"An Act authorizing the Alaska Railroad Corporation to issue revenue bonds to finance rail transportation projects that qualify for federal financial participation; and providing for an effective date. "
"While the Alaska Railroad will have the flexibility to issue the bonds in a single issuance or in several issuances, the current plan is to issue bonds in 2006, 2009 and 2012 with each issuance having a 12-year payoff schedule."
- Sen. Huggins
Senate Bill 308 will authorize the Alaska Railroad to issue up to $165,000,000 in tax exempt bonds backed by Federal Transit Administration (FTA) formula funds received annually by the Railroad. Bond proceeds will be used to finance FTA-eligible rail transportation projects focused on accelerating the Railroad's mainline track and bridge rehabilitation program by as much as ten years.
The Alaska Railroad corridor between Anchorage and Fairbanks handles more than 600 passenger trains per year and over 30,000 carloads of fuel and other hazardous materials annually. Accelerating the Railroad's mainline track and bridge rehabilitation program between Seward and Fairbanks is important for the following reasons:
Greatly enhances safety. Investment in this corridor will substantially reduce derailments caused by track failure.
Increases capacity and speed important to meet growing passenger demand.
Enhancing passenger capacity and safety allows the railroad to better support gas pipeline construction and other freight services.
Reduces maintenance upkeep and operating cost.
Consistent with the Railroad's #1 corporate priority to improve safety through track and bridge rehabilitation.
Provides for stability, clarity and capital budget discipline.
Specifically, in the Anchorage to Fairbanks corridor, the program will result in 100% continuous welded rail to reduce "joint batter" which can lead to broken rail that causes derailments. Concrete ties and new 141 pound welded rail will be placed on all curves over six degrees to increase stability. Wood tie installment will create a tie replacement cycle which would not exceed 10 years (allowing for a replacement rate of 25% to 30% per year each 10 years).
In no event will the general credit of the state or Railroad be pledged for the repayment of these bonds. AS.42.40 requires that all liabilities incurred by the Alaska Railroad shall be satisfied "exclusively" from the assets or revenue of the Alaska Railroad and not the State.
Debt payment for the bonds will come from a portion (between 30% to 50%) of the FTA formula funds which are statutorily mandated by Federal law and received annually by the Railroad. Issuing debt backed by FTA formula funds is authorized through FTA regulation and has already been used by other rail transit authorities in the lower 48 states.
While the Alaska Railroad will have the flexibility to issue the bonds in a single issuance or in several issuances, the current plan is to issue bonds in 2006, 2009 and 2012 with each issuance having a 12-year payoff schedule. The Alaska Railroad Board of Directors is required to approve each bond issuance and associated projects.
While mainline track and bridge refurbishment is the main project identified for this program, a portion of the bond proceeds will also be used for FTA-eligible technology upgrades and passenger equipment.