Legislature(1999 - 2000)
01/27/2000 01:35 PM Senate TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 208-RAILROAD AND FERRY AUTHORITY
MS. ANGELA MOSS, staff to Senator Ward, read the following sponsor
statement for SB 208.
"An Act establishing the Alaska Marine and Rail Transportation
Authority; relating to ferries and ferry terminals; relating
to the Alaska Railroad Corporation; and providing for an
effective date."
The intent of this Act is to establish a state-owned authority
that would be directly responsible for the operation and
management of both the Alaska Railroad Corporation and the
Alaska Marine Highway.
In 1985 the State of Alaska purchased the Alaska Railroad from
the federal government for $20 million dollars. This
transaction came with a significant amount of excess land that
assists in the operational costs of the railroad. The Alaska
Railroad currently has a surplus land base. The Alaska
Railroad is not currently under the executive budget act. The
Alaska marine highway was created under the authority of the
federal government in 1963 and was not given a land base. For
the past several years, the Alaska marine highway has relied
on the general fund for costs because of a lack of capital
equity base in order to make it self sufficient.
Creating an authority would allow the excess land to generate
revenue and provide a stable funding base for the Alaska
Marine and Rail Transportation Authority. The idea is to
reduce the requirements to fund the Alaska marine highway
through the general fund. The overall transportation plan in
Alaska would benefit from the re-organization and provide for
a system to utilize both services and cut the cost of doing
so. Currently the Alaska marine highway and the Alaska
Railroad share the use of facilities in many locations.
The authority will be a public corporation of the state and a
division of DOTPF. The authority will operate the Alaska
marine highway system and the state-owned Alaska Railroad as
separate divisions of the authority.
The authority will make all of its financial records available
to the legislature and an appointee of the governor. The
authority shall submit an annual budget for the Alaska marine
highway system and the Alaska Railroad Corporation to the
legislature through the governor.
The primary duties of the authority will be to assist
residents, businesses and communities of the state to obtain
the highest quality of the marine, rail passenger and freight
service. The authority will be responsible to encourage and
integrate with other public and private carriers in and
outside the state to provide the highest quality of service
within the state. The authority is required to employ Alaskan
residents to the highest legal level possible.
The authority will operate under the name "Alaska Marine and
Rail Transportation Authority." The authority shall prepare
a comprehensive long-range plan for the development and
improvement of the Alaska marine highway system and the Alaska
Railroad.
The authority may acquire by purchase, gift, or exchange of
land in fee simple or easements that it considers necessary
and reasonable for either temporary or permanent public use.
The authority may transfer land, other than rail land under AS
44.90.240, that is not considered necessary for use by the
marine highway system. The authority will have the power to
receive additional land grants from the state. The proceeds
of disposal by the Department of Natural Resources (DNR) shall
be credited to the funds from which the purchase of the land
was originally made.
It is my hope as sponsor of SB 208 that it becomes legislation
in order to ensure a long term transportation network that
serves all Alaskans.
Number 2049
FORMER GOVERNOR BILL SHEFFIELD, President and CEO of the Alaska
Railroad Corporation (ARRC), had a prepared statement for Wendy
Lindskoog to read to the committee.
MS. WENDY LINDSKOOG, Director of External Affairs for the Alaska
Railroad Corporation, read the following statement:
Thank you Chairman Ward and Senate Transportation Committee
members for giving us the opportunity to testify on SB 208.
We have had only one week to consider this bill and believe
this issue requires a more in-depth review on our part before
we can better convey our concerns about the bill's fiscal
impact on the railroad.
Having said that, we do have some initial reactions.
The marine highway system and the Alaska Railroad Corporation
both provide a valuable transportation service. We both move
people and goods throughout many parts of Alaska not accessed
by the state's highway system. For these reasons, the idea to
combine the marine highway system and the Alaska Railroad
Corporation has merit. The reality, however, comes with
obstacles.
The legislature has worked over the years to streamline
government. At first glance, SB 208 appears to accomplish the
goal. At a closer look, however, this bill creates an
additional layer of management staff that could impact the
efficiency and decision making process of both transportation
organizations.
Combining both transportation entities will also produce an
administrative burden in terms of managing four different
types of employee benefit systems.
There are two classes of Alaska Railroad Corporation employee
including federal employees and corporation employees. Each
group has different retirement benefits, but neither are part
of the state's personnel benefit system.
Under the new authority, the marine highway system would also
have two classes of employee. These include employees who are
part of the state personnel benefit system and those who would
be under the "new authority" benefit system.
In addition to adding administrative layers, SB 208 diverts
the railroad's net earnings from its real estate and uses them
to help subsidize the marine highway system.
This results in taking money away from the railroad's regular
maintenance and capital program and stripping the Alaska
Railroad Corporation of its ability to remain a true self-
sustaining entity.
After many years of federal neglect, the Alaska Railroad
Corporation has been investing heavily in deferred
maintenance. We are replacing approximately 100,00 ties per
year, new ballast, and are working on several projects,
including our track straightening project between Anchorage
and Wasilla.
The track realignment will make the railroad safer by removing
congestion on our tracks, straightening out curves, reducing
equipment wear and tear and increasing train handling
consistency.
In terms of industry standards, railroads the size of the
Alaska Railroad should be reinvesting $15 to $20 million
annually into the rail line. This level of funding ensures
proper maintenance and operations. That is what we do. Every
bit of money we make is put directly back into our road bed,
equipment, bridges, roads, etc.
We have recently had two derailments. While those were not
related to worn out track, we cannot afford to diminish our
ongoing efforts to maintain and continue to improve the
railroad's infrastructure. Safety is too important.
In addition to providing safe transportation, part of our
mission is to promote economic development. We are on the
verge of an exciting growth phase at the Alaska Railroad.
This is made possible through the federal grants we receive.
In order to qualify for these grants, the railroad must match
them with an investment of its own funds. For example, the
$10 million grant for crossties, rail, and ballast, which we
have received for the past 4 years, requires an annual
investment by the railroad of $6 to $8 million.
These grants provide us the opportunity to accomplish many
important safety and economic development projects including:
Seward passenger dock - re: hub for cruise ship landings.
New freight dock - new contracts for freight through
Seward.
Whittier underpass for safe pedestrian traffic under our
rail and from the boat harbor to the City of Whittier.
Anchorage airport rail station - this allows the railroad
to be competitive in time and dollars to new cruise ship
passengers to and from Anchorage, to Seward and Whittier
as well as downtown Anchorage. This provides good
revenue to help with "maintenance of way" for the good of
the railroad. If we should lose the coal contract or
continue to receive less for transporting coal, this
passenger service will help pick up that $2.5 million a
year to maintain the Anchorage to Seward mainline track.
Klatt road to Eagle River - double track - straighten
curves to Wasilla. Improve safety, efficiency and
profit.
$10 million a year for road bed improvements, new and
larger sidings where trains meet, electric switches, rail
grinding, new rail, ties, ballast, etc.
New Denali depot - move passengers - passenger trains
longer.
New intermodal facility in Fairbanks - move from downtown
- blocking streets. More efficient operation.
Proposed new track alignment to North Pole refinery which
will eliminate 30 crossings and enhance safety.
And the list goes on and on.
This is safety and common sense along with meeting our
customer needs.
Producing the matching funds for these grants will be next to
impossible if proceeds from our real estate, which represent
35 to 50 percent of our net income, are shifted to the
authority under this legislation.
The Alaska Railroad does not require, and has never asked for,
operational or capital funding from the state. We are self-
sustaining. This will not remain the case if our earnings are
shared with the state's marine highway system. Under this
scenario, the Alaska Railroad Corporation will be put in a position
within a year or two of seeking state subsidies to operate its
services and maintain its track. The net effect will be more
demand on the state's general fund, not less.
Finally, SB 208 places the new authority under the executive
budget act. As you are aware, the Alaska Railroad Corporation
needs the flexibility to operate its business to react to
market demands. We believe that this action would hinder that
ability to react to market demands for new or additional
business or catastrophic events. The authority would not have
the prerogative to obligate funds to make things happen in a
timely fashion.
In closing Mr. Chairman, you have requested detailed financial
information from the railroad as it relates to the proposed
changes in SB 208. Discerning the financial implications and
obtaining good information will take some time.
This bill is complex, it represents a huge policy decision
requiring a lot of dialog. We hope we can continue a dialogue
with this committee as we gain a better understanding of
changes called for in SB 208.
Mr. Chairman, the big picture is that what we are doing, in
addition to running a railroad 24 hours a day, is building a
railroad--a state asset, to be a better railroad--and larger
asset, fostering economic development for the entire state and
all Alaskans.
And to let you know, our goal is to foster and improve a
better working relationship with the legislature to ensure
that we are both working towards mutually beneficial goals.
In fact, we welcome and invite you to tour our facilities and
meet our employees.
Thank you again for this opportunity to testify.
CHAIRMAN WARD agreed with Ms. Lindskoog that this issue will take
time for consideration.
Number 2337
SENATOR MILLER stated that he and the Chairman were in the
legislature when the railroad was purchased. He worked on the
legislation because the federal government made the railroad
available for purchase and Alaska wanted it. It was also felt that
at some point the railroad would become a private corporation.
CHAIRMAN WARD commented that this legislation would remove the
possibility of future privatization.
Tape 00-1, Side B
CHAIRMAN WARD stated he felt the marine highway system had not been
given a proper land base, and the railroad had more land than it
needed. He feels an authority combined with additional state
acreage would stop the need for general funds going into the marine
highway system. He has not ruled out the possibility of a sale of
the railroad, but he wants to make sure the marine highway system
and railroad continue to exist in Alaska. He noted he has some of
the same concerns that Ms. Lindskoog expressed and he does not have
all of the answers but he chose to model the legislation after
Louisiana's authority system because it has been successful.
SENATOR LINCOLN asked for Governor Sheffield's comments regarding
the makeup of the Board of ARRC and for any additional comments.
GOVERNOR SHEFFIELD responded the railroad board is appointed by the
governor and confirmed by the legislature. There is one union
member, one commissioner from DOTPF and one from DCED, one outside
member with railroad experience and two members from the public.
Number 2215
CAPTAIN NORM EDWARDS, Operations Manager for the Alaska Marine
Highway (AMHS), read the following statement:
I would like to start by saying that we have had less than one
week to review this piece of legislation. We were not given
a copy of the legislation prior to it's introduction and were
not asked to work with the sponsor on it's development. We
have not had time to fully consider this unusual proposal.
That being said, our initial impression is that this proposal
is an attempt to blend two agencies that have different
missions, have different customers and serve different regions
of the state. We fail to see that this bill would benefit
either organization and if one of the sponsors goals is to
adequately fund the AMHS, there is a simpler and less
disruptive way.
Frankly, we are perplexed as to the objectives of this
legislation. We are in the process of implementing the
Southeast Transportation Plan, developed with considerable
community input and support. We are also currently working on
the Southwest and Prince William Sound Transportation Plans.
Under these plans, we will effectively redesign and manage the
marine highway system, providing better and more efficient
service for the communities of coastal Alaska. Therefore, as
the old saying goes: "If it isn't broken, don't fix it."
Before we comment in detail on the bill, we will need more
time to analyze it. In short, however, we believe that the
AMHS is right where it belongs, an integral part of the
Southeast Region of DOTPF.
Again, thank you for the chance to testify today.
CHAIRMAN WARD asked Captain Edwards what the easy way to run the
ferry system would be without using general fund monies.
CAPTAIN EDWARDS responded that has not been fully determined at
this time.
CHAIRMAN WARD responded that SB 208 may not be the answer, but
having a land base is one option and it will eliminate the need to
come to the legislature for funding every year. He welcomed
Captain Edwards to his new position at the Alaska Marine Highway
System.
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