SB 86-ALASKA RAILROAD CORP: LAND;BONDS,FINANCE    3:17:04 PM CHAIR KITO announced that the first order of business would be CS FOR SENATE BILL NO. 86(FIN) am, "An Act relating to the sale or other disposal, leasing, or encumbrance of Alaska Railroad Corporation land; relating to the financing and bonding authority of the Alaska Railroad Corporation; and providing for an effective date." 3:17:33 PM SENATOR JOHN COGHILL, Alaska State Legislature, paraphrased from the sponsor statement [included in member packet], which reads as follows [original punctuation provided]: SB 86 repeals the current requirement for legislative approval prior to an Alaska Railroad Corporation (ARRC) land sale or land lease for more than 95 years and enables the ARRC to react much more quickly and efficiently to real estate opportunities and land transactions with state entities such as DOTPF for state road and facility projects. SB 86 will put ARRC on an even playing field with the Department of Transportation and Public Facilities (DOTPF), the Department of Natural Resources (DNR), the Alaska Mental Health Lands Trust, and the University of Alaska. The bill would enable ARRC to sell land on which development would not occur with a land lease such as real estate in residential areas that could be subdivided for home construction. Such an incentive could increase private land ownership, encourage private development, and increase the local tax base. SB 86 will allow ARRC to monetize non-performing land assets, generate cash flow to respond to opportunities in the real estate market, enhance the overall real estate portfolio of ARRC, and enable ARRC to continue to comply with the statutory mandate to remain self- sufficient. SB 86 has a three-year sunset provision. 3:22:02 PM REPRESENTATIVE JOSEPHSON asked about a legal opinion stating there is no constitutional problem with the bill except that any funds received by the railroad have to be appropriated to the railroad. SENATOR COGHILL replied that the question of appropriation is unsettled. He deferred to his staff to present the citation. 3:25:04 PM RYNNIEVA MOSS, Staff, Senator John Coghill, Alaska State Legislature, said there is a provision in Public Law 97468, January 14, 1983, that states that revenues generated by the state-owned railroad shall be retained and managed by the railroad for railroad and related purposes. She added that Senator Stevens had specified on the record that the provision is in public law to eliminate the necessity to appropriate the money to the railroad. 3:25:52 PM REPRESENTATIVE WOOL moved to adopt the proposed committee substitute (CS) for CSSB 86 as the working draft. 3:26:06 PM CHAIR KITO objected for the purpose of discussion. 3:26:18 PM CRYSTAL KOENEMAN, Staff, Representative Sam Kito, Alaska State Legislature, paraphrased the explanation of changes, Senate Bill 86, Version U.A to Version N [included in member packet], which reads as follows [original punctuation provided]: Adds a new subsection to 42.40.350 that prohibits the Alaska Railroad Corporation to exercise management authority over lands which were unlawfully transferred in violation of state law. Adds a new subsection 42.40.410 that states that any land or interest in land the Alaska Railroad Corporation received from the U.S. Department of the Interior that was not conclusively owned by the United States at the time of transfer does not satisfy the exception from legislative approval required under AS 42.40.285. Provides for Legislative Approval of the transfer of Real Property to Eklutna, Inc. and the Municipality of Anchorage. All other provision in version U.A have been removed. CHAIR KITO explained that the transfer language is in Sections 4 and 5. He called on Representative Kopp for a brief explanation of Sections 1, 2, and 3. 3:28:24 PM REPRESENTATIVE CHUCK KOPP, Alaska State Legislature, said the aim of the proposed changes is to clarify the rights of the Alaska Railroad Corporation over the right of way and to prevent the ARRC from exerting perceived authority to continue to purchase private property in violation of federal and state law. He said there is no railroad corporation property transferred from federal or state ownership which will be affected by the amendments. He pointed to Section 2, AS 42.40.350, and said it uses the phrase "to not have authority over real property. The railroad corporation is given its authority in state law. The amendment clarifies that the authority does not include the ability to take action on or otherwise manage property unlawfully obtained. He added that the amendment to AS 42.40.410 uses the term "conclusively owned", which means any individual parcel's chain of title clearly states the federal government was the owner of the title or interest at the time, and as stated by the ARRC, each parcel would have to be individually examined to determine what the federal government owned when it transferred rail properties which only included the right, title, and interest in those properties which belonged to the federal government. If it becomes clear that the ARRC is only in possession of the federal interest in those parcels of land, then the amendments would have no effect. He referenced a letter from Congressman Don Young in which he said there is no way that a bill quietly annexing private property rights would have passed the Congress in 1982. 3:32:50 PM REPRESENTATIVE JOSEPHSON asked about page 2, line 30 of the CS. He asked what the statute of limitations is on the determination of ownership. REPRESENTATIVE KOPP replied that regardless of the statute of limitations, if an unlawful taking occurred, it cannot be unconstitutional to attempt to right it. He said the discussion arose more recently when the ARRC has claimed an interest. The homesteaders were never notified and there was no question of whether they owned the land. REPRESENTATIVE JOSEPHSON asked whether anything could be construed to imply that [if there was] a failure of the federal government to afford due process for any claims in the mid- 1980s, the costs of any prospective litigation would fall on the state or on the ARRC. 3:35:00 PM REPRESENTATIVE KOPP answered the query highlights the most important reason for the CS. He said the proposal gives direction to the ARRC to ascertain what the federal interest was at the time of the transfer. He said he sees the state liable only if it takes no action. REPRESENTATIVE JOSEPHSON spoke to the concern over 30,000 acres in the Fairbanks, Alaska, area. He asked whether the concerns overlap with the sites of the lands in question. REPRESENTATIVE KOPP answered that he fully supports the ARRC sale of the two land parcels. He said he does not know where the "30,000 acres" comes from. He stated the resolution spoke to the claims to the right-of-way that was across homestead property. He explained the federal government has completely divested itself of all ownership in the land and had not issued two homestead patents but left it as one homestead with a standard easement. The reading is that the ARRC only received what the federal interest was, and it was on public lands. 3:39:17 PM CHAIR KITO removed his objection. 3:39:23 PM REPRESENTATIVE JOSEPHSON objected. 3:39:44 PM REPRESENTATIVE SULLIVAN-LEONARD maintained her objection. 3:40:03 PM WILLIAM O'LEARY, President & CEO, Alaska Railroad Corporation (ARRC), said the ARRC has objections to the language in the CS. He stated that if there were an erroneous transfer, the federal government should bear the burden. He said the concept of restitution from the federal government is very different from creating a patchwork quilt of land use rights across the state. 3:43:18 PM REPRESENTATIVE JOSEPHSON asked what part of the language in the CS would shift the burden. MR. O'LEARY said it is in Section 2. He deferred to legal counsel for a better description. 3:44:18 PM ANDY BEHREND, Chief Counsel, Alaska Railroad Corporation (ARRC), answered the language is in Sections 2 and 3 does concern the ARRC. He said in the event of a transfer of a federal interest that was greater than what they owned at the time, the typical approach would be a claim in federal court for compensation. He said the language would take rights that were in the agreement since 1985 for 95 percent of the right-of-way that have been in the patent for 10 to 30 years. He said the language would tell the railroad it can no longer claim those rights. 3:47:34 PM REPRESENTATIVE BIRCH disclosed he previously worked closely with Mr. O'Leary. He asked if the railroad had undertaken any initiative to shore up any property interested in the intervening years. MR. BEHREND explained the first thing that happened with the transfer occurred was that the federal government transferred all of its interests. Afterwards, for any land that had not been fully surveyed, surveys were completed, and the final patents were issued. He added that the U.S. Dept. of the Interior, Interior Board of Land Appeals (IBLA) looked at the transfer act and determined that the Division of Land Management (DLM) had followed that act. 3:51:26 PM REPRESENTATIVE BIRCH asked if the railroad asserted an interest in property if the government did not own it at the time of transfer. MR. BEHREND answered in the affirmative. He added that the federal government transferred all of the interest to the ARRC for each parcel in the right-of-way. He said that if there were mistakes in transferring any of the land, the interest still passed to the ARRC and was put into the patent. If that happened, then it constitutes a taking by the federal government which should be addressed with them. 3:54:12 PM REPRESENTATIVE JOSEPHSON said it sounded like the ARRC enjoys a strong presumption under federal law that in the event of an improper transfer, the railroad is insulated from liability. He suggested Sections 2 and 3 act to attenuate the "shield of protection" and potentially foist [liability] on the railroad directly. MR. BEHREND said he thinks that is an accurate way to put it. He said that the act contains an express guarantee that the federal government would defend any challenge. He added the language in the proposed bill says the railroad cannot exercise authority over the land. 3:57:02 PM REPRESENTATIVE WOOL asked whether the ARRC would like to see the projects move forward. MR. O'LEARY said the projects are both very good. 3:57:33 PM REPRESENTATIVE STUTES asked if the property would be sold outright or partner with whatever development takes place. MR. O'LEARY explained the sales would be outright and there would be a land trade with Eklutna [Inc.]. REPRESENTATIVE STUTES asked if there is an anticipated project that would be funded through the proceeds. MR. O'LEARY said funds from land sales are used for other real estate activities such as improving access and water and sewer improvements, and not for rail operations. REPRESENTATIVE STUTES said it sounds like the ARRC will become a real estate holding company. MR. O'LEARY said the ARRC is still an operating entity. He said the decision was a wise one and real estate activities provide a significant buffer for other operations. 4:00:23 PM REPRESENTATIVE JOSEPHSON asked whether the railroad would rather have the bill with or without the language in question. MR. O'LEARY answered the ARRC would like to see the legislation move forward. 4:01:20 PM REPRESENTATIVE JOSEPHSON removed his objection. REPRESENTATIVE SULLIVAN-LEONARD maintained her objection. 4:01:32 PM A roll call vote was taken. Representatives Knopp, Stutes, Wool, Birch, and Kito voted in favor of adopting the proposed committee substitute (CS) for CSSB 86 as the working draft. Representatives Sullivan-Leonard and Josephson voted against it. Therefore, Version N was adopted as the working draft by a vote of 5-2. 4:02:14 PM CHAIR KITO opened public testimony on SB 86. 4:02:27 PM CURTIS MCQUEEN, CEO, Eklutna Inc., testified in support of SB 86. He gave the background of his corporation. He stated the Alaska railroad goes through Eklutna lands. He said they have a longstanding relationship with the railroad. He said the Eklutna corporation represents the traditional village of Anchorage. He stated they recognize how crucial the railroad is to the economy of the area. He stated the Eklutna corporation owns a lot of property in the area and it appreciates the ARRC's support. He stated Eklutna, Inc. owns property that would be made contiguous through the proposal. He said it is thought appropriate to have a "trial run" of three years to give the ARRC an opportunity to try. 4:05:56 PM FRED ROSENBERG said he is a property owner who has property near the railroad. He said it appears the ARRC has been supporting the idea of going to court. He said he does not see it as a court issue. He said under Alaska Railroad Transfer Act (ARTA), the ARRC has a federal interest in the right-of-way. He referred to the letter from Congressman Young. He stated federal interest does not include private rights. He stated it was a specious argument to suggest that the government has any right to do so. If the government did not own it, it cannot transfer it. 4:08:42 PM JODI TAYLOR, Church of Jesus Christ of Latter-Day Saints, stated the church has owned property in Willow, Alaska, for many years. She said the issue has cut them off from the other part of their property. She stated adoption of the proposed language is a win-win. 4:09:52 PM CHAIR KITO held over SB 86.