05/11/2024 10:00 AM Senate FINANCE

CS FOR HOUSE BILL NO. 122(FIN) am                                                                                             
                                                                                                                                
     "An Act authorizing the Alaska Railroad Corporation to                                                                     
     issue revenue bonds to finance the replacement of the                                                                      
     Alaska  Railroad   Corporation's  passenger   dock  and                                                                    
     related   terminal   facility    in   Seward,   Alaska;                                                                    
     authorizing  the Alaska  Railroad Corporation  to issue                                                                    
     revenue  bonds to  finance the  completion of  the Port                                                                    
     MacKenzie  Rail Extension  in Point  MacKenzie, Alaska;                                                                    
     and providing for an effective date."                                                                                      
                                                                                                                                
12:11:10 PM                                                                                                                   
                                                                                                                                
Co-Chair  Olson relayed  that the  committee  had heard  the                                                                    
companion bill, SB 105, on February 27, 2024.                                                                                   
                                                                                                                                
12:11:35 PM                                                                                                                   
                                                                                                                                
ZACH  YOUNG,  STAFF  TO  REPRESENTATIVE  FRANK  TOMASZEWSKI,                                                                    
shared  that  the  bill  would  provide  an  additional  $75                                                                    
million  in bond  authorization for  the Alaska  Railroad to                                                                    
complete  the  reinstallation  and  construction  of  a  new                                                                    
floating passenger  cruise ship  dock and  attached terminal                                                                    
in  Seward.  He  relayed  that   in  2022,  the  legislature                                                                    
authorized  $60 million  in bond  authorization,  but a  new                                                                    
cost  study and  renewed scope  of the  work had  determined                                                                    
that the  need was for  75 million. The project  would break                                                                    
ground in  the fall of 2025,  to be completed in  the Spring                                                                    
of 2026. He explained that  there was an amendment passed on                                                                    
the   House   floor  that   added   $58   million  in   bond                                                                    
authorization  for the  first phase  of  the Port  MacKenzie                                                                    
Rail Extension. The legislature  had appropriated UGF in the                                                                    
past  of approximately  $180 million,  however, the  project                                                                    
had never been  completed. He concluded that the  bill was a                                                                    
railroad bonding bill.                                                                                                          
                                                                                                                                
12:13:35 PM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  recalled  that several  years  previously                                                                    
there had  been a  request, and  an appropriation  made, for                                                                    
the  rail  extension in  the  area.  He recounted  that  the                                                                    
railroad had  indicated that it  did not want to  extend the                                                                    
rail but  would prefer the  funds be used for  rolling stock                                                                    
and upgrades.  He said that  the railroad had  asserted that                                                                    
it would  not maintain or  use a rail extension.  He thought                                                                    
there was important history on  the matter that needed to be                                                                    
considered.                                                                                                                     
                                                                                                                                
12:14:52 PM                                                                                                                   
                                                                                                                                
BILL  O'LEARY,   PRESIDENT  &  CEO,  ALASKA   RAILROAD  (via                                                                    
teleconference),  believed that  Co-Chair Stedman's  remarks                                                                    
had  been in  reference to  decisions made  by the  previous                                                                    
CEO.  He  asserted  that the  railroad  supported  the  Port                                                                    
MacKenzie  Rail  Extension  Project. The  railroad  believed                                                                    
that  rail infrastructure  was key  to  unlocking areas  and                                                                    
resources of  the state.  He noted  that the  Port Mackenzie                                                                    
rail  extension  was  costly, and  they  were  applying  for                                                                    
federal match  dollars. He stated  that customers  needed to                                                                    
be  identified  that  would use  the  infrastructure  before                                                                    
bonds could  be issued.  He said that  $58 million  in bonds                                                                    
was  approximately $4.5  million in  debt service  per year,                                                                    
which would be the targeted pre cash flow.                                                                                      
                                                                                                                                
12:18:21 PM                                                                                                                   
                                                                                                                                
Co-Chair Olson expressed concern  related to the funding for                                                                    
the rail  extension in addition  to funding the  port, which                                                                    
would be  needed to bring customers.  He admitted skepticism                                                                    
and asked whether there was more to the plan.                                                                                   
                                                                                                                                
Mr. O'Leary  replied that the port  was owned by the  Mat Su                                                                    
Borough,  and he  could not  speak to  the condition  of the                                                                    
port or the needs of users.                                                                                                     
                                                                                                                                
Co-Chair Olson referenced the concern  that there was a port                                                                    
being considered  less than  2 miles away  from the  Port of                                                                    
Alaska would be in competition with that port.                                                                                  
                                                                                                                                
12:19:34 PM                                                                                                                   
                                                                                                                                
Co-Chair Stedman  referenced the  beginning of the  bill and                                                                    
the dock  extension, which  would accommodate  cruise ships.                                                                    
He asked  whether there were  customers standing by  for use                                                                    
of the proposed facility.                                                                                                       
                                                                                                                                
Mr. O'Leary  answered that  "absolutely, we  have customers"                                                                    
and furthered that  the deal that was being  proposed was to                                                                    
work with  the Royal Caribbean Group;  Royal Caribbean Group                                                                    
would be  the anchor tenant.  He noted that  Royal Caribbean                                                                    
had approached  the railroad with a  real estate transaction                                                                    
and would be  guaranteeing the issued bonds  through a long-                                                                    
term tiered usage agreement.                                                                                                    
                                                                                                                                
12:21:35 PM                                                                                                                   
                                                                                                                                
Senator Wilson  thought the difference  between the  port in                                                                    
Anchorage  and  the proposed  one  in  Mat-Su was  that  the                                                                    
Anchorage port  saw more  goods and  services and  the Point                                                                    
McKinzie port would be more  of a  resource port  that aided                                                                    
in  the movement  of resources.  He queried  pending funding                                                                    
opportunities awarded to the railroad.                                                                                          
                                                                                                                                
Mr. O'Leary cited that the  grant application was due at the                                                                    
end of May  and the railroad estimated that  the award would                                                                    
be announced prior to the election in November 2024.                                                                            
                                                                                                                                
Senator  Wilson  asked  when  the match  would  need  to  be                                                                    
awarded to be eligible for the grant.                                                                                           
                                                                                                                                
Mr.  O'Leary  thought  that the  match  would  be  necessary                                                                    
before construction were to begin  in 2025. If bonds were to                                                                    
be used as  matching funds, they would need to  be issued in                                                                    
the 2025 timeframe.                                                                                                             
                                                                                                                                
Senator Wilson surmised that if  the funding was not awarded                                                                    
until  winter,  the  construction   would  not  start  until                                                                    
springtime,  and   that  it  was  possible   that  the  next                                                                    
legislature  could issue  bonds that  would be  usable in  a                                                                    
timely manner.                                                                                                                  
                                                                                                                                
Mr. O'Leary understood the same  and did not think there had                                                                    
been a detailed construction schedule issued.                                                                                   
                                                                                                                                
12:24:24 PM                                                                                                                   
                                                                                                                                
Co-Chair Stedman  asked whether the  grant would be  lost if                                                                    
matching funds were not immediately  available upon award of                                                                    
the grant in the fall.                                                                                                          
                                                                                                                                
Mr.  O'Leary  said  that  the grant  would  bee  awarded  in                                                                    
September or  October. Before the  grant could  be executed,                                                                    
the railroad would have to  demonstrate where matching funds                                                                    
would come from.                                                                                                                
                                                                                                                                
Co-Chair Stedman  about the time  frame to  acquire matching                                                                    
funds to avoid losing the grant.                                                                                                
                                                                                                                                
Mr. O'Leary responded that he did not know.                                                                                     
                                                                                                                                
Co-Chair  Stedman  thought  clarity   was  needed  when  Mr.                                                                    
O'Leary answered  the committee's  questions. He  thought it                                                                    
would be  abnormal to receive  a grant in November  and have                                                                    
to have matching  funds available by December.  He felt that                                                                    
the bill needed further amending.                                                                                               
                                                                                                                                
12:27:48 PM                                                                                                                   
                                                                                                                                
Senator Bishop  mentioned the  Northern rail  extension, and                                                                    
thought  it  was  important  to add  the  extension  to  the                                                                    
conversation.                                                                                                                   
                                                                                                                                
12:28:03 PM                                                                                                                   
                                                                                                                                
Co-Chair Olson OPENED public testimony.                                                                                         
                                                                                                                                
12:28:21 PM                                                                                                                   
                                                                                                                                
Co-Chair Olson CLOSED public testimony.                                                                                         
                                                                                                                                
12:28:31 PM                                                                                                                   
                                                                                                                                
Senator  Wilson  asked  about  the  choice  of  Seward  over                                                                    
Whittier.                                                                                                                       
                                                                                                                                
Mr.  O'Leary responded  that the  railroad was  replacing an                                                                    
existing asset  in Seward. He  said that the  railroad would                                                                    
continue to work with customers  in Whittier and there could                                                                    
be expansion in both locations.                                                                                                 
                                                                                                                                
Senator Wilson  wondered whether  it was true  that Whittier                                                                    
had  more opportunity  for expansion  and  growth. He  asked                                                                    
whether Whittier  offered opportunity for expansion  for the                                                                    
railroad.                                                                                                                       
                                                                                                                                
Mr. O'Leary  was not certain he  understood Senator Wilson's                                                                    
question. He noted that he  was happy to work with customers                                                                    
in Whittier.                                                                                                                    
                                                                                                                                
12:30:51 PM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman commented  on  the various  port and  rail                                                                    
projects in  the state.  He thought  the committee  would be                                                                    
receptive in  expanding the rail  in all the  directions. He                                                                    
contrasted that just as power  line extensions were made, or                                                                    
electrical    interties,   economically    beneficial   rail                                                                    
extension was of interest to the committee.                                                                                     
                                                                                                                                
Co-Chair Olson agreed. He suggested that Mr. OLeary return                                                                      
to the committee in the future with a list of priority                                                                          
projects.                                                                                                                       
                                                                                                                                
Mr. O'Leary relayed that he would be delighted to do so.                                                                        
                                                                                                                                
HB 122 was heard and HELD in Committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
12:32:21 PM                                                                                                                   
RECESSED                                                                                                                        
                                                                                                                                
3:10:37 PM                                                                                                                    
RECONVENED