Legislature(1997 - 1998)
02/19/1997 01:08 PM House TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 55 - ALASKA RR BUDGET AND LAND Number 1116 CHAIRMAN WILLIAMS stated the committee would hear testimony on HB 55. "An Act relating to the fiscal operations of the Alaska Railroad Corporation and to land acquired by the State of Alaska under the Alaska Railroad Transfer Act of 1982 or otherwise acquired for railroad purposes; and providing for an effective date." CHRIS KNIGHT, Researcher to Representative Terry Martin, stated that the committee substitute would place the Alaska Railroad Corporation under the Executive Budget Act. He stated that it would give the legislature and the government the process of open communication with the Alaska Railroad corporation that does not exist currently. Number 1143 REPRESENTATIVE MASEK moved to adopt CSHB 55(TRA) for the purpose of discussion. There being no objection it was so ordered. Number 1164 REPRESENTATIVE COWDERY asked that the railroad land has been increased from 36,000 acres to 44,000 acres of land. Number 1182 MR. KNIGHT replied that the number is 43,000 acres of land. He stated that 50 to 60 percent of that has yet to be transferred to the Alaska Railroad Corporation at this time. Number 1211 CHAIRMAN WILLIAMS asked what is going to be done with the land portion of the bill. Number 1223 MR. KNIGHT replied that it is up to the chairman of the Legislative Audit Committee to work out the land portion of the bill. Number 1288 JOE PERKINS, Commissioner, Department of Transportation & Public Facilities, stated that the administration is not in favor of the bill. He stated that the Alaska Railroad, since the transfer from the federal government, has acted with a deficit for only two of those years. He stated that the Alaska Railroad provides both public and business purposes and in order to function effectively as a business the railroad needs the flexibility to make business decisions unencumbered by yearly appropriation schedules. He stated that the railroad borrows funding from banks and is dependant on this revenue to manage cash flow. He stated that the railroad also enters into long term lease agreements which would be hampered by the uncertainty of legislative approval for repayment on a yearly basis. He stated that at the present time railroad profits would go back into rolling stock and railroad costs. Number 1383 COMMISSIONER PERKINS stated that state ownership of the railroad has been extremely successful, and does not think changes and risks should be made on a successful operation. He stated that there are other ways to provide additional legislative oversight. Number 1506 JIM BALDWIN Assistant Attorney General, Governmental Affairs Section, Department of Law stated that he was employed by the attorney general's office when bill was first enacted many years ago. He referred to a study done by the law firm of Wicwire, Lewis and Shorr on whether the railroad should be subject to the appropriation of the legislature. He stated that the result of the study was that other means of oversight should be adopted which could be found under the Enabling Act of the railroad such as, submission of capitol spending plan, review by the governor on fiscal decisions of the railroad, but not the appropriation of the legislature. He stated that this bill will present legal problems. He stated that the railroad has been in business for a while and has incurred a certain amount of indebtiness. He stated that this was done through commercial banks being the railroad's creditors. He stated that these arrangements are without a non-appropriation risk. He stated that a non-appropriation risk means that when money is lent to a public entity, they have to assume that the legislature may not appropriate funds to pay the obligations, so many of these agreements state that there is no backing of the agreement if the legislature fails to appropriate. He stated that the bill will have to make a provision for this circumstance so that there is not a possibility of a default in any of these agreements or so that the lenders don't become uncomfortable with the arrangement and declare default. Number 1680 CHAIRMAN WILLIAMS asked how the legislature would be liable for what the railroad does. He asked that if the railroad did not make any money would the state be liable. Number 1693 MR. BALDWIN stated that anyone who does business with the railroad is limited to go after only the assets of the railroad. Number 1750 CHAIRMAN WILLIAMS stated, "They would go back to the railroad which the state owns, and take the railroad for whatever it is but we own it. So how do we get around the problem, that if your going to go out and invest money and do anything that you want to do, whenever you want to do it and we are sitting back here letting the railroad run and do anything it wants to do and we have no control." Number 1775 MR. BALDWIN replied that there can be different ways of controlling corporations, some are closely held, having the legislature approve all projects. He stated that the railroad has service contracts and questions would be raised as to what would happen to those contracts under the Executive Budget Act. Number 1857 CHAIRMAN WILLIAMS stated that the legislature feels very uncomfortable in the direction that the railroad is going, we have no control over what happens to the railroad and we have a lot at stake. Number 1877 MR. KNIGHT replied that Mr. Baldwin's concern of getting investors to sign contracts is a little far fetched, the legislature would not nickel and dime their budget. He stated the appropriation would be an aggregate amount and not be detailed as to what the CEO and board of directors could choose to spend it on. Number 1921 REPRESENTATIVE COWDERY asked if Mr. Baldwin thought banks would call the loans that are in existence with the railroad. Number 1851 MR. BALDWIN replied that they probably would not but he would recommend that the bill have a savings provision in it for existing contracts and agreements. Number 1974 REPRESENTATIVE COWDERY stated that in the case of a claim against the railroad all of Alaska looses since it is an asset of the state. Number 2042 CHAIRMAN WILLIAMS asked what happens if a loan can't be repaid. Number 2064 MR. BALDWIN replied that the reason it is set up as a public corporation is to limit any loss to the corporation and not have it be a general debt of the state. Number 2080 CHAIRMAN WILLIAMS stated that a bank will not lend money without collateral. Number 2092 MR. BALDWIN stated that the collateral is usually a stream of revenue. He stated that bond ratings may not drop but this issue was considered in the past and the legislature decided they wanted the railroad to act more like a private business. CHAIRMAN WILLIAMS stated that the committee is out of time and the bill will be taken up at the next meeting.
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