Legislature(1995 - 1996)
04/09/1996 01:50 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 64
An Act relating to the dissolution of the Alaska
Railroad Corporation and providing for a successor
corporation; and providing for an effective date.
Co-chairman Halford directed that SB 64 be brought on for
discussion. Senator Rieger noted that a hearing on the
bill, last year, revealed that CSSB 64 (TRA) provided for a
change of ownership of the Alaska Railroad in the form of a
stock corporation. The theory behind that was that if sale
of the railroad could not be achieved as a complete one-time
sale of all assets, perhaps the railroad could be sold by
selling shares of stock, over time, without changing the
underlying corporate structure. Since that time, at a joint
Senate Finance and Senate Transportation meeting, an outside
firm made a presentation indicating it was genuinely
interested in purchasing all of the assets. That increased
the level of confidence that a complete sale at one time
could be achieved. The draft CSSB 64 (9-LS0579\R,
Utermohle, 4/8/96) reflects a modified version of an
amendment proposed in Senate Transportation. It calls for
sale of the railroad and prescribes time tables within which
that is to occur.
Senator Rieger referenced scheduled identification of
railroad assets (both those needed for operation and those
which are not). Concern has been raised that "some of the
real estate which belongs to the railroad should not be part
of the sale." The first phase of identification, scheduled
for August, focuses upon the real estate and will identify
what is necessary for operation and what is surplus.
The second date, in October, is the time by which the
Governor will issue a request for proposals for purchase of
the railroad.
The third deadline, February 15, 1997, is the deadline for
reaching agreement with the maker of the most responsive
offer to the RFP.
Senator Rieger next pointed to Page 2, line 10, of the draft
and noted the requirement that the Governor submit the
agreement to the Legislature to provide an opportunity for
Legislative disapproval. It is unclear exactly when the
Governor is required to make the submission. Senator Rieger
suggested that the following additional language
(underlined) be added to line 10 so that the sentence reads:
Upon entering into an agreement to sell the Alaska
Railroad, the governor shall immediately submit
the agreement to the legislature for review during
the regular session of the legislature.
A second concern relates to preparation of a report of the
fair market value of the railroad and when the document
should be made public. A provision could be added to
require that the report remain confidential until after
proposals are received or an agreement is reached. The
reason for the fair market report is to evaluate proposals.
The third issue is whether the legislative branch would want
or should have input into development of the request for
proposals. Senator Rieger subsequently noted Legislative
Budget and Audit Committee ability to review the
classification of assets necessary for operation of the
railroad.
Senator Rieger MOVED for adoption of the draft CSSB 64 dated
4/8/96. No objection having been raised, the "R" version
was ADOPTED as CSSB 64 (Fin).
Senator Rieger voiced his belief that only the first of the
three issues raised requires a clarifying amendment. He
then MOVED for adoption of the above-cited language. No
objection having been raised, Amendment No. 1 was ADOPTED.
Co-chairman Halford referenced accompanying fiscal notes
indicating a cost of $800.0 to $1 million for preparation of
the fair market analysis. Senator Rieger acknowledged that
earlier discussion indicated the cost could be as high as $2
million. He suggested it would be prudent for the committee
to accept a fiscal note from the department or railroad or,
in the alternative, write a committee note to provide
funding for the effort.
SENATE PRESIDENT DRUE PEARCE noted that an update provided
last week indicated $2 million would be high.
MARK HICKEY, representing the Alaska Railroad, advised that
the actual figure for the 1983 valuation, conducted by the
United States Railway Association when the state purchased
the railroad, was $863.0. That represented a full valuation
including an appraisal of the real property as well as a
"going concern" assessment with a ten-year window for
operation. That is where the $22 million was derived.
While some baseline data may be usable, the valuation is
twelve or thirteen years old. It is unknown how much data
would be useful to the new valuation. Co-chairman Halford
asked if $900.0 in corporate receipts would be adequate.
Mr. Hickey responded that it should be adequate for the
appraisal. He also noted expenses associated with "running
a process." Senator Rieger expressed concurrence in the
$900.0, saying that conferees could later amend the number
if better information is available. Co-chairman Halford
directed that a Senate Finance Committee fiscal note be
prepared showing $900.0 in non-general- fund railroad
receipts.
Senator Randy Phillips raised a question regarding how the
transfer would affect railroad employees and their
retirement and benefits. Co-chairman Halford suggested that
language at Page 1, subsection (2) would cover the
situation. Senator Phillips termed the retirement system
under federal jurisdiction "unique" and sought clarification
of the status under the proposed sale. Mr. Hickey explained
that, in terms of retirement, the railroad has two classes
of employees:
1. Those who have been with the railroad for a period
of time and fall under the federal program.
2. New employees who joined the railroad following
purchase by the state.
For those in the federal system, it seems clear that the
definition of what constitutes a "state-owned railroad" is
broad enough to include a private entity operating the
railroad. Those employees will continue to participate in
the federal system as long as they remain with the railroad.
They are covered by the previous transfer law.
Newer employees are in a different retirement system
maintained by the railroad. Mr. Hickey said he was less
comfortable commenting on coverage, without additional
information. He voiced his belief that current bargaining
agreements deal with the retirement benefit as a component
of the agreement.
Senator Phillips advised that he would feel more comfortable
adding language relating to retirement agreements. Co-
chairman Halford suggested that "and retirement obligations"
be added to language at Page 1 so that the first portion of
subsection (2) reads:
(2) accept assignment of all contracts, including
collective bargaining agreements and retirement
obligations and agreements with connecting
carriers, shippers . . . .
Senator Phillips formally MOVED for adoption. No objection
having been raised, Amendment No. 2 was ADOPTED.
Senator Rieger then MOVED that CSSB 64 (Fin) pass from
committee with individual recommendations and the Senate
Finance Committee fiscal note. No objection having been
raised, CSSB 64 (Fin) was REPORTED OUT of committee with a
Senate Finance Committee fiscal note showing $900.0 in
railroad corporate receipts. All members present (Co-
chairmen Halford and Frank and Senators Phillips and Rieger)
signed the committee report with a "do pass" recommendation.
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