Legislature(2023 - 2024)SENATE FINANCE 532
02/27/2024 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB105 | |
| SB125 | |
| SB205 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 105 | TELECONFERENCED | |
| *+ | SB 205 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 125 | TELECONFERENCED | |
SENATE BILL NO. 105
"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; and
providing for an effective date."
9:10:02 AM
EMMA TORKELSON, STAFF, SENATOR JAMES KAUFMAN, introduced
the legislation. She read from the Sponsor Statement (copy
on file):
The Alaska Railroad Corporation (ARRC) owns and
operates a passenger dock and an associated intermodal
terminal facility in Seward, Alaska. These facilities
serve cruise ships; other passenger and freight
vessels; and provide cruise ship passengers who help
support Southcentral Alaska's economy.
These facilities were both built in 1966 and have
experienced significant corrosion over their half
century lifespan. Recently, the deterioration of the
dock has forced dock managers to implement weight
restrictions. While currently safe for restricted
service, the dock is clearly nearing the end of its
useful life. Continuing to curtail use or completely
closing the dock would severely impact not just the
vessels that rely on the dock, but also the robust
tourism industry in Seward. ARRC would lose a key
revenue source, important for meeting their public
corporation obligations and supporting necessary
capital improvements across the state. More broadly,
losing the Seward dock would diminish a key gateway
that would take a heavy toll on Southcentral Alaska's
travel industry and broader transportation
infrastructure across the state.
The Legislature and the Governor recognized the
importance of this issue in 2022 when both parties
authorized ARRC to issue up to $60 million in bonds to
replace its aging Seward passenger dock and terminal.
After working closely with their long-term dock
tenant, Royal Caribbean Group (RCG), ARRC is now
requesting an additional $75 million in bond
authorization to support an expanded version of this
vital project that aligns with RCG growing needs.
Senate Bill 105 authorizes ARRC to issue revenue bonds
up to $135 million total for the Seward Dock
replacement project. The project will be fully funded
by ARRC through a multi-year berthing agreement with
the RCG with an annual revenue guarantee. Per the
railroad's statutes, the bonds are not a liability of
the state, and no state dollars will be used to repay
them. To support RCG's commitment and associated
economic growth, the project construction schedule is
time sensitive.
The passage of SB 105 this session allows ARRC to
proceed on schedule with the critically needed Seward
dock/terminal replacement and expansion project. Join
me in supporting this opportunity to secure Seward's
critical port infrastructure and boost the tourism
industry in Seward and around the state of Alaska.
9:12:27 AM
Co-Chair Olson wondered what had happened with the $60
million in revenue bonds that had already been issued.
9:12:34 AM
Ms. Torkelson replied that no funds had been bonded. An
additional amount was being waited on for the expansion of
the larger project.
9:12:44 AM
Co-Chair Olson said in addition to the $75 million.
9:12:46 AM
Ms. Torkelson responded in the affirmative; the total would
be $135 million.
Co-Chair Olson aske whether that total would be enough to
complete the dock.
Ms. Torkelson replied that the railroad had indicated that
it would be enough.
9:12:57 AM
Co-Chair Olson asked when the project would be complete.
9:13:03 AM
Ms. Torkelson replied that the project completion was
expected in 2026.
9:13:16 AM
Ms. Torkelson discussed the Sectional Analysis (copy on
file):
Section 1. Authorizes the Alaska Railroad Corporation
to issue additional $75 million (not exceeding a total
$135 million) in revenue bonds to finance the
replacement of ARRC's passenger dock and related
terminal facility in Seward, Alaska.
Section 2. Sets an immediate effective date.
9:14:17 AM
BILL O'LEARY, PRESIDENT AND CEO, ALASKA RAILROAD
CORPORATION, discussed the presentation, "Seward Passenger
Dock and Terminal Replacement Project" (copy on file). He
looked at slide 2, "Need For Replacement":
• Current Seward dock facility is rapidly approaching
end of useful life
• Seward cruise port is critical infrastructure for
Alaska's travel industry: 188,124 passengers cruised
to or from Seward in 2023, many adding on travels in
Southcentral and Interior
9:19:38 AM
Mr. O'Leary looked at slide 3, "Funding and Timeline":
2022: $60 million in bond authorization approved
2024: Requesting additional $75 million bond
authorization
Fall 2025: Construction begins
Spring 2026: New dock and terminal complete
Bonds issued by ARRC are not a liability of the state,
and no state dollars will be used for repayment; ARRC
bonds will be secured by a long-term use agreement
with anchor tenant Royal Caribbean Group.
The new dock and terminal facility will support the
next 50 years of industry growth and visitor demand.
9:20:10 AM
Co-Chair Stedman requested the cost escalators of the
project.
9:20:25 AM
Mr. O'Leary replied that there had been significant
escalation in costs over the past few years. He noted
changing of scope to meet anchor tenant needs. He said that
the dock could be used by other cruise lines and the point
was to be able to bring in larger ships not currently
supported by the dock.
9:21:43 AM
Senator Bishop understood that the dock would be a dual-
purpose dock.
9:22:07 AM
Mr. O'Leary replied that it would be a floating dock
designed for the cruise industry and could be available for
light freight.
9:23:16 AM
Senator Wilson asked why the dock was a floating dock
rather than a fixed dock.
9:23:30 AM
Mr. O'Leary replied that that was what the customer wanted.
9:23:46 AM
Senator Wilson asked whether there might be other customers
who would want something different.
9:23:57 AM
Mr. O'Leary replied that other cruise lines had shown
interest, but Royal Caribbean Group had been the only one
to sign a long-term agreement.
9:24:32 AM
Co-Chair Stedman mentioned long-term agreements and
preferential moorage.
9:24:37 AM
Mr. O'Leary replied that the anchor tenant would have
benefits but that the railroad perceived that the dock
would be an open dock available for other users.
9:24:58 AM
Co-Chair Stedman expressed dissatisfaction with the reply.
He queried electrification of the dock.
9:25:21 AM
Mr. O'Leary responded deferred to Mr. Carnahan.
9:25:36 AM
PRESTON CARNAHAN, REGIONAL VICE PRESIDENT OF DEVELOPMENT,
ROYAL CARIBBEAN, introduced himself, and asked Co-Chair
Stedman to restate his question.
9:25:50 AM
Co-Chair Stedman asked about electrification of the ports
so that ships could turn off generators while in port.
9:26:32 AM
Mr. Carnahan replied that the budget provided for
electrification of the dock to provide power to ships. He
said that the utilities would work to make power available.
Co-Chair Olson queried the technical details.
9:27:15 AM
Mr. Carnahan replied that he had a technical team that had
the details.
9:27:33 AM
Co-Chair Stedman understood the idea of preferential
moorage for an anchor tenant and thought that the cruise
industry and the railroad should be transparent about that
common benefit. He asked whether the electrification would
be put in during the installation of the dock and whether
it was included in the current bond authorization request.
He asked how many ships the dock could accommodate and
whether the ships could plug in on either port or starboard
sides.
9:28:41 AM
Mr. O'Leary deferred to Mr. Carnahan.
9:28:51 AM
Mr. Carnahan replied that the dual sided pier would
accommodate two larger ships simultaneously. The current
budget included the dock electrification.
9:29:19 AM
Co-Chair Stedman asked about plugging in on port and
starboard sides of the ships; some older ships only plugged
in on one side. He asked about the megawattage capacity
once ships were plugged in.
9:30:45 AM
Co-Chair Hoffman wondered whether the project was fully
designed before the 2022 $60 million bond authorization.
9:31:15 AM
Mr. O'Leary responded that the project had been designed
but modifications could still be made. He asserted that the
process of building could begin under the current design.
9:32:01 AM
Co-Chair Hoffman noted that the Port of Alaska had had some
challenges. He wondered whether a breakdown of how the $70
million would be spent was available.
9:32:26 AM
Mr. O'Leary responded that there was no construction risk
to the railroad.
9:33:13 AM
Co-Chair Olson asked who would oversee quality control on
the construction.
9:33:19 AM
Mr. O'Leary replied that the railroad would be involved to
assure that the design met the needs of the railroad.
9:33:54 AM
Co-Chair Hoffman understood that the dock would be designed
and built by the state and wondered what involvement the
state had in the construction, considering it would
eventually become a state asset.
9:34:39 AM
Mr. O'Leary agreed that the railroad should be aware of the
operations and maintenance responsibilities that would be
assumed by the railroad. He said that the arrangement with
the anchor tenant would include provisions for funding.
9:35:24 AM
Co-Chair Hoffman asserted that the operation and
maintenance would depend on the design and that those costs
should be as minimal as possible. He expressed reluctance
to give approval for the state to take responsibility for
operation and maintenance without more design information.
9:36:45 AM
Mr. O'Leary said that it was incumbent on the railroad to
know what the costs would be and deferred further
explanation of the design to the projects chief engineer.
9:37:53 AM
Co-Chair Hoffman said that the railroad would not be before
the committee if there was funding authorization to proceed
with the project. He felt that it was the legislature's
fiduciary responsibility to vet the project more
extensively.
9:38:51 AM
Senator Merrick asked whether Seward ever had more than two
cruise ships in dock at a time, and if so, would the dock
have the capability to accept tenders.
9:39:03 AM
Mr. O'Leary replied in the affirmative.
9:39:29 AM
Senator Bishop wondered whether a percentage contingency
fee for overruns had been built into the cost.
9:39:43 AM
Mr. O'Leary responded that the liability was capped for the
railroad.
9:40:04 AM
Senator Bishop asked whether there was a third-party
consultant assigned to consult on the execution on the dock
project.
9:40:30 AM
Mr. O'Leary replied that the railroad was adept at the
building of large projects and that this project would be
no different.
9:40:47 AM
Senator Bishop asked whether there was a sinking fund
component built into the project plans.
9:41:18 AM
Mr. O'Leary replied in the negative. He suggested that dock
fees would be used for repairs.
9:41:49 AM
Senator Bishop wondered whether the floating dock method
was a one off or whether there were other examples of the
method being used.
9:42:00 AM
Mr. O'Leary deferred to Mr. Carnahan but explained that a
large percentage of recently built cruise docks had used a
similar design to Seward.
9:42:53 AM
Co-Chair Olson asked whether there was Port of Alaska
support as well.
9:42:56 AM
Mr. O'Leary replied "no."
9:43:04 AM
Co-Chair Olson asked Mr. Carnahan to speak to Co-Chair
Bishops question.
9:43:18 AM
Mr. Carnahan explained that the dock was unique to Alaska.
He stated that the dock in Seward would be a turnaround
port and the design reflected an enhanced design to turn
around passengers and be a port of call.
9:44:06 AM
Co-Chair Stedman queried the scale of the dock as compared
to other docks in Southeast.
9:44:26 AM
Mr. Carnahan responded that the facilities in Hoonah and
Ketchikan were port of call docks, which meant they
required less space, and all access hatches of the vessel
did not need to be accessible. The project at Seward would
have all hatched available and the dock was wider and sat
steeper.
9:45:09 AM
Co-Chair Stedman understood the width was wider but
wondered about length.
9:45:17 AM
Mr. Carnahan said that the dock was long enough to
accommodate access to all hatches.
9:45:39 AM
Co-Chair Stedman asked whether the dock could be used for
aircraft carriers or naval vessels.
9:45:43 AM
Mr. Carnahan responded that he did not know.
9:45:54 AM
Co-Chair Stedman requested that he get back to the
committee with the information. He noted that there was a
military build up in the North Pacific.
9:46:18 AM
Senator Bishop wondered whether the debt could be floated
in the event of another pandemic or if a contingency had
been built in.
9:46:57 AM
Mr. O'Leary responded that the railroad would first look to
the long-term agreement with the anchor tenant. If for an
unforeseen reason the railroad was not paid, he was
confident that the railroad could float the debt service.
9:47:47 AM
Senator Kiehl asked whether that answer would change if the
railroad put in the maximum amount of money under
discussion.
9:48:20 AM
Mr. O'Leary replied in the negative.
9:48:47 AM
Senator Kiehl referred to Co-Chair Stedmans question about
military vessels. He asked about the capacity the railroad
would have for bringing on more capacity across the dock.
9:49:55 AM
Mr. O'Leary replied that the design under consideration
would address the largest cruise ships currently traveling
to the state.
9:50:27 AM
Mr. Carnahan furthered that the dock would accommodate any
ships currently existing and under future contemplation. He
added that the company did not intend to bring those larger
ships to Seward.
9:50:55 AM
Senator Kiehl spoke of the ship to shore connection. He
asked about the docks capacity to handle dramatic
increases in loads.
9:51:33 AM
BRIAN LINDAMOOD, CHIEF ENGINEER, ALASKA RAILROAD
CORPORATION, ANCHORAGE (via teleconference), responded
discussions were underway to analyze and optimize capacity.
He said that the current design was for highway loads. The
float itself was designed to increase capacity later. The
gangway was also being studied for increased capacity. He
noted that the dock was designed for light to medium
duty freight.
9:53:05 AM
Co-Chair Stedman asked about passenger turnaround and how
large cruise ships and large passenger groups would be
handled.
9:53:27 AM
Mr. O'Leary responded that the issue was a concern. The
infrastructure, excluding the dock, would need to be
addressed. He understood that large ships had not been
planned for in the immediate future but that the dock would
have capacity in the future for large ships. He said that
the railroad was looking to expand the passenger fleet to
meet growth in the cruise industry. He relayed that the
first step was to optimize existing assets. He did not
think that passenger coaches would need to be added to
address the growing number of tourists.
9:55:10 AM
Co-Chair Stedman remarked that the railroad would need to
expand to accommodate the increase in visitors. He asked
whether the railroad had contemplated any capital needs
that would be brought before the legislature for funding
or could the railroad absorb expenses internally.
9:55:50 AM
Mr. O'Leary responded that the goal was to fund any
expansion internally and not have to come before the
legislature to ask for funding.
9:56:31 AM
KAT SORENSON, CITY MANAGER, CITY OF SEWARD (via
teleconference), spoke in support of the legislation. She
stated that the bill represented a crucial investment in
the community and the broader economic prosperity of
Alaska. She replied that the spaced was designed for year-
round community use and would be a vibrant hub for
residents. She noted that the project would bring seasonal
and year-round employees to the city. She attested that the
project would add a large rate payer to the locally owned
electric utility, which would ease the overall burden to
smaller rate payers and contribute to overall energy
sustainability in the community. She said that the railroad
had also invested in the freight dock in Seward, expanding
and improving corridors. She urged the committee to support
the legislation.
9:58:39 AM
Co-Chair Stedman queried the utility capacity and the
utility ownership in Seward, and the citys ability to have
two large ships plug into their grid.
9:59:06 AM
Ms. Sorenson replied that currently the utility was owned
by the municipality and power was purchased from Chugach
Electric. She said that infrastructure projects were
underway to meet the demand of the cruise ships upon their
arrival.
9:59:48 AM
Co-Chair Stedman felt that the committee needed more
information. He predicted future funding requests from the
city for financial assistance, as had been the case with
other communities electrifying cruise ships in port.
10:00:19 AM
Mr. O'Leary spoke in support of shore power. He relayed
that the railroad would work with the city and the
developer to make shore power a reality.
10:00:42 AM
Co-Chair Olson asked for the numbers that Co-Chair Stedman
had requested.
Mr. O'Leary agreed to provide the information.
10:01:00 AM
Co-Chair Olson surmised and wondered what would happen with
the fixed dock once the floating dock was completed.
10:01:14 AM
Mr. O'Leary replied that the existing passenger dock would
be demolished but the freight dock would remain and would
be lengthened and widened.
10:01:36 AM
Co-Chair Olson asked whether the cold dock was currently
being used.
10:01:41 AM
Mr. O'Leary replied in the negative.
10:01:55 AM
Senator Merrick asked about the difference between light,
medium, and heavy freight. She wondered whether light
and medium freight would cover food shipments.
10:02:12 AM
Mr. O'Leary responded that the Seward freight dock could be
of use in the event of an emergency at the Port of Alaska.
10:03:08 AM
Mr. Lindamood added that the proposed passenger dock could
take on any of the freight that was currently being handled
at the Port of Alaska.
10:03:40 AM
Co-Chair Stedman asked whether cranes would be installed on
the proposed dock.
10:03:47 AM
Mr. O'Leary responded in the negative.
10:04:00 AM
Co-Chair Stedman remarked that a dock without a crane might
be inefficient. He thought that if the docks at Whittier
and Seward were to be back up dock for the Port of
Anchorage, they should have cranes.
10:04:33 AM
Mr. O'Leary responded that the railroad would be
delighted to discuss possible uses of both their assets
in Whittier and in Seward.
10:05:28 AM
Co-Chair Olson asked Ms. Sorenson to comment on the
discussion.
10:05:36 AM
Ms. Sorenson highlighted that Whittier and Seward were deep
water, ice-free ports year-round. She said that the city
had been working to get shore power infrastructure in place
and would provide numbers to the committee.
10:06:15 AM
Co-Chair Olson OPENED and CLOSED public testimony.
SB 105 was HEARD and HELD in committee for further
consideration.