Congress passes bill that preserves most railroad funds
The threat hanging over the Alaska Railroad Corp. has been lifted.
Congress passed a 28-month surface transportation bill on June 29 that allows the railroad to keep the majority of its annual federal dollars.
The surface transportation bill that passed the Senate in March would have reduced annual funding to the Alaska Railroad from $36 million to about $6 million annually. Losing the funding would have induced a technical default on capital improvement bonds sold in 2007, led to immediate layoffs and would have put passenger service in jeopardy as well.
“When a company goes through a threat like this, it is the affect it has on the employee population and productivity is really damaging, and we are all breathing a sigh of relief here,” said ARRC President and CEO Chris Aadnesen. “And this will allow us to recover from that, take all the bandages off and go forward trying to focus on business and do the best job for the state like we’re supposed to and put this behind us.”
Under the new bill, ARRC will get about $31 million per year in Federal Transit Administration funds through fiscal year 2014 compared to the $36 million it received since 2006.
Aadnesen and others have fought to preserve the funds since the Senate bill passage. Aadnesen said all of the employees, union workers and shippers have been locked into trying to retain the funds for months.
“That’s just about all we’ve done,” he said.
The new law replaces the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, or SAFETEA-LU, that passed in 2005 when Alaska Rep. Don Young was chairman of the Transportation Committee.
This law, which has been extended nine times since expiring in 2009, specifically names ARRC to receive federal funds because it is allocated funds for 60 percent of its track miles compared to 10 percent in a 2000 transportation bill.
In the Senate, this was considered an “earmark” and was not included in the bill that was sent to the House.
Young, who served on the conference committee, was successful in retaining most of the railroad funds.
“My priority from day one as a member of the conference committee has been Alaska,” Young said in a release. “The Senate-passed highway bill hung Alaskans out to dry and would have had drastic implications all across the State. Whether we’re talking about vital rail funding in the Interior, ferry funding in Southeast or Tribal Transportation funding in rural Alaska – the Senate-passed bill would have severely impacted Alaska.”
The preservation of the majority of the funding is a rescue beacon to many of the railroad’s services. One of the top looming threats for the last several months has been the uncertainty as to the future of the passenger service. ARRC is the country’s last entity to own its track and offer both freight and passenger service.
The federal funds on an ongoing basis will allow the railroad to move forward with positive train control. This is a federally mandated safety measure ARRC must complete by 2015 in order to maintain passenger service. The railroad has spent about $40 million on the $100 million project.
“The future of the passenger service is to continue growing as if this threat never happened,” Aadnesen said.
Something else that will be spared is employment. Aadnesen said the new bill should prevent further job losses or restructuring.
“If we had lost those federal funds, there would have been a lot of employee layoffs,” Aadnesen said. “It would have been a tragic thing for the railroad.”
ARRC recently eliminated 52 jobs due to lost production from the Flint Hills refinery in North Pole and the harsh winter. Aadnesen said these positions were unrelated to the threat of losing federal funds. Most of the eliminated positions were from attrition rather than layoffs.
The annual funds will also enable continued payment on a $137 million balance in federal bonds. The funds currently received under SAFETEA-LU will pay off the bonds through February. The new bill will guarantee ARRC’s ability to continue paying these bonds, which have debt service costs of about $16 million annually.
The passage of the earlier Senate bill had resulted in a possible technical default because the original payment parameters had been threatened. Moody’s then lowered the railroad’s credit rating. Aadnesen said this continued guarantee of payment will hopefully enable the credit rating to be raised back up to its previous level.
There will still be some changes ahead. Aadnesen said that having $5 million less per year will result in some reductions to capital projects. The railroad will be prioritizing these projects to decide what can be spent.
ARRC Director of Strategic Planning Bruce Carr said the $31 million comes from a formula change in the new bill. The formula is based on different apportionment amounts than SAFETEA-LU.
Carr said FTA will be working on this for the next several weeks to come out with a new register. He said that $31 million per year has been assured in the meantime.
The bill aids more than the railroad in Alaska. There is $924 in formula funds for Alaskan highways, roads, bridges and infrastructure projects in fiscal years 2013 and 2014. This amount is slightly lower than in the Senate bill.
Young’s spokesman, Luke Miller, said the conference committee version gives an advantage for ferries over the Senate version in that it guarantees money from the Highway Trust Fund rather than going through the Congressional appropriations process each year. The formula for ferry funds places additional emphasis on route miles, which is an advantage for the Alaska Marine Highway System.
The agreement also keeps tribal transportation funding stable at $46 million per year and restores the High Priority Program funding at $30 million per year. The High Priority Program was not included in the Senate bill.
“When it’s all said and done, this bill isn’t perfect, but I was able to dramatically improve the bill and restore funding to several crucial Alaska programs,” Young said.
While both Sens. Lisa Murkowski and Mark Begich voted for the original Senate bill because it aided major highway developments for the state, they lauded the conference committee’s legislation to largely maintain the railroad funds.
“I’ve always said potholes are not partisan and the bipartisan work to complete this bill leads to a balanced agreement that will create jobs and move our economy forward,” Begich said in a release. “Congressman Young did a great job on the House side while Senator Murkowski and I worked to ensure Alaska priorities from the Senate bill were included.”
In her release, Murkowski said, “Alaska is still a young state with high priority needs, whether through our rural roads linking communities, the critical economic and geographic role played by the Alaska Railroad, or our Alaska Marine Highway connecting many communities unreachable otherwise. I worked diligently with my Senate colleagues on Capitol Hill to push our priorities — and I am pleased that Alaska’s needs have been addressed on both sides by our delegation.”