Railroad wants longer land leases
Alaska Railroad officials say developers are having difficulty securing financing for large projects under current state law that limits leases to 35 years.
Sen. Loren Leman, R-Anchorage, is sponsoring a bill that would allow the railroad to lease some 8,000 acres of its land in Anchorage, Fairbanks, Seward and Healy for up to 55 years, making commercial and residential development more attractive.
SB209 was introduced late in the legislative session last year, but was not acted on by state lawmakers.
The bill has since gained support from various lending institutions, developers and chambers of commerce, said Wendy Lindskoog, the railroad’s director of external affairs.
Supporters of lengthening the leases include the Anchorage Chamber of Commerce and the City of Seward, Lindskoog said.
"Business organizations and city groups have been highly supportive,’’ Lindskoog said. "There is a definite economic benefit.’’
Among the projects that could immediately benefit would be a senior housing development near Government Hill in Anchorage, Lindskoog said. The Department of Housing and Urban Development will not commit to a project on railroad land unless it has at least a 50-year lease, Lindskoog said.
Wal-Mart also has expressed interest in railroad land and other sites in Fairbanks, according to railroad officials.
Extending leases on railroad land would increase financing options, spurring investor interest, Lindskoog said. New leases mean additional revenues for the railroad, and infrastructure development and an increased tax base for communities.
Lenders and developers have balked at large, expensive projects on railroad land since there was no assurance the land would be available after 35 years, Lindskoog said.
Some banks require a lease to exceed loan maturity by at least 10 years. And increasing the lease term to 55 years allows companies to amortize debt longer, Lindskoog said.
Extending leases to 55 years also would give the railroad equal footing with other state agencies. The University of Alaska and the state Department of Natural Resources can lease land for up to 55 years under state law, Lindskoog said.
Under the proposed legislation, the railroad can terminate any lease after 35 years if the land is needed for railroad purposes.
Leman, state Senate majority leader, said he doesn’t see any major hurdles for the legislation next session.
"This is win-win,’’ he said. "I think it makes some sense.’’
"I think it will pass in both the House and the Senate if we keep it clean and on this issue and not let it become a Christmas tree,’ where people begin venting frustration on the railroad in general," Leman said.
Some lawmakers want to sell the railroad to a private corporation, as was the intent when the federal government transferred the line to the state in 1985.
"There is still the mentality to transfer the railroad to the private sector,’’ Leman said. "We need to maximize the value of the railroad when and if that ever occurs, or whatever we do with it in the future.’’
Established in 1914, the Alaska Railroad was operated by the federal government until it was purchased by the state. Along with the railroad came 36,228 acres of land in Seward, Crown Point, Portage, Whittier, Anchorage, Talkeetna, Curry, Hurricane, Healy, Clear, Nenana, Fairbanks, Valdez, Birchwood and Eagle River. About 13,700 acres are devoted to right of way, and 4,520 more acres are used for railroad operations.
About 18,000 acres remaining along the 525-mile line are either leased or available for lease, said Pat Flynn, the railroad’s public affairs officer.
The railroad earns about $10 million annually from leasing land, or about 9 percent of its annual revenues, Flynn said.
Along with passenger and freight revenues, money from leases is used for operating expenses, capital improvement programs, track maintenance and federal grant matches, Flynn said. The railroad receives no money from the state.
"You don’t hear a lot about it -- it’s sort of a dark horse -- but leasing land is extremely important for the railroad,’’ Flynn said.
Leasing railroad land also is important to communities like Healy, about 100 miles south of Fairbanks. Usibelli Mines Inc., the state’s only producing coal mine, leases about 350 acres of railroad land and subleases it to Healy residents and mine workers who have built about 60 homes on it.
"It’s been a godsend to the people of Healy,’’ said Steve Denton, Usibelli general manager.
Usibelli also leases another 86 acres of commercially zoned land, where the mining company’s offices are located, as is the town’s fire department and community center.
Two years ago, the Legislature, recognizing the importance of the issue to the small mining community, passed a law to allow the railroad to increase its lease limits in Healy from 35 to 65 years.