Legislature(2023 - 2024)BARNES 124
02/16/2023 01:00 PM House TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Overview: Alaska Railroad Corporation | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
February 16, 2023
1:02 p.m.
MEMBERS PRESENT
Representative Kevin McCabe, Chair
Representative Sarah Vance, Vice Chair
Representative Tom McKay
Representative Craig Johnson
Representative Jesse Sumner
Representative Genevieve Mina
MEMBERS ABSENT
Representative Louise Stutes
COMMITTEE CALENDAR
PRESENTATION(S): OVERVIEW: ALASKA RAILROAD CORPORATION
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
BILL O'LEARY, President, CEO
Alaska Railroad Corporation
Anchorage, Alaska
POSITION STATEMENT: Gave a PowerPoint presentation on the
Alaska Railroad Corporation.
ACTION NARRATIVE
1:02:51 PM
CHAIR KEVIN MCCABE called the House Transportation Standing
Committee meeting to order at 1:02 p.m. Representatives Vance,
Mina, McKay, and McCabe were present at the call to order.
Representatives C. Johnson and Sumner arrived as the meeting was
in progress.
^PRESENTATION(S): Overview: Alaska Railroad Corporation
PRESENTATION(S): Overview: Alaska Railroad Corporation
1:03:40 PM
CHAIR MCCABE announced that the only order of business would be
the Alaska Railroad Corporation presentation.
1:04:17 PM
BILL O'LEARY, President and CEO, Alaska Railroad Corporation
(ARRC), gave a PowerPoint presentation on the Alaska Railroad
Corporation [hard copy included in the committee packet]. He
began on slide 2, which highlighted the measures taken by ARRC
to maintain safety, service, and profitability. He stressed
that safety is the first priority. He moved to slide 3, titled
"Quick Facts," which covered ARRC's organization following state
purchase, operating data, operating statistics, and employees.
He stated that this slide is critical, as it explains how ARRC
works. He explained that it is a state-owned entity but self-
sustaining, like private industry. He added that currently no
state general funds support the railroad, and none of the
employees are state employees. He moved to slide 4 and slide 5,
pointing out the chart showing the net income for the past ten
years, up to fiscal year 2022 (FY 22), which has not yet been
finalized.
1:10:53 PM
MR. O'LEARY, in response to a committee question on the change
in revenue for FY 16 and FY 17, stated that some of ARRC's
revenue sources have changed and fallen over the last eight to
nine years, and this has resulted in some staff layoffs. He
noted that in FY 16 ARRC stopped receiving some grant funds;
however, it received double the amount in FY 17. He noted the
change in revenues in FY 20 due to the COVID-19 pandemic.
1:13:18 PM
MR. O'LEARY moved to slide 6 and discussed passenger operations,
which is provided year-round. He added that most passengers
travel in the summer, but the winter months travel has been
growing. He pointed out on the graph the number of train cars
owned by the cruise ship industry partners. He noted the impact
on the cruise ship traffic during the pandemic and expressed the
expectation that FY 22 would show improvement.
1:15:04 PM
MR. O'LEARY, in response to a committee questioned concerning
the high net income of FY 21, stated that this is partly from
federal grant funds, as these funds have been used for capital
activities and some passenger services activities. He added
that this was also due to tightening the cost structure, and the
unexpected rise in passengers and freight in 2021.
1:16:36 PM
MR. O'LEARY moved to slide 7, discussing the future addition of
specialty passenger trains for Alaskans, such as holiday trains,
beer trains, and ski trains. He moved to slide 8, pointing out
that the freight operations are the bulk of the operations;
however, the tonnage the ARRC carries has dropped over the
years. He noted that one reason for the drop is the downturn in
the coal-exporting industry.
1:19:11 PM
MR. O'LEARY, in response to a committee questioned concerning
what goes into the "other" freight category, stated that this is
the "catch all" category, which includes transportation for the
military and moving rock, for example.
1:19:52 PM
MR. O'LEARY moved to slide 9 and addressed ARRC's future freight
service. He stated that moving liquified natural gas (LNG) is a
project that is being pursued. He discussed the interline barge
service that is done in conjunction with the barge industry. He
described this as an efficient way of moving things, as it is a
way of connecting with the railways in the Lower 48. He
suggested that moving freight offers a strong market for ARRC.
MR. O'LEARY moved to slide 10 and discussed ARRC's real estate
holdings. He stated that when the railroad was transferred from
the federal government to the state, it came with 36,000 acres
of land. He noted that most of the land is used in operations,
while some is leased out for other purposes. He pointed out
that this is a consistent piece of revenue for the railroad,
adding that ARRC has also participated in some land trades with
other entities. He moved to slide 11, titled "Wetlands
Mitigation Bank." He stated that ARRC is one of the first state
entities to put this bank into place. In respect to this, he
discussed the plans concerning the area around the Seward
Highway.
MR. O'LEARY, on slide 12, expressed the opinion that the amount
of capital that ARRC has reinvested into the organization and
its infrastructure is a good metric of success. He stated that
this reinvestment has been driven by the federal monies
available, and the internal funds generated. He moved on to
slide 13, titled "ARRC Whittier Terminal Master Planning." He
pointed out that Whittier is a key piece of ARRC's operation, as
it is the location of the rail-barge facility. He noted that
the master plan for Whittier is currently being updated using
mostly federal funds.
MR. O'LEARY moved to slide 14 and discussed the investments ARRC
is making in Seward's infrastructure. He stated that the
railroad has significant holdings in Seward and discussed the
three docks there. Moving to the next slide, he stated that
ARRC is looking to put around $200 million into the Seward
passenger and freight docks in the next five years. The
passenger dock is key because of the tourist industry, not only
for Southcentral Alaska, but for the Interior as well. He
discussed how the current passenger dock in Seward is reaching
the end of its life, as seen on slide 16. The plan is for ARRC
to take ownership and finance the new dock. He moved to slide
17 and discussed the expanded Seward master plan, which is in
combination with the Royal Caribbean Group. He added that the
plan is to fund this with tax-exempted bonds, as this would not
in debt the state; however, the legislature would need to
authorize the bond's increase from $60 million to $150 million.
1:35:08 PM
MR. O'LEARY, in response to a committee question concerning any
results to the state if the bond increase is approved, stated
that there would be no cost to the state, only a benefit of the
increased economic development. He expressed the understanding
that the cruise industry has the desire to grow in the Seward
area. In response to a follow-up question, he stated that the
master plan for Seward involved extensive public and city
government input. He expressed the understanding that
resolutions of support for the plan will be given from the city.
MR. O'LEARY, in response to a committee question, stated that if
ARRC is not eligible for the bond expansion, it has explored
other paths forward. He expressed the opinion that if the tax-
exempt funds are not available, the financing would look "brutal
and ugly," as it would be done with a much higher interest rate
over a longer period of time. In response to a follow-up
question, he stated that the reworked master plan includes one
larger dock and one larger terminal building, and this would
meet the needs of larger ships. He responded that this would
not include the new freight dock, as this project would not
occur until 2027 or 2028.
MR. O'LEARY, in response to a committee question concerning
whether the Royal Caribbean Group is putting any funds into the
project, stated that raising the tax-exempt bond amount would be
the most cost-effective way to do the project. He stated that
ARRC is in the process of making a long-term agreement with the
Royal Caribbean Group. In response to a follow-up question, he
stated that other entities would be using the dock, as this
would be the premier dock in Southcentral. He added that the
new freight dock would be designed for use by the Alaska Marine
Highway System.
MR. O'LEARY, in response to a committee question concerning the
number of passengers this would accommodate, stated that the
plan is for quantum-class ships to arrive in 2025; therefore,
the bond legislation would need to pass during the current
legislature. He reiterated that the cruise industry is
motivated to expand in Alaska.
1:44:06 PM
MR. O'LEARY moved to slide 18 and addressed the Seward freight
dock's status. He stated that ARRC will receive a federal grant
of about $20 million for the project. On slide 20, he noted
that other than these projects, the railroad still must be
maintained, and this requires the use of its revenue. He
discussed the ARRC's five-year capital investment plan, which
has a projected cost of $500 million, and this would be for
deferred maintenance.
MR. O'LEARY moved through the next slides and addressed the
capital projects outside of the five-year plan. On slide 23, he
provided that one of these projects is the Northern Rail
Extension, which would connect North Pole with Delta Junction.
He stated that the project has four phases. Phase one has been
completed, but the funding has since dissipated. On slide 25,
he discussed the Port MacKenzie Rail Extension project, of which
this funding has also dissipated.
1:49:46 PM
MR. O'LEARY, in response to a committee question concerning
transporting LNG, confirmed that if the Port MacKenzie Rail
Extension project was completed, LNG tanks could be transported
to Fairbanks from Port MacKenzie.
MR. O'LEARY moved to slide 26 and addressed how the railroad
corridor is managed. He pointed out that the corridor is
incredibly valuable, as it covers roughly 14,000 acres and is a
safety buffer for rail operations. He stated that, as it is
valuable, ARRC is looking to make it available for other uses,
such as for crossings and utilities. He moved to slide 27 and
discussed the permit application process for this. He pointed
out that this land ownership is also an asset which allows ARRC
to be self-sustaining.
1:53:52 PM
MR. O'LEARY, in response to a committee question on slide 26,
stated that the application process was created to be cost
neutral for ARRC. In respect to the corridor management, he
stated that ARRC looks to have fair market value on this.
MR. O'LEARY, in response to a committee question concerning
whether the railroad owns the land, stated that ARRC owns the
land, but the railroad is fully owned by the state. In response
to a follow-up question, he stated that the fair market value
would be determined by appraisers who are [Members of the
Appraisal Institute]. He added ARRC would also investigate the
value of adjoining pieces of land. He suggested that the
corridor itself could be appraised for a better understanding.
He expressed the opinion that fair market value is a difficult
thing to "pin down."
MR. O'LEARY, in response to a committee question concerning why
ARRC is not in the Alaska Executive Budget Act, stated that this
is because the railroad is charged with acting as a business,
and a static business approach would not serve a free-market
enterprise.
1:58:35 PM
MR. O'LEARY moved to slide 28 and suggested that the railroad is
a key asset for a state that is lacking in basic infrastructure.
He asserted that ARRC "works hard" to make sure it is
financially healthy and serves the residents of the state. He
moved to slide 29, pointing out ARRC is now 100 years old.
2:00:47 PM
MR. O'LEARY, in response to a committee question concerning
HAZMAT [hazardous materials] that the railroad might transport,
reiterated that ARRC takes safety seriously. He stated that a
large amount of petroleum product is carried on the railroad.
He pointed out that the railroad is regulated, with regular
drills on safety. He expressed the opinion that ARRC is
prepared for the unexpected, as its safety record continues to
improve.
2:03:56 PM
CHAIR MCCABE thanked him for the presentation.
2:04:24 PM
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 2:04
p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Alaska Railroad Presentation to (H)TRA 2.16.23.pdf |
HTRA 2/16/2023 1:00:00 PM |
Alaska Railroad Presentation to (H)TRA 02.16.23 |