Legislature(2023 - 2024)BUTROVICH 205
02/13/2024 01:30 PM Senate TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| SB105 | |
| SB199 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 105 | TELECONFERENCED | |
| *+ | SB 199 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 105-RAILROAD CORP. FINANCING
1:35:56 PM
CHAIR KAUFMAN announced the consideration of 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."
He said this is the first hearing of SB 105 in the Senate
Transportation Committee
1:36:10 PM
CHAIR KAUFMAN noted that the Alaska Railroad Corporation (ARRC)
requested a committee substitute for SB 105.
1:36:18 PM
CHAIR KAUFMAN solicited a motion from the committee.
1:36:22 PM
SENATOR WILSON moved to adopt the committee substitute (CS) for
SB 105, work order 33-LS0606\B, as the working document.
1:36:34 PM
CHAIR KAUFMAN objected for purposes of discussion.
1:36:45 PM
EMMA TORKELSON, staff, Senator James Kaufman, Alaska State
Legislature, Juneau, Alaska, explained the summary of changes
for SB 105:
[Original punctuation provided.]
SB 105 Explanation of Changes, Version A to B
"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."
Section 1. Page 1, Line 5: Reduces the amount of
bonding authority the Railroad is requesting from $150
million to $135 million.
1:37:19 PM
CHAIR KAUFMAN removed his objection. He found no further
objection and CSSB 105 was adopted as the working document.
1:37:48 PM
EDISON WALLACE-MOYER, Intern, Senator James Kaufman, Alaska
State Legislature, Juneau, Alaska, read from the following
sponsor statement:
Sponsor Statement for SB 105 Bill Version B
"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."
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.
The current port in Seward was built in 1966 and is
now past its design life expectancy. Until the dock
can be replaced, weight restrictions have been imposed
to ensure the dock can still be used safely. Further
degradation of the dock will lead to increased
restrictions, placing limits both on the people coming
through Seward and the revenue they bring with them.
The railroad, along with their longtime cruise
partner, Royal Caribbean Group, have developed a plan
for the Seward Port that will ensure maximum use of
the port long into the future.
Senate Bill 105 will allow the Alaska Railroad
Corporation to pursue the replacement and expansion of
the port by authorizing the Railroad to issue an
additional $75 million in revenue bonds in addition to
$60 million the legislature authorized in 2022. This
will allow the railroad to issue up to a total of $135
million in revenue bonds for the Seward dock
replacement project. The railroad is looking to
finalize their construction plans and timeline this
year which makes the passage of this bill within this
session a priority. Once the dock is functioning, it
will be a guaranteed source of revenue for the
railroad, Seward and the surrounding area for many
years to come.
Per the railroad statutes, the state will not be
liable for any of these bonds.
1:39:47 PM
MS. WALLACE-MOYER read the sectional analysis for SB 105:
[Original punctuation provided.]
Sectional Analysis for SB 105 Bill Version B
"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."
Section 1. Authorizes the Alaska Railroad Corporation
to issue an 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.
1:40:23 PM
CHAIR KAUFMAN announced a presentation by ARRC and the Royal
Caribbean Group.
1:40:54 PM
BILL O'LEARY, President and CEO, Alaska Railroad Corporation,
Anchorage, Alaska, began the presentation on SB 105, titled
"Seward Passenger Dock & Terminal Replacement Project" by the
Alaska Railroad and the Royal Caribbean Group. He moved to slide
1:
[Original punctuation provided.]
Alaska
Railroad
Seward Passenger Dock & Terminal Replacement Project
Senate Transportation Committee
Bill O'Leary, President & CEO, Alaska Railroad
Corporation
Preston Carnahan, Regional Vice President,
Destinations
February 13, 20
MR. O'LEARY expressed appreciation for the opportunity to speak
in support of SB 105. He noted the legislative approval for the
$60 million bond authorization in 2022 and that this discussion
is about the additional increment to "make this project a
reality."
1:42:14 PM
MR. O'LEARY moved to slide 2:
[Original punctuation provided.]
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
1:43:11 PM
MR. O'LEARY moved to slide 3:
[Original punctuation provided.]
FUNDING & TIMELINE
2022: $60 million in bond authorization approved
2024: Requesting additional $75 million bond
authorization Fall
Fall 2025: Construction begins Spring
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.
MR. O'LEARY explained that the project partners: the Alaska
Railroad (the owner), the Seward Company (the developer) and
Royal Caribbean Group (the prime customer/anchor tenant) took a
"strategic pause" to come together to develop the scope, the
model and the financing plan for the project. He noted the
request for bond authorization was reduced from $90 million in
2023 to $75 million through that planning. The total request is
for a $135 million bond authorization. The plan of finance
includes issuing tax exempt debt and an infusion of equity from
the Alaska Railroad for a total $137 million project.
MR. O'LEARY expressed excitement on behalf of the Alaska
Railroad and emphasized that the request is time sensitive
because the facility is planned to be operational for the 2026
cruise season. He stated that approval of the bond authorization
would need to occur this session. He emphasized that bonds, by
statute, are not obligations of the state of Alaska nor can any
state dollars be used to secure or pay the debt service.
1:46:41 PM
SENATOR WILSON commented that the plan seems to be an aggressive
construction time schedule. He asked if contractors and
materials have been sourced. He expressed concern about the
current supply chain and related construction challenges.
1:47:21 PM
MR. O'LEARY suggested deferring the question to Preston
Carnahan; and observed that the current plan is to work with a
contractor well versed in dock construction and materials
sourcing. Once financing is in place, that contractor can move
forward to execute the plan.
1:48:06 PM
PRESTON CARNAHAN, Regional Vice President of Destinations, Royal
Caribbean Group, Seattle, Washington, said infrastructure
remains a key component of the state's economic engine; the
Seward Dock Replacement Project solves one of the challenges to
the infrastructure at a crucial time. He opined that the
railroads operation of the port is in everyone's best interest.
Royal Caribbean sees strong demand in Alaska for the cross-gulf
product from Vancouver to Seward as well, which also benefits
Alaskan owned businesses. He said Royal Caribbean is a strong,
capable, and responsive partner.
1:50:16 PM
SENATOR KIEHL asked for details on the plan to structure the
debt for the project.
1:50:37 PM
MR. O'LEARY answered that a port user agreement between ARRC and
Royal Caribbean Group has not yet been finalized. The term of
the agreement and the term of the bonds are expected to be 30
years. He said rates are unknown at this point.
1:51:19 PM
MR. CARNAHAN explained that an agreement with ARRC will be
reached based on a commitment by Royal Caribbean to produce a
specific number of passengers or a set level of revenue that is
in line with the debt structure. The level of commitment is
based on 2530-year projections based on current market trends
for travelers and for interest rates.
1:52:15 PM
SENATOR KIEHL asked for clarification about the owners of "The
Seward Company".
MR. CARNAHAN answered that "The Seward Company" is a purpose-
built (financial) vessel that is owned by Turnagain Marine
Construction. Royal Caribbean considers itself to be a
development partner in The Seward Company; the owner is
Turnagain.
1:53:03 PM
SENATOR TOBIN asked why the request to raise revenue is limited
to $75 million. She suggested that it might be advantageous to
continue to raise revenue bonds and add assets in the future.
She also asked what would happen in 50 years, and if 50 years is
the projected life span for the new dock.
MR. O'LEARY answered that the request to raise bonds applies
only to the specific project currently proposed. Requests for
similar funding approval for future projects will be specific to
those projects. He affirmed that 50 years is the projected life
span of the assets being constructed; plans and proposals will
likely follow the same request for authorization.
1:54:40 PM
SENATOR KIEHL asked for clarification of ARRC's equity stake in
the proposal.
MR. O'LEARY answered that ARRC's equity in the project is the
cash ARRC is putting into the project. ARRC is investing $30
million into the project; and the remaining $107 million will be
financed through debt:
$137 million Project
$30 million ARRC cash investment
$107 million, financed through debt
He explained that financing the $135 million debt through bond
authorization will provide flexibility when considering
financing factors, such as interest rates, risk profile and debt
structure options. The timing of financing could happen anytime
between bond authorization approval and completion of
construction and will allow for optimizing the financing
factors. The project is not expected to exceed $135 million, and
they would not borrow more than they need.
1:56:45 PM
SENATOR KIEHL asked for clarification of ARRC's equity expressed
in percentage.
MR. O'LEARY explained that out of the $137 million project, $30
million would be ARRC cash, and the rest would be railroad bonds
to pay for the $137 million project cost. At the end of the
loan, ARRC will own and operate the terminal and the pier.
1:57:29 PM
SENATOR KIEHL said he understands the plan but is trying to
clarify the amount ARRC will invest, and the amount needed for
financing the project.
MR. O'LEARY explained the plan is to put $30 million of railroad
cash toward the project, allowing for flexibility for the
financing. He explained the benefit of flexibility is to
optimize the terms and conditions of the final loan.
1:58:54 PM
MR. O'LEARY moved to slide 4 and slide 5: overhead views
depicting the existing dock and pier and the proposed dock,
pier, terminal buildings and parking area.
1:59:53 PM
SENATOR TOBIN asked about the impact of the proposed pier on
boats that use the neighboring dock.
MR. O'LEARY answered that the neighboring dock had been there
since 1966 with significant use and there is no expectation that
the new facility will impact it.
2:00:45 PM
CHAIR KAUFMAN asked if the slides represent a mature design
plan. He asked if the design is near final, and ready to
execute.
MR. CARNAHAN explained this design is specifically for the
cruise industry in Alaska. The design is a proven design, a
purpose-built Alaska design like projects in Hoonah, and Ward
Cove that have floating facilities; but improved to allow the
ships to turn around. He described the plan as advanced, well
thought out and close to final.
2:02:03 PM
CHAIR KAUFMAN asked if all the geophysical work on site is
complete.
MR. CARNAHAN explained that the construction contractor could
speak specifically to that, but they have experience with
similar marine work in the Seward area. This design reflects
their experience with the challenges of the area.
2:02:38 PM
CHAIR KAUFMAN expressed appreciation for the design specific to
Seward.
2:02:45 PM
SENATOR KIEHL described having observed significant sediment
disturbed by a ship executing a turn in the bay. He asked if the
cost of dredging is built into these plans and if that would be
part of the project financing.
MR. O'LEARY answered that dredging is included in the project
plan and future dredging would be contemplated in the user
agreement between Royal Caribbean Group and ARRC.
2:04:11 PM
CHAIR KAUFMAN announced invited testimony on SB 105.
2:04:42 PM
KAT SORENSON, Executive Director, Seward Chamber of Commerce,
Seward, Alaska, introduced herself as the Seward City Manager
and noted the Seward Mayor, Vice Mayor and entire city council
are in strong support of SB 105. She explained that SB 105
represents a crucial investment in the future of the Seward
community and the future economic prosperity of the state. She
highlighted the value of the project to the community as it will
provide:
• welcoming facility for cruise passengers and local
residents
• well-designed space for year-round community use
• shore power infrastructure, allowing for a large rate payer
to participate in the locally owned electric utility,
easing the burden for small community rate payers, and
contributing to overall energy sustainability for the
community
• stable long-term employment opportunities with ARRC
2:07:20 PM
TOM TOUGAS, Owner, Major Marine Tours, Seward, Alaska, explained
that the need to replace the current dock is critical to the
community of Seward, the interior and to the state. Seward
serves the tour industry in the summer and is an important
marine repair hub with longshoremen working year-round. He
emphasized the important economic ripple effect of the Seward
Dock to Seward and statewide. He further emphasized that the
dock is a 50-year asset affecting the rail belt from Seward to
Anchorage and on through to Fairbanks and there is no option but
to do this work.
2:10:06 PM
CHAIR KAUFMAN opened public testimony on SB 105.
2:10:24 PM
JILLIAN SIMPSON, President and CEO, Alaska Travel Industry
Association, Anchorage, Alaska, testified in support of SB 105.
She testified that Alaska Travel Industry Association (ATIA)
supports transportation initiatives that enhance and support
tourism opportunities and improve visitor industry access. She
explained that the Seward dock is a vital piece of
infrastructure for most of Alaska's visitors. She noted ATIA
found that 2022 direct spending on goods and services by
visitors throughout the state came to $3.9 billion. Last year
the state saw 1.6 million cruise ship passengers and they
represent 60% of summer visitation. Of those passengers, 1/3 of
them are on ships that visit South Central and travel
extensively in the state. This does not include the cost of a
cruise or transportation to get to or from Alaska. This spending
supports local economies in all 5 regions of the state. ATIA
supports the infrastructure investment in the Seward dock and
passenger terminal as it will provide statewide benefits to
Alaska's communities and small businesses.
2:12:35 PM
JOSH HOWES, President, Premier Alaska Tours, Anchorage, Alaska,
testified in support of SB 105. He testified that continuous
investment in infrastructure is critical to maintain a
competitive position with cruise destinations around the world.
The Seward dock and passenger facility is a critical component
of that infrastructure. He explained that one of the most
important advantages of the Seward project is that the Seward
dock will be available to other cruise lines and not exclusive
to Royal Caribbean. He said that his company moves over 100,000
guests and books over 200,000 hotel rooms and employs over 750
employees. The cruise ship industry is a heavily competitive
environment. This specific project, owned by ARRC, will keep
this facility open for competition among cruise lines, and will
serve all visiting cruise lines, not just Royal Caribbean. He
emphasized that this project is long overdue and urged
expeditious passage of the bill.
2:15:39 PM
CHAIR KAUFMAN closed public testimony on SB 105.
2:15:50 PM
SENATOR KIEHL asked if the new design for the Seward dock and
passenger facility allowed for increased security if greater
security measures become necessary.
MR. CARNAHAN answered that the security aspect starting point
will be as it exists today. The design change from fixed to
floating dock does not change the security aspect of the dock
design. The new terminal design incorporates the security
standards required by the Coast Guard and other security aspects
of business conducted at the facility.
2:17:53 PM
CHAIR KAUFMAN held SB 105 in committee.