HB 122-RAILROAD CORP. FINANCING  2:05:04 PM CHAIR MCCABE announced that the final order of business would be HOUSE BILL NO. 122, "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." 2:05:20 PM REPRESENTATIVE FRANK TOMASZEWSKI, Alaska State Legislature, as prime sponsor, presented HB 122. He offered the sponsor statement [included in the committee packet], which read as follows [original punctuation provided]: The purpose of HB 122 is to enable the Alaska Railroad Corporation to secure financing for the critical replacement of its passenger dock and associated terminal facility in Seward, Alaska. By issuing revenue bonds, the Alaska Railroad Corporation can address infrastructure needs, enhance transportation services, and contribute to the economic vitality of the region. The existing passenger dock and terminal facility play a crucial role in supporting tourism, commerce, and transportation along the scenic Alaska Railroad route. However, due to wear and aging, these facilities require immediate attention. The proposed financing through revenue bonds will allow for timely upgrades, ensuring safe and efficient operations for passengers, freight, and tourism-related activities. The replacement project aims to enhance the overall experience for travelers, promote economic growth, and maintain the Alaska Railroad's status as a vital transportation link within the state. By investing in modern infrastructure, we can continue to connect communities, foster tourism, and support local businesses. HB 122 represents a collaborative effort to address critical infrastructure needs while maintaining fiscal responsibility. We appreciate your support for this legislation, which will benefit Alaskans and visitors alike. 2:07:23 PM ZACK YOUNG, Staff, Representative Frank Tomaszewski, Alaska State Legislature, on behalf of Representative Tomaszewski, prime sponsor, gave the sectional analysis for HB 122 [included in the committee packet] which read as follows [original punctuation provided]: Section 1. Beginning Page 1, Line 5: Authorizes the Alaska Railroad Corporation to issue an additional $90 million, for a total not to exceed $150 million, in revenue bonds to finance the replacement of ARRC's passenger dock and related terminal facility in Seward, Alaska. Section 2. Page 2, Line 7: Sets an immediate effective date. 2:08:15 PM REPRESENTATIVE STUTES related that when she first heard about HB 122, she presumed ARRC was in partnership with someone involved in the repairs and rebuilding of the docks. REPRESENTATIVE TOMASZEWSKI confirmed that ARRC is and added that ARRC staff were available for questions. 2:09:15 PM CHAIR MCCABE noted it was a good segway for ARRC staff to join the discussion. 2:10:02 PM MR. O'LEARY joined the discussion on HB 122 in support of the proposed legislation and presented a short PowerPoint [hard copy included in the committee packet], titled "Seward Passenger Dock & Terminal Replacement Project." He stated that the reason ARRC was present is due to railroad statutes requiring legislative approval before issuing bonds. He noted the three docks in Seward as he continued on slide 2, titled "Need for Replacement," which read as follows [original punctuation provided]: • Current Seward dock facility is rapidly approaching end of useful life Seward cruise port is critical infrastructure for Alaska's travel industry: 188,124 passengers cruised to or from Seward in 2023, many adding on travels in Southcentral and Interior MR. O'LEARY further stated that ARRC is being forced to put millions of dollars into the docks through 2025 just to keep them safe and functional. 2:13:42 PM MR. O'LEARY continued on slide 3, titled "Funding & Timeline," which read as follows [original punctuation provided]: 2022: $60 million in bond authorization approved 2024: Requesting additional $75 million bond authorization Fall 2025: Construction begins Spring 2026: New dock and terminal complete Bonds issued by ARRC are not a liability of the state, and no state dollars will be used for repayment; ARRC bonds will be secured by a long-term use agreement with anchor tenant Royal Caribbean Group. The new dock and terminal facility will support the next 50 years of industry growth and visitor demand. MR. O'LEARY stressed that it is a debt of ARRC only and no state monies can be used to pay the debt; they are revenue bonds. He quickly moved through slides 4 and 5 which showed a rendering of the new dock and terminal facilities. 2:17:06 PM PRESTON CARNAHAN, Regional Vice President of Destinations, Royal Caribbean Group, gave invited testimony in support of HB 122 and added that he represented a number of developments throughout the Western U.S. Region, and that the dock in Seward clearly needed to be replaced. He offered his belief the right solution had been found, which is why he said Royal Caribbean Group would offer a three-decade commitment to back the project up with revenue. 2:18:32 PM CHAIR MCCABE invited questions from committee members. 2:18:43 PM REPRESENTATIVE STUTES inquired about the utilization of the dock and whether any other cruise companies had been consulted. MR. O'LEARY responded that the proposal is to build a floating dock, and ARRC had discussions with those individuals who work on the docks about their concerns and how the dock could be used other than for cruise lines. He pointed out the project to widen the freight dock as well, and that the longshoremen's union has been in the loop. He further discussed the projected versatility of the docks. 2:22:12 PM REPRESENTATIVE STUTES clarified that she wished to know whether other cruise lines or longshoremen were consulted before the plans were drawn up. MR. O'LEARY responded that the structure of the deal included a developer, an anchor tenant, and the owner being ARRC. He clarified it is being looked at like a real estate type transaction. REPRESENTATIVE STUTES asked whether the City of Seward was involved. MR. O'LEARY said he could not respond to the level of detail, but Ms. Sorensen was online to answer questions. 2:25:20 PM KATHLEEN SORENSEN, City Manager, City of Seward, addressed Representative Stutes and stated that the City of Seward had been in discussions with ARRC for years and was excited about the project. She added that there was a presentation recently to the City Council regarding the design, and other administrations have been involved. REPRESENTATIVE STUTES referred to the cargo dock being rebuilt and asked what the timeframe was. She expressed her concern that if there were a disaster, Seward would be the next place as an ice-free port where anyone could go and must be available for cargo ships. MR. O'LEARY explained that the cargo dock has been somewhat delayed while grants and environmental permitting are being put in place. It would be challenging to manage two dock projects at the same time and would take significant coordination, he said. He requested that Mr. Lindamood join the conversation. 2:28:17 PM BRIAN LINDAMOOD, Vice President Engineering, Alaska Railroad Corporation, added that one of the complications was scheduling. He clarified that at any given time there must be a place for at least one ship to berth, and he confirmed there have been discussions with the development team to make sure that happens. Traffic must be maintained during construction, he said, and to make sure coordination is happening. REPRESENTATIVE STUTES stated it alarmed her that there may not be the ability to accommodate a large cargo ship, but the priority is a cruise ship. She expressed her opinion that the dock may not be large enough to accommodate a large ship offloading goods somewhat easily. 2:30:13 PM MR. O'LEARY affirmed that the freight dock could be used in a pinch, and there have been discussions about contingency plans in Seward should there be an issue at the Port of Alaska, but it may not be the most efficient. REPRESENTATIVE STUTES reiterated that she hoped there would be something in place before "you start tearing everything apart." 2:31:07 PM CHAIR MCCABE wondered about the dock itself and whether the ramp could be wider to accommodate bigger loads. MR. O'LEARY noted that Turnagain Marine is the constructor, and the focus is not for it to only be a freight dock, but to have greater utility in the off season. CHAIR MCCABE expressed interest in obtaining a timeline and mirrored Representative Stutes' concerns. 2:33:32 PM MR. LINDAMOOD added that the passenger dock schedule is more filled right now, and the intent is to continue through the winter and open back up again in time for the 2026 cruise passenger season. He confirmed that the existing berth at the freight dock is not going away, but is being expanded long term, and that the project is being held up slightly. 2:35:26 PM CHAIR MCCABE asked whether the docks were being built somewhere else. MR. CARNAHAN stated that the dock would be built in two sections in Washington state, which he described as the closest center of excellence for that type of work. The construction is more robust than any other floating dock, he said. CHAIR MCCABE brought up a news release about Haines and the Federal Government not paying for a $10 million hit, and he sought to know if construction is robust enough to "take a hit and be ok with it." MR. CARNAHAN said he could not speak on behalf of Turnagain [Marine], but in the past five years the construction company has successfully completed all the new floating cruise ship docks, and based on its portfolio, is a very robust company. 2:39:05 PM REPRESENTATIVE STUTES asked whether the dock could accommodate the Alaska Marine Highway System (AMHS). MR. O'LEARY replied that should AMHS plan to return to Seward, it would be at the freight docks as opposed to the cruise ship dock. REPRESENTATIVE STUTES asked whether ARRC would work with the Department of Transportation & Public Facilities (DOT&PF) to make sure the freight dock improvements would be facilitated. MR. O'LEARY said they had not contacted DOT&PF yet but would. 2:39:54 PM REPRESENTATIVE VANCE commented that the project looked a little too efficient and inquired about Royal Caribbean Group's objective in giving passengers time in communities on the Central peninsula, as well as investing dollars into the economy. 2:41:48 PM MR. CARNAHAN first referred to the dock construction and said that it was a very capable solution to handle the ship itself. He said as a company, Royal Caribbean Group is locally focused with strategic entrepreneurial partners and relies on Alaska businesses to create these partnerships. He said he believed many issues would be worked through by the time of the completion of the dock in 2026. 2:44:53 PM CHAIR MCCABE commented about the scheduling of passengers and how the added population all at once may affect Seward. 2:45:40 PM REPRESENTATIVE STUTES observed that the dock looked narrow and inquired whether two ships could be in at once. MR. CARNAHAN said it is a double-sided berth and could accommodate two large passenger ships. 2:47:09 PM REPRESENTATIVE VANCE spoke to the impacts of solid waste from larger ships and asked if he had conversations with communities in dealing with the waste. MR. CARNAHAN said industry members have signed on to a memorandum of understanding (MOU) where they discharge no waste into the communities. 2:48:12 PM CHAIR MCCABE announced that HB 122 was held over.