04/07/2015 01:00 PM Senate TRANSPORTATION

        HB 140-LEG. APPROVAL: AK RAILROAD REVENUE BONDS                                                                     
                                                                                                                                
1:07:16 PM                                                                                                                    
CHAIR MICCICHE announced the consideration of HB 140.                                                                           
                                                                                                                                
REPRESENTATIVE STEVE THOMPSON,  Alaska State Legislature, Juneau,                                                               
Alaska,  sponsor of  HB 140,  said this  bill deals  with funding                                                               
positive train control (PTC), the  technology that is designed to                                                               
stop a train before human  error causes an accident. He explained                                                               
that in  2008 the  Federal Rail  Safety Improvement  Act required                                                               
that certain railroads install fully  functional PTC by 2015 that                                                               
was later extended to 2018.                                                                                                     
                                                                                                                                
The  Alaska  Railroad,  because  of  its  passenger  service,  is                                                               
required to  install PTC. Providing passenger  service brings the                                                               
Railroad $25 million  a year with an additional  $29 million from                                                               
the Federal  Transit Administration. That is  $54 million between                                                               
the two  that the railroad would  lose in revenues if  they don't                                                               
install PTC.                                                                                                                    
                                                                                                                                
HB  140  authorizes the  Alaska  Railroad  Corporation (ARRC)  to                                                               
issue  up to  $37  million  in tax  exempt  bonds  backed by  the                                                               
Federal Transit Administration (FTA).  Bond proceeds will be used                                                               
to finance PTC, which has an estimated cost of $158 million.                                                                    
                                                                                                                                
He said the  railroad also has proposed to  refinance $66 million                                                               
in  existing bonds  and extend  the  repayment date  in order  to                                                               
issue  these additional  $37 million  in bonds  to pay  for major                                                               
portions  of   the  remaining  $55   million  needed   to  finish                                                               
installing PTC.                                                                                                                 
                                                                                                                                
AS  42.40.285  requires  the  ARRC to  ask  the  legislature  for                                                               
permission to  issue bonds. In  no event will the  general credit                                                               
of the State  of Alaska or the ARRC be  pledged for the repayment                                                               
of  these  bonds.  AS  42.40.500   requires  that  all  liability                                                               
incurred by the railroad shall  be satisfied exclusively from the                                                               
assets or revenue of the railroad and not the state.                                                                            
                                                                                                                                
REPRESENTATIVE  THOMPSON said  debt  payment for  the bonds  will                                                               
come  from  a  portion  of  the  Federal  Transit  Administration                                                               
formula funds, which are statutorily  mandated by federal law and                                                               
received annually  by the  railroad. Issuing  debt backed  by FTA                                                               
formula  funds  is authorized  through  FTA  regulations and  has                                                               
already been used by the railroad to issue bonds.                                                                               
                                                                                                                                
He said estimates  for this project indicate that it  will cost a                                                               
total of $158  million to implement. Since 1997  the railroad has                                                               
invested $68.9  million to develop  a PTC system. In  2013/14 the                                                               
railroad  received an  additional $19.1  million and  $15 million                                                               
respectively from the  State of Alaska for continued  work on it.                                                               
Between  2016  and  2018,  an  additional  $55  million  will  be                                                               
required to complete  the development and installation  of PTC by                                                               
the 2018  deadline. This bond  issuance will leave  an additional                                                               
$18 million to complete the funding package.                                                                                    
                                                                                                                                
1:12:19 PM                                                                                                                    
The  railroad understands  that  over the  next  three years  the                                                               
state will  probably not have  any funds available.  He explained                                                               
that this figure does not  include the estimated $5-7 million per                                                               
year of  operating and  maintenance costs  related to  the system                                                               
once it's installed.                                                                                                            
                                                                                                                                
1:12:59 PM                                                                                                                    
He noted  that if the railroad  doesn't show it is  making a good                                                               
faith effort to implement PTC, the  FTA can implement fines of up                                                               
to $100,000 per day.                                                                                                            
                                                                                                                                
SENATOR DUNLEAVY asked if HB 140 had a fiscal note.                                                                             
                                                                                                                                
REPRESENTATIVE THOMPSON answered  that it has a  zero fiscal note                                                               
and explained that the bonds are totally backed by FTA funds.                                                                   
                                                                                                                                
SENATOR DUNLEAVY asked  if this is passed, the  railroad won't be                                                               
coming to the legislature for money for PTC.                                                                                    
                                                                                                                                
REPRESENTATIVE   THOMPSON  responded   that   the  railroad   has                                                               
acknowledged that  they won't  get any money  from the  state for                                                               
the next three years.                                                                                                           
                                                                                                                                
CHAIR MICCICHE  opened public testimony and  finding none, closed                                                               
it. He asked Mr. O'Leary to explain the legislation.                                                                            
                                                                                                                                
1:15:06 PM                                                                                                                    
BILL  O'LEARY, President  and  CEO,  Alaska Railroad  Corporation                                                               
(ARRC), said it is important to  keep this project moving and the                                                               
only  way  forward  that  they   see  is  issuing  debt.  Federal                                                               
regulators are requiring it.                                                                                                    
                                                                                                                                
SENATOR BISHOP moved to report  HB 140, version 29-LS0699\A, from                                                               
committee  with  individual  recommendations  and  attached  zero                                                               
fiscal note. There were no objections and it was so ordered.