Legislature(2009 - 2010)CAPITOL 17

03/23/2010 01:00 PM TRANSPORTATION


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HJR 47 SMALL VESSEL CARGO EXEMPTION TELECONFERENCED
Moved Out of Committee
+= HB 257 BAN CELL PHONE USE WHEN DRIVING TELECONFERENCED
<Bill Hearing Canceled>
+= HB 357 AK RAILROAD CORP. LAND SALES TELECONFERENCED
Moved CSHB 357(TRA) Out of Committee
+ SB 272 RENTAL CAR CHARGES TELECONFERENCED
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
              HB 357-AK RAILROAD CORP. LAND SALES                                                                           
                                                                                                                                
1:25:27 PM                                                                                                                    
                                                                                                                                
CHAIR P. WILSON  announced that the next order  of business would                                                               
be   HOUSE BILL  NO. 357, "An  Act relating to  the sale  of land                                                               
owned  by the  Alaska Railroad  that is  not needed  for railroad                                                               
purposes."                                                                                                                      
                                                                                                                                
1:25:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   BILL   STOLTZE,    Alaska   State   Legislature,                                                               
introduced his staff.                                                                                                           
                                                                                                                                
JOHN  COAN,  Staff,  Representative Bill  Stoltze,  Alaska  State                                                               
Legislature, on  behalf of  the prime  sponsor, related  that two                                                               
questions arose  at the  last hearing: whether  the ARRC  land is                                                               
considered  state   land  and  if   it  is,  whether   any  legal                                                               
ramifications  to in  stating a  right  of first  refusal on  the                                                               
land.   He  stated that  the Alaska  Railroad Corporation  (ARRC)                                                               
land is  state land and  the legislature approves any  land sales                                                               
and  disposals.   Thus,  a right  of first  refusal  is fine,  he                                                               
stated.                                                                                                                         
                                                                                                                                
1:27:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STOLTZE  offered that this bill  really represents                                                               
a policy  call for the legislature.   The purpose of  the bill is                                                               
captured by  the letter  from the  Alliance in  members' packets.                                                               
The  Alliance  called  the   bill  a  "pro-business,  pro-private                                                               
sector, pro-investment, pro-jobs,  and pro-Alaska Railroad" bill.                                                               
He said  he said  he stumbled  into this "unrest."   He  bill has                                                               
spurred lots of discussion from  the business community.  Without                                                               
the  ability  to  have  the  opportunity to  own  the  land,  the                                                               
business owners do  not have the confidence to  make the business                                                               
investments.  He  remarked on the breadth of  letters he received                                                               
on this matter.                                                                                                                 
                                                                                                                                
1:29:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE T.  WILSON asked whether  the bill would  give the                                                               
Alaska Railroad Corporation (ARRC) the option to sell land.                                                                     
                                                                                                                                
REPRESENTATIVE  STOLTZE  answered  that  the  bill  provides  the                                                               
permission  to  do  so.    He  remarked  on  what  he  termed  as                                                               
"arrogance" that  the ARRC has  shown to private businesses.   He                                                               
offered that  the ARRC properties  are taxable  properties, which                                                               
will likely only increase in  value.  He anticipated that lessees                                                               
would be  more likely to improve  the property if they  owned it,                                                               
similar to how  homeowners versus renters are more  apt to invest                                                               
and care for property.                                                                                                          
                                                                                                                                
1:32:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  referred  to  the  sponsor  statement,                                                               
which read:                                                                                                                     
                                                                                                                                
     To  spur economic  development throughout  the state,  House                                                               
     Bill  357 adds  a  fourth clause  to  the existing  language                                                               
     governing how  the Alaska  Railroad Corporation  may dispose                                                               
     of land.  House Bill  357 will enable  the railroad  to sell                                                               
     land  that is  not needed  for essential  railroad purposes.                                                               
     This bill  does not  ask for  any irresponsible  disposal of                                                               
     land,  as  the  sale  must  be initiated  by  the  board  of                                                               
     directors  on two  conditions. The  first condition  is that                                                               
     the land  is not essential  to railroad operations,  and the                                                               
     second condition  is that the  sale is in the  best interest                                                               
     of the state of Alaska.                                                                                                    
                                                                                                                                
     As support has shown,  current leaseholders are very unhappy                                                               
     with the inability to purchase  their leased properties from                                                               
     the  railroad.  In  general real  estate  dealings,  private                                                               
     purchases are made in mutually  beneficial sales. House Bill                                                               
     357 encourages these sales after  determination by the board                                                               
     of directors  of the  railroad looks at  each sale  with the                                                               
     overall benefit  to the state  of Alaska as the  key driver.                                                               
     Not only will the private  sector benefit from this addition                                                               
     to state law, the railroad  will also have increased ability                                                               
     to  make  decisions  regarding  their  overall  real  estate                                                               
     portfolio.                                                                                                                 
                                                                                                                                
     The sale  and relationship of  private and public  lands are                                                               
     vital to the  economic growth of the state of  Alaska. I ask                                                               
     for  your consideration  and support  of House  Bill 357  to                                                               
     promote Alaskan  growth through the diversification  of land                                                               
     ownership,  increasing  the  tax  base  of  the  state,  and                                                               
     encouraging responsible development of Alaskan land.                                                                       
                                                                                                                                
REPRESENTATIVE  GRUENBERG  stated   that  the  sponsor  statement                                                               
outlines the first condition for sale  would be that "the land is                                                               
not essential to railroad operations..."   He referred to page 1,                                                               
lines  11-12,  which  read,  "the   land  is  not  necessary  for                                                               
essential railroad purposes,..."  He  pointed out the language is                                                               
not the same.                                                                                                                   
                                                                                                                                
1:33:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STOLTZE  asked members  to refer  to the  bill and                                                               
not his letter for the true meaning.                                                                                            
                                                                                                                                
1:33:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  offered his belief that  the bill would                                                               
provide  the Alaska  Railroad Corporation  (ARRC)  a little  more                                                               
flexibility.                                                                                                                    
                                                                                                                                
REPRESENTATIVE STOLTZE  agreed that  is his intent.   He  said he                                                               
hoped  the ARRC  would not  abuse the  business owner's  trust by                                                               
being inflexible.                                                                                                               
                                                                                                                                
1:33:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MUNOZ  asked  whether the  leases  generate  more                                                               
money at eight percent interest  than the ARRC would earn through                                                               
investments,  in  practical  terms  if  the  ARRC  would  have  a                                                               
compelling case to sell the land.                                                                                               
                                                                                                                                
REPRESENTATIVE STOLTZE  again noted that  this is a  policy call.                                                               
He  suggested that  the  bill  is not  just  about enhancing  the                                                               
state's revenue,  but is about the  ARRC's impact on jobs  in the                                                               
private sector.   He characterized the provisions in  the bill as                                                               
"a balancing  act" that  the legislature  must weigh  in on.   In                                                               
terms  of pure  revenue,  he  considered that  it  is probably  a                                                               
better deal for the ARRC "to  have a hammer over lessee," but the                                                               
correspondence  he  received reflects  that  HB  357 may  promote                                                               
business and "spur" more activity.                                                                                              
                                                                                                                                
1:35:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MUNOZ  supported  fostering business  growth  and                                                               
opportunities for  business.  She  wondered whether  the language                                                               
is strong  enough.  She  asked whether the sponsor  believes that                                                               
HB 357  will lead to  opportunities for individual  businesses to                                                               
acquire the properties.                                                                                                         
                                                                                                                                
REPRESENTATIVE STOLTZE  said he  hoped the  bill would  alert the                                                               
ARRC that the legislature is  interested in the ARRC developing a                                                               
better   working  relationship   with  businesses   operating  on                                                               
railroad property.   He recalled anecdotal  comments from lessees                                                               
who  would  like  to  make  investments but  cannot  due  to  the                                                               
uncertainty of  "dealing with  the railroad."   This is  not just                                                               
about the  financial aspect but is  also about how the  ARRC will                                                               
react  to  lessees  in  five   years.    He  recalled  the  terms                                                               
"arbitrary  and capricious"  have been  used in  relation to  the                                                               
ARRC.    He  related  his  understanding  that  lease  terms  are                                                               
erratic.  He  has observed this first hand when  working with the                                                               
ARRC  on other  issues.   He believed  that fiscal  certainty and                                                               
right of first refusal is important to lessees, he stated.                                                                      
                                                                                                                                
1:37:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG referred  to page  1, line  12, to  the                                                               
word "essential"  yet the  language on  page 2,  line 3  does not                                                               
refer  to  "essential."    He asked  whether  the  sponsor  would                                                               
consider  deleting "essential"  from the  provision on  the first                                                               
page.                                                                                                                           
                                                                                                                                
1:38:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STOLTZE  responded  that   the  change  may  read                                                               
better, although  he would probably prefer  adding "essential" to                                                               
the language on page 2.                                                                                                         
                                                                                                                                
REPRESENTATIVE GRUENBERG  suggested that  he would prefer  not to                                                               
say "essential" in order to give ARRC more leeway.                                                                              
                                                                                                                                
REPRESENTATIVE STOLTZE  offered his belief that  the ARRC already                                                               
has a  lot of  flexibility.   He stated  that "essential"  was to                                                               
protect the ARRC.                                                                                                               
                                                                                                                                
REPRESENTATIVE   GRUENBERG  asked   whether   the  language   was                                                               
discretionary.                                                                                                                  
                                                                                                                                
REPRESENTATIVE   STOLTZE  stated   that   he   would  leave   the                                                               
punctuation and grammar to Representative Gruenberg to consider.                                                                
                                                                                                                                
1:39:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  referred  to  page 2,  lines  8-11  to                                                               
subsection  (c).   He asked  whether the  funds are  deposited to                                                               
general fund (GF) or to a separate account.                                                                                     
                                                                                                                                
REPRESENTATIVE STOLTZE  stated that  the funds are  not deposited                                                               
to  the  GF, but  are  retained  by the  ARRC.    Thus, the  land                                                               
proceeds are not used for the general ARRC operations.                                                                          
                                                                                                                                
1:40:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  referred to page 2,  lines 10-11, which                                                               
read, "Money  in the  account may  be appropriated  in accordance                                                               
with  45  U.S.C.  1207(a) (5)(Alaska  Railroad  Transfer  Act  of                                                               
1982)."  He  inquired as to whether  the legislature appropriates                                                               
these funds.                                                                                                                    
                                                                                                                                
REPRESENTATIVE STOLTZE did not recall.   He stated that the state                                                               
must comply  with the Alaska Railroad  Transfer Act of 1982.   He                                                               
explained that the ARRC does not  appear in the state budget.  He                                                               
thought the language referred to activities within the ARRC.                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  whether "appropriated"  is  the                                                               
correct  term since  that is  generally reserved  for legislative                                                               
bodies.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  STOLTZE responded  that the  legislature is  at a                                                               
disadvantage since  the ARRC  does not  fall under  the Executive                                                               
Budget Act.                                                                                                                     
                                                                                                                                
1:42:48 PM                                                                                                                    
                                                                                                                                
JIM KUBITZ,  Vice President, Real  Estate and  Facilities, Alaska                                                               
Railroad Corporation  (ARRC), introduced  himself.   He explained                                                               
that "appropriated"  is not likely  the best term.   He suggested                                                               
that the ARRC's legal counsel is on-line.                                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG  also asked the  ARRC to comment  on the                                                               
word "essential" that he previously mentioned.                                                                                  
                                                                                                                                
CHAIR P. WILSON opened up public testimony on HB 357.                                                                           
                                                                                                                                
PHYLISS  JOHNSON,  Vice  President   &  General  Counsel,  Alaska                                                               
Railroad Corporation  (ARRC) introduced herself.   In response to                                                               
Representative   Gruenberg,  said   she  thought   that  deleting                                                               
"essential" on page 1 would give the ARRC more flexibility.                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG referred  to page 2, line  10, and asked                                                               
whether some  other language than "appropriated"  should be used.                                                               
She recommended that "expended" be used.                                                                                        
                                                                                                                                
1:45:25 PM                                                                                                                    
                                                                                                                                
MS.  JOHNSON, in  further response  to Representative  Gruenberg,                                                               
stated that  she did  not have any  other recommended  changes to                                                               
the bill.   In response  to Chair  P. Wilson, she  responded that                                                               
having the  reference to the  Alaska Railroad Transfer Act  was a                                                               
good  to have  in the  bill, since  "railroad funds  be used  for                                                               
railroad  and  related  purposes."   She  also  recalled  similar                                                               
language in  the state transfer  act, as  well.  She  stated that                                                               
this  language helps  to clarify  the continued  use of  railroad                                                               
funds for railroad purposes.                                                                                                    
                                                                                                                                
1:46:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  referred  to  two fiscal  notes.    He                                                               
pointed out  that one fiscal  note was  approved on 3/23/10.   He                                                               
assumed that the  fiscal note supersedes the one  with an earlier                                                               
signature date.                                                                                                                 
                                                                                                                                
MR. KUBITZ answered yes.  He believed that was correct.                                                                         
                                                                                                                                
1:47:37 PM                                                                                                                    
                                                                                                                                
MR. KUBITZ referred to  page 1, line 12, and read:   "...(2)  the                                                               
sale of  the land  is in  the best  interest of  the state."   He                                                               
explained  that the  determination  must be  made  by the  ARRC's                                                               
Board of Directors in order to  sell land.  He offered his belief                                                               
that what is in the best interest  of the state may not mesh with                                                               
what  is  in  the  best  interest of  the  ARRC,  since  economic                                                               
development  and  self-sufficiency  are   listed  in  the  ARRC's                                                               
mission  statement.   The state's  historic properties  group may                                                               
have a best interest statement that  may be contrary to the ARRC.                                                               
He suggested that  this may not be a huge  problem but he related                                                               
that this  language would  require the  ARRC's Board  to consider                                                               
what is in the best interest of the state.                                                                                      
                                                                                                                                
1:49:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG offered  his belief  that this  is "the                                                               
heart of the  bill."  The ARRC's  board must make a  finding.  He                                                               
Normally,  when  a  court  makes  a finding  it  is  not  usually                                                               
reviewable  by a  higher court  unless it  is clearly  erroneous.                                                               
That  term means  the  court is  left with  a  definite and  firm                                                               
conviction  that the  facts the  lower body  found were  wrong or                                                               
else the  court misapplied the  law.   This forms the  twin basis                                                               
for determining an erroneous decision.   He said he does not know                                                               
whether that applies  to a finding of the board,  but the sponsor                                                               
says that  this is discretionary.   Further, the use of  the term                                                               
"may" on  line ll makes it  discretionary.  He asked  Ms. Johnson                                                               
if she thought he was correct in his assessment.                                                                                
                                                                                                                                
1:49:51 PM                                                                                                                    
                                                                                                                                
MS. JOHNSON said,  "Certainly it's discretionary with  the use of                                                               
the  word 'may.'"   She  agreed with  Mr. Kubitz,  that the  ARRC                                                               
Board's has  a lack of  familiarity in applying the  state's best                                                               
interest standard.   She said  to use  this standard casts  us "a                                                               
little bit  adrift in  an area of  expertise that  previously the                                                               
ARRC has not been called upon  to consider.  She offered that the                                                               
best interest  of the  ARRC is more  economically based  than the                                                               
state's best  interest.  She  recalled that if the  Department of                                                               
Natural Resources  (DNR) was considering  whether to  lease land,                                                               
the department  must consider other  things such as  fish habitat                                                               
or  game management  since the  state is  comprised of  multi-use                                                               
agencies.    She suggested  that  the  standard of  appeal  would                                                               
generally be determined by the Superior Court.                                                                                  
                                                                                                                                
1:52:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  related that the ARRC  may tactfully be                                                               
suggesting that on  page 1, line 13  and on page 2,  line 4, that                                                               
the committee consider changing "state" to "railroad."                                                                          
                                                                                                                                
MS.  JOHNSON answered  yes.   She thought  the language  would be                                                               
more satisfactory.                                                                                                              
                                                                                                                                
REPRESENTATIVE MUNOZ asked  to hear from the sponsor.   She asked                                                               
whether the  sponsor intended that  this language would  apply to                                                               
the best interest of the economic vitality of the area.                                                                         
                                                                                                                                
1:53:11 PM                                                                                                                    
                                                                                                                                
JOHN  COAN,  Staff,  Representative Bill  Stoltze,  Alaska  State                                                               
Legislature, on behalf  of the prime sponsor,  offered his belief                                                               
that the  intent of the  specific language "in the  best interest                                                               
of the state" was multi-faceted.   He suggested that the language                                                               
would provide another  vehicle for responsible sale  of land, and                                                               
for  the ARRC  to take  a greater  role in  community development                                                               
instead of being  a hindrance.  He further thought  that the ARRC                                                               
should facilitate  a better level  of contact between  the quasi-                                                               
public  agency   and  the  private   sector.    He   related  his                                                               
understanding  that  replacing   "state"  with  "railroad"  might                                                               
change the focus of the bill.                                                                                                   
                                                                                                                                
1:54:28 PM                                                                                                                    
                                                                                                                                
MARK STEARNS,  Owner, Alaska Wood  Molding, stated that he  has a                                                               
business located at the Port of Anchorage.   He said that he is a                                                               
nine-year   leaseholder  and   the   ARRC   has  generally   been                                                               
supportive.  He  stated that one source of  frustration that many                                                               
have is  the issue of uncertainty.   He explained that  the terms                                                               
of his lease went from $790 per  month in 2001 to over $1600 over                                                               
a three-year  period and then increased  to $3000 per month.   He                                                               
related  that the  terms contained  in leases  typically restrict                                                               
any increases  to 135 percent  of the  lease payment over  a five                                                               
year period.   He pointed out that his business  was not afforded                                                               
similar terms or  any official notification process.   Changes to                                                               
the terms of his lease have  created a climate of uncertainty and                                                               
makes  it difficult  for him  to consider  any improvements.   He                                                               
recapped that having lease terms  dramatically increase by nearly                                                               
400  percent  over  nine years  without  an  explanation  clearly                                                               
created uncertainty.  He described  the situation as "random" and                                                               
"a scary situation."                                                                                                            
                                                                                                                                
1:58:17 PM                                                                                                                    
                                                                                                                                
MR. STEARNS  explained that lessees  do not have any  process for                                                               
relief.  The ARRC "pretty much  does what the railroad would like                                                               
to do."  He urged members  to support HB 357 to afford businesses                                                               
an opportunity to have some certainty.                                                                                          
                                                                                                                                
1:58:57 PM                                                                                                                    
                                                                                                                                
CHAIR P. WILSON asked for the length of his lease.                                                                              
                                                                                                                                
MR.  STEARNS responded  that he  is in  the process  of extending                                                               
their lease to 35  years, but he has not yet  heard back from the                                                               
ARRC.   He said  he hopes the  lease will not  allow the  ARRC to                                                               
increase payments more  than 35 percent over  a five-year period.                                                               
In further response to Chair P.  Wilson, he explained that he has                                                               
read  his lease  but some  question remains  as to  which is  the                                                               
valid  lease.   He  pointed out  that the  potential  to own  the                                                               
property   would  afford   him   greater   flexibility  to   make                                                               
investments.                                                                                                                    
                                                                                                                                
CHAIR P. WILSON commented that  the newer ARRC leases contain the                                                               
language.                                                                                                                       
                                                                                                                                
MR. STEARNS  agreed that the  provision limiting the  increase is                                                               
in the new lease.                                                                                                               
                                                                                                                                
2:01:35 PM                                                                                                                    
                                                                                                                                
PAT  GAMBLE,  President  and  CEO,  Alaska  Railroad  Corporation                                                               
(ARRC),  offered his  belief that  the dialogue  is healthy.   He                                                               
referred to page  2, line 2, to the public  notice, best interest                                                               
of the state, and to the first  right of refusal.  He described a                                                               
scenario  in  which  a  parcel   is  for  sale  and  the  current                                                               
leaseholder  makes an  offer  to  purchase the  property.   If  a                                                               
member of  the public makes a  higher offer, he wondered  if that                                                               
would be considered as acquiring  the best interest for the state                                                               
or if  some other determination  would be made.   He acknowledged                                                               
that  if the  scenario arose  that  he would  recommend the  ARRC                                                               
board take  the higher offer.   However,  he was not  certain how                                                               
that would  "square with the  first right of refusal"  or obtains                                                               
the  best return  for the  state.   He  concluded that  practical                                                               
issues  like this  arise,  but overall  the  discussion has  been                                                               
large healthy discussion.                                                                                                       
                                                                                                                                
2:03:30 PM                                                                                                                    
                                                                                                                                
CHAIR P.  WILSON asked whether  first right of refusal  refers to                                                               
paying the "going  rate" and when another offer is  made that the                                                               
"going rate" would prevail.                                                                                                     
                                                                                                                                
2:03:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  clarified that this raises  issues that                                                               
are  addressed  in the  memorandum  from  the Division  of  Legal                                                               
Services.   He asked whether  Ms. Johnson has reviewed  the March                                                               
20, 2010 memo.                                                                                                                  
                                                                                                                                
MS. JOHNSON answered no.                                                                                                        
                                                                                                                                
REPRESENTATIVE  GRUENBERG  suggested   that  the  ARRC's  lawyers                                                               
should review the memo.                                                                                                         
                                                                                                                                
MS. JOHNSON agreed to do so.                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  referred to  a letter August  25, 2004,                                                               
from  Steve  Van  Sant,  State  Assessor,  to  Marty  McGee,  the                                                               
Municipality  of   Anchorage's  Assessor,   and  asked   for  its                                                               
relevance to the bill.                                                                                                          
                                                                                                                                
MR. KUBITZ  replied that  he made  copies of  the letter  for the                                                               
committee.    He  explained  the   contention  was  that  selling                                                               
railroad land would increase local  tax revenue.  He acknowledged                                                               
tenants  are  taxed  following a  somewhat  complicated  formula.                                                               
Basically  as  the lease  approaches  the  termination date,  the                                                               
actual value goes  down.  The letter of August  25, 2004 informed                                                               
the MOA  that it needed to  tax the tenants as  though they owned                                                               
the land.   Thus, this letter provided the  justification for the                                                               
lessee's taxes on ARRC leased land  and the reason that the taxes                                                               
will not go up.                                                                                                                 
                                                                                                                                
2:07:15 PM                                                                                                                    
                                                                                                                                
MR.  KUBITZ, in  response  to  Representative Gruenberg,  related                                                               
that the  tenants understood the  reason the leased  property was                                                               
being tax.  He said that  represents one reason that some tenants                                                               
believe  they "may  as well"  own the  land since  they must  pay                                                               
taxes  on  the  land.   In  further  response  to  Representative                                                               
Gruenberg, he agreed  that the assessed amount is  reduced as the                                                               
lease draws closer to the end of the term.                                                                                      
                                                                                                                                
REPRESENTATIVE GRUENBERG  remarked that  the property  tax amount                                                               
is less at  the end of the  lease than it would be  if the lessee                                                               
was a fee simple owner.                                                                                                         
                                                                                                                                
MR. KUBITZ agreed.                                                                                                              
                                                                                                                                
2:07:59 PM                                                                                                                    
                                                                                                                                
CHAIR  P. WILSON  related that  the committee  must consider  the                                                               
reason the ARRC does not request  state funding, which is that as                                                               
a quasi-independent  agency it owns  land and has the  ability to                                                               
earn income.                                                                                                                    
                                                                                                                                
MR. KUBITZ,  in response to  Representative T.  Wilson, explained                                                               
that  the appraisal  and appeal  process  is up  to the  tenants.                                                               
Typically, tenants  often appeal  tax assessments  and that  is a                                                               
relationship  with   the  taxing   agency.    Some   tenants  are                                                               
successful in their appeals and others are not.                                                                                 
                                                                                                                                
2:09:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE T.  WILSON related  a scenario  in which  the ARRC                                                               
appraisal is set  at $500,000, but the borough  assessment is set                                                               
at  $400,000.   She  asked  whether the  tenant  could appeal  by                                                               
furnishing the borough assessment.                                                                                              
                                                                                                                                
MR. KUBITZ  answered that the  tenant has  the right to  obtain a                                                               
third  party appraisal  and  can  present that  to  the ARRC  for                                                               
consideration.  Per  a mechanism in the lease, if  the tenant and                                                               
the  ARRC cannot  reach  an  agreement, the  matter  would go  to                                                               
binding  arbitration for  a decision.   A  third party  appraisal                                                               
must  be  performed   by  a  "Member  of   the  Appraisal  (MAI)"                                                               
appraiser.                                                                                                                      
                                                                                                                                
2:10:39 PM                                                                                                                    
                                                                                                                                
MR.  KUBITZ,   in  response  to  Representative   T.  Wilson,  he                                                               
explained that the ARRC appraises  its property every five years.                                                               
He pointed  out that Mr.  Stearns will  be operating under  a new                                                               
lease,  which  provides  adequate protection.    Previously,  Mr.                                                               
Stearns was operating under a  50-year old federal lease that did                                                               
not contain any  cap.  Thus, any time an  appraisal increased the                                                               
property value, the lease also  increased accordingly, as per the                                                               
lease terms.   He pointed  out that  the ARRC's leases  limit the                                                               
term increases to 135 percent over a five-year period.                                                                          
                                                                                                                                
2:11:34 PM                                                                                                                    
                                                                                                                                
CHAIR P. WILSON  asked whether the amount of  the lease increases                                                               
applied to all tenants.                                                                                                         
                                                                                                                                
MR. KUBITZ explained that not all  the leases are ARRC leases and                                                               
a few  leases remain that date  back to the 60s,  although little                                                               
time  remains on  those  leases.   The old  leases  did not  even                                                               
contain environmental language.  He  assured Chair P. Wilson that                                                               
the  ARRC strives  to  have  everyone under  the  new leases  for                                                               
everyone's benefit.                                                                                                             
                                                                                                                                
2:12:13 PM                                                                                                                    
                                                                                                                                
CHAIR P.  WILSON, after first  determining no one else  wished to                                                               
testify, closed public testimony on HB 357.                                                                                     
                                                                                                                                
2:12:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  made  a  motion  to  adopt  Conceptual                                                               
Amendment 1, on page 1, line 12 to delete "essential."                                                                          
                                                                                                                                
REPRESENTATIVE T. WILSON objected for purpose of discussion.                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  expanded  Conceptual Amendment  1,  on                                                               
page  1,  line 10  to  delete  "essential."   He  explained  that                                                               
removing the  two references to  "essential would conform  to the                                                               
language on  page 2,  line 3.   This  would give  the corporation                                                               
more flexibility  and would  lower the  standard in  instances in                                                               
which the  ARRC board determines  the land is necessary  for ARRC                                                               
purposes.   He offered  that this would  avoid the  discussion of                                                               
deciding  the   whether  the  land  is   essential  for  railroad                                                               
purposes.    He  commented  that  the  sponsor  does  not  oppose                                                               
Conceptual  Amendment   1  and   the  ARRC   supports  Conceptual                                                               
Amendment 1.                                                                                                                    
                                                                                                                                
REPRESENTATIVE T. WILSON removed her objection.                                                                                 
                                                                                                                                
There being no objection, Conceptual Amendment 1 was adopted.                                                                   
                                                                                                                                
2:14:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  made  a  motion  to  adopt  Conceptual                                                               
Amendment  2,  on page  1,  line  1,  in  the title,  to  replace                                                               
"needed" with "necessary".                                                                                                      
                                                                                                                                
REPRESENTATIVE T. WILSON objected for purpose of objection.                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG offered  his  belief  that this  change                                                               
would be grammatically correct.                                                                                                 
                                                                                                                                
MR. COAN suggested that pending  the legal drafter's consent that                                                               
the change should be fine.                                                                                                      
                                                                                                                                
REPRESENTATIVE T.  WILSON removed her  objected.  There  being no                                                               
further objection, Conceptual Amendment 2 was adopted.                                                                          
                                                                                                                                
2:15:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  made  a  motion  to  adopt  Conceptual                                                               
Amendment 3,  on page  2, line 10,  to remove  "appropriated" and                                                               
insert "expended."                                                                                                              
                                                                                                                                
REPRESENTATIVE  T.  WILSON objected.    She  asked whether  funds                                                               
could be deposited  so the ARRC could spend  the interest instead                                                               
of spending the principal.                                                                                                      
                                                                                                                                
REPRESENTATIVE  GRUENBERG explained  that Conceptual  Amendment 3                                                               
provides  a  grammatical  change,  which is  that  the  ARRC  can                                                               
"expend" only in accordance with federal law.                                                                                   
                                                                                                                                
REPRESENTATIVE PETERSEN  recalled that the federal  definition in                                                               
45  U.S.C. 1207(a)  (5) (Alaska  Railroad Transfer  Act of  1982)                                                               
required that  the funds  be used for  railroad purposes.   Thus,                                                               
the funds would  be "expended" for railroad purposes.   He agreed                                                               
the term "appropriate" referred to legislative action.                                                                          
                                                                                                                                
REPRESENTATIVE MUNOZ  suggested that  "expend" means to  spend so                                                               
she thought it  may be clearer to use "budgeted."   She explained                                                               
that the ARRC may want to invest the funds.                                                                                     
                                                                                                                                
MS. JOHNSON  offered that her  first response is that  using "may                                                               
be expended"  would also give the  ARRC the latitude to  save the                                                               
funds in  an account.   She pointed  out reference to  "45 U.S.C.                                                               
1207  (a) (5)  (Alaska Railroad  Transfer  Act of  1982)" was  to                                                               
ensure the  funds are  spent for  railroad and  related purposes.                                                               
She  recalled  when  another   committee  member  summarized  the                                                               
federal law  that the  member left  out "related  purposes" which                                                               
could be significant.                                                                                                           
                                                                                                                                
2:19:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  T. WILSON  stated that  she preferred  "invested"                                                               
for the  intent it implies since  she would rather see  the funds                                                               
invested and "to send the ARRC a better message."                                                                               
                                                                                                                                
MR. COAN  pointed out that  he not  an attorney, but  he believed                                                               
the drafter  used the  term "appropriated" since  it is  the term                                                               
used in  Alaska Railroad Act  of 1982.   He said, 45  U.S.C. 1207                                                               
(a) (5)  reads, "Revenues generated by  the state-owned railroad,                                                               
including any amount appropriated  or otherwise made available to                                                               
the state-owned  railroad should be  retained and managed  by the                                                               
state-owned railroad for railroad and related purposes."                                                                        
                                                                                                                                
2:20:18 PM                                                                                                                    
                                                                                                                                
MR. COAN,  in response to  Representative Gruenberg,  re-read the                                                               
federal law.                                                                                                                    
                                                                                                                                
CHAIR P.  WILSON said she  thought that the language  referred to                                                               
an appropriation made to the legislature.                                                                                       
                                                                                                                                
REPRESENTATIVE GRUENBERG agreed.  He  said this language seems to                                                               
be just the opposite of the language in the bill.                                                                               
                                                                                                                                
MR. COAN related  his understanding that the  specific section in                                                               
federal law  references "appropriation" so  using "appropriation"                                                               
in the bill is correct.                                                                                                         
                                                                                                                                
2:21:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG offered  his  belief  that the  federal                                                               
language the sponsor's staff read  is correct, but he opined that                                                               
it is not correct to use "appropriated"  in the bill.  He said he                                                               
believes that  a person can  "budget money without  spending it."                                                               
He  said  he prefers  not  to  use  the  term "budget"  and  that                                                               
"expended" is the legal term.                                                                                                   
                                                                                                                                
CHAIR P. WILSON preferred the use of "expended."                                                                                
                                                                                                                                
REPRESENTATIVE  T. WILSON  disagreed, stating  that the  language                                                               
"expended" sends the wrong message to the ARRC.                                                                                 
                                                                                                                                
2:22:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  related that this provision  sets out a                                                               
limitation, which  is that  the funds could  only be  expended in                                                               
accordance  with the  federal  law.   He  asked  Ms. Johnson  for                                                               
clarification.                                                                                                                  
                                                                                                                                
MS.  JOHNSON  answered  yes,  that  Representative  Gruenberg  is                                                               
correct.                                                                                                                        
                                                                                                                                
REPRESENTATIVE PETERSEN  asked whether  "money in account  may be                                                               
used" is a possible clarification.                                                                                              
                                                                                                                                
MS. JOHNSON stated that "used" is acceptable.                                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG  explained that a person  does not "use"                                                               
money in  an account,  but "spends  it."   He offered  his belief                                                               
that "spend" or "expended" is the normal legal term.                                                                            
                                                                                                                                
2:24:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN  made  a   motion  to  amend  Conceptual                                                               
Amendment 3, to  delete "appropriated" and insert  "used."  There                                                               
being no objection,  the amendment to Conceptual  Amendment 3 was                                                               
adopted.                                                                                                                        
                                                                                                                                
2:25:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE T. WILSON removed her objection.                                                                                 
                                                                                                                                
There  being no  further  objection, Conceptual  Amendment 3,  as                                                               
amended, was adopted.  Thus, subsection (c) read:                                                                               
                                                                                                                                
     (c) The corporation shall separately account for the                                                                       
     proceeds from the sale of land under this section and                                                                      
     shall report the earnings and balance in the account                                                                       
     in the annual report required by AS 42.40.260. Money                                                                       
     in the account may be used in accordance with 45                                                                           
     U.S.C. 1207(a)(5) (Alaska Railroad Transfer Act of                                                                         
     1982).                                                                                                                     
                                                                                                                                
2:25:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE T. WILSON moved to  report HB 357, as amended, out                                                               
of   committee   with    individual   recommendations   and   the                                                               
accompanying fiscal  notes.  There  being no objection,  the CSHB
357(TRA)  was reported  from  the  House Transportation  Standing                                                               
Committee.                                                                                                                      
                                                                                                                                
2:25:40 PM                                                                                                                    
                                                                                                                                

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