Legislature(2021 - 2022)BELTZ 105 (TSBldg)
03/01/2022 01:30 PM Senate TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| SB218 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 218 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE TRANSPORTATION STANDING COMMITTEE
March 1, 2022
1:35 p.m.
MEMBERS PRESENT
Senator Robert Myers, Chair
Senator Mike Shower, Vice Chair
Senator Click Bishop
Senator Jesse Kiehl
MEMBERS ABSENT
Senator Peter Micciche
COMMITTEE CALENDAR
SENATE BILL NO. 218
"An Act authorizing the Alaska Railroad Corporation to issue
revenue bonds to finance the replacement of the Alaska Railroad
Corporation's passenger dock and related terminal facility in
Seward, Alaska; and providing for an effective date."
- MOVED SB 218 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
3
BILL: SB 218
SHORT TITLE: LEG. APPROVAL: AK RAILROAD REVENUE BONDS
SPONSOR(s): SENATOR(s) MICCICHE
02/22/22 (S) READ THE FIRST TIME - REFERRALS
02/22/22 (S) TRA, FIN
03/01/22 (S) TRA AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
KONRAD JACKSON, Staff
Senator Peter Micciche
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Co-presented the sponsor statement for SB
218 on behalf of the sponsor.
MADISON GOVIN, Staff
Senator Peter Micciche
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Co-presented the sponsor statement for SB
218 on behalf of the sponsor.
BILL O'LEARY, President & Chief Executive Officer
Alaska Railroad Corporation
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint on the Seward
Passenger Dock project funding in SB 218.
BARBARA AMY, Chief Financial Officer
Alaska Railroad Corporation
Anchorage, Alaska
POSITION STATEMENT: Answered questions on SB 218 on behalf of
the Alaska Railroad Corporation.
TIM SULLIVAN, Director of External Affairs
Alaska Railroad Corporation
Anchorage, Alaska
POSITION STATEMENT: Answered questions on the Seward Passenger
Dock project in SB 218.
JANETTE BOWER, City Manager
City of Seward
Seward, Alaska
POSITION STATEMENT: Testified in support of SB 218 due to the
economic benefits for the community.
PRESTON CARNAHAN, Director of Destination Development
Royal Caribbean Cruises Ltd.
Seattle, Washington
POSITION STATEMENT: Testified in support of SB 218 as needed
infrastructure for the cruise industry.
TOM TOUGAS, representing self
Seward, Alaska
POSITION STATEMENT: Testified in support of SB 218 for the
economic benefits for the community.
ACTION NARRATIVE
1:35:57 PM
CHAIR ROBERT MYERS called the Senate Transportation Standing
Committee meeting to order at 1:35 p.m. Present at the call to
order were Senators Kiehl, Shower, and Chair Myers. Senator
Bishop arrived as the meeting was in progress.
SB 218-LEG. APPROVAL: AK RAILROAD REVENUE BONDS
1:36:26 PM
CHAIR MYERS announced the consideration of SENATE BILL NO. 218
"An Act authorizing the Alaska Railroad Corporation to issue
revenue bonds to finance the replacement of the Alaska Railroad
Corporation's passenger dock and related terminal facility in
Seward, Alaska; and providing for an effective date."
1:36:58 PM
KONRAD JACKSON, Staff, Senator Peter Micciche, Alaska State
Legislature, Juneau, Alaska, paraphrased a portion of the
sponsor statement on behalf of the sponsor.
While Alaska Railroad Corporation (ARRC) must seek
authority from the Legislature to issue bonds, under
AS 42.40.690 the State of Alaska is not liable for the
debts of ARRC. Senate Bill 218 would grant the ARRC
the legislative authority, as required under AS
42.40.285, to issue bonds of no more than $60 million
to fund the construction of a new passenger terminal
facility in Seward, Alaska.
MR. JACKSON stated that this bill relates specifically to the
passenger dock and terminal facility, which is critical to the
Alaska Railroad Corporation and cruise ships. He said Ms. Govin
would provide more details on the bill.
1:38:15 PM
MADISON GOVIN, Staff, Senator Peter Micciche, Alaska State
Legislature, Juneau, Alaska, paraphrased a portion of the
sponsor statement on behalf of the sponsor.
The existing passenger terminal facility was
constructed in 1966 and has experienced significant
corrosion over its half-century lifespan. Associated
integrity issues have resulted in an implementation of
weight restrictions. While currently safe for
restricted service, the dock is clearly nearing the
end of its useful life. Eighty-two cruise ships are
expected for the 2022 season, with more growth
expected in future years. ARRC is working with an
anchor tenant to ensure long-term fiscal stability for
the use of the passenger terminal for future cruise
ship operations. During the off-season, the terminal
facility provides support and moorage space for
freight, U.S. Coast Guard, and non-cruise passenger
vessels.
Between ARRC revenues and an additional $60 million
bond offering, $79 million will fund the cost of
demolition and construction. The debt service on these
bonds will be paid entirely from passenger terminal
revenues without State of Alaska liability for the
debts of ARRC.
In order to meet the 2024 need for the replacement
passenger terminal facility, it is imperative that
ARRC coordinate public debt funding by mid-2022.
1:39:46 PM
BILL O'LEARY, President & Chief Executive Officer (CEO), Alaska
Railroad Corporation, Anchorage, Alaska, stated that this
project is an exciting project for the Alaska Railroad
Corporation (ARRC), the City of Seward, and the Southcentral and
Interior Alaska visitor industry.
1:40:19 PM
SENATOR BISHOP joined the meeting.
1:40:33 PM
MR. O'LEARY began a PowerPoint on the Seward Passenger Dock
project in SB 218. He reviewed slide 1, Alaska AARC Seward
Passenger Dock.
• ARRC owns 3 docks in Seward
• Freight, passenger, and Coal
• Passenger Dock Status
• Built in 1966
• 736 ' x 200'
• Terminal Building on dock
• Nearing End of Useful Life
• Passenger Info
• 220,000 + visitors 2019
• 95 Ship Calls
• Important to ARRC rail service but also to
visitor industry as a whole
• 2/3 to 3/4 of cruise passengers to Southcentral
Alaska come thorough Seward.
1:41:00 PM
MR. O'LEARY explained that ARRC is a capital-intensive railroad.
It owns 50 locomotives, 50 passenger cars, hundreds of freight
cars, and 600 miles of track. ARRC owns three docks in Seward,
its southernmost terminus. It has a freight dock, currently
under expansion to address growing freight opportunities. It has
a coal dock, not currently in use since the coal export has been
dormant.
MR. O'LEARY provided the status of the third dock, the passenger
dock. It was built in 1966 as a freight dock, constructed on
piling, with concrete decking. On the north end of the dock is a
27,000 square foot terminal building used for passenger
processing by the cruise lines. It has been well used but
corrosion and time have taken their toll. He related that it is
still being used but is nearing the end of its useful life. It
is key infrastructure for ARRC, and also for the Southcentral
and Interior Alaska visitor industry. Prior to COVID-19, the
majority of the 250,000 cruise passengers that arrived in
Southcentral Alaska in 2019 arrived at this dock. These
passengers ride the railroad, rent cars, take motor coaches or
fly to locations in the Kenai Peninsula and the Railbelt from
Seward to Fairbanks and beyond. He related that the industry
forecasted over 80 ship calls in 2022, with continued
opportunities as cruise lines expand to cross-gulf activity
rather than limiting their cruises to Southeast Alaska.
1:43:52 PM
MR. O'LEARY reviewed slide 2, AARC Seward Passenger Dock.
• ARRC project to rebuild pier and building
• $79 million project on tight timeframe to be ready
for 2024 cruise season.
• Sources: $60 million in ARRC revenue bonds (no
recourse to state), $19 million in ARRC cash
• Continuing to look for other options to optimize
financing - federal grants or other mechanisms
MR. O'LEARY stated that ARRC has embarked on the project to
rebuild and modernize the pier and building in Seward. The plan
includes building a 1,200-foot dock and new building that should
meet customer needs for the foreseeable future. ARRC's timeline
is aggressive to meet customer needs and handle larger ships in
time for the 2024 cruise season. He related that the project
cost of $62 million for the pier and $17 million for the
building, with two primary fund sources, including $60 million
in ARRC revenue bonds and $19 million in ARRC internal funding
from its capital program. He noted that ARRC continues to look
at ways to optimize the financial structure. Federal grants or
other funds could limit the amount necessary to borrow if it
fits into the timing and schedule. This means $60 million
represents ARRC's ceiling, and if it finds a better way, ARRC
will issue fewer bonds. The Board of Directors approved the
bonding, but ARRC statutes require legislative authorization to
issue debt. He emphasized that this debt is not a debt to the
state but is solely ARRC's debt. ARRC requested legislative
authority in 2015. These requests are typically reserved for
larger, more critical issues. The goal is to be in the bond
market by the third quarter of 2022.
1:46:52 PM
MR. O'LEARY turned to slide 3, Seward Passenger Dock.
• Royal Caribbean Group
• Key strategic partner
• Acting as anchor tenant with a long-term
arrangement for asset use.
• Legislative action needed this session
• New facility for 2024 season
MR. O'LEARY stated that ARRC entered into a strategic
partnership with Royal Caribbean Group, one of the world's
largest cruise companies. He related that Royal Caribbean acts
as one of the anchor tenants, providing long-term berthing
arrangements that provide financial stability to market these
bonds effectively. In closing, he emphasized that this project
is vital to ARRC. Its mission is to be an agent of economic
development for the state, and this project fits within that
mission. He characterized it as an essential project to the City
of Seward and the Alaska visitor industry.
1:47:59 PM
SENATOR SHOWER asked how ARRC intends to operate through the
cruise season while demolishing the dock. He recalled asking at
a prior hearing whether ARRC has enough railroad cars.
MR. O'LEARY responded the engineering staff has considered
several options that will allow it to operate during the 2022 to
2023 season. He reported that with the initial demolition of
portions of the dock immediately after the 2022 cruise season,
half of the dock would be available for the 2023 season. During
double ship days, it would use the freight dock for overflow
capacity. He related that the project should be complete and be
available for the 2024 cruise season.
1:50:17 PM
MR. O'LEARY stated that ARRC works with its Board of Directors
to meet the needs of passenger or freight cars, so it can obtain
additional cars to meet any demand. He explained that ARRC
cannot have overcapacity but must remain self-sustaining per its
statute. ARRC continues to project growth on the cruise side, so
it is currently engaged in discussions on whether it needs
additional assets. First, ARRC must ensure that it is optimizing
its current assets, but once it is comfortable with that, it
would create the business case, get board approval, and obtain
the necessary cars.
1:52:02 PM
SENATOR SHOWER thanked him for the assurance.
1:52:25 PM
SENATOR KIEHL asked if ARRC owns the submerged lands, how far
off the vessels stand, and whether they would be above the
tidelands.
MR. O'LEARY answered that it would be on ARRC tidelands, but he
offered to confirm it with staff.
1:53:14 PM
SENATOR KIEHL acknowledged that he had experienced this with a
local project, and it takes time to obtain approval for
submerged lands from the state.
1:53:35 PM
CHAIR MYERS asked if the coal facility would be demolished.
MR. O'LEARY answered no.
1:54:01 PM
CHAIR MYERS asked if the dock currently could accommodate two
ships and if that would continue to be the case.
MR. O'LEARY answered that is correct.
1:54:14 PM
CHAIR MYERS asked how the docks are used in the off-season.
MR. O'LEARY answered that the dock is used for parking overflow
from the freight dock and other vessels, including US Coast
Guard and University of Alaska. He emphasized that Seward has
increased its maritime activity. He related that the passenger
dock has quite a bit of use in the off-season.
1:55:14 PM
SENATOR KIEHL asked for the status for dredging the harbor.
MR. O'LEARY answered that the last dredging was done within the
last decade. He stated that ARRC engineers were working with
customers to ensure that no additional dredging is currently
needed. He acknowledged that it was a concern, especially if
larger cruise ships used the dock. He related that it has not
surfaced as an issue for this project.
SENATOR KIEHL noted he should have asked for the expected
dredging frequency and if it is the US Army Corps of Engineers,
the City of Seward, or ARRC's responsibility.
MR. O'LEARY offered to provide the information.
1:57:59 PM
CHAIR MYERS noted that ARRC had not used a substantial amount of
its bonding authority. He asked for the reason and how that fits
into the plans.
BARBARA AMY, Chief Financial Officer, Alaska Railroad
Corporation, Anchorage, Alaska, agreed that ARRC has
authorizations that it has not used, but she was unfamiliar with
each one. She recalled as Mr. O'Leary stated, that ARRC
requested bonding in 2015. At the time, ARRC refunded bonds
issued in 2006 and 2007 and issued additional bonds for the
Positive Train Control Project. She stated ARRC was scheduled to
have those bonds repaid next year. She was not sure why ARRC did
not use prior authorizations.
CHAIR MYERS offered to follow up offline.
1:59:14 PM
CHAIR MYERS referred to page 2, lines 4-5, states, "The general
credit of the Alaska Railroad Corporation and the state may not
be pledged for the repayment of the bonds." He asked why the
general credit of the railroad was not being pledged.
MS. AMY responded that ARRC was pursuing project financing, so
the cash flow from the dock itself would be the repayment source
rather than train revenues or other revenue coming into the
Alaska Railroad Corporation (ARRC).
2:00:04 PM
SENATOR KIEHL asked for the debt term and expectations for the
interest rate.
MS. AMY answered that ARRC contemplates 30-year financing, and
it anticipates an interest rate between 3.75 to 4.25 percent.
2:00:47 PM
SENATOR KIEHL asked whether it was the true interest cost.
MS. AMY answered yes, it would be the true interest cost.
2:01:18 PM
SENATOR SHOWER asked when the interest rate would be set.
MS. AMY answered that the expectation for the bond issuance
would be early to mid-third quarter 2022. She stated that ARRC
issues tax-exempt bonds, so its rates are a bit lower than a
regular treasury rate or corporate bond rate. She stated that
ARRC is in the process of getting an underwriter, but she would
have more clarity on rates in the coming months. She highlighted
that ARRC has built in some cushion into the rates given the
current financial environment.
2:02:50 PM
SENATOR KIEHL asked what assumptions ARRC used for passenger
counts or vessel size. He said he was unsure whether the
passenger fees were per person or if it was based on vessel
tonnage.
MS. AMY responded that the charges are per passenger, and the
tariffs are posted to ARRC's website. She explained that fees
are associated with passengers who embark on a cruise ship. Once
the passenger terminates in Seward, the same fee applies. She
stated that over 200,000 passengers traveled to Seward in 2019,
180,000 passengers were estimated for 2022, and ARRC anticipates
that ridership would have some ups and downs but gradually
increase overall.
2:04:21 PM
SENATOR KIEHL asked for the amount of the tariffs. He estimated
that the fees would be $15 to $16 per passenger to cover the
debt.
MS. AMY replied that the improvement fee tariffs are listed in
the freight section tariffs under customer tools. She stated
that Seward would charge a $15 improvement fee beginning in 2022
to help pay for the dock project. Passengers would also be
subject to a combined service fee and facilities fee of $12. The
grand total for fees per passenger is $27.
2:05:27 PM
SENATOR BISHOP asked if ARRC could cover the cash flow if the
estimated number of passengers did not travel.
MS. AMY answered that she believed ARRC could do so for a period
of time, which would give it the flexibility to restructure it
if needed. She stated ARRC has built a safety net into its
projections.
2:06:17 PM
TIM SULLIVAN, Director of External Affairs, Alaska Railroad
Corporation, Anchorage, Alaska, responded to earlier questions.
He confirmed that ARRC dredges the harbor in Seward every 8-10
years; it was last dredged in 2014. He related that ARRC would
do its own dredging, and it has a permit from the US Army Corps
of Engineers. He acknowledged that ARRC would need to dredge
deeper for the larger ships, but it will still maintain the 8-10
year schedule.
MR. SULLIVAN reported that ARRC owns all of the submerged lands
for the length of the dock.
2:07:06 PM
At ease
2:07:52 PM
CHAIR MYERS reconvened the meeting.
2:08:05 PM
JANETTE BOWER, City Manager, City of Seward, Seward, Alaska,
stated that the Seward City Council adopted Resolution 2022-013
to support the Alaska Railroad Corporation's efforts to secure
funding for the Seward Passenger Dock Project. She said ARRC
provided technical information about the dock project. She
stated that this project is vital to the City of Seward. The
closure of the current facilities would eliminate cruise ship
tourism dollars, including the commercial passenger vessel
excise tax (CPV) for the City of Seward and the Kenai Peninsula
Borough. This project is vital to the community. She commended
the Royal Caribbean Cruise, Ltd. as a good partner committed to
the Seward port. The building is used in the off-season by many
organizations. For example, the community held a Lidia Jacoby
Olympic Watch party. She thanked ARRC for its partnership and
allowing the community to use the facility.
2:10:01 PM
PRESTON CARNAHAN, Director of Destination Development, Royal
Caribbean Cruises Ltd., Seattle, Washington, stated that Royal
Caribbean is one of the largest cruise companies in the world.
It has 60 ships with over five brands carrying over 7 million
passengers annually. The Royal Caribbean International is the
largest single brand. He reported that Royal Caribbean
International, Celebrity Cruises, and Silversea Cruises serve
Alaska. He noted the cruise ships serving Alaska have grown from
6 ships during the last full cruise season in 2019 to 10 ships
in 2022. The corporation has been in Alaska since the 1990s,
serving Seward for over 20 years. He characterized the
partnership with the community, including the Alaska Sealife
Center, as excellent.
2:11:42 PM
MR. CARNAHAN said ARRC has stayed in communication with Royal
Caribbean Cruises, Ltd., providing support and the cruise lines
are happy to support this endeavor. The company regularly makes
berthing agreements and commitments, but it has not had an
agreement with the City of Seward. He characterized working
through the agreement to reach a long-term contract goal as a
huge step forward. He stated that the Port of Seward is the
northernmost port from Vancouver, British Columbia. The
agreement will allow the cruise line to travel to Southeast
Alaska, including Skagway, Juneau, Ketchikan, Icy Strait Point
[near Hoonah], and Sitka will receive additional ships. The
Ovation of the Seas is the largest ship in Alaska, and the
cruise lines provide technical specifications to ensure that the
dock being built will meet the ship and passenger standards. He
offered his view that ARRC has done a good job doing its due
diligence to ensure that the new facility meets all
requirements.
2:14:26 PM
CHAIR MYERS opened public testimony on SB 218.
2:14:50 PM
TOM TOUGAS, representing self, Seward, Alaska, stated that
Seward residents support ARRC's passenger dock project. He
characterized it as important to the visitor infrastructure. He
highlighted that this dock is used year-round. For example,
three fuel barges are tied to the dock. These barges will haul
fuel to Western Alaska. He characterized Seward as being a
marine repair town in the winter. The ferries, tugboats, and
vessels that haul fuel and equipment to Western Alaska all bring
their boats to Seward in the off-season, but not during the
cruise season. He stated that there is very little time when the
dock does not have ships tied up, and even expanding the freight
dock will not provide enough space for marine repair. While it
is great for ARRC and the city to have a year-round anchor
tenant, it is critical to the community to have year-round
employment in Seward.
2:16:45 PM
CHAIR MYERS closed public testimony on SB 218.
2:17:04 PM
SENATOR SHOWER moved to report SB 218, work order 32-LS1514\B,
from committee with individual recommendations and attached
fiscal note(s).
CHAIR MYERS heard no objection, and SB 218 was reported from the
Senate Transportation Standing Committee.
2:17:20 PM
At ease
2:19:08 PM
CHAIR MYERS reconvened the meeting.
2:19:32 PM
There being no further business to come before the committee,
Chair Myers adjourned the Senate Transportation Standing
Committee meeting at 2:19 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 218 Sponsor Statement.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218Letter of Support_Alaska Railroad_AWA_2.16.22.docx.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 AAT AKRR Support Letter.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 AKRR Bonding Dock Letter of Suport.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 AKRR LOS on Letterhead.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 AKRR Support Letter for Bonding.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 Explore Fairbanks Letter of Support.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 AlaskaTourTravel-ARR-SewardDock-LetterofSupport.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 JAG AK Support Letter.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 Seward City Council Resolution of Support.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 Seward dock letter of support.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 Support Letter - Seward Dock.pdf |
STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB218 Fiscal Note NA.pdf |
STRA 3/1/2022 1:30:00 PM |
SB 218 |
| SB 218 Seward Bonding Presentation.pdf |
SFIN 5/5/2022 9:00:00 AM STRA 3/1/2022 1:30:00 PM |
SB 218 |