Legislature(1995 - 1996)
04/27/1996 10:12 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE April 27, 1996 10:12 a.m. MEMBERS PRESENT Representative Jeannette James, Chair Representative Scott Ogan, Vice Chair Representative Joe Green Representative Brian Porter Representative Caren Robinson Representative Ed Willis MEMBERS ABSENT Representative Ivan Ivan COMMITTEE CALENDAR CS FOR SENATE BILL NO. 310(STA) "An Act making corrective amendments to the Alaska Statutes as recommended by the revisor of statutes; and providing for an effective date." - PASSED OUT OF COMMITTEE SENATE BILL NO. 256 "An Act relating to the offices of mayor and mayor pro tempore of a second class city." - PASSED OUT OF COMMITTEE HOUSE BILL NO. 136 "An Act mandating the sale of the Alaska Railroad; and providing for an effective date." - HEARD AND HELD CS FOR SENATE BILL NO. 280(FIN) am "An Act relating to municipalities; the incorporation of certain boroughs in the unorganized borough; the formation of separate unorganized boroughs; and to taxation in the unorganized boroughs." - BILL POSTPONED PREVIOUS ACTION BILL: SB 310 SHORT TITLE: 1996 REVISOR'S BILL SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE COUNCIL JRN-DATE JRN-PG ACTION 03/14/96 2739 (S) READ THE FIRST TIME - REFERRAL(S) 03/14/96 2739 (S) STATE AFFAIRS 03/14/96 2739 (S) SECTIONAL ANALYSIS: (S) JOURNAL SUPP 11 04/18/96 (S) STA AT 4:15 PM BELTZ ROOM 211 04/18/96 (S) MINUTE(STA) 04/19/96 (S) STA AT 1:30 PM BELTZ ROOM 211 04/19/96 (S) MINUTE(STA) 04/22/96 (S) RLS AT 8:40 PM FAHRENKAMP RM 203 04/22/96 3411 (S) STA RPT CS 2DP 1NR SAME TITLE 04/22/96 3411 (S) ZERO FISCAL NOTE (LAA) 04/23/96 3448 (S) RULES TO CALENDAR 4/23/96 04/23/96 3454 (S) READ THE SECOND TIME 04/23/96 3454 (S) STA CS ADOPTED UNAN CONSENT 04/23/96 3454 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/23/96 3454 (S) READ THE THIRD TIME CSSB 310(STA) 04/23/96 3454 (S) PASSED Y18 N2 04/23/96 3454 (S) EFFECTIVE DATE(S) SAME AS PASSAGE 04/23/96 3478 (S) TRANSMITTED TO (H) 04/24/96 3948 (H) READ THE FIRST TIME - REFERRAL(S) 04/24/96 3948 (H) STATE AFFAIRS 04/27/96 (H) STA AT 10:00 AM CAPITOL 102 BILL: SB 256 SHORT TITLE: SECOND CLASS CITY MAYOR SPONSOR(S): SENATOR(S) ADAMS BY REQUEST JRN-DATE JRN-PG ACTION 02/02/96 2281 (S) READ THE FIRST TIME - REFERRAL(S) 02/02/96 2282 (S) CRA, STA 03/18/96 (S) CRA AT 1:30 PM BUTROVICH ROOM 205 03/18/96 (S) MINUTE(CRA) 03/20/96 2805 (S) CRA RPT 4DP 1NR 03/20/96 2805 (S) ZERO FISCAL NOTE (DCRA) 04/02/96 (S) STA AT 3:30 PM BELTZ ROOM 211 04/02/96 (S) MINUTE(STA) 04/03/96 (S) RLS AT 1:15 PM FAHRENKAMP RM 203 04/03/96 (S) MINUTE(RLS) 04/03/96 3042 (S) STA RPT 3DP 2NR 04/03/96 3043 (S) PREVIOUS ZERO FN (DCRA) 04/15/96 3243 (S) RULES TO CALENDAR 4/15/96 04/15/96 3244 (S) READ THE SECOND TIME 04/15/96 3244 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/15/96 3244 (S) READ THE THIRD TIME SB 256 04/15/96 3245 (S) PASSED Y20 N- 04/15/96 3251 (S) TRANSMITTED TO (H) 04/16/96 3793 (H) READ THE FIRST TIME - REFERRAL(S) 04/16/96 3793 (H) CRA, STATE AFFAIRS 04/23/96 (H) CRA AT 1:00 PM CAPITOL 124 04/23/96 (H) MINUTE(CRA) 04/24/96 3954 (H) CRA RPT HCS(CRA) 2DP 4NR 04/24/96 3955 (H) DP: NICHOLIA, IVAN 04/24/96 3955 (H) NR: AUSTERMAN, ELTON, VEZEY, KOTT 04/24/96 3955 (H) SENATE ZERO FISCAL NOTE (DCRA) 3/20/96 04/27/96 (H) STA AT 10:00 AM CAPITOL 102 BILL: HB 136 SHORT TITLE: MANDATE SALE OF ALASKA RAILROAD SPONSOR(S): REPRESENTATIVE(S) MARTIN JRN-DATE JRN-PG ACTION 01/30/95 174 (H) READ THE FIRST TIME - REFERRAL(S) 01/30/95 174 (H) TRA, STA, FIN 04/03/96 (H) TRA AT 1:00 PM CAPITOL 17 04/03/96 (H) MINUTE(TRA) 04/10/96 (H) TRA AT 1:00 PM CAPITOL 17 04/10/96 (H) MINUTE(TRA) 04/11/96 (H) STA AT 8:00 AM CAPITOL 102 04/11/96 (H) MINUTE(STA) 04/11/96 (H) MINUTE(STA) 04/12/96 (H) FIN AT 1:30 PM HOUSE FINANCE 519 04/12/96 3691 (H) TRA RPT CS(TRA) NT 1DP 5NR 1AM 04/12/96 3692 (H) DP: G.DAVIS 04/12/96 3692 (H) NR: WILLIAMS, SANDERS, LONG, JAMES 04/12/96 3692 (H) NR: MASEK 04/12/96 3692 (H) AM: BRICE 04/12/96 3692 (H) INDETERMINATE FISCAL NOTE (DCED) 04/12/96 3692 (H) FISCAL NOTE (LAW) 04/12/96 3692 (H) 2 ZERO FISCAL NOTES (GOV, DOT) 04/12/96 3692 (H) REFERRED TO STATE AFFAIRS 04/13/96 (H) FIN AT 1:00 PM HOUSE FINANCE 519 04/16/96 (H) STA AT 8:00 AM CAPITOL 102 04/16/96 (H) MINUTE(STA) 04/18/96 (H) STA AT 8:00 AM CAPITOL 102 04/18/96 (H) MINUTE(STA) 04/23/96 (H) STA AT 8:00 AM CAPITOL 102 04/23/96 (H) MINUTE(STA) 04/25/96 (H) STA AT 8:00 AM CAPITOL 102 04/25/96 (H) MINUTE(STA) 04/27/96 (H) STA AT 10:00 AM CAPITOL 102 WITNESS REGISTER PAMELA FINLEY, Revisor of Statutes Legislative Legal Counsel Legislative Legal & Research Services Legislative Affairs Agency 130 Seward Street, Suite 409 Juneau, Alaska 99801-2105 Telephone: (907) 465-2450 POSITION STATEMENT: Presented CSSB 310(STA) MARLA BERG, Legislative Assistant to Senator Al Adams Alaska State Legislature Capitol Building, Room 417 Juneau, Alaska 99801-1182 Telephone: (907) 465-3707 POSITION STATEMENT: Presented sponsor statement for SB 256 REPRESENTATIVE TERRY MARTIN Alaska State Legislative Capitol Building, Room 502 Juneau, Alaska 99801-1182 Telephone: (907) 465-3783 POSITION STATEMENT: Prime sponsor of HB 136 WILLIAM SHEFFIELD, Former Governor and Chairman, Board of Directors Alaska Railroad Corporation 4442 East 4th Avenue Anchorage, Alaska 99508 Telephone: (907) 337-7526 POSITION STATEMENT: Testified on CSHB 136 CLIFFORD PROETZ, Employee Alaska Railroad HC32, Box 6679 Wasilla, Alaska 99654 Telephone: (907) 376-5440 POSITION STATEMENT: Testified on CSHB 136 JOHN BERG, Employee Alaska Railroad P.O. Box 870002 Wasilla, Alaska 99687 Telephone: (907) 376-5893 POSITION STATEMENT: Testified on CSHB 136 WILLIAM PHELPS, Employee Alaska Railroad Address Unknown Telephone: Unknown POSITION STATEMENT: Testified in opposition to CSHB 136 BRAD PHILLIPS Seattle, Washington Telephone: Unknown POSITION STATEMENT: Testified on CSHB 136 DALE LINDSEY, Director Alaska Railroad Corporation P.O. Box 107500 Anchorage, Alaska 99510-7500 Telephone: (907) 265-2403 POSITION STATEMENT: Testified on CSHB 136 LANCE THOMPSON, Employee Alaska Railroad Address Unknown Telephone: Unknown POSITION STATEMENT: Testified on CSHB 136 MR. RUSSACK, Employee Alaska Railroad Address Unknown Telephone: Unknown POSITION STATEMENT: Testified on CSHB 136 AL PARRISH Holland America Line Westours 880 H Street Anchorage, Alaska 99501 Telephone: (907) 274-9019 POSITION STATEMENT: Testified on CSHB 136 JEFF LOWENFELS, President Yukon Pacific Corporation 1049 West 5th Avenue Anchorage, Alaska 99501 Telephone: (907) 265-3100 POSITION STATEMENT: Testified on CSHB 136 JOHN GAULE, Employee Alaska Railroad Corporation Address Unknown Telephone: Unknown POSITION STATEMENT: Testified on CSHB 136 JEFF COOK, Vice President of External Affairs MAPCO Alaska Petroleum, Inc. Anchorage, Alaska Telephone: (907) 276-4100 POSITION STATEMENT: Testified on CSHB 136 MARGARET BRANSON P.O. Box 271 Seward, Alaska 99664 Telephone: (907) 224-3212 POSITION STATEMENT: Testified in writing in opposition to CSHB 136 DOROTHY URBACH P.O. Box 249 Seward, Alaska 99664 Telephone: (907) 224-3088 POSITION STATEMENT: Testified in writing in opposition to CSHB 136 LAVERL SCHILLINGBERG, Employee Alaska Railroad Address Unknown Telephone: Unknown POSITION STATEMENT: Testified in opposition to CSHB 136 MICHAEL O'NEIL Moose Pass, Alaska 99631 Telephone: Unknown POSITION STATEMENT: Testified in opposition to CSHB 136 ROBERT CACY Moose Pass, Alaska 99631 Telephone: Unknown POSITION STATEMENT: Testified in opposition to CSHB 136 JACK BURTON, Member Alaska Railroad Board of Directors Address Unknown Telephone: Unknown POSITION STATEMENT: Testified in opposition to CSHB 136 BERTELLO BUMANGLAG Moose Pass, Alaska 99631 Telephone: Unknown POSITION STATEMENT: Testified on CSHB 136 CHARLES DILLARD, Employee Alaska Railroad Address Unknown Telephone: Unknown POSITION STATEMENT: Testified in opposition to CSHB 136 CHRISTINE HESTNES Address Unknown Telephone: Unknown POSITION STATEMENT: Testified on CSHB 136 LORRAINE RISCH, Employee Alaska Railroad Address Unknown Telephone: Unknown POSITION STATEMENT: Testified on CSHB 136 LARRY BURTON, Employee Alaska Railroad Moose Pass, Alaska 99631 Telephone: Unknown POSITION STATEMENT: Testified on CSHB 136 ED RIVERA, President American Federation of Government Employees and Employee, Alaska Railroad Moose Pass, Alaska 99631 Telephone: Unknown POSITION STATEMENT: Testified on CSHB 136 CHRIS BROOKS, Employee Alaska Railroad Moose Pass, Alaska 99631 Telephone: Unknown POSITION STATEMENT: Testified in opposition to CSHB 136 JO ANN MCDOWELL Moose Pass, Alaska 99631 Telephone: Unknown POSITION STATEMENT: Testified in opposition to CSHB 136 JEFF BUSH, Deputy Commissioner Department of Commerce & Economic Development P.O. Box 110800 Juneau, Alaska 99811-0800 Telephone: (907) 465-2500 POSITION STATEMENT: Testified on CSHB 136 KIRBY ROUNDTREE, Employee Alaska Railroad Fairbanks, Alaska Telephone: Unknown POSITION STATEMENT: Testified on CSHB 136 MARK HICKEY, Lobbyist 211 4th Street, No. 108 Juneau, Alaska 99801 Telephone: (907) 586-2263 POSITION STATEMENT: Commented on Alaska Railroad purchase BOB EVANS, Lobbyist Montana Rail Link 2822 Iliamna Avenue Anchorage, Alaska 99517 Telephone: (907) 586-6252 POSITION STATEMENT: Commented on CSHB 136 ACTION NARRATIVE TAPE 96-61, SIDE A Number 0015 The House State Affairs Committee was called to order by Chair Jeannette James at 10:12 a.m. Members present at the call to order were Representatives Robinson, Porter, Willis, Green and James. Members absent were Representatives Ivan and Ogan. CSSB 310(STA) - 1996 REVISOR'S BILL The first order of business to come before the House State Affairs Committee was CSSB 310(STA). CHAIR JEANNETTE JAMES called on Pamela Finley, Legislative Affairs Agency, to present SB 310. Number 0035 PAMELA FINLEY, Revisor of Statutes, Legislative Legal Counsel, Legislative Legal and Research Services, Legislative Affairs Agency, explained that SB 310 was designed to fix the mistakes found in the Alaska Statutes. Some of the mistakes went back to the 1962 codification while some were more recent. It was also intended to remove obsolete provisions. She called it a boring bill. Number 0110 REPRESENTATIVE BRIAN PORTER asked Ms. Finley if there were any substantive changes or was it boring? Number 0121 MS. FINLEY replied it was a boring bill. There were a few substantive matters in the criminal sections where mistakes were being fixed. There were no policy changes, however. Number 0163 REPRESENTATIVE ED WILLIS asked Ms. Finley if there were any repealers? Number 0176 MS. FINLEY replied yes. She directed the committee's attention to the last page of the sectional analysis and said it primarily repeals obsolete or duplicative provisions. Number 0217 REPRESENTATIVE WILLIS moved that CSSB 310(STA) move from the committee with individual recommendations and attached zero fiscal note. Hearing no objection, it was so moved from the House State Affairs Committee. SB 256 - SECOND CLASS CITY MAYOR The next order of business to come before the House State Affairs Committee was HCS SB 256(CRA). CHAIR JAMES called on Marla Berg, Legislative Assistant to Senator Al Adams, to present the sponsor statement for SB 256. Number 0300 MARLA BERG, Legislative Assistant to Senator Al Adams, read the following sponsor statement into the record. "Under current law, the mayor of a second class city may not be elected by the voters. Mayors are elected by and from the council and serve a one-year term, unless a longer term is approved by ordinance. "This bill, introduced at the request of the City of Savoonga and endorsed by the Alaska Municipal League, would amend the law so that voters in a second class city would have the option of directly electing their mayor. "This bill does not change the qualifications for mayor, powers and duties of the mayor or give the mayor the veto power in second class cities." Number 0349 CHAIR JAMES announced she discussed SB 256 with Representative Ivan Ivan before he left and he supported it. Number 0357 REPRESENTATIVE CAREN ROBINSON asked what if the city wanted to continue with the status quo? MS. BERG replied, "that's the way it would be." REPRESENTATIVE ROBINSON confirmed the bill allowed for it but did not mandate it. MS. BERG responded that was correct. Number 0376 REPRESENTATIVE PORTER understood that currently council members are elected and one of them is elected mayor by the rest of the council members. MS. BERG said that was correct. REPRESENTATIVE PORTER asked Ms. Berg if the bill would allow for an additional position? Number 0401 MS. BERG said no, it wouldn't allow for an additional position. One of the city council members would still end up as mayor, but the people would vote instead of the council members. Number 0410 REPRESENTATIVE PORTER said it would have to be a simultaneous election. Number 0420 MS. BERG remarked that based on the bill, the city council would be elected first, followed by a second election for mayor. REPRESENTATIVE PORTER wondered what would happen if nobody decided to run for mayor. Number 0450 CHAIR JAMES replied that happened to a city in her district where nobody was willing to run for mayor. Number 0469 REPRESENTATIVE ROBINSON moved that HCS SB 256(CRA) move from the committee with individual recommendations and attached zero fiscal note. Hearing no objection, it was so moved from the House State Affairs Committee. HB 136 - MANDATE SALE OF ALASKA RAILROAD The next order of business to come before the House State Affairs Committee was CSHB 136(STA) (9-LS0438/R). CHAIR JAMES called on Representative Terry Martin, sponsor of HB 136. Number 0509 REPRESENTATIVE TERRY MARTIN explained it was past the tenth anniversary of the purchase of the Alaska Railroad from the federal government. He further explained the federal government poured a lot of money into the railroad for close to 100 years before it was bought. Ironically, the railroad was first offered for $100 million, but it was felt the price was too high and the state ended up paying $20 million including the land. It had proven to be a great asset to Alaska. Now, was the opportune time to look again at what the state had for an orderly transfer of the land. The Alaska Railroad Corporation was being cooperative and he did not expect it to cost that much to take a look at what the state's future was in the railroad. He was excited about it because he felt that as long as the state owned the railroad, it wouldn't be expanded. He stated the proposed committee substitute was substantially different from the original bill; he didn't mind the changes, however. It created a five person commission that would objectively look at the railroad and the land involved. He had spoken with Speaker of the House, Gail Phillips, about the possibility of allowing the Legislative Budget & Audit Committee to objectively take a look at it. As a result, Randy Welker, legislative auditor, came up with four recommendations, one of which was that perhaps the Budget & Audit Committee should not be involved so directly. Number 0761 CHAIR JAMES asked Representative Martin if he had any drafted amendments? REPRESENTATIVE MARTIN replied any minute now the amendments would be available. Number 0761 CHAIR JAMES referred committee members to the memorandum dated April 25, 1996, from Legislative Auditor, Randy S. Welker, referring to draft O. She explained it would also apply to draft R. She asked for a motion to accept draft R as the working document. Number 0844 REPRESENTATIVE PORTER moved that CSHB 136(STA), 9-LS0438/R be adopted for consideration. Hearing no objection, it was so adopted. WALT WILCOX, Legislative Assistant, explained for clarification purposes, there would not be four amendments, but rather there would be a committee substitute which would include the four amendments. CHAIR JAMES said the committee would take a look at the forthcoming committee substitute; however, amendments could be made to the committee substitute draft R that was just adopted by the committee. Number 0950 CHAIR JAMES said she was concerned if the legislature had the authority to spend the Alaska Railroad Corporation's money. It was explained to her by George Utermohle, Attorney, Legislative Affairs Agency, that the legislature did have the authority to appropriate money to the railroad each year, if the legislature opted to do that. It has been set aside to allow the corporation to manage its own funds in the past. However, the legislature had not given up their authorization for appropriation of funds, which is the prime responsibility as a legislature. She explained another concern is that the legislature is not managing the cash flow of this business nor are they considering the cash flow either by taking out a certain amount of money for a particular purpose. Personally, she wouldn't like someone telling her she had to spend a particular amount of money when she had already obligated those funds for other things. Furthermore, there were no sideboards included in the legislation. There would be costs for the commission including daily costs plus per diem and travel expenses, but there was no schedule of the total cost. She was also concerned about the cost of the appraisal. It would probably be necessary to use an outside agent for that. The bill also said the process was exempt from the Administrative Procedures Act, which means it is not necessarily a bid, but finding someone to do the appraisal. Again, if the Alaska Railroad Corporation was forced by pay these costs out of their working capital, she was concerned about causing a serious cash flow problem. She had asked Mr. Utermohle if the legislature could appropriate funds out of the interest on the money that was on deposit for the Wishbone Hill cars, which was part of the railroad's assets. It was her understanding the principal or the interest had never been touched and it was her thinking it needed to be reappropriated before any of that money was spent. Number 1182 REPRESENTATIVE MARTIN believed the legislature had the responsibility to oversee the expenditures of the Alaska Railroad Corporation. He explained that audits had been done sporadically over the last two or three years as problems arose, and in fact there was an audit underway now. He believed the legislature had fulfilled it's responsibility on behalf of the citizens in monitoring the expenditures and contracts. He noted the legislature had the authority to subpoena the records, but he didn't feel that was necessary. The state spends state money and okays federal money on a regular basis for the Alaska Railroad Corporation. Therefore, "we can giveth, we can taketh." He believed the Wishbone money could be used since the legislature had the oversight of approval for expenditures. Number 1348 CHAIR JAMES wondered if Legislative Budget and Audit was going to oversee the commission proposed in the committee substitute. Although it wasn't spelled out, she assumed that one member of the commission would be the leader, but her concern was who was going to determine there was not enough money in the railroad operating fund to pay for the expenses of the commission. She wondered again if Legislative Budget and Audit would have the authority to oversee the expenditures. She suggested that a more responsive amount of money would be the interest accumulating on the Wishbone Hill fund. Number 1410 REPRESENTATIVE MARTIN replied Legislative Budget and Audit could only look and that's why Mr. Welker did not want the commission as part of Legislative Budget and Audit. It needed to remain separate to maintain an objective outlook if anything went astray. It would on behalf of the legislature follow the progress of the commission. Number 1484 REPRESENTATIVE PORTER assumed the committee substitute, draft R, did not have a cap on the expenditures. Number 1498 REPRESENTATIVE MARTIN replied there was a cap in a general sense in that the Alaska Railroad Corporation said it would be about $2 million. He explained that approximately $1.2 million was expended when the state bought the railroad from the federal government, so it wasn't necessary to re-invent the wheel, but rather just upgrade the available reports. Number 1518 REPRESENTATIVE PORTER wondered if the legislation couldn't provide for Legislative Budget and Audit to determine the sideboards and give it the authority to review the expenditures in compliance with the sideboards. He felt it would be appropriate to give the committee that authority; however, he did not want to issue a blank check. Number 1567 CHAIR JAMES said when money was being taken from the working capital of an ongoing business, someone within that business had to have some control over what can be paid and when it can be paid. The committee substitute did not provide those safeguards and "essentially we could break the railroad by doing just this, if we don't do it in a cautiously, careful way." She commented that if the legislature was going to go forward with this, she would be a lot more comfortable if the legislature assigned where the money was going to come from, as opposed to coming out of their working capital. Number 1605 REPRESENTATIVE PORTER thought that within the framework of phase one provided by this legislation, would be a requirement that the Legislative Budget and Audit Committee assess the Alaska Railroad's ability to pay for this so it did not adversely affect the daily operations. Number 1627 REPRESENTATIVE MARTIN referred to Section 1(d) of Randy Welker's memorandum dated April 25, 1996, from Randy S. Welker, Legislative Auditor in which he suggested that the Alaska Railroad Corporation's receipts be used. Representative Martin, however, agreed with Chair James' suggestion to look into using the Wishbone Hill money. He explained that that money had been set aside over four years ago for the Japanese company who was going to do some coal mining in the Palmer area, but the project didn't go through. Number 1666 REPRESENTATIVE ROBINSON asked Representative Martin why the legislature, through a resolution, could not direct the existing board to begin the process of evaluating the concept of selling the railroad? Number 1700 REPRESENTATIVE MARTIN replied the major reason was to maintain an objective evaluation. Some people, including himself felt that the railroad commission might have a selfish interest. The commission objected before when there was the potential to sell the railroad about five years ago to an outside group. He reiterated an objective approach was needed for the evaluation process. Number 1772 REPRESENTATIVE ROBINSON asked if it was possible the board could determine to hire an independent person to evaluate the concept of selling the railroad? Number 1793 REPRESENTATIVE MARTIN reiterated the entire idea was to try to keep it separate. Number 1834 REPRESENTATIVE ROBINSON asked Representative Martin how the appointments to the Alaska Railroad Commission would be managed? She wondered if a current board member could be appointed. Number 1876 REPRESENTATIVE MARTIN said it was his thought to be objective and stay neutral with the ultimate goal of doing something on behalf of the people during this tenth anniversary. REPRESENTATIVE ROBINSON asked Representative Martin what type of expertise he was considering for the appointment to the commission? REPRESENTATIVE MARTIN replied the Speaker of the House of Representatives and the President of the Senate have conveyed to him they would be appointing a top person to the commission. Number 1977 REPRESENTATIVE WILLIS explained that in 1996 the railroad received $10 million from the federal government. He was concerned if the railroad was sold that revenue source would disappear. He announced he had received a lot of phone calls from his constituents concerned about the retirement of the several hundred employees who 10 or 12 years ago were given the option of staying in the federal retirement system or going to the railroad system. He understood that was a once-in-a-lifetime option. These several hundred people are now really concerned as to what will happen with their retirement system. He said there had also been a lot of concern expressed about the labor agreements, both from the standpoint of the employees who operate the railroad and the managerial positions, some of which are under contract. He was further concerned about the objectivity of the fair market value. Lastly, he was concerned about the traditional use of the railroad. The railroad had been a major factor in war and peace to build the state. He did not want to see the state dismiss the traditional uses of the railroad. Number 2145 REPRESENTATIVE MARTIN stated he too, had received many calls from people concerned about losing their jobs or the railroad being shut down. He said the railroad would not shut down. Once the commission had been set up, they can see whether or not the railroad can run on its own. Presently, it's being subsidized; therefore, it was not making it on its own. Some believe it would shut down in five years, for example, if it continued at the status quo. There was an agreement that indicated the federal pension program would continue for the approximately 149 people in that program. Individuals in the other two pension programs would be protected. The future of the railroad and the employees needed to be considered and a potential buyer would take that into consideration. He believed a private enterprise would expand the railroad. He referred to Representative Willis' concern about fair market value and said of course, fair market value was the goal. The value will never be known if this is not looked at further. He believed money would be made on the land. With regard to tradition, he could not promise that the tradition would continue. Number 2303 CHAIR JAMES stated that in private industry when a business is sold, one of the reasons why almost all the negotiations are done in secret is because selling a business of any kind disrupts the normal flow of business. Employees get antsy, contractors and customers are hesitant until they assess the stability, etc. She sympathized with the railroad employees with respect to the instability of their jobs. Likewise, it was going to be difficult to negotiate with users for long term commitments while this was in a state of flux. Therefore, she was willing to act quickly to prevent as much anxiety as possible. She understood that this issue was a public one however. She disagreed with Representative Martin; the state has not been subsidizing the railroad because the money for the Wishbone Hill was still sitting there. The $10 million from the federal government was the first subsidy which was used for the rails. She believed that the corporation was doing quite well. Some of the loss was attributed to the total reorganization of the Alaska Railroad Corporation, which in many cases there is a cost associated with a reorganization. CHAIR JAMES called on the first witness via teleconference in Anchorage, Governor Bill Sheffield. Number 2433 GOVERNOR BILL SHEFFIELD, Chairman, Board of Directors, Alaska Railroad Corporation, said this whole issue was troublesome to him. He explained SB 64 mandated the sale of the Alaska Railroad for a minimum of $34 million in a short period of time. He explained it took 4 years to purchase the railroad from the federal government and 10 years to discuss it, so to sell it in a couple of weeks didn't make a lot of sense to him. TAPE 96-61, SIDE B Number 0001 REPRESENTATIVE SCOTT OGAN joined the meeting at 11:00 a.m. GOVERNOR SHEFFIELD understood that according to this legislation, the evaluation had to be completed by November 1, 1996, but the task force doesn't report to the Governor or the legislature until January 13, 1997. It seemed to him "the cart was before the horse." He suggested a larger task force including the users, engineers, stewards and representation from the visitor industry. He explained this was the first year the railroad did not have to borrow money in January to meet the payroll. Every person who has operated a business knows that most businesses do less business in the winter time so it is not uncommon to have to borrow money during the winter season. The railroad has made a profit every year except for two since it was bought from the federal government. He said the railroad is a performing asset; it doesn't come back to the legislature and request funds to operate the railroad. He explained that every state that has state-owned passenger service has been participating for several years in a $2.7 billion fund, except the Alaska state-owned railroad because it didn't qualify. Last year, Congress changed the law so the railroad qualifies to participate in that $2.7 billion fund which amounts to approximately $5.7 million a year. He didn't believe the railroad should be condemned for their participation in this fund - it is not a subsidy, it's to upgrade the railroad. It wasn't new money; a little was taken from each of the other states to make up the $5.7 million in the formula program for the railroad. He noted the formula didn't get out of the Conference Committee in Congress last year because of the budget battle, but Senator Stevens has placed that same language for the formula in the Amtrak bill so maybe the railroad can participate in the annual appropriation. It was the first time the railroad ever received a capital grant. The funds are administered through the Federal Railway Administration and are to be used only for upgrades. GOVERNOR SHEFFIELD further said Governor Knowles had suggested that Governor Sheffield form a committee made up of users, employees, communities, etc., to determine how Alaskans feel about the railroad and report back next year. He noted he would do that if there was no legislative action this year. He didn't believe it made good sense to rush into this now, spend a lot of money and give the railroad away. He explained the railroad participates in the Alaskan economy in a major way; it hauls coal from the Usibelli mines plus fuel. The railroad is also involved heavily in the travel industry, carrying over 500,000 passengers last year. It hauls gravel from Wasilla into Anchorage serving gravel companies for construction. It also serves communities in the winter time that have no other access except by rail. The railroad is developing real estate in all the communities served and currently owns 38,000 acres of which about 16,000 (indisc.) right-of-way and the rest of it is located in Healy, Whittier, Seward, Anchorage and Fairbanks. GOVERNOR SHEFFIELD said this issue raises a host of public policy questions. He noted it was nearly impossible to ask the railroad to pay all the costs associated with this legislation. Their profits are used for upgrading and maintenance purposes. In addition, there are 550 year-round employees and an additional 150 in the summer time. The railroad was bought so that it could expand into areas when the opportunity was right, get resources to market and to provide jobs. He said the railroad is a major transportation link and will explore expansion opportunities, as they arise. In fact, they are currently exploring the opportunity to expand the rail to the Anchorage International Airport to drop off passengers in the summer time and provide a better service. The Alaska Railroad Corporation is currently expanding the Seward dock and helping Whittier to expand their boat harbor. He noted that expansion work was underway in Talkeetna to provide better passenger service for Princess Tours in their hotel. In addition, some work is being done at the downtown terminal in Fairbanks with a goal of expanding out to Alaskaland. GOVERNOR SHEFFIELD said as Chairman, he is aware there are legislators that have problems with the Alaska Railroad. He understands that; but he knows the Board of Directors take their job very seriously and are very concerned. GOVERNOR SHEFFIELD suggested that Chair James may want to request a legal opinion to determine the role of the legislature as it relates to telling the railroad what to do in terms of the dollars. He remarked the Alaska Railroad Corporation has a budget which outlines the use of their funds; their annual financial statement cites the activities of the Alaska Railroad Corporation; and an annual audit from an operational standpoint is conducted by an independent firm. These documents are all available for review. He stated he was prepared to do a study which would include a cross section of the people to evaluate how to better serve the people. The value of the railroad continues to increase. The corporation is aware that it needs to be concerned about the 600,000 shareholders. He urged the legislature to give the railroad the opportunity to establish a committee and report back to the legislature next year. CHAIR JAMES called on the next witness via teleconference in Mat- Su, Clifford Proetz. Number 0641 CLIFFORD PROETZ said he was a 21-year employee of the Alaska Railroad Corporation. He expressed concern that the bill did not give enough consideration to the employees. As he approached retirement, he was very concerned about his retirement possibilities. He asked committee members to review the legislation from 1984-85 for the transfer of the railroad to state ownership and to consider that legislation as a model for this current legislation. CHAIR JAMES called on the next witness via teleconference in Mat- Su, John Berg CHAIR JAMES noted for the record that Representatives Ogan and Green were in attendance. Number 0697 JOHN BERG thanked Representative Ogan for the courtesy call from him and his staff this morning. He also thanked Chair James for the opportunity to respond to this issue. He has worked for the Alaska Railroad Corporation for over 21 years and considers himself to be a hardworking, productive, contributing Alaskan. He said, "please don't put me out of work by simply not including me as part of the sale." He thought HR 3420 should be used as a model for this legislation as it had a unique way of giving employees a two- year period to ensure their pensions were protected. He believed the railroad was a tremendous asset for the citizens of the state. According to his research, when the Montana Rail Link buys a railroad, it forms a separate company within the corporation or uses one of the subsidiaries to make the acquisition thereby circumventing the Railway Labor Act. He said the legislature was his last line of defense and if they believed the railroad must be sold, at least allow him the dignity of continuing his career and saving his pension. CHAIR JAMES called on the next witness via teleconference in Anchorage, William Phelps. Number 0859 WILLIAM PHELPS said as a 28-year employee of the Alaska Railroad Corporation, he was opposed to the sale of the railroad as it stands now. He believed it was on a fast track and needed to be slowed down so that additional consideration could be given to employees and their retirement. Number 0888 REPRESENTATIVE OGAN advised Mr. Berg that his letter was being made available to committee members. CHAIR JAMES called on the next witness via teleconference in Anchorage, Brad Phillips. Number 0897 BRAD PHILLIPS testified he was in the tourist business and wasn't concerned about retirement because he was too old. His concern was that of a substantial customer of the railroad. He supported the testimony of Chair James and Governor Sheffield. He urged the committee to carefully look at the situation and not allow the use of the railroad's funds. He noted they have a difficult time getting the type of service they'd like, but he understands the railroad's limitations financially. If funds were extracted from the railroad, he believed the tourist industry and the type of service they need would greatly suffer. CHAIR JAMES called on the next witness via telephone, Dale Lindsey. Number 0976 DALE LINDSEY said he was testifying in a dual capacity as Director of the Alaska Railroad Corporation and as a concerned citizen. From his perspective, one of the fundamental problems in Alaska was that too many of the cornerstone businesses were located elsewhere. He thought it was a problem because there was not any other state that had such little control over its internal destiny as Alaska. His point was that the railroad periodically did things not necessarily looking at the bottom line, but just to make things happen, for example the coal from Healy to Seward. Historically, the railroad has hauled coal and passengers at a loss. He wondered if an outside based company would do the same. He expressed concern about the dates set out in the bill in that he believed the time schedule was too aggressive. Appraisals that are on a fast track generally cost more money. He said the capital requirements of the railroad from a director's perspective, were almost overwhelming. There is literally not enough cash to do all the things that need to be done in terms of maintaining the rail bed and (indisc.) He conveyed that the railroad certainly needed to fine tune some of their policies, but he didn't believe it was in the overall best interest of the state to sell the railroad. It has impacted the morale of the employees and undermined the confidence of the customers. Number 1128 REPRESENTATIVE MARTIN commented the Montana Railroad actually expanded its employees from 550 to over 1,000 in one year. CHAIR JAMES said she understood that; however, that was in the Lower 48 and not in Alaska. It was dangerous to compare the two. The issue was an emotional one and she did not want to get into it. CHAIR JAMES called on the next witness via telephone, Lance Thompson. Number 1177 LANCE THOMPSON said he was a 13-year employee of the Alaska Railroad Corporation. He expressed concern about his retirement pension and future agreements if the railroad is sold. CHAIR JAMES called on the next witness via telephone, Mr. Russack. Number 1193 MR. RUSSACK said he was a 5-year employee of the Alaska Railroad Corporation and a 20-year Alaskan resident. Present employees did not want to lose their jobs or their benefits and would like to see some protection written into the agreement if the railroad is sold. CHAIR JAMES called on the next witness via telephone, Al Parrish. Number 1227 AL PARRISH said he had three areas of concern he would like to express to the committee. The first one dealt with the mandating of the new commission to evaluate the sale and the funding aspects of the railroad. He believed that if the legislature was going to mandate, then they should also supply a funding source separate from the railroad's working fund. He said his firm, Holland America Line Westours, was one of the largest users of the railroad from May 15 through the end of September. He expressed his concern with using the operating funds of the railroad to fund the review process called for in HB 136 which takes those funds away from railroad ties and the alignment of the railroad, for example. As a customer, he was concerned about the safety and comfort of their passengers and certainly rail beds and alignment of the track was a very important feature. His second concern was the time frame called for in the bill. He said it was optimistic and almost impossible to meet. Just to come to a conclusion in reference to an appraiser would require probably 30 to 45 days at a minimum. To appraise not only the one asset, but the multiple assets of the railroad would be a very time consuming process. He believed that fast tracking it to a November 1 date would cause a tremendous amount of management's time to re-focus from running a railroad during its peak season to supplying information that an appraiser will need. Subsequently, he believed that could defeat the earnings of the railroad by taking management's focus off of its main priority of running the railroad. His third concern was with the size of the commission. A five member commission representing the users and residents of the state of Alaska who have benefits from the railroad, which would be basically the railbelt corridor from Fairbanks to Seward, seems to be an awfully small commission. He suggested increasing the commission to encompass a broader base. He agreed with the comments of Governor Sheffield suggesting the existing board retain a committee to review the issue. CHAIR JAMES called on the next witness via telephone, Jeff Lowenfels. Number 1399 JEFF LOWENFELS, President, Yukon Pacific Corporation, said he knew many people in the legislature were skeptical, but there were others like him who believed that Alaska would have a gas pipeline project. He urged the legislature to be extremely careful with its very valuable asset, the Alaska Railroad. Yukon Pacific believes the dedication given to the maintenance of the track, rebuilding cars, etc., is extremely important. Their cost estimates are predicated upon doing a tremendous amount of business with the Alaska Railroad which leads to their concern regarding the certainty of the continued operation as well as the future of the railroad. He asked the members to look carefully at this issue and to proceed slowly. He reiterated that Alaska will have a gas pipeline project and it will be predicated upon the use of the Alaska Railroad. CHAIR JAMES called on the next witness via telephone, John Gaule. Number 1500 JOHN GAULE testified that as an employee of the Alaska Railroad Corporation and a 20-year resident of the state, he was concerned and against the railroad paying for the commission. He echoed the concerns voiced by previous speakers regarding his retirement and supported the comments of Governor Sheffield, the tour groups and the residents that previously testified. He asked committee members to take into account the testimony heard today when voting on this bill. CHAIR JAMES called on the next witness via telephone, Jeff Cook. Number 1588 JEFF COOK, Vice President of External Affairs and Administration, MAPCO Alaska Petroleum Inc., said MAPCO was the largest customer of the Alaska Railroad. They have over 350 rail tanker cars under full or part-time lease to move millions of gallons of oil per year to Anchorage. In 1995, MAPCO paid nearly $23 million to the Alaska Railroad Corporation which helped contribute to a very profitable year. He noted the product was moved without incident and with efficiency. He said that MAPCO is responsible for some of the yo- yo revenues of the Alaska Railroad in that there are several months during the year they cannot export their product because of ice in the Port of Anchorage. MAPCO exports naphtha to Japan, Korea, and the West Coast, which has to be finely timed and which generally runs heavy from now until the end of October. He said the railroad had done an outstanding job on a timely and successful basis. As the largest customer, they were concerned about a possible sale of the railroad because they have 12 years remaining on their contract with options to extend. He said that MAPCO was proud of their relationship and alliance with the railroad. They have an outstanding strategic alliance and are connected with the railroad's electronic data interchange which results in an almost paper-free relationship. MAPCO believes the committee substitute is a vast improvement over Senate Bill 64. He suggested deleting subsection (f), under Section 1 from the committee substitute because there were really two separate issues that needed to be addressed: 1) Is the railroad doing their job; and 2) should it be considered for sale or not. If it is determined that it should be, then there needs to be a long time frame to really look at that and set it up. He believed it was unfair to use the money from the operating fund of the railroad and to force the issue during the busiest time of its season. He stated the railroad was a great asset which provides a unique service in a unique state. The state would come to a grinding halt if it were not for the great service the Alaska Railroad provides to MAPCO and other major users. CHAIR JAMES called on the next witness via teleconference in Seward, Margaret Branson. Number 1809 MARGARET BRANSON referred to her letter sent to the House State Affairs Committee and explained it addressed the CSHB 136 (TRA), not the most recent version of the bill. She believed the legislature should pay for the commission and there should be a fiscal note attached. She said the time frame is extremely unreasonable and suggested that it be expanded. She asked that her letter reflect "1990" and not "1984." CHAIR JAMES read the paragraph that Ms. Branson changed into the record. "If you will recall, in 1990 there was an effort by a group to emasculate the operations of the railroad and by a vote margin of 72,000, the ballot measure was defeated. I believe that any sale of the ARR must be ratified by the people who own it - the Alaskans." Number 1941 CHAIR JAMES read the following statement into the record from Dorothy Urbach in Seward. "I am opposed not only to HB 136 but also to selling the Alaska Railroad altogether. Why would you want to sell an entity that has made money with the exception of two years, and has never asked the state for money. This bill would not only force the railroad to appraise its property but also to pay for it. The railroad has better things to do than this project. Senator Steven's was successful in obtaining $10 million for improvements this year for the railroad. Why would the legislators want millions of dollars to go outside than stay in the Alaskan economy." Number 1980 REPRESENTATIVE OGAN said for the record, the Alaska Railroad Corporation had asked the legislature for money. CHAIR JAMES called on the next witness via teleconference in Anchorage, Laverl Schillinberg. Number 2050 LAVERL SCHILLINBERG said he has been an employee of the Alaska Railroad Corporation for the past six years. He believed the railroad had stood by itself for a long time now and it would be terrible to sell an important asset. He said everyone owns the railroad and the people will not support somebody else owning the railroad. CHAIR JAMES called on the next witness via teleconference in Anchorage, Michael O'Neil. Number 2142 MICHAEL O'NEIL testified that as a resident of Alaska for over 20 years he was opposed to the sale of the railroad. He believes the railroad supports a lot of people in the state and expressed concern that money would go outside if an out-of-state agency bought it. He remarked the state has done a good job considering the concerns of Alaskans surrounding the railroad. It would benefit the state to keep the railroad. CHAIR JAMES called on the next witness via teleconference in Anchorage, Robert Cacy. Number 2300 ROBERT CACY thanked committee members for the changes made to HB 136. He believed the state and the Governor have done a good job running the railroad and it should remain state-owned because it benefits the people of Alaska as well as the state. He did not want to see it sold to an outside agency. CHAIR JAMES called on the next witness via teleconference in Anchorage, John Britt. Number 2430 JOHN BRITT testified in opposition to the sale of the Alaska Railroad. TAPE 96-62, SIDE A Number 0001 CHAIR JAMES called on the next witness via teleconference in Anchorage, Jack Burton. Number 0011 JACK BURTON, Member, Alaska Railroad Board of Directors, said he represented the employees, also. The railroad has been operating as intended by law in its present form. He did not know there was anything wrong with the railroad, but it was obvious someone believed it needed to be fixed. In his opinion it did not need to be fixed. He expressed concern about the liability of the employee's retirement fund and wondered if the state would pick that up. He had received a number of calls from employees who were concerned about their jobs. He believed selling the railroad was a bad idea. He agreed with the testimony of Governor Sheffield. CHAIR JAMES called on the next witness via teleconference in Anchorage, Bertello Bumanglag. Number 0210 BERTELLO BUMANGLAG testified in opposition to selling the railroad. He said when discussing the value of the railroad, consideration should also be given to the employees and their livelihoods because it would put a lot of people in distress. In his opinion, the railroad has been good for the state; it has made a profit and he did not see why an entity making of profit should be sold. CHAIR JAMES called on the next witness via teleconference in Anchorage, Charles Dillard. Number 0267 CHARLES DILLARD said he had been an Alaskan resident for 35 years and had been an employee of the Alaska Railroad Corporation for over 30 years. He advised that the state should be very careful selling the railroad to an outside entity. The railroad was a valuable asset and the future of the railroad is unknown at this time. He noted that an outside agency could strip the assets of the railroad and leave the state with less. He commented on the jobs provided by the railroad as well as the opportunities that exist for businesses such as Holland America Lines to participate in business ventures with the railroad. As a resident of the state of Alaska, the Alaska Railroad means a lot to him because it has provided a good living for him. He urged the legislature to be very careful in how it manages the state's assets. He said, "A lot of times the dollar figure is not necessarily the only thing, and I think this is one of the areas that we haven't given due consideration to - the prospects of the future assets." CHAIR JAMES called on the next witness via teleconference in Anchorage, Christine Hestnes. Number 0461 CHRISTINE HESTNES said the railroad was here before the Alaska Highway and it opened up the state. If the coal, gravel, oil and gas could not be transported to the markets, the state could not sell them. CHAIR JAMES called on the next witness via teleconference in Anchorage, Lorraine Risch. Number 0549 LORRAINE RISCH said she has worked for the Alaska Railroad Corporation for almost 18 years. The railroad is a good resource for the state because it services a lot of communities. She expressed concern that an outside entity may cut off service to many of those communities. CHAIR JAMES called on the next witness via teleconference in Anchorage, Larry Burton. Number 0621 LARRY BURTON testified that he has worked for the Alaska Railroad Corporation for about 10 years now and was concerned that a lot of employees would be laid off if the railroad was sold. CHAIR JAMES called on the next witness via teleconference in Anchorage, Ed Rivera. Number 0660 ED RIVERA, President, American Federation of Government Employees, said he had been a resident of Alaska for about 25 years. He had not heard any testimony today on behalf of selling the railroad so he was concerned that this piece of legislation had its own agenda. He said there was loyalty to the railroad as the testimony indicated, and he wondered where the loyalty was from the legislature. He asked committee members to consider the testimony when voting on the bill. CHAIR JAMES called on the next witness via teleconference in Anchorage, Chris Brooks. Number 0746 CHRIS BROOKS testified in opposition to HB 136 as written. He was opposed to having the Alaska Railroad Corporation pay for the appraisal. Furthermore, the owner would take a profit if the railroad was sold. The only place that money would come from would be from employee wages. This would hurt the economy of Anchorage and put a lot of people out of work. CHAIR JAMES called on the next witness via teleconference in Anchorage, Jo Ann McDowell. Number 0836 JO ANN MCDOWELL said she was opposed to HB 136. In her opinion the railroad should not be sold because of the great resource, not only to the state and the employees, but also many businesses around the state. She urged the legislature to consider the economic impact of the sale of the railroad. She believed in keeping the resources in the state. CHAIR JAMES called on the next witness in Juneau, Jeff Bush, Deputy Commissioner, Department of Commerce and Economic Development. Number 0909 JEFF BUSH, Deputy Commissioner, Department of Commerce and Economic Development, said the Administration was more comfortable with the committee substitute than with the original bill; however, there were still some areas of concern. The Administration does not oppose an objective analysis of whether or not selling the railroad is a good idea and therefore either a task force appointed by the railroad or an independent commission are acceptable. The Governor would like more input in the make up of the commission if it was to be established; specifically he would like equal representation as the legislature. The Governor's Office has also expressed concern with the representation and would like to see more public and users appointed to the commission. Furthermore, the Governor was concerned about the legal issues the Department of Law had raised regarding the use of the railroad's operating funds. He believed the Administration would be more comfortable with an appropriation from an independent funding source such as the Wishbone Hill interest. Moreover, the Administration was concerned about the time frame set out in the committee substitute. In their opinion, November 1 was probably unrealistic for a full appraisal of the railroad. Number 1071 CHAIR JAMES said she was concerned about the environmental liability associated with the railroad. She cited the railroad yard in Fairbanks as an example of contamination. She asked Representative Martin if he had considered that issue; it would have to be addressed before selling the railroad. Number 1109 REPRESENTATIVE MARTIN agreed that was an issue that needed to be looked into. The railroad has been around for almost 100 years and the state has only been concerned about the environment for the last 20 years. He said, "who knows what lies under the ground of the railroad." That would be included in the evaluation process. He wondered if the federal government could be held responsible for the damage done 10 to 20 years ago. CHAIR JAMES asked Representative Martin if the extent of the environmental impact could be determined by November 1, 1996? Number 1160 REPRESENTATIVE MARTIN replied November 1, 1996, was the first date of review, but really the commission had eight months. He suggested an updated review every six weeks to the legislature through the Budget and Audit Committee and a final report by the beginning of the next session. That would give the commission eight months. Number 1182 CHAIR JAMES commented part of that time also included the winter which would exclude certain review activities. The committee substitute said the commission "shall" determine whether or not it is in the best interest of the state to sell the railroad. She suggested including sideboards to control the spending and the whole process. Number 1265 REPRESENTATIVE MARTIN replied an open committee would address the "shall" that Chair James was concerned about. He felt the major problem was there were no answers to anything now. He reiterated now was the time to look into it. If, however, the commission determines that by January there was not enough opportunity to study the whole issue but had 80 percent of the answers, the new legislature would be given the opportunity to determine if the commission should be continued. CHAIR JAMES said she understood the concerns of Representative Martin, but she wondered how much was needed in this piece of legislation. CHAIR JAMES called on the next witness via telephone in Anchorage, Kirby Roundtree. Number 1384 KIRBY ROUNDTREE said he had been an employee of the Alaska Railroad Corporation for 14 years. He noted the public did not know that much about the railroad. For example, many people believed he was a state employee. He was not in favor of selling the railroad because the state could make some money one time, but they would lose control of what the railroad has to offer once it was sold to a private entity. He noted there are a number of things the railroad does that are not profit making, but are for the benefit of the state. Number 1481 REPRESENTATIVE OGAN commented that approximately 20 years ago when he came to Alaska, he spent a great deal of time about 40 miles north of Talkeetna. It was quite an experience to be dropped off by the passenger service there and to stand by the railroad tracks waving a white flag when you wanted to be picked up. One time he had just shot a bear right before the train came, and he literally threw the whole bear in the baggage compartment, which was quite entertaining for the tourists. He remarked there is a certain amount of romance associated with the railroad and there are a lot of people who depend on that service in that area. He said the state has disposed of land along that corridor which people have built on. He noted that last year the railroad did ask the legislature to reappropriate the money that had originally been appropriated for Wishbone Hill to maintain the tracks. He expressed concern that if the railroad was going to be sold whether or not some of the assets should be "cherry picked" and some of the real estate liquidated before it's sold. He believed the concerns of the employees needed to be addressed. He said the railroad is quasi-private and quasi-private corporations are quite frankly socialistic in nature in this state. In conclusion, he said if a task force is appointed to study this issue, committee members needed to search their reason and logic as well as their hearts and decide if this is a good idea. If they believe it is a good idea to sell the railroad, then he believed the committee should move forward with the task force to study it. However, if it's going to be another task force study that gathers dust on a shelf, he does not support it. Number 1689 REPRESENTATIVE ROBINSON stated she felt strongly this is the wrong direction to be going at this time. She believed the existing board should look into this issue. She would like to see the bill tabled or at least put into a subcommittee for further discussions. This was an important decision to consider especially at the end of the legislative session. Testimony had indicated the railroad was operating as it should. She asked Governor Sheffield what type of task force he would organize as the chairman of the board? Number 1787 GOVERNOR SHEFFIELD replied he would select the users, the affected communities, independent individuals and legislators, for example, to be a part of the task force. He would also work closely with the Governor. He would ask former Governor Wally Hickel, to serve on the task force as well. He said he would organize a task force within 30 days and get started right away. Number 1915 REPRESENTATIVE GREEN asked Governor Sheffield what type of cost he anticipated for the commission? Number 1926 GOVERNOR SHEFFIELD stated he was not sure how much it would cost. When he was Governor, he spent $2 million evaluating the railroad and the federal government spent $2 million; however, a fast track project such as this one would probably cost more. He stated it would probably cost $750,000 to $1.5 million. The appraisal would need to be done by knowledgeable people, so that may necessitate the use of an outside agency for the appraisal. GOVERNOR SHEFFIELD reiterated this was the first year the railroad did not have to borrow money to meet the payroll; business was good. He was concerned about using the railroad's operating budget to fund the commission. Number 2034 REPRESENTATIVE GREEN asked Governor Sheffield if he would look into the value of the land surrounding the railroad or simply the operations and maintenance? Number 2056 GOVERNOR SHEFFIELD replied the original bill, SB 64, called for the sale of the property or returning it to the Department of Natural Resources. He believed that any committee would look at all of it and try to separate the two. He noted the railroad owns 38,000 acres of land of which 16,000 was in right of way. Number 2138 REPRESENTATIVE GREEN replied the land might not be a large number, but it could be disproportionately valuable compared to other acreage in the state. Number 2149 GOVERNOR SHEFFIELD replied, "that's right, it would be." He noted that was something that needed to be watched when they lease property to an individual or a company because the municipality or town may have other ideas in their planning process about what that land ought to be used for or adjacent to. Number 2176 REPRESENTATIVE ROBINSON asked Governor Sheffield where the money would come from for the task force and how the parameters would be set as to what the task force would be addressing? Number 2188 GOVERNOR SHEFFIELD supposed that if the railroad set up a task force it would not pay anybody except for travel. He did not envision a lot of money being spent on the task force. He envisioned a lot of time and work. There were enough interested individuals in the state that would volunteer their time. GOVERNOR SHEFFIELD further stated he had not thought about an agenda so he could not answer in detail. However, he would first concentrate on organizing a cross-section of Alaskans for the task force. He would then establish the goals of the task force such as getting people's opinion of the railroad, the projected revenue and the long-term plan of the railroad. Number 2317 CHAIR JAMES reiterated she was interested in an east-west railroad, and a Bering Strait tunnel to connect to Russia and China. She continued to focus on those possibilities because no one had flat out said they were not possible. She explained people around the world were excited about connecting the two continents. This would never happen, however, as long as the railroad was in state ownership. CHAIR JAMES further said she would rather see the land stay with the railroad because it could be good trading stock. She did not want it to go to the Department of Natural Resources; that would be like dumping it into a black hole. TAPE 96-62, SIDE B Number 0001 CHAIR JAMES said she was the biggest critic and the biggest supporter of the Alaska Railroad Corporation. She explained a public relations person was needed, however. The relationship between the public and the railroad was not good because of mis- communication. She called the current issue a public relations problem. Number 0036 REPRESENTATIVE PORTER stated he admired the restraint of Governor Sheffield and of others who had resisted the obvious comment of, "this bill was no way to run a railroad." Number 0057 GOVERNOR SHEFFIELD said he keeps hearing that the railroad is going to shut down in five years, the railroad can't make and that the railroad is being subsidized all the time. He wondered what those comments stemmed from. CHAIR JAMES believed that was another public relations problem. Number 0066 REPRESENTATIVE WILLIS wondered if Governor Sheffield associated this with John Voit's book titled, "Runaway Train." GOVERNOR SHEFFIELD replied, "yes." Number 0075 REPRESENTATIVE GREEN asked Governor Sheffield if he would consider using teleconference capability to combine the various committee members to help reduce cost? Number 0102 GOVERNOR SHEFFIELD replied that was a good idea. He explained that in Fairbanks the railroad had its own phone system which the members could use for free. He agreed many of the meetings could be held using a teleconference system. Number 0135 REPRESENTATIVE GREEN asked Governor Sheffield to comment on the use of the Wishbone Hill interest money. Number 0142 GOVERNOR SHEFFIELD said he did not have a problem using the money from the Wishbone Hill which was approximately $12 million now. He suggested a ruling from the Attorney's General office to determine if that money could be reappropriated. CHAIR JAMES agreed a legal opinion was needed. According to the Legislative Legal Department a special appropriation was needed. Number 0170 REPRESENTATIVE OGAN referred to the $4 million that was spent on two different studies and asked Governor Sheffield how valuable the information was that was gathered in those studies? He wondered if it could be used as a baseline and updated at a minimal cost perhaps. He commented that government is real good at studying things, but not using the studies for anything. He reiterated his question of whether the studies done previously could be utilized with a minimal amount of updating. He wondered if they were privatization studies or what kind of information was encompassed. Number 0221 GOVERNOR SHEFFIELD noted that Mark Hickey had been involved in the transfer team and could perhaps furnish additional information. He added the studies encompassed environmental issues, the track, the conditions, amount and location of land owned by the railroad and he hoped the old studies could be used; the information was there but it would need to be updated. At one point the railroad was appraised at $244 million. However, due to contamination, Occupational Safety and Health Administration (OSHA) concerns, and environmental problems, for example, the price dropped to $22.5 million, which is what the state paid. The corporation was given $11 million to start the business because there was no cash to begin the operation. Therefore, the state has invested $33.5 million in the railroad. There were a lot of reasons why the state got the railroad for $22.5 million instead of $244 million. In his opinion, the railroad is better off now; it makes money, the condition of the railroad has been improved, the contamination is organized from the railroad standpoint. Therefore, he believes the price should start out at $244 million and go up from there. He explained that a disgruntled, former employee wants to sell the railroad and is going around looking for a finders fee. That's how Dennis Washington found out about the Alaska Railroad to begin with. CHAIR JAMES asked Mark Hickey to respond to the comments of Governor Sheffield. Number 0360 MARK HICKEY, Lobbyist, explained that he managed the purchase process for the Governor when it was bought from the federal government. The $4 million figure was a rough estimate of all the funds spent by the state and federal government in about a 4.5 year process. He explained one-half of the federal money was spent on evaluating the railroad. It was an elaborate effort to look at all aspects of the operation of the railroad as well as the real property to come up with a price tag, taking into account all the conditions that were imposed on the state under the Federal Transfer Law. Some of the state's money was spent working and following that process, doing its own OSHA assessment using the Department of Labor people, and conducting its own condition assessment because the state knew there were serious problems in some areas in terms of deferred maintenance. Also, money was spent on following and working on the federal bill. Therefore, a lot of that information would not be applicable in this situation; however, he felt a fair amount of the information would be useful. For example, there was a full acquisition assessment done that looked at all the issues including why the railroad is important to the state, what the cost would be to the state in terms of a highway system if the railroad wasn't there. He believed it would be fairly easy to update the information to the extent of its relevancy. It considered the cost to the state if it was not there and why the railroad was important, for example. That information would be easy to update without too much difficulty. He had participated in the appraisal/evaluation process and he believed that some of the information was useful, but much of it was not to the extent that if a full evaluation of the railroad was going to be done today, many of the conditions have changed since the appraisal/evaluation was done in 1983. In conclusion, some of the information would be useful, some would have to be updated, and a lot of the cost went to issues that aren't pertinent to what would need to be looked at currently. Number 0480 REPRESENTATIVE MARTIN explained he was interested in an open process. He was concerned about his reputation being tarnished with respect to people going around getting bidders for the railroad. He advised committee members that he had heard nothing from anyone. He just recently heard about the Montana Railroad. He stated his interest came from experience because he knew it was only a 10-year commitment to the federal government to keep the railroad running and then find an orderly way to transfer whatever land that could be transferred. He was fed-up with the bad publicity surrounding this issue and it was his hope that with an open process these issues would be publicized. The process called for in the committee substitute would allow for the public to voice their concerns. He was concerned about a task force established by Governor Sheffield and its objectivity. Number 0612 CHAIR JAMES said no one wanted to impugn the character of Representative Martin. She stated for the record, that the concerns of Representative Martin had nothing to do with Montana Rail Link. He had been completely honest about his intentions from the beginning. CHAIR JAMES said this piece of legislation had been on the fast track and fast tracks don't always produce good results. The meeting today had been very informative. Number 0695 BOB EVANS, representing Montana Rail Link, said the most important issue discussed here was change. He explained that change makes people anxious. His client was interested in talking to an objective group about the potential to buy the railroad. There was the possibility his client would not even be interested in the railroad once the evaluation had been made. However, a process was needed to allow an arms-length assessment and evaluation and he believed that could only be done through a vehicle such as that before the committee. In terms of cost, he has been told there are four to six groups or operations in the country that have the skills and ability to complete an evaluation of this nature. He has been advised by his client that the ability to make an assessment or an evaluation of the railroad "as a going concern" is very different than the appraisal being talked about and may be significantly less expensive than an appraisal like the one being discussed. He had further been advised by the President of Montana Rail Link that the time line for making this kind of assessment is substantially less than what is being discussed. He believed the time frame in the legislation was realistic and the cost was probably going to be a lot less than what had been discussed in the meeting. Number 0833 CHAIR JAMES said she personally believes that if someone wants to buy the railroad, they should pay for the assessment because every company has a different idea of how they're going to run it and their assessment as to whether or not it's a good purchase might be calculated totally different than the state's assessment, as the seller. However, there is a flip side of that in that just because the assessment may meet their concerns, the state has the fiduciary responsibility of meeting the concerns of the state of Alaska - the shareholders which are the public. She surmised that only a small portion of the public was even aware this issue was being discussed. She expressed concern with the time line in that the railroad is the public's asset and they should be involved in the decision making or at least know what is happening. Number 0888 REPRESENTATIVE ROBINSON asked Mr. Evans why Montana Rail Link doesn't feel they can go to the existing board and get the information needed to determine if a purchase was feasible? Number 0898 MR. EVANS replied Montana Rail Link did ask the board. They sent a letter last year in October and received a reply stating the circumstances were such that it was not appropriate to talk about selling the railroad at that time. The letter was distributed to a joint House and Senate Transportation Committee meeting last month. Therefore, the company supported the committee substitute as a means to communicate with the railroad. He believed without this piece of legislation there would not be a public forum. Number 0970 GOVERNOR SHEFFIELD stated he and Representative Martin were good friends and he wanted to stay good friends. He hoped it was not something he said today that offended him. He thought the audit conducted by the Legislative Budget and Audit Committee should be kept a separate issue. He agreed with Chair James that the railroad had a public relations problem which he felt had been coming on for a long time and one of his goals as Chairman, was to turn that around. He explained the Montana Rail Link scenario of events. Last October, he received a letter from Dennis Washington, the owner of Washington & Companies which owns Montana Rail Link. The letter was also sent to the Governor, the Speaker of the House of Representatives and the President of the Senate. The letter indicated Washington & Companies wanted to enter into a confidential dialogue about the possibility of purchasing the Alaska Railroad Corporation. He commented that the corporation receives three or four letters a year inquiring about buying the Alaska Railroad. The fact that Mr. Washington had written to not only him, but also the Governor and the legislature, Governor Sheffield thought this was probably not any ordinary Montana guy. He responded in what some might say was slightly negative, but it was meant to be guarded so that someone wanting to take over the Alaska Railroad couldn't come back and say things were done wrong and sue. The last three paragraphs indicated that procedures to purchase the Alaska Railroad would be through the procurement process for a negotiated sale. Furthermore, if he was interested in purchasing the Alaska Railroad, the corporation would be willing to meet with him and establish a procedure. He had noted that 10 years ago, the appraisal on the railroad was very expensive so he would expect an interested company to participate up front in the cost of the appraisal. Governor Sheffield received a call from the go-between person he spoke of earlier, and he finally met Mr. Washington between Thanksgiving and Christmas in Palm Springs, but he didn't offer to come up with any money for the appraisal and indicated that if the state was really interested in selling the railroad, further discussions could be held in the future. Governor Sheffield heard nothing more from the Washington company until he received a call from the railroad while on vacation that a hearing was going to be held before the Senate and House Transportation Committees, which he testified at a couple of weeks ago. He has nothing against the Washington group or talking with them, but the ball had been thrown in their court. He reiterated that his idea of a committee would be open to the public. Governor Sheffield thanked the committee for the opportunity to participate in this discussion. ADJOURNMENT Number 1319 CHAIR JAMES thanked everyone for their participation and adjourned the House State Affairs Committee meeting at 1:05 p.m.