Editorial: Cuts to rail are a betrayal of federal commitments

For those of us among the vast majority of Americans who believe the current national debt and budget deficit are an immediate threat to our future prosperity, nothing is quite so maddening as the unending stream of red ink pouring out of Washington, D.C., and the political cowardice that allows it to continue unabated.

We’re told that actual, tangible budget cuts are impossible and the best we can hope for is a cut in the rate of growth even as we spend $4 billion more per day than we take in as revenue.

Nearly as infuriating is that when Congress isn’t wildly spending money we don’t have, its members are proposing cuts that don’t make any sense, are meant to score political points or are just flatout intended to settle old grudges.

The current funding cuts facing the Alaska Railroad Corp. certainly fit into a couple of those categories, most notably in the Doesn’t Make Sense Department.

The future of the Alaska Railroad — and by extension vast realms of the state economy and freight system — is in jeopardy because the Senate stripped out nearly all of the Federal Transit Administration funding it has received since 2005 in a two-year surface transportation bill passed in March.

The cuts, which could amount to $30 million per year and could take effect this summer if the Senate language passes, leave the railroad without the ability to pay off its capital improvement bonds or comply with an unfunded federal mandate to install Positive Train Control by 2015.

If the Alaska Railroad doesn’t have Positive Train Control, or PTC, installed by 2015 it will no longer be able to offer passenger service. ARRC has already spent $40 million on the $100 million PTC installation.

(PTC was required in 2008 legislation passed after three deadly rail accidents. It is a GPS-based system that can override the train controls if the operator is unresponsive or an accident is impending.)

Alaska Sens. Lisa Murkowski and Mark Begich voted for the transportation bill that cuts the railroad funding, but not without introducing amendments that would have prevented such deep reductions. The amendments failed to pass, partly on the mistaken belief that the Alaska Railroad funding is an earmark.

Alaska doesn’t have a lot of room to point fingers about earmarks after the success its powerful former committee chairmen led by the late Sen. Ted Stevens and Rep. Don Young had in steering billions of federal dollars into the state.

However, the only reason the Alaska Railroad is mentioned specifically in the existing surface transportation law is because it receives money for fewer track miles — not more — than other rail systems even though it qualifies by providing year round public transportation from Seward to Fairbanks.

After only 10 percent of the railroad’s track miles (those around Anchorage) were considered eligible for FTA funding in 2000, Young, as Transportation Committee chairman, attempted to get 100 percent of its track miles eligible for federal grant funding in 2005.

The wrangling over the railroad funding apparently got pretty ugly in the Senate between Stevens and then-Banking Committee Chairman Sen. Richard Shelby, R-Ala., before a compromise was hammered out to make 60 percent of the Alaska Railroad track miles eligible for annual grant funding.

Since then, the railroad has received $36 million per year, of which $16 million services the debt on the $137 million balance in capital improvement bonds, $9 million goes toward operating expenses and the other $11 million to capital projects.

Based on the passage of the Senate bill alone, the bond rating for the Alaska Railroad Corp. was downgraded by Moody’s to negative in April. There’s no immediate impact on the debt service costs, but all other financial activities by ARRC such as obtaining short-term credit or using revolvers will now be more expensive if not impossible to obtain.

This is just outrageous.

The FTA approved the capital improvement bond sale in 2007 and the use of annual grant funding to service the debt. The bondholders bought the debt on those guarantees, and now Congress may force the Alaska Railroad to default on the bonds through no fault of its own by refusing to provide the funding it was promised.

So to sum up: the Alaska Railroad already receives less money than it should be eligible for, it sold bonds based on assurances from the federal government that it would receive annual funding, and on top of that has an unfunded, $100 million federal mandate to install Positive Train Control or lose its passenger service by 2015.

Makes a lot of sense, doesn’t it?

Especially from a government that spent $10 billion-with-a-B in the 2009 stimulus bill on high-speed rail that’s going nowhere.

Imagine what Alaska would look like without the rail system as it operates today. Just picture the 11,000 buses it would take to transport cruise ship passengers who now travel to Denali and Fairbanks every summer by rail.

There is still time for Congress to do the right thing, and now is a good time to make your voice heard. Perhaps the fact that ratings agencies are now examining other rail bonds backed by federal guarantees will be the kick in the pants the conference committee needs to fulfill the obligations the government has made to the Alaska Railroad.

The current extension of the surface transportation bill expires June 30. Congress comes back to session this week after the Memorial Day recess. Knowing how Congress works, if an agreement can’t be reached, another short-term extension that preserves the Alaska Railroad funding may get it through the end of the 2012 fiscal year Sept. 30.

But even with a temporary reprieve, this fight isn’t going away. Alaskans need to keep vigilant to ensure the commitments made to the railroad and its creditors are honored.

05/31/2012 - 1:24pm