Call to Order and Roll Call
The 2nd meeting of the Interim Joint Committee on Transportation was held on<Day> Tuesday, August 10, 2010, at 10:00 AM, in Room 154 of the Capitol Annex. Representative Hubert Collins, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Ernie Harris, Co-Chair; Representative Hubert Collins, Co-Chair; Senators Walter Blevins, David Givens, Jimmy Higdon, Bob Leeper, R.J. Palmer, John Schickel, Brandon Smith, Damon Thayer, Representatives Eddie Ballard, Tim Couch, Will Coursey, David Floyd, Richard Henderson, Melvin Henley, Jimmy, Lee, Charles Miller, Lonnie Napier, Rick Nelson, Marie Rader, Arnold Simpson, Fitz Steele, Jim Stewart, and Tommy Turner. House Majority Floor Leader Rocky Adkins attended the meeting as a guest.
Guests: Tammy Branham, Executive Director, Office of Budget and Fiscal Management, Kentucky Transportation Cabinet; Chuck Knowles, Deputy State Highway Engineer, Kentucky Transportation Cabinet; J Secretary Mike Hancock, Kentucky Transportation Cabinet; Joe Crabtree, Director of the Transportation Center; Taylor Manley, Budget Office, Transportation Cabinet; Martha Horseman, Training Manager, Director of the Transportation Center; Patsy Anderson, Director of Technology Transfer; Richard Dobson, Executive Director, Sales and Use Taxes; and Jim Oliver, Director of Miscellaneous Taxes, Kentucky Department of Revenue.
LRC Staff: John Snyder, Brandon White, Dana Fugazzi, Ashlee McDonald and Jennifer Beeler
Representative Henderson made a motion to amend the minutes from the July 6, 2010 meeting. On page 4, second paragraph, it should read 5,000 instead of 500. The motion was seconded by Representative Lee, and approved by voice vote. The motion was then made by Representative Henderson to approve the minutes as amended. The motion was seconded by Representative Lee and adopted by voice vote.
Senator Leeper wanted to think Chairman Harris and Chairman Collins for allowing the reconstitution of the Subcommittee on Kentucky Waterways. Senator Leeper also stated that the first meeting of the subcommittee is going to be August 20, 2010 at 8:00 a.m. in Paducah. It will be a joint meeting with the Special Subcommittee on Energy. There will be a tour of the Olmsted Lock and Dam Project. He stated that staff has provided information on the meeting to subcommittee members.
Chairman Collins introduced the first guests of the meeting, Joe Crabtree, Martha Horsemen, and Patsy Anderson; all with the University of Kentucky’s Transportation Center (KTC). The mission statement of the Kentucky Transportation Center is to provide services to the transportation community through research, technology transfer and education. The center also creates and participates in partnerships to promote safe and effective transportation systems.
Mr. Crabtree, Director of the Transportation Center, began his presentation by reviewing the history of the KTC, which traces its origins back to 1941, when Kentucky Highway Department formed the Division of Research, located on the University of Kentucky’s campus. In 1979, UK’s Board of Trustees created the Kentucky Transportation Center at UK. In 1980, the Kentucky Department of Transportation abolished the Division of Research and transferred these activities to the KTC.
Mr. Crabtree explained that the total budget for the KTC is around $10 million dollars a year, a $4 million increase from 10 years ago. The General Assembly appropriates $190,000 annually to the KTC and the program is able to leverage that to generate the $10 million dollar research program funding from a variety of sources. Mr. Crabtree described the breakdown of the KTC funding sources which includes funding from State Planning and Research, U.S. Department of Homeland Security, other Universities, other state agencies, and other Federal programs.
Mr. Crabtree informed the Committee about two recent research projects where the center’s work resulted in cost savings. The first project pertains to the use of Ground-Penetrating Radar at the Cumberland Gap Tunnel. The Cumberland Gap tunnel was completed in 1996 and six years after its completion, pavement settlement was detected. KTC researchers used Ground-Penetrating Radar (GPR) to assess the problem which was substantial voids developing beneath the pavement. These voids were anywhere from 20-80 feet long and depths up to 40 inches. Examinations of the groundwater showed an extremely low “calcite saturation index.” As the groundwater flowed through the backfill material under the pavement, it was dissolving the material and carrying it away, causing the voids.
Mr. Crabtree explained that the short-term fix for the tunnels is to remove and replace a 125 foot settled area and inject cement grout beneath the pavement. The permanent fix is to remove and replace approximately 8,000 lineal feet of pavement, using granite backfill. This is scheduled to be done in 2013 in the 6 year high way plan.
The next project Mr. Crabtree discussed was the Bridge Retrofit using Carbon Fiber Reinforced Polymer (CFRP) Fabric. This is a much more cost effective solution to repairing bridges. The original solution would be to replace the superstructure would cost approximately $600,000 and shut off traffic to the bridge during the repairs. With the CFRP approach, it would cost $105,000 (which includes design, repair, and 3 years of monitoring) and would allow the bridge to remain open to traffic (excluding heavy trucks) during repair process.
Martha Horseman, Training Manager for the KTC Technology Transfer Program explained the mission statement of the Program, whose mission is to foster a safe, efficient, environmentally sound surface transportation system by improving skills and increasing knowledge of the transportation workforce and decision-makers. Ms. Horseman stated that one of the services they provide is their library, which provides over 20,000 volumes of materials, 800 videos, online lending library, manuals, and a Traffic Counter loan program.
The TTP also provides publications and marketing services as well as technical assistance across the state. The technical assistance program is currently working in areas with “high crash rates’ to provide low-cost roadway safety improvements. Ms. Horseman stated that in the counties where they have visited, they have seen a dramatic drop in crashes and in some areas it’s as much as 26 percent. She also stated that these projects are less than $10,000 dollars so it is very affordable for local governments.
Chairman Collins wanted to clarify if this program has reduced the rate of crashes in the areas where the traffic warning signs were implemented. Ms. Horseman stated that it has. Ms. Anderson added that each county is responsible for cost of implementing the suggestions provided by the TTP. Ms. Horseman continued the discussion stating that the largest area of the program is training. She added that the program delivered 206 training sessions to 5,571 participants and had a total of 33,250 participant contact hours. The TTP also has a Roads Scholar program and a Roads Master program both of which focus on road maintenance and safety improvements.
Next, Mike Hancock, Secretary of the Transportation Cabinet and Tammy Branham, Executive Director, Office of Budget and Fiscal Management, Kentucky Transportation Cabinet updated the Committee on the Road Fund and Bonding for Highway Construction. Ms. Branham began her presentation by informing the committee of how the Transportation Cabinet ended the fiscal year 2010. Ms. Branham stated that they exceeded the road revenue estimate by $7.5 million, exceeding the revised estimate by less than 1 percent. Exceeding the revenue by $7.5 million, added to the amount the cabinet was able to lapse to the state construction account in compliance with the surplus expenditure plan meant the cabinet lapsed a total of $41.9 million dollars.
The Transportation Cabinet lapsed $23.3 million in debt service as well as $11 million in operating. Ms. Branham also informed the committee of the upcoming estimates for the 2011-2012 Biennial Road Fund. The total revenue estimate for fiscal year 2011 is $1.265 billion and for fiscal year 2012 is $1.340 billion. The fiscal year 2011 estimate has been reduced by the legislative action to extend the motor vehicle usage trade-in allowance by $4.8 million. The cabinet also realized the maximum amount that they could have increased gas tax for the 1st quarter in the fiscal year 2010 because of the increase in the average wholesale price of gasoline. The price jumped from $1.96 to $ 2.16, increasing the per gallon tax by 1.8 cents.
Ms. Branham stated that the motor vehicle usage trade-in credit has been legislatively extended until June 2011 or until the $25 million dollar cap is reached, whichever comes first. This legislation allowed for a trade-in allowance on the purchase of a new vehicle. As of August 9, 2010, the trade-in credit was $23.5 million. It is estimated that the $25 million cap will be reached by the end of August.
Ms. Branham then gave a historical overview of vehicle use taxes and found that the revenues from FY 2010 barely exceeded revenues from FY 1996. In fiscal year 2010, the cabinet exceeded the estimate slightly, collecting $332.8 million. The projection that the consensus forecast group has estimated for fiscal year 2012 is $ 398.1 million. Secretary Hancock added that this was a long term issue since transportation has traditionally been funded as a “pay as you go” program.
Ms. Branham moved on to the Advancement of 2009 and 2010 Bond Projects and a discussion of how the cabinet manages bond program cash. No projects are being delayed because bonds aren’t being sold. Ms. Branham explained that the cabinet is managing Bond program cash using sound cash management practices, which include starting projects as soon as possible using all available program cash, only selling bonds as cash is needed and avoiding arbitrage. Arbitrage is a future potential interest rebate due to the IRS if funds are not spent for designated purposes within defined IRS time frames. In the event a “spend-down” schedule is not met, a rebate may be required if interest earnings on invested bond proceeds exceed the interest paid to investors.
Senator Givens wanted to clarify with Ms. Branham what exactly a BAN was. Ms. Branham explained that it was a Bond Anticipation Note. Bond anticipation notes are an excellent means of acquiring short term financing that will later be repaid by the issuance of bonds, with a portion of the proceeds gained from the sale of the bonds going to settle the notes. The use of the bond anticipation note is common for local municipalities that wish to generate funding for an upcoming project, and plan on issuing bonds that will cover the expenses over the long term.
Senator Givens also wanted to know if the BAN moved projects ahead faster. Ms. Branham explained that it was not faster, but a cheaper way of accomplishing the same task. Senator Smith then asked who exactly the market for the sale of these bonds was. Taylor Manley, Budget Office, Transportation Cabinet, said the market was generally larger banks.
Chairman Collins recognized Majority Floor Leader Rocky Adkins as a guest. Representative Adkins commented that the bond market is very attractive right now because of the lowered interest rates. Representative Adkins also asked if the passage of the transportation plan means the cabinet will be able to recoup some of the money spent and if there would be a saving to the taxpayers. Secretary Hancock stated that the goal was to move projects out as soon as possible.
Ms. Branham further explained how the cabinet manages cash so that every bond authorization gets the authorization due and advance projects. Ms. Branham stated it was on a 1st in and 1st out basis. In 2005 the General Assembly legislated the $300 million to the Transportation Cabinet. Secretary Hancock also added that everyone needs to understand that if there was a project in the road plan that says SP, meaning “state funded dollars,” that is the lowest priority identified and they typically do not expect to have funding available.
The next item on the agenda is the discussion on the Cabinet’s Storage and Removal of Ice Storm Debris from the 2009 ice storm. Chuck Knowles, Deputy State Highway Engineer, Kentucky Transportation Cabinet began by explaining to the members the scope of the damage from that storm. He stated that 103 out of 120 Kentucky counties were declared disaster counties. The cabinet has removed 15.7 million cubic yards of material from the roadside and disposed of it. The cabinet used 193 management sites statewide, some of which were public sites. The cabinet had 90 property leases with private property owners. To date, the cabinet has spent $134 million in cleaning up the January 2009 ice storm. So far the cabinet has received reimbursements of $20 million from FEMA and $16 million from Federal Highway Administration. Of the $134 million, $3 million was paid to lease private property owners and $4 million to cities and counties for their effort in clean up.
Chairman Collins inquired about disposal of the debris left over from the ice storm. Mr. Knowles explained that the cabinet had a wide variety of options. Some was put into landfills and debris was ground and disposed of. There were some companies that offered a free chipping service and the cabinet also utilized burning to dispose of debris.
Senator Leeper explained that a concern of his constituents is that there is a contract that states that the property being leased for debris management shall be left in the condition it was found. One of the efforts that the constituents tried was to dig trenches to fill with debris and burn it. The constituents concern is with the settling of that trench. Senator Leeper asked if there was any requirement that stated the cabinet needed to fill that in to make it as it was. Mr. Knowles stated that the cabinet’s goal from day one was to dispose of debris and restore property to the original state.
Senator Leeper also had another constituent whose concern dealt with the contracted companies. The constituent was concerned that the contracted company was not paying their employees. Senator Leeper asked if there was any oversight on payment to employees of the contract company. Mr. Knowles explained that would have to be a question directed to the Department of Labor. Todd Shipp, Legal Office, approached the testimony table to help clarify this matter. Mr. Shipp stated that any concerns with employees not being paid needed to go to the Department of Labor.
Representative Coursey asked who was responsible for writing the contracts for debris clean up. Mr. Shipp stated that as a general rule, they try to keep a universal contract. Representative Coursey also asked if the contractors were given options on how they would like to dispose of the debris. Mr. Knowles explained that the cabinet decides how they want the debris disposed of and then write the contract. Representative Coursey wanted to ensure that the private property that is being leased will be returned to its original state. Mr. Knowles assured him that it would be.
Representative Henley inquired if there were consequences for contractors that had a repeated history of not paying their employees. Mr. Shipp explained that by law, the cabinet is required to accept the bid for the lowest bidder, but includes the most responsible bidder as well.
Chairman Collins called the next guests, Richard Dobson, Executive Director, Sales and Use Taxes, Department of Revenue; Jim Oliver, Director of Miscellaneous Taxes, Department of Revenue to discuss the New Motor Vehicle Trade-In Credit. Mr. Dobson explained that on the Department of Revenue’s website, there is a display that shows the accumulated credit towards the tax credit. This has been implemented since the credit took effect in September 2009. Mr. Dobson explained that based on their calculations, the estimated tax credit will be reached on August 23, 2010. Mr. Dobson also stated that the Department of Revenue has been in constant contact with the clerks offices and KADA to keep them updated on where the numbers stand.
Chairman Collins stated that the committees concern was that the dealerships have the information where they are able to check the tax credit regularly each day. Mr. Dobson stated that it was almost an impossibility to keep them informed to the exact minute because of the lag time between dealerships and clerk’s offices receiving the paperwork from the trade.
Chairman Collins wanted to briefly explain the item of business which pertained to the consideration of Referred Administrative Regulation 601 KAR 2:020 – Drivers’ Privacy Protection. He explained that it gave gas stations the opportunity to get information from the cabinet that would allow them to prosecute any drive-offs at gas stations. No objection was raised to the proposed Administrative Regulation.
Before adjournment, Chairman Collins informed the members that the next meeting would be held on September 7th, 2010.
With no further business before the Committee, the meeting adjourned at 12:10 p.m.