HOUSE BILL NO. 136 "An Act mandating the sale of the Alaska Railroad; and providing for an effective date." Representative Martin, sponsor of HB 136, spoke in support of the legislation. He noted that the legislation was introduced in recognition of the tenth anniversary of the acquisition of the Alaska Railroad. He emphasized that land is available for transferred to the State of Alaska. He noted that the State paid the federal government $20.0 million dollars for the Alaska Railroad. He maintained that the State should assess what is the value of the railroad. The legislation would provide for a commission to assess the value of the railroad. He noted that the legislation was changed from providing for the sale of the railroad to a commission evaluating the asset. Representative Martin referred to the fiscal note. The fiscal noted by the House State Affairs Committee for the Department of Commerce and Economic Development would provide $250.0 thousand dollars. In response to a question by Representative Brown, Representative Martin noted that other assets are addressed 2 on page 4, lines 17 - 27. Representative Brown asked the status of the accompanying land. She asked if the land would become state land and be under existing procedures for disposal of state land. Representative Martin stated that the intent is to assess the extent of the assets and their current status. Representative Brown suggested that the land would fall under a default status. She expressed concern that the Commission would recommend procedures for the disposal to the State. She thought that the State would already be the owner. She observed that there are existing contracts. She asked if contracts are addressed. Representative Martin referred to a memorandum by George Utermohle, dated 11/9/92. He stated that he did not know the extent of contracts entered into by the Alaska Railroad Corporation. He noted that section (B) on page 5 addresses contracts. He reiterated that the intent is to determine what is there. Representative Brown questioned what would happen to assets that would not be part of the sale. Representative Mulder pointed out that the current version does not mandate a sale. The legislation will created a Commission to provide guidance and counsel. Representative Brown referred to page 4, line 19. She suggested that "recommend procedures for the disposal of" be changed to "inventory real property and contracts of the Alaska Railroad Corporation that are not necessary for the operation of the railroad, and make recommendations for their disposition." She stressed that the amendment would recognize that there are contracts attached to some of the real property that is not necessary for the operation of the railroad. Representative Mulder questioned if the addition of "possible" before disposal would alleviate Representative Brown's concerns. Representative Brown reiterated that her suggested language would clarify the section. She stressed that the current language refers to the specific conditions attached to the sale. Representative Brown MOVED to delete "recommend procedures for the disposal of" and insert "inventory real property and contracts of the Alaska Railroad Corporation that are not necessary for the operation of the railroad, and make recommendations for their disposition." There being NO OBJECTION, it was so ordered. 3 Representative Brown referred to page 2, lines 23 and 24. She noted that the contract for evaluation is exempt from AS 36.30, Procurement Code. Representative Mulder asked how long it would take to issue a request for procurement. He questioned if the procurement bid could be finished by the November 1, 1996 target date. Representative Martin stressed that there are a limited amount of people that specialize in railroad properties and functions. Representative Brown noted exceptions for professional services on page 2, lines 16 and 17. She questioned the need for this exception. She noted that (d) is out of railroad receipts, (c) states that it is subject to appropriation. She asked if subject to appropriation includes the $250.0 thousand dollar fiscal note. Representative Martin stated that the reference is to the $250.0 thousand dollar fiscal note. He noted that (c) and (d) would both be covered by the $250.0 thousand dollar fiscal note. Representative Brown asked why it was necessary to give consideration to persons with experience in corporate mergers and acquisitions. She questioned how many individuals would have the required experience. Representative Mulder stressed the logic of having persons with experience in business practices. Representative Brown stated that it would be at least as important to have people who are familiar with the local communities and the issue of land disposition. She emphasized that the needs of communities be taken into account. Representative Martin observed that a wide range of individuals and communities would want to participate. He emphasized that everyone will have opportunities in open meetings to express their concerns. Representative Therriault stated that it was unclear if all the individuals should have experience. He suggested that "at least one person" be inserted. Representative Martin stressed that all user groups cannot be represented on the Commission. He reiterated that all will be able to testify in open meetings. Representative Mulder pointed out that the language does not mandate that all members have experience. 4 Representative Brown questioned how open the Commission's proceedings would be. She noted provisions on page 5 that the Commission could discuss in executive session. She stressed that it could be argued under subsection (1) that the entire conversation has an adverse effect on the Alaska Railroad Corporation's finance. She added that subsection (5) and (6) would cover large portions of the discussions. She maintained that the whole conversation could take place in secret. She asserted that it is a valid concern that public members be involved. She questioned why land acquisition or disposal needs to be included in allowances for executive session. Representative Martin expressed concern that the discussions be open. He pointed out that page 2, line 1 states that the Commission "shall" give consideration to the appointment of persons who have experience involving corporate mergers and acquisitions. Representative Therriault MOVED to delete "persons who have" and insert "at least one person who has" experience on page 2, line 1. There being NO OBJECTION, it was so ordered. Representative Martin emphasized that it is important to know what is available. He observed that the language on page 5, lines 7 - 19 is taken from the Corporation's by laws. Representative Therriault questioned if the Corporation's concerned regarding negotiations currently under discussion for purchase of or disposal of a piece of property. He stated that the language could be expanded to clarify that only those things that are currently in negotiation would be allowed discussion under executive session. Representative Therriault expressed support for the addition on page 5 line 15, of "currently under negotiations." He added that consideration should be given to the customer or customers that pay the majority of the freight costs. Representative Parnell MOVED to adopt Amendment 3 (copy on file). He explained that the amendment would require that reports be given to the Speaker of the House and the President of the Senate as well as the Governor. The amendment would also require that copies of the report be made available for the public. There being NO OBJECTION, it was so ordered. BILL SHEFFIELD, FORMER GOVERNOR, CHAIRMAN, BOARD OF DIRECTORS, ALASKA RAILROAD CORPORATION testified via the teleconference network. He noted that a number of 5 individuals were interested in testifying on the legislation. He gave a brief history of the creation of the railroad. He noted that the State purchased the railroad to obtain ownership of an important transportation corridor in the Interior of Alaska. He noted that the railroad was built to allow expansion where needed. He maintained that the railroad is a performing asset. He observed that the railroad has only lost money in two years while under ownership by the State. He asserted that the railroad will continue to make a profit. He emphasized that the railroad is a major player in the State's economy. (Tape Change, HFC 96-147, Side 2) Mr. Sheffield noted other functions of the Alaska Railroad. He emphasized that the Corporation is developing real estate. He discussed land managed by the Corporation. He observed that all the land was transferred to the State owned Corporation. If the Corporation is disposed of then the land would also have to be disposed. He stressed that the sale raises public questions. Mr. Sheffield stated that he is opposed to the sale of the Alaska Railroad. He maintained that the membership of the Commission is too small. He did not think that a five member commission would allow for sufficient representation. He maintained that it is wrong to require the Corporation to pay for a fast track appraisal. He noted that the federal government paid $850.0 thousand dollars for the first cut of an appraisal of the fair market value of the Alaska Railroad in 1984. Mr. Sheffield emphasized that money spent for an appraisal will reduce funding available for railroad ties and other expenses. Mr. Sheffield stressed that the Corporation could convene a Committee to address the issue and make recommendations. Mr. Sheffield viewed plans for expansion and improvements. He discussed efforts to obtain federal funds for passenger service. He clarified that the reversionary clause is in relationship to the land ownership. He noted that if there were a sale of the railroad prior to ten years then the difference between what was paid for the railroad and what was received for the railroad would go to the federal government. After ten years any profits would remain with the State. Mr. Sheffield reiterated that the Corporation could appoint a committee consisting of legislators, users and the public to address the issue at no cost to the State. Representative Therriault referred to page 5, line 15. Mr. 6 Sheffield observed that lines 7 - 15 are in the Corporation's by-laws. He acknowledged that some of the items are more important than others in regards to confidentiality. He stressed that matters related to personnel or finances are of most concern. Representative Brown questioned if the discussion of the possible sale of the railroad would have an adverse effect on the finances of the railroad. Mr. Sheffield responded that discussion of the sale could have an adverse effect. Representative Brown observed that the Commission is not the same as the Board of the Alaska Railroad Corporation. She acknowledged that the Corporation would want to keep items (1) - (7) in executive session. She maintained that there should be a different standard for the Commission than for the Board. Mr. Sheffield acknowledged that some of the items could be revised. JEFF COOK, VICE PRESIDENT, EXTERNAL AFFAIRS AND ADMINISTRATION, MAPCO PETROLEUM testified via the teleconference network. He noted that Mapco paid the railroad approximately $23 million dollars in 1995. He stressed the need for efficiency. He expressed concern about any sale of the railroad. He emphasized that Mapco has an excellent relationship with the railroad. He stressed the quality of service and partnership. He expressed concern that the Commission's membership is too small. He questioned if the Commission should first see if it is in the State's best interest to sell. He stated that the provisions of subsection (g) would best be addressed if a decision is made to pursue a sale. He stressed that the Commission should be big enough to represent the diverse users that have an interest in the railroad. He reiterated that he did not see a reason for the sale. JOHNE BINKLEY, EX-SENATOR, BOARD MEMBER, ALASKA RAILROAD CORPORATION testified via the teleconference network. He spoke in opposition to the legislation. He observed that the railroad has been instrumental in the development of Fairbanks. He stressed that the railroad is an important transportation corridor. He maintained that the railroad should not be sold. He asserted that the railroad is an important asset that should be protected. He stated that he has been impressed with the management of the Alaska Railroad. He observed that the railroad made a profit in the current year. He stressed that the Board protects the public's interest. He agreed that the Board should look at the issue. He observed that $250.0 thousand dollars could be used to purchase needed equipment. 7 GARY ANGLAN, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES (AFGE) testified via the teleconference network. He noted that AFGE represents many of the employees on railroad property. He expressed concern with the legislation. He noted that the transfer from the federal government was an agonizing experience for the railroad employees. He noted that employees were retained in the Civil Service Retirement System during the transfer in 1985. He emphasized that the stress and uncertainty that accompanied the transfer resulted in the loss of qualified employees. He noted that there was an unfunded liability for the employees in the Civil Service Retirement System. He emphasized the difficulty of ascertaining the unfunded liability for these employees. He maintained that in the advent of a sale the new owner should assume the cost of the employee's participation in Civil Service Retirement System. He noted that employee unions are actively engaged in collective bargaining. He stated that the discussions regarding sale of the railroad is having a destablizing effect on the negotiation process. He asked if the railroad is currently running okay and what is the potential to Alaska if the railroad was free of legislative interference and regulation. He noted that the railroad received $10.0 million dollars for tie upgrades. He asked the total worth of these improvements for future operations. He observed that Governor Sheffield indicated that the railroad would fall apart if this money is not spent. MARK HICKEY, ALASKA RAILROAD CORPORATION discussed item (6) on page 5, line 15. He stated that the additional language recommended by Representative Therriault should not create a problem. Representative Therriault asked if a problem would be created if (6) was deleted. Mr. Hickey pointed out that the language is not mandatory. He stated that there could be a matter pending that would need to be discussed in executive session. Representative Martin stressed that once the guidelines are placed into law there would be a greater barrier. (Tape Change, HFC 96-147, Side 1) Representative Brown referred to subsection (1) on page 5. She suggested that "except as related to the potential sale," be added to the beginning of line 7. She stressed that it should be clear that discussions should take place in public. Mr. Hickey stated that the intent is clear that to the extent possible the proceedings are to be public. He emphasized that subsection (1) states, would "clearly" have 8 an adverse effect upon the finances of the Alaska Railroad Corporation. He emphasized that assuming that the Commission intends to operate to the extent practical in a public way, that the language is adequate. He observed that the application of the Corporation Act in relating to its work with the Commission needs to be considered. Representative Brown clarified that her concern is that the Corporation, with all its concerns, by laws, and practices will want to go into executive session in its discussions with the Commission. Representative Brown referred to subsection (5) on page 5, line 14. She suggested the addition of "current litigation involving the Alaska Railroad Corporation". She stated that the entire issue addresses the legal position of the Alaska Railroad Corporation. Mr. Hickey stressed that current litigation may be too narrow. He observed that there could be legal matters pending. Mr. Sheffield noted that the Corporation discusses in executive session matters under litigation and matters that may be potential subjects for litigation. Mr. Sheffield noted that $250.0 thousand dollars represents 25,000 railroad ties or 40 miles of track. HB 136 was HELD in Committee for further consideration. HOUSE BILL NO. 136 "An Act mandating the sale of the Alaska Railroad; and providing for an effective date." Representative Therriault MOVED to delete subsection (6) on page 5, line 15. There being NO OBJECTION, it was so ordered. Representative Brown MOVED to delete "the legal position of the" and insert "current or potential litigation involving." There being NO OBJECTION, it was so ordered. Representative Therriault MOVED to report CSHB 136 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. Representative Brown OBJECTED. She noted that the legislation is structured into two parts. Section (f) provides for a determination of best interest. Section (g) contains the particulars related to the determination to sell. She asserted that subsection (3) on page 4, lines 17 and 18 should be moved under section (f). She noted that subsection (3) allows for a broader 10 interpretation. Representative Therriault WITHDREW his motion to move CSHB 136 (FIN). There being NO OBJECTION, it was so ordered. Representative Brown MOVED to move subsection (3) on page 4, lines 17 and 18 to be placed under section (f) on page 2, line 31. There being NO OBJECTION, it was so ordered. Representative Kohring MOVED to report CSHB 136 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. A roll call vote was taken on the MOTION. IN FAVOR: Kohring, Martin, Mulder, Parnell, Therriault, Foster OPPOSED: Brown, Navarre Co-Chair Hanley and Representatives Kelly and Grussendorf were absent for the vote. The MOTION PASSED (6-2). CSHB 136 (FIN) was reported out of Committee with "no recommendation" and with a fiscal impact note by the House State Affairs Committee for the Department of Commerce and Economic Development.