Legislature(2015 - 2016)SENATE FINANCE 532
04/10/2015 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB71 | |
| HB140 | |
| SB70 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 140 | TELECONFERENCED | |
| + | SB 70 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 71 | TELECONFERENCED | |
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."
9:16:11 AM
REPRESENTATIVE STEVE THOMPSON, SPONSOR, introduced the
legislation. He explained that HB 140 will authorize the
Alaska Railroad Corporation (ARRC) to issue up to $37
million in tax-exempt bonds backed by Federal Transit
Administration (FTA) formula funds received annually by
ARRC. Bond proceeds will be used to finance Positive Train
Control (PTC): a safety program mandated by the federal
government without any correlating funding, which is
estimated to cost ARRC approximately $158 million. ARRC
proposes to refinance $66 million in existing bonds and
extend the repayment date in order to issue an additional
$37 million in bonds to pay for a major portion of the
remaining $55 million in PTC costs. Under AS.42.40.285 ARRC
is required to receive legislative approval to issue bonds.
In no event will the general credit of the State of Alaska
or ARRC be pledged for the repayment of these bonds.
AS.42.40.500 requires that all liabilities incurred by ARRC
shall be satisfied "exclusively" from the assets or revenue
of ARRC and not the State. Debt payment for the bonds will
come from a portion of Federal Transit Administration (FTA)
formula funds which are statutorily mandated by Federal law
and received annually by ARRC. Issuing debt backed by FTA
formula funds is authorized through FTA regulation and has
already been used by ARRC to issue bonds. PTC is technology
designed to stop or slow a train before human-error causes
an accident to occur. In 2008, the federal Rail Safety
Improvement Act required certain railroads to install a
fully functional PTC system by the end of 2015; by virtue
of its passenger service, ARRC is subject to this
requirement. A failure to implement PTC will force ARRC to
severely curtail or eliminate passenger service and/or face
severe fines for non-compliance. Estimates for this large
research and development project indicate that it will cost
approximately $158 million to implement. Since 1997, ARRC
has invested $68.9 million to develop a PTC system. In 2013
and 2014, ARRC received an additional $19.1 million and $15
million respectively from the State of Alaska to continue
work on PTC. Between 2016 and 2018, an additional $55
million will be required for ARRC to complete the
development and installation of PTC by 2018. This figure
does not include the estimated $5 million to $7 million per
year of operating and capital maintenance costs related to
the system that ARRC will fund after PTC is installed.
Vice-Chair Micciche shared that he was not in support of
PTC, but understood that the state did not have a choice.
He expressed support for the legislation.
Senator Dunleavy appreciated the legislation.
Co-Chair MacKinnon CLOSED public testimony.
9:21:36 AM
Senator Hoffman wondered how much unutilized land was owned
by the Alaska Railroad.
BILL O'LEARY, CEO, ALASKA RAILROAD, explained that there
was roughly 36,000 acres of land owned by the corporation.
Approximately 18,000 acres of that land was used directly
in rail operations, such as right-of-way. Therefore, there
was a remaining 18,000 acres available for other use. He
recalled that there was approximately 2600 acres that were
under lease or permit.
Senator Hoffman queried the future plans of the remaining
15,000 acres. Mr. O'Leary replied that there was a hope to
develop the unused land. There were some plans in
Fairbanks, Anchorage, and Seward with the hopes to move
forward.
Senator Hoffman wondered if the undeveloped acres would be
available to create jobs to incur investment. Mr. O'Leary
replied that it was of great concern to the corporation,
and was a part of the financial picture. He stated that
there was a hope to utilize the railroad land.
Senator Hoffman queried the corporation's position on
selling any of the land. Mr. O'Leary replied that the
corporation was not often interested in selling the land,
because the ownership of the land was a key piece in the
financial structure.
Senator Hoffman wondered if the corporation would sell the
land upon threat of closing the railroad operations, as
they are with the PTC federal requirement. Mr. O'Leary
responded that the corporation was not in favor of selling
the land, because of the possibility of the need for
continuous revenue stream. He felt that the selling of the
land would not produce enough funds in the short time that
the funds were needed for the project.
Senator Hoffman surmised that the railroad would rather
close down operations, than sell the land to keep the
railroad operating. Mr. O'Leary disagreed.
Vice-Chair Micciche shared that he was supporting the bill,
because the state would not have bond liability. He asked
for further explanation of the bond. Mr. O'Leary replied
that the debts to the Alaska Railroad were not liabilities
of the state. There would be no recourse to the state for
the bond, as was explicitly outlined in the bond documents.
There was also no recourse to the general credit of the
Alaska Railroad. The only security for the bonds, as
proposed, was from the Federal Transit Administration
formula funding.
HB 140 was HEARD and HELD in committee for further
consideration.
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