Legislature(1999 - 2000)
02/11/1999 09:10 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
GENERAL SUBJECT(S): OVERVIEW: Alaska Railroad
by Governor Bill Sheffield
The following overview was taken in log note format. Tapes and
handouts will be on file with the Senate Finance Committee through the
21st Legislative Session, contact 465-2618. After the 21st
Legislative session they will be available through the Legislative
Library at 465-3808.
Time Meeting Convened: 9:10 A.M.
Tape(s): SFC-99 #27, Side A (000 - 587)
Side B (587 - )
PRESENT:
x
Senator Parnell
x
Senator Adams
x
Senator Torgerson
x
Senator P. Kelly
Senator Donley
x
Senator Green
x
Senator Leman
x
Senator Phillips
x
Senator Wilken
ALSO PRESENT: GOV. BILL SHEFFIELD; JOHN BINKLEY, CHAIRMAN, ALAKSA
RAILROAD;
LOG
SPEAKER
DISCUSSION
000
JOHN BINKLEY
Chairman of the Board for Alaska Railroad was
invited to join the committee.
He noted this was becoming an annual event and
was important to have a dialogue with the
Senate Finance Committee.
044
Introduced Governor Sheffield to make actual
presentation. (President and CEO) Most people
know the Governor because of his political
career. Owned and operated large hotel chain
in the State. Has excellent understanding of
the political scene, which helps balance with
the Alaska Railroad.
069
GOVERNOR SHEFFIELD
Was invited to join the committee. He
referrerd to the colored handout by the
railroad. The Alaska Railroad is a public
corporation.
The railroad has many 30-year employees. He
felt they had an excellent team. They are
audited every year by one of the largest
companies; also a performance audit.
110
Briefly explained performance and operating
audit.
Expects that 1999 and 2000 will be a little
tougher due to oil company layoffs and less
freight.
Anticipates a downward trend in freight hauling
as of this year. Barges are presently full
coming out of Washington State.
Have done homework and able to deal with blips
of the economy.
$140 million has been put into improvements.
There is an aggressive maintenance program to
help them stay efficient.
1998 highlights: safety is number one concern.
23% reduction in employee injuries.
Heavy freight coming south. Reinforced ties
and put in extra ballast.
$30 - $40 million into maintenance.
Replaced 100,000 more ties.
Increased passengers and freight reveues with
an estimated net earning of $9 million.
Goals for 1999 another 25% drop in injuries,
cut expenses to meet potential drops in freight
volumes, increase and diversify passenger
business.
Smooth out ups and downs in real estate master
plan. Explained real estate plan which will
bring in more revenue for the railroad.
219
Transportation is fifth in the national
economy. It is an ambitious program,
especially in Alaska.
Will be a lot of money cominginto the state for
transportation.
New locomotives, new depots, track
straightening, airport terminal design, roadbed
maintenance all included in the 1999 - 2000
capital plan. $75 million in railroad revenues
and Federal funds will be used. No State funds
or taxes will be used.
250
Explained projects in Seward and Whittier.
Seward will have a new port to accommodate
passengers and the State ferry dock.
Will share in revenues of projects in Whittier
in about five to seven years.
Pedestrian overpass from depot to main part of
town (Whittier).
267
Safety issue for the city of Whittier.
He explained changes in the Denali depot and
more changes in the park. Have been working
with the Parks service. Bigger, longer depot
which will accommodate longer trains from 17
cars to 25 cars.
Fairbanks has new intermodal facility, depot,
bus parking. It will be a more efficient
facility. Getting close to beginning work on
this project. This will help railroad service.
295
Motive power: Ready to receive new
locomotives. Will take delivery of 16 new ones
between this past November to April. Will have
more power. Will start to see some savings.
Have paid half cash out of their own earnings.
309
The new locomotives have better fuel
efficiency, cleaner air, are equipped with GPS
and computer dispatching.
Anchorage International Airport is their
centerpiece. It will allow them to move
passengers from Seward and Whittier into the
airport facility. Anchorage will have new
depot to handle the tourists from the cruise
ships.
Can provide commuter service from Palmer and
Wasilla.
There will be considerable construction on
tunnel and elevator tracks; escalators that
will go into a moving sidewalk. This will be a
beautiful addition to the Anchorage Airport.
Train station will be on top. Within three to
four years will be able to move lots of people.
Will cut running time from Wasilla by 17
minutes.
Help freight and passenger service. Crews only
work 12-hour shifts.
366
Helping to make the railroad better.
Hopes to go into Canada. Refers to 1977 study
268 miles from Ft. Rich to Fort St. John.
Railroad from Chitna.
Missile site in Delta/Ft. Greely will expand
the railroad spur into that area to deliver
missiles.
Gold mine and Pogo Mine will also require spur.
Plates to eat from for the next couple of
years.
405
Future bright for the State and the Alaska
Railroad.
407
SENATOR LEMAN
Asked about real estate operations? How much
revenue secured?
GOV. SHEFFIELD
Transportation services and railroad brought
money to the State last year and will continue.
More income from real estate also.
Transportation doing more business and bringing
more money; has taken over from real estate,
about 60% - 40%.
SENATOR LEMAN
Asked about Federal funds and how much from
railroad operations?
GOV. SHEFFIELD
Refers to normal capital budget. About $15
million/year into the capital budget. Some
back into maintenance. Last few years $10
million from Federal government going into road
bed, new switches, new safeguarding controls,
ties and ballast.
Couple of years ago was about even 50 - 50.
Are getting more Federal dollars now. Taking
part into TEA-21. All money in the bank for
the railroad system.
(9:40 a.m. Senator Donley arrived.)
SENATOR LEMAN
GOV. SHEFFIELD
Monies for Federal match come from railroad
funds.
SENATOR WILKEN
1987 - 1988 railroad vs real estate
operations.
Asks freight increase or decrease for 1999;
also passenger projections.
GOV. SHEFFIELD
Looking at about a 20% increase in passenger
services revenue for 1999. Increase in freight
at about the same. Some things hinge on this,
however. MAPCO project will start in April.
Market was not available in November. Could
however start as early as March. Inline
freight may be down this year, but do not know
how much at this time. Keeping constant vigil.
Covered with potential budget cuts. Last year
only hauled 290,000 tons of coal; should have
delivered up to 800,000 tons. Re: Lack of
coal.
Newspapers report railroad has coal contract,
however at this point they do not. Hauling
Healy to Seward. They are at about half of
previous years.
486
No coal hauled from Seward since November.
Ship is now on its way into Seward. May haul
about 700,000 tons this year. May be lower
hauling price in 1999 than in 1998.
Does not want to lose coal contract because
they will not be able to get it back. Can use
small margin of profit for track repair.
Usibelli Mine.agrees they need to keep the coal
contract. Will keep this contract as long as
they can. Hopes to sign contract by next week.
JOHN BINKLEY
Monthly financials; management come-back each
quarter with revised budgets. Dynamic business
and markets changing all the time. Do not want
to be surprised with any changes. Therefore do
adjustments each quarter.
SENATOR WILKEN
Railroad doing all to keep contract in coal?
GOV. SHEFFIELD
Yes.
SENATOR WILKEN
Explains his wharehouse in Fairbanks center.
Obtained in 1980. Under new management of the
railroad now doing better. Yard cleaner, more
organized, relationship with railroad and
tenants greatly improved. Glad to see
expansion plans. Wanted to report this to the
committee.
SENATOR PHILLIPS
What happens to old locomotives being replaced?
GOV. SHEFFIELD
Will lease out locomotives in lower '48.
Passenger service out of Anchorage going south
will still use old locomotives. Phasing out
old and bringing in new.
SENATOR PHILLIPS
What about Y2K?
GOV. SHEFFIELD
Wayne Wiley in charge of computers and has been
involved in the Y2K. Are doing everything they
can do.
JOHN BINKLEY
Testing vendors; this is concern. Thought they
were compliant but found they were not.
SENATOR PHILLIPS
Refers to Kennicott and it not being compliant
but they did not know until after the ferry
came on line.
GOV. SHEFFIELD
Alaska Railroad only railroad in U.S. with GPS
system and fully computer dispatched.
JOHN BINKLEY
Each locomotive will transmit exact location of
equipment.
GOV. SHEFFIELD
Waiting for completion of study regarding GPS
system.
(Tape #27 switch to side B at log 587, 9:55
a.m.)
CO-CHAIR TORGERSON
Auditor recommends passing.
GOV. SHEFFIELD
Has spoken with auditors. Has flexibility to
run business freehanded at this moment. Do
come under the State's ethics laws and State's
procurement laws. Legislative Budget and
Audit; their own checks and balances. However,
if they come under Executive Budget Act would
not have this flexibility.
Worked a long time on a scheme with ARCO
hauling scrap out of Fairbanks. Haul pipe on
gondola cars to Fairbanks and then scrap out.
Had to spend nearly a million dollars to
purchase special forklift to lift pipe off cars
on to the ground and then on to high boys for
transport to Prudhoe Bay. If they did not have
this flexibility to purchase the equipment
necessary could not have done this project.
Could not enter into contracts. Special
benefits to Fairbanks. Could not borrow money
from bank. Has elaborate line item budget
system. Keep trying to improve this system.
543
Want to be different than they used to be. Are
open to anything the Legislature wants to know.
All you have to do is ask. Earnings are going
to decline. Increase in revenues will come
from efficiencies. Will have better railroad
in future.
CO-CHAIR TORGERSON
Refers to the budget document. Especially cash
settlements. Railroad appeared to rely heavily
on "buying their way out of trouble". This is
a bad precedent. Assumed railroad has deep
pockets. Urges railroad to be aware of
precedent they may be setting.
GOV. SHEFFIELD
LB&A report also gave them some praise as to
doing things differently today as compared to
previously.
Refers to Ship Creek. Lease was up. Did not
renew or extend lease. Nothing happened over
five years. Lots of negotiations, some face to
face meetings. Some here and some in Detroit.
They sued him. Make some decisions and some
things do not always turn out. However,
decision at time was made in good faith. Sued
him to get off property. Got outside attorney
to help them. Made the decision to pay
$250,000 to be rid of lease rather than go into
Court and time-consuming lawsuit. Now have
master plan for Ship Creek. There are people
wanting to come in and operate under this new
master plan who are really interested. In five
to seven years will also see Ship Creek
developed and in full operation. If had gone
to court this would not have happened.
There are other cases. Early retirements were
expensive. Made changes in resources. Bob
Hatfield retired. Rules and regulations were
changed at that time. Do not have them anymore
on their books that they would be obligated to.
JOHN BINKLEY
"There is no parachute on the Governor's back."
GOV. SHEFFIELD
Earnings are rather fragile. Trying to make
them less fragile at this time.
470
SENATOR LEMAN
Relationship with Ft. Rich and Elmendorf?
GOV. SHEFFIELD
Will always have to operate railroad. Have
been working with them. Have helped with signs
on Government Hill. Government Hill council
comes to their board meetings.
SENATOR LEMAN
How are you doing with the moose?
GOV. SHEFFIELD
Doing well. Haven't hit high water mark of
years ago. Communities have also helped out.
Not been as much snow as in recent years. Do
not want to hit moose anymore than anyone else.
Delays trains for about 3 - 4 hours. However,
they just won't move off the track. Doesn't
know what the count is this year, but it is
less than 100.
438
SENATOR DONLEY
Mitigation in increase in railroad
transportation and undertaking on "C" street?
GOV SHEFFIELD
Explains phase; Tudor into international
airport. Next year will provide overpass from
"C" street.
SENATOR DONLEY
Which one goes over?
Railroad goes over via build-up. Does not know
much about the design. However, traffic will
allow for overpass.
SENATOR DONLEY
Asked if was possible to work with Department
of Transportation on the new east-west
corridor?
GOV. SHEFFIELD
Have discussed this with Department of
Transportation and are working closely for this
corridor. Tom Brooks specifically working on
this project with DOT.
About 4 trains a day and will save on traffic.
SENATOR DONLEY
Monies from AMATS?
(pause for laughter)
CO-CHAIR TORGERSON
Thanks Gov. Sheffield for coming in and gave
good overview.
GOV SHEFFIELD
Appreciates question and time spent before the
committee.
CO-CHAIR TORGERSON
Took a brief recess to get ready for bill
hearing.
SENATE FINANCE COMMITTEE
LOG NOTES
02/15/99
SFC-99 -1- 2/11/99
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