Legislature(1993 - 1994)
03/23/1993 03:35 PM Senate TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
The next order of business was SB 148 (ALASKA RAILROAD CORPORATION). SENATOR KERTTULA gave committee members some information regarding the corporation. CHAIRMAN SHARP asked Mr. Hatfield if he had any comments. BOB HATFIELD, President and Chief Executive Officer, Alaska Railroad Corporation, indicated the committee members has the corporation's position paper. He said he would highlight some of the corporation's concerns relating to SB 148. Mr. Hatfield said he is troubled by the sense of urgency surrounding the bill and questions the need for such urgency. The state law that created the Alaska Railroad took four years to write and pass, which doesn't include the time spent with the federal government which allowed the Transfer Act to begin. The Alaska Railroad Corporation Act was considered by and debated in both chambers of the twelfth and thirteenth legislatures headed by both Republicans and Democrats. The bill was also reviewed officially and unofficially by an array of industry, civic groups, and government bodies to ensure that the best possible environment would be created for such a delicate business as a railroad. There is now a bill, which is in its third week of existence, that would make sweeping changes to the Corporation Act. To date, the only public testimony that has been heard by the Senate Transportation Committee is that given by a union employee, several members of one interest group, and himself. Mr. Hatfield said he is troubled by some of the contents in the bill. Federal law mandates that the Alaska Railroad Corporation be entitled to engage in all business opportunities available to comparable railroads. State law dictates that the corporation be allowed to conduct its business consistent with that federal law. State law further dictates that the corporation be self sustaining while prudently operating a railroad in accordance with sound business practices. He said in his view, there is a very good reason for the provisions in the two laws that created the Alaska Railroad Corporation. Mr. Hatfield said all the study and debate that went into the creation of the railroad uncovers the fact that railroads need to use all assets available to them in order to remain viable and competitive. Undue restrictions of their activities can bring them down. Mr. Hatfield said SB 148, in its present form, would cause the legislature to have to approve the capital budget for the Alaska Railroad Corporation each year. It would also make it difficult of the corporation to effect large scale emergency repairs to docks, buildings, and right-of-ways without sacrificing all other investments for that year and, perhaps subsequent years. SB 148 would prohibit the Alaska Railroad Corporation from taking advantage of attractive deals for acquisition of equipment when they arrive. The bill would put tremendous pressure on the corporation to increase revenues solely for the purpose of avoiding leasing or borrowing. Mr. Hatfield said traditionally in the transportation industry, revenues are increased either by increasing or lowering rates according to market conditions. It would force the corporation to apply to the legislature to subsidize various aspects of their business such as the Hurricane Turn and the Whittier Shuttle and others that aren't currently compensatory to avoid borrowing. Mr. Hatfield said it may cause the corporation to charge municipalities and other public entities fair market value for permits and leases in order to make up for revenue shortfalls that could be caused by some aspects of the legislation. It further would provide a disincentive for bankers or other financial institutions, to lend to the corporation for capital projects for fear that all or a portion of that does not have the proper legislative approval. There may be other unintended results that cannot be adequately be addressed at this point due to the haste of which the legislation is being considered. Mr. Hatfield said it is troubling to the corporation that there is a phrase which limits them to railroad and railroad related transportation services in the state. He said the phrase "limited to railroad and railroad related transportation services in the state" can be interpreted to mean "no leasing of real estate for any purpose, no drayage service, no marketing in sales offices in the lower 48, no true rates for points off of the Alaska Railroad Corporation property, no warehousing or trans load services could be conducted outside of the state, no charitable fund raising activities, sponsorships..." Mr. Hatfield said one final result is that it was and still is the intent of the legislation that created the Alaska Railroad Corporation to sell the property at some point. If the property isn't kept at its highest and best order and if the corporation is not competitively viable as a railroad property, any chance that may exist for the sale of the property, if at the time seems the appropriate thing to do, would probably be lessened rather than heightened by the legislation. Mr. Hatfield said currently the corporation has not considered any suggested amendments as there are some confusing aspects surrounding the legislation in that originally when discussions have occurred with the Finance Committee and others, the primary concern seems to be that the Alaska Railroad Corporation had taken a participatory interest in a hotel in Anchorage. The thought was that the corporation may be doing that again in Fairbanks. He said they are in the process of addressing that issue. Mr. Hatfield said that the corporation was hoping to do is, thorough the committee process, is perhaps to get a clear idea of what results are intended from the legislation so that they could perhaps suggest particular amendments if it is appropriate. TAPE 93-16, SIDE B SENATOR RANDY PHILLIPS said the Alaska Railroad Corporation, the Alaska Housing Corporation, the Student Loan Program, and AIDA have to walk that fine line between private and public. He said for the last two days he asked for a page by page -line by line suggestions from the Alaska Railroad Corporation. Most of those requests were denied. He said the railroad is not a privately held corporation. State statutes say the definition of a "corporation" is "a public corporation and is an instrumentally of the state within the Department of Commerce and Economic Development." He said it was unfortunate that his request was denied. SENATOR KERTTULA said he thinks it is a very short time to expect a detailed response to each and every suggestible amendment. He said there is a time that the railroad has to report and should report, but said he doesn't believe it is the same as the function of the other departments. Senator Randy Phillips said he doesn't see a difference between the Alaska Railroad Corporation, Alaska Housing Corporation, AIDA, or the Student Loan Program. All of them are quasi/private agencies. There was continued discussion regarding requesting information from different agencies and policy issues. Number 052 SENATOR LINCOLN referred to page 7, line 19, and said it requests that the corporation must come to the legislature as the legislature must approve action. She asked what happens when the legislature isn't in session. MR. SKIDMORE said he supposes it would be up to the committee to either draft a provision for a procedure that the railroad would follow in the interim or amend the bill to say the provision doesn't apply. SENATOR DRUE PEARCE referred to the language in the bill and said the corporation can't issue bonds or convey its entire interest in land or incur debt except for the acquisition and maintenance of rolling stock and bonds and debt incurred through a short-term, less than one year, line of credit. The railroad would have to do exactly the same thing that other agencies of the state do. They have to plan a head for major purchases. If they weren't able to come to the legislature during the legislative session, they would have to come before the legislature during the next session. SENATOR LINCOLN inquired as to whether the corporation would be able to purchase a car. Senator Pearce said the cars are railroad rolling stock and they wouldn't count. She referred to page 7, lines 27 through 28, and said you can incur debt that does not apply to rolling stock. She said railroad cars can be purchased. Mr. Hatfield said the locomotives are not rolling stock nor are locomotive cranes, etc. He said rolling stock is a term of art. It refers to a group of freight or passenger cars and railroad cars only. He said as he interprets the bill, the corporation would not be able to acquire locomotives when they come on the market. Further, should there be damage to one of their docks, they might be able to get it fixed but they wouldn't be able to borrow money directly for that. Mr. Hatfield said the corporation is a corporation meant to be self-sustaining. There was continued discussion regarding the term "rolling stock." CHAIRMAN SHARP said he thinks it is his intention and an obligation of the committee to weigh the testimony and make decisions on proposed amendments. He noted the bill has a Senate Finance referral. Chairman Sharp said it is intention to hold the legislation until the following Tuesday. He encouraged that the committee members bring suggested amendments to the next hearing and noted he will take public testimony. SENATOR LINCOLN suggested appointing a subcommittee to devise language to bring back to the Transportation Committee. SENATOR KERTTULA indicated concern with creating inhouse competition. SENATOR RANDY PHILLIPS asked that the Alaska Railroad Corporation supply the committee with page by page - line by line suggestions. CHAIRMAN SHARP said he believes that there are several areas of the bill that need serious review and consideration. He said he would check with committee members to possibly have a work session over the weekend. He indicated the bill would be heard again the following Tuesday.
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