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Senators look hard at bonds

Posted: Thursday, April 11, 2002

The heads of the state transportation departments in New Mexico and Colorado assured Alaska senators this morning that so-called GARVEE bonds are a prudent way to accelerate major transportation projects.

GARVEEs, or "grant anticipation revenue vehicles," are debt that is repaid with a state's annual stream of federal highway funds.

The administration of Democratic Gov. Tony Knowles has proposed a GARVEE package of about $400 million, including funding for a second fast ferry in Southeast.

The state would use about 10 percent of its annual $400 million in federal highway funds, or about $40 million, to make payments on the debt.

The House passed the GARVEE bill last year. But the reception has been cool in the Senate, partly because of concerns raised by the Associated General Contractors of Alaska about the experiences with GARVEEs in New Mexico and Colorado.

Today, the Senate Finance Committee heard a ringing endorsement of GARVEEs from Pete Rahn, secretary of the New Mexico State Highway & Transportation Department, and Tom Norton, executive director of the Colorado Department of Transportation. Both were appointed by Republican governors.

"We believe it's been a phenomenal investment for the state of New Mexico," Rahn said by teleconference from New York City. "We're exactly - I want to reiterate, exactly - where we wanted to be six years ago when we undertook this process. ... New Mexico contractors have had more work than they've ever had during their lifetimes."

While "a vocal few" contractors have been worried about fluctuations in work and about out-of-state competition for big projects, Rahn said his primary concern is for taxpayers. By building a 118-mile, four-lane highway all at once, thanks to GARVEEs, New Mexico cut costs from $1.3 million per mile to $700,000, he said.

"Use bonding as a financial and management tool to make your program move in a better, more efficient, more effective way," Norton urged the committee. He called it "the most conservative financial approach."

But Dick Cattanach, the executive director of Alaska's AGC, said he remains opposed to GARVEEs.

"You wonder why, because we're known as the rape, burn and pillage boys - we'll build anything you want any time," Cattanach said. "DOT is barely able to manage the project level that currently exists. ... Passing this bill will not change that problem. We have to find a mechanism to get the project through DOT and on to the street."

DOT Commissioner Joseph Perkins responded that the department has spent the full federal funding every year, indicating that there were no potential projects left behind.

As for GARVEEs, Perkins said the ultimate test is the financial market, which has been willing to buy GARVEEs issued by several states.

But Cattanach called GARVEEs "a zero sum game" that merely moves projects forward without increasing the total over time. "Do all of these have to be accelerated? ... We're creating artificial peaks and valleys."

The federal funding for Alaska isn't secure, Cattanach said.

At a time when President Bush has been pushing for reductions in the federal highway program, Alaska gets $6 for every $1 it pays in the gas tax, the best ratio in the nation, he said. "The fact that we get six times what we pay in is an issue of contention with other states."

Some people stressed the need for the projects, rather than the financing mechanism.

"We're kind of behind the curve on implementing the Southeast Alaska Transportation Plan," said Loren Gerhard of Juneau, executive director of the Southeast Conference, a business and government group. "From our perspective, building these ferries soon is important. ... In fact, we urge you to replace the additional shuttle ferry that was dropped from the bill."

Frank Dillon of Anchorage, executive vice president of the Alaska Trucking Association, supported GARVEEs in general but said some projects would be better funded through general obligation bonds that go to a public vote. Shuttle ferries "don't accommodate the commercial vehicle usage" associated with highways, Dillon said.

Bill McAllister can be reached at billm@juneauempire.com.



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