Legislature(2017 - 2018)CAPITOL 17

03/16/2017 01:00 PM House TRANSPORTATION

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04:23:07 PM Start
04:25:01 PM Presentation: Alaska Marine Highway System Reform Project by the Southeast Conference
05:06:55 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 10 min. After Recess --
-- Location Change --
+ Presentation: AK Marine Highway Reform Project TELECONFERENCED
by Southeast Conference
<Bill Hearing Canceled>
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
                         March 16, 2017                                                                                         
                           4:23 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Louise Stutes, Co-Chair                                                                                          
Representative Chuck Kopp                                                                                                       
MEMBERS ABSENT                                                                                                                
Representative Adam Wool, Co-Chair                                                                                              
Representative Matt Claman                                                                                                      
Representative Harriet Drummond                                                                                                 
Representative Mark Neuman                                                                                                      
Representative Colleen Sullivan-Leonard                                                                                         
Representative David Eastman (alternate)                                                                                        
Representative Gabrielle LeDoux (alternate)                                                                                     
COMMITTEE CALENDAR                                                                                                            
PRESENTATION: ALASKA MARINE HIGHWAY SYSTEM REFORM PROJECT BY                                                                    
SOUTHEAST CONFERENCE                                                                                                            
     - HEARD                                                                                                                    
HOUSE BILL NO. 136                                                                                                              
"An Act relating to motor vehicle franchises, motor vehicle                                                                     
transactions,    motor    vehicle    dealers,    motor    vehicle                                                               
manufacturers, and motor vehicle distributors."                                                                                 
     - BILL HEARING CANCELED                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
ROBERT VENABLES, Energy and Transportation Coordinator                                                                          
Southeast Conference                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Co-Presented the Alaska Marine Highway                                                                   
Services Reform Project Business and Operational Plan.                                                                          
JOHN WATERHOUSE, Chief Concept Engineer                                                                                         
Elliot Bay Design Group                                                                                                         
Seattle, Washington                                                                                                             
POSITION  STATEMENT:    Co-presented the  Alaska  Marine  Highway                                                             
Services Reform Project Business and Operational Plan.                                                                          
ACTION NARRATIVE                                                                                                              
4:23:07 PM                                                                                                                    
CO-CHAIR LOUISE  STUTES called the House  Transportation Standing                                                             
Committee meeting  to order at  4:23 p.m.  Representatives Stutes                                                               
and Kopp were present at the call to order.                                                                                     
^PRESENTATION:  Alaska Marine  Highway System  Reform Project  by                                                               
the Southeast Conference                                                                                                        
       PRESENTATION: Alaska Marine Highway System Reform                                                                    
             Project Business and Operational Plan                                                                          
                  by the Southeast Conference                                                                               
CO-CHAIR STUTES announced  that the only order  of business would                                                               
be  a presentation  by the  Southeast  Conference titled  "Alaska                                                               
Marine Highway  Services Reform Project Business  and Operational                                                               
4:25:01 PM                                                                                                                    
ROBERT   VENABLES,   Energy   and   Transportation   Coordinator,                                                               
Southeast  Conference,   offered  that  the   presentation  would                                                               
address questions  and issues regarding  the costs of  the Alaska                                                               
Marine Highway System  (AMHS) and what could be done  to make the                                                               
system  more  sustainable  and  viable.    He  advised  that  the                                                               
Southeast Conference  was formed  58 years ago  in large  part to                                                               
create the AMHS,  and it is pleased to lead  the statewide effort                                                               
in  determining what  measures could  be taken  to move  the AMHS                                                               
forward.  Denis  Watson, Mayor of the City of  Craig, is chair of                                                               
the  committee, and  Jim Calvin,  McDowell  Group, has  performed                                                               
exhaustive work on  the AMHS issue moving forward.   He described                                                               
that  Mr. Waterhouse  and his  firm, Elliott  Design Group,  have                                                               
been involved  with the AMHS  itself for  quite a few  years, but                                                               
also with  other firms and marine  highway transportation systems                                                               
throughout  the  country.   The  Southeast  Conference leads  the                                                               
project  steering  committee  [depicted   on  slide  2,  "Project                                                               
Steering  Committee"].   He  advised that  labor  and unions  are                                                               
represented in  this effort because  the goal is to  reach across                                                               
the  state  to  include  stakeholders  representing  all  of  the                                                               
"causes and  regions" that the AMHS  touches.  He offered  that a                                                               
statewide steering  committee applied  to be  part of  this group                                                               
and have met throughout the year.                                                                                               
4:27:13 PM                                                                                                                    
MR. VENABLES turned  to slide 3, "Ferry Summit"  and advised that                                                               
the  Project  Steering  Committee   began  with  a  well-attended                                                               
listening session in  Anchorage with the intent  that the process                                                               
would  lead to  recommendations addressing  the needs  the public                                                               
believes  the AMHS  needs to  perform and  produce.   He referred                                                               
back  to slide  2 and  added that  the ex  officio member  is the                                                               
Department  of  Transportation   &  Public  Facilities  reflected                                                               
through Commissioner Marc Luiken  and Deputy Commissioner Michael                                                               
4:28:20 PM                                                                                                                    
JOHN  WATERHOUSE,  Chief  Concept  Engineer,  Elliot  Bay  Design                                                               
Group,  advised that  the  Elliot  Bay Design  Group  is a  naval                                                               
architectural  and marine  engineering  firm that  has worked  in                                                               
marine transportation  issues for  many years.   He  related that                                                               
his AMHS origins began in 1980,  and that his firm is a successor                                                               
firm to  Philip F. Spaulding  Associates, the original  firm that                                                               
designed the  four Alaska ferries in  the 1960s.  He  pointed out                                                               
that  his company  has  a long  background  and interaction  with                                                               
ferry  systems in  general  and with  the  Alaska Marine  Highway                                                               
System (AMHS) in particular.                                                                                                    
MR. WATERHOUSE turned  to slide 4, "Key Themes"  and referring to                                                               
the   listening   session   held    in   Juneau,   related   that                                                               
transportation is  a foundation  for the Alaskan  economy because                                                               
without transportation  other state activities would  not happen,                                                               
which is  a fundamental aspect  to keep in mind.   Transportation                                                               
provides engagement between communities  across the state, offers                                                               
access   to   fundamental   services,  health   care,   shopping,                                                               
entertainment, and  connection to the Lower-48,  for example when                                                               
the U.S. Coast Guard and  others move their families to different                                                               
duty  stations.     He   related  that   the  government   has  a                                                               
transportation role  in providing  an overarching service  to the                                                               
benefit of  the citizens, and  his company is reviewing  the best                                                               
structure in moving AMHS forward.                                                                                               
MR.  WATERHOUSE  turned  to  slide  5,  "Critical  Concepts"  and                                                               
advised that  the critical concepts to  any marine transportation                                                               
system are  as follows: Dependability,  the schedule is  known 18                                                               
to  24  months  in  advance  in  order  to  accommodate  business                                                               
transportation  plans   and  the   public's  travel   plans,  but                                                               
especially   businesses;   Reliability,   seldom   breaks   down,                                                               
assurances the  system is available  for the  public; Efficiency,                                                               
clear  metrics  used  to improve  revenue  and  reduce  expenses,                                                               
including  the   value  AMHS  receives  for   its  transportation                                                               
dollars;  Sustainability,  such   that  structured  finances  are                                                               
predictable and the benefits to Alaska are recognized.                                                                          
4:31:35 PM                                                                                                                    
MR.  WATERHOUSE turned  to slide  6, "Proposed  Vision Statement"                                                               
and offered  that labor and  management both pointed to  the lack                                                               
of  a  clear  vision  for  the AMHS.    Although,  when  pressing                                                               
management and crews  on what the vision statement  was, they did                                                               
not  know,  or they  could  only  remember  parts of  the  vision                                                               
statement.     Effective   organization  of   transportation,  he                                                               
explained,  is  a  clear  vision,  and  while  working  with  the                                                               
Department  of Transportation  &  Public  Facilities (DOTPF)  and                                                               
management, a "stretch vision" was  created.  Wherein, he further                                                               
explained,  the  AMHS  would  be  the  preeminent  marine  travel                                                               
experience while  connecting with other intermodal  components of                                                               
state,  federal and  international transportation  systems.   The                                                               
AMHS  would set  itself up  as  being better  than just  adequate                                                               
because Alaska is more than just an adequate state, he related.                                                                 
MR. WATERHOUSE turned  to slide 7, "Proposed  Mission and Values"                                                               
and   pointed  to   the  fairly   extensive  mission   and  value                                                               
statements.      He   described   the  elements   of   a   marine                                                               
transportation system  that must be  "touched upon every  day" as                                                               
follows:  Safety, because  safety is  fundamental to  the service                                                               
being provided  to the  public; Excellence,  people come  to work                                                               
every  day  trying  to  do their  best;  Integrity  and  Respect,                                                               
includes  the traveling  public  using the  service, fellow  crew                                                               
members, management, and  the citizens of Alaska  that allow this                                                               
system to exist; Partnerships, managing  operations in a fiscally                                                               
responsible  manner  and  finding  partnerships  that  will  help                                                               
leverage the abilities  of the system in a  manner that benefits,                                                               
such  as other  marine  transportation  entities, businesses,  or                                                               
public agencies  across the  nation, in order  to get  "more bang                                                               
for the  buck;" Teamwork,  operating as  a cohesive  team through                                                               
honest,  respectful, and  trusting interactions  because teamwork                                                               
delivers a reliable system.                                                                                                     
4:34:12 PM                                                                                                                    
MR.  WATERHOUSE  turned  to  slide  8,  "Goverance  Summary"  and                                                               
explained that  the Elliot Bay  Design Group reviewed  the manner                                                               
in which  other ferry  systems across the  United States  and the                                                               
world are governed,  their models and best practice,  in order to                                                               
improve and offer a better delivery  of service for the AMHS.  He                                                               
related  that his  company  has been  working  with the  agencies                                                               
listed  and; therefore,  it has  a deep  understanding as  to how                                                               
each system  was structured,  and the  strengths and  benefits of                                                               
the  different governance  structures.   He pointed  to the  left                                                               
side  of the  slide and  explained as  follows:   AMHS is  a line                                                               
agency of government;  GGF - the Golden Gate Ferry  System in San                                                               
Francisco  Bay  organized as  a  transportation  district; BCF  -                                                               
British  Columbia Ferry  System, originally  a Crown  Corporation                                                               
and  currently  a  public corporation;  WSF  -  Washington  State                                                               
Ferries is a line agency; NCF  - North Carolina Ferry System; New                                                               
York Waterways is a passenger  only ferry service around the City                                                               
of New York, a public/private  partnership wherein the operations                                                               
side handled  by a  private company and  ownership of  the docks,                                                               
piers handled by  the Port Authority of New York  and New Jersey;                                                               
BPJ - Bridgeport  Port Jefferson Ferry, privately  owned over 100                                                               
years and  operates between  Port Jefferson  on Long  Island, and                                                               
Bridgeport,   Connecticut;  SSA   -  Steam   Ship  Authority   of                                                               
Massachusetts provides ferry service  to the Islands of Nantucket                                                               
and  Martha's  Vineyard; CM  -  Caledonian  MacBrayne a  Scottish                                                               
ferry system, similar to the AMHS  in that it provides a lifeline                                                               
service to small communities throughout the Country of Scotland.                                                                
4:36:44 PM                                                                                                                    
MR.  WATERHOUSE turned  to slide  9, "Identified  Best Practices"                                                               
and explained  that best practices  included: a clear  vision and                                                               
mission  for   the  system,  facilitates  governance,   and  gets                                                               
everyone  on   the  same  page   and  direction;   setting  clear                                                               
performance  goals  and  giving  the  management  of  the  system                                                               
authority  and fiduciary  responsibility over  both revenues  and                                                               
expenses,   thereby  having   the  fiduciary   responsibility  of                                                               
striking that balance  and moving things along; in  the event the                                                               
system operates  with financial support from  state government or                                                               
a public  entity, there must  be a predictable  long-term funding                                                               
source identified  for both  operations and  capital construction                                                               
in  that marine  transportation is  highly capital  intensive and                                                               
acquiring assets  or modifying  assets does not  occur in  one or                                                               
two years, it takes multiple years  to make changes in the system                                                               
and,  therefore,   stable  funding   is  absolutely   vital;  and                                                               
oversight  works  best  with a  dedicated  board  providing  some                                                               
insulation for  the day-to-day management from  political forces.                                                               
He  related that  that is  part  of the  reason British  Columbia                                                               
Ferries, for example,  shifted from being a  Crown Corporation to                                                               
a  public corporation  in order  to  get that  distance from  the                                                               
changing political landscape.                                                                                                   
4:38:02 PM                                                                                                                    
MR.  WATERHOUSE  turned to  slide  10,  "Goverance Analysis"  and                                                               
advised that after performing a  goverance analysis the following                                                               
was determined: insulating management  from politics, how to hire                                                               
good  managers  and  let  them manage;  how  to  give  management                                                               
control  over  both setting  tariffs,  the  revenue side  of  the                                                               
equation, and  managing expenses  - the  largest expenses  of the                                                               
AMHS are  labor, fuel,  and maintenance;  retain access  to vital                                                               
federal funding -  prevent jeopardizing access to  those funds in                                                               
the  event of  a change  in governments;  how to  coordinate with                                                               
other transportation  modes, the  customers are not  really there                                                               
to ride  a ferry but rather  as part of a  journey; and recognize                                                               
that Alaska is a unique situation  and that the ferry system must                                                               
be  seen as  a benefit  to all  Alaskans and  not simply  certain                                                               
communities, determine a manner in  which to send out the message                                                               
that  the efforts  and  time spent  on  the AMHS  is  seen as  an                                                               
integral part of what makes Alaska, Alaska.                                                                                     
MR. WATERHOUSE  turned to slide  11, "Public  Corporation (CalMac                                                               
model)"  and advised  that of  the various  models they  reviewed                                                               
there were real strengths in  the Caledonian MacBrayne [Hebridean                                                               
& Clyde Ferries]  (CalMac) from Scotland.  He  reiterated that it                                                               
is organized  as a corporation  with a single  shareholder which,                                                               
in this case would be the  State of Alaska [just as in Scotland].                                                               
Wherein  the  public  corporation  enters into  a  contract  with                                                               
government  on a  fee for  service  basis after  working out  the                                                               
minimum  level  of  service,  and   the  relationship  between  a                                                               
government and  transportation.   The mission  is to  operate the                                                               
system as  efficiently as  possible and treat  it as  a business.                                                               
He recommended  keeping in mind that  transportation necessitates                                                               
being  nimble   in  order   to  respond   to  a   highly  dynamic                                                               
environment,  such  as  weather,  changing  travel  patterns  and                                                               
tourism  activities.    He   also  recommended  determining  some                                                               
compensation and incentive systems  in line with peer businesses,                                                               
ways to  reward excellence and  promote the best activities.   At                                                               
the end  of the  day, he  said, government  continues to  own the                                                               
assets, vessels  and terminals,  and leases  those to  the public                                                               
corporation  through standard  and  proven  marine practices  for                                                               
leasing  capital   assets  on  the  waterfront.     He  suggested                                                               
providing  oversight  by  a  board   of  directors  with  members                                                               
representing  the  different  key stakeholders,  similar  to  the                                                               
structure of  the Alaska Railroad  Corporation with  attention to                                                               
the  needs of  labor, fiduciary  responsibility, and  good fiscal                                                               
4:42:16 PM                                                                                                                    
MR.  WATERHOUSE  turned  to  slide   12,  "Improved  Line  Agency                                                               
(Interim)"  and   commented  that   transitioning  to   a  public                                                               
corporation  would  not occur  overnight,  if  it occurs  at  all                                                               
because the leg work has  not been completed to determine whether                                                               
that is  the best  path forward,  which would  occur in  Phase 2.                                                               
During  the interim,  there must  be  a determination  in how  to                                                               
improve the current  operation of the AMHS, and  he stressed that                                                               
one of  the most potent  tools is finding  a way to  forward fund                                                               
that system, find a way  to provide some fiscal predictability in                                                               
order to  work with  its service network,  its customers,  and be                                                               
able to  post its schedule for  next year.  Forward  funding is a                                                               
key  component,  he  expressed, and  recommended  shifting  labor                                                               
relations  from the  Department  of Administration  (DOT) to  the                                                               
Alaska Marine  Highway System  (AMHS) to give  it some  degree of                                                               
control over  its largest  cost center.   He  further recommended                                                               
the  following:  rationalize  tariffs,   the  AMHS  is  currently                                                               
involved  in  a  process  to  determine  a  more  reasonable  and                                                               
transparent tariff structure so  the public understands how those                                                               
tariffs are set,  and a component of this is  its new reservation                                                               
system  that will  provide opportunities  for dynamic  pricing or                                                               
cross-selling  of   opportunities;  and,  allow   incentives  for                                                               
management and  employees, offering  more flexibility  and reward                                                               
for those who step up and do more than "just a good job."                                                                       
MR. WATERHOUSE  advised that have  finished their Phase  1 effort                                                               
with a report  and a set of recommendations and  are currently in                                                               
discussions with Southeast Conference  regarding a scope of work,                                                               
budget, and schedule, for Phase 2.                                                                                              
4:44:30 PM                                                                                                                    
MR. WATERHOUSE  turned to  slides 13-14,  "AMHS Reform  Project -                                                               
Phase  2"  and   "Phase  2  Objectives"  and   advised  that  the                                                               
objectives  are as  follows: identify  reforms that  will improve                                                               
operations  and   stabilize  finances;  inform  and   engage  key                                                               
stakeholders to  build consent toward reform;  and, give guidance                                                               
on the necessary legislation changes  to make the transition from                                                               
a line agency of the DOT to a public corporation.                                                                               
4:45:02 PM                                                                                                                    
MR. WATERHOUSE  turned to  slide 15, "Tasks"  and pointed  to the                                                               
six  vital tasks  and one  optional task  identified as  follows:                                                               
Revenue Analysis, look at the  revenue side of the equation, what                                                               
is the  fare elasticity for  the different routes in  the system,                                                               
what are the opportunities for  partnering with other business to                                                               
enhance  fares, and  what are  sources of  non-fare revenue  that                                                               
could be brought  into the system; Operations  Analysis, dig into                                                               
the operations, how  are the vessels crewed, how  are the vessels                                                               
maintained, how are the terminals  staffed, are there better ways                                                               
of organizing the operations to  be more efficient or enhance the                                                               
customer's  experience  that would  then  allow  for an  enhanced                                                               
revenue  source; Operations  Financial  Model -  come  up with  a                                                               
yardstick  to evaluate  different operational  choices in  moving                                                               
forward  to   rationalize  the  system,  and   how  to  determine                                                               
differences;  Structure  and   Benefits  of  Public  Corporation,                                                               
identify  the  structure and  benefits  of  a public  corporation                                                               
because if  a strong coherent  argument could  not be made  as to                                                               
why change  should occur,  there would be  no convincing  the key                                                               
stakeholders to go  through the expense and effort  of making the                                                               
change  happen;  [Mr.  Waterhouse  skipped  over  the  Transition                                                               
Plan];  and,  Public  Process  and  Stakeholder  Engagement,  "an                                                               
overarching   all"  is   the  public   process  and   stakeholder                                                               
engagement  because   everyone  must  be  pulling   in  the  same                                                               
direction, he  said.  An  optional task  is the capital  needs of                                                               
the system  and he related that  the fleet is having  some vessel                                                               
replacement  as the  new Alaska  class ferries,  designed by  the                                                               
Elliot  Bay Design  Group, are  under construction  in Ketchikan.                                                               
Although, these two new vessels are  not the end of the story and                                                               
he  put forth  the  questions, what  sort  of additional  vessels                                                               
should be constructed,  and the dollars involved,  should that be                                                               
accomplished as  part of Phase 2,  or leave it to  other entities                                                               
to determine.   He opined that  the discussion as to  how to deal                                                               
with the long-term capital will take place during Phase 2.                                                                      
4:47:42 PM                                                                                                                    
MR.  WATERHOUSE  turned  to  slide  16,  "Revenue  Analysis"  and                                                               
reiterated  that the  objective  of the  revenue  analysis is  to                                                               
identify the  mix of public  funding and other revenue  that will                                                               
provide for  the sustainability of  AMHS over the next  25 years.                                                               
He then  advised that an advisor  joining the project at  Phase 2                                                               
is Mike Anderson,  and he described Mr.  Anderson's background in                                                               
dealing  with  labor  negotiations  and capital  projects.    The                                                               
deliverable   aspect  is   the  Long-Range   Revenue  Development                                                               
Strategy  Report and  advised that  the McDowell  Group is  their                                                               
partner and will lead the work product effort.                                                                                  
4:49:40 PM                                                                                                                    
MR.  WATERHOUSE turned  to slide  17,  "Operations Analysis"  and                                                               
advised  that  the   Elliot  Bay  Design  Group   will  lead  the                                                               
operations analysis  due to its  background in ferry  systems and                                                               
will  identify the  basic transportation  and shipping  needs for                                                               
Alaska,  and  the key  user  group,  such as,  Alaska  residents,                                                               
Alaska businesses, and the strong  tourism component.  He offered                                                               
that part  of the  challenge is  determining the  balance between                                                               
those three user groups that  makes the most sense moving forward                                                               
which looks  at the "four-dimensional chess"  of matching vessels                                                               
to routes to  schedules to frequency of  service, determining how                                                               
to  meet  the needs  of  the  different  users groups,  the  cost                                                               
structure associated  with it, and  has demands as far  as labor,                                                               
terminals, and asset requirements,  he explained.  Mr. Waterhouse                                                               
related  that from  that  data they  will  produce a  deliverable                                                               
Vessel and Terminal Operations  Report with strategic operational                                                               
goals, working closely with AMHS management and employees.                                                                      
MR. WATERHOUSE  turned to slide 18,  "Operations Financial Model"                                                               
and advised they  are not looking for the  optimum system because                                                               
there is  not the time  or ability  to completely go  through and                                                               
optimize.   Frankly, he  said, that  is not the  role of  a study                                                               
group, that's the role of  the management that will ultimately be                                                               
brought  in to  run  the system  as a  public  corporation.   The                                                               
Elliot  Bay Design  Group's goal  with  the operations  financial                                                               
model  is to  offer yardsticks  for measuring  what change  could                                                               
mean to  the system in terms  of operating costs and  benefits to                                                               
the  user  groups.    He   explained  that  they  will  look  for                                                               
opportunities, such as the concession  side on board the vessels,                                                               
routes, or  other aspects  of the  operation that  are innovative                                                               
and  beneficial to  the  state.   From  that  data, a  Long-Range                                                               
Financial Strategy  Report focused  on the balancing  of revenues                                                               
and expenses will be produced.                                                                                                  
MR.  WATERHOUSE turned  to  slide 19,  "Structure  & Benefits  of                                                               
Public  Corporation" and  explained  that the  Elliot Bay  Design                                                               
Group  will work  with the  McDowell Group  on the  structure and                                                               
benefits  of  a public  corporation.    He  said, "What  is  that                                                               
compelling  story  that we  can  tell  having  done our  work  on                                                               
revenue and  operations to say  why this  is the path  forward --                                                               
or, the  recommended path forward for  the State of Alaska?"   He                                                               
advised they  will review how  that goverance  structure actually                                                               
works, what would be the  duties and responsibilities of a board,                                                               
what  would be  the interaction  with other  state agencies,  and                                                               
from that  data the  Elliot Bay Design  Group will  determine the                                                               
clear argument on why a public corporation would make sense.                                                                    
4:53:12 PM                                                                                                                    
MR. WATERHOUSE  turned to  slide 20,  "Transition Plan"  and said                                                               
that after defining what the vision  might look like in 20 years,                                                               
to then look at the current  situation and determine how to offer                                                               
guidance  on what  must begin  occurring in  order to  transition                                                               
from the current AMHS to a  marine highway system that will cover                                                               
the  next 50  years.   In  that  regard, he  said  they will  put                                                               
together a transition plan or  a goverance strategy to advise the                                                               
executive and legislative branches on a possible path forward.                                                                  
MR.  WATERHOUSE   turned  to  slide   21,  "Public   Process  and                                                               
Stakeholder  Engagement"   and  commented  that   throughout  the                                                               
process  there   will  be  a   public  process   and  stakeholder                                                               
engagement and  will look at holding  additional hearing sessions                                                               
on  this project.    The steering  committee  assembled for  this                                                               
project  represents  communities across  Alaska  in  order to  be                                                               
certain  the  efforts  of  Phase   2  reflect  input  from  those                                                               
communities.   The McDowell Group  will look at a  combination of                                                               
public messaging, surveys, meetings  with listening sessions, web                                                               
sites,  and  how to  receive  input  from the  public  reflecting                                                               
Alaskans needs for this system.                                                                                                 
MR. WATERHOUSE turned to slide  22, "Timeline" and expressed that                                                               
the  timeline  is  aggressive  as  the goal  is  to  have  enough                                                               
information that legislation  could be considered by  the time of                                                               
the  Southeast  Conference  meeting  this  fall,  or  earlier  if                                                               
possible.  The  ability to meet this schedule  will be determined                                                               
by what  is gleaned  along the  way because this  is a  large and                                                               
complex  operation with  many moving  parts.   He said  they will                                                               
look to  the steering committee,  communities across  Alaska, and                                                               
resources  within  the  Department  of  Transportation  &  Public                                                               
Facilities (DOTPF),  the Department of Administration  (DOA), and                                                               
other  branches of  Alaska's government  to assist  in completing                                                               
this project.                                                                                                                   
4:55:59 PM                                                                                                                    
MR. VENABLES turned to slide  23, "Project Sponsors" and stressed                                                               
that even  though he  sees an expanded  role for  communities and                                                               
the  private  sector  to  partner and  create  other  streams  of                                                               
revenue for the AMHS envisioned  for the future, AMHS will always                                                               
be a public  entity as he is  not looking to privatize  this as a                                                               
private system or port authority.   He pointed out that there has                                                               
been broad  support across the  state and the entities  listed on                                                               
the  slide  have  provided  financial  support  for  the  project                                                               
currently.  The goal is to  have completed the "meat of the work"                                                               
for the next legislative session.                                                                                               
4:57:17 PM                                                                                                                    
CO-CHAIR  STUTES disclosed  that  the  AMHS is  one  of her  "pet                                                               
projects" as  it is  a critical  part of  Alaska's transportation                                                               
system and  her goal is to  optimize the system.   There are "all                                                               
kinds of different  waters around here," and she  asked whether a                                                               
more standard ferry  could be built and utilize in  a large area.                                                               
The two vessels currently under  construction are fairly specific                                                               
and  would not  do well  on  a route  from Homer  to Kodiak,  for                                                               
instance,  and  she   asked  whether  the  lack   of  a  standard                                                               
measurement  for   any  of  the  anticipated   vessels  could  be                                                               
contributing to the problem.                                                                                                    
MR. WATERHOUSE responded  that the AMHS does not have  a class of                                                               
vessels, but rather  13 classes of vessels.  He  pointed out that                                                               
a  success of  Alaska  Airlines is  that it  flies  one class  of                                                               
airplanes and, unfortunately, the oceans  are not as forgiving as                                                               
the air  ways.  He explained  that AMHS has vessels  operating on                                                               
open ocean routes, large vessels  operating on somewhat protected                                                               
inland routes, and smaller vessels  that can access the docks and                                                               
piers  in  the smaller  communities.    Nominally, he  explained,                                                               
there  are three  classes of  vessels, and  part of  the Phase  2                                                               
effort will be  looking at the routes and assets  on those routes                                                               
to determine  the best  mix of  vessel sizes  and types  to offer                                                               
flexibility to the system and  also meet the mission requirements                                                               
of schedule and capacity.                                                                                                       
5:00:03 PM                                                                                                                    
CO-CHAIR STUTES referred to the  13 classes of vessels, and asked                                                               
the number of  classes of different docks, as that  appears to be                                                               
problematic as well.                                                                                                            
MR. WATERHOUSE opined that AMHS  calls at 33 different terminals,                                                               
and a  significant number of  those terminals are  not controlled                                                               
or owned  by AMHS.   There, he pointed  out, is the  challenge of                                                               
AMHS not only  calling at its own terminals, but  also calling at                                                               
terminals  managed, designed,  and used  by other  entities.   He                                                               
described it as a complex problem and  at the end of the day, the                                                               
vessels  and terminals  have  to work  together.   Terminals  are                                                               
difficult when looking at the  connection to other transportation                                                               
networks and  the challenges of  meeting the landscape  of Alaska                                                               
in a  working manner.   There are opportunities, he  offered, for                                                               
some standardization  and monetization  of the terminals,  and to                                                               
determine whether  there are ways  to make them  generate revenue                                                               
other than just as a place to take tickets.                                                                                     
5:01:33 PM                                                                                                                    
CO-CHAIR STUTES  said she would  presume that all of  these items                                                               
would go into the same bucket when determining the system.                                                                      
MR.  WATERHOUSE  answered that  they  will  be looking  at  these                                                               
items, but  their ability to  dig deeply  will be limited  by the                                                               
time allowed as it  will be a sprint to cover  the many areas and                                                               
offer enough information to the  Southeast Conference to create a                                                               
set  of  solid  and  defensible  recommendations.    Clearly,  he                                                               
related, not every last question will be answered.                                                                              
5:02:20 PM                                                                                                                    
REPRESENTATIVE KOPP offered his  excitement about this project as                                                               
Co-Chair Stutes and  he are huge fans of the  ferry system and he                                                               
appreciates  the  current leadership  of  DOTPF  heading in  this                                                               
direction.    He referred  to  a  previous  statement of  how  to                                                               
message  this information  to  Alaskans, how  to  talk about  the                                                               
direction this is  moving, and to the  proposed vision statement,                                                               
and  described that  this  project  is opening  up  Alaska.   The                                                               
biggest problem Alaskans have is  occupying their own land due to                                                               
a lack of  access and, he stressed, Alaska  has approximately 900                                                               
road miles  with 25,000 coastal  miles.  Somehow that  fact needs                                                               
to  be  messaged so  people  understand  that "we're  not  Alaska                                                               
without the marine highway system,  we literally fall back into a                                                               
postage stamp  size that  we occupy" he  related, but  with DOTPF                                                               
and AMHS  the entire State of  Alaska can be opened  up, and that                                                               
vision  needs to  be  pushed hard.   He  referred  to the  public                                                               
corporation models such as the  British Columbia Ferry System and                                                               
the Caledonian MacBrayne and asked  whether they have shown to be                                                               
MR. WATERHOUSE responded that both  systems are sustainable.  The                                                               
British  Columbia Ferry  System recently  signed a  10-year labor                                                               
contract with  its labor unions which  offers long-term stability                                                               
and predictability  in its cost structure.   Caledonian MacBrayne                                                               
recently  signed a  renewed 7.5-year  contract with  the Scottish                                                               
government  which  will ensure  that  its  operating budgets  and                                                               
schedules  are set,  but also  that the  fees paid  to it  by the                                                               
government  are  known  and  predictable  and  tied  to  required                                                               
specific service  delivery standards.   He  related that  part of                                                               
Phase 2 is looking at  how those systems transitioned and whether                                                               
there are  lessons to be  learned.   The person who  was formerly                                                               
head of  the London  Stock Exchange, and  currently in  charge at                                                               
CalMac Ferries,  Caledonian MacBrayne Clyde &  Hebridean Ferries,                                                               
and  he  were  discussing  Phase   1  of  this  project  and  Mr.                                                               
Waterhouse  was  promised full  cooperation  for  the Elliot  Bay                                                               
Design Group in moving forward.   Mike Corrigan, former President                                                               
and CEO  of BC Ferries,  will also  work closely with  the Elliot                                                               
Bay Design Group.                                                                                                               
5:05:53 PM                                                                                                                    
CO-CHAIR STUTES  commented that  she has  been working  for three                                                               
years to get  the system forward funded and she  has not given up                                                               
even  though this  is  not the  prime year.    She stressed  that                                                               
forward funding  Alaska's ferries is critical  to contributing to                                                               
its sustainability, and that it would be revenue generating.                                                                    
5:06:55 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Transportation Standing  Committee meeting was adjourned  at 5:06                                                               

Document Name Date/Time Subjects
AMHS Reform Presentation House Transportation 3_16_2017.pdf HTRA 3/16/2017 1:00:00 PM
Presentation by SE Conference on the AMHS Reform Project