HB 314-ALASKA RAILROAD LAND LEASES  4:26:16 PM CHAIR OLSON announced that the final order of business would be HOUSE BILL NO. 314, "An Act extending the time period for which the Alaska Railroad Corporation may lease land without reserving the right to terminate the lease; and providing for an effective date." 4:26:29 PM ANNA LATHAM, Staff, Representative Kurt Olson, on behalf of the sponsor, the House Labor and Commerce Committee, introduced herself. MS. LATHAM stated that HB 314 would extend the maximum Alaska Railroad Corporation (ARRC) property lease term from 55 to 95 years. She provided a brief overview of the ARC, such that the state has owned the Alaska railroad since 1985. It has been incorporated and operates as though it is a private business. The corporation generates revenues through real-estate holdings, year-round passenger service and freight service. Historically, railroads have owned large parcels of land which they lease to generate revenue. The railroad industry has been cyclical so revenue generated from property leases have helped to carry railroads through economic downturns. MS. LATHAM related that the ARRC leases approximately 2,000 of the 36,000 acres it owns and the corporation currently holds 260 long-term leases. She reported that 38 percent of the 36,000 acres is devoted to right-of-way, 12 percent is used for operations, and the remaining 50 percent is available for lease. As a state-owned entity, the ARRC is mandated to foster economic development statewide and in communities along the Railbelt. An extension of lease terms for up to 95 years would assist the ARRC in meeting this directive. She explained that longer leases encourage high-value building construction by assuring developers and financiers the developments will retain their value for future buyers. Quality developments retain their value for a longer period of time and have a higher resale value, which is good for the railroad, the state, and for leaseholders. MS. LATHAM cautioned that this does not mean the standard lease will be 95 years, but the bill will give the ARRC Board of Directors the option of extending a lease for up to 95 years at their discretion. She highlighted that this bill has received widespread support and members' packets contain letters of support from the Municipality of Anchorage (MOA), the cities of Valdez, Seward and Whittier, and from various leaseholders and developers throughout the Railbelt. She noted that the sponsor has not received any opposition to this bill. 4:29:06 PM JON COOK, Chair, Real Estate Committee; Member, Board of Directors (BOD), Alaska Railroad Corporation (ARRC), stated that the genesis of the bill was explained by Ms. Latham. He said that this bill was requested by existing tenants and potential developers who indicated they would be interested in developing projects on ARRC leased property if the 95-year lease term was available. He explained that the 95-year leases would give the tenants an opportunity to remarket the properties to ensure that the owners the long-term leases are as close to fee simple as one can get. He advised that another reason to extend the lease terms is that the underwriting standards for obtaining loans has tightened up pretty dramatically since 2008. Therefore, 55 years for very large project is insufficient. He suggested if HB 314 passes the 95-year leases would not be the norm, but would be an exception reserved for new, large development, or existing businesses that plan to invest substantial amount of capital in the property. 4:31:14 PM CHAIR OLSON, after first determining no one else wished to testify, closed public testimony on HB 314. 4:31:44 PM REPRESENTATIVE HOLMES moved to report HB 314 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 314 was reported from the House Labor and Commerce Standing Committee.