Railroad cuts PTC ask, aims to finance remaining need
The Alaska Railroad Corp. is using some strategic financing to cut its fiscal year 2016 capital request to $18 million as it looks for ways to finance Positive Train Control.
Before the legislative session, the railroad was preparing to ask the Legislature for $53.5 million over three years, with a $21.8 million request for the 2016 fiscal year.
Refinancing debt accrued in 2006-07 should allow the railroad to bond for $37 million if it gets $18 million this session, Alaska Railroad President and CEO Bill O’Leary told the Joint Transportation Committee Feb. 3.
Refinancing the debt and pushing its bond maturity out from 2021 to 2025 would give the railroad enough financial headroom to make the deal work if the Legislature funds the plan, O’Leary said.
All $18 million is needed this session so the entire financing package can be taken to the bond markets, he said.
Gov. Bill Walker’s initial capital budget did not include funding for Positive Train Control.
The Legislature appropriated $34.1 million over the last two years to what O’Leary calls, “the mother of all unfunded mandates.”
To date, the railroad has spent nearly $70 million on what is expected to be a $160 million endeavor.
Positive Train Control is a safety system designed to eliminate human error accidents on railroads. The Federal Railway Administration currently has a December 2015 deadline for implementation, but Alaska Railroad officials have long said they expect a multi-year extension to the deadline; it’s likely no railroad in the country will meet the current timeline, O’Leary said.
Not complying with the requirement really isn’t an option. Railroad leadership could face heavy corporate and even personal fines and the Alaska Railroad could ultimately lose its right to operate passenger service without Positive Train Control.
The mandate came down in 2008 after several serious accidents involving passenger trains in the Lower 48.
Passenger service produces more than $25 million per year for the railroad, but the statewide impact is much greater, according to a McDowell Group study. It’s estimated passenger service generates about 2,000 jobs and $50 million of direct and indirect wages annually in the state. Additionally, spending from non-resident railroad passengers tops $20 million per year.
Approximately 3,700 motor coach trips would be added to Railbelt highways each year in order to keep comparable service volumes without rail passenger service, O’Leary noted.
The railroad will be safer with Positive Train Control, but spending money on the system will pull funds away from infrastructure upkeep, he said.
If he had his way the $160 million would go into rails, ties, ballast and bridges, he said.
“The cost-to-benefit ratio on (Positive Train Control) doesn’t provide a classic return on investment,” O’Leary said.
The system will likely cost between per year $5 million and $7 million to maintain, he said, a cost the railroad will work to absorb.
Over the past several years the Alaska Railroad’s net income has been in the $15 million range.
Elwood Brehmer can be reached at [email protected].