Legislature(2017 - 2018)BUTROVICH 205
02/12/2018 03:30 PM Senate RESOURCES
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB86 | |
| SB173 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 86 | TELECONFERENCED | |
| *+ | SB 173 | TELECONFERENCED | |
| += | SB 92 | TELECONFERENCED | |
SB 86-ALASKA RAILROAD CORPORATION LAND
3:30:36 PM
CHAIR GIESSEL announced SB 86 to be up for consideration. [CSSB
86(RES), version 30-LS0487\J, was before the committee.] Public
testimony was opened at the last meeting.
3:31:32 PM
KARL GOHLKE, representing self, Fairbanks, Alaska, supported
CSSB 86 (RES). He said the Alaska Railroad Corporation (ARRC)
has lost three iterations of seasoned employees because of a
loss in revenue. A few factors have contributed to the loss in
revenue, but the biggest one is the slowdown on North Slope
production followed by the closing of the Flint Hills Refinery
and the loss of export contracts for Usibelli Coal Mine. SB 86
is a solution that will allow the ARRC to generate more revenue
and revitalize communities along the Railbelt.
3:34:19 PM
BARBARA BLAKELY, representing herself, Sterling, Alaska, had
concerns with SB 86. She explained that she and her husband
operate a business in Soldotna and own a condominium in Whittier
Manor in the City of Whittier and she sits on its board. She
referenced a letter from her board and followed up with a few
comments and encouraged them once again to consider Whittier
Manor's situation when voting on this bill.
One of their concerns is that with no sale of their land or
long-term lease to their association that their property values
are decreasing at an alarming rate. When the city gave them a
draft of the 15-year lease to consider, it included a clause
that they would have first right of refusal. That makes them a
little nervous. If that land should ever be sold or traded, the
Whittier Manor Condo Association should have first right of
refusal.
MS. BLAKELY explained that a large percentage of full-time
Whittier residents live in Whittier Manor. It's hard to imagine
the railroad ever kicking them out of their homes. That makes it
hard to understand the railroad being so adamant about not
selling to them. In Friday's hearing she understood the railroad
to say it wanted to sell property that is not income producing.
Whittier Manor pays lease payments regularly, but if the
railroad's intent is to make money, why would they turn a
percentage of their lease income over to the City of Whittier?
3:36:33 PM
SENATOR COGHILL thanked her for bringing this issue to their
attention and asked if their lease is held by the condo
association or by the City of Whittier, because language says to
offer the leaseholders the right of first refusal on page 7,
line 4, subsection 2.
MS. BLAKELY dropped off line.
CHAIR GIESSEL said Senator Coghill would get back to her on
that.
3:38:27 PM
CHAIR GIESSEL finding no further comments, closed public
testimony on SB 86.
SENATOR WIELECHOWSKI asked who has title over this land: ARRC or
the State of Alaska (SOA).
3:39:14 PM
BILL O'LEARY, President and CEO, Alaska Railroad Corporation
(ARRC), answered that the railroad has title to the land.
SENATOR WIELECHOWSKI said he pulled up the statute 45 U.S.C.S.
1203 (1982), which says "subject to the provision of this title,
the United State shall transfer all rail properties of the
Alaska Railroad to the state." He asked if the title was
transferred to the ARRC sometime after that.
MR. O'LEARY replied this was in 1982, and the ARRC was not
created until 1984 or 85. That is when the transfer from the
state occurred.
SENATOR WIELECHOWSKI asked how a sale of property would work.
Would the state have the ability to appropriate the funds or
would the ARRC do as it wished with them?
MR. O'LEARY replied that currently it is envisioned that those
monies would remain with the ARRC for its own purposes.
SENATOR WIELECHOWSKI asked if the timeframe for the right of
first refusal should be clarified in the statute.
MR. O'LEARY answered there is nothing in the bill at this point
about a timeframe. He suggested using 60 or 90 days.
3:42:12 PM
JOHN COOK, Chair, Board of Directors, Alaska Railroad
Corporation (ARRC), Fairbanks, Alaska, added it is not their
intent to sell any lands currently leased by an existing
leaseholder unless they want to do it. And at a minimum, there
is a 30-day public notice provision. They have no desire to sell
income-producing lands to a third party who would then be the
lessor.
SENATOR WIELECHOWSKI stated that the state has a constitutional
public trust obligation to manage lands in the state's best
interest, and these are state lands that were conveyed by the
U.S. government. Would he object to have a requirement for state
and/or local review before any proposed sale, lease or
encumbrance?
MR. COOK answered best interest findings are in several areas of
the statute to for the state to get fair market value for these
lands. Having an additional review phase beyond the public
notice will delay transactions from happening in a "reasonably
timely manner."
3:44:13 PM
SENATOR WIELECHOWSKI said this language protects the railroad
but doesn't necessarily protect the people of Alaska.
SENATOR STEDMAN said he understands why the ARRC doesn't want to
deal with possible legislative encumbrances, because it convenes
every winter and not 365 days a year like their board does, but
he didn't see where the legislature historically has been overly
cumbersome to the railroad in disposal of properties, and he
didn't understand why they can't come in with bundled
transactions or why they haven't brought in projects that are
"ripe" for economic development earlier for legislative approval
for liquidation.
MR. COOK responded that there are a number of practical issues
with those suggestions, but telling the public in general and
commercial entities (developers) that a legislative process is
involved and that means they may or may not be able to have
their land at the conclusion of the legislature - maybe it won't
even happen - has served as a deterrent in the past. Another
impediment is what happens if someone comes to the railroad and
expresses interest in a piece of property that they haven't
identified, and it's on day 89 of the legislature or the day
after adjournment. It ties the railroad's hands in terms of
being timely and responsive.
SENATOR STEDMAN asked why the legislature can't pre-authorize
the railroad in advance of any developer having a proposal that
would allow them to do a private market transaction on a
particular parcel like the one in Fairbanks that is up for
residential development. Normally, when there is developable
property more than one entity recognizes it. The Fairbanks
property has been brought before this committee several times
and is a known development site.
3:49:12 PM
MR. COOK responded that Chena Landing residential development is
an easy transaction that would work under the scenario Senator
Stedman described, but he develops commercial real estate for a
living, and one never knows what will walk through the door. For
instance, one of the transactions he is in negotiations over
includes a fee simple sale of a parcel near Healy that would be
used for a hotel development. If pursued it would be a $30-40
million private sector investment. That is an opportunity he
would not have been able to contemplate six months ago. Some
would fit into the scenario Senator Stedman described and some
just wouldn't.
SENATOR VON IMHOF said this bill has a three-year sunset as a
built-in limitation. However, she offered that maybe they could
limit the number of transactions over the next three years to
three deals (hypothetically) just for a sense of a pilot project
type of finite timeframe and activity. But she is comfortable
with the three-year sunset.
3:51:31 PM
SENATOR COGHILL moved to report CSSB 86(RES), version 30-
LS0487\J, from committee with individual recommendations and
attached zero fiscal note.
SENATOR WIELECHOWSKI objected. He commented that he has
significant concerns with this bill and agreed with Senator
Stedman that he didn't understand why these properties couldn't
be bundled and come before the legislature for approval. It has
been done many times in the past. He worries this is a
significant amount of land - 18,000 acres - some of which is
prime real estate all across Alaska. The State of Alaska has a
trust obligation under the Alaska Constitution to manage that
for the best interests of the people of Alaska. The statute, 45
U.S.C.S. 1203, specifically provides that this land was provided
to the State of Alaska.
A 2009 Supreme Court case, Southeast Alaska Conservation Council
v. State of Alaska, is very similar to this one. In that case,
the legislature passed two pieces of legislation conveying
250,000 acres to the University of Alaska and the net proceeds
were to be used for an endowment trust. A lawsuit ensued, and
the Supreme Court held that it was an illegal dedication of
state assets and violated the state dedicated funds clause.
3:53:53 PM
He cited a Legislative Legal opinion stating a provision in 45
U.S.C.S. 1207 says: "Revenues generated by the state-owned
railroad shall be retained and managed by the state-owned
railroad for railroad and related purposes." He wasn't sure that
applies to land but had asked for a legal opinion. However, a
1984 Attorney General's opinion concluded dedication of land to
the railroad to allow them to do with as they please would be a
violation of the dedicated funds clause of the Constitution. He
is worried about the future impacts of this legislation, because
the state would be giving up its authority of this potentially
significant right of way. The railroad may never have to come
before the legislature again on this.
SENATOR WIELECHOWSKI said a process is in place for management
of this land, and it has worked in the past. There should be
some state and local review of a proposed sale, lease, or
encumbrance and there should be some sort of timeframe on right
of first refusal. Probably 15 or 30 days is not enough for
someone to come up with a significant amount of money to
purchase land. As Senator Von Imhof mentioned, maybe there could
be a pilot project.
3:56:05 PM
SENATOR WIELECHOWSKI removed his objection and said he would
mark an "N" on the bill report.
CHAIR GIESSEL, finding no further objections, announced that
CSSB 86(RES) had moved from the Senate Resources Standing
Committee.