Legislature(1995 - 1996)
03/23/1995 01:36 PM Senate TRA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE TRANSPORTATION
March 23, 1995
1:36 p.m.
MEMBERS PRESENT
Senator Steve Rieger, Chairman
Senator Lyda Green
Senator Al Adams
Senator Georgianna Lincoln
MEMBERS ABSENT
Senator Robin Taylor, Vice Chair
COMMITTEE CALENDAR
SENATE BILL NO. 64
"An Act relating to the dissolution of the Alaska Railroad
Corporation and providing for a successor corporation; and
providing for an effective date."
CS FOR HOUSE CONCURRENT RESOLUTION NO. 9(TRA)
Relating to Alaska School Bus Driver Appreciation Day.
PREVIOUS SENATE ACTION
SB 64 - See Senate Transportation minutes dated 2/9/95.
HCR 9 - No previous senate committee action.
WITNESS REGISTER
Robert S. Hatfield, Jr., President & CEO
Alaska Railroad Corporation
Department of Commerce & Economic Development
P.O. Box 107500, Anchorage, AK 99510-7500¶
POSITION STATEMENT:
James B. Blasingame, Vice President of Corporate Affairs &
Secretary, Alaska Railroad Corporation
Department of Commerce & Economic Development
P.O. Box 107500, Anchorage, AK 99510-7500¶
POSITION STATEMENT:
ACTION NARRATIVE
TAPE 95-6, SIDE A
STRA - 3/23/95
SB 64 CONVERT AK RR TO PRIVATE CORPORATION
Number 002
CHAIRMAN RIEGER called the Senate Transportation meeting to order
at 1:36 p.m. He introduced SB 64 as the first order of business
before the committee. The chairman outlined the changes in the
committee substitute to SB 64: the sections requiring the railroad
to pay for an appraisal have been deleted; there is new language
describing the qualifications of board members; the board of
directors will report on suggestions for creating a trust, and
there is language added to clarify that the legislature will retain
its' power of appropriation of these shares, while the shares are
in state hands. Chairman Rieger noted those sections are
highlighted in members' bill packets.
Number 049
SENATOR GREEN made a motion to adopt the Senate Transportation
committee substitute for SB 64.
SENATOR ADAMS objected in order to inform the committee that he
also had a proposed committee substitute for the bill. Senator
Adams removed his objection.
Hearing no further objection, the Utermohle CS, version K dated
3/22/95, was adopted.
Number 067
BOB HATFIELD, President & CEO of the Alaska Railroad Corporation,
testifying from Anchorage, noted the presence of board members
Loren Lounsbury, Jack Burton, Paul Massey, Dale Lindsey, and
Secretary Jim Blasingame. Mr. Hatfield informed the committee that
the corporation is taking a break in a board meeting in order to
accommodate this Senate Transportation Committee meeting. The
board received a copy of the committee substitute for SB 64 late
yesterday afternoon, and has had a chance to quickly review it.
The board is pleased with the changes incorporated in the CS which
had been discussed earlier.
Mr. Hatfield directed the committee to page 2, line 6; the board
does not like the language, "...subject to the concurrence of the
other parties to the contract." He is not sure what is intended by
that language. The board certainly supports keeping the railroad's
current labor agreements in place, but he would not want to suggest
that some of the railroad's customers would be able to cancel their
contracts with the successor corporation. The language on page 2,
line 6 suggests that possibility to him.
CHAIRMAN RIEGER thought that was a good question. He pointed out
that the language to which Mr. Hatfield is concerned was in the
original draft of SB 64. There was no objection raised previously,
which is why that language remains in the CS.
Number 110
BOB HATFIELD suggested removing that language. Mr. Hatfield stated
that the language on page 2, subsection (f) appears open ended to
him. He is not sure what costs might be included by that language.
He reiterated that the board has not had very much time to review
the committee substitute, and asked if anyone could explain what
specific costs that language was meant to cover.
[Mr. Hatfield raised concern about the language on line 17
regarding the manner in which shares are to be distributed, but due
to taping difficulties, it is not possible to understand what he is
saying. He mentioned that the language might bring an appraisal
process back into the picture.]
Number 140
Mr. Hatfield stated that under Section 3, subsection (b), perhaps
language should be added to specify that different judicial
districts on the railbelt should be represented on the board. Such
language has served the corporation well in the past. He
explained, regarding the language in Section 5, usually dividends
are paid with the amount of money remaining after the future and
present needs of the corporation have been met. In conclusion, Mr.
Hatfield addressed Section 7; he would like to see the corporation
keep its' current name.
CHAIRMAN RIEGER observed that, with the exception of geographic
distribution of board members, the points raised by Mr. Hatfield
were all in the original draft of SB 64. He was not sure why Mr.
Hatfield did not raise his concerns earlier. BOB HATFIELD
apologized for any inconvenience caused.
Number 215
CHAIRMAN RIEGER noted the presence of Senator Adam's proposed
committee substitute.
SENATOR ADAMS said it was unfair that the Alaska Railroad
Corporation does not have a copy of his proposed CS. Senator Adams
explained that his CS stipulates that the governor shall issue a
request for proposals by July 1, 1996 to sell the Alaska Railroad
Corporation. By January 1, 1998, the corporation shall be sold
with the following requirements: the continuing operation of the
railroad for 20 years; continuation of the current contracts;
purchase of the railroad for fair market value; retention of the
right-of-way by the State of Alaska; the appraisal will be
contracted by the governor; the governor shall report to the
legislature on the sale; upon sale, the Alaska Railroad Corporation
will be dissolved; the governor may adopt regulations for
implementation of this act; the sale will not be subject to the
state procurement code; and there is an immediate effective date.
SENATOR ADAMS stated his proposal is very simple and should be
considered a working document.
CHAIRMAN RIEGER informed Mr. Hatfield he was being faxed a copy of
Senator Adam's proposed CS at that moment.
SENATOR ADAMS asked the chairman if the committee was planning to
move SB 64 from committee today.
CHAIRMAN RIEGER responded he was planning on doing so, but he could
hold SB 64 over to the next meeting.
SENATOR ADAMS stated he would appreciate that.
CHAIRMAN RIEGER added he was willing to hold the bill over for one
meeting. The approach Senator Adams is proposing has been
discussed. Senator Adams' proposal has the advantage of speed, but
the disadvantage that the state might not maximize value.
SENATOR ADAMS commented that the state might not gain an immediate
profit from the sale, but in the long run there would be gains.
Number 269
SENATOR LINCOLN asked, regarding Section 5 of SB 64, who would make
the determination of the amount of the dividend.
SENATOR RIEGER replied that the language, "...30 percent of net
earnings...." has a literal meaning. He acknowledged that there
can be a difference of opinion regarding the definition "net
earnings." There is an implicit assumption that the accounting for
the railroad would be conducted in accordance with generally
accepted accounting principles. He recognized that reinvestment of
earnings is a common source of tension between the shareholders and
the management of a corporation. The chairman thinks 30 percent is
a reasonable number, but it is not clear whether it is the right
number. That provision was in the original draft of SB 64, and no
objection was raised until now. Chairman Rieger noted that this
requirement is lifted once the state is no longer a majority
shareholder.
Number 313
SENATOR ADAMS asked if a financial run could be done using that
language, with the scenario that the language has been in place for
the past three years. CHAIRMAN RIEGER said the committee could ask
the railroad to prepare such a run; that would be beneficial.
SENATOR LINCOLN asked if that information would be requested from
the corporation.
CHAIRMAN RIEGER stated he planned to ask for that. Chairman Rieger
clarified the request that the corporation submit information
describing how a 30 percent of net earnings requirement would have
affected the corporation and the state if it had been in effect for
the previous five years. How much money would have been paid in
dividends?
BOB HATFIELD responded no money would have been paid in 1994 or
1993, about $600,000 would have been paid in 1992, and about
$900,000 would have been paid in 1991. That was as far back as he
could recall.
SENATOR LINCOLN asked if that is using 30 percent of the net
earnings equation. BOB HATFIELD replied that is correct.
SENATOR LINCOLN noted the language in Section 5 of SB 64 states
payment must equal or exceed 30 percent net earnings. BOB HATFIELD
was assuming the board could limit it to 30 percent.
CHAIRMAN RIEGER specified that the board would have the option of
paying out any dividend, as long as it was at least 30 percent.
SENATOR LINCOLN asked Mr. Hatfield if he could justify the zero
fiscal note.
Number 348
JIM BLASINGAME, Vice President for Corporate Affairs and Secretary
of the Alaska Railroad Corporation, testifying from Anchorage,
stated that at the time the state purchased the railroad from the
federal government, the federal government paid just over
$2,000,000 to go through the appraisal process. That does not
include funds expended by the state during that process. It is
unknown to the corporation how much an appraisal would cost today.
He indicated that the corporation put the 1984 costs on the fiscal
note, just as a benchmark.
BOB HATFIELD explained that zero fiscal note is due to the fact
that there is no required expenditure of general fund money or
state funds in the original draft of the legislation.
Number 370
SENATOR LINCOLN asked Mr. Hatfield about his concern that
geographic representation be addressed by Section 2. She asked Mr.
Hatfield if the corporation currently has geographic representation
on the board. BOB HATFIELD replied the board does currently have
geographic representation.
SENATOR LINCOLN asked if geographic representation is
representative of the state as a whole, or just the railbelt area.
BOB HATFIELD stated that the board is currently meant to represent
the geographic diversity of the railbelt.
CHAIRMAN RIEGER informed Mr. Hatfield that he would review the
possibilty of revising the language on page 2, line 6. Also,
language relating to the par value may be meaningless, and that
could probably be deleted from SB 64.
SENATOR LINCOLN voiced continuing concern over the fiscal note.
She indicated the need to see an opinion from the Attorney
General's Office on whether or not the state would be paying for
the appraisal.
CHAIRMAN RIEGER informed Senator Lincoln that the committee
substitute removed the requirement for the appraisal from the
original bill.
SENATOR LINCOLN asked how the value of the corporation would be
determined if an appraisal is not conducted.
CHAIRMAN RIEGER replied, under the concept of selling shares of
stock, the value is determined by the amount of money the buyer is
willing to pay. That is why he believes the requirement on the par
value is no longer meaningful.
Number 422
CHAIRMAN RIEGER asked Senator Adams if he would like more exact
figures on the run he requested earlier.
SENATOR ADAMS responded he would not. He is getting the feeling
that the committee doesn't want to get rid of the Alaska Railroad.
The railroad is an asset the state needs.
CHAIRMAN RIEGER stated that he was willing to have one more hearing
on SB 64, and then he would like to see either the current
Transportation CS or Senator Adam's proposed CS moved from
committee. The committee would certainly be open to Senator Adam's
offering his language.
CHAIRMAN RIEGER stated that SB 64 would be held until the next
Senate Transportation Committee meeting.
STRA - 3/23/95
HCR 9 SCHOOL BUS DRIVER APPRECIATION DAY
CHAIRMAN RIEGER introduced HCR 9 as the next order of business
before the Senate Transportation Committee.
Number 434
SENATOR ADAMS made a motion to discharge HCR 9 from committee with
individual recommendations. Hearing no objection, it was so
ordered.
CHAIRMAN RIEGER adjourned the Senate Transportation Committee
meeting at 2:05 p.m.
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