Legislature(1993 - 1994)
04/08/1993 08:20 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 before
committee for discussion and referenced the following backup
material (copies on file in the original SFC bill file for
SB 148):
1. A memorandum from staff in Co-chair Frank's office
comparing the original bill with CSSB 148
(Transportation).
2. Amendment No. 1, providing approval for a regional
sanitary land fill at mile 388.
3. April 7, 1993, correspondence from Robert
Hatfield, President and CEO, Alaska Railroad
Corporation.
She further advised that SB 148 reflects railroad
legislation introduced by the Senate Finance Committee.
BERNIE KARL, Chairman and CEO, Alaska Resource and
Conservation Center, Inc., and ROBERT KNIGHT, Mayor, City of
Nenana, came before committee. Mr. Karl acknowledged
committee concern regarding certain railroad operations but
cautioned that under the proposed legislation the private
sector would not be able to freely joint-venture with the
railroad. The City of Nenana, the Alaska Railroad
Corporation, and Alaska Resource Conservation Center, Inc.
are presently involved in a joint-venture to establish a
regional land fill. The project would serve 80% of Alaska's
population. Restricting or eliminating railroad ability to
hold an equity interest would seriously harm the project.
Mr. Karl voiced his understanding that the railroad act
mandates that the Alaska Railroad Corporation not come to
the legislature for funding. It is to generate its own
income. The railroad cannot be expected to utilize its
assets to generate income when the legislature passes laws
restricting or prohibiting use of those assets. Should the
proposed legislation pass, two options arise:
1. The railroad should immediately be put up for
sale.
2. The Dept. of Transportation and Public Facilities
should take over management and operate the railroad
strictly as a means of transportation.
Mr. Karl voiced his belief that passage of the proposed bill
would not bring about the intended results since the
railroad would no longer be able to function. The railroad
does not generate sufficient revenues from transport of
freight. It must utilize its assets for additional income.
On October 9, 1993, approximately 12 landfills along the
railbelt will close as the result of federal legislation.
Costs associated with meeting federal requirements for a
closure fund, water and methane gas monitoring, etc. would
total in the millions. A regional landfill will allow
communities to close local landfills by the October 9
deadline while providing a site for disposal of municipal
waste.
Mr. Karl noted that every man, woman, and child creates five
pounds of waste per day. If the regional landfill is
developed, everyone will derive long-term benefits.
Communities will have twenty-five-year contracts and a fixed
cost for waste disposal. Alaska has never managed its
waste. The Alaska Railroad has 1,835 acres well suited for
a regional landfill. It is located at Clear (in the middle
of the state), is served by rail, and can accommodate all
the communities including Anchorage. The landfill is
designed to consist of small, "digester" cells--2.5 acres.
Cells will be closed out in three to five years. The cells
will be studied in conjunction with the University, and
methane gas emanating from them will be used by communities
in close proximity to the landfill. Mr. Karl questioned
whether the landfill would become a reality if the railroad
is not allowed an interest in the project.
Mr. Karl acknowledged concerns regarding liability. He
suggested that the liability belongs to the state. If
Alaska does not have a responsible regional landfill for
proper handling of waste, improper disposal problems will
follow. Mr. Karl next attested to ongoing EPA suits in the
Fairbanks area.
Mr. Karl suggested that SB 148 be tabled until next year.
He again acknowledged concern regarding railroad operations
but stressed need for railroad involvement in the landfill
project.
Co-chair Pearce noted that the three-year period between
issue of federal landfill regulations and impending closure
of many local sites left ample time for the railroad to
bring the proposed project to the legislature. Mr. Karl
advised of need for the strength and credibility of the
railroad to back the project.
Further discussion followed between Co-chair Frank and Mr.
Karl concerning the impact of impending federal closure of
landfills.
In response to a question from Senator Kelly, Mr. Karl
explained that the state is attempting to obtain primacy
over municipal waste.
Additional discussion of the workings of the proposed
landfill followed. The railroad would be an equity owner,
would receive a fee for hauling waste, and would share one-
third of the profit from the landfill. Twenty-five-year
contracts will also provide stability for communities. Mr.
Karl stressed that funding for the project would be borrowed
from a commercial bank.
Co-chair Pearce called for additional comments. None were
forthcoming. She then directed that SB 148 be HELD in
committee pending comments from the executive director of
the railroad, later in the meeting.
SENATE BILL NO. 148
An Act relating to the Alaska Railroad Corporation; and
providing for an effective date.
Co-chair Pearce directed that discussion revert to SB 148
and noted that ROBERT HATFIELD, President and CEO, Alaska
Railroad Corporation, and PHYLLIS JOHNSON, General Counsel,
Alaska Railroad Corporation, were available to testify via
TELECONFERENCE from Anchorage.
Senator Sharp provided an overview of changes between the
original bill and CSSB 148 (TRA):
1. Modification of language regarding board members,
making requirements less restrictive.
2. A loosening of restrictions on use of debt to
allow
debt financing of all railroad operations.
The Senator specifically noted that the issue of property
taxes was not addressed within the Senate Transportation
version.
Co-chair Pearce referenced April 7, 1993, correspondence
(copy on file in the SFC file for SB 148) from Mr. Hatfield
and asked that he speak to points therein. Mr. Hatfield
indicated that CSSB 148 (TRA) represents an improvement over
the original bill in that it clarifies many provisions.
Mr. Hatfield voiced his understanding that the legislation
was introduced in response to committee concern regarding
the railroad's equity position in a hotel, as a result of
its real estate holdings. A major complaint was that the
railroad's tax status impacted the project. Mr. Hatfield
explained that at its upcoming meeting, the board will
consider taking the equity issue "off the table." That
action, as well as legislative efforts tightening
restriction on ability to leverage railroad land, will place
the railroad in the position of paying taxes on the land as
though it was private, fully unencumbered property, yet not
being able to use it as such. Mr. Hatfield suggested that
it be one way or the other. If the land is to be taxed, the
railroad should be able to manage it unilaterally.
Requiring the payment of approximately $400.0 per year in
taxes without the ability to leverage the land and recover
costs is unfair.
Mr. Hatfield next spoke to borrowing policies and debt
limitations. The railroad board carefully considers all
major expenditures, including land and site improvements as
well as acquisition of rolling stock. The two-day public
session each fall reviews plans for both the coming year and
the next five years. Expenditures in excess of $500.0 go to
the board for final approval. There is thus substantial
public, board, and financial community oversight.
Referring to statutory creation of the railroad corporation,
Mr. Hatfield noted that it is financially and legally
independent of the state. Language further indicates that
the state does not stand behind indebtedness or liability
the corporation might incur. Debt provisions of the
proposed bill are thus adequately covered by existing
statutes.
Mr. Hatfield next advised that current conflict of interest
requirements for board members are more restrictive then
APOC provisions set forth in the proposed bill. He voiced
support for the prohibition precluding the chief executive
officer from serving as chairman or vice-chairman of the
board.
In his concluding remarks, Mr. Hatfield reiterated that the
board is ready to implement a policy that would preclude the
railroad from taking equity positions in hotels and other
nontransportation
related activities. That is the issue behind the proposed
bill. Since other bill provisions are covered by existing
law, there appears to be little need for the legislation.
He asked that the railroad be allowed to prove itself.
Mr. Hatfield further noted need for the railroad to be able
to conduct site preparation in order to lease its land.
Senator Rieger directed attention to language dealing with
tax provisions and asked if railroad property would be
taxable if leased at less than fair-market value. Phyllis
Johnson, General Counsel, Alaska Railroad, said that the
railroad is required to lease at fair-market value unless
the land is leased to the state or a subdivision of the
state.
Senator Kelly MOVED that "fair value" be amended to "fair
market value" at page 2, line 29. No objection having been
raised, the motion CARRIED, and Amendment No. 1 was ADOPTED.
Co-chair Pearce directed attention to March 19, 1993,
correspondence, (copy appended to these minutes as
Attachment A) which she noted sets forth intended railroad
policy that the corporation not assume an equity position in
nontransportation
related activities. She then asked if the proposed landfill
project would fall within the definition of
nontransportation
related activity. Ms. Johnson voiced her legal opinion that
the project would not be prohibited. She acknowledged
conflicting opinions in this area. Co-chair Frank took
exception to Ms. Johnson's opinion that the landfill project
would fall outside the proposed prohibition.
Co-chair Frank then MOVED for adoption of Amendment No. 2
which would specifically authorize the railroad to acquire
an equity position in the regional sanitary landfill at
Nenana. Senator Kelly MOVED to AMEND Amendment No. 2 by
authorizing the railroad to "incur debt and" equity. Co-
chair Pearce called for a show of hands on adoption of the
amendment to Amendment No. 2. The motion CARRIED and the
Amendment to Amendment No. 2 was ADOPTED. [See subsequent
action rescinding adoption, page 12 of these minutes.]
Co-chair Pearce next called for a show of hands on adoption
of Amendment No. 2, authorizing railroad participation in
the Nenana landfill project. The motion CARRIED, and
Amendment No. 2 was ADOPTED.
Senator Rieger cited language at page 5, lines 3 through 15,
and noted that the prohibition to be incorporated within AS
42.40.285(6) speaks to utilization of assets rather than
debt to obtain an equity position. He then questioned
whether the above amendment to Amendment No. 2 was
necessary. Co-chair Frank suggested that foregoing
committee action on the Amendment to Amendment No. 2 be
considered adoption of a conceptual amendment, leaving
discretion to legal staff to insert the proper language in
the proper place within the bill. Senator Kelly voiced his
intent to ensure that the railroad could incur debt "above
the $10 million if they needed it for this specific
project." The proposed project is separate from limits set
forth within the legislation.
Questions were raised by Co-chair Frank concerning the
amount of debt that might be incurred for the project, and
Mr. Karl again came before committee. He explained that
since engineering for the project has not yet been
completed, it would not be prudent to estimate total costs.
He said that the landfill would be developed in phases. The
cost of developing the first cell would be $5 million.
DAVE SKIDMORE, aide to Senator Frank, next came before
committee. Referencing Senator Rieger's concern, Mr.
Skidmore acknowledged that should the committee desire to
authorize the railroad to incur debt on behalf of the
project, reference to AS 42.40.285(3) at page 4, lines 24
through 28, should be made. If the committee intends to
authorize debt beyond $10 million, an exception to AS
42.40.285(3) should also be cited.
Mr. Hatfield advised that the railroad would have minimal
cash or debt invested in the project as it is currently
structured. The railroad would secure the permits and
prepare the land.
Senator Kelly MOVED to RESCIND committee action adopting
Amendment No. 2. No objection having been raised, IT WAS SO
ORDERED. Senator Kelly then MOVED to RESCIND committee
action adopting the Amendment to Amendment No. 2. No
objection having been raised, IT WAS SO ORDERED. Senator
Kelly then MOVED for adoption of Amendment No. 2. No
objection having been raised, Amendment No. 2 was ADOPTED.
Senator Kelly asked what the City of Nenana would be
devoting to the project. Mr. Karl said that the project
would utilize the city dock. Nenana will use the interior
river systems for moving municipal waste. The city will
take care of that transportation effort.
End, SFC-93, #55, Side 2
Begin, SFC-93, #57, Side 1
Mr. Karl acknowledged that the City of Nenana would profit
from the landfill. The city is also working on long-term
liability and insurance aspects. It will share an equity
position, a portion of the insurance cost, and part of the
liability.
Mr. Hatfield directed attention to language within Amendment
No. 2 and questioned use of the word "sanitary" in
connection with the regional landfill. Mr. Karl voiced need
to designate the project a "regional landfill" since that
term is accepted by EPA as a means of "taking care of large
regions." Further comments followed regarding the scope of
different phases of the project as well a spin-off, strand-
board plant.
In response to a question from Senator Sharp, Mr. Karl said
it is not the intent that the project become a hazardous
waste landfill. He acknowledged that the railroad has the
capability of moving hazardous waste out of the state.
Mr. Hatfield again expressed concern regarding use of the
word "sanitary," advising that the term "regional landfill"
is more broadly interpreted. Mr. Karl acknowledged that
"regional landfill" is the proper term and suggested that
"sanitary" be removed. Senator Kelly MOVED to delete the
word "sanitary" from Amendment No. 2. No objection having
been raised, IT WAS SO ORDERED.
Co-chair Pearce redirected attention to Sec. 11, page 5,
lines 23 through 30, and asked that Ms. Johnson again speak
to a definition of "nontransportation activity,"
specifically as it relates to subsection (i) and the
movement, handling, or distribution of people or personal
property. She expressed committee intent that just because
the railroad hauls a commodity such as logs, does not mean
that it can become involved in a sawmill or lumber business.
Ms. Johnson suggested that there is no foregone legal
conclusion regarding whether or not the proposed landfill
would be included within the above-noted term. It is a
possibility, and an argument could be made. She then
acknowledged an opinion from legislative counsel, George
Utermohle, indicating that the railroad would be prohibited
from obtaining an equity position in the project without
legislative approval since the landfill represents a
nontransportation activity.
On behalf of Co-chair Frank, who was temporarily absent from
the meeting, Co-chair Pearce expressed the intent that the
railroad not become involved in businesses that are not
transportation related. The landfill would fall within that
prohibition. For that reason it has specifically been
addressed within an amendment to the bill.
Co-chair Pearce announced her intent to HOLD the legislation
in committee for further discussion of taxation issues.
Senator Rieger voiced his belief that the legislature would
continue its involvement in the railroad due to complaints
from the public regarding whether it is competing fairly.
He said that the proper approach is for the legislature to
authorize the railroad to issue stock and ensure that "some
of that stock is in private hands." Co-chair Pearce
concurred. Senator Kelly voiced opposition to that
approach.
Comments by Mr. Hatfield followed regarding commuter service
to Alyeska.
Mr. Hatfield next spoke to site preparation by the railroad
prior to lease of its land and sought clarification of the
committee's position on that effort. He asked that the
railroad be allowed to conduct site work (grading, street
work, utility connection, etc). Co-chair Pearce responded,
"Okay, fine." She then announced that the bill would again
be brought before committee at the Saturday morning meeting.
| Document Name | Date/Time | Subjects |
|---|