HOUSE BILL NO. 140 "An Act authorizing the Alaska Railroad Corporation to issue revenue bonds to finance a positive train control rail transportation safety project that qualifies for federal financial participation; and providing for an effective date." 2:15:43 PM JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON, communicated that the bill would authorize the Alaska Railroad Corporation to issue up to $37 million in tax exempt bonds backed by the federal transit administration formula funds received annually by the corporation. She detailed that bond proceeds would be used to finance positive train control, a safety program mandated by federal government without any correlating funding. Co-Chair Neuman noted that the railroad needed approximately $55 million to complete the program. He referred to the bonding authority of $34.1 million provided under the bill, which left $18 million. He asked if it was the intent of the Alaska Railroad Corporation to ask the legislature for the additional funds. WILLIAM O'LEARY, PRESIDENT AND CEO, ALASKA RAILROAD CORPORATION (via teleconference), replied that the railroad had yet to determine where it would obtain the remaining $18 million; $55 million would be addressed through the legislation. He elaborated that $37 million would get the railroad through approximately two years of activity on the project, which would provide the railroad time to look at options. Co-Chair Neuman asked if the corporation had discussed the $18 million with its board and the possibility the legislature may need to provide additional funding in the future. Mr. O'Leary in the affirmative. He detailed that originally the plan had been to request the full $55 million over a three-year period from the legislature. The corporation's had the ability to refinance existing debt, which created headroom to bond for the $37 million. He addressed the remaining $18 million and agreed that everyone was considering where the funds would come from. He stated that the corporation did not currently know where the additional funds could come from. 2:19:44 PM Co-Chair Neuman was concerned that the state did not have capital funds to put towards the project. He wondered what would happen in three years' time. He wondered what other options the corporation had besides requesting the funds from the legislature. Mr. O'Leary replied that he did not know. He reasoned that the issue would be dealt with as the project went forward. He communicated that the corporation's primary objective was to keep the project moving forward and to continue to make a good faith effort as required by its regulators. He believed that the legislation would hopefully provide time to come up with a solution for the remainder of funds needed to complete the project by 2018. Co-Chair Neuman commented that he did not mind moving the bill forward, but he wanted assurance from the railroad that it did not intend to come forward with further capital fund requests in the future. Representative Gattis wanted assurance that the corporation did not intend to come back to the state for funds. She spoke to decisions businesses were required to make related to financing; there were choices to sell assets, to re- bond, or other. Mr. O'Leary answered that he was not trying to be coy in his response. The corporation did not know where the funds would come from. He agreed that the corporation's major focus was continuing to move forward with the unfunded mandate. He mentioned options of state, federal, and railroad funds. He underscored that the railroad understood that it had to obtain the funds somewhere and that it was necessary to keep moving forward on the project. Representative Gattis asked if the corporation had the assets it could utilize if push came to shove. Mr. O'Leary answered that the railroad did not have the money or assets currently. He noted that if it did have the money it would most likely be moving forward with those funds. The goal was to begin to determine what the corporation would need to do to obtain the $18 million. 2:24:11 PM Co-Chair Thompson believed the railroad had significant assets that it may need to consider utilizing. He hoped the committee had adequately conveyed that the state would probably not have any money for three or four years. Co-Chair Thompson CLOSED public testimony. Co-Chair Neuman MOVED to REPORT HB 140 out of committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. HB 140 was REPORTED out of committee with a "no recommendation" recommendation and with one new zero fiscal note from the Department of Commerce, Community and Economic Development. Co-Chair Thompson discussed the schedule for the following day.