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had some assurance that this will be done. I realize it is a complex problem as far as any of the carriers are concerned.
We are trying to cooperate with them. I think that the same principles are involved here as are involved in the previous statement about the competition between the Alaska Railroad.
If we are to make Anchorage a port city, and have direct ocean shipping connections with the State, we had to have a deepwater port. The people of this area said they wanted to have a deepwater port.
We have some problems to iron out. It is my hope that these can be ironed out with the carriers and with the Department of Interior, and that, as I have said before, we all play this game of competition with the same rules.
We have the feeling that we aren't right now.
I hope that the hearings, the FMB hearings, will determine once and for all whether we are right or whether the Alaska Railroad is right.
I have the greatest amount of respect for Mr. Smith and his management of the railroad. I am not saying that if I was in his position I might not be doing some of the same things he is doing, because it is competition. It is up to the people, the governing bodies of the United States, to determine the rules that we are going to operate under.
I think that concludes my statement.
Senator BARTLETT. You said that Mr. Smith provides tough competition. With all due deference to him, I should say it is lucky you haven't got Otto F. Ohlson.
Mr. STRANDBERG. I think many of you who know me from the past know that I am an expert on Otto Ohlson because we were in partnership for a number of years. I wholeheartedly agree with you. Senator BARTLETT. How much did it cost to build the port of Anchorage?
Mr. STRANDBERG. If you figure the total cost, I think it was $6 million plus. The balance of the money was set up for the covering of bonded indebtedness.
Senator BARTLETT. How was the money raised?
Mr. STRANDBERG. $2 million of general obligation bonds by the city of Anchorage which are being paid off now by the taxpayers, and with no thought of this $2 million being returned until after the general obligation bonds are paid.
In other words, it was $2 million that the city of Anchorage put up for the construction of the port.
We used that $2 million to try to get Federal participation. We approached the railroad, the Federal Government, and it was with a great deal of misgiving that we went the revenue bond approach. There is no requirement on the part of the people of Anchorage, and no strings attached to the revenue bonds. They are true revenue bonds, similar to the revenue bond that is proposed to be floated for the International Airport.
Senator BARTLETT. How much money was raised by the sale of revenue bonds?
Mr. STRANDBERG. The total bond indenture was $8 million. I think we got authorization for $8,600,000.
I am advised it was a total revenue bond authorization of $6,800,000, of which $6,200,000 had been sold.
The total is $8,800,000.
Senator BARTLETT. What was the interest rate?
Mr. STRANDBERG. I think the average interest rate is just a little under, with the GO's and the revenues together, just a little under 5 percent, isn't it? You are asking me for a figure which I shouldn't mention. I can furnish it.
Senator BARTLETT. Please have prepared and placed in the record a statement of what the port of Anchorage pays. Does the port of Anchorage pay the interest on the general obligation bonds?
Mr. STRANDBERG. Wait a minute. Port of Anchorage is not funding the general obligation bonds.
Senator BARTLETT. You don't have to pay the interest on those? Mr. STRANDBERG. No. That is handled by the city. That is the ante that the people of this area put in the kitty for the construction of the port.
Senator BARTLETT. Is there an understanding, formal or otherwise, that when the port is a going concern, you will repay to the general fund of the city the amount raised by those general obligation bonds?
Mr. STRANDBERG. The only obligation to pay that back is that it cannot be paid back until the general revenue bonds are retired.
Senator BARTLETT. And then it may or may not be paid back?
Senator BARTLETT. You will place in the record
Mr. STRANDBERG. We will be glad to place in the record the complete trust indenture.
Senator BARTLETT. Fine.
(The document referred to is too extensive for reprinting but is retained in the committee's files for public reference.)
Senator BARTLETT. Now, how is tonnage running in the port since April to date in respect to your calculations as of earlier this year?
Mr. STRANDBERG. Poorly. We are under our calculations.
Senator BARTLETT. What do you think would be required by way of annual tonnage to make the port self-supporting?
Mr. STRANDBERG. It is figured that it takes about 110,000 tons a year across the port to amortize the obligations of the port.
Senator BARTLETT. Thank you, Mr. Strandberg.
Mr. MCELROY. I have no questions at this time.
Mr. GRINSTEIN. Is my understanding correct that it costs less for cargo to come from Seattle to Seward, and then transship from Seward to Anchorage, than it does to land it directly in Anchorage from Seattle?
Mr. STRANDBERG. I don't believe so. Understand that I am not qualified to pass on all these rates. I am chairman of the commission. We would be glad to furnish you with any information which we have as to the comparison between the costs of bringing freight in over the dock and the available information to us via Seward. I would rather do it that way rather than make any off-the-cuff statements.
Mr. GRINSTEIN. Is the charge to the consignee less?
Mr. STRANDBERG. We believe it is. Our records show that it is, Our trouble is mainly we haven't got a major carrier in here. Senator BARTLETT. Why won't they come in; do you know?
Mr. STRANDBERG. I would rather not answer that. I would rather let the records speak for themselves on that. I have my own opinions and I don't believe at this time that I would care to
Senator BARTLETT. The witness remains mute then.
Mr. STRANDBERG. That is right.
Senator BARTLETT. Thank you.
Is there any other witness on the subject of transportations? (No response.)
Senator BARTLETT. I think that since we have concluded the subject of transportation, and since we have a good long afternoon in which to proceed with any further witnesses on the subject of the fishery, and the reception center at the international airport, and any other subjects within the jurisdiction of the committee we will stand in recess until 2 o'clock; I presume, although I cannot state categorically, that we will be in the same room.
The committee is in recess until 2 o'clock.
(Whereupon, at 11:43 a.m., the hearing was recessed to reconvene at 2 p.m., the same day.)
Senator BARTLETT. The committee will be in order.
Will you give your full name and mailing address?
STATEMENT OF JACK ANDERSON, ANCHORAGE, ALASKA, CHAIRMAN OF THE TRANSPORTATION COMMITTEE, ALASKA STATE CHAMBER OF COMMERCE
Mr. ANDERSON. My name is Jack Anderson, mailing address, 1016 East 4th Avenue, Anchorage.
Senator BARTLETT. Do you have a prepared statement?
Senator BARTLETT. We will be glad to hear from you.
Mr. ANDERSON. I served in the capacity of the chairman of the Transportation Committee of the Alaska State Chamber of Commerce and director of the Anchorage Chamber, and the division chairman of the Transportation Division of the Anchorage Chamber of Commerce.
I would like to ask permission of the Senator to insert in the record, starting with paragraph 2, page 4, through page 8, remarks that I made at Ketchikan with regard to surface transportation in Alaska. The preceding remarks are related to air transportation and I don't believe they are pertinent to the hearing you are conducting.
Senator BARTLETT. Would you mind inserting the whole document? Aviation is within the jurisdiction of this committee.
Mr. ANDERSON. I wouldn't mind.
Senator BARTLETT. Do you have an extra copy of it? I have been hearing about it for days and haven't seen it yet.
Proceed in your own way, Mr. Anderson.
(The document referred to is as follows:)
ADDRESS BY MR. JACK ANDERSON, CHAIRMAN OF THE TRANSPORTATION COMMITTEE, ALASKA STATE CHAMBER OF COMMERCE, AT CONVENTION OF ALASKA STATE CHAMBER OF COMMERCE, KETCHIKAN, ALASKA, OCTOBER 12, 13, AND 14, 1961
I appreciate the opportunity that has been extended to me this afternoon to discuss with you the transportation industry, an industry which I feel is the key to the development of the economic stability of the State of Alaska.
I should like to preface my remarks by saying that I am presenting this afternoon results and conclusions that have been reached over the past year after careful review of Alaska's transportation problems, after extensive inquiry among Alaskan citizens and shippers, and among transportation consultants in the south 48.
To discuss transportation as related to the State of Alaska, you must, of a necessity, discuss transportation in two phases:
Alaska is unique among the 50 States in that it does not have a network of highways. It does not have a railroad system crisscrossing the State; therefore, it does not have the huge complex of private transportation available and is necessarily dependent on public utility type transportation-both surface and air.
The first phase in my discussion with you is devoted to aviation. Alaska does not yet have adequate facilities in the field of aviation; but, to the credit of the farsighted men who have pioneered aviation in Alaska, the services provided by this industry come closer to being adequate than any other transportation system that exists within the State today. So, this being in my estimation the best operated and the most adequate, let us discuss what the chamber's responsibility should be in the field of aviation.
I refer you to an article which appears in the October issue of Air Travel which is a part of the "Official Airline Guide" and I quote verbatim :
"UNITED STATES-ALASKA MARKET LOOKED AT BY CAB"
"The Civil Aeronautics Board has expressed concern with the 'continuing problem of uneconomic multiple carrier service' in the 'relatively thin' U.S.Alaska market and may launch a formal two-step investigation of the market to determine, among other things, whether one or more carriers might be eliminated from the route.
"Officials of the airlines currently serving the route-Pan American, Northwest, Pacific Northern, and Alaska Airlines-have held informal meetings with the CAB, which sought their ideas as to how much service the market requires and how it can be best provided.
"As in its U.S.-South America route case, the Board probably will first seek to determine what United States-Alaska routes should be served and then determine what carriers should serve the routes. The Board also may welcome merger proposals from carriers in the market."
What is the significance of this article and what relationship does it have to the State chamber of commerce? First, the Alaska State Chamber of Commerce and its members must concern themselves and inform themselves of existing local service routes and patterns. Secondly, the Alaska State Chamber of Commerce and its members must concern themselves and inform themselves of the pattern of service which exists between Seattle and Alaska. Thirdly, the Alaska State Chamber of Commerce and its member chambers must concern themselves and apprise themselves of the eminent position that Alaska occupies in international air routes.
These three factors are so important in the orderly development of the State's aviation industry that I could dwell on them for this entire presentation, but let me recount to you what I think is the greatest single concern that we should look toward. This is a concern that I share with many people in Alaska and relates to the continuance of subsidy payments by the Federal Government to provide the necessary air service that Alaska requires.
Using round figures, the Federal Government today allocates 12 percent of its entire subsidy payments to Alaska. We are talking about subsidy payments of $10 million annually. In States-Alaska service, we are talking about four air carriers all with their management, their maintenance, and their headquarters in the south 48 and who base their permanent crews in the south 48. Two of these carriers, Northwest and Pan American, are not subsidized. The
other two, Alaska Airlines and Pacific Northern Airlines, share about one-half of these subsidy payments.
The other half of this subsidy goes to support the network of intra-Alaska carriers whose management, crews, and maintenance facilities are located entirely within the State. Now, these two subsidized carriers in States-Alaska service are well operated and well managed and contribute very substantially to our transportation pattern and growth. They do not have international air routes and their management is devoted entirely to the improvement of their States-Alaska service.
With the demands by the traveling public for upgrading of equipment and service, Alaska Airlines and Pacific Northern Airlines may be faced with a heavy capital expenditure program for acquisition of jets which may, or could; result in additional subsidy requirements to maintain and operate this ultramodern equipment.
The State chamber of commerce and its members must become aware of the infinite details of air routes, regulations, and subsidies and they must separate in their thinking the subsidy payments that provide States-Alaska service from the subsidy payments that provide intra-Alaska service. An economy government or an economy-minded Congressman may not separate or concern themselves with States-Alaska subsidy versus intra-Alaska subsidy. If we do not examine "the continuing problem of uneconomic multiple-carrier ervice." Infunds provide, we Alaskans could find ourselves in a position of jeopardizing our entire intra-Alaska air route system or our States-Alaska air route system as they exist today.
There must be in the chamber's thinking of a clear-cut understanding of subsidies necessary to maintain a strong intra-Alaska air carrier operation. There must be concern and understanding of the CAB's announced policy to examine "the continuing problem of uneconomic multiple carrier service." Individual chambers and the State chamber may be asked to enunciate policy in both respects, and I urge you to study these problems and prepare yourselves to arrive at some firm solution as to your chamber policy.
Now, may I discuss with you surface transportation as we know it in Alaska today and the role that I feel that the chambers and the State chamber should play in the public interest in this regard. As important as air transport is to the State, and as important as the development of a highway system for Alaska, and as important as the development of a marine highway in southeastern Alaska is, there still remains the undisputed fact that surface transportation provides the lowest cost and best method for moving goods.
There are many in Alaska who feel that the best method for developing low; cost surface transportation is by regulation. Conversely, there are many in Alaska who feel that the best method for the orderly development of low-cost surface transportation is by complete freedom of regulation. I think that the greatest single problem that will be faced by the Alaska State Chamber and its members is the policy that they may choose to adopt in favor of, or opposed to regulation and service.
The State of Alaska through the Alaska Public Service Commission already has established certain ground rules and procedures whereby they have the authority to publish cease-and-desist orders halting service deemed not in the public interest, and whereby they have the authority to hold public hearings to determine the requirements for, or the necessity of, additional truck service over specified routes.
The chambers of commerce in the respective communities involved in service hearings should participate, and are welcome to participate, representing the public interest in these hearings which are held before the Public Service Commission.
The Alaska State Chamber and its members should concern themselves and interest themselves in these hearings as the decisions that are made on the basis of information presented are decisions that establish frequency of service, type of service, and rates--all of which are important to a businessman or a business community in establishing its distribution industry and the highway trade patterns and rates that will be applied to their particular locality. The chambers should apprise themselves of the method under which these rates and services are promulgated.
Continuing under the subject of regulation and service, let us turn to the situation as it exists today in waterborne commerce to Alaska. In order to establish a basic outline from whence the policy of the Alaska State Chamber of Commerce can be established and from such outline, member chambers can