03/23/2015 01:30 PM House FINANCE

HOUSE BILL NO. 140                                                                                                            
                                                                                                                                
     "An Act authorizing the  Alaska Railroad Corporation to                                                                    
     issue  revenue  bonds  to   finance  a  positive  train                                                                    
     control   rail  transportation   safety  project   that                                                                    
     qualifies  for  federal  financial  participation;  and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
2:15:43 PM                                                                                                                    
                                                                                                                                
JANE   PIERSON,   STAFF,  REPRESENTATIVE   STEVE   THOMPSON,                                                                    
communicated  that  the  bill  would  authorize  the  Alaska                                                                    
Railroad  Corporation to  issue  up to  $37  million in  tax                                                                    
exempt bonds  backed by  the federal  transit administration                                                                    
formula  funds received  annually  by  the corporation.  She                                                                    
detailed  that  bond  proceeds  would  be  used  to  finance                                                                    
positive  train  control,  a   safety  program  mandated  by                                                                    
federal government without any correlating funding.                                                                             
                                                                                                                                
Co-Chair   Neuman    noted   that   the    railroad   needed                                                                    
approximately  $55  million  to  complete  the  program.  He                                                                    
referred to the bonding  authority of $34.1 million provided                                                                    
under the bill,  which left $18 million. He asked  if it was                                                                    
the intent  of the  Alaska Railroad  Corporation to  ask the                                                                    
legislature for the additional funds.                                                                                           
                                                                                                                                
WILLIAM   O'LEARY,  PRESIDENT   AND  CEO,   ALASKA  RAILROAD                                                                    
CORPORATION (via teleconference),  replied that the railroad                                                                    
had yet  to determine  where it  would obtain  the remaining                                                                    
$18  million; $55  million would  be  addressed through  the                                                                    
legislation. He  elaborated that  $37 million would  get the                                                                    
railroad through approximately two  years of activity on the                                                                    
project, which  would provide the  railroad time to  look at                                                                    
options.                                                                                                                        
                                                                                                                                
Co-Chair Neuman  asked if the corporation  had discussed the                                                                    
$18  million   with  its  board  and   the  possibility  the                                                                    
legislature may  need to provide  additional funding  in the                                                                    
future.  Mr. O'Leary  in the  affirmative. He  detailed that                                                                    
originally  the  plan  had  been to  request  the  full  $55                                                                    
million over  a three-year period from  the legislature. The                                                                    
corporation's had  the ability  to refinance  existing debt,                                                                    
which  created headroom  to  bond for  the  $37 million.  He                                                                    
addressed  the   remaining  $18  million  and   agreed  that                                                                    
everyone was  considering where the  funds would  come from.                                                                    
He stated that the corporation  did not currently know where                                                                    
the additional funds could come from.                                                                                           
                                                                                                                                
2:19:44 PM                                                                                                                    
                                                                                                                                
Co-Chair Neuman  was concerned that  the state did  not have                                                                    
capital funds to  put towards the project.  He wondered what                                                                    
would happen  in three years'  time. He wondered  what other                                                                    
options  the corporation  had besides  requesting the  funds                                                                    
from the legislature.                                                                                                           
                                                                                                                                
Mr. O'Leary replied  that he did not know.  He reasoned that                                                                    
the issue would  be dealt with as the  project went forward.                                                                    
He  communicated that  the  corporation's primary  objective                                                                    
was to  keep the project  moving forward and to  continue to                                                                    
make a good  faith effort as required by  its regulators. He                                                                    
believed that  the legislation would hopefully  provide time                                                                    
to  come up  with  a  solution for  the  remainder of  funds                                                                    
needed to complete the project by 2018.                                                                                         
                                                                                                                                
Co-Chair Neuman  commented that he  did not mind  moving the                                                                    
bill  forward, but  he wanted  assurance  from the  railroad                                                                    
that it did not intend  to come forward with further capital                                                                    
fund requests in the future.                                                                                                    
                                                                                                                                
Representative Gattis wanted  assurance that the corporation                                                                    
did not  intend to  come back  to the  state for  funds. She                                                                    
spoke to decisions businesses were  required to make related                                                                    
to  financing; there  were choices  to sell  assets, to  re-                                                                    
bond, or other.                                                                                                                 
                                                                                                                                
Mr. O'Leary  answered that he  was not  trying to be  coy in                                                                    
his response. The  corporation did not know  where the funds                                                                    
would  come from.  He agreed  that  the corporation's  major                                                                    
focus  was  continuing to  move  forward  with the  unfunded                                                                    
mandate.  He  mentioned  options   of  state,  federal,  and                                                                    
railroad funds. He underscored  that the railroad understood                                                                    
that it  had to obtain the  funds somewhere and that  it was                                                                    
necessary to keep moving forward on the project.                                                                                
                                                                                                                                
Representative  Gattis  asked  if the  corporation  had  the                                                                    
assets it could  utilize if push came to  shove. Mr. O'Leary                                                                    
answered that the railroad did  not have the money or assets                                                                    
currently. He noted  that if it did have the  money it would                                                                    
most likely  be moving  forward with  those funds.  The goal                                                                    
was to  begin to determine  what the corporation  would need                                                                    
to do to obtain the $18 million.                                                                                                
                                                                                                                                
2:24:11 PM                                                                                                                    
                                                                                                                                
Co-Chair  Thompson  believed  the railroad  had  significant                                                                    
assets that it may need  to consider utilizing. He hoped the                                                                    
committee  had  adequately  conveyed that  the  state  would                                                                    
probably not have any money for three or four years.                                                                            
                                                                                                                                
Co-Chair Thompson CLOSED public testimony.                                                                                      
                                                                                                                                
Co-Chair  Neuman MOVED  to REPORT  HB 140  out of  committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
note. There being NO OBJECTION, it was so ordered.                                                                              
                                                                                                                                
HB  140   was  REPORTED   out  of   committee  with   a  "no                                                                    
recommendation" recommendation and with  one new zero fiscal                                                                    
note  from   the  Department  of  Commerce,   Community  and                                                                    
Economic Development.                                                                                                           
                                                                                                                                
Co-Chair Thompson  discussed the schedule for  the following                                                                    
day.