Legislature(2009 - 2010)CAPITOL 17
03/17/2009 01:00 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| HB155 | |
| HB127 | |
| SB72 | |
| HB131 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 155 | TELECONFERENCED | |
| *+ | HB 131 | TELECONFERENCED | |
| + | SB 72 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 127 | TELECONFERENCED | |
HB 127-ALASKA RAILROAD BUDGET 1:55:50 PM CHAIR WILSON announced that the next order of business would be HOUSE BILL NO. 127, "An Act providing that the Alaska Railroad Corporation is subject to the Executive Budget Act and providing that expenditures of the Alaska Railroad Corporation are subject to appropriation; and providing for an effective date." [Before the committee was Version A.] 1:56:33 PM PATRICK GAMBLE, President, and CEO, Alaska Railroad Corporation (ARRC), stated the proposal to transfer the ARRC under the Executive Budget Act is clear. He offered to address the "why" today. He offered his belief that this issue is raised about every ten years. He opined that it is appropriate to do. He inquired as to what has changed that might require such action, which he said is exactly the right approach. He related that examining whether the framers of the Alaska Railroad Transfer Act of 1982 (ARTA) "had it right" and whether the properties are enduring properties. 1:58:23 PM MR. GAMBLE stated that he reviewed the 38 pages of the corporate act, and as he thumbed through and highlighted any issues that might arise between the ARRC Act under AS 42.40 and the Executive Budget Act. He stated that he had about 50 items that would need to be clarified how the ARRC would operate under the Executive Budget Act. He said he agrees with Representative Gruenberg that it is a complex issue. He provided a history of the ARRC, that the legislature approved the ARRC transfer from the federal government after 70 years of federal government control. He offered that the legislature deliberated whether to take over the railroad, and many issues and legalities were discussed. He related that the legislature created an entity that was a business like entity, quasi-independent, and outlined the scope of the ARRC. MR. GAMBLE recalled that the Corporate Act under AS 42 goes to great length to explain the purpose of the ARRC. He related the introduction states that it is the legislature's intent, the policy of the State of Alaska to foster and promote the long term growth of the state; and to foster and promote the development of the state land and natural resources. Thus, properties for business would be enduring properties; and the state does not have the authority to sell off land, he opined. He emphasized that cited at least a half a dozen times in the corporate act is an overriding concern as to the ARRC's solvency. Therefore, when it came to selling bonds, the legislature placed safeguards in at least six places, advising the ARRC that it cannot sell bonds without the proper authority. 2:01:51 PM MR. GAMBLE continued by stating that ARRC is an "essentiality" of the state infrastructure in that the ARRC needed to be able to provide transportation without state approval. He opined that the state had confidence in the business case that was presented, that the business case would allow the ARRC to "pay its bill" meet its obligations, and contribute to a capital program, and as an independent operating agency not have to seek approval. He offered his belief that the model works. He welcomed the review to determine whether the ARRC is doing the best it can. He opined that if it is not, that it was time to reexamine the business case. He offered his belief that he is here to discuss the alternative and impact if the ARRC is to be placed under the Executive Budget Act. He admitted that he did not know exactly the implications of the change. 2:03:55 PM MR. GAMBLE reiterated that the statutes defined the details of the ARRC operations. He reiterated that he is not sure of changes in the ARRC operations under the Executive Budget Act. He expressed concern to offer opinions on hypothetical questions, given the ambiguity of how the ARRC would need to operate under the Executive Budget Act. MR. GAMBLE referred to the ARRC operations in the past 24 years that the ARRC has been in existence. He related that the capital contributions are well in excess of $900 million, and the ARR earnings all are invested in capital programs, which he stated are jobs, contracts, opportunities for employees, and the trickle down effect. He opined that effect is growing at a 14 percent compound annual growth rate for last 23 years, although he cannot say that for this year. He reported assets of $22 million have grown to almost $900 million. He opined that the ARRC has been considered a model, that in fact, China asked him to speak on the regional model since China is working to segment its large railroad into regions. 2:06:09 PM MR. GAMBLE related that Commonwealth North in its report "Putting Alaska's Assets to Work for Alaskans" cited the ARRC as a good model of an operating entity. He reported that 24 hours per day somewhere in the system "a wheel is turning." He reported that the ARRC has its own liabilities and employees, which are funded from its earnings. He identified that it links responsibility and accountability within its model. Thus, if the ARRC receives board approval for capital expenditures, which are then accomplished within the organization, the ARRC reviews it. Therefore, he observed that he is not sure he understands the current deficiencies. He conceded that perhaps it is not deficiencies, but the prospect of a better business enterprise model. He expressed a willingness to review the current ARRC model. He stated that if the ARRC can improve its profitability for the state's economic development, it needs to do so. MR. GAMBLE opined that HB 127 does not provide this option. He recalled that some people have asked him "what is broken." He offered his belief that nothing is broken but the ARRC has an obligation and responsibility to ensure the ARRC is still doing what the legislature intended it to do. He speculated if the issue is not whether the business is performing, but instead is a constituent issue in which the ARRC has taken action in certain constituent matters, that is a legitimate concern. He recalled the ARRC personnel were called arrogant by some legislators. He said this upset him since the majority of the public comments refute that statement. He observed that if this is a constituent issue that he needs to identify and address the matter. 2:09:18 PM MR. GAMBLE identified that ARRC's Strategic Plan and five year plans emphasize the need to work at the grassroots level with individuals, entities, and municipalities to in order to fulfill the mission of the ARRC. He highlighted that the statement was developed especially for ARRC's employees. Thus, he would appreciate knowing of instances in which employees are perceived as arrogant or who are not willing to address issues. He stressed if employee attitudes are the issue that it is not necessary to change the current ARRC model. He reiterated his interest in identifying constituent issues. 2:10:18 PM MR. GAMBLE offered his belief that the ARRC's overall record is clear. He recalled similar statements when he initially began working for the ARRC. He observed that he has not heard complaints about arrogance in three or four years. He shared the ARRC public affairs department distributes surveys and reported that approval ratings are up from 65 to over 80 percent statewide. He specified in Fairbanks, despite "tough issues" that the ARRC's favorable rating is over 90 percent. Thus, he concluded that the public has trust in the ARRC. 2:11:40 PM MR. GAMBLE recalled a prior hearing he was unable to attend. He offered to comment on several matters that arose. He related that the ARRC has employees who are members of five unions. He conveyed that of those, two are currently unhappy over work which has been contracted out. He detailed that the two unions have 10,000 and 7,000 hours of backlog, respectively. He reported that he contracted out one segment of the backlogged work, especially since the ARRC's busiest season will soon start. He mentioned that this is a one-time contract and this is the first time he recalls that he has had to contract work out. He related that he discussed this with union leadership. 2:12:59 PM REPRESENTATIVE GRUENBERG inquired as to the specific unions that are affected. MR. GAMBLE replied that one union is the Transportation Communication Union (TCU), comprised of about 46 employees. He mentioned that the ARRC is in the process of hiring four more journeymen. He described the task as replacing wooden planking on flatcars, after 30 to 40 years use. He characterized the work as "grunt work" and not skilled labor, yet it is work that must be finished by summer since the flatcars would otherwise be deemed unsafe. He remarked that the ARRC has hired local business to rip and replace the planks while the rest of the ARRC team is doing "winter work" to ready the passenger coaches for summer. He surmised that when employees are not happy they will complain. He acknowledged that he anticipates the complaints. However, he also respects the employee's rights to represent their union, even if it means complaining to legislators. He recalled difficulties with the United Transportation Union (UTU) six years ago. He related that through informal discussions he was able to assist and negotiate a contract. He speculated it is possible that the UTU may well support the ARRC's position with the current issue, although he emphasized that he cannot speak for the union. In response to Representative Gruenberg, Mr. Gamble related that the union represents the locomotive engineers, firemen, and brakemen. 2:16:07 PM MR. GAMBLE speculated that the unions may support the ARRC's leadership since the perception is if the ARRC fell under the Executive Budget Act that members fear they would have 60 managers instead of the ARRC, when contemplating pay raises or work rules. He reported he has successfully negotiated 11 contracts thus far without a strike, although he recalled that he has reached impasse at times. He offered that in those instances he has intervened and has been successful. In response to Representative Harris, Mr. Gamble pointed out the International Association of Machinists (IAM) represent the machinists, currently working on a technology project as a result of a Congressional mandate that is about a 7,000 man hour. He related that the installation piece was contracted out. While IAM members would like to do the work, he pointed out that he cannot double the workforce in order to accommodate the union. Thus, given the short timeframe, he has contracted out the one-time installation segment and members are not happy, he reiterated. 2:18:38 PM MR. GAMBLE then turned to Flint Hills Resources Alaska (Flint Hills). He explained that the ARRC could not purchase the Flint Hills refinery without involving the legislature in numerous issues. He said, "It's my opinion that the answer to that question is no, we could not go out and buy Flint Hills." He surmised that the capital investment alone would require the state to step in. He replied that the ARRC would receive federal economic stimulus funding through a formula based on the number of passenger coaches and passenger miles. He emphasized that the funding is strictly for "rail" and is based on 60 percent of the miles, which has been set at $26 million. He allowed that he has not yet taken proposals to the ARRC board, but related the federal rules are explicit. He outlined the categories are all related to passengers. He recalled that one is the technology project previously mentioned. Another is to provide funding to rebuild main line to Fairbanks and Seward. The third category is for passenger equipment. He noted that the ARRC is on the same timelines as the Department of Transportation & Public Facilities (DOT&PF) must adhere to for the economic stimulus funding. 2:21:15 PM MR. GAMBLE referred to the fiscal note and recalled questions about the ARRC issuing dividends, which he says comes up periodically. He clarified that he testified in Senate Finance Committee several years ago about dividends. He opined that federal law prohibits the ARRC from issuing dividends. However, he related that since the legislature gave bonding authority to the ARRC it has accelerated the ARRC's building program by about ten years. He further related that the ARRC is in its fourth year of the six-year upgrade to rebuild the line. Thus, he opined that the ARRC may have discretionary capital dollars available. He is under discussions with DOT&PF about instances in which the railroad has commonality with roads and bridges. He speculated that it is possible the ARRC could cooperatively work with DOT&PF to apply capital dollars and those dollars could stretch the DOT&PF funding. He opined that would be a way to contribute to another department's needs with capital excess while still following the federal guidelines. He further opined that could amount to several million dollars a year for the state. 2:23:40 PM MR. GAMBLE related that legislative oversight of federal projects could represent a method to successfully work on such cooperative projects. In response to Chair Wilson, Mr. Gamble related that the fiscal note is $1.3 million, with subsequent funding of $247,000. 2:24:38 PM BILL O'LEARY, Chief Financial Officer, Alaska Railroad Corporation (ARRC), referred to the fiscal note. He stressed that the fiscal note was difficult to prepare since significant uncertainty exists with respect to the proposed ARRC transfer under the Executive Budget Act. He related that page 2 of the fiscal note refers to five bullet points in the analysis section. He further related that items one and two were unquantifiable at this time since the ARRC structure is unknown. He explained it is possible that the ARRC could suffer loss of revenue due to the more rigid budget guidelines. Additionally, in discussions with financial entities, the ARRC believe that any debt subject to appropriation could impact pricing on future debt depending solely on the amount of debt issued. He indicated that the current ARRC financial system is not designed to accommodate legislative appropriation control of the state's accounting system. He related that initial discussions to modify the current system "have not been promising." Thus, the ARRC anticipates a significant increment to maintain appropriate level of control. He identified the ARRC would anticipate additional staffing in order to comply with the Executive Budget Act. Finally, the ARRC anticipates additional costs would be incurred to travel to Juneau to coordinate with the Office of Management & Budget and the Department of Commerce, Community, & Economic Development during the legislative session. 2:27:34 PM REPRESENTATIVE HARRIS remarked on his earlier comments about arrogance, which he described as comments from third parties were passed on to him. He related comments were not directed at Mr. Gamble personally. He opined the ARRC has a pretty good record. He indicated the ARRC is an entity solely owned by the state. He suggested since the ARRC is tax exempt, that it competes with the private sector but not necessarily on a "fair playing field." MR. GAMBLE offered his belief that it would depend on who was asked. However, he affirmed the ARRC does compete with the private sector. In further response to Representative Harris, Mr. Gamble agreed the ARRC does not pay property taxes. REPRESENTATIVE HARRIS inquired as to how much land the ARRC owns that is not currently being used. MR. GAMBLE estimated that the ARRC owns 36,000 acres, with half unusable land. He related that approximately 18,000 acres is the ARRC plant. He opined that about 8,000 acres are leasable. 2:29:41 PM REPRESENTATIVE HARRIS related his understanding that about 18,000 acres are not leasable. He inquired as to whether the ARRC can sell the land. MR. GAMBLE replied that while the ARRC does not prohibit sale, that it requires legislative approval. He said, "The legislature over the past 23 years has been very loathe to consider outright sales, fee simple type sales." REPRESENTATIVE HARRIS recalled that the ARRC owns 18,000 acres that has not been earning any money. MR. GAMBLE said, "No necessarily." He described a scenario, about 25 miles north of Talkeetna, in which the ARRC has discovered high quality granite at a site where the road ends but the rail continues into the backcountry. He mentioned that the ARRC save $700,000 year by not buying the fill. He opined that the process of setting up the granite mine used up the majority of the 5,000 acres at Curry. However, he acknowledged that other areas, somewhat along the rail could be identified as not being used. He mentioned that the ARRC has 85 acres in Valdez, with a right-of-way to the ocean used during the pipeline construction phase to store pipe, transfer the pipe to trucks for transport. He opined that the 85 acres has been dormant but recently the pipeline companies are discussing the possibility of using the land for the gasline. He surmised that over the long run this represents the fluctuation of parts of the land endowment depending on development. 2:32:18 PM REPRESENTATIVE HARRIS inquired as to whether the ARRC is amenable to sell land. MR. GAMBLE indicated this may be one of the things the legislature wants to review, and if so, the ARRC certainly could not say no without defense. He characterized the ARRC as stewards of the state land. He stressed that if the legislature gives the ARRC that direction, that it will take it. He commented that the ARRC board will certainly want to provide its input. 2:33:12 PM REPRESENTATIVE HARRIS remarked that he had an uncle who was an engineer stationed in Curry years ago. 2:33:22 PM RICK BARRIER, Executive Director, Commonwealth North, stated that he has studied the ARRC since the mid-80s transfer. He said, "We have concluded that the structure that's currently in place for this enterprise seems to be working in an very effective way to manage this property." He affirmed that it is an operating business that needs to have ability to be flexible to respond quickly. He offered his belief that the ARRC has done a pretty good job. He reported that Commonwealth North does not see a need for HB 127 unless there is an issue that has not yet been raised. However, he opined that the ARRC seems to be functioning well and Commonwealth North does not see bringing it under the state's Executive Budget Act would be beneficial to the railroad or the state. 2:35:20 PM CHAIR WILSON, after first determining no one wished to testify, closed public testimony on HB 127. 2:35:48 PM REPRESENTATIVE HARRIS referred to a handout titled "COMMENTS ON HB 127, Executive Summary, submitted by the Alaska Railroad Corporation (ARRC)" dated 3/10/09. He then referred to a bullet point that stated making the ARRC subject to the Executive Budge Act may violate the federal Alaska Railroad Transfer Act (ARTA), which specifically provides that the ARRC is to retain control of its funds. He inquired as to whether any effort to sell the Alaska Railroad Corporation would violate the ARTA. MR. GAMBLE related that the ARTA was fully approved by the legislature. He said, "It is my understanding that the legislature giveth and the legislature taketh away. Therefore, in my opinion if the legislature wanted to make a fundamental change, it certainly could." He surmised that the current federal and state act requires the ARRC to retain earnings. He surmised that it might be necessary to go to Washington DC to change the federal law. He said, "It's not that it couldn't be done." However, if the federal law was not changed, the ARRC may be in violation of a federal statute. 2:37:58 PM REPRESENTATIVE HARRIS related his understanding that the ARTA is a federal act. Thus, if the legislature passed something different, that it would need Congressional modification of the ARTA. MR. GAMBLE related that this is complex. He offered his belief, items such as the one just raised would be addressed at that level. He remarked that he does not have a way to answer the question at this time. He acknowledged it could be flagged as an as an issue, but he does not have "a quick answer." 2:38:34 PM REPRESENTATIVE HARRIS related that Wells Fargo Bank is listed as a major customer. He inquired as to what dealings the ARRC has with Wells Fargo Bank. MR. GAMBLE related his understanding that the ARRC has a line of credit with Wells Fargo Bank. In further response to Representative Harris, Mr. Gamble agreed it was a financial deal. 2:39:18 PM REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, opined as prime sponsor of HB 127, that the impact of the Executive Budget Act has been far overstated. He related that several other corporate entities such as the Aerospace authority, AIDEA, and the AHFC. He indicated that this is not about a constituent issue. He emphasized that he has always been a fan of the ARRC. He reiterated his family history with the ARRC and his personal history of land adjacent to the railroad. He offered the reason for the bill is to address a broad policy issue, to lift the corporate veil of secrecy. He opined that he would like the ARRC to be part of a broad budget process. He related that positive things have happened simply by introducing the bill, such as the Flint Hills purchase. He related that having the issue raised solves one of his concerns. He reiterated that this bill is to address a broader policy issue. He opined that aloofness is a better term than arrogance. He recalled rumors that this is a nuisance bill, which he finds an affront to the legislature process. He related this is an institutional change but emphasized that he is not out to destroy the ARRC, that he wants it to prosper and sees the ARRC as an important part of the transportation network and the state's economy. 2:44:35 PM REPRESENTATIVE DOOGAN commented that although other agencies are under the Executive Budget Act, but he was not aware of any corporations in direct competition with the public. He offered that the ARRC competes with private sector. He offered his belief that under the Executive Budget Act the ARRC would have less flexibility to operate in the environment, which he said does not strike him as a good thing to do. He offered that it would be difficult for him to support the bill. 2:46:34 PM REPRESENTATIVE HARRIS moved to report HB 127 out of committee with individual recommendations and the accompanying fiscal notes. REPRESENTATIVE Doogan objected. 2:47:00 PM A roll call vote was taken. Representatives Gruenberg, Johnson, Harris, Johansen, Munoz, and Wilson voted in favor of moving HB 127 from the House Transportation Standing Committee. Representatives Doogan voted against it. Therefore, HB 127 was reported out of the House Transportation Standing Committee by a vote of 6-1.
| Document Name | Date/Time | Subjects |
|---|---|---|
| ARRC Exec Summary.pdf |
HTRA 3/12/2009 1:00:00 PM HTRA 3/17/2009 1:00:00 PM |
HB 127 |
| ARRC HB127 Commentary.pdf |
HTRA 3/12/2009 1:00:00 PM HTRA 3/17/2009 1:00:00 PM |
HB 127 |
| SB72AAPSupportLetter.pdf |
HTRA 3/17/2009 1:00:00 PM |
|
| SB72ABINSupportLetter.pdf |
HTRA 3/17/2009 1:00:00 PM |
|
| SB72AkAccidentstats.pdf |
HTRA 3/17/2009 1:00:00 PM |
|
| SB0072B.pdf |
HTRA 3/17/2009 1:00:00 PM |
|
| SB72Chart.pdf |
HTRA 3/17/2009 1:00:00 PM |
|
| HB127 Sponsor Stmt.pdf |
HTRA 3/12/2009 1:00:00 PM HTRA 3/17/2009 1:00:00 PM |
HB 127 |
| hb 131 sectional.pdf |
HTRA 3/17/2009 1:00:00 PM |
HB 131 |
| hb 131 backup.pdf |
HTRA 3/17/2009 1:00:00 PM |
HB 131 |
| hb131 sponsor stmt.pdf |
HTRA 3/17/2009 1:00:00 PM |
HB 131 |
| hb131 cs.pdf |
HTRA 3/17/2009 1:00:00 PM |
HB 131 |
| SB72OtherStates.pdf |
HTRA 3/17/2009 1:00:00 PM |
|
| SB72Sponsor.pdf |
HTRA 3/17/2009 1:00:00 PM |
|
| SB72SupportAPOA.PDF |
HTRA 3/17/2009 1:00:00 PM |
|
| SB72SupportLetterAADA.pdf |
HTRA 3/17/2009 1:00:00 PM |
|
| SB72SupportLetterPeggyHayashi.pdf |
HTRA 3/17/2009 1:00:00 PM |
|
| SB72SupportLetterSafeKidsAK.pdf |
HTRA 3/17/2009 1:00:00 PM |