Legislature(2003 - 2004)
04/29/2004 02:55 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 395-MUNICIPAL LAND USE REGULATION
The committee took up SB 395.
CO-CHAIR COWDERY announced that a committee substitute (CS),
labeled version D, had been prepared.
CO-CHAIR WAGONER moved to adopt the CS for discussion purposes.
MR. PAT GAMBLE, President and CEO of the Alaska Railroad
Corporation (ARRC), summarized that SB 395 redresses some
confusing language recently cited in an Alaska Supreme Court
decision regarding the intent of prior state legislation to
exempt the railroad from planning and zoning requirements.
He explained that under federal law, railroads are exempt from
planning and zoning for interstate commerce purposes. When
writing the state railroad transfer act 18 years ago, the
legislature looked at the federal exemption and attempted to
mirror it in the legislation. ARRC operated under that exemption
for 18 years until it was recently challenged in court. The
supreme court recently overturned a lower court ruling that
favored the railroad's exemption and, in a hotly contested 3:2
split decision, said that the language of the legislature was
sufficiently unclear as to be convincing as to its intent. The
tone of that decision suggested that if the legislature intended
to exempt the railroad, it should clear the language up. That's
what SB 395 attempts to do. In its decision, the court opened
up a very complex situation.
MR. GAMBLE stated that as of the March 12 court decision, the
railroad, as well as any other state entity, is no longer exempt
from borough or municipal planning and zoning requirements. The
railroad's 500 miles spans 13 municipalities and boroughs. The
court said a test should be applied regarding planning and
zoning issues whenever the railroad confronts a project that
requires planning and zoning; that being to apply for a permit.
If the permit is conditional, and the conditions are not
favorable to the railroad, the railroad can litigate. The court
directed that differences be worked out in litigation on a case-
by-case basis for every individual project.
The court further said that using a permit test and litigation
[process] would presume to open up to the public, an individual,
a public entity, or a group the opportunity to join in a public
challenge to the permit. That could work in two ways. Number
one, the group could join with a municipality or borough and
challenge the railroad. Number two, if the municipality and the
borough agree on a project and begin to go forward, an
individual or public entity could challenge that agreement and
permit and litigate.
MR. GAMBLE said in this new process, ARRC has not lost its
federal exemption but ARRC's legal department believes the
federal exemption is highly likely to be challenged repeatedly.
To his knowledge, the federal exemption has never been
challenged because both the state and federal exemption have
been so airtight. The feeling now is that could happen. If ARRC
won a few times, the federal exemption, as it applies directly
to railroad operations, would probably remain intact. However,
more litigation involving the periphery of railroad operations
is likely, for example, real estate holdings, lease holdings,
and real estate development.
3:00 p.m.
MR. GAMBLE said he was here to talk about the effect of the
exemption on the railroad but noted that one must also consider
the effect on interstate and intrastate commerce as the federal
law was put into place for the same purpose. The exemption
affects anything put on railroad rights-of-way, such as
pipelines, fiber optic cable, gas lines, or anything involving
the railroad as an agent for economic development in Alaska.
This also includes linking to the Canadian railroad to move
goods back and forth. The business of interstate and intrastate
commerce via rail operates on some presumptions, for example the
opportunity to condemn property, supported by plenty of federal
and state precedents. The recent court decision opens up that
issue here.
MR. GAMBLE illustrated the exemption problem with the example of
a building in Ship Creek in Anchorage on fee-simple railroad
property. It is a non-municipal building that has to meet all
codes. ARRC has broken ground on the building but the project is
at a dead stop. Normally, a city permit is routinely issued
because of the railroad exemptions - the permit is a paperwork
transfer. However, the city stopped the process because it was
not exactly sure how to handle the permit because of the court
decision and is looking for guidance. Mr. Gamble noted that no
one is "grandfathered in" under the existing law. So now, the
permitting process for the Ship Creek building, from landscaping
to other attributes, is being checked out. If anybody objects
to the permit and wants to tie the project up, the court has
laid out the process ARRC has to go through.
In the Eklutna quarry issue [Native village of Eklutna vs.
Alaska Railroad], which started this whole case, a bank
attempted to get a permit in 1990 to mine granite on property
that neighbored ARRC property on which granite has been mined
since the '40s. The bank applied for a conditional use permit
from the city but, after five years, the bank gave up because
the permit was not issued. Nothing has been done with that
property since; it's in limbo.
MR. GAMBLE said he wasn't arguing on anyone's behalf in that
situation, but described it as typical of what can happen when a
permit application gets tied up in legal matters. ARRC would
face that possibility on every project across the entire 500-
mile length of rail. Those kinds of delays are unacceptable when
the state is trying to develop itself economically.
MR. GAMBLE pointed out that in the last few weeks the railroad
expansion project has gained new vitality. He recently talked
to individual legislators, military officials, and the National
Guard, which will run the operation at the missile site, about
the possibility of extending the rail line from Fairbanks to
Greeley. On Tuesday he spoke to the strategic defense missile
commander in Washington, D.C. and told him that ARRC can bond
the entire extension project using its tax-free bonding
capability, thereby avoiding the need for government
appropriations. The debt service would be paid from the annual
operating and maintenance (O&M) payments from Ft. Wainwright for
access to the range area, and from the missile field folks in
payment for commuter service provided by ARRC. The numbers look
very attractive compared to what the military was going to spend
as an alternative, both in appropriations and in O&M. The
military housing and support needs in Greeley would cost many
millions of dollars - the same military personnel could live in
Fairbanks, contribute to the economy and have a lifestyle of
choices while commuting to their jobs at Ft. Greeley.
MR. GAMBLE repeated if the legislature does not redress the
language in the Alaska Supreme Court decision, any project along
the railway line could be challenged by anyone, which would hold
the extension up. So, even if all agree that the railroad
extension is good for Alaska, ARRC won't have the exemption
without passage of SB 395. ARRC can't guarantee that it can move
forward and acquire federal funds, construction materials, and
hire people for a four or five year period to complete the
project because it could be stopped at any time. ARRC would be
unable to go forward with this or any other projects that might
go through the same railroad right-of-way.
MR. GAMBLE said while he is arguing on behalf of ARRC's specific
interests, it's very difficult to narrowly define its interests
without talking about the greater development interests of the
state and some of the projects the railroad has been asked to
contribute to, such as the gas pipeline and other projects like
the rail line extension to Canada.
CO-CHAIR COWDERY asked about permitting for the [Ted Stevens]
International Airport.
MR. GAMBLE said the airport falls within the same jurisdiction
under the court ruling. He said he would rather defer to the
Department of Transportation and Public Facilities (DOTPF) to
talk about the details.
SENATOR THERRIAULT asked Mr. Gamble about his contact with
municipalities. He referred to Section 1, and asked if the
Legislature would basically be enshrining the status quo
regarding the way the railroad has been operating and
interacting with municipalities since it was built and
transferred to the state by saying the Legislature intended to
mirror the federal exemptions.
MR. GAMBLE said that is exactly right.
SENATOR THERRIAULT asked what contacts he has had with mayors
along the rail line extension route.
MR. GAMBLE said this all happened very recently. When the
th
Alaska Supreme Court decision was issued on March 12, the
decision was dissected and the ARRC board spent time determining
its immediate impacts. ARRC thought it was too late in the game
to redress the matter this legislative session yet the railroad
has a number of very important issues coming up this summer.
However, when the possibility that legislation could be
addressed this session surfaced, ARRC went into high gear to try
to see what could be done. About two weeks ago he contacted the
Alaska Municipal League in an effort to convey the issue and
ARRC's position to the communities and boroughs. He did not
contact the mayors of the municipalities and boroughs personally
and acknowledged that personal contact would have been better.
From what he's heard today in the building, he believes many
misconceptions about what ARRC is attempting to do are floating
around, which ARRC needs to overcome. He said he plans to talk
to several mayors, and has already made efforts to contact the
mayors of Fairbanks, Wasilla, and North Pole.
SENATOR THERRIAULT referred to Section 1, the new language that
deals with legislative authorization for the railroad to bond
the extension, and asked Mr. Gamble to review the provisions
that make it clear that the railroad would not be putting assets
at risk, and that the bonds would be backed by long-term
contracts with the federal government for the repayment of debt.
MR. GAMBLE responded that earlier talk about the line extension
centered around getting some sort of annual appropriations on a
large scale. As a result of educational sessions with bonding
experts, the railroad learned in recent weeks of the possibility
of using bonding authority for this particular railroad
extension. He ran preliminary numbers to determine the amount
necessary to do the entire extension and the advantage to the
military and the railroad. The numbers were prepared by an
underwriting firm and are preliminary and hypothetical and make
assumptions that would need to be worked out.
MR. GAMBLE said the numbers assume that ARRC would bond for the
entire project, obviating the need to get large annual
[congressional] appropriations. Additionally, the U.S. Army
would not have to get appropriations to build the bridge over
the Tanana River and support facilities in Greeley, or renovate
the housing that's been sitting empty since approximately '93.
The ARRC proposal would be to bond for the entire project at a
cost of approximately $450 - $500 million. The debt service
would be paid by a "you call/we haul" contract to provide
freight and passenger service to the Department of the Army and
the missile command along the 80-mile extension to and from
Fairbanks. He added, "...you call, we haul down to the training
ranges, for the army to move their new striker brigade out into
approximately 1 million acres of training grounds which would
now become available to them as a result of the railroad
extension that they currently do not have access to year round,
only when the river is frozen deep enough to cross with other
vehicles."
3:20 p.m.
MR. GAMBLE noted that 60,000 square miles of airspace sits atop
the training ground, so that space would become the single
largest and finest joint military training area in the U.S.,
offering a high possibility that Lower 48 units will train there
as it is very difficult to do large-scale training in the Lower
48. This arrangement is very attractive to the Army; it has
expressed support, as has Senator Ted Stevens, through his
appropriations staff. His first indication of interest in this
proposal occurred while talking with the missile commander in
Washington who asked if the [military] went with this proposal,
could [Mr. Gamble] guarantee that the bonds could be sold. He
said he would have to get approval from the ARRC board and the
legislature. They asked what the likelihood of that happening
was. He said he thought this was a very positive project and
that he would find out, which is one reason he's here.
MR. GAMBLE told members he walked into a "buzz storm" today
because these two issues are separate but very much related. He
said he questioned his ability to guarantee that if the
legislature approves the bonding, as proposed here, with a
trigger that says that if the army can't make the debt service,
the deal is off, the project could move forward. The problem is,
even if it is approved [by the Legislature], agreed upon and
moves forward, the project could get stopped somewhere in the
middle because of the permit exemption change. That would be a
disaster, not only for the state, but it could jeopardize the
whole project for DOD.
SENATOR THERRIAULT asked Mr. Gamble to discuss the language
beginning on page 2, line 31, about issuing bonds and what kind
of commitment the state would get from the federal government.
His concern springs from a conversation with Ms. Lindskoog about
wanting to assure the general public that the railroad's assets
are not going to be on the line for the repayment of the bonds.
The [Legislature] cannot go forward unless the contracts have
been signed.
MR. GAMBLE said the underwriters would buy the bonds, only if
they are assured, and turn around and sell them. The government
has a natural AAA rating, which would result in a very favorable
interest rate. In combination with ARRC's tax-free capability,
that package becomes a very attractive bond issuance. The
preliminary word he has gotten from those who do large bond
deals is that this bond sale will go very favorably. He noted
that Senator Therriault made an excellent point: unless ARRC
gets a guarantee that the debt service is committed for the life
of the bond issuance, there will be no deal. The difference is
that this is not a guarantee based on an annual appropriation.
The funds would come out of O&M to pay the freight to a military
base every single year, similar to paying your light bill. He
brought attention to the housing project at Elmendorf as another
example of a long-term state/federal agreement that is a 50-year
commitment for a privatization partnership.
SENATOR THERRIAULT commented that the military would pay for
transport of the troops, equipment, and so forth. He asked if
the railroad would be dependent on the military actually
transporting enough freight to make the payment, or would the
military basically commit to a minimum payment of ARRC's annual
obligation for the bond.
MR. GAMBLE said the latter. It would make a level payment on an
annual basis and commit for the life of the bond issuance.
That's a negotiable item, depending on whether ARRC wants a 15,
20 or 30-year bond.
CO-CHAIR COWDERY said authorizing ARRC to go forward doesn't
guarantee anything other than the legislature's authorization.
MR. GAMBLE said it authorizes him to go forward and give the
[military] assurance that after all agreements have been made
and they've committed in their budget cycle, the legislature
won't step up, change its mind, and say no.
CO-CHAIR COWDERY said that was his point.
MR. GAMBLE said this pre-authorizes with a trigger as discussed,
which says that if [the debt] is not payable, then the deal
doesn't happen.
SENATOR WAGONER asked if $500 million is the total cost.
MR. GAMBLE said it is all-inclusive.
SENATOR WAGONER asked if the railroad's right-of-way is 200-feet
along the entire length except in locations where a storage yard
or other support facilities are needed.
MR. GAMBLE said it has the standard railroad right-of-way.
SENATOR WAGONER asked if any portion of the rail bed has been
put down yet.
MR. GAMBLE indicated that it hasn't.
SENATOR WAGONER said in Canada the railroad extended some
portion of [its bed].
MR. GAMBLE said the [Canadian railroad] built a bed but no rails
are on it.
SENATOR THERRIAULT asked Mr. Gamble to walk the committee
through the right-of-way acquisition process.
MR. GAMBLE responded that on the plus side, most of the right-
of-way is on government land. On the minus side, there is some
private right-of-way land. The closer you get to Fairbanks, the
more that becomes an issue. ARRC is trying to create a 79 mph
rail line, so avoiding curves and switchbacks, which the rail
line was traditionally made of, would be desirable. ARRC wants
to build the line for high speed and as straight as possible,
and wants to get toward the river, away from agricultural,
private, or potential land use issues. It would cross the river
at the bridge and extend down the far side of the river to
Delta, then come back across the river and go into Ft. Greeley.
He said he has not looked at every foot of this route but the
vast majority of the land is government property.
CO-CHAIR COWDERY asked if he was referring to state or federal
government property.
MR. GAMBLE said both, and he could get more information on that.
SENATOR THERRIAULT said he represents part of the district just
south of Eielson Air Force base, and the community of Salcha
where the river comes in close to the hills and everything is
"squeezed together." He said there would be some concern about
how the rights-of-way are secured through that area. That area
has had problems with river erosion and flooding, and he can see
the potential for the rail bed to act as a bit of a dike to help
with some of the flooding problems. He expects to hear concerns
from the citizens there.
MR. GAMBLE said the next level of engineering design, which will
come with an appropriation from Senator Ted Stevens in 2005,
will include the preliminary design and engineering. ARRC is
interested in looking at putting the rail bed on a dike as part
of the flood control project. This would also get it off of
private land and kill two birds with one stone.
SENATOR LINCOLN referred to the language on page 2, line 7, that
says the corporation may also acquire land along the corridor
that can be developed for terminal station maintenance
facilities, switchyards, and any other purposes associated with
the railroad corridor. She asked about acquiring land beyond
the 200-foot corridor, how much land is being considered, and
what the other purposes would be.
MR. GAMBLE said the best example is the opportunity to buy land
to use for gravel pits, the materials that would form the basis
of the rail bed itself, mine the gravel on those sites, and
reduce the transportation cost to the line itself.
SENATOR LINCOLN asked, regarding the EIS being more stringent
when crossing waterways, if there is any time/date when the EIS
might be completed and how this might affect what's being
attempted.
MR. GAMBLE replied that for a project like this it's safe to say
it might be a yearlong process that would involve public input.
It's not an unfamiliar piece of land in terms of previous
studies, which the environmental impact statement (EIS) could
take advantage of to move the process along. He didn't know if
an (environmental assessment) EA or an EIS will be required, but
guessed an EIS will.
SENATOR LINCOLN said in talking about the various municipalities
that he has not yet talked with, he didn't mention Delta. She
asked if Delta is an important entity on his list.
3:34 p.m.
MR. GAMBLE confirmed Delta is at the other end of this extension
and is a major stakeholder. He said he needed to talk to Delta
officials because, if they hear about it inaccurately, they
could get the idea that Delta will lose something. In this
proposal Delta becomes just as big a winner by bringing rail
into the town, so a number of things will improve automatically.
A missile field is a very fragile thing and anybody in the
business, particularly in the strategic defense business, knows
that you're one treaty away, one signature on a piece of paper
away from the whole thing ending. That's the nature of the
business. You deal with another country and you say as a part
of the negotiations, "Okay, we'll take our field down and if you
promise not to launch your missiles, we'll take our missile.
It's all treaty, diplomatic, and politics, and so on." The
bubble could pop and Delta will be left exactly where it was.
If ARRC extends the rail line, Delta will have an opportunity
for a lot of business. The railroad will bring in fiber optic
communications, which Delta doesn't have. The military will
bring in technical support people and put headquarters in Delta,
with big dish antennas as it does at other ranges in the Lower
48. Tourism will come - hunters, fishermen, and miners. Typical
of any railroad town is that it will grow. That is the promise
to Delta.
SENATOR LINCOLN referred to the 79-mile area, and asked if any
Native corporations, village and/or regional, will be involved
in any segment of that 79-miles.
MR. GAMBLE said he couldn't talk to specifics, but the answer is
yes. He said this is still a concept that is being put
together, and part of the homework of taking it from the concept
to the proposal level would be to look at exactly that.
SENATOR LINCOLN asked if it was necessary to put the Greeley-
specific segment in the bill rather than use broad language.
She asked if that language was needed in [Washington] D.C.
SENATOR LINCOLN clarified that she was referring to the language
on page 2, lines 2 through 12. She asked if that language must
be included to secure the bond.
MR. GAMBLE replied that "Ft. Greeley" is appropriate because it
is at the end of the extension. Delta is a little bit short of
the end. For physical purposes, a description to Ft. Greeley is
appropriate. Second, by including it, this document could be
taken forward to the missile defense command people as proof
that the Legislature's specific intent is to improve the bond
capacity for the purpose of extending the rail line to Ft.
Greeley.
SENATOR THERRIAULT asked if it is envisioned that the track
would extend from the southern portion of the track on Eielson
Air Force Base or start in the Moose Creek area.
MR. GAMBLE replied at Moose Creek. He said that Eielson would
remain as a spur for purposes of coal to the power plant. The
defined piece would be Moose Creek to Greeley.
SENATOR THERRIAULT said he was asking because of the agriculture
area west of Eielson, where a possible rail right-of-way was
platted through many of those farms. He asked if that right-of-
way was already secured by the railroad.
MR. GAMBLE said to his knowledge there are no secured properties
other than the right-of-way upon which the spur goes into the
power plant.
SENATOR THERRIAULT anticipated some sensitivity [of residents]
because the line might bisect some fields; he cautioned the
railroad would need to proceed with some caution.
MR. GAMBLE said ARRC engages in a very involved public dialogue
when a project is done. Typically, even at the concept stage,
the project gets local very fast. After approval, the next step
would be community outreach, taking input, and maneuvering if
needed. That process would be important in this case. He
acknowledged that he is presenting a concept because it's late
in the game and two budget cycles are out-of-synch, so he is
asking for pre-approval. He repeated the public involvement
process is lengthy, involved, and very detailed.
SENATOR THERRIAULT asked if ARRC has had any discussions with
Tech-Pogo regarding the benefits the rail line would extend to
the mine.
MR. GAMBLE said no, and he looks forward to it. That's the kind
of thing that rail line extensions do, regarding the opening up
of opportunities.
SENATOR WAGONER said early on Mr. Gamble mentioned that instead
of the military having to build quarters for housing, military
personnel could live in Fairbanks. He asked if the train
commute would be about an hour from Fairbanks to Ft. Greeley.
MR. GAMBLE replied that it would be about 75 to 90 minutes.
SENATOR WAGONER asked if the military would be comfortable
having its personnel that far removed from Ft. Greeley.
MR. GAMBLE replied that the project was born originally because
ARRC had always thought the idea was to use freight cars to
support the missile field to move the missiles and so forth.
But ARRC was really asking the wrong question. The question
was, "Where is everybody going to live?" It turns out there is
quite a difference of opinion right now amongst different
organizations within the Department of Defense; however, the
Alaska National Guard is in agreement on that question. Craig
Campbell was with him at the meeting on Tuesday and is adamant
about wanting Alaska guardsmen to live in Fairbanks and North
Pole, where they would have choices about health care, schools,
jobs for spouses, and so forth. He said if this question were
turned around, and it was assumed that military personnel would
live on base in Delta or Ft. Greeley, the scenario is that of
the young housewife with a few kids who has to drive a two-lane
road at 50 below zero to take the kids to the dentist. General
Campbell doesn't want to subject guardsmen to that. He doesn't
think he could recruit and retain people in that area, even with
the amount of money the [U.S.] Army is willing to put into the
fort itself.
SENATOR WAGONER asked if the National Guard would be in charge
of missile defense.
MR. GAMBLE said it would. Once the project is tested and is
declared operational, it will be turned over to the National
Guard. The first battalion commander to take command at Ft.
Greeley will be a National Guard commander.
SENATOR THERRIAULT said he understood the National Guard's
concern. He said there is a long-term benefit to Delta, and he
doesn't want this to be perceived as the pipeline that would be
taking everybody and their paychecks north. He expressed
skepticism that a high-speed commuter rail would transport
everybody north in the evening.
MR. GAMBLE said the military is more likely to have shift work
where personnel would spend three days on and three days off.
However, the rail line is capable of running several cycles a
day. He said ARRC wants to open up commuter service to anybody.
The military would probably have a smart car to swipe because of
the contract nature of the agreement with them. Anybody else who
wants to go from Fairbanks to Delta would have the same rights
and privileges to ride the railroad. He said it is important to
convince Delta that steady and long-term economic growth is
substantive and would endure as opposed to relying on a short-
term bubble. That's the nature of the business, and even their
commander admitted to that.
SENATOR WAGONER said he has very good friends who work in
military situations, and the jobs aren't 8 - 5 for the most part
when they're in silos, switching centers or computer message
centers.
TAPE 04-21, SIDE B
SENATOR THERRIAULT said with the addition of the bonding
component, he would have to add a Senate Finance Committee
referral to the bill. That referral will give ARRC more time to
work with some of the communities and assess their concerns, and
to see what can be done to allay any fears that they have before
the bill comes up on the floor.
SENATOR THERRIAULT moved to report CSSB 395(TRA) from committee
with individual recommendations, and said it is his intent to
add a Senate Finance Committee referral to the bill.
MR. GAMBLE said he had one more point to express. He said that
normally, for a project like this, ARRC would begin with the
communities first. A community outreach process would be in the
preliminary stages. However, because of the nature of the Army's
own budget process, the short time remaining, and the idea that
an entire year could be saved on this project if it found favor
in Juneau, ARRC put the cart before the horse. It clearly has
upset some people, rightfully so, and he apologized for that.
It is a concept, and ARRC thinks it has value. As a result of
being out-of-synch with the normal process, ARRC has subverted
its own process and is paying a price for that with
misperceptions. He said he appreciated the committee's
consideration given the circumstances.
CO-CHAIR COWDERY announced, "Hearing no objection, the bill
passes to the next committee of referral." There being no
further business to come before the committee, he adjourned the
meeting at 3:50 p.m.
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