SENATE BILL NO. 64 An Act relating to the dissolution of the Alaska Railroad Corporation and providing for a successor corporation; and providing for an effective date. Co-chairman Halford directed that SB 64 be brought on for discussion. Senator Rieger noted that a hearing on the bill, last year, revealed that CSSB 64 (TRA) provided for a change of ownership of the Alaska Railroad in the form of a stock corporation. The theory behind that was that if sale of the railroad could not be achieved as a complete one-time sale of all assets, perhaps the railroad could be sold by selling shares of stock, over time, without changing the underlying corporate structure. Since that time, at a joint Senate Finance and Senate Transportation meeting, an outside firm made a presentation indicating it was genuinely interested in purchasing all of the assets. That increased the level of confidence that a complete sale at one time could be achieved. The draft CSSB 64 (9-LS0579\R, Utermohle, 4/8/96) reflects a modified version of an amendment proposed in Senate Transportation. It calls for sale of the railroad and prescribes time tables within which that is to occur. Senator Rieger referenced scheduled identification of railroad assets (both those needed for operation and those which are not). Concern has been raised that "some of the real estate which belongs to the railroad should not be part of the sale." The first phase of identification, scheduled for August, focuses upon the real estate and will identify what is necessary for operation and what is surplus. The second date, in October, is the time by which the Governor will issue a request for proposals for purchase of the railroad. The third deadline, February 15, 1997, is the deadline for reaching agreement with the maker of the most responsive offer to the RFP. Senator Rieger next pointed to Page 2, line 10, of the draft and noted the requirement that the Governor submit the agreement to the Legislature to provide an opportunity for Legislative disapproval. It is unclear exactly when the Governor is required to make the submission. Senator Rieger suggested that the following additional language (underlined) be added to line 10 so that the sentence reads: Upon entering into an agreement to sell the Alaska Railroad, the governor shall immediately submit the agreement to the legislature for review during the regular session of the legislature. A second concern relates to preparation of a report of the fair market value of the railroad and when the document should be made public. A provision could be added to require that the report remain confidential until after proposals are received or an agreement is reached. The reason for the fair market report is to evaluate proposals. The third issue is whether the legislative branch would want or should have input into development of the request for proposals. Senator Rieger subsequently noted Legislative Budget and Audit Committee ability to review the classification of assets necessary for operation of the railroad. Senator Rieger MOVED for adoption of the draft CSSB 64 dated 4/8/96. No objection having been raised, the "R" version was ADOPTED as CSSB 64 (Fin). Senator Rieger voiced his belief that only the first of the three issues raised requires a clarifying amendment. He then MOVED for adoption of the above-cited language. No objection having been raised, Amendment No. 1 was ADOPTED. Co-chairman Halford referenced accompanying fiscal notes indicating a cost of $800.0 to $1 million for preparation of the fair market analysis. Senator Rieger acknowledged that earlier discussion indicated the cost could be as high as $2 million. He suggested it would be prudent for the committee to accept a fiscal note from the department or railroad or, in the alternative, write a committee note to provide funding for the effort. SENATE PRESIDENT DRUE PEARCE noted that an update provided last week indicated $2 million would be high. MARK HICKEY, representing the Alaska Railroad, advised that the actual figure for the 1983 valuation, conducted by the United States Railway Association when the state purchased the railroad, was $863.0. That represented a full valuation including an appraisal of the real property as well as a "going concern" assessment with a ten-year window for operation. That is where the $22 million was derived. While some baseline data may be usable, the valuation is twelve or thirteen years old. It is unknown how much data would be useful to the new valuation. Co-chairman Halford asked if $900.0 in corporate receipts would be adequate. Mr. Hickey responded that it should be adequate for the appraisal. He also noted expenses associated with "running a process." Senator Rieger expressed concurrence in the $900.0, saying that conferees could later amend the number if better information is available. Co-chairman Halford directed that a Senate Finance Committee fiscal note be prepared showing $900.0 in non-general- fund railroad receipts. Senator Randy Phillips raised a question regarding how the transfer would affect railroad employees and their retirement and benefits. Co-chairman Halford suggested that language at Page 1, subsection (2) would cover the situation. Senator Phillips termed the retirement system under federal jurisdiction "unique" and sought clarification of the status under the proposed sale. Mr. Hickey explained that, in terms of retirement, the railroad has two classes of employees: 1. Those who have been with the railroad for a period of time and fall under the federal program. 2. New employees who joined the railroad following purchase by the state. For those in the federal system, it seems clear that the definition of what constitutes a "state-owned railroad" is broad enough to include a private entity operating the railroad. Those employees will continue to participate in the federal system as long as they remain with the railroad. They are covered by the previous transfer law. Newer employees are in a different retirement system maintained by the railroad. Mr. Hickey said he was less comfortable commenting on coverage, without additional information. He voiced his belief that current bargaining agreements deal with the retirement benefit as a component of the agreement. Senator Phillips advised that he would feel more comfortable adding language relating to retirement agreements. Co- chairman Halford suggested that "and retirement obligations" be added to language at Page 1 so that the first portion of subsection (2) reads: (2) accept assignment of all contracts, including collective bargaining agreements and retirement obligations and agreements with connecting carriers, shippers . . . . Senator Phillips formally MOVED for adoption. No objection having been raised, Amendment No. 2 was ADOPTED. Senator Rieger then MOVED that CSSB 64 (Fin) pass from committee with individual recommendations and the Senate Finance Committee fiscal note. No objection having been raised, CSSB 64 (Fin) was REPORTED OUT of committee with a Senate Finance Committee fiscal note showing $900.0 in railroad corporate receipts. All members present (Co- chairmen Halford and Frank and Senators Phillips and Rieger) signed the committee report with a "do pass" recommendation.