Legislature(1995 - 1996)

03/23/1995 01:36 PM Senate TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                     SENATE TRANSPORTATION                                     
                         March 23, 1995                                        
                           1:36 p.m.                                           
                                                                               
  MEMBERS PRESENT                                                              
                                                                               
 Senator Steve Rieger, Chairman                                                
 Senator Lyda Green                                                            
 Senator Al Adams                                                              
 Senator Georgianna Lincoln                                                    
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
 Senator Robin Taylor, Vice Chair                                              
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
 SENATE BILL NO. 64                                                            
 "An Act relating to the dissolution of the Alaska Railroad                    
 Corporation and providing for a successor corporation; and                    
 providing for an effective date."                                             
                                                                               
 CS FOR HOUSE CONCURRENT RESOLUTION NO. 9(TRA)                                 
 Relating to Alaska School Bus Driver Appreciation Day.                        
                                                                               
  PREVIOUS SENATE ACTION                                                       
                                                                               
 SB 64 - See Senate Transportation minutes dated 2/9/95.                       
                                                                               
 HCR 9 - No previous senate committee action.                                  
                                                                               
  WITNESS REGISTER                                                             
                                                                               
 Robert S. Hatfield, Jr., President & CEO                                      
 Alaska Railroad Corporation                                                   
 Department of Commerce & Economic Development                                 
 P.O. Box 107500, Anchorage, AK 99510-7500¶                                    
 POSITION STATEMENT:                                                           
                                                                               
 James B. Blasingame, Vice President of Corporate Affairs &                    
 Secretary, Alaska Railroad Corporation                                        
 Department of Commerce & Economic Development                                 
 P.O. Box 107500, Anchorage, AK 99510-7500¶                                    
 POSITION STATEMENT:                                                           
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
 TAPE 95-6, SIDE A                                                             
                                                                               
 STRA - 3/23/95                                                                
                                                                               
         SB  64 CONVERT AK RR TO PRIVATE CORPORATION                         
                                                                               
 Number 002                                                                    
                                                                               
 CHAIRMAN RIEGER called the Senate Transportation meeting to order             
 at 1:36 p.m.  He introduced  SB 64  as the first order of business            
 before the committee.  The chairman outlined the changes in the               
 committee substitute to SB 64: the sections requiring the railroad            
 to pay for an appraisal have been deleted; there is new language              
 describing the qualifications of board members; the board of                  
 directors will report on suggestions for creating a trust, and                
 there is language added to clarify that the legislature will retain           
 its' power of appropriation of these shares, while the shares are             
 in state hands.  Chairman Rieger noted those sections are                     
 highlighted in members' bill packets.                                         
                                                                               
 Number 049                                                                    
                                                                               
 SENATOR GREEN made a motion to adopt the Senate Transportation                
 committee substitute for SB 64.                                               
                                                                               
 SENATOR ADAMS objected in order to inform the committee that he               
 also had a proposed committee substitute for the bill.  Senator               
 Adams removed his objection.                                                  
                                                                               
 Hearing no further objection, the Utermohle CS, version K dated               
 3/22/95, was adopted.                                                         
                                                                               
 Number 067                                                                    
                                                                               
 BOB HATFIELD, President & CEO of the Alaska Railroad Corporation,             
 testifying from Anchorage, noted the presence of board members                
 Loren Lounsbury, Jack Burton, Paul Massey, Dale Lindsey, and                  
 Secretary Jim Blasingame.  Mr. Hatfield informed the committee that           
 the corporation is taking a break in a board meeting in order to              
 accommodate this Senate Transportation Committee meeting.  The                
 board received a copy of the committee substitute for SB 64 late              
 yesterday afternoon, and has had a chance to quickly review it.               
 The board is pleased with the changes incorporated in the CS which            
 had been discussed earlier.                                                   
                                                                               
 Mr. Hatfield directed the committee to page 2, line 6; the board              
 does not like the language, "...subject to the concurrence of the             
 other parties to the contract."  He is not sure what is intended by           
 that language.  The board certainly supports keeping the railroad's           
 current labor agreements in place, but he would not want to suggest           
 that some of the railroad's customers would be able to cancel their           
 contracts with the successor corporation.  The language on page 2,            
 line 6 suggests that possibility to him.                                      
                                                                               
 CHAIRMAN RIEGER thought that was a good question.  He pointed out             
 that the language to which Mr. Hatfield is concerned was in the               
 original draft of SB 64.  There was no objection raised previously,           
 which is why that language remains in the CS.                                 
                                                                               
 Number 110                                                                    
                                                                               
 BOB HATFIELD suggested removing that language.  Mr. Hatfield stated           
 that the language on page 2, subsection (f) appears open ended to             
 him.  He is not sure what costs might be included by that language.           
 He reiterated that the board has not had very much time to review             
 the committee substitute, and asked if anyone could explain what              
 specific costs that language was meant to cover.                              
                                                                               
 [Mr. Hatfield raised concern about the language on line 17                    
 regarding the manner in which shares are to be distributed, but due           
 to taping difficulties, it is not possible to understand what he is           
 saying.  He mentioned that the language might bring an appraisal              
 process back into the picture.]                                               
                                                                               
 Number 140                                                                    
 Mr. Hatfield stated that under Section 3, subsection (b), perhaps             
 language should be added to specify that different judicial                   
 districts on the railbelt should be represented on the board.  Such           
 language has served the corporation well in the past.  He                     
 explained, regarding the language in Section 5, usually dividends             
 are paid with the amount of money remaining after the future and              
 present needs of the corporation have been met.  In conclusion, Mr.           
 Hatfield addressed Section 7; he would like to see the corporation            
 keep its' current name.                                                       
                                                                               
 CHAIRMAN RIEGER observed that, with the exception of geographic               
 distribution of board members, the points raised by Mr. Hatfield              
 were all in the original draft of SB 64.  He was not sure why Mr.             
 Hatfield did not raise his concerns earlier.  BOB HATFIELD                    
 apologized for any inconvenience caused.                                      
                                                                               
 Number 215                                                                    
                                                                               
 CHAIRMAN RIEGER noted the presence of Senator Adam's proposed                 
 committee substitute.                                                         
                                                                               
 SENATOR ADAMS said it was unfair that the Alaska Railroad                     
 Corporation does not have a copy of his proposed CS.  Senator Adams           
 explained that his CS stipulates that the governor shall issue a              
 request for proposals by July 1, 1996 to sell the Alaska Railroad             
 Corporation.  By January 1, 1998, the corporation shall be sold               
 with the following requirements: the continuing operation of the              
 railroad for 20 years; continuation of the current contracts;                 
 purchase of the railroad for fair market value; retention of the              
 right-of-way by the State of Alaska; the appraisal will be                    
 contracted by the governor; the governor shall report to the                  
 legislature on the sale; upon sale, the Alaska Railroad Corporation           
 will be dissolved; the governor may adopt regulations for                     
 implementation of this act; the sale will not be subject to the               
 state procurement code; and there is an immediate effective date.             
                                                                               
                                                                               
 SENATOR ADAMS stated his proposal is very simple and should be                
 considered a working document.                                                
                                                                               
 CHAIRMAN RIEGER informed Mr. Hatfield he was being faxed a copy of            
 Senator Adam's proposed CS at that moment.                                    
                                                                               
 SENATOR ADAMS asked the chairman if the committee was planning to             
 move SB 64 from committee today.                                              
                                                                               
 CHAIRMAN RIEGER responded he was planning on doing so, but he could           
 hold SB 64 over to the next meeting.                                          
                                                                               
 SENATOR ADAMS stated he would appreciate that.                                
                                                                               
 CHAIRMAN RIEGER added he was willing to hold the bill over for one            
 meeting.  The approach Senator Adams is proposing has been                    
 discussed.  Senator Adams' proposal has the advantage of speed, but           
 the disadvantage that the state might not maximize value.                     
                                                                               
 SENATOR ADAMS commented that the state might not gain an immediate            
 profit from the sale, but in the long run there would be gains.               
                                                                               
 Number 269                                                                    
                                                                               
 SENATOR LINCOLN asked, regarding Section 5 of SB 64, who would make           
 the determination of the amount of the dividend.                              
                                                                               
 SENATOR RIEGER replied that the language, "...30 percent of net               
 earnings...." has a literal meaning.  He acknowledged that there              
 can be a difference of opinion regarding the definition "net                  
 earnings."  There is an implicit assumption that the accounting for           
 the railroad would be conducted in accordance with generally                  
 accepted accounting principles.  He recognized that reinvestment of           
 earnings is a common source of tension between the shareholders and           
 the management of a corporation.  The chairman thinks 30 percent is           
 a reasonable number, but it is not clear whether it is the right              
 number.  That provision was in the original draft of SB 64, and no            
 objection was raised until now.  Chairman Rieger noted that this              
 requirement is lifted once the state is no longer a majority                  
 shareholder.                                                                  
                                                                               
 Number 313                                                                    
                                                                               
 SENATOR ADAMS asked if a financial run could be done using that               
 language, with the scenario that the language has been in place for           
 the past three years.  CHAIRMAN RIEGER said the committee could ask           
 the railroad to prepare such a run; that would be beneficial.                 
                                                                               
 SENATOR LINCOLN asked if that information would be requested from             
 the corporation.                                                              
                                                                               
 CHAIRMAN RIEGER stated he planned to ask for that.  Chairman Rieger           
 clarified the request that the corporation submit information                 
 describing how a 30 percent of net earnings requirement would have            
 affected the corporation and the state if it had been in effect for           
 the previous five years.  How much money would have been paid in              
 dividends?                                                                    
                                                                               
 BOB HATFIELD responded no money would have been paid in 1994 or               
 1993, about $600,000 would have been paid in 1992, and about                  
 $900,000 would have been paid in 1991.  That was as far back as he            
 could recall.                                                                 
                                                                               
 SENATOR LINCOLN asked if that is using 30 percent of the net                  
 earnings equation.  BOB HATFIELD replied that is correct.                     
                                                                               
 SENATOR LINCOLN noted the language in Section 5 of SB 64 states               
 payment must equal or exceed 30 percent net earnings.  BOB HATFIELD           
 was assuming the board could limit it to 30 percent.                          
                                                                               
 CHAIRMAN RIEGER specified that the board would have the option of             
 paying out any dividend, as long as it was at least 30 percent.               
                                                                               
 SENATOR LINCOLN asked Mr. Hatfield if he could justify the zero               
 fiscal note.                                                                  
                                                                               
 Number 348                                                                    
                                                                               
 JIM BLASINGAME, Vice President for Corporate Affairs and Secretary            
 of the Alaska Railroad Corporation, testifying from Anchorage,                
 stated that at the time the state purchased the railroad from the             
 federal government, the federal government paid just over                     
 $2,000,000 to go through the appraisal process.  That does not                
 include funds expended by the state during that process.  It is               
 unknown to the corporation how much an appraisal would cost today.            
 He indicated that the corporation put the 1984 costs on the fiscal            
 note, just as a benchmark.                                                    
                                                                               
 BOB HATFIELD explained that zero fiscal note is due to the fact               
 that there is no required expenditure of general fund money or                
 state funds in the original draft of the legislation.                         
                                                                               
 Number 370                                                                    
                                                                               
 SENATOR LINCOLN asked Mr. Hatfield about his concern that                     
 geographic representation be addressed by Section 2.  She asked Mr.           
 Hatfield if the corporation currently has geographic representation           
 on the board.  BOB HATFIELD replied the board does currently have             
 geographic representation.                                                    
                                                                               
 SENATOR LINCOLN asked if geographic representation is                         
 representative of the state as a whole, or just the railbelt area.            
 BOB HATFIELD stated that the board is currently meant to represent            
 the geographic diversity of the railbelt.                                     
                                                                               
 CHAIRMAN RIEGER informed Mr. Hatfield that he would review the                
 possibilty of revising the language on page 2, line 6.  Also,                 
 language relating to the par value may be meaningless, and that               
 could probably be deleted from SB 64.                                         
                                                                               
 SENATOR LINCOLN voiced continuing concern over the fiscal note.               
 She indicated the need to see an opinion from the Attorney                    
 General's Office on whether or not the state would be paying for              
 the appraisal.                                                                
                                                                               
 CHAIRMAN RIEGER informed Senator Lincoln that the committee                   
 substitute removed the requirement for the appraisal from the                 
 original bill.                                                                
                                                                               
 SENATOR LINCOLN asked how the value of the corporation would be               
 determined if an appraisal is not conducted.                                  
                                                                               
 CHAIRMAN RIEGER replied, under the concept of selling shares of               
 stock, the value is determined by the amount of money the buyer is            
 willing to pay.  That is why he believes the requirement on the par           
 value is no longer meaningful.                                                
                                                                               
 Number 422                                                                    
                                                                               
 CHAIRMAN RIEGER asked Senator Adams if he would like more exact               
 figures on the run he requested earlier.                                      
                                                                               
 SENATOR ADAMS responded he would not.  He is getting the feeling              
 that the committee doesn't want to get rid of the Alaska Railroad.            
 The railroad is an asset the state needs.                                     
                                                                               
 CHAIRMAN RIEGER stated that he was willing to have one more hearing           
 on SB 64, and then he would like to see either the current                    
 Transportation CS or Senator Adam's proposed CS moved from                    
 committee.  The committee would certainly be open to Senator Adam's           
 offering his language.                                                        
                                                                               
 CHAIRMAN RIEGER stated that SB 64 would be held until the next                
 Senate Transportation Committee meeting.                                      
                                                                               
 STRA - 3/23/95                                                                
                                                                               
          HCR  9 SCHOOL BUS DRIVER APPRECIATION DAY                          
                                                                               
 CHAIRMAN RIEGER introduced HCR 9 as the next order of business                
 before the Senate Transportation Committee.                                   
                                                                               
 Number 434                                                                    
                                                                               
 SENATOR ADAMS made a motion to discharge HCR 9 from committee with            
 individual recommendations.  Hearing no objection, it was so                  
 ordered.                                                                      
                                                                               
 CHAIRMAN RIEGER adjourned the Senate Transportation Committee                 
 meeting at 2:05 p.m.                                                          
                                                                               

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