Legislature(1993 - 1994)
03/16/1994 09:10 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 148
An Act relating to the Alaska Railroad Corporation; and
providing for an effective date.
Co-chair Pearce directed that SB 148 be brought on for
discussion. She noted that it was introduced by committee
in the first session of the current legislature, and she
referenced 1993 adoption of work draft CSSB 148 (Fin) (8-
LS0583\X, Utermohle 4/12/93) and Amendments 1 through 3.
Co-chair Pearce next directed attention to an updated work
draft (8-LS0583\I, Utermohle 3/11/94) which she explained
incorporates the previously adopted amendments. Co-chair
Frank MOVED for adoption of CSSB 148 (Fin), "I" version in
place of the previously adopted "X" version. No objection
having been raised, CSSB 148 (Fin), "I" version, was
ADOPTED.
Co-chair Pearce referenced a pending Amendment No. 4 and a
March 11, 1994, memorandum (copy on file) thereto. DAVID
SKIDMORE, aide to Senator Frank, came before committee. He
explained that the proposed bill would bar the chief
executive officer of the Alaska Railroad Corporation from
serving as the member of the railroad board of directors
required by statute to have certain types of railroad
experience. If the bill were to become effective
immediately, it would render Mr. Hatfield's position on the
board illegal. Amendment No. 4 creates a transition period
to delay the effective date of that provision of the bill
until the Governor appoints a board member who fills the
railroad experience qualification. The Amendment states
that the Governor is to appoint an individual with the
necessary qualifications, this fall, should either Mr.
Chapados or Mr. Lounsbury fail to continue to serve on the
board.
Co-chair Pearce noted that Amendment No. 4 was drafted for
incorporation within the previously adopted version "X"
which has since been replaced by version "I." She then
voiced need to conceptually adopt the amendment for
inclusion in the proper place within CSSB 148 (Fin), "I"
version. Co-chair Frank MOVED for adoption of Amendment No.
4. No objection having been raised, Amendment No. 4 was
CONCEPTUALLY ADOPTED into CSSB 148 (Fin).
MARK HICKEY, next testified on behalf of the Alaska Railroad
Corporation. He remarked that the newly-adopted draft
addresses a number of concerns raised by the railroad, but
three areas of concern remain:
1. Sec. 7, page 3, contains language allowing
participation
by board members by teleconference. This is
current practice. Sec. 7 may not be necessary.
2. Sec. 8, page 4, lines 8 through 12, raises concern
regarding the debt limit, particularly in light of
SB 338. There appears to be a problem between
these two pieces of legislation. Although non-
recourse revenue bonds are proposed, debt of the
railroad will be issued and the railroad will
already have exceeded "the total aggregate limit."
A possible fix might involve exemption of non-
recourse revenue bonds from this language. The
language was included as a way to deal with equity
participation in non-transportation activities.
Since that is addressed by subsection (6), another
means of curing the problem would be deletion of
subsection (3) (lines 8 through 12).
3. Sec. 8, page 4, line 18, contains a limitation to
prevent the railroad from obtaining an equity
position in a non-transportation activity.
The board of directors adopted a policy that
the railroad would not enter such an
arrangement. That policy remains in effect.
Placing this language in statute may create
potential for litigation.
Mr. Hickey next referenced provisions relating to the Nenana
land fill and informed members that the railroad is no
longer pursuing the project. Parties involved found that it
was not financially feasible, and there was local
opposition.
Speaking to the above-noted limitation on debt, Co-chair
Frank explained that it arose from the fact that statutes
presently require that the railroad receive legislative
approval prior to issuance of bonds. The Senator
acknowledged numerous methods of issuing debt. It was the
intent of the legislature, when it authorized acquisition of
the railroad from the federal government, to include the
legislature "in the loop" when the railroad issued debt.
Mr. Hickey noted that the original bill required that debt
exceeding $1 million be approved by the legislature.
Discussion followed between Co-chair Frank and Mr. Hickey
regarding language associated with issuance of debt rather
than bonds. The Co-chair said he would not support allowing
the railroad to issue debt of any kind while maintaining a
limitation on bonds.
Senator Rieger advised of his preference for incorporation
of the railroad as a stock corporation and issuance of all
shares of common stock to the state. That represents a step
toward independence and eventual privatization of the
railroad. He observed that the proposed bill provides a
good vehicle for development of that structure. Chapter 40
would then become the by-laws of the corporation, instead of
statute. Mr. Hickey explained that, at the time of
purchase, there was discussion of a similar arrangement.
One of the principal concepts involved the permanent fund,
and that raised many concerns. That approach was
subsequently dismissed, and the state conducted a "straight
purchase." The railroad board has not devoted time to this
issue. The approach raises many questions "about how this
would ultimately work down stream." Senator Kelly voiced
his understanding that selling the railroad would be in
direct conflict with the intent of the proposed bill. He
suggested that entities seeking to purchase the railroad
would not buy it "to run trains" but to develop railroad
land. That is where the value is. Co-chair Frank observed
that "that would be fine" if the entities were private.
Senator Rieger concurred, advising that if the railroad was
private, the legislature would not be adjudicating endless
issues relating to competition with truckers, land
developers, etc. Privatization would relieve 20 to 40 hours
of finance committee time per session. He suggested that
that effort be set in motion.
End: SFC-94, #32, Side 1
Begin: SFC-94, #32, Side 2
Mr. Hickey stressed need to consider transportation services
provided by the railroad and the importance of that service.
He concurred that private entities would be "very interested
in portions of the real estate . . . ." A mechanism has yet
to be developed that would ensure continuation of
transportation services under privatization. That is what
precipitated purchase of the railroad by the state. The
transportation services save the state considerable moneys
in terms of what moves on the railroad versus on the highway
system. Real estate assets are key to continuance of the
transportation role. Freight was an overall loss during the
past year. That service, even when well run, in marginal.
Senator Rieger commented on inability to secure tariff
charges to evaluate the economics of railroad freight
service with respect to the private sector. Senator Kelly
suggested that lack of competition to railroad
transportation would result in problems were the railroad
privatized. He pointed to lack of airline competition
between Juneau and Anchorage as an example.
Co-chair Pearce referenced page 4, line 9, noted provisions
precluding aggregated debt exceeding $50 million, and
concurred that passage of SB 338 would "arguable put them
over that limit." Senator Kelly suggested that addition of
"excluding non-recourse revenue bonds" would cure the
problem. Co-chair Pearce voiced her understanding that the
proposed language would preclude the railroad from issuing
bonds of more than $50 million for its own use, but the
current "federal window of opportunity" could be exploited.
In response to a question from Senator Kelly, Mr. Hickey
explained that the state wrote the majority of the transfer
act. It sought to ensure that the railroad would have a
wide range of authority, equal to public entities elsewhere,
to engage in railroad related projects to support the goals
and viability of the railroad without a state subsidy.
Co-chair Frank advised that his staff had been working with
legal services on issues relating to legislative approval.
Mr. Utermohle has said, and will provide written
confirmation, that subsection (3) ceilings set forth at page
4, lines 8 through 12, would not apply to debt specifically
authorized by the legislature. Co-chair Frank suggested
that language offered by Senator Kelly would provide an
exclusion from legislative approval for all non-recourse
bonds. Both Co-chair Pearce and Senator Kelly noted language
within Sec. 8 (2) requiring legislative approval prior to
issuing bonds. Co-chair Frank raised concern that another
form of debt would be utilized. Co-chair Frank stressed
need to work with legislative attorneys on development of
workable language. Senator Kelly voiced committee intent to
ensure that if the railroad issues the $55 million in non-
recourse revenue bonds, the issue is excluded from the debt
cap. Senator Rieger voiced his belief that draft "I"
language is sufficient to accomplish committee intent, and
no amendment would be necessary. Co-chair Pearce asked that
Mr. Utermohole provide a written opinion.
Senator Rieger inquired concerning the net profit for the
railroad over the past year. Mr. Hickey advised of a net
loss of $2.6 million comprised of $800.0 in freight and a
one-time write down of $1.8 based on reorganization and
early-out retirement payments to reduce the work force.
Senator Rieger remarked that the railroad should pay a
dividend similar to AHFC. Mr. Hickey spoke briefly to
continued losses in passenger services. Since that service
returns a considerable dividend to the state, the railroad
has covered the loss from operating moneys rather than
seeking a subsidy.
Senator Sharp voiced his understanding that the transfer act
provided tax exempt status for financing of railroad
upgrades and railroad related activities. He then suggested
that the tax exempt benefit might be lost if it is used for
other financing. Mr. Hickey noted that railroad real estate
(and flexibility in its development) was critical to
purchase of the railroad and its viability. Senator Sharp
voiced need for testimony from the chief executive officer
and railroad board of directors on both SB 148 and SB 338.
Discussion of the relationship of the two bills and the
railroad's position on them followed.
Co-chair Frank directed attention to Sec. 10 provisions
relating to the regional land fill at Nenana and noted
earlier comments that it could be removed from the bill. He
expressed reluctance to do so without consultation with
legislators from that area. Mr. Hickey voiced his
understanding that there is a possibility discussion of the
landfill will resume in the near term, at the proposed site.
There is potential over the next two to five years that the
project might make sense.
Senator Rieger pointed to information from the railroad
charting the corporation's real estate revenue plan
projected for 1993 through 1998 and cautioned that until the
railroad is privatized, the legislature will "have many more
hours at this table discussing the equity of each of those
projects . . . ."
| Document Name | Date/Time | Subjects |
|---|