Legislature(2019 - 2020)SENATE FINANCE 532
03/20/2019 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB41 | |
| SB54 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 54 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 41 | TELECONFERENCED | |
SENATE BILL NO. 54
"An Act approving the transfer of certain Alaska
Railroad Corporation land; and providing for an
effective date."
9:03:30 AM
Co-Chair von Imhof invited Senator Coghill and his staff to
the testifier table.
SENATOR JOHN COGHILL, SPONSOR, thanked the committee for
hearing his bill. He recounted that the previous year he
had worked on legislation to enable the Alaska Railroad
Corporation to sell and authorize the sale of certain
pieces of property. The Healy area was one area that had
been agreed on. He relayed that previously the legislature
had made the railroad run through a gauntlet to get the
bill. In the process, the property description was removed.
He deferred to his staff, Rynnieva Moss, for further
details on SB 54.
RYNNIEVA MOSS, STAFF, SENATOR JOHN COGHILL, provided a
brief history of how the bill was derived. She recalled
that in 2017 the senator had introduced SB 86 [Legislation
having to do with the Alaska Railroad Corporation, land,
bonds, and finance]. She explained that the original
version of the bill repealed the statute that required the
railroad to obtain legislative approval for land sales. The
bill left the Senate as a 3-year pilot project that would
allow the corporation to sell property and return to the
legislature to give reports of the status of the land
sales. She indicated the first year's report could be found
in members' packets. She continued that SB 86 died a very
slow death in the House Labor and Commerce Committee.
Ms. Moss continued that the House and the Senate agreed
that it was important to put public lands into private
ownership and to encourage economic development. Therefore,
they rolled SB 86 into HB 119 [Legislation passed in 2018]
which dealt with public corporations. The legislature added
5 specific land sales that the railroad had already
approved by resolution, and it also added 2 land sales that
were by request of companies that already had land leases
with the railroad. One of the leases was with Lynden
Transport and the other lease was for a low-income housing
project. Five of the sales were currently in the process
and the report would provide the related status of the
sales.
Ms. Moss reported that it was not until the last 2 or 3
days of session when SB 86 was rolled into HB 119. There
was an error in the land description, which she admitted
was her fault. She was under the impression the railroad
was selling the existing lease it had. The railroad was
selling the related lease as well as the rest of the block
of land. She specified that there was a map in members'
packets that showed "Parcel B" which was about 18 acres in
the original land sale, but it was not in the bill. No one
caught the error at the time. Senate Bill 54 would correct
the error.
Senator Wielechowski asked where Parcel B was on the map
handout. Ms. Moss stated that the parcel was on the right-
hand side of the map. Senator Wielechowski asked for
additional clarity. Ms. Moss responded that the parcel was
in the Healy area East of the Parks Highway. Senator
Wielechowski requested a better map. Ms. Moss was happy to
provide a better map.
Senator von Imhof relayed that Senator Bishop had joined
the meeting.
Senator Micciche asked if someone from the Alaska Railroad
Corporation was available to answer questions. Senator von
Imhof replied that Mr. John Cook, a board member of Alaska
Railroad Corporation, would be providing invited testimony
shortly. Senator Micciche indicated he could wait.
Senator Hoffman relayed that in the past when the state
transferred property it did not transfer subsurface rights.
He asked if the state had subsurface rights and whether
they were being transferred in the bill. Ms. Moss stated
that the bill was only transferring surface rights, not
subsurface rights.
Co-Chair von Imhof announced that the committee would hear
from Mr. John Cook who was online.
9:09:29 AM
JON COOK, CHAIR, BOARD OF DIRECTORS, ALASKA RAILROAD
CORPORATION, explained that SB 54 was needed to clean up an
error from the prior year regarding a sale the railroad
wanted to proceed with at Otto Lake near Healy that would
be used for a hotel development. The railroad remained in
support of the project and wanted to complete the sale to
Premier Alaska Tours in the current year. The buyer wanted
to begin construction activities in the present year. The
railroad welcomed the legislature's support of SB 54.
Senator Micciche was curious about the status of the
previous year's land sales. He referenced the transfer of
lands to private ownership, particularly entities that had
spent many years and millions of dollars developing the
properties. He asked for a status report of the properties
Ms. Moss had referred to earlier in the meeting.
Mr. Cook reported that the railroad closed the vast
majority of sales that were approved in the prior year. In
the previous year the Alaska Railroad Corporation closed
the sale of Tri-Valley Subdivision to Usibelli Coal Mine
who would, in turn, sell it to the individual owners. The
railroad also closed a portion of the Premier Alaska Tours
sale at Otto Lake. Additionally, there was a residential
subdivision that the railroad owned which had sat vacant
for over 20 years. The railroad received authorization to
sell the lots. He reported that out of the 10 lots that
were put up for sale the previous year, 9 of the lots had
sold. There was only 1 lot left from the original Phase I.
The railroad would be putting another 14 lots up for sale
soon. The 10 lots that sat vacant for over 20 years had
over $1 million invested in utilities.
Mr. Cook continued that there were 2 other parcels that had
not closed but were anticipated to close in the current
year. The first parcel was in Eklutna and was a land swap
requiring permission from the state to do so. The final
parcel was a sale of port land to the Port of Alaska and
the Municipality of Anchorage. The final sale was
anticipated to close in the current year. He asserted that
all of the transactions that were approved by the
legislature had either closed or would be closing by the
end of the year. He noted that in the instance of China
Landings, a multi-year phased project, the railroad had a
very positive sell-out. It was new construction for single
family homes or multi-family homes in the Fairbanks area.
The project was well-received, and the railroad received at
or above the asking price on all 9 lots sold in 2018.
Senator Micciche asked about the sale to Lynden. Mr. Cook
responded that there was land that the Municipality of
Anchorage needed for the Port of Alaska. The related
transaction was in process. The Lynden and Neighbor Works
transactions were put in without an agreement to sell.
9:14:25 AM
Co-Chair Stedman asked about potential setbacks for
property being discussed. He asked for an update. Mr. Cook
asked what type of setbacks Co-Chair Stedman was
referencing. Co-Chair Stedman explained that when the state
transferred land with waterfront they typically had
building setbacks for pedestrians or access easements. He
used the example of a 50 foot setback, which would prevent
a structure being erected 50 feet from the waterline of a
lake. He provided an additional example. He wondered if any
setback issues were attached to the sales.
Mr. Cook stated that with regard to the Chena Landings
Subdivision there was a waterway setback of 25 feet from
the mean-high water mark that was a no-build area.
Additionally, the railroad granted a trail easement to go
through the subdivision. The city and the Department of
Transportation and Public Facilities (DOT) would eventually
build a walking and biking trail. He could not speak to
specific setbacks on Otto Lake. He thought other invited
testifiers could address the area. He was aware that a
replotting process had to be done with the Denali Borough.
To the extent that there were actual setbacks noted on a
plat or in purchase and sales agreements, he did not know
any specifics. He indicated there were other people online
that could speak to specifics regarding Otto Lake.
Co-Chair von Imhof listed others available online.
Co-Chair Stedman had more questions that he could ask after
the other testifiers had a chance to speak.
9:18:00 AM
Senator Wielechowski referenced and read lines 12-14 on
page 1 of the bill. He asked if there had been an appraisal
done and queried about its findings. He asked if there had
been a history of the land being leased previously. He
asked about cash equivalents and whether the railroad had
the ability to accept less than a property's fair market
value.
Mr. Cook explained that an appraisal on the parcel had been
obtained a year previously. He affirmed that the sale of
the property was for an amount in excess of the appraised
value. A portion of the sale amount was paid for the
fee-simple land and the remainder, which was being
discussed, was a prepaid 95-year lease. In the event that
the legislation was not passed, the railroad had a back-up
plan. He confirmed that the railroad had the entire amount
paid upfront at the time of the sale closure in the
previous fall. The sale amount was paid in cash and a
portion of the amount remained as a deposit for a prepaid
lease or the fee-simple purchase. The railroad had obtained
full funds in cash.
Senator Wielechowski asked for the appraisal and sale
amounts. Mr. Cook estimated the appraisal to be $250,000
and the sale amount to be $400,000. There was a tenant that
had a portion of the property. Premier Alaska Tours had to
work with the entity to obtain their rights prior to
closing with the railroad. A portion of the property had
been leased to a tourism entity.
Co-Chair von Imhof had jotted down some of the questions to
bring up with other testifiers. She invited Mr. Kubitz to
address the questions regarding setbacks and sales prices.
9:21:25 AM
JIM KUBITZ, VICE PRESIDENT OF REAL ESTATE, ALASKA RAILROAD
(via teleconference), addressed the question about setbacks
in the Healy area. He indicated that it was a local
determination depending on the borough regulations. The
borough would have a regulation defining the land use
setbacks. The appraisal on the property was $270,00 and the
sale price was $400,000.
Senator Wielechowski asked about the tenants on the
property and wondered what terms the railroad had with the
tenants. He also asked if the sale of Parcel B exceeded the
lease with the tenants. Mr. Kubitz asked for clarification
about what piece of land the senator was referring to.
Senator Wielechowski was talking about the piece of land in
the bill currently before the committee.
Mr. Kubitz reported that the railroad had a tenant on the
property on Otto Lake which was part of the property that
was transferred and sold already to Premier Alaska Tours.
The railroad had a long-term lease on the property, but
Premier Alaska Tours bought out the business and the sale
was consummated. The piece of property in question was not
under lease previously. It was naked land adjacent to the
development site.
Co-Chair Stedman referenced setbacks and realized Otto Lake
was a lake body rather than a tidewater body. He was
concerned that the railroad was moving forward with land
sales and having a zero waterfront setback. The legislature
was trying to work with the Alaska Railroad to enhance
their real estate portfolio and liquidate properties as
warranted. He spoke of different setbacks on different
waterfront properties and the possibility of setbacks
diminishing values. He wondered how values of properties
were enhanced with 100 foot setbacks. He wanted to
highlight the discrepancy in setbacks between properties
owned by the Alaska Railroad, the Department of Natural
Resources, and the University of Alaska. He thought it was
an important issue to consider. He was in agreement with
how the railroad was handling its properties and setbacks.
He continued to stress that setbacks were hurting land
values.
9:27:00 AM
Senator Micciche thought the question of setbacks was
interesting. He referenced the Kenai Peninsula Borough
doing an anadromous streams act that put a 50 foot setback
on all properties. If a property owner wanted a dock on a
piece of tidewater property it might be difficult to obtain
permitting. It might be that the property owner would not
be able to install a dock - the reason for their purchase.
He thought it was difficult to purchase tidewater property.
He agreed with Co-Chair Stedman and stated that the issue
affected his district significantly. He wondered if there
was a permitting system under which a property owner could
utilize the setback area for an installation even if it was
not permanent.
Mr. Kubitz stated that decisions were made by borough or
city land use entities. He knew there was a 25 foot setback
on the Chena River. A local decision would have to be made
whether they could use the 25 foot setback.
Senator Bishop added to Co-Chair Stedman's comments about
DNR land. He wanted to see the land more accessible for
purchase in order to get the highest and best value for
land sales.
Co-Chair Stedman, in response to the Chena River, relayed
the difference between a building setback and an access
easement. A building setback did not allow for a public
access easement. He mentioned pedestrian, utility, and
powerline easements. He stated there was no interest to
eliminate public access to the waterfront, rather his
concern had to do with the amount of setback. He argued
that that large setbacks of 50 to 100 feet affected
property values.
Co-Chair von Imhof reminded members about the bill in front
of them that added a small amount of land to the bill that
was passed in the prior year in order to complete the sale
of a property in and around Healy. She reported that the
buyer of the property was available to testify.
Senator Wielechowski referenced page 1, line 13 that stated
the Alaska Railroad Corporation could accept a cash
equivalent. He wanted to clarify that the language did not
give the railroad the ability to accept less than the cash
equivalent of the fair market value. Mr. Kubitz answered in
the affirmative, the railroad could not accept anything
less than fair market value.
Co-Chair von Imhoff invited the next testifier to the
table.
9:32:18 AM
PETER GRUNWALDT, CO-OWNER, ALASKA TOURISM DEVELOPMENT, LLC
(via teleconference), was a managing member of Alaska
Tourism Development which was a real estate and investment
holding company, and Premier Alaska Tours was its operating
company. He relayed that the bill in front of the committee
was simply correcting a clerical error from the previous
year that the company had authorization or at least
approval from the Board of Directors of the Alaska Railroad
Corporation.
Mr. Grunwaldt explained that the company had moved forward
with an appraisal for the purchase of a 47-acre piece of
property on Otto Lake just North of Denali National Park.
The intention of the company was to build a hotel for its
summer tourist operations, a boat house, a motor coach
maintenance facility, and some employee housing. The 17
acres specifically being discussed currently was included
in the appraisal and was essentially prepaid at the time
the company closed on the 26 acres. The land, Parcel B, was
not contiguous with the lake and had not been previously
leased by the railroad. It had been a buffer area for a
view shed and was set to be an area for a motor coach
maintenance facility and some employee housing away from
the development that would be visible to the hotel. The
company was looking forward to starting construction in the
summer. However, without the ability to own the property,
it was more challenging to obtain bank financing or develop
partnerships. He appreciated the committee's support of the
bill.
Co-Chair von Imhof noted that the governor had discussed
the importance of unleashing entrepreneurism and
diversifying the state's revenue. Tourism had been
highlighted as a bright spot in Alaska's economy and
continued to be a significant employer. The state was
forecasted to have record visitors in Alaska in the coming
summer via ground and water. She suggested that having the
featured element of Denali National Park was
world-renowned.
Senator Bishop asked how many new jobs the construction
would bring when the project was at capacity. Mr. Grunwaldt
stated that Premier Alaska Tours was an operating company
with motor coaches and rail cars. The company's summer
tours operation employed 650 people. The company tried as
much as possible to hire local Alaskans, as it was very
proud to be a locally owned and operated company. The
company delivered Alaskan service, Alaskan food, and
anything else made in Alaska. The operation the company
currently ran was experiencing a bottle neck in Denali
National Park. There were not enough rooms, and in order
for the company to grow its business and continue to fill
seats on its train cars and busses, more capacity was
needed in Denali National Park.
Mr. Grunwaldt continued that when visitors came to Alaska
there were two places they wanted to visit: Glacier Bay
National Park and Denali National Park. The company was
concerned in the long-term that if it did not do something
to provide more accommodations in Denali National Park, it
would not be able to continue selling tours that were 7-9
night tours that also included visits to several other
places in Alaska. He noted the planned hotel would have 300
rooms and employ an additional 200 people that would work
in various areas including housekeeping and management. The
company was also considering a maintenance facility that
would help with winter operations. Currently, the company
did not have an ability to keep coaches warm in the winter.
The company was bringing in several tourists, including
tourists from China, to view the Northern Lights in the
winter. The company was considering a winter presence for
the long-term. On the maintenance side, it would be very
helpful to be able to warm-start and work on coaches.
Senator Bishop thanked Mr. Grunwaldt for creating
additional jobs for Alaska's economy.
9:37:15 AM
Co-Chair von Imhof OPENED public testimony.
9:37:31 AM
Co-Chair von Imhof CLOSED public testimony. She asked
whether the will of the committee was to move the bill
forward.
9:37:48 AM
AT EASE
9:38:46 AM
RECONVENED
Co-Chair von Imhof asked Senator Shower to review the
fiscal note.
Senator Shower discussed Fiscal Note 1 from the Department
of Commerce, Community and Economic Development with an
appropriation of the Alaska Railroad Corporation, an
allocation of Alaska Railroad, and an OMB component number
of zero. He read from the analysis on the second page of
the fiscal note:
"The Alaska Railroad Corporation is a public
corporation established under AS 42.40.010. The
Corporation operates independently and is not a part
of the Governor's FY2020 proposed operating budget."
Co-Chair von Imhof indicated that in lieu of waiting for
some additional information to come back, including a
larger map, she would set the bill aside. She asked members
to let her office know if there were any concerns or
amendments regarding the bill. She reviewed the agenda for
the following day.
SB 54 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 54 - ARR Resolution 2018-03 Otto Lake for SB 86.pdf |
SFIN 3/20/2019 9:00:00 AM |
SB 54 SB 86 |
| SB 54 - Sponsor Statement.pdf |
SFIN 3/20/2019 9:00:00 AM |
SB 54 |
| SB54 - Map of parcels A B by Otto Lake.pdf |
SFIN 3/20/2019 9:00:00 AM |
SB 54 |
| SB 54 - ARR Annual Property Management Report.pdf |
SFIN 3/20/2019 9:00:00 AM |
SB 54 |
| SB 54 - Language from HB 119 Land Transfer Authority from 2018 Session.pdf |
SFIN 3/20/2019 9:00:00 AM |
SB 54 |