Minutes of a Public Meeting

MINUTES OF A

DEFINITION OF NEEDS, RESOURCES AND REVENUES

MEETING OF THE

GOVERNOR’S TRANSPORTATION VISION 21 TASK FORCE

10:00 a.m., Tuesday, March 6, 2001

Arizona State Capitol

Executive Tower

Phoenix, Arizona

The Definition of Needs, Resources and Revenues Committee of the Governor’s Transportation Vision 21 Task Force met in official session for a meeting at 9:00 a.m., Tuesday, March 6, 2001 with Co-Chairperson John Mawhinney presiding. Other members in attendance were Steve Basila, Robert Bulla, Paulson Chaco, Joe Herrick, Valerie Manning, Dennis Mitchem, Lela Steffey and Frank Thorwald. Also present were Alan Maguire, Mary Lynn Tischer, John Carlson, Matt Carpenter and Lisa Pendrick.

Welcome

Co-Chairperson Mawhinney called the meeting to order at approximately 10:07 a.m. Ms. Steffey led those present in the Pledge of Allegiance.

Discussion and Adoption of Transportation Needs and Revenue Draft Recommendations

Mr. Maguire reviewed changes to the Committee’s Draft Potential Recommendations.

Mr. Carlson said, realistically, the Federal Highway Trust Distribution would increase approximately $25 million annually.

Mr. Mawhinney asked what ADOT’s current limit is. Mr. Maguire said they are currently not limited on RARF bonds, however, have an $800 million limit on HURF bonds. He pointed out the largest mismatch during any five year period was about $2 billion, noting that reflects all modes and all levels of government. He said they could eliminate the debt-service ratio cap on HURF bonds

Mr. Mawhinney asked Mr. Maguire if he expects the legislature will ask for guidance regarding the increase. Mr. Maguire said he is working toward that.

Ms. Steffey asked if there is a figure, according to the formula, that they can work from. Mr. Maguire explained the amount of debt ADOT can issue is determined by the debt service times coverage test and what the market will bear. He said ADOT HURF bonds currently have a resolution limitation of three times coverage and a Board policy of four or five times coverage.

Mr. Mitchem asked if there are limits on any state revenue bonds. Mr. Maguire said there are limits, pointing out HURF Bonds are revenue bonds.

Mr. Carlson noted a bill will be introduced at the Legislature this season to raise the cap to $1 billion.

Mr. Mawhinney asked Mr. Maguire to make a notation that the Committee will further discuss the recommendation.

In response to Mr. Thorwald’s question about the Tribal vehicle tax, Mr. Maguire said in order for the state to be the tax collecting agency, the VLT collected would have to be dedicated to transportation.

Mr. Thorwald suggested the new language under Expansion of Privatization Authority and Public-Private Partnerships be clarified. He also recommended dropping the words "related to innovative techniques" from the last line of that paragraph. He expressed his opinion the paragraph under Re-dedication of the Flight Property Taxes to the State Aviation Fund should be modified to clarify that Phoenix and Tucson would be limited to the funds they currently have and would not receive a portion of the restored funds.

Ms. Steffey asked where they stand in terms of privatization authority, noting they previously discussed whether they should give the state authority to do toll projects if private groups were not available. Mr. Maguire referred to the specific recommendation dealing with the creation of a public toll authority.

Mr. Thorwald asked if a private company is currently capable of building a toll road. Mr. Maguire said the current transportation privatization statute authorized privately owned and operated toll roads.

Mr. Chaco asked if the state should assist local transportation agencies in establishing system preservation analysis models rather than just mandating that they be done. Mr. Maguire said one of the other committee’s has made a recommendation specifically providing funding for local transportation agencies. He said he could add language to the System Preservation recommendation providing for adequate funding.

Mr. Bulla asked if the recommendations they are reviewing represent the entire document. Mr. Maguire said it reflects the recommendations of the Definition of Needs, Resources and Revenues Committee. Mr. Bulla pointed out nothing in the document indicates the review of total potential needs and shortfalls or recommendations for funding. Mr. Maguire said that comes through a different process at the Task Force level. He explained the Committee originally had two jobs, to make specific policy recommendations and to be shepherds of the revenue process. He said responsibility for the revenue process eventually shifted to the Task Force. Mr. Bulla said he believes it would be irresponsible not to include at least some comment regarding the shortfall. Mr. Maguire offered to draft a statement documenting the methodology used to validate costs. He noted this would be the last time they see the Committee’s recommendations as a separate document, explaining the next time the recommendations are reviewed they will have been blended with those made by the other committees. Mr. Bulla stated none of the committees recommended a review of economic needs and revenue or the shortfall.

Mr. Thorwald said Mayors in his area had misconceptions regarding the shortfall and asked what the Committee has done to ensure the figures are correct. He said the Mayors were appeased once he explained the process. He said they also wanted to know what amounts and kinds of taxes they would have to impose to achieve the shortfall. He said a summary of those issues should be provided by the Committee. Mr. Mawhinney said they need to adopt the report prepared by the revenue consultant, explaining it lists the shortfall as well as the available methods.

Mr. Maguire stated the committees are charged with preparing a series of separate recommendations that will go through a public hearing process. He said he assumes some of the recommendations will be changed during that process, with additional recommendations being made.

Ms. Manning asked if there would be an opportunity to discuss the $20 billion shortfall once the recommendations have been sent to the full task force. She expressed her concern that there are not enough dollars in the unmet needs category to deal with rapid transit and rail transit issues. Mr. Maguire explained the $61 billion represents an estimate of the budget required to meet future transportation demands. He said the intent was not to identify the specific transportation solution to meet demand, but to create a budget. He stated the performance based planning process is equally important and is key to spending the funds wisely. Ms. Manning said she agrees with the methodology, however, questions whether everyone clearly understands it. Mr. Maguire acknowledged this is a new way of budget planning.

Mr. Mawhinney stated the Committee has no objections to the Draft Potential Recommendations.

Mr. Maguire reviewed the Additional Draft Potential Recommendations, explaining they were crafted based on identified problem areas.

Mr. Carlson said it became apparent during their meeting with the Corporation Commission and ADOT’s rail expert that changing the train schedules would not make any impact. He stated they also explained how one event in another state has a ripple effect on other trains already in the system. He said they are attempting to draft a potential recommendation for the task force creating a funding mechanism to fund grade separation in Tucson, Flagstaff and other affected urban areas. He explained the recommendations were modeled after the Highway Expansion and Loan Program because it has an existing government body that oversees projects, it has an advisory committee and requires matches.

Mr. Mitchem said he supports adding grade separation as a recommendation.

Mr. Mawhinney asked how they tie prioritization into regularly scheduled construction projects to prevent roads from being torn up more than once.

Mr. Thorwald asked if costs would go beyond the $61 billion. He said, while he agrees with the recommendations, they are more specific and questioned whether they should come from the task force. Mr. Maguire said some railroad crossings were included in the $61 billion, but not necessarily all. Mr. Thorwald suggested they reassess whether $61 billion would be sufficient if the recommendations were made. Mr. Maguire stated that figure would change as they continue to work on the recommendations. He estimated the total cost for all of the railroad separation projects to be approximately $300 million. Mr. Carlson expressed his opinion the Committee should identify and prioritize the projects rather than artificially increase the budget. Mr. Thorwald suggested making a recommendation that certain things need to be implemented, rather than making project specific recommendations.

Ms. Manning recommended they take references to particular geographic areas out of the draft to avoid having factions ask for assistance.

In regard to state support of essential air service, Ms. Steffey said she has a problem using other transportation revenues. She expressed her opinion the State Aviation Fund needs to be increased and the larger airports need to contribute their fair share. She said the transportation fund itself is in need of more money and it would be bad policy to take money from the fund and put it into airports. Mr. Maguire explained the Aviation Fund, historically, has been dedicated to capital projects, not operating costs. He stated their intent was to make a parallel with regard to air service that was roughly equivalent to the express bus model. He noted the Aviation Fund is significantly short of projected needs. Ms. Steffey expressed her opinion the airports need to raise their taxes.

Mr. Thorwald expressed his opinion costs for air service to rural areas in Arizona are too high and marketing of both the facilities and the services, at least in his area, is not adequate. He said a companion project to market and promote the area has to be included in the program or it will not work.

Mr. Mitchem stated, in his experience, intrastate air service is not as good as it once was. He said the recommendation implies a return to a system that privatization has overtaken and eliminated. He asked if specific airports would be listed in the plan. Mr. Maguire said the concept was to pick key areas around the state. He stated there seem to be two pivotal factors in an airline’s decision to provide service to smaller airports, the ability to capture customers for their long haul flights and the expectation of consistent demand.

Mr. Mawhinney suggested they add language recommending the State, through its Aviation Department, examine the establishment of a standardized regularly scheduled air service between rural Arizona communities and central hubs and that they look to a program that encourages regional cost sharing. He agreed with Ms. Steffey that the funds should not come from the regular Transportation Fund.

Ms. Steffey pointed out the gas tax cannot be used for aviation needs. She said increasing the Aviation Fund would impact Sky Harbor the most. Mr. Mawhinney disagreed. He said Sky Harbor has enough money that they would not need to utilize the Aviation Fund. He explained the Aviation Fund comes from the property tax on airlines, not Sky Harbor itself.

Mr. Thorwald said certain funds in the $61 billion are limited to particular types of uses, thereby limiting the monies that can be used in other areas. He said reform would be needed to allow money to be used in a broader way. Mr. Maguire stated, throughout the process, they have kept careful track of the amount of revenues that come from restricted sources. He said of the three packages prepared by Wilbur Smith, the one with the lowest percentage varied in unrestricted revenues between 45 percent and 70 percent of total available revenues being added.

Mr. Thorwald suggested they more clearly identify the sources of the revenues. Mr. Maguire stated that has been addressed in other places. Mr. Thorwald asked if the Aviation Fund, if restored, would have adequate funds to meet the needs that have been identified or if there would be a shortfall. Mr. Maguire said the identified shortfall for aviation was $800 to $900 million. He stated the incremental amount that would be funded through the Flight Property Tax totals about $160 million.

Mr. Mawhinney suggested they create one document that explains the administration of transportation, including financial management, data collection and reporting, and also includes a means of enforcing compliance. Mr. Maguire agreed.

Mr. Mitchem stated the reality is that, as they move forward, additional revenue has to be found, yet as additional funding is obtained, it will come with some level of specificity as to how it would be used. He suggested if they do a persuasive enough job of demonstrating needs to get legislative bodies or the public to approve funding, ADOT can see that the funds are spent effectively.

Mr. Thorwald agreed. He suggested they ask for more than they believe they will need and that the funds be dedicated to make them more reliable.

Mr. Mawhinney said, even if they were unable to raise any funds, they have established a process to standardize data collection, control and prioritization and can start to rebuild the public’s confidence. He agreed the funds should be dedicated.

Mr. Herrick stated he is happy with the process they have gone through. He explained they have been able to identify current needs as well as immediate needs.

Mr. Mawhinney thanked members and staff for their hard work.

Acceptance of Minutes for February 26, 2001

Action: A motion to approve the minutes from the February 26, 2001 meeting was made, seconded and carried unanimously.

Ms. Manning expressed her opinion the Committee did a good job of following the guiding principles identified at the Casa Grande retreat. Mr. Maguire agreed.

Call to the Public

No requests to address the committee were submitted by the public.

Adjourn

The meeting adjourned at 11:35 a.m.

JOHN MAWHINNEY, Co-Chairperson