Legislature(2009 - 2010)SENATE FINANCE 532

03/17/2009 09:00 AM Senate FINANCE

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09:06:36 AM Start
09:08:24 AM Alaska Railroad Overview
10:05:36 AM SB75
10:46:46 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation on the Alaska Railroad TELECONFERENCED
Corporation, by Patrick Gamble, CEO
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
Department of Commerce, Community and
Economic Development
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 17, 2009                                                                                            
                          9:06 AM                                                                                               
9:06:36 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Stedman called the Senate Finance Committee                                                                            
meeting to order at 9:06 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Charlie Huggins, Vice-Chair                                                                                             
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
MEMBERS ABSENT                                                                                                                
Senator Johnny Ellis                                                                                                            
ALSO PRESENT                                                                                                                  
Senator Gene  Therriault; Patrick  Gamble, President  & CEO,                                                                    
Alaska Railroad  Corporation; Bill O'Leary,  Chief Financial                                                                    
Officer, Alaska  Railroad; Amanda Ryder,  Director, Division                                                                    
of   Administrative   Services,  Department   of   Commerce,                                                                    
Community and Economic Development;                                                                                             
PRESENT VIA TELECONFERENCE                                                                                                    
Alaska Railroad Overview                                                                                                        
SB 75     "An Act making and amending appropriations,                                                                           
          including capital appropriations, supplemental                                                                        
          appropriations, and appropriations to capitalize                                                                      
          funds; and providing for an effective date."                                                                          
^Alaska Railroad Overview                                                                                                       
9:08:24 AM                                                                                                                    
PATRICK   GAMBLE,   PRESIDENT   &   CEO,   ALASKA   RAILROAD                                                                    
CORPORATION,   provided   members   with   a   power   point                                                                    
presentation, "About the Alaska  Railroad, March 2009" (copy                                                                    
on file).                                                                                                                       
BILL  O'LEARY,  CHIEF  FINANCIAL OFFICER,  ALASKA  RAILROAD,                                                                    
introduced himself to the committee.                                                                                            
9:10:28 AM                                                                                                                    
Mr.  Gamble  began  his  overview  of  the  Alaska  Railroad                                                                    
Corporation  (ARRC). He  stated that  employees of  ARRC are                                                                    
not  state  workers.  He  described  the  corporation  as  a                                                                    
private  enterprise transferred  to the  state of  Alaska in                                                                    
1985.  The  Alaska Railroad  Corporation  runs  as a  quasi-                                                                    
independent  organization with  the flexibility  and freedom                                                                    
to  operate  in  a  dynamic  business  world.  As  a  normal                                                                    
corporation,  the railroad  has  a mission,  a vision,  core                                                                    
values, goals,  strategies and staff  rules, but it  is also                                                                    
inextricably  tied  to  Alaska state  government  through  a                                                                    
board of  directors and by legislation.  The Alaska Railroad                                                                    
Corporation  has existed  under this  business model  for 24                                                                    
Mr. Gamble  turned to the  "Alaska Railroad Quick  Facts" on                                                                    
page  3 of  the power  point. He  pointed out  that employee                                                                    
numbers are dropping,  and the overall size  of the railroad                                                                    
is going  down. He  remarked that ARRC  pays for  a benefits                                                                    
program  out of  its own  earnings and  takes seriously  the                                                                    
responsibility to  keep the package whole  for its non-state                                                                    
employees over the long-term and upon retirement.                                                                               
Mr. Gamble  observed ways in  which ARRC differs  from other                                                                    
state agencies on page 4.                                                                                                       
9:12:46 AM                                                                                                                    
Mr. Gamble talked  about the three pillars  of the railroad:                                                                    
passengers,  freight,  and  the   36,000  acre  real  estate                                                                    
endowment.  The   Corporation  Act  of  1985   directed  the                                                                    
railroad to  operate on a  sustainable basis and  to develop                                                                    
the land given  to it to support  transportation assets into                                                                    
the future.  For example, the  organization could  never opt                                                                    
to  dispose  of state  land  outright,  and would  need  the                                                                    
approval  of the  legislature to  sell. The  Alaska Railroad                                                                    
Corporation chooses instead to lease  or trade land with the                                                                    
federal  government; it  negotiates  with municipalities  at                                                                    
rates  lower than  appraised property  values but  leases to                                                                    
private businesses at assessed worth.                                                                                           
Mr. Gamble  referred to graphs depicting  freight, passenger                                                                    
and real estate  revenue from 2004 to 2009.  He commented on                                                                    
the growth observed across all  three sources, and predicted                                                                    
a  flattening out  or downward  turn  in each  area for  the                                                                    
coming year.                                                                                                                    
9:14:32 AM                                                                                                                    
Mr.  Gamble touted  the chart  "ARRC Fund  Flow Model:  2008                                                                    
Data,"  as an  excellent pictorial  of the  dynamic flow  of                                                                    
money at the railroad.                                                                                                          
9:15:03 AM                                                                                                                    
Mr. Gamble cited the slide  "Overall Growth Pattern" with an                                                                    
increase in  total assets  between 2001  and 2008.  He spoke                                                                    
about  people  as  "faces,  spaces,  dollars  or  full  time                                                                    
equivalents"  (FTE).  He  elaborated  on  the  term  FTE  to                                                                    
account  for  capital  and  expense  employees  as  well  as                                                                    
overtime hours.  Mr. Gamble arrived  at the  FTE calculation                                                                    
by adding  the total  number of  hours of  everything worked                                                                    
and dividing  by 2080  (a year's worth  of work  at straight                                                                    
time hours).  He remarked that  the capital program  and FTE                                                                    
alongside have  grown considerably but expected  to see both                                                                    
eventually level off and start back down again.                                                                                 
9:16:22 AM                                                                                                                    
Mr.  Gamble spoke  about major  capital  projects under  the                                                                    
2009 program. He  addressed fund sources and  an overview of                                                                    
federal grant money received in  the past. The total capital                                                                    
budget  for  2009  is estimated  at  $138  million;  federal                                                                    
economic  stimulus   funding  will  likely  add   about  $26                                                                    
9:16:54 AM                                                                                                                    
Mr.  Gamble  turned  to  funding  by  way  of  the  stimulus                                                                    
package. He projected  the total amount of  increase to come                                                                    
to about $25,825,000. The money  issues from Formula Fund 49                                                                    
United States Code (U.S.C.) 5307,  which grants resources to                                                                    
urbanized  areas and  states for  transit related  purposes.                                                                    
Every passenger  railroad in  the country  is entitled  to a                                                                    
share; the  Alaska Railroad Corporation is  simply receiving                                                                    
its portion.                                                                                                                    
Mr.  Gamble mentioned  the possibility  of collecting  funds                                                                    
from the  $100 million energy program,  but the requirements                                                                    
for  eligibility  are  not  yet   clear.  He  described  the                                                                    
multimodal discretionary  fund as  a competitive  grant fund                                                                    
for which the  ARRC knows it can qualify.  The railroad will                                                                    
have to internally  compete with state entities  such as the                                                                    
Department  of Transportation  and  Public Facilities  (DOT)                                                                    
and the  ports for  a Congress approved  national allocation                                                                    
of between $20 and $300 million.  The sum divided by a count                                                                    
of  50  (states)  yields  an   approximation  of  the  total                                                                    
expected for Alaska. He explained  that the railroad plays a                                                                    
numbers game when  it tinkers with what  projects to include                                                                    
in an attempt to qualify for grants of this nature.                                                                             
9:18:55 AM                                                                                                                    
Mr. Gamble  summarized the categories where  ARRC spends its                                                                    
capital  money.  He  elucidated that  a  majority  of  funds                                                                    
support  safety-oriented construction  when the  corporation                                                                    
rebuilds the line  and finance the basic  building blocks of                                                                    
a railroad: ties, ballast, rock, etc.                                                                                           
9:19:13 AM                                                                                                                    
Mr. Gamble pointed out the  efficacy of the diagram entitled                                                                    
"Capital projects  started, continued  or completed  in 2009                                                                    
are  all  along  the  railroad."   He  emphasized  that  the                                                                    
represents the  huge workload to which  employees contribute                                                                    
no  matter   what  job   they  do.   He  commented   on  the                                                                    
considerable level  of effort  exerted by  the company  on a                                                                    
seasonal basis.                                                                                                                 
9:20:24 AM                                                                                                                    
Mr.  Gamble  informed  the committee  that  ARRC  leads  the                                                                    
nation  in  fielding  the first  Vital  Collision  Avoidance                                                                    
System in the  country. The company has spent  a dozen years                                                                    
and  invested  several   millions  on  developmental  safety                                                                    
technology  that Congress  just  recently  mandated for  all                                                                    
railroads carrying passenger  and hazardous materials. State                                                                    
railroads that  qualify must support an  operational control                                                                    
system by  2015. While  the lower 48  will struggle  to meet                                                                    
the  deadline, ARRC  has already  progressed to  the testing                                                                    
stage. The  railroad is in  good shape and will  safely meet                                                                    
the target date.                                                                                                                
Mr.  Gamble said  that the  system essentially  prevents on-                                                                    
track collisions  and reduces human error.  The multi-phased                                                                    
project arms  locomotives with  a Global  Positioning System                                                                    
(GPS)  locator  and links  on-board  computer  systems to  a                                                                    
dispatch server.  The communications network keeps  track of                                                                    
a  vehicle's   speed,  weight  and  relative   location  and                                                                    
computes safe stopping distance.  The computer takes control                                                                    
away  from  the  engineer  if   the  equipment  registers  a                                                                    
violation  not  corrected within  a  short  period of  time,                                                                    
applies the  brakes and  requires a  reset before  the train                                                                    
can continue.                                                                                                                   
9:22:31 AM                                                                                                                    
Mr. Gamble spoke  about the "1  Five  Year Plan, 2002-2006."                                                                    
He   introduced  it   as  an   intermediary   to  the   more                                                                    
comprehensive  strategic   plan  that   is  mailed   to  all                                                                    
employees. The forward of the  strategic plan summarizes the                                                                    
intent  of   the  railroad.   He  touched   on  methodology,                                                                    
productivity and employee satisfaction.  The First Five Year                                                                    
Plan  impacted ARRC  on  a tactical  level  and the  company                                                                    
began a budget to improve  areas such as pay, benefits, tool                                                                    
modernization, training, etc.                                                                                                   
9:23:43 AM                                                                                                                    
Mr. Gamble skimmed  the achievements of the  first five year                                                                    
plan.  He  explained that  in  2007,  the railroad  took  an                                                                    
intervening year  to evaluate and  build the next  five year                                                                    
plan, which spans 2008 to 2012.                                                                                                 
9:24:18 AM                                                                                                                    
Mr. Gamble directed attention to  a table that showed growth                                                                    
and productivity  on the railroad.  He summarized  that most                                                                    
of  the productivity,  other than  asset growth,  relates to                                                                    
the measure  of work done  on the  main line. The  five year                                                                    
plan has helped productivity  grow considerably from earlier                                                                    
Mr.  Gamble  discussed the  2009  budget  challenges of  the                                                                    
"Second 5  Year Plan."   He mentioned train  operations, the                                                                    
core  business of  the railroad,  as  capital intensive  and                                                                    
expensive at  the fare box. The  Alaska Railroad Corporation                                                                    
has  found  it a  challenge  to  match revenue  and  expense                                                                    
dollars particularly in the current environment.                                                                                
Mr.  Gamble emphasized  the nature  of the  second five-year                                                                    
plan to  confront expenses and keep  the railroad profitable                                                                    
until the  economy turns upwards. Economic  initiatives such                                                                    
as   transporting  gravel   or   fuel   make  the   railroad                                                                    
successful. In  the ebb and  flow of the times,  ARRC echoes                                                                    
the economy of Alaska.                                                                                                          
Mr.  Gamble   described  the  impact   of  the   economy  on                                                                    
personnel.  The  Alaska  Railroad Corporation  examined  the                                                                    
entire workforce  and eliminated a number  of management and                                                                    
some labor  positions, mostly through attrition  rather than                                                                    
layoffs. The  task was accomplished through  a hiring freeze                                                                    
in 2007  that created  a number of  funded vacancies  in the                                                                    
2008 budget. Mr.  Gamble then captured the  savings from the                                                                    
expired  positions.  Three  more management  positions  were                                                                    
reclassified from  expenses to  capital expenditures  and an                                                                    
assistant  vice president  was  eliminated. The  corporation                                                                    
continues the downsizing process and  has followed it with a                                                                    
reorganization  and consolidation  phase.  The  result is  a                                                                    
streamlining  that has  significantly  changed  some of  the                                                                    
organizations within the railroad.                                                                                              
9:27:09 AM                                                                                                                    
Mr. Gamble highlighted  the results of the  first and second                                                                    
five-year  plans on  a chart  entitled  "Forecast Impact  on                                                                    
ARRC Corporate Net Income."   He pointed out that 2009 began                                                                    
with a good budget estimate,  but that the railroad expected                                                                    
the Flint  Hill's reduction to  have material impact  on its                                                                    
ability to  bring off  the budget approved  by the  board in                                                                    
Mr.  Gamble noted  that before  the  market dropped,  ARRC's                                                                    
pension plan was fully funded  at 114%, and the railroad was                                                                    
very   close  to   fully  funding   post-retirement  medical                                                                    
benefits. He commented that although  ARRC took quite a hit,                                                                    
the  chart  illustrated  that   the  company  weathered  the                                                                    
economic downturn pretty well.                                                                                                  
Mr.  Gamble  turned  to  the  complexities  of  the  "Alaska                                                                    
Railroad Post  Retirement Medical Program."   He offered the                                                                    
summary to  committee members as  a comparison to  the state                                                                    
Mr.  Gamble   revealed  a  graph  that   showed  the  Alaska                                                                    
Railroad's  obligation   to  the  Post   Retirement  Medical                                                                    
Program.  He remarked  that the  drop occurred  between 2008                                                                    
and 2009.                                                                                                                       
9:28:50 AM                                                                                                                    
Mr. Gamble  brought up  Flint Hills  Resources (FHR)  as the                                                                    
primary issue  impacting the  Railbelt. Mr.  Gamble included                                                                    
data  to refresh  the  committee's  memory although  nothing                                                                    
material had changed from a few months prior.                                                                                   
9:29:31 AM                                                                                                                    
Mr.  Gamble addressed  the  stimulus  package. The  railroad                                                                    
believed itself to  be well-off with regards  to the initial                                                                    
intent  of the  "American Recovery  and Reinvestment  Act of                                                                    
2009" aimed at infrastructure  building and rails. After the                                                                    
federal   government  parceled   out  stimulus   funds,  the                                                                    
railroad essentially just received  more of the regular 5307                                                                    
formula money.                                                                                                                  
Mr.  Gamble  said that  a  total  of  $26 million  had  been                                                                    
apportioned to ARRC, no more and no less.                                                                                       
9:31:05 AM                                                                                                                    
Mr.  Gamble   explained  the  origin  of   the  $26  million                                                                    
allocation made by the  Federal Transit Administration (FTA)                                                                    
and  distributed  by  the  Anchorage  Urbanized  Area  (UZA)                                                                    
Formula  Fund 5307.  He delineated  funds applicable  to the                                                                    
Anchorage bus  system through  a mathematical  formula based                                                                    
on population and passenger miles.  Mr. Gamble turned to the                                                                    
"Rail  Incentive  Tier"  awarded  at  an  almost  negligible                                                                    
amount of  $1500. The "Rail  Non-Incentive Tier"  equals the                                                                    
bulk of the railroad's stimulus  monies and is based on rail                                                                    
coach miles.                                                                                                                    
Mr.  Gamble elaborated  on  ARRC's  eligibility for  federal                                                                    
funding  under the  "Fixed Guideway  Modernization" program,                                                                    
which  encompasses passenger  cars  and  miles exclusive  to                                                                    
railroads in  Anchorage. He  stated that  the funds  are not                                                                    
transferable  to Anchorage's  People  Mover  bus system.  He                                                                    
emphasized  that railroads  and  busses  are two  absolutely                                                                    
separate   items  in   the   federal   registry.  If   money                                                                    
apportioned  does not  go to  the Alaska  Railroad, it  will                                                                    
stay with the federal government.                                                                                               
9:33:34 AM                                                                                                                    
Co-Chair  Stedman asked  if the  administration agreed  with                                                                    
ARRC's interpretation of the stimulus dollars.                                                                                  
Mr. Gamble  expressed confidence that the  calculation would                                                                    
not change.  He reviewed the $1.5  million competitive grant                                                                    
for which  several state entities can  qualify. He mentioned                                                                    
the  railroad's work  in cooperation  with  DOT to  increase                                                                    
chances that  the federal government would  fund a mutually-                                                                    
beneficial  project  satisfying  both. He  believed  in  the                                                                    
strategy,  and  thanked  Commissioner Von  Schaben  for  the                                                                    
9:35:17 AM                                                                                                                    
Mr.  Gamble  informed that  the  remainder  of the  briefing                                                                    
encompassed  the federal  rules, reporting  requirements and                                                                    
deadlines associated  with the stimulus. He  noted the "ARRC                                                                    
Implementation  Plan"   on  page   8  of  the   power  point                                                                    
presentation (copy on file).                                                                                                    
Mr.  Gamble  explained  that because  the  stimulus  package                                                                    
stems  from FTA  money, projects  primarily fall  into three                                                                    
categories to meet  qualifications:  infrastructure, safety,                                                                    
and passenger  facilities. Mr. Gamble reported  the need for                                                                    
approval from  ARRC's Board  of Directors  before presenting                                                                    
the list  of eligible  projects to  the committee.  One such                                                                    
project  is  the  congressionally  mandated  positive  train                                                                    
control system.                                                                                                                 
9:36:58 AM                                                                                                                    
Co Chair  Hoffman asked if  the governor or  legislature had                                                                    
the  right to  modify ARRC's  stimulus recommendations.  Mr.                                                                    
Gamble   replied  that   neither   the   governor  nor   the                                                                    
legislature has a say.                                                                                                          
In  response  to  Co-Chair Hoffman's  question,  Mr.  Gamble                                                                    
affirmed  that the  legislature does  not need  to take  any                                                                    
action in  order to  for the state  to receive  the stimulus                                                                    
9:37:40 AM                                                                                                                    
Co-Chair    Stedman   endorsed    an   expansion    of   the                                                                    
infrastructure  of the  railroad that  will remain  10 years                                                                    
from today.                                                                                                                     
Co-Chair Hoffman requested criteria  used by the railroad to                                                                    
recommend projects to the board.                                                                                                
9:38:31 AM                                                                                                                    
Mr. Gamble interjected that reconstruction  of the main line                                                                    
has the  lion's share  of stimulus  money. He  described the                                                                    
project   as  a   continuation  and   acceleration  of   the                                                                    
railroad's  ability  to build  and  complete  the line  from                                                                    
Anchorage  to  Fairbanks.  He   detailed  that  the  project                                                                    
utilizes welded rail, concrete  ties, upgraded track, bridge                                                                    
repair, improved  signaling devices, and  newer technologies                                                                    
that can detect failing wheels  or bearings, the major cause                                                                    
of  derailments. He  assured the  committee of  ARRC's basic                                                                    
focus on  infrastructure and the collision  avoidance system                                                                    
in its recommendation to the board.                                                                                             
9:39:45 AM                                                                                                                    
Senator  Huggins inquired  into how  ARRC communicates  with                                                                    
trains  on   the  track.  Mr.  Gamble   responded  that  all                                                                    
communication  utilizes very  high  frequency (VHF)  radios.                                                                    
Senator Huggins wondered  at the existence of  dead spots at                                                                    
points along the track using this system.                                                                                       
Mr.  Gamble spoke  about a  series of  relay sites  built up                                                                    
over   the  years   through   the   mountains  to   maintain                                                                    
communications.  He mentioned  redundancy in  both data  and                                                                    
radio  capability  now and  into  the  future that  includes                                                                    
fiber-optic  cable running  through  the  line, a  microwave                                                                    
system as back-up and good radio relay.                                                                                         
Senator  Huggins questioned  whether  the  railroad had  the                                                                    
Alaska Land Mobile Radio  (ALMR) system and interoperability                                                                    
between radios as a matter of homeland security.                                                                                
Mr.  Gamble  acknowledged  that with  the  purchase  of  new                                                                    
radios,  the  railroad  will  join  the  ALMR  standard  for                                                                    
Alaska.  He shared  his personal  involvement in  initiating                                                                    
the ALMR common  radio system when still in  uniform back in                                                                    
1996.  He affirmed  that the  incident command  center would                                                                    
include the railroad  and allow it to be linked  on the same                                                                    
ALMR frequency  with other federal,  state and  local safety                                                                    
Senator  Huggins  referenced page  21  of  the power  point,                                                                    
"Capital  projects  started,  continued  or  completed."  He                                                                    
solicited  a   timeline  in  the  strategic   plan  for  the                                                                    
extensions of two projects: the  Northern Rail Extension and                                                                    
Port Mackenzie.                                                                                                                 
Mr. Gamble clarified that the  stimulus money cannot be used                                                                    
for extensions; it  can only be used  for projects currently                                                                    
underway.  With regard  to the  Northern Rail  Extension, he                                                                    
observed  that ARRC  sought  preapproval  several years  ago                                                                    
from  the  legislature to  sell  $500  million in  tax  free                                                                    
bonds.  The  Alaska  Railroad  Corporation  hoped  that  the                                                                    
visible  sign  of support  would  enable  efforts to  secure                                                                    
federal earmark money in Washington, DC.                                                                                        
Mr. Gamble  stated that  the railroad  took the  project one                                                                    
step  at  a time.  The  first  step involved  obtaining  $14                                                                    
million  in  earmark  dollars to  prepare  an  Environmental                                                                    
Impact  Statement  (EIS).  The   draft  EIS  and  record  of                                                                    
decision should  be available  in summer  2009. The  EIS was                                                                    
conducted along an eighty-mile stretch  and took a couple of                                                                    
years to complete.                                                                                                              
9:43:46 AM                                                                                                                    
Mr.  Gamble described  that the  next  step centered  around                                                                    
disagreements  on how  to handle  the Fairbanks  bypass. The                                                                    
ARRC separated  the issue out.  The next  phase consolidated                                                                    
dollars  around  the bridge  across  the  Tanana River,  the                                                                    
major feature in the 80-mile extension.                                                                                         
Mr. Gamble mentioned that during  the intervening period the                                                                    
army built  up forces in  Alaska. With the larger  number of                                                                    
soldiers  at  Fort  Wainwright  needing  to  reach  training                                                                    
ranges across the river, the  military declared the bridge a                                                                    
requirement for  the US Army.  The ARRC has  since collected                                                                    
$116 million  for the project  and finds itself  $40 million                                                                    
short  in   work  that  involves  the   corps  of  engineers                                                                    
stabilizing  the banks  upstream to  prevent erosion  in the                                                                    
flooding season.  The bridge  would allow  year-round access                                                                    
across the unpredictable ice.                                                                                                   
Mr. Gamble  emphasized the project's timeline,  which relies                                                                    
upon the financials within the  state and federal government                                                                    
and  successful cooperation  with  the army  to move  slowly                                                                    
forward.   He  indicated   that  the   bridge  could   begin                                                                    
construction this spring on the  assumption that a record of                                                                    
decision  exists and  a $40  million source  identified. The                                                                    
bridge will  be state-owned; the  railroad will cross  it en                                                                    
route  to  Delta  Junction  and   will  earn  state  revenue                                                                    
carrying freight and passengers.                                                                                                
9:46:38 AM                                                                                                                    
Senator Huggins  questioned the ability  of the  railroad to                                                                    
take on a  significant amount of heavy  freight from enabler                                                                    
projects and  the natural gas  pipeline in  the next 5  to 6                                                                    
years to help preserve the roads.                                                                                               
Mr.  Gamble  emphasized that  the  value  of a  railroad  is                                                                    
measured  in moving  high volume,  low  margin products.  He                                                                    
stressed that the railroad is  a cheaper method of transport                                                                    
to support resource development.                                                                                                
Mr. Gamble  noted two points  in connecting the rail  to the                                                                    
Yukon  River System.  The extension  would offer  year-round                                                                    
rail-line access  to villagers  that now  only have  one way                                                                    
out during the wintertime. Trains  could also provide a nice                                                                    
piece  of intermodal  infrastructure helping  to move  goods                                                                    
traditionally on barges, which are  trying to make their way                                                                    
north  in October  before the  river  freezes. The  railroad                                                                    
could haul fuel  right to the water and  a distributor could                                                                    
pick it up and move it up  the river on the ice. He stressed                                                                    
again that ARRC  generates no state bills  for operations or                                                                    
maintenance after capital expenditures.                                                                                         
9:49:54 AM                                                                                                                    
Senator Huggins  mentioned that state officials  continue to                                                                    
pursue the implications of synfuel  production in Alaska. He                                                                    
wondered whether  the railroad  would find a  "big customer"                                                                    
in  synfuel   manufacturers  both  internally   and  through                                                                    
exportation to  Department of Defense (DOD)  entities in the                                                                    
Pacific Rim.                                                                                                                    
Mr.  Gamble  responded  that  the  question  relied  on  the                                                                    
specific  scenario. The  Alaska  Railroad Corporation  could                                                                    
find a  large potential  customer depending on  the location                                                                    
of a plant  and what would power the  facility. He continued                                                                    
that hauling  several million  tons of  coal would  mean big                                                                    
business while  supporting technologies that convert  gas to                                                                    
liquid would call for less support from the railroad.                                                                           
Mr.  Gamble  noted  two synfuel  initiatives  in  the  early                                                                    
stages of  discussion, both of which  would support military                                                                    
requirements requirements and the  Flint Hills refinery. The                                                                    
Air Force recently closed an  intended operation in Montana,                                                                    
and the Defense Logistics Agency  (DLA) made a serious offer                                                                    
last  week  in Anchorage  to  put  a  plant in  Alaska.  The                                                                    
bureau's  proposal encouraged  private  industry to  suggest                                                                    
the best model  and guaranteed purchase by DOD  of a certain                                                                    
quantity of synfuel  annually for so many  years. The Alaska                                                                    
Railroad Corporation  knew more about the  second initiative                                                                    
in  Fairbanks,  which requires  the  transport  of coal  and                                                                    
could prove a very profitable undertaking.                                                                                      
9:52:54 AM                                                                                                                    
Senator Thomas  asked if the  oil industry was  contacted in                                                                    
regards  to rail  transportation and  truck traffic  through                                                                    
Fairbanks.  Mr.  Gamble  noted  that  several  options  were                                                                    
reviewed.  There are  a couple  of  promising private  yards                                                                    
that have highway access on one  side and rail on the other.                                                                    
He concluded  that Fairbanks  will need  all options  if the                                                                    
big gas line is built.                                                                                                          
Senator Thomas  referred to a  pipe yard, which  was located                                                                    
where the box stores are  currently. He suggested pipe would                                                                    
even come  through Haines. He mentioned  north expansion and                                                                    
questioned if  the assumption would  be that the  pass would                                                                    
be tunneled.                                                                                                                    
9:55:04 AM                                                                                                                    
Mr. Gamble had  not surveyed the route, but  he thought that                                                                    
previous  surveys  indicated  it  would be  usable  for  the                                                                    
railroad. He  did not think  the pass would pose  a problem.                                                                    
The pass would require more  locomotives with operating at a                                                                    
slower speed. The  northern route has been  reflected on but                                                                    
there  "is nothing  concrete going  on there."  The railroad                                                                    
has been in conversations with the oil companies.                                                                               
9:56:49 AM                                                                                                                    
Senator Huggins  reviewed slide  58 -  and noted  that there                                                                    
are 14  Special Services.  Mr. Gamble  clarified that  11 of                                                                    
the 14  are high school  tour guides. The overall  group was                                                                    
Senator Huggins asked  if the rail engineers  have access to                                                                    
simulators.  Mr.  Gamble  affirmed and  explained  that  the                                                                    
visual  display was  designed after  portions of  the actual                                                                    
rail  line. The  simulators  help  to standardize  operating                                                                    
procedures for fuel efficiencies and emergency procedures.                                                                      
9:58:49 AM                                                                                                                    
Senator    Huggins     spoke    to     hybrid    locomotives                                                                    
(diesel/elective) and asked if there  is an initiative to go                                                                    
to   the  next   step.   Mr.  Gamble   suggested  that   the                                                                    
diesel/elective hybrid is  the next step. The  "state of the                                                                    
art"  comes in  the  diesel  motor itself  and  some of  the                                                                    
efficiencies  in the  transfer  of the  energy  down to  the                                                                    
RECESSED:    10:00:14 AM                                                                                                      
RECONVENED:  10:05:25 AM                                                                                                      
SENATE BILL NO. 75                                                                                                            
     "An Act  making and amending  appropriations, including                                                                    
     capital  appropriations,  supplemental  appropriations,                                                                    
     and appropriations  to capitalize funds;  and providing                                                                    
     for an effective date."                                                                                                    
10:05:36 AM                                                                                                                   
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT                                                                      
AMANDA   RYDER,   DIRECTOR,   DIVISION   OF   ADMINISTRATIVE                                                                    
SERVICES,  DEPARTMENT OF  COMMERCE,  COMMUNITY AND  ECONOMIC                                                                    
DEVELOPMENT provided information  regarding the department's                                                                    
capital budget requests.                                                                                                        
Reference No. 40056                                                                                                           
Organization Grant  $100,000                                                                                                    
Ms. Ryder explained that the  grant would defray the cost of                                                                    
incorporation for  the third and  final payment to  the city                                                                    
and  borough of  Wrangell for  incorporation as  required by                                                                    
Reference No. 38950                                                                                                           
Alaska Energy Authority (AEA) Projects $31 million                                                                              
Ms. Ryder  explained that the request  supports longstanding                                                                    
(mostly federal)  grants. The department expects  $4 million                                                                    
in federal  funds from the  Denali commission for  bulk fuel                                                                    
upgrades  to   replace  tank  farms  with   new  refurbished                                                                    
facilities   that    meet   all   applicable    safety   and                                                                    
environmental standards.  The program began in  1997 and has                                                                    
expanded since  FY 99 with federal  Denali Commission funds.                                                                    
When  the work  began  there were  1,100  above ground  tank                                                                    
farms  in 171  remote  communities. She  explained that  $30                                                                    
million  is   needed  to  complete  the   upgrades  for  the                                                                    
remaining 25 communities on the list.                                                                                           
Co-Chair Stedman  asked for a  list of the  communities. Ms.                                                                    
Ryder agreed to provide a list after the meeting.                                                                               
10:09:08 AM                                                                                                                   
In response  to a  question by  Co-Chair Stedman,  Ms. Ryder                                                                    
observed that Alterative Energy  grants were included in the                                                                    
request because they are part  of AEA's energy projects. The                                                                    
Alternative Energy  and Energy Efficiency program  is a long                                                                    
standing  federal program  that receives  grants for  diesel                                                                    
generation, hydroelectric  project development  pass through                                                                    
federal  grants,  wind  energy,  biomass  geothermal,  ocean                                                                    
energy and energy cost reduction.  The program does not deal                                                                    
with  the renewable  energy grant  projects that  are funded                                                                    
from   the  $100   million  dollar   fund  created   by  the                                                                    
Ms.  Ryder  observed  that the  request  also  includes:  $7                                                                    
million  for Rural  Power System  upgrades  from the  Denali                                                                    
Commission,  $1  million  to develop  the  statewide  Alaska                                                                    
Energy Plan, and $2 million  for Renewable Energy Grant Fund                                                                    
projects.    No  state  match is  required  for  the  Denali                                                                    
Commission projects in this request.                                                                                            
Reference NO. 47877                                                                                                           
AEA - Denali Commission       $10 million                                                                                       
Match for rural power system upgrades                                                                                           
Ms. Ryder  explained that  the funding  would come  from the                                                                    
Capital Income  Fund. The Denali Commission  asked the state                                                                    
to provide  a match to  what had been 100  percent federally                                                                    
funded projects.                                                                                                                
10:13:41 AM                                                                                                                   
Reference No. 38946                                                                                                           
Community Block Grant    $6.1 million.                                                                                          
Ms.  Ryder  observed  that  the  request  contains  $6,030.0                                                                    
million in federal  funds and $70 thousand  in general funds                                                                    
for grants  to improve  the quality of  life for  low income                                                                    
rural  Alaskans through  RurAL  CAP  a non-profit  community                                                                    
agency.  The  request also  includes  funding  for Food  and                                                                    
Nutrition  Grants, Community  Development Block  Grants, and                                                                    
Emergency Shelter Grants.                                                                                                       
Reference No. 47006                                                                                                           
Grants Tracking System   $255 thousand                                                                                          
Ms.  Ryder observed  that the  grants tracking  system would                                                                    
provide software to assist the  department with its tracking                                                                    
of grants and expand reporting capacity.                                                                                        
Co-Chair Stedman assumed that the  requests were ranked in a                                                                    
priority  order.  Ms. Ryder  was  uncertain  but offered  to                                                                    
report back.                                                                                                                    
10:16:15 AM                                                                                                                   
Reference No. 41789                                                                                                           
Kodiak Launch Complex Infrastructure    $17.5 million                                                                           
Ms. Ryder  explained that $14  million of the  request would                                                                    
come  from  federal  funds.  The  remaining  $3.5  would  be                                                                    
general  funds. This  is the  second  year appropriation  to                                                                    
build a  dedicated rocket motor  facility and  an additional                                                                    
launch pad, which would allow multiple launches.                                                                                
Reference No. 40242                                                                                                           
Manufacturing Extension Program    $806,401                                                                                     
Ms. Ryder  highlighted the request  which would  support the                                                                    
federal  program   set  up  to  support   small  and  medium                                                                    
manufacturers. The  request funds  the state's third  of the                                                                    
10:18:08 AM                                                                                                                   
Reference No. 38943                                                                                                           
Community Development and Assistance    $2.63 million.                                                                          
Ms. Ryder  observed that the  general fund portion  would be                                                                    
$430  thousand.  The  request supports  multiple  federally-                                                                    
funded   programs    providing   grants    and   development                                                                    
opportunities and  assistant to communities  and non-profits                                                                    
for community development. The  request includes funding for                                                                    
the  Alaska  Floodplain   and  Erosion  Management  program,                                                                    
business  development,  and   the  Coastal  Zone  Management                                                                    
Reference No. 47007                                                                                                           
Licensing MyAlaska Integration     $310 thousand                                                                                
Ms. Ryder noted  that the project goal is  to integrate each                                                                    
of the division's on line  applications so that users do not                                                                    
have  to   apply  for  separate  ID's   and  passwords.  She                                                                    
concluded that the project would  offer greater security and                                                                    
ability to view accounts online.                                                                                                
Reference No.47878                                                                                                            
Denali Commission Match/Rural Transportation    $5 million                                                                      
Ms. Ryder  explained that  the funding  would come  from the                                                                    
Capital  Income  Fund. The  purpose  of  the request  is  to                                                                    
assist  the   Denali  Commission's   effort  to   fund  cost                                                                    
effective  road  construction   and  waterfront  development                                                                    
projects in  rural Alaska. The  request would  benefit rural                                                                    
Alaska  by   reducing  the  cost  of   goods  and  services,                                                                    
improving village  to village connections,  providing access                                                                    
to  resources,  and  helping to  create  jobs  and  economic                                                                    
development.  She observed  that  there is  30,000 miles  of                                                                    
shoreline  and  that  Alaska's   marine  facilities  are  an                                                                    
integral  part   of  local,  statewide,   and  international                                                                    
transportation of goods and  services. The Denali Commission                                                                    
previously  funded 100  percent  of these  projects but  has                                                                    
requested state participation.                                                                                                  
10:20:56 AM                                                                                                                   
Reference No. 47847                                                                                                           
Shishmaref Beach Erosion      $3 million                                                                                        
Ms. Ryder  observed that  the request funds  phase III  of a                                                                    
four phase project.  This phase would construct  550 feet of                                                                    
ocean side protection for the  washeteria and sewage lagoon.                                                                    
She noted that phases I and II are complete.                                                                                    
Co-Chair Hoffman  asked if these improvements  would prevent                                                                    
relocation  of Shishmaref.  Ms.  Ryder  understood that  the                                                                    
project would provide Shishmaref with  time to plan. She did                                                                    
not know how much time the project would buy.                                                                                   
10:22:51 AM                                                                                                                   
Reference No. 47987                                                                                                           
Kenai River Bluff Erosion Project $5 million                                                                                    
Ms.  Ryder  explained that  the  request  is the  result  of                                                                    
erosion  and is  the number  one  priority for  the city  of                                                                    
Kenai. The  total cost  of the project  is $20  million ($13                                                                    
million in  federal funds). The  local match is  $2 million.                                                                    
This request provides the state's portion.                                                                                      
Reference No. 41956                                                                                                           
Municipality of Anchorage     $10 million                                                                                       
Expansion of the Port of Anchorage                                                                                              
Ms.  Ryder observed  that the  Port of  Anchorage serves  80                                                                    
percent of Alaska's population and  is the entry point of 90                                                                    
percent of  the consumer goods  shipped to Alaska.  The port                                                                    
is securing funding of $350  million to $400 million through                                                                    
a  combination of  state, federal  and local  resources. The                                                                    
total  federal cost  is 52  percent; 48  percent would  come                                                                    
from  state   grants,  port   retained  earnings   and  loan                                                                    
proceeds. The state has so  far appropriated $55 million for                                                                    
this purpose.                                                                                                                   
Reference No. 47879                                                                                                           
Alaska Marine Exchange    0                                                                                                     
Ms.  Ryder clarified  that the  governor  removed this  item                                                                    
that would have  expanded the vessel tracking  system due to                                                                    
the state's fiscal situation.                                                                                                   
10:25:40 AM                                                                                                                   
Co-Chair  Stedman noted  that the  original request  for the                                                                    
marine exchange  system was $650 thousand  and questioned if                                                                    
the  cruise  ship head  tax  would  be an  appropriate  fund                                                                    
source.  Ms.  Ryder was  unable  to  answer but  offered  to                                                                    
discuss the  issue with OMB. Co-Chair  Stedman questioned if                                                                    
deletion of  the request would  impact cruise  ship tracking                                                                    
and monitoring of  discharge. He asked if  other areas would                                                                    
be increased  and questioned the  long term "deal"  with the                                                                    
transmitter  network  of  the  Alaska  Marine  Exchange.  He                                                                    
wanted  to  ascertain if  the  deletion  was temporary.  Ms.                                                                    
Ryder  responded  that she  was  unable  to comment  on  the                                                                    
policy issues behind  the deletion but offered  to talk with                                                                    
10:28:35 AM                                                                                                                   
Reference No. 38713                                                                                                           
Arctic Power   $120 thousand                                                                                                    
Ms. Ryder  explained that the  grant would  support eduation                                                                    
efforts in opening  up ANWR for oil and  gas exploration and                                                                    
Reference No. 41959                                                                                                           
Arctic Winter Games Team Alaska    $250 thousand                                                                                
Ms.  Ryder   clarified  that   the  request   would  support                                                                    
participation in the 2009 Arctic Winter Games.                                                                                  
Reference No. 38948                                                                                                           
NPR-A Impact Grant Program    $15,967,840                                                                                       
Ms. Ryder  explained that the  request funds  fifteen grants                                                                    
to  communities impacted  by  oil and  gas  lease sales  and                                                                    
development  within   the  National  Petroleum   Reserve  of                                                                    
Co-Chair  Stedman  asked about  a  list  of the  grants  and                                                                    
applications  that  were not  funded.  Ms.  Ryder agreed  to                                                                    
provide  the  list and  pointed  out  that the  grants  were                                                                    
Co-Chair  Hoffman asked  the reason  for the  amendment that                                                                    
reduced the request by $7 million.                                                                                              
10:31:40 AM                                                                                                                   
Ms.  Ryder answered  that one  of  the lease  sales did  not                                                                    
occur.  The  appropriation was  based  on  the actual  lease                                                                    
Co-Chair Stedman reiterated his request  for a list of grant                                                                    
applications that were declined.                                                                                                
Reference No. 47031                                                                                                           
Electrical Emergencies Program     $250 thousand                                                                                
Ms. Ryder clarified that the  request is a long standing AEA                                                                    
program  that funds  technical  support  when an  electrical                                                                    
utility has  lost or is in  danger of losing the  ability to                                                                    
generate power,  creating a  situation that  is a  threat to                                                                    
health, life  and/or property.  A language  appropriation is                                                                    
also  included  to reappropriate  the  cash  balance of  the                                                                    
Rural Electrification Revolving  Loan Fund ($80.4 thousand).                                                                    
The total cost would be $330.4 thousand.                                                                                        
Reference No. 45662                                                                                                           
Climate Change Impact Mitigation Program     $300 thousand                                                                      
Ms.  Ryder  explained  that the  program  provides  planning                                                                    
assistance  to the  most  at risk  villages  and provides  a                                                                    
planned   approach   to   shoreline   protection,   building                                                                    
relocation and/or  the eventual  relocation of  the village.                                                                    
The request would fund approximately five grantees.                                                                             
10:33:59 AM                                                                                                                   
Reference No. 47898                                                                                                           
Cruise Ship-Related Grant Projects $22.54 million.                                                                              
Ms. Ryder  noted that the  grants to municipalities  use the                                                                    
Cruise Ship  Impact Fund.  The Department  of Transportation                                                                    
and  Public Facilities  worked with  the department  to rank                                                                    
and  review  the projects  based  on  need and  cruise  ship                                                                    
industry impact to the communities and specific projects.                                                                       
Co-Chair Stedman  asked for more information  on the process                                                                    
used to collect  and rank projects. Ms.  Ryder observed that                                                                    
OMB outlined the ranking process  in a letter dated February                                                                    
26,  2009.  The  Department  of  Transportation  and  Public                                                                    
Facilities  gathered  project  information  and  prioritized                                                                    
projects based on OMB's letter.                                                                                                 
Co-Chair Stedman  did not  see Petersburg  on the  list. Ms.                                                                    
Ryder  did not  know  which communities  had proposals.  Co-                                                                    
Chair  Stedman asked  for more  information on  the pool  of                                                                    
requests and ranking. He observed  that there are still some                                                                    
funds available  and noted that  some projects  requested in                                                                    
the  previous  year  were  not  funded.  He  asked  for  any                                                                    
information  provided  by  the  industry that  was  used  in                                                                    
ranking with the objective to  keep the industry in the loop                                                                    
in regards  to the selected  grants project. He  pointed out                                                                    
that Fairbanks and Anchorage receive cruise ship visitors.                                                                      
10:37:56 AM                                                                                                                   
OFFICE OF THE GOVERNOR                                                                                                          
Reference No. 47009                                                                                                           
Banking and Securities Imaging     $580 thousand                                                                                
Ms.  Ryder   added  that  a   number  of   the  department's                                                                    
information and  technology projects  were placed  under the                                                                    
Office  of  the  Governor.  She  observed  that  an  imaging                                                                    
project  for  the  Banking and  Security  Management  System                                                                    
remains.  The  project  uses an  imaging  system  previously                                                                    
developed for  the Division of  Insurance as a base  for the                                                                    
new  project. Imagines  are currently  stored  in hard  copy                                                                    
format.  The request  would  improve document  accessibility                                                                    
and eliminates the cost of paper.                                                                                               
Ms. Ryder discussed the items that were deleted.                                                                                
Reference NO. 47005                                                                                                           
Community and Regional Affairs Imaging  $690 thousand                                                                           
Ms. Ryder observed  that the request was deleted  due to the                                                                    
state's fiscal situation.                                                                                                       
Reference NO. 47010                                                                                                           
Banking and Securities Management System     $890 thousand                                                                      
Ms. Ryder explained  that the request was removed  due to an                                                                    
incident that  convinced the administration to  start on the                                                                    
project  prior to  FY 10.  The  request encompasses  systems                                                                    
that address  STAR, ANCSA and Native  corporations. The STAR                                                                    
system was deemed  at risk and the request was  added to the                                                                    
supplemental appropriation.  Co-Chair Stedman  observed that                                                                    
the intent was to remove capital from the supplemental.                                                                         
10:42:10 AM                                                                                                                   
Co-Chair Stedman suggested that  the department's request be                                                                    
stacked in priority order.                                                                                                      
Co-Chair   Stedman    asked   for    information   regarding                                                                    
applications  for  climate  impact mitigation  funding.  Ms.                                                                    
Ryder noted that applications were  ranked by the department                                                                    
but did not know how the applications were submitted. She                                                                       
observed that some applications have been returned for more                                                                     
10:45:04 AM                                                                                                                   
Co-Chair Stedman  referred to economic stimulus  funding for                                                                    
the  department.  Ms.  Ryder   observed  that  requests  for                                                                    
economic stimulus  funding would  be made  for longstanding,                                                                    
existing programs. Co-Chair Stedman  observed that the issue                                                                    
would be given further review.                                                                                                  
10:46:46 AM                                                                                                                   
The meeting was adjourned at 10:52 AM.                                                                                          

Document Name Date/Time Subjects
DCCED Kodiak AADC Overview.pdf SFIN 3/17/2009 9:00:00 AM
SB 75
AK Railroad briefing 31709.ppt SFIN 3/17/2009 9:00:00 AM