that                                                               
the only  larger domestic purchaser  is the combined  branches of                                                               
the U.S.  military.  She  explained that  fuel is a  "huge, huge"                                                               
driver for Delta.  The labor  costs only exceeded fuel costs this                                                               
year due to  the dip in fuel prices.   Outside of that exception,                                                               
fuel has been Delta's number  one operating cost for the previous                                                               
five to six years.                                                                                                              
1:23:00 PM                                                                                                                    
MR. D'ANDREA noted  that UPS pays the state  $130 million dollars                                                               
annually for fuel.                                                                                                              
1:23:11 PM                                                                                                                    
REPRESENTATIVE    STUTES    sought   clarification    that    the                                                               
aforementioned  annual fuel  cost  of  $10-$12 billion  described                                                               
airlines as a whole, not just Delta.                                                                                            
MS. DEBEL  replied that the  figure was Delta's annual  fuel cost                                                               
on  its  profit and  loss  statement,  not  that of  the  airline                                                               
industry as a whole.                                                                                                            
1:23:49 PM                                                                                                                    
MS. DEBEL  began a brief PowerPoint  presentation entitled "Delta                                                               
Air Lines in  Alaska."  She stated that  Delta currently operates                                                               
19  round-trip  flights  per  day in  Alaska,  in  five  markets:                                                               
Fairbanks, Anchorage,  Juneau, Sitka,  and Ketchikan.   She noted                                                               
that the Sitka  and Ketchikan flights operate  seasonally.  Delta                                                               
employs 161 people  in the state, which  includes people employed                                                               
by  the  company's connecting  carriers.    The company's  annual                                                               
expenditure on  goods and services  in Alaska,  excluding payroll                                                               
and  fuel, is  $19.1 million,  which includes  approximately $1.4                                                               
million in landing  fees; an ever increasing amount.   She stated                                                               
that Delta  considers itself to  be a substantial  contributor to                                                               
the state.                                                                                                                      
MS. DEBEL  stated that, of the  five markets in Alaska,  the most                                                               
robust is  the flight  service for  Anchorage connecting  to five                                                               
markets  in the  Lower 48,  which are:   once  daily to  Atlanta,                                                               
Georgia; three times daily to  Minneapolis, Minnesota; once daily                                                               
to  Portland, Oregon;  once daily  to Salt  Lake City,  Utah; and                                                               
seven  times daily  to Seattle,  Washington.   She  noted that  a                                                               
seventh  round  trip  to  Seattle  and  a  third  round  trip  to                                                               
Minneapolis  were added  in the  last  year and  that Delta  "up-                                                               
gauged" the  size of  the aircraft  for the  Minneapolis service.                                                               
She  explained that  these  actions are  positive,  as Delta  up-                                                               
gauges  when there  is  more demand  than it  can  fill with  its                                                               
current  service.   She  stated  that  Delta has  also  up-gauged                                                               
service  between  Minneapolis and  Fairbanks  in  the last  year.                                                               
Additionally,  Juneau has  recently received  year-round service,                                                               
however, Sitka and Ketchikan flights remain seasonal.                                                                           
MS. DEBEL  said Delta has  been growing  in Alaska and  likes the                                                               
state  as  a  market  because  there  is  potential  for  growth;                                                               
however,  she  stated that  an  increase  in  fuel tax  would  be                                                               
another cost barrier and cause for  concern.  She stated that the                                                               
proposed increase  in fuel  tax would catapult  Alaska up  in the                                                               
rank of fuel taxes, and people  at Delta and the airline industry                                                               
in general  pay very close  attention to tax  changes, especially                                                               
in  the case  of a  three-fold increase.   She  expressed concern                                                               
that the  proposed tax increase  would have the  most significant                                                               
effects on  companies like Delta  and UPS, but that  the revenues                                                               
would  primarily  be  spent at  airports  where  neither  company                                                               
operates.    She  indicated  that  Delta's  preferred  method  of                                                               
addressing the needs of airports  is through landing fees, rental                                                               
rates, and concession  fees because they are all  assessed at the                                                               
airport level, the  money is reinvested in the  airport where the                                                               
fee is  levied, it is spread  amongst the users of  the airports,                                                               
and  there  is greater  transparency  regarding  where the  money                                                               
goes.  She  offered that Delta is willing to  invest in necessary                                                               
capital and  infrastructure needs and, this  past year, supported                                                               
over  $3 million  in  new  capital projects  at  the Ted  Stevens                                                               
Anchorage  International  Airport.     She  stated  that  Delta's                                                               
preference  is to  contribute  these funds  at  the local  level,                                                               
because the company's  goal is to continue to grow  in Alaska and                                                               
provide service as efficiently and economically as possible.                                                                    
1:29:07 PM                                                                                                                    
CO-CHAIR FOSTER asked  whether UPS and Delta were  members of the                                                               
Alaska Aviation Advisory Board or if  they had any input into the                                                               
board's   process,  which   developed  the   aviation  fuel   tax                                                               
recommendation provided to the governor.                                                                                        
MS. DEBEL responded no.                                                                                                         
MR.  D'ANDREA  responded  no,  and  indicated  he  only  recently                                                               
learned about the advisory board.                                                                                               
1:30:34 PM                                                                                                                    
CO-CHAIR FOSTER  opened public  testimony, after  ascertaining no                                                               
one further wished to testify, closed public testimony.                                                                         
1:31:08 PM                                                                                                                    
REPRESENTATIVE MILLETT  stated her understanding that  great care                                                               
was utilized  in vetting the  governor's proposed motor  fuel tax                                                               
bill, but stated  that it would be difficult for  her to increase                                                               
any tax  at this time.   She stated that  she had agreed  to move                                                               
the bill to  the finance committee, not because  she supports the                                                               
proposal, but  because of  the continued  process that  this bill                                                               
would undergo  when all  of the  tax bills were  in front  of the                                                               
House  Finance Committee  as  a  full package.    She stated  her                                                               
belief that while  the legislature was still  trimming the budget                                                               
and identifying  areas for government  efficiencies, it  would be                                                               
hasty to  pass a  motor fuel  tax effecting  industry, commercial                                                               
fisherman,   pilots,  mariners,   commuters,  and   residents  if                                                               
islands, like Kodiak,  where the only means  of transportation to                                                               
or  from  requires  some  type  of hydrocarbon.    She  said  she                                                               
respects the  governor for introducing  the individual  pieces of                                                               
legislation  and  for  providing  the opportunity  to  hear  from                                                               
industry  and  the  public  via   the  committee  process.    She                                                               
reiterated that despite  her disapproval of HB  249, she supports                                                               
it being  passed to the House  Finance Committee where it  can be                                                               
considered  with  the  rest  of the  finance  packages  that  the                                                               
governor  has offered,  including the  "sin" taxes,  fishing tax,                                                               
and  the plethora  of others  that  have been  introduced by  the                                                               
administration, emphasizing that she is  not endorsing a fuel tax                                                               
by letting HB 249 pass out  of committee.  Alaska is experiencing                                                               
tough  times;  therefore,  HB  249  has  to  be  a  part  of  the                                                               
conversation, she finished.                                                                                                     
1:32:54 PM                                                                                                                    
CO-CHAIR FOSTER stated that he  would like to echo Representative                                                               
Millet's and Representative Hughes' comments  that the job of the                                                               
committee  is  to   hear  the  proposal  and   start  the  public                                                               
discussion,  so that  the public  could have  the opportunity  to                                                               
provide  testimony.      He  explained  that  the  House  Finance                                                               
Committee could further modify HB 249  and may or may not pass it                                                               
out of  that committee.   He stated  that three changes  had been                                                               
made  by  the  House  Transportation  Standing  Committee:    the                                                               
addition  of a  sunset  provision,  the addition  of  an $85  per                                                               
barrel  oil  price  trigger,  and   the  exemption  of  emergency                                                               
vehicles.  He  noted that the House Finance  Committee could make                                                               
substantive changes.                                                                                                            
1:33:52 PM                                                                                                                    
CO-CHAIR HUGHES explained that it  is important for the public to                                                               
be aware  that revenue  bills such as  HB 249 do  not have  to be                                                               
assigned to a standing committee,  but the legislature thought it                                                               
was important  to not send HB  249 directly to the  House Finance                                                               
Committee,  in  part because  of  the  number  of bills  in  that                                                               
committee and  in part to  give the public  a chance to  begin to                                                               
consider  it  and provide  input.    She  stated that  the  House                                                               
Transportation  Standing Committee  has  received testimony  from                                                               
many  people, and  she surmised  that individuals  who have  been                                                               
listening to the  proceedings could probably tell  that she, like                                                               
Representative  Millet,  has  reservations  about HB  249.    She                                                               
opined  that  now is  not  a  good time  to  put  the payment  of                                                               
government services  on all  Alaskans.   She said  eventually any                                                               
tax  increases  that  are  implemented   would  be  visited  upon                                                               
consumers  and   that  further  reductions  in   the  budget  are                                                               
necessary.   She  noted that  the CS  inserts language  to ensure                                                               
that  the revenues  produced cannot  be  used for  administrative                                                               
purposes  and  must be  directed  to  costs associated  with  the                                                               
operation of infrastructure.                                                                                                    
CO-CHAIR HUGHES  related that she  used to live in  rural Alaska,                                                               
thus,  she   expressed  her  understanding   of  the   high  cost                                                               
associated with  living there.   She explained that  although she                                                               
opposed the amendment offered by  Representative Stutes, she also                                                               
would  prefer that  commercial  fishers  not pay  the  tax.   She                                                               
reemphasized  that the  focus  of the  legislature  should be  on                                                               
reducing the cost  of government, but that the bill  should go to                                                               
the  House  Finance Committee  for  discussion  of the  numerical                                                               
figures  in  the  bill,  as  the  House  Transportation  Standing                                                               
Committee's focus  is on policy.   She underscored that  she does                                                               
not support the bill in its current form.                                                                                       
1:36:16 PM                                                                                                                    
REPRESENTATIVE  MILLETT moved  to  report CSHB  249, Version  29-                                                               
GH2912\N,  Nauman,  2/24/16,  as  amended,  from  committee  with                                                               
individual  recommendations  and  the accompanying  fiscal  note.                                                               
There being  no objection,  CSHB 249(TRA)  was reported  from the                                                               
House Transportation Standing Committee.                                                                                        

Document Name Date/Time Subjects
HB 249 Draft Proposed Amendment Ver E.1.pdf HTRA 2/25/2016 1:00:00 PM
HB 249
HB 249 Draft Proposed Amendment ver E.2.pdf HTRA 2/25/2016 1:00:00 PM
HB 249
HB249 Draft Proposed TRA CS Ver N.pdf HTRA 2/25/2016 1:00:00 PM
HB 249
HB 249 Opposing Document - Letter Cargo Airline Association 2-25-2016.pdf HTRA 2/25/2016 1:00:00 PM
HB 249
HB249 Opposing Document - Letter Airlines for America 2-25-2016.pdf HTRA 2/25/2016 1:00:00 PM
HB 249
HB 249 Opposing Document - Presentation Delta Airlines 2-25-201.pdf HTRA 2/25/2016 1:00:00 PM
HB 249