Legislature(1995 - 1996)
04/29/1996 02:10 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 136
"An Act mandating the sale of the Alaska Railroad; and
providing for an effective date."
Representative Martin, sponsor of HB 136, spoke in support
of the legislation. He noted that the legislation was
introduced in recognition of the tenth anniversary of the
acquisition of the Alaska Railroad. He emphasized that land
is available for transferred to the State of Alaska. He
noted that the State paid the federal government $20.0
million dollars for the Alaska Railroad. He maintained that
the State should assess what is the value of the railroad.
The legislation would provide for a commission to assess the
value of the railroad. He noted that the legislation was
changed from providing for the sale of the railroad to a
commission evaluating the asset.
Representative Martin referred to the fiscal note. The
fiscal noted by the House State Affairs Committee for the
Department of Commerce and Economic Development would
provide $250.0 thousand dollars.
In response to a question by Representative Brown,
Representative Martin noted that other assets are addressed
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on page 4, lines 17 - 27.
Representative Brown asked the status of the accompanying
land. She asked if the land would become state land and be
under existing procedures for disposal of state land.
Representative Martin stated that the intent is to assess
the extent of the assets and their current status.
Representative Brown suggested that the land would fall
under a default status. She expressed concern that the
Commission would recommend procedures for the disposal to
the State. She thought that the State would already be the
owner. She observed that there are existing contracts. She
asked if contracts are addressed.
Representative Martin referred to a memorandum by George
Utermohle, dated 11/9/92. He stated that he did not know
the extent of contracts entered into by the Alaska Railroad
Corporation. He noted that section (B) on page 5 addresses
contracts. He reiterated that the intent is to determine
what is there.
Representative Brown questioned what would happen to assets
that would not be part of the sale.
Representative Mulder pointed out that the current version
does not mandate a sale. The legislation will created a
Commission to provide guidance and counsel.
Representative Brown referred to page 4, line 19. She
suggested that "recommend procedures for the disposal of" be
changed to "inventory real property and contracts of the
Alaska Railroad Corporation that are not necessary for the
operation of the railroad, and make recommendations for
their disposition." She stressed that the amendment would
recognize that there are contracts attached to some of the
real property that is not necessary for the operation of the
railroad.
Representative Mulder questioned if the addition of
"possible" before disposal would alleviate Representative
Brown's concerns. Representative Brown reiterated that her
suggested language would clarify the section. She stressed
that the current language refers to the specific conditions
attached to the sale.
Representative Brown MOVED to delete "recommend procedures
for the disposal of" and insert "inventory real property and
contracts of the Alaska Railroad Corporation that are not
necessary for the operation of the railroad, and make
recommendations for their disposition." There being NO
OBJECTION, it was so ordered.
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Representative Brown referred to page 2, lines 23 and 24.
She noted that the contract for evaluation is exempt from AS
36.30, Procurement Code.
Representative Mulder asked how long it would take to issue
a request for procurement. He questioned if the procurement
bid could be finished by the November 1, 1996 target date.
Representative Martin stressed that there are a limited
amount of people that specialize in railroad properties and
functions.
Representative Brown noted exceptions for professional
services on page 2, lines 16 and 17. She questioned the
need for this exception. She noted that (d) is out of
railroad receipts, (c) states that it is subject to
appropriation. She asked if subject to appropriation
includes the $250.0 thousand dollar fiscal note.
Representative Martin stated that the reference is to the
$250.0 thousand dollar fiscal note. He noted that (c) and
(d) would both be covered by the $250.0 thousand dollar
fiscal note.
Representative Brown asked why it was necessary to give
consideration to persons with experience in corporate
mergers and acquisitions. She questioned how many
individuals would have the required experience.
Representative Mulder stressed the logic of having persons
with experience in business practices.
Representative Brown stated that it would be at least as
important to have people who are familiar with the local
communities and the issue of land disposition. She
emphasized that the needs of communities be taken into
account.
Representative Martin observed that a wide range of
individuals and communities would want to participate. He
emphasized that everyone will have opportunities in open
meetings to express their concerns.
Representative Therriault stated that it was unclear if all
the individuals should have experience. He suggested that
"at least one person" be inserted.
Representative Martin stressed that all user groups cannot
be represented on the Commission. He reiterated that all
will be able to testify in open meetings.
Representative Mulder pointed out that the language does not
mandate that all members have experience.
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Representative Brown questioned how open the Commission's
proceedings would be. She noted provisions on page 5 that
the Commission could discuss in executive session. She
stressed that it could be argued under subsection (1) that
the entire conversation has an adverse effect on the Alaska
Railroad Corporation's finance. She added that subsection
(5) and (6) would cover large portions of the discussions.
She maintained that the whole conversation could take place
in secret. She asserted that it is a valid concern that
public members be involved. She questioned why land
acquisition or disposal needs to be included in allowances
for executive session.
Representative Martin expressed concern that the discussions
be open. He pointed out that page 2, line 1 states that the
Commission "shall" give consideration to the appointment of
persons who have experience involving corporate mergers and
acquisitions.
Representative Therriault MOVED to delete "persons who have"
and insert "at least one person who has" experience on page
2, line 1. There being NO OBJECTION, it was so ordered.
Representative Martin emphasized that it is important to
know what is available. He observed that the language on
page 5, lines 7 - 19 is taken from the Corporation's by
laws.
Representative Therriault questioned if the Corporation's
concerned regarding negotiations currently under discussion
for purchase of or disposal of a piece of property. He
stated that the language could be expanded to clarify that
only those things that are currently in negotiation would be
allowed discussion under executive session.
Representative Therriault expressed support for the addition
on page 5 line 15, of "currently under negotiations." He
added that consideration should be given to the customer or
customers that pay the majority of the freight costs.
Representative Parnell MOVED to adopt Amendment 3 (copy on
file). He explained that the amendment would require that
reports be given to the Speaker of the House and the
President of the Senate as well as the Governor. The
amendment would also require that copies of the report be
made available for the public. There being NO OBJECTION, it
was so ordered.
BILL SHEFFIELD, FORMER GOVERNOR, CHAIRMAN, BOARD OF
DIRECTORS, ALASKA RAILROAD CORPORATION testified via the
teleconference network. He noted that a number of
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individuals were interested in testifying on the
legislation. He gave a brief history of the creation of the
railroad. He noted that the State purchased the railroad to
obtain ownership of an important transportation corridor in
the Interior of Alaska. He noted that the railroad was
built to allow expansion where needed. He maintained that
the railroad is a performing asset. He observed that the
railroad has only lost money in two years while under
ownership by the State. He asserted that the railroad will
continue to make a profit. He emphasized that the railroad
is a major player in the State's economy.
(Tape Change, HFC 96-147, Side 2)
Mr. Sheffield noted other functions of the Alaska Railroad.
He emphasized that the Corporation is developing real
estate. He discussed land managed by the Corporation. He
observed that all the land was transferred to the State
owned Corporation. If the Corporation is disposed of then
the land would also have to be disposed. He stressed that
the sale raises public questions.
Mr. Sheffield stated that he is opposed to the sale of the
Alaska Railroad. He maintained that the membership of the
Commission is too small. He did not think that a five
member commission would allow for sufficient representation.
He maintained that it is wrong to require the Corporation to
pay for a fast track appraisal. He noted that the federal
government paid $850.0 thousand dollars for the first cut of
an appraisal of the fair market value of the Alaska Railroad
in 1984. Mr. Sheffield emphasized that money spent for an
appraisal will reduce funding available for railroad ties
and other expenses.
Mr. Sheffield stressed that the Corporation could convene a
Committee to address the issue and make recommendations.
Mr. Sheffield viewed plans for expansion and improvements.
He discussed efforts to obtain federal funds for passenger
service. He clarified that the reversionary clause is in
relationship to the land ownership. He noted that if there
were a sale of the railroad prior to ten years then the
difference between what was paid for the railroad and what
was received for the railroad would go to the federal
government. After ten years any profits would remain with
the State.
Mr. Sheffield reiterated that the Corporation could appoint
a committee consisting of legislators, users and the public
to address the issue at no cost to the State.
Representative Therriault referred to page 5, line 15. Mr.
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Sheffield observed that lines 7 - 15 are in the
Corporation's by-laws. He acknowledged that some of the
items are more important than others in regards to
confidentiality. He stressed that matters related to
personnel or finances are of most concern.
Representative Brown questioned if the discussion of the
possible sale of the railroad would have an adverse effect
on the finances of the railroad. Mr. Sheffield responded
that discussion of the sale could have an adverse effect.
Representative Brown observed that the Commission is not the
same as the Board of the Alaska Railroad Corporation. She
acknowledged that the Corporation would want to keep items
(1) - (7) in executive session. She maintained that there
should be a different standard for the Commission than for
the Board.
Mr. Sheffield acknowledged that some of the items could be
revised.
JEFF COOK, VICE PRESIDENT, EXTERNAL AFFAIRS AND
ADMINISTRATION, MAPCO PETROLEUM testified via the
teleconference network. He noted that Mapco paid the
railroad approximately $23 million dollars in 1995. He
stressed the need for efficiency. He expressed concern
about any sale of the railroad. He emphasized that Mapco
has an excellent relationship with the railroad. He
stressed the quality of service and partnership. He
expressed concern that the Commission's membership is too
small. He questioned if the Commission should first see if
it is in the State's best interest to sell. He stated that
the provisions of subsection (g) would best be addressed if
a decision is made to pursue a sale. He stressed that the
Commission should be big enough to represent the diverse
users that have an interest in the railroad. He reiterated
that he did not see a reason for the sale.
JOHNE BINKLEY, EX-SENATOR, BOARD MEMBER, ALASKA RAILROAD
CORPORATION testified via the teleconference network. He
spoke in opposition to the legislation. He observed that
the railroad has been instrumental in the development of
Fairbanks. He stressed that the railroad is an important
transportation corridor. He maintained that the railroad
should not be sold. He asserted that the railroad is an
important asset that should be protected. He stated that he
has been impressed with the management of the Alaska
Railroad. He observed that the railroad made a profit in
the current year. He stressed that the Board protects the
public's interest. He agreed that the Board should look at
the issue. He observed that $250.0 thousand dollars could
be used to purchase needed equipment.
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GARY ANGLAN, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES
(AFGE) testified via the teleconference network. He noted
that AFGE represents many of the employees on railroad
property. He expressed concern with the legislation. He
noted that the transfer from the federal government was an
agonizing experience for the railroad employees. He noted
that employees were retained in the Civil Service Retirement
System during the transfer in 1985. He emphasized that the
stress and uncertainty that accompanied the transfer
resulted in the loss of qualified employees. He noted that
there was an unfunded liability for the employees in the
Civil Service Retirement System. He emphasized the
difficulty of ascertaining the unfunded liability for these
employees. He maintained that in the advent of a sale the
new owner should assume the cost of the employee's
participation in Civil Service Retirement System. He noted
that employee unions are actively engaged in collective
bargaining. He stated that the discussions regarding sale
of the railroad is having a destablizing effect on the
negotiation process. He asked if the railroad is currently
running okay and what is the potential to Alaska if the
railroad was free of legislative interference and
regulation. He noted that the railroad received $10.0
million dollars for tie upgrades. He asked the total worth
of these improvements for future operations. He observed
that Governor Sheffield indicated that the railroad would
fall apart if this money is not spent.
MARK HICKEY, ALASKA RAILROAD CORPORATION discussed item (6)
on page 5, line 15. He stated that the additional language
recommended by Representative Therriault should not create a
problem. Representative Therriault asked if a problem would
be created if (6) was deleted. Mr. Hickey pointed out that
the language is not mandatory. He stated that there could
be a matter pending that would need to be discussed in
executive session.
Representative Martin stressed that once the guidelines are
placed into law there would be a greater barrier.
(Tape Change, HFC 96-147, Side 1)
Representative Brown referred to subsection (1) on page 5.
She suggested that "except as related to the potential
sale," be added to the beginning of line 7. She stressed
that it should be clear that discussions should take place
in public.
Mr. Hickey stated that the intent is clear that to the
extent possible the proceedings are to be public. He
emphasized that subsection (1) states, would "clearly" have
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an adverse effect upon the finances of the Alaska Railroad
Corporation. He emphasized that assuming that the
Commission intends to operate to the extent practical in a
public way, that the language is adequate. He observed that
the application of the Corporation Act in relating to its
work with the Commission needs to be considered.
Representative Brown clarified that her concern is that the
Corporation, with all its concerns, by laws, and practices
will want to go into executive session in its discussions
with the Commission.
Representative Brown referred to subsection (5) on page 5,
line 14. She suggested the addition of "current litigation
involving the Alaska Railroad Corporation". She stated that
the entire issue addresses the legal position of the Alaska
Railroad Corporation.
Mr. Hickey stressed that current litigation may be too
narrow. He observed that there could be legal matters
pending.
Mr. Sheffield noted that the Corporation discusses in
executive session matters under litigation and matters that
may be potential subjects for litigation.
Mr. Sheffield noted that $250.0 thousand dollars represents
25,000 railroad ties or 40 miles of track.
HB 136 was HELD in Committee for further consideration.
HOUSE BILL NO. 136
"An Act mandating the sale of the Alaska Railroad; and
providing for an effective date."
Representative Therriault MOVED to delete subsection (6) on
page 5, line 15. There being NO OBJECTION, it was so
ordered.
Representative Brown MOVED to delete "the legal position of
the" and insert "current or potential litigation involving."
There being NO OBJECTION, it was so ordered.
Representative Therriault MOVED to report CSHB 136 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal note. Representative Brown OBJECTED.
She noted that the legislation is structured into two parts.
Section (f) provides for a determination of best interest.
Section (g) contains the particulars related to the
determination to sell. She asserted that subsection (3) on
page 4, lines 17 and 18 should be moved under section (f).
She noted that subsection (3) allows for a broader
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interpretation.
Representative Therriault WITHDREW his motion to move CSHB
136 (FIN). There being NO OBJECTION, it was so ordered.
Representative Brown MOVED to move subsection (3) on page 4,
lines 17 and 18 to be placed under section (f) on page 2,
line 31. There being NO OBJECTION, it was so ordered.
Representative Kohring MOVED to report CSHB 136 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. A roll call vote was taken on the
MOTION.
IN FAVOR: Kohring, Martin, Mulder, Parnell, Therriault,
Foster
OPPOSED: Brown, Navarre
Co-Chair Hanley and Representatives Kelly and Grussendorf
were absent for the vote.
The MOTION PASSED (6-2).
CSHB 136 (FIN) was reported out of Committee with "no
recommendation" and with a fiscal impact note by the House
State Affairs Committee for the Department of Commerce and
Economic Development.
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