Legislature(2021 - 2022)SENATE FINANCE 532
05/05/2022 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB218 | |
| HB307 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 218 | TELECONFERENCED | |
| *+ | HB 307 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 218
"An Act authorizing the Alaska Railroad Corporation to
issue revenue bonds to finance the replacement of the
Alaska Railroad Corporation's passenger dock and
related terminal facility in Seward, Alaska; and
providing for an effective date."
9:06:01 AM
Co-Chair Bishop relayed it was the first hearing for SB
218. The committee's intent was to hear a bill introduction
and sectional analysis, take invited and public testimony,
and set the bill aside.
9:06:29 AM
SENATOR PETER MICCICHE, SPONSOR, addressed SB 218, which
pertained to the Alaska Railroad passenger terminal in
Seward. The bill would grant the railroad the legislative
authority to issue bonds of no more than $60 million to
construct a new passenger terminal. He commented on the age
of the current passenger terminal. He cited that the region
expected 82 cruise ships in the 2022 season and emphasized
the importance of the project for Southcentral Alaska. He
explained that the cruise ships fed tourism-related
businesses across the region from Anchorage and Fairbanks
and down to the Seldovia area. He cited that the total cost
of the project would be $79 million, which was a recent
figure. The railroad would use other funds in combination
with the $60 million proposed in the bill.
Senator Micciche informed that $60 million was the lending
cap for the project to come to fruition. The bonds would
need to be paid entirely from passenger terminal revenues,
without any state liability for the debts incurred by the
railroad. In order to meet the 2024 need for replacement of
facilities, it was imperative that the railroad coordinate
public debt funding by mid-2022. He relayed that there were
representatives from the Alaska Railroad available to
answer questions.
Co-Chair Bishop acknowledged that Senator Olson and Senator
Hoffman were present.
9:09:25 AM
BILL O'LEARY, PRESIDENT AND CEO, ALASKA RAILROAD
CORPORATION, introduced himself. He thought the proposed
project was exciting for the Alaska Railroad Corporation
(ARC), the City of Seward, and the Southcentral and
Interior visitor industry.
Mr. O'Leary discussed a presentation entitled "Investing in
Alaska's Travel and Tourism Infrastructure: Seward
Passenger Dock" (copy on file). He turned to slide 2, "ARRC
Terminal Infrastructure in Seward":
? ARRC owns 3 docks in Seward
? Passenger cruise ship, other passenger,
research and more
? Freight used primarily for non-passenger
ships and barges
? Loading previously for coal; now used for
tie-up & overflow
? Terminal Uplands support for:
? Freight logistics and storage
? Marine and other commercial activities,
including future visitor business opportunities
? Passenger Terminal (dock and building on dock)
? Receives typically 220,000+ visitors annually
(2019)
? Accommodates just under 100 cruise ship calls
per year
? Important to ARRC rail service but also to
visitor industry as a whole
? 2/3 to 3/4 of cruise passengers to Southcentral
Alaska come through Seward
Mr. O'Leary drew attention to the photograph on slide 2,
which showed ARCs freight dock, passenger dock, and
loading facility. He continued that ARC also had over 300
acres of railroad land in the area for additional
development by the private sector. He discussed the
passenger terminal, which had been built originally as a
freight dock around 1966. The structure was a pile-
supported pier dock that had been affected by saltwater and
time.
Mr. O'Leary pointed out the terminal facility used for
passenger processing on the north end of the pier. He
explained that the dock was still safe for use but was
nearing the end of its life. He emphasized that the dock
was a key piece of infrastructure for the railroad and
entire visitor industry in the region. The majority of
cruise ship passengers that came to Southcentral Alaska in
2019 came over the dock. He discussed activities of cruise
passengers that generated business.
Mr. O'Leary continued to address slide 2 and cited that
there were 90 ship calls for 2022. He shared that the
industry thought the area was well positioned for continued
growth for the cross-gulf product that was increasing in
popularity.
9:13:21 AM
Mr. O'Leary showed slide 3, "ARRC Invests in Seward
Infrastructure":
? Alaska Railroad pursuing two near-term, large-scale
capital projects in Seward with positive economic
impacts statewide.
? Passenger Terminal
? Estimated nearly $80 million investment
? Replace passenger dock by 2024
? Replace terminal building by 2025
? Freight Terminal
? Est. $25 million investment; 80% funded by
MARAD grant
? Widen and lengthen freight dock by 2027
? Improve upland transportation corridor by
linking Port and Airport avenues.
Co-Chair Bishop asked about the freight terminal expense
shown on slide 3 and asked if the $25 million would be ARC
matching funds.
Mr. O'Leary expanded that $25 million was the total project
cost, $20 million of which would be funded by the MARAD
grant while the remaining would be other funds.
Senator Wielechowski asked if the railroad ran the freight
dock in Seward.
Mr. O'Leary answered "yes."
Senator Wielechowski asked about the capacity of the Seward
freight dock in the event that the Anchorage freight dock
suffered a catastrophic failure.
Mr. O'Leary relayed that the Seward freight dock was
available if the Port of Alaska was unavailable, although
it would not be optimal.
9:15:51 AM
Co-Chair Stedman relayed that the committee had been
looking at several ports across the state and asked if Mr.
OLeary could provide information about tariffs for goods
that crossed the dock. He referenced multiple container
ports in Southeast, Kodiak, and the Aleutian Chain. He
wanted to hear more information regarding further port
expansions. He wanted to discuss expansions and have the
presenter address growth in the industry and electrifying
docks for cruise whip use. He mentioned carbon emissions
issues with cruise ships, and the need for ships to use
alternate power sources. He thought that the project was
the beginning of a multi-year expansion that would be
taking place around the coast of the state.
Senator Olson dovetailed on Senator Wielechowski's question
regarding the hypothetical failure of the Anchorage port.
He wondered about the military, which used the port for
supplies and heavy equipment. He mentioned the war in
Ukraine and additional needs.
Mr. O'Leary affirmed that the Seward dock did work with the
military but thought the majority of traffic went to the
Port of Alaska. He offered to get back to the committee
with further information. He did not think there would be
that much of an issue using the freight dock as described.
He noted that the Vice President for Engineering for ARC
was available to comment.
Senator Olson repeated the question about the Seward docks
capacity in the case that there was a catastrophic failure
with the port in Anchorage. He referenced global conflict
and asked how long it would take to revamp the dock to
handle the additional load.
9:20:33 AM
BRIAN LINDAMOOD, VICE PRESIDENT, CHIEF ENGINEER, ALASKA
RAILROAD (via teleconference), answered that the freight
dock with expansion would be able to handle the same sort
of ships that currently called on the Port of Anchorage. He
cited that the cruise dock would be able to do the same. He
noted that the two marine lines that served the port in
Anchorage came at the same time.
Mr. Lindamood continued that the land transportation to and
from Seward would be strained in the scenario described by
Senator Olson, by a limit of available equipment and
drivers. He thought it would be feasible if the matter was
looked into and additional investment made.
Senator Olson asked what kind of time frame was involved
for dock work being done to utilize the dock as described
if there was an issue with the Port of Alaska.
Mr. Lindamood shared that the current schedule estimated
completion of the cruise dock by 2024 and the freight dock
by 2025 or 2026.
Senator Hoffman asked about the bonding capacity of the
railroad.
Mr. O'Leary explained that the railroad had not identified
a maximum for bonding capacity, and stated it was very
comfortable with the up to $60 million proposed in the
bill. He continued that generally the railroad was a low-
debt operation. He cited that there was roughly $8 million
in debt that had recourse and $ 30 million of debt secured
by federal monies that would be paid off in the next year.
Senator Hoffman asked about if any ARC land was used as
collateral for the bonds.
Mr. O'Leary answered "no." He noted that the railroad had
some debt that was secured by lease revenues from some of
the lands, but he believed it would be paid off shortly.
Senator Hoffman asked how much land the railroad had.
Mr. O'Leary cited that the railroad had about 36,000 acres
total, half of which was used for operations through right-
of-way, yards and facilities, and the remainder available
for lease or permitting.
9:24:22 AM
Co-Chair Stedman directed a question to Mr. Lindamood. He
mentioned the Port of Whittier and thought it would be nice
to get a briefing from the railroad on the capacity. He
thought if the state was going to considering putting
hundreds of millions into a port, it should be the correct
port. He wondered if there should be investment in multiple
ports. He considered modifications whereby Seward or
Whittier would need to handle additional goods and wondered
what capital goods would be needed. He pondered rail
capacity out of Whittier and mentioned road issues in
Seward. He wanted more information on railroad upgrades and
thought there was a much larger subject matter to consider
than merely the topic of the bill. He was concerned about
the global position of the three ports.
Mr. O'Leary relayed that ARC would be happy to discuss the
issues mentioned by Co-Chair Stedman.
9:26:45 AM
Co-Chair Bishop asked if there was hydro-rail capacity in
Whittier.
Mr. O'Leary affirmed that there was a rail barge system
that worked in conjunction with Lynden Companies.
Co-Chair Bishop asked if Seward had roll-on and roll-off
hydro-train capacity.
Mr. O'Leary answered in the negative.
Co-Chair Bishop thought it was a two-step process for
Seward, where goods would have to be handled twice.
Senator Wielechowski asked if the railroad had an opinion
as to whether the state should be funding the Port of
Alaska in Anchorage, and if so to what degree.
Mr. O'Leary emphasized that the Port of Alaska was a very
important port for the railroad. He continued that ARC did
an extraordinary amount of business with the port and
shared customers. He commented on a positive working
relationship and that ARC was supportive of ensuring the
infrastructure was available for customers.
Co-Chair Bishop referenced committee conversation about
redundancy. He asked which ports in Alaska had the highest
volume of casing and frack sands going to the North Slope.
Mr. O'Leary knew the railroad's Seward freight dock had
been very active in receiving frack sand over the previous
two years. He thought the activity had worked well and
anticipated additional cargoes coming.
Co-Chair Bishop asked which docks the materials came
across.
Mr. O'Leary guessed that the materials came to the Whittier
dock but agreed to get back to the committee with a precise
answer.
9:29:37 AM
Mr. O'Leary turned to slide 4, "ARRC Seward Passenger
Terminal":
? Passenger Dock Status
? Built in 1966
736' x 200'
? Terminal Building on dock
? Nearing End of Useful Life
? ARRC project to rebuild pier and building
? $79 million project on tight timeframe to be ready
for 2024 cruise season.
? Sources: $60 million in ARRC revenue bonds (no
recourse to state), $19 million in ARRC cash
? $62 million for dock, $17 million for building
? Continuing to look for other options to optimize
financing federal grants or other mechanisms
Mr. O'Leary commented that the railroad had a plan to
rebuild the pier and building, modernizing both to meet
current and future demands. The new dock would be longer
and the building would provide an opportunity to handle
triple ship days where three ships might call on the port
at the same times. He commented on the aggressive timeline.
He thought it was critical to understand that the revenue
bonds would be supported by dock revenues, and there was no
liability or recourse for the state. He reminded that
issuance of public debt required legislative authorization.
Co-Chair Bishop referenced the timeframe of the project and
asked if the railroad had all the materials secured.
Mr. Lindamood answered "no," and informed that ARC intended
to do a long-lead items purchase over the upcoming summer.
Co-Chair Bishop had learned that steel procurement was two
years out and wondered how much steel was in the project.
He questioned the cost estimates and wondered if Mr.
Lindamood was still confident in the numbers because of
project escalation costs.
Mr. Lindamood stated that the estimate ARC was working from
was four to five months old. He stated that ARC was
carrying a bit of contingency. He continued that assuming
inflationary pressures began to return to historic levels
soon, he thought it was okay, but he believed Co-Chair
Bishop's question was well-timed. He thought inflation was
among the top three risks to the project.
9:34:59 AM
Mr. O'Leary continued to address slide 4 and commented that
the construction time frame was the reason behind
requesting legislative authorization in the current
session.
Co-Chair Bishop asked if the photo on slide 4 was an
artist's rendition or an actual photo.
Mr. OLeary affirmed that the graphic was a photo.
Mr. O'Leary spoke to slide 5, "ARRC Seward Passenger
Terminal":
Project and Investment have Time-sensitive
Requirements
? Aging Facility must be replaced ASAP
? Need new facility for 2024 season
? Timeline requires start in 2022
? $60 million ARRC bonds
? Requires legislation
? Legislative action needed this session
? Royal Caribbean Group
? Key strategic partner
? Anchor tenant with a long-term arrangement for
asset use.
Mr. O'Leary emphasized that the fiscal stability of having
the Royal Caribbean Group (RCG) as a long-term anchor
tenant would aid in financing the project.
Mr. O'Leary summarized that the project fit nicely within
the railroads wheelhouse and would help to keep it self-
sustaining. He thought the project fit ARCs mission of
economic development for the state.
Co-Chair Stedman wanted to hear from RCG about the carbon
emission issue, and the challenges facing the industry with
regard to ships and getting them plugged in to shoreside
power. He thought the project was good but wondered if it
should be larger in scope.
9:38:01 AM
Senator Wilson asked Mr. O'Leary what the railroad could do
for the Matanuska-Susitna (Mat-Su) area. He mentioned
Infrastructure Investment and Jobs Act (IIJA) funding and
pondered freight capacity of the railroad and the future of
the railroad. He mentioned a snow machine path in his
district and expansions in the Interior.
Mr. O'Leary emphasized the equal importance of freight,
passenger, and real estate activities. He noted that
freight activities had been growing and noted that barge
service out of Whittier had been extraordinarily busy the
previous six months and was expected to continue. He stated
there was still capacity on the rail. There was high
density during the summer months.
He referenced the Port MacKenzie rail extension, which was
a Mat-Su Borough project that the railroad had been
integrally involved in. He shared an estimate that there
was $175 million to $190 million needed to complete the
rail extension. He mentioned greater momentum in 2014 and
2015 and that prospective customers had been quieter since
the amount of work had died down. He noted that the
railroad had worked cooperatively with the Mat-Su Borough
and the Fairbanks North Star Borough and one of the
utilities in Fairbanks to pursue grant opportunities to
benefit the Interior Energy Project but could complete a
portion of the project.
Mr. O'Leary continued to address Senator Wilson's question.
He summarized that the railroad believed in infrastructure
and thought infrastructure was lacking in the state but did
not have the capacity to move forward with projects that
could not make a "business case." He identified that ARCs
cash flow would not support either rail extension project
without identified customers or without having external
funding.
9:42:20 AM
Senator Wilson asked if the railroad was actively seeking
funds from federal infrastructure packages to help fund
projects.
Mr. O'Leary informed that the railroad was still
"unpacking" the infrastructure bill. He continued that ARC
was finding that there were lots of opportunities. He
continued that the railroad was resource-constrained in the
ability to go after many of the grants, and it was doing
its best to expand its capability. He thought the funds
could be great for the railroad and for the state.
Co-Chair Bishop asked Mr. O'Leary to expound on how ARC was
resource-constrained in going after IJJA grants.
Mr. O'Leary thought being a grant writer or grant
administrator was a good position to be in currently,
because there was a lot of grant monies available. He
thought it was challenging to find resources and mentioned
difficulty filling positions.
Co-Chair Bishop mentioned that there were two
infrastructure grants out at the moment for $4 billion for
ports, rail, and passenger service.
9:44:33 AM
JANETTE BOWER, CITY MANAGER, SEWARD (via teleconference),
believed the proposed project was vital to the City of
Seward. She expanded that the closure of the dock facility
would eliminate cruise ship dollars from local business and
city and borough. The closure would also affect the marine
industry. She noted that the dock and cruise ship terminal
were used year-round, and many community events were held
in the terminal. She discussed the positive relationship
between the city and the railroad. She asserted that the
RCG had proven their commitment to the city as an anchor
tenant and past activities. She spoke to the positive
economic impact the project would bring to Seward and the
state.
Ms. Bower addressed earlier comments and noted that Seward
had been contemplating electrification of the docks and
wanted to partner with the railroad. She expanded that the
city was doing a major electric upgrade project of its
systems. She noted that the city owned and operated its
electricity in Seward, and it was aware of what was needed
to be in compliance. She addressed the hypothetical event
of catastrophic failure of the port in Anchorage. She noted
some tenants in Anchorage had looked at Seward as a
possible option. She mentioned that the United States Coast
Guard had received $13.5 million for housing in Seward,
which indicated growth. She asserted that the port was
active and had a lot of capacity.
Senator Wielechowski asked if the City of Seward was
contributing financially to the construction of the project
proposed in the bill.
Ms. Bower answered "no."
Co-Chair Bishop asked if the City of Seward was still
overrun with feral rabbits.
Ms. Bower had not seen any rabbits.
9:48:33 AM
PRESTON CARNAHAN, DIRECTOR OF DESTINATION AND BUSINESS
DEVELOPMENT, ROYAL CARIBBEAN GROUP (via teleconference),
explained that RCG had 60 ships globally, and would have 10
in Alaska this year. He mentioned that access to a modern
and capable dock in Seward was critical to RCGs ability to
bring passengers to the Interior. Additionally, the
Southeast Alaska communities relied heavily on RCGs
ability to continue calling into Seward, as the ships
stopped in Southeast communities on the way. He discussed
working with ARC and the City of Seward. He affirmed that
RCG would be the main user of the new facility and planned
to be there for decades in the future.
9:50:37 AM
Co-Chair Stedman referenced environmental "winds of change"
that were approaching and mentioned carbon emissions. He
mentioned communities he represented and significant docks
in Ketchikan, Sitka, and Hoonah. He wanted an update
regarding the carbon emissions issue, and the industry's
plan to electrify the docks that ships tied up to. He
thought the plan was a win-win for everyone.
Mr. Carnahan relayed that one of the drivers for the
project in Seward was a larger dock that would allow for
larger ships. The ships were on average 15 to 20 percent
more efficient than past generations and would cut carbon
emissions. He mentioned dock electrification, and noted
that the larger ships were capable and had the necessary
hardware to plug in. He mentioned the impact of the number
of passengers and ship size relative to the community
assets. He cited that RCG took the available electricity
into account, which was often from hydropower. He thought
it might not currently make sense to plug in ships given
the current infrastructure. He considered that RCG needed
to work with communities to assess the power grid and
whether there were projects to upgrade the infrastructure.
He noted that RCG was equipping its ships to be able to
plug in where it was available.
Co-Chair Stedman commented that he thought Ketchikan was
gearing up and moving forward to power ships in the summer
and locals would use the power in the winter. He noted that
the electricity was from hydropower. He thought it was true
that electrification of four to five ships was not
possible, but he thought the more docks that could benefit
from electrical expansion was a benefit to everyone.
9:54:18 AM
Co-Chair Bishop OPENED public testimony.
BONNE WOLDSTAD, SELF, FAIRBANKS (via teleconference), spoke
in support of SB 218. She supported maintenance of state
infrastructure. She mentioned comments by Senator
Wielechowski, Co-Chair Stedman, and Senator Olson relating
to a backup for the Port of Alaska. She wanted to see some
form of commitment from the Alaska Railroad to recognize
prior existing rights as documented under Section 1203 of
the Alaska Railroad Transfer Act (ARTA) and the return of
full rights to adjacent property owners. She acknowledged
that the bill would not be the correct mechanism to address
the matter, but encouraged the committee to work to solve
issues between ARC and property owners.
9:55:41 AM
Co-Chair Bishop CLOSED public testimony.
SB 218 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 218 AAT AKRR Support Letter.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 AKRR Bonding Dock Letter of Suport.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 AKRR LOS on Letterhead.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 AKRR Support Letter for Bonding.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 Explore Fairbanks Letter of Support.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 AlaskaTourTravel-ARR-SewardDock-LetterofSupport.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 JAG AK Support Letter.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 Seward City Council Resolution of Support.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 Sponsor Statement.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 Seward dock letter of support.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218Letter of Support_Alaska Railroad_AWA_2.16.22.docx.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 Seward Bonding Presentation.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 2022_Seward_Dock_Presentation_Senate-Finance_May5.pdf |
SFIN 5/5/2022 9:00:00 AM |
SB 218 |
| SB 218 Support Letter_JAG AK.pdf |
SFIN 5/5/2022 9:00:00 AM |
SB 218 |
| SB 218 Support Letter_ASLC.pdf |
SFIN 5/5/2022 9:00:00 AM |
SB 218 |
| SB 218 Support Letter_Premier AK Tours.pdf |
SFIN 5/5/2022 9:00:00 AM |
SB 218 |
| HB 307- Sectional Analysis 3.7.2022.pdf |
HFIN 4/4/2022 1:00:00 PM SFIN 5/5/2022 9:00:00 AM |
HB 307 |
| HB 307 - Research - Interior Energy Project January 2022 Update to Legislature 2.23.2022.pdf |
HFIN 4/4/2022 1:00:00 PM SFIN 5/5/2022 9:00:00 AM SFIN 5/11/2022 1:00:00 PM |
HB 307 |
| HB 307 - Sponsor Statement 4.25.2022.pdf |
SFIN 5/5/2022 9:00:00 AM |
HB 307 |
| HB 307 - Letters of Support 4.25.2022.pdf |
SFIN 5/5/2022 9:00:00 AM |
HB 307 |
| SB 218 FW_ ARRC responses to Senate Finance questions.pdf |
SFIN 5/5/2022 9:00:00 AM |
SB 218 |