HOUSE TRANSPORTATION STANDING COMMITTEE February 10, 1997 1:10 p.m.ΒΆ MEMBERS PRESENT Representative Bill Williams, Chairman Representative Beverly Masek, Vice Chairman Representative John Cowdery Representative Jerry Sanders Representative Kim Elton Representative Al Kookesh MEMBERS ABSENT Representative Bill Hudson COMMITTEE CALENDAR HOUSE BILL NO. 83 "An Act relating to commercial motor vehicle inspections; and providing for an effective date." - MOVED CSHB 83(TRA) OUT OF COMMITTEE *HOUSE BILL NO. 55 "An Act relating to the fiscal operations of the Alaska Railroad Corporation and to land acquired by the State of Alaska under the Alaska Railroad Transfer Act of 1982 or otherwise acquired for railroad purposes; and providing for an effective date." - HEARD AND HELD (* First Public Hearing) PREVIOUS ACTION BILL: HB 83 SHORT TITLE: COMMERCIAL VEHICLE INSPECTIONS SPONSOR(S): REPRESENTATIVE(S) MARTIN JRN-DATE JRN-PG ACTION 01/22/97 122 (H) READ THE FIRST TIME - REFERRAL(S) 01/22/97 122 (H) TRANSPORTATION, STATE AFFAIRS 02/03/97 (H) TRA AT 1:00 PM CAPITOL 17 02/03/97 (H) MINUTE(TRA) BILL: HB 55 SHORT TITLE: ALASKA RR BUDGET AND LAND SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE BUDGET AND AUDIT JRN-DATE JRN-PG ACTION 01/13/97 42 (H) READ THE FIRST TIME - REFERRAL(S) 01/13/97 42 (H) TRANSPORTATION, FINANCE 01/15/97 78 (H) STA REFERRAL ADDED 02/05/97 (H) TRA AT 1:00 PM CAPITOL 17 02/10/97 (H) TRA AT 1:00 PM CAPITOL 17 WITNESS REGISTER BRAD BROWN, Sergeant Alaska State Troopers 117 West Fourth Avenue Anchorage, Alaska 99515 Telephone: (907) 278-0312 POSITION STATEMENT: Testified on HB 83 FRANK DILLON, Executive Director Alaska Trucking Association 3433 Minnesota Drive Anchorage, Alaska 99505 Telephone: (907) 465-4970 POSITION STATEMENT: Testified on HB 83 and HB 55 TERRY MARTIN, Representative Alaska State Legislature Capitol Building, Room 502 Juneau, Alaska 99901 Telephone: (907) 465- 3783 POSITION STATEMENT: Testified on HB 55 GEORGE UTERMOHLE, Attorney Legislative Legal and Research Services Legislative Affairs Agency 130 Seward Street, Suite 409 Juneau, Alaska 99801 Telephone: (907) 465-2450 POSITION STATEMENT: Testified on HB 55 RANDY WELKER, Legislative Auditor Legislative Audit Division Legislative Agencies and Offices P.O. Box 113300 Juneau, Alaska 99811 Telephone: (907) 465-3830 POSITION STATEMENT: Testified on HB 55 BILL COUMBE, Mayor City of Whittier P.O. Box 690 Whittier, Alaska 99693 Telephone: (907) 472-2320 POSITION STATEMENT: Testified on HB 55 JOE PERKINS, Commissioner Department of Transportation and Public Facilities 3132 Channel Drive Juneau, Alaska 99801 Telephone: (907) 465-3000 POSITION STATEMENT: Testified on HB 55 BILL SHEFFIELD, former Governor P.O. Box 107500 Anchorage, Alaska 99510 Telephone: (907) 265-2403 POSITION STATEMENT: Testified on HB 55 PAUL LAVERTY, member Government Hill Community Council 224 East Manor Avenue, Anchorage 99501 Telephone: (907) 258-11896 POSITION STATEMENT: Testified on HB 55 JERRY DURNILL (address and telephone not provided) FRANK DEWEY, Locomotive Engineer Alaska Railroad Corporation 4011 Edinburgh Drive Anchorage, Alaska 99515 Telephone: (907) 248-2406 POSITION STATEMENT: Testified on HB 55 BILL CUMMINGS, Assistant Attorney General Transportation Section Department of Law P.O. Box 110300 Juneau, Alaska 99811 Telephone: (907) 465-3600 POSITION STATEMENT: Testified on HB 55 ACTION NARRATIVE TAPE 97-4, SIDE A Number 001 CHAIR BEVERLY MASEK called the House Transportation Standing Committee to order at 1:10 p.m. Members present at the call to order were Representatives Masek, Cowdery, Sanders, Elton and Kookesh. Representative Williams was present via teleconference from Ketchikan. Representative Hudson was absent. HB 83 - COMMERCIAL VEHICLE INSPECTIONS Number 090 CHAIR MASEK announced the first order of business would be HB 83, "An Act relating to commercial motor vehicle inspections; and providing for an effective date." REPRESENTATIVE JERRY SANDERS made a motion to adopt CSHB 83, Version F. Number 137 REPRESENTATIVE KIM ELTON objected for the purpose of discussion as to what the differences are between the proposed committee substitute and HB 83. Number 146 CHAIR MASEK stated that Sergeant Brad Brown and Frank Dillon from the Alaska Truckers Association are on line to discuss the proposed committee substitute. She stated that she would like to adopt CSHB 83 in order to discuss the proposed committee substitute. Number 180 REPRESENTATIVE ELTON stated he would withdraw his objection. Number 194 CHAIR MASEK stated there being no objection, CSHB 83(TRA) was adopted by the House Transportation Standing Committee. Number 207 BRAD BROWN, Sergeant, Alaska State Troopers, testified via teleconference from San Diego. He stated CSHB 83 is to replace the current law which is not being applied. He stated that in the 1980s, part of the commercial vehicle enforcement activity was annulled and they came in with a self inspection program that was not adequately funded and not applied. Sergeant Brown stated that after an investigation, it was found that the Department of Transportation and the Department of Public Safety were not complying with the provisions of AS 28.32.010, as a result it was changed to be compatible with the current enforcement effort, the Motor Carriers Safety Regulations (MCSR). He stated that the current annual inspection program in effect, is an administrative code rather than a statutory code. Sergeant Brown stated that he is looking to move the requirement of annual inspections to a statutory nature. He stated he would like CSHB 83 to be consistent with the current penalty for a driver or vehicle that is placed out of service to be issued a class A misdemeanor, instead of a class B misdemeanor. Number 422 CHAIR MASEK asked Sergeant Brown to discuss the repeals in Title 28. Number 475 SERGEANT BROWN stated that he would like to have the Section 32 as it pertains to certified inspection stations removed from CSHB 83 because it would be impossible to monitor certified inspection stations in Alaska specifically in the rural areas. He further stated "What we are looking at is to have qualified inspectors and that is under AS 28.32.040, that says if they are certified and we already have it adopted again underneath the Alaska Administrative Code, that will lay out the criteria of what an inspector is so we don't have to go back to and try reinvent the wheel again we've already got the laws already on the books that says this is what involves being a certified inspector." Number 580 REPRESENTATIVE JOHN COWDERY asked if there are any plans regarding vehicle identification stickers to identity the vehicles that have been inspected. Number 598 SERGEANT BROWN stated that in accordance to the MCSR under Title 49 Section 396.17, proof is required of an annual inspection, which is shown by a sticker attached to the vehicle. He stated that an additional provision in the MCSR under Title 49 Section 396.17(c) basically states "if the vehicle has passed one of our inspections it can act as its annual inspection, so they would carry a copy of the inspection report in the vehicle and produced that upon demand and that would identify that they have in fact passed an annual inspection." Number 693 REPRESENTATIVE COWDERY asked if there was an outside visual that indicated what month the vehicle passed the inspection. Number 706 SERGEANT BROWN stated the Federal Highway Administration (FHWA) sticker provides the date when the inspection was performed. Number 738 REPRESENTATIVE COWDERY asked if the certified stations that perform the inspections would be licensed by the state. Number 745 SERGEANT BROWN stated that it is proposed that there wouldn't be any licensing by the state because it would be difficult to monitor the stations, the certified stations would comply with the provisions of the MCSR as far as being a certified inspection station and have qualified inspectors in the stations. Number 781 REPRESENTATIVE COWDERY asked if a company that has its own inspection station would be able to perform its own inspections. SERGEANT BROWN replied, "Yes they could." Number 788 REPRESENTATIVE ELTON asked if in CSHB 83, Section 2, AS 28.32.040 where it is repealed and reenacted to read "a person may not conduct commercial vehicle inspections unless qualified under law", is the law you just referenced to Representative Cowdery. Number 822 SERGEANT BROWN replied, "Yes." He stated, the commissioner can enact administrative codes and adopted 396.11 through 396.17 under Administrative Code 13 AAC05.020. Number 870 REPRESENTATIVE ELTON stated, "I wanted to make sure that by repealing the former sections and by saying qualified under law, this new section does give you the authority to maintain those administrative regs." SERGEANT BROWN responded, yes it does. Number 881 FRANK DILLON, Executive Director, Alaska Trucking Association, testified via teleconference from Anchorage, that CSHB 83 would put into statute the MCSR that have been applied to the trucking industry through the administrative code for the past several years. MCSR is a comprehensive set of regulations that cover everything from the types of equipment allowed, to the drug testing and alcohol testing programs as well as encompassing the equipment inspection criteria. He stated that under the federal regulation when adopted into statute, will result in a system where people will have to meet minimum qualifications for inspection purposes. He stated that, besides the annual inspection requirement there is the pre-trip inspection which requires the driver to inspect the equipment twice daily at the beginning and end of the shift to ensure the equipment is in good working order, if not the equipment must be fixed before it can be operated. The daily inspection sheets are carried with the equipment and is available on the road, upon request by an inspector. Number 1059 REPRESENTATIVE SANDERS made a motion to move CSHB 83, out of committee with unanimous consent, individual recommendations and zero fiscal note. Number 1077 CHAIR MASEK asked if there was an objection. Hearing none CSHB 83(TRA), Draft F, was moved out of the House Transportation Standing Committee. She wanted to note that the bill was greatly supported by both the administration and the Alaska Trucking Association. HB 55 - ALASKA RR BUDGET AND LAND Number 1117 CHAIR MASEK stated HB 55, "An Act relating to the fiscal operations of the Alaska Railroad Corporation and to land acquired by the State of Alaska under the Alaska Railroad Transfer Act of 1982 or otherwise acquired for railroad purposes; and providing for an effective date", would be the next order of business. She asked Representative Martin to give his explanation of HB 55. REPRESENTATIVE TERRY MARTIN stated that HB 55 was introduced on behalf of the Legislative Budget and Audit Committee and it hopes to smooth out some of the problems pertaining to the Alaska Railroad Corporation, the assets of Alaska, and complete the transfer of the Alaska land, after Alaska's commitment is completed to the federal government. He stated the commitment to the federal government developed in 1982, when the federal government wanted to get rid of the railroad because it was costing the federal government a lot of money. He stated that the state legislature decided it wanted to save the railroad and paid the federal government $22,400,000 for it as well as established the railroad board to operate and manage the railroad for an unspecified period of time. He stated that it was anticipated that the railroad would be privatized because the state did not want to have the same financial obligation as the federal government had. He stated that for the past 12 years the railroad has been successful, and now the legislature needs to do something to transfer the assets to the state of Alaska or the corporation, because without the transfer, Alaska is losing millions of dollars. He stated that once the land is transferred to the state then the decision of what to do with it, such as put it under the corporation, give it local government, or to sell it, can be made. He stated that the most important aspect of HB 55, is it puts the corporation under the Executive Budget Act. He stated "we have negated our responsibilities of overseeing the appropriations, of overseeing how the land had been disposed of or used or leased, of overseeing the other assets of the state corporation." He stated that this is the only state corporation not under the preview of the legislature. Representative Martin stated that this has nothing to do with diminishing the operation of the railroad but with following the constitutional responsibility in Article 8 and Article 9, regarding the resources of the state. He stated that if the Alaska Railroad Corporation is put under the Executive Budget Act it would be another part of the Department of Revenue along with all the other corporations such as Alaska Industrial Development and Export Authority (AIDEA), the Alaska Housing Finance Corporation and the Permanent Fund Corporation. He stated HB 55 protects the state, its citizens and ensures the legislature is aware of what is occurring with the railroad. Number 1448 REPRESENTATIVE COWDERY asked if AIDEA, under the Executive Budget Act has shown a profit. Number 1460 REPRESENTATIVE MARTIN replied that we monitor what they invest in and what they will do and not do. He stated they do not want money to be misused. REPRESENTATIVE COWDERY asked if his understanding was correct that the Legislative Budget and Audit Committee has done a study on the railroad. Number 1519 REPRESENTATIVE MARTIN replied, "They have done a number of small requests according to what legislators have come up with in problems. One would be the R.V. park up in Fairbanks, what happened there. There is a serious question to what degree the railroad is getting involved in private enterprise that is outside of the railroad domain." He stated that a letter of intent was passed prohibiting the railroad from getting into private ventures that do not relate to the railroad business. Number 1557 REPRESENTATIVE COWDERY asked, "What is the cost occurred from the board of directors on the railroad." Number 1565 REPRESENTATIVE MARTIN stated that it was to some degree available but he would have to ask Mr. Welker for more information. Number 1573 REPRESENTATIVE ELTON stated, "When I read the bill it seemed almost like the stereotypical democratic response. You want to bring this corporation more fully under the government tent. I'd be interested in your response to that. I would have thought that you retain flexibility by keeping the corporation outside of that tent." Number 1602 REPRESENTATIVE MARTIN replied that it seems like just the opposite in that he believes in free enterprize and private enterprise. He stated that the future life of the railroad will be privatization and getting private monies. He stated that we got a nice gift from the federal government, 43,000 acres of land for $22 million. He stated that it was not expected that the railroad be run as a public corporation for 13 years, it was thought that it would be privatized and now the legislature finds itself with the constitutional responsibility. He stated that when the land is transferred to the state, the legislators will have to decide, not the railroad board, what they want to do with it. Number 1673 REPRESENTATIVE ELTON stated, "I understand what you are saying and in some ways it kind of bothers me. What we are doing is bringing them in we're making their assets more difficult to use and we're adding 62 politicians to the board." Number 1697 REPRESENTATIVE MARTIN stated that legislators are not going to be on the board. He stated that it is like the Permanent Fund Corporation where we monitor their involvements closely and pass legislation as things change. He stated the railroad corporation belongs to the people and constitutionally only the public has the responsibility of authorization, appropriation, leasing sales, and need an open forum to be aware of what is being done with the lands and gravel. Number 1759 REPRESENTATIVE ELTON asked, "You're not saying that the existing structure is unconstitutional now?" Number 1778 REPRESENTATIVE MARTIN replied that we are in serious neglect from our responsibilities under Article 8 and Article 9. He stated, "It was not meant to be, we felt we would privatize it pretty quick and not have to worry about it but now since it has been belabored this long and now that we do need to take necessary action to transfer the land to us we are the ones that are responsible not the railroad board." Number 1839 REPRESENTATIVE BILL WILLIAMS asked if Representative Martin would have a problem if the committee chose to split the fiscal operations of the railroad corporation and the transference of land to the state into two bills. Number 1869 REPRESENTATIVE MARTIN responded that he thought that it was an excellent idea due to the long range evaluation and consideration for the legislature regarding the transference of land. Number 1969 GEORGE UTERMOHLE, Attorney, Legislative Legal and Research Services, Legislative Affairs Agency, stated that the issue relates to whether or not the legislature is required to appropriate funds of the Alaska Railroad. He stated the issue arises under Section 7, Article 9 of the constitution which requires that no money be removed by the state treasury except by appropriation of law. Mr. Utermohle stated that the issue then becomes whether or not the Alaska Railroad is part of the state treasury. If the railroad and its revenues are part of the state treasury than the constitution would require those revenues be appropriated by the legislature. He stated that if the corporation is a public corporation with an existence independent than that of the state, then it would be out of the state treasury. He stated however, that in itself, does not eliminate the power of the legislature to appropriate railroad revenues, the issue then becomes whether or not railroad revenues are subject to appropriation by the legislature, as required by the constitution under Section 7, or they become available for appropriation under the legislature's appropriation power. Mr. Utermohle stated it would take a court decision to resolve those questions. Number 2069 REPRESENTATIVE COWDERY asked if his understanding was correct that any amount of money that may be appropriated should go towards the purpose of the railroad operation and that the question is the requirement to appropriate. Number 2092 MR. UTERMOHLE replied, "that is the issue, the role of the legislature in appropriating the revenue. The use of that revenue is restricted under the terms of the Alaska Railroad Transfer Act. That legislation requires that the revenue of the railroad be retained by the railroad, and used for railroad and railroad related purposes." He stated the broad sense of what that money is used for, is not at issue here. Number 2127 REPRESENTATIVE COWDERY asked if it was Mr. Utermohle's opinion that all of the requirements of the transfer from the federal government to the state were met, for instance, the opportunity to privatize the railroad at any given time. Number 2135 MR. UTERMOHLE responded that at the time the state acquired the railroad and under the Alaska Railroad Corporation Act, it was the intent that the Alaska Railroad be held and operated by the state until it is converted to private ownership. He stated, however, the law did not provide a specific date, it just stated when the state found it appropriate that the railroad be transferred to private ownership. Number 2155 REPRESENTATIVE COWDERY stated it was his understanding that privatization was within a ten year span. Number 2160 Mr. UTERMOHLE stated there is no specific time under statute or law when the railroad was to become privatized. Number 2179 RANDY WELKER, Legislative Auditor, Legislative Audit Division, Legislative Agencies and Offices, stated that the Legislative Audit Division and the Budget and Audit Committee roles, in regards to the railroad, has always been an after the fact approach, to prevent a problem from reoccurring. He stated that the issue today is determining what is the best vehicle to provide legislative oversight of the assets of the state. He stated that he is in the agreement that the Executive Budget Act is that vehicle. He stated that it is meant to be a tool for informing the legislature of what is going on in the corporations. He stated that it is legislative prerogative to appropriate. He stated that the railroad prepares a budget annually, and bringing the budget in front of the legislature for oversight would not be a burden on the railroad corporation. Mr. Welker stated that we are looking at the best mechanism to provide a degree of legislative oversight. Number 2366 REPRESENTATIVE SANDERS asked if Mr. Welker was saying that this is an unconstitutional dedicated fund and that the legislature needs to do something about it. Number 2380 MR. WELKER stated that would be his position that we are in violation by not appropriating, although it is untested. Mr. Welker stated that this is the only entity of state government that is not subject to the Executive Budget Act. Number 2429 CHAIR MASEK asked Mr. Welker to comment on railroad management regarding payment of property taxes, state corporation taxes, vehicle licensing taxes and how it effects the state's revenue. Number 2442 MR. WELKER stated that the railroad does not receive a general fund subsidy for its operation. He said that state subsidies have not been quantified dollar-wise to indicate how much the state is actually subsidizing operations. TAPE 97-4, SIDE B Number 030 REPRESENTATIVE COWDERY asked if they did pay the taxes would they still show the $7 million profit as in the past. Number 039 MR. WELKER stated that it would definitely impact the income statement unfortunately there is not a calculation on how much that impact would be. Number 060 REPRESENTATIVE COWDERY asked if his understanding was correct that there are several entities that would like to purchase the railroad, but did not want to purchase the land. He believed that if they did need land they would prefer to lease rather than buy. Number 081 MR. WELKER stated, "We are venturing off now the sale discussion and in my opinion there is a little bit we know and a lot we need to know about the railroad before those decisions can be responsibly reached." Number 093 REPRESENTATIVE ELTON asked if HB 55 changed the collection of any fees. Number 107 MR. WELKER replied that HB 55 does not change any of the fees. Number 111 REPRESENTATIVE ELTON asked if his understanding was correct that because the railroad is not under the Executive Budget Act now, all funds that are spent by or on the railroad are not part of general fund dollars that are attached to the overall state budget. Number 121 MR. WELKER stated, "That's correct." REPRESENTATIVE ELTON asked if his understanding was correct that if the railroad is brought in under the Executive Budget Act and we have a pledge that we are going to cut $60 million, that will mean we are going to have to cut more than $60 million because we are adding general fund dollars to the top. Number 142 MR. WELKER replied that the railroad's receipts as they would come into the budget act and be appropriated would be considered corporate receipts, therefore, would fall outside the general fund. He stated that he would assume, if a component was going to be brought into the budget that was not there previously, an adjustment would result to prevent an out of balance starting point. Number 165 REPRESENTATIVE ELTON asked if passenger fees and freight fees would come in as general fund dollars. Number 172 MR. WELKER replied that they would fit the definition of corporate receipts, which is all inclusive. Number 180 CHAIR MASEK asked if her understanding was correct, that if the railroad was under the Executive Budget Act, the public would have better scrutiny over its operations. Number 191 MR. WELKER stated that the Executive Branch has an input in the railroad operation by the appointment of board members, so the administration is represented in the railroad corporation. He stated that what has been absent is a structured formal mechanism that requires legislative oversight. Number 240 BILL COUMBE, Mayor, City of Whittier, testified via teleconference from Whittier, that the city of Whittier is in the process of trying to develop its infrastructure, and has to deal with the railroad because it owns 50 percent of Whittier's core land and 70 percent of the land in the harbor areas. Mayor Coumbe stated that the city of Whittier's issues are an upcoming road that will increase traffic to Whittier by 600,000 vehicles in two years and 600 people on the boat harbor's waiting list. He stated that negotiations have been going on for two years with little resolution in regards to the land needed to expand the boat harbor, uplands and city core. The position in the past has been to lease land at five year intervals. He stated that Whittier needs legislative help to resolve the problem. Mayor Coumbe stated that they have passed a sales tax ordinance but it does not affect the sales of tickets and freight fees of the city. He stated Whittier's budget is $360,000 and feels they will not be able to build the infrastructure needed in two years. Number 379 CHAIR MASEK stated that the committee has Mayor Coumbe written testimony and resolution from the city of Whittier. Number 387 REPRESENTATIVE COWDERY asked how much of the land in Whittier is useable. Number 403 MAYOR COUMBE replied that out of 211 acres, about 137 acres are suitable for development and half of it is owned by the railroad. Number 414 REPRESENTATIVE COWDERY stated that it was his understanding "that the federal monies were going to be used to expand the harbor and some of railroad yard that was down in the harbor area was going to be moved up north near the tunnel." Number 441 MAYOR COUMBE replied that the engineering plan is that the city of Whittier must expand inward from the current location into land owned by the railroad. Number 453 REPRESENTATIVE COWDERY further asked if his understanding was correct, that the railroad yard and tracks were going to move up near the three-mile tunnel. Number 465 MAYOR COUMBE, replied not that it was known to him. He stated that there is a plan to move the tracks south at the city's expense of $3 million to $4 million. Number 477 REPRESENTATIVE COWDERY asked how the legislature could help the city of Whittier. Number 483 MAYOR COUMBE replied the uplands on the south side of the railroad would be owned by the railroad and the city of Whittier would own the land on the east and the west the property, resulting in two landlords and two supervisors in the harbor. Mayor Coumbe stated that the city of Whittier would like to resolve that issue in a manner that would allow the city to seek the funding to (indisc.) the harbor. He stated that core lands, half the size of the current community, are unused and the city has no ability to plan for the use of the property because it is not their land. Number 523 REPRESENTATIVE COWDERY asked if his understanding was correct that there are appropriations to expand the land to put the road in, but without the negotiations the building is held up. Number 544 MAYOR COUMBE stated that is correct. He stated there are six issues that the city and railroad need to work out. He stated the city of Whittier is in a hard position because they have pressures for the road to be built, but without negotiations they can not begin. Number 600 JOE PERKINS, Commissioner, Department of Transportation and Public Facilities (DOT/PF), stated that the administration does not have a final position on HB 55 as it is still being reviewed. He stated the DOT/PF feels that if the system is working fine it should not be changed. He stated that the railroad did make a $9 million profit in 1996, although there was service made by the state to the railroad, but no appropriation to the railroad of general fund money by the legislature. He stated currently the DOT/PF knows how the railroad is operating and can predict the impact of this operation. He believes that because HB 55 would result in portions of land no longer in railroad control it would be difficult to predict the future of the railroad financially and operationally. He questioned if it was worth the risk to get into unknowns versus the current operation. Commissioner Perkins stated that land has been involved with the railroad ever since it was built, and it is not unusual to have a railroad own land. The revenue from the lease portion of the land is a major contributor to the railroad operation. He stated that the sizable amount of jobs, economic benefit and revenue that the railroad provides must be considered. He stated that the committee needs to look at the railroad as what is best for it now and not what was intended for it 15 years ago. Number 775 REPRESENTATIVE COWDERY asked where HB 55 would affect the amount of jobs because it would take the same amount of people to operate the railroad no matter who the owner is. Number 791 COMMISSIONER PERKINS replied, "When I look at jobs, I look at jobs that are created by those people that are using the railroads. For instance, the refining business in Fairbanks, the coal in Healy, the gravel that we haul to Anchorage." He stated that the railroad is an operating organization, that runs a service to the people in the state and in doing so there needs to be flexibility. He stated for example, it not known what the gravel shipments are going to be to Anchorage and if more employees and extra trains are going to be needed. He stated, "this is something that on the business side requires a lot of flexibility, this all affects jobs. I think it is tied very closely to economics and the ability of the railroad to react to changing situations daily." Number 874 REPRESENTATIVE COWDERY stated that the municipalities, do not know how much it is going to snow and the streets are kept in good shape even though they have unknown circumstances under the Executive Budget Act. He further stated that he can not see how the railroad being under the Executive Budget Act would have any affect on the jobs as fuel and gravel is still going to be hauled. He said, "I don't agree that this is going to have an impact on the jobs." Number 920 COMMISSIONER PERKINS stated, "If you prescribed an X number of people that they would have and they could not hire more without coming back then definitely it would affect the ability to have flexibility in the summertime." He stated that in order to run a business flexibility is needed and you need to be able to instantly change a particular business plan. He suggested that maybe this could be written in to HB 55. Number 961 CHAIR MASEK asked Commissioner Perkins that since he is a board member on the railroad, is he testifying on behalf of the Knowles Administration or on behalf of the railroad. COMMISSIONER PERKINS stated that his testimony is from the Knowles Administration. Number 985 REPRESENTATIVE AL KOOKESH asked Commissioner Perkins when he thought he would be done with his analysis on HB 55. Number 995 COMMISSIONER PERKINS stated that probably a week to ten days, because it involves quite a few people and the DOT/PF needs to look at HB 55 in detail. Number 1053 CHAIR MASEK indicated that Jane Angvik, Director, Division of Land, Department of Natural Resources and Crystal Smith, Legal Administrator, Office of the Attorney General, Department of Law, were on line to answer any questions. Number 1077 BILL SHEFFIELD, former Governor, testified via teleconference from Anchorage, that the changes in the railroad business require the ability to respond with capital investments. The railroad is a capital business and has responded to changes by becoming more competitive to get cargo and passengers to employ the railroad. He stated that they have a long term contract to ensure that the tank car fleet is the most competitive in the business. He said, "We are currently evaluating the upgrade of our locomotive fleet, the upgrade will offer the opportunity for long term savings. Responding to customer needs requires quick action and it usually occurs during the fiscal year." He stated that this would be difficult if not impossible to respond, if administrative approval was needed, as it would be under the Executive Budget Act. He stated that by assuming substantial control over the financial and legal obligations of the railroad and by removing a substantial portion of the railroads asset base, the state may be subjecting itself to full state liability, despite language to the contrary. Number 1266 MR. SHEFFIELD stated that the railroad is considering buying 20 new locomotives which will cost $40 million. The public corporation for profit allows the railroad to borrow money. He stated that HB 55 will make it difficult to borrow money for operating capital or to purchase equipment. He stated it may be difficult for the railroad to assure its creditors that the legislature will appropriate sufficient money, or approved line entries on its budget to pay for the debt service on its loans. He stated that HB 55 would be a violation of the Alaska Railroad Transfer Act which provides that the railroad would retain control of the funds and budget because the federal railroad realized it was not possible to recognize all the business opportunities. He stated that the federal government might recognize HB 55 to be a breech of its contract with the state of Alaska. He stated that the railroad's customer base may not change but the proposed budgeting process will increase the cost of doing business. He stated that it would be unreasonable to suggest that the customers could make up the additional cost. Number 1344 MR. SHEFFIELD stated that Alaska's business is highly seasonal, and moving to a state's fiscal year would split the railroad's business season. He stated it would also require the railroad to spend considerable time participating in the budgeting process. He stated the inconsistencies in HB 55 illustrate the difficulty in separating the financial management of the corporation from the operational management. He stated HB 55 lacks definition of guidance on making decisions. MR. SHEFFIELD indicated that the 1996 financial statement exhibits that real estate provided for $4.4 million of the railroad $8 million income. He stated that the general effect of the bill would be to remove a considerable amount of railroad real estate holdings from the operation's control. He stated that the real estate revenues are relatively stable and predictable unlike freight revenue. He indicated that most of the valuable leasable land is already leased which will complicate the effectiveness of any transfers. He stated that the railroad currently enjoys a benefit with the Federal Railway Administration that clarifies the responsibility for pre-transfer of contamination. He stated that this could be jeopardized by the transfer of the land or by other parties who could find a basis for a significant environmental liability. He stated that HB 55 will result in "Ratification of leases to third parties. Limitations on future leases of right away. Inconsistency created by terminology, a technical amendment is needed to make reference to the right away consistency." He stated more opportunities for communication is needed and if you want more legislative oversight the Executive Budget Act is not the place to do it. He stated that HB 55 limits the railroad's ability to earn an profit and as a result the railroad will not be worth anything. He indicated that the board of directors want to be able to work with the legislature. He stated that there is a new service starting up next year from Seattle into Whittier. He stated the railroad employees are not state employees they come under the railroad retirement program. He stated that they are trying to work with the city of Whittier to move the tracks away from the waterfront so the harbor will be able to expand. He stated that they would work with the city of Whittier on the budget and how to get the expansion of the boat harbor to pay for itself. CHAIR MASEK stated that the committee was running short of time as there are other people who would like to testify so if he would like to forward his testimony the committee would greatly appreciate it. Number 1958 PAUL LAVERTY, member, Government Hill Community Council, testified via teleconference from Anchorage, that Government Hill was established at the same time the railroad was established, it sits above the railroad and is surrounded by railroad land. He said that he would like to see the railroad placed under the state procurement code, so that it will explicitly state that the railroad will function as a state entity. He believed that the railroad acts as a private corporation when it is most convenient and as a state agency at other times. He stated that during the joint oversight hearing it was said the railroad does not pay any state corporate tax, local property tax or even pay for their license plates. He stated that during tax time the railroad functions as a state agency. He stated these arbitrary procurement rules have resulted in the Comfort Inn transaction which involved state land being traded for equity share of a hotel in downtown Anchorage in direct competition with other privately owned hotels. He stated that these roles resulted in the real estate transaction. He stated that five years ago the first developer was picked through a team comprised of the municipality of Anchorage, Anchorage Economic Development Corporation and the railroad. The name of this entity was the Intergroup Development of Texas. The railroad arbitrarily dropped the Intergroup Development Corporation and then signed a contract with the LoPatin Corporation resulting a lawsuit. He stated that the lease will expire in end of February of 1997 and there has been no action taken with the re-development, in fact the legislature had to re-appropriate $5 million from this project. He stated another instance of the implementation of arbitrary rules is documented in a division of Legislative Audit Report Number 08-45-47-96 dated July 3, 1996, regarding the Flamingo Brothers gravel disposal contract. He stated that this was a sole source contract for the disposal of up to one million tons of Alaska railroad owned gravel with no public notice and no open competitive bidding. He stated the railroad has excluded the owners of the railroad, the public and by doing so they made decisions that may not have been in the best interest of the general public. Number 2312 MR. LAVERTY stated that HB 55 seeks to transfer the management of the land not needed for real operations to the DNR. He stated that this will result in the name change of the corporation from the Alaska Real Estate and Railroad Corporation to the Alaska Railroad. He stated that there are bills filed to convey state land to municipalities and burroughs. The Anchorage Heritage Land Bank is set up to sell excess municipality land to the highest bidder completing the transfer of land from government management to private ownership and puts it under local tax rules. He stated that major developers, financial developers and financial institutions may not want long term leases on government owned land when it comes time to develop local projects and to lend money. Development would be easier on private owned land if it was conveyed from the DNR to private ownership. Mr. Laverty stated that the DNR is more willing to look out for the best interest of the general public. He stated that he urged the Legislature to look at the information presented at the Legislative Budget and Audit Committee meeting conducted on June 25, 1996 and August 29, 1996. He stated that there were a couple of pertinent items such as adding a legislator to the Alaska Railroad Board providing more oversight of the railroad activities. He stated that even though only 5 percent of the land is in Anchorage, 75 percent of the total value of the land is in Anchorage. TAPE 97-5, SIDE A Number 001 MR. LAVERTY stated that former Governor Sheffield said by adding oversight to the legislature the process will add time and cost without adding value. Mr. Laverty feels that by adding legislative oversight, making sure that the state asset is being run in a prudent manner both financially and in the public interest, is adding value to the entire asset. He stated that as far as differences in the fiscal year, Alaska's fiscal year is different than the federal's and the municipality of Anchorage's fiscal year but they are able to make things work. He stated that a valuable piece of land is becoming available and since the railroad has shown that they have not been successful at picking developers, transferring the land into the municipality to sell the land to the highest bidder would be best for the railroad. Number 217 JERRY DURNILL, testified via teleconference from Whittier, that the total acreage in the core area owned by the railroad is 108.7 acres, the city owns 19.6 acres of the core area. He stated that a resolution would be a more equitable distribution of the land, that is available, more along the lines of the rest of the railbelt community. He stated that the documentation in those communities show that the railroad percentage of ownership is under ten percent of the core areas. In Whittier it is 51.3 percent of the core area. He stated that the railroad has said that they will follow guidelines established by the city for the development of the core area but the city lacks revenues from property taxes that would come from the sale of this property through private development. Number 408 REPRESENTATIVE WILLIAMS stated that he called the city manager of Whittier in January and he was told that the city was meeting with the railroad corporation and asked Mayor Coumbe if that was correct. Number 461 MAYOR COUMBE replied that they have been meeting infrequently and they had attended the railroad's board meeting in January. Number 521 REPRESENTATIVE COWDERY asked Mayor Coumbe if he could sent a public opinion message so the legislature could work to get all parties to the table to resolve the issue. Number 581 FRANK DEWEY, Locomotive Engineer, Alaska Railroad Corporation, testified via teleconference from Anchorage, and read the following testimony into the record. "As an Alaska Railroad engineer for the past 22 years, I speak with experience across many different administrations. As an applicant to the position of Alaska Railroad Corporation's Chief Executive Officer, I speak of the prospect for the immediate future. As one who believes in the expansion of railroads, as being key to the future economy of the state of Alaska, I speak of the distant future. As a resident of the state of Alaska, I speak as on who desires an accounting of the railroad, the land and the policies affecting them. "Maybe our eyes are being clouded by another's riches. When one prospers, others set about to discover ways to enrich themselves with or by the other's effort. On January 5, 1985, the state of Alaska received ownership of the Alaska Railroad and its 36,000 acres of land and now we hear it may be as high as 43,000. Of the total amount approximately 12,000 acres lies beneath our current facilities, some lies beneath abandoned rights of way or industrial developments, the rest is principally undeveloped. "Municipalities, communities, villages, and others have eyed some of these lands with envy. The railroad corporation apparently feels that they deserve the right to retain their lands without any oversight, both I feel are wrong in their assumptions. Just because a neighbor prospers does not give us the right to steal form them. Neither is it right for the other to totally disregard their neighbor. Some people feel that because the railroad received 'free' land that it came without a price. First, the land was given to the railroad to provide transportation and townsites to those along its right of way. Without the railroad Anchorage need not exist, Fairbanks would be a hamlet forgotten along the banks of the Chena River, remembering only a Gold Rush of long ago. Seward, Whittier, Palmer, Wasilla, Talkeetna, Healy, Nenana and North Pole who could even imagine. Prudhoe Bay might be visited only by Eskimo whalers following the annual migrations. The state of Alaska might still be a protectorate of the United States or may have been traded back to Russia for some reason. World War II might have turned out differently. "Secondly, the railroad was granted land as an inducement to develop industries and commerce in the nearby areas. That profitable revenues would be able to sustain operation without further expenditures of federal dollars. The idea was also to create a demand to sell the adjoining lands, there by gaining immediate revenues and future tax income. "For the Alaska Railroad Corporation, owned 100 percent by the state of Alaska, to feel that it owes no obligation to its owner is nonsensical. For the state of Alaska to expect that the railroad could remain profitable, either in State or private hands, without land to develop is equally as much nonsense. The state has the right to demand that its property is being handled properly and profitably. The state, needs to allow the Alaska Railroad Corporation to use all of its assets to achieve this. The Alaska Railroad Corporation must recognize that good working partnerships must be formed with local governments. The local governments must realize that rail operation don't happen in a vacuum. The railroad needs land development and land revenues to sustain normal rail maintenance, operations and the payment of local employment dollars. "I propose HB 55 be changed to include the following: "1. All lands, by mutual agreement, be classified as to the useful proximity to the railroad right of way. That future rail corridors throughout the state be identified and guaranteed. That the process of eminent domain be guaranteed by the state to the Alaska Railroad Corporation, or its successor, for future development of any railroad within the state of Alaska. "2. That Alaska Railroad ownership of abandoned right of way must be guaranteed, if it might be judged that any marketable quantity of mineral or industrial development may be occurring in the area within the next 50 years, i.e Palmer branchlike to Sutton. "3. All lands currently under actual lease by the Alaska Railroad Corporation at time of enactment of this bill, be guaranteed from that date forth as Alaska Railroad Corporation corporate lands; to be sellable, leasable and developable by the Alaska Railroad Corporation, or its successor. "4. That any amount of land transferred form the Alaska Railroad Corporation for any reason to the state of Alaska or any entity within the state of Alaska, be paid in present marketable cash value or an equal amount of land area be held in reserve for future selection by the Alaska Railroad Corporation, or its successor. "5. That a vehicle be created to allow shared land development partnerships to be formed between the Alaska Railroad Corporation and any recognized governmental bodies for the equal and mutual development of land within their boundaries for the benefit of both parties. "6. That re-alignments of existing right of way be guaranteed to the Alaska Railroad Corporation, or its successor, for its increased efficiency and the safety of railroad traffic. That sufficient wetlands be set aside to cover any possible usage by the Alaska Railroad Corporation, or its successor, for said realignments affecting wetlands. "7. That any reference to executive budgeting be separated from HB 55. "8. That a vehicle be created to allow Alaskan Citizens and Alaskan Companies and Corporations to purchase stock shares in the Alaska Railroad Corporation. This would allow the state of Alaska to divest itself of total responsibility for the railroad and allow the citizens of the state of Alaska to participate in the future of the Alaska Railroad. "I ask, how do you view the railroad and its future? What, as a leader of this state, is your vision for the state of Alaska in the 21st century? The future economic health of the state of Alaska is tied directly to the future of the Alaska Railroad. No single development could ever give back to the state of Alaska what an expanded rail system could. Creating more jobs, more revenues, more tax base, more economically and protecting the environment more than any other transportation system known. The question is what kind of Alaska do you want for the future. I want one where my children and their children will be able to have a home, a job and a future in the Alaska that we all love." Number 1041 FRANK DILLON, Executive Director, Alaska Trucking Association, testified via teleconference from Anchorage, that it would be a good idea to see the executive budget portion and the land portion split into different bills. He stated that the trucking industry competes directly with the railroad in a number of areas. He stated that the railroad plays the game of being a state entity when it is to its advantage and a private entity when it is to its advantage. He stated that he was shocked to hear that the railroad was debt free. He stated that the Alaska Trucking Association does not have the types of subsidies that railroad has, we pay for our highways through fuel excise and other taxes. He stated we that if the railroad is such a good business deal it should be privatized. He stated "If it needs all the sorts of convoluted things that it has now to keep itself in existence than it shouldn't be maintained." He stated that he disagreed that the railroad is vital to Alaska's economy. He stated that railroads were built before highways existed. He stated that Alaska future lies in the development if the highway system and not in the railroad. He stated that the railroad does not go to Prudhoe Bay, the railroad does not go any farther north that Fairbanks. He stated that the freight that goes to Prudhoe Bay is sent by truck. Number 1131 REPRESENTATIVE COWDERY asked Mr. Dillon if he would fax his comments to the committee. Number 1186 BILL CUMMINGS, Assistant Attorney General, Transportation Section, Department of Law, stated that the provisions of Section 25 in HB 55 vest the title and the land transfer from the railroad to the state on the effective date of this act. He stated that the way it is written could result in state exposure to environmental obligations. The total land is in excess of 40,000 acres which would require a thorough environmental review. He stated the Department of Law anticipates that this would require the need for three lawyers and $415,000. Number 1266 REPRESENTATIVE COWDERY asked if the legal process would be ongoing. Number 1281 MR. CUMMINGS stated that one lawyer would be needed to be involved with the federal government over the presently existing pollution sites, such as the standard steel site in Anchorage. He stated that the state would be subject to other litigation if the state received the immediate transfer. Number 1309 REPRESENTATIVE COWDERY asked isn't the state liable for a spill that exceeds the ability of the railroad. Number 1324 MR. CUMMINGS responded that a benefit of having a state owned corporation isolates the general fund from claims, the people could only collect the assets of the railroad. Number 1348 REPRESENTATIVE COWDERY asked that it would have to be resolved separately since we inherited that from the federal government. Number 1356 MR. CUMMINGS replied yes and that the railroad has had on going litigation with the federal government over that and anticipates that if the set out transfer were to happen it could result in a very expensive burden. Number 1396 REPRESENTATIVE WILLIAMS stated that he would split HB 55 to separate bills regarding the Executive Budget Act and the land transfer. Number 1413 ADJOURNMENT CHAIR MASEK stated that the House Standing Transportation Committee meeting is adjourned at 3:07 p.m.