Legislature(1995 - 1996)
04/27/1996 10:12 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= 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.
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