HOUSE BILL NO. 140 "An Act authorizing the Alaska Railroad Corporation to issue revenue bonds to finance a positive train control rail transportation safety project that qualifies for federal financial participation; and providing for an effective date." 9:16:11 AM REPRESENTATIVE STEVE THOMPSON, SPONSOR, introduced the legislation. He explained that HB 140 will authorize the Alaska Railroad Corporation (ARRC) to issue up to $37 million in tax-exempt bonds backed by Federal Transit Administration (FTA) formula funds received annually by ARRC. Bond proceeds will be used to finance Positive Train Control (PTC): a safety program mandated by the federal government without any correlating funding, which is estimated to cost ARRC approximately $158 million. ARRC proposes to refinance $66 million in existing bonds and extend the repayment date in order to issue an additional $37 million in bonds to pay for a major portion of the remaining $55 million in PTC costs. Under AS.42.40.285 ARRC is required to receive legislative approval to issue bonds. In no event will the general credit of the State of Alaska or ARRC be pledged for the repayment of these bonds. AS.42.40.500 requires that all liabilities incurred by ARRC shall be satisfied "exclusively" from the assets or revenue of ARRC and not the State. Debt payment for the bonds will come from a portion of Federal Transit Administration (FTA) formula funds which are statutorily mandated by Federal law and received annually by ARRC. Issuing debt backed by FTA formula funds is authorized through FTA regulation and has already been used by ARRC to issue bonds. PTC is technology designed to stop or slow a train before human-error causes an accident to occur. In 2008, the federal Rail Safety Improvement Act required certain railroads to install a fully functional PTC system by the end of 2015; by virtue of its passenger service, ARRC is subject to this requirement. A failure to implement PTC will force ARRC to severely curtail or eliminate passenger service and/or face severe fines for non-compliance. Estimates for this large research and development project indicate that it will cost approximately $158 million to implement. Since 1997, ARRC has invested $68.9 million to develop a PTC system. In 2013 and 2014, ARRC received an additional $19.1 million and $15 million respectively from the State of Alaska to continue work on PTC. Between 2016 and 2018, an additional $55 million will be required for ARRC to complete the development and installation of PTC by 2018. This figure does not include the estimated $5 million to $7 million per year of operating and capital maintenance costs related to the system that ARRC will fund after PTC is installed. Vice-Chair Micciche shared that he was not in support of PTC, but understood that the state did not have a choice. He expressed support for the legislation. Senator Dunleavy appreciated the legislation. Co-Chair MacKinnon CLOSED public testimony. 9:21:36 AM Senator Hoffman wondered how much unutilized land was owned by the Alaska Railroad. BILL O'LEARY, CEO, ALASKA RAILROAD, explained that there was roughly 36,000 acres of land owned by the corporation. Approximately 18,000 acres of that land was used directly in rail operations, such as right-of-way. Therefore, there was a remaining 18,000 acres available for other use. He recalled that there was approximately 2600 acres that were under lease or permit. Senator Hoffman queried the future plans of the remaining 15,000 acres. Mr. O'Leary replied that there was a hope to develop the unused land. There were some plans in Fairbanks, Anchorage, and Seward with the hopes to move forward. Senator Hoffman wondered if the undeveloped acres would be available to create jobs to incur investment. Mr. O'Leary replied that it was of great concern to the corporation, and was a part of the financial picture. He stated that there was a hope to utilize the railroad land. Senator Hoffman queried the corporation's position on selling any of the land. Mr. O'Leary replied that the corporation was not often interested in selling the land, because the ownership of the land was a key piece in the financial structure. Senator Hoffman wondered if the corporation would sell the land upon threat of closing the railroad operations, as they are with the PTC federal requirement. Mr. O'Leary responded that the corporation was not in favor of selling the land, because of the possibility of the need for continuous revenue stream. He felt that the selling of the land would not produce enough funds in the short time that the funds were needed for the project. Senator Hoffman surmised that the railroad would rather close down operations, than sell the land to keep the railroad operating. Mr. O'Leary disagreed. Vice-Chair Micciche shared that he was supporting the bill, because the state would not have bond liability. He asked for further explanation of the bond. Mr. O'Leary replied that the debts to the Alaska Railroad were not liabilities of the state. There would be no recourse to the state for the bond, as was explicitly outlined in the bond documents. There was also no recourse to the general credit of the Alaska Railroad. The only security for the bonds, as proposed, was from the Federal Transit Administration formula funding. HB 140 was HEARD and HELD in committee for further consideration.