ARRC BOARD OF DIRECTORS SPECIAL MEETING

AGENDA
June 27, 2019 – 8:30 a.m. to 10:00 a.m.
Executive Conference Room – Some Directors via Teleconference
Anchorage, Alaska
I.
1.

CALL TO ORDER – 8:30 a.m.
This special meeting has been called for the specific purpose of discussing, and, if deemed
appropriate, taking action to approve (i) Resolution No. 2019-16 – Relating to Approval of the
Collective Bargaining Agreement between the Alaska Railroad Corporation and the American Train
Dispatchers Association; (ii) Resolution No. 2019-24 – Relating to the Master Agreement Between
the Alaska Railroad Corporation and The Alaska to Alberta Railroad Development Corporation; (iii)
Resolution No. 2019-25 – Relating to Funding to Purchase Van Loaders for TOFC Operations
(AFE No. 10777); and (iv) Amendment to Option Provisions of Lease Contract No. 20180.

II.

ESTABLISH QUORUM

III.

SAFETY BRIEFING

IV.

CHAIR COMMENTS

V.

ADOPTION OF AGENDA

VI.

CONFLICT OF INTEREST DISCLOSURES

VII.

OPPORTUNITY FOR PUBLIC COMMENT (for agenda items only)

VIII.

NEW BUSINESS (portions to be held in Executive Session)
A.

American Train Dispatchers Association (ATDA) Collective Bargaining Agreement
1.

B.

ARRC—Alaska to Alberta Railroad Development Corporation Master Agreement
2.

C.

Resolution No. 2019-24 – Relating to the Master Agreement Between the Alaska
Railroad Corporation and The Alaska to Alberta Railroad Development Corporation

Funding for TOFC Van Loaders
3.

D.

Resolution No. 2019-16 – Relating to Approval of the Collective Bargaining
Agreement between the Alaska Railroad Corporation and the American Train
Dispatchers Association

Resolution No. 2019-25 – Relating to Funding to Purchase Van Loaders for TOFC
Operations (AFE No. 10777)

Amendment to Option Provisions of Downtown Edge Ground Lease
4.

Amendment to Option Provisions of Contract No. 20180

IX.

DIRECTOR/CEO/STAFF COMMENTS/OPPORTUNITY FOR PUBLIC COMMENT (for agenda
items only)

X.

ADJOURNMENT

 Adopted:

Resolution No. 2019-16

Relating to Approval of the Collective Bargaining
Agreement between the Alaska Railroad Corporation
and the American Train Dispatchers Association

WHEREAS, the Alaska Railroad Corporation (ARRC) and the American Train
Dispatchers Association (ATDA), have recently completed negotiations on the terms
and conditions of a new collective bargaining agreement; and
WHEREAS, the collective bargaining agreement has been ratified by the ATDA
members and must be approved by the ARRC Board of Directors (Board) before it may
become effective; and
WHEREAS, ARRC and the ATDA have agreed that the collective bargaining agreement
will become effective upon approval by the Board of Directors; and
WHEREAS, the substantive terms and conditions of the proposed collective bargaining
agreement have been disclosed to the Board during Executive Session; and
WHEREAS, the Board has considered the terms and conditions contained in the new
collective bargaining agreement and the presentation by management at the June 27,
2019 Special Board Meeting.
NOW, THEREFORE, BE IT RESOLVED, that the Board hereby approves the new
ATDA collective bargaining agreement terms and conditions and authorizes the
President and CEO or his designee to execute the agreement with the ATDA.

 Adopted:

Resolution No. 2019-24

Relating to the Master Agreement
Between the Alaska-to-Alberta Railroad
Development Corporation and the
Alaska Railroad Corporation

WHEREAS, the Alaska Railroad Corporation (“ARRC”) owns, operates and maintains a
contiguous railroad and other transportation and utility corridor between Seward and North
Pole, Alaska; and
WHEREAS, AS 42.40.460 provides that ARRC may delineate a proposed transportation
and utility corridor between ARRC’s existing railroad and utility corridor and the border of
Alaska and Canada; and
WHEREAS, AS 42.40.460 further provides for a process (the “460 Process”) by which
ARRC may acquire land owned by the State of Alaska that is located within said
transportation/utility corridor upon application to the Alaska Department of Natural
Resources (“DNR”); and
WHEREAS, the Alaska-to-Alberta Railroad Development Corporation (“A2A Rail”) has
proposed a project whereby it proposes to construct and operate a railroad line from
Northern Alberta to Alaska that would allow it to transport bitumen and other commodities
from Alberta to ARRC’s existing system for transport to tidewater ports in Alaska, which rail
line would also tie into existing Canadian rail lines which connect to rail lines in the
contiguous United States (the “Project”); and
WHEREAS, A2A Rail proposes to fund the Project, including the 460 Process and the
permitting, construction, maintenance and operation of the new rail line connecting ARRC’s
existing system with the Alaska-Canada border; and
WHEREAS, ARRC and A2A desire to negotiate a series of agreements relating to the
Project, including the leasing of the new railroad corridor by ARRC to A2A; procedures
related to Project costs incurred by the parties; operation of the new railroad corridor within
Alaska; terms pursuant to which freight delivered onto ARRC’s existing system will be
transported to Alaska tidewater ports; and, if necessary, terms under which A2A would
finance necessary upgrades to ARRC’s existing rail system to handle anticipated increases
in freight traffic; and

WHEREAS, ARRC Staff and A2A have negotiated a draft agreement (the “Master
Agreement”), in the form of the document attached as Exhibit A to this resolution, which

 sets out a framework by which the parties will negotiate toward the specific Project-related
agreements described above and which states the intent of the parties with respect to such
negotiations; and
WHEREAS, ARRC continues to foster economic development for the State of Alaska
through railroad operations and management of a railroad and other utility corridor; and
WHEREAS, the Project, if completed, would not only provide significant revenues to
ARRC, but also would provide the State of Alaska, its businesses and its citizens with
access to a valuable transportation and utility corridor connecting ARRC’s existing system
with the Alaska-Canada border and, in turn, with Canada and the contiguous United
States; and
WHEREAS, the Board of Directors finds that entering into the Master Agreement on the
terms and conditions set forth in Exhibit A to this resolution is in the best interest of ARRC
and the State of Alaska because of the potential benefits of the Project outlined above.
NOW, THEREFORE, BE IT RESOLVED that the ARRC Board of Directors hereby approves
the execution by ARRC of a Master Agreement with A2A Rail in substantially the same form
as Exhibit A hereto; and
NOW, THEREFORE, BE IT FURTHER RESOLVED that the ARRC Board of Directors
hereby directs and authorizes the President and CEO, or his designee, to take such actions
as are reasonably necessary to execute said Master Agreement and to meet all obligations
of ARRC thereunder; provided that to the extent AS 42.40, ARRC Board Rules and/or the
ARRC Approval Authority Guide require the Board of Directors to approve particular
agreements and undertakings related to the Project, including but not limited to those
related to the leasing of land, the Board hereby expressly reserves said authority and
directs ARRC Management Staff to submit any such matters to the Board for its
consideration.

 ______ [_], 2019

MASTER AGREEMENT

By and Among

THE ALASKA RAILROAD CORPORATION
THE ALASKA TO ALBERTA RAILROAD DEVELOPMENT CORPORATION

FOR THE ALASKA TO CANADA RAIL PROJECT

EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

1

 Master Agreement

________ [__], 2019

Table of Contents
RECITALS
ARTICLE 1: PRINCIPLES
ARTICLE 2: BENEFITS OF THE ALASKA TO CANADA RAIL PROJECT
ARTICLE 3: ALASKA TO CANADA RAIL PROJECT WORK
ARTICLE 4: OTHER PROJECT ENABLING TERMS
ARTICLE 5: OTHER UNDERSTANDINGS
ARTICLE 6: MISCELLANEOUS

EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

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 THIS MASTER AGREEMENT is made this [__] day of _____, 2019 (“Effective Date”)
by and among:
(1)

The Alaska Railroad Corporation (“ARRC”); and

(2)

The Alaska to Alberta Railway Development Corporation (“A2A Rail”).

ARRC and A2A Rail may hereinafter be collectively referred to as the “Parties” and
separately as a “Party”.
RECITALS
(A)

In 2004, the State of Alaska passed legislation, SB 31, codified in AS 42.40.460
and AS 42.40.465, to encourage the expedited construction of a railroad to connect
Alaska to the North American railroad system.

(B)

ARRC is a state-owned corporation operating passenger and freight rail service
within Alaska, with rail-barge connections to the Lower 48. Pursuant to AS
42.40.460 and AS 42.40.465, the ARRC has authority to apply to the Alaska
Department of Natural Resources (“DNR”) for a 500-foot transportation corridor
to complete railroad service to the Alaska and Canada border and to purchase
assets in Canada to connect the North American rail system to the Alaska
Railroad.

(C)

A2A Rail is a Canadian development company that proposes to connect Canadian
rail lines with the Alaska Railroad at North Pole, Alaska (or at Delta Junction,
Alaska, if the ARRC has completed its permitted expansion to Delta Junction)
(“Project”). Over the past few years, A2A Rail has contracted with the world’s
leading railroad engineering and environmental consulting firms, actively engaged
with indigenous communities in both Alaska and Canada, filed an application with
the United States State Department to secure a Presidential Permit for the border
crossing, entered into a Project Undertaking Reimbursement Agreement with the
United States Customs & Border Protection Agency, and begun the assemblage of
base line data needed for the Project. A2A Rail will soon commence the pre-filing
process with the United States Surface Transportation Board to secure a
Certificate of Public Convenience and Necessity. A2A Rail intends to connect
and interchange with the ARRC at the end of its existing mainline at North Pole
(or Delta Junction, as noted above), which provides access to ports at tidewater.

(D)

In May 2017, the Parties entered into a Memorandum of Understanding to assist
each other in the conceptualization and design of the Project whereby the Parties

EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

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 agreed that A2A Rail would have the responsibility of determining the desired
location for the Project.
(E)

In October 2017, Governor Walker sent a letter of support for the Project to the
United States Department of State and on February 13, 2019, Governor Dunleavy
wrote to President Trump expressing his support for A2A Rail’s request for a
Presidential Permit.

(F)

The Parties have entered into discussions as to how they may cooperate with each
other to jointly pursue the Project. Accordingly, this Master Agreement
establishes certain guiding principles and understandings to support the
advancement of the Project and is a precursor to commercial, leasing, and
operating agreements between the Parties. The Parties will endeavor to execute
these agreements by December 31, 2019.

NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1: PRINCIPLES
1.1

This Master Agreement sets out the guiding principles upon which the Parties
wish to advance the permitting, design, construction and completion of the Project.
It is understood and agreed that the Legislature, in AS 42.40.460, authorizes the
ARRC to acquire state land for a rail corridor. The statute also authorizes the
ARRC to enter into agreements with private organizations to facilitate the
construction of such a rail corridor. In entering into this Master Agreement, it is
the intent of the Parties that this Master Agreement provide a roadmap for how the
Parties propose to advance the Project.

ARTICLE 2: BENEFITS OF THE PROJECT
2.1

Advancing the Project Work outlined in Article 3 will jump-start the Legislature’s
objective of extending the Alaska Railroad to the Alaska and Canada border in
order to connect with the North American railroad system.

2.2

The Project, if successful, will provide substantial benefit to the State of Alaska,
the Parties, and other stakeholders, including, but not limited to, expanding
infrastructure that will facilitate the diversification of Alaska’s economy,
generating revenue for state and local governments, private and Native corporation
land owners, and tribal entities, attracting foreign direct investment into Alaska,
and enabling returns on investment to both Parties.

EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

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 ARTICLE 3: PROJECT WORK
3.1

Execution of the Project involves a phased development process. To advance the
Project, the Parties shall promptly proceed in good faith to evaluate the technical,
operational, economic, environmental, regulatory, and legal feasibility and costs of
the Project by undertaking the activities (“Project Work”) outlined in Article 3.2.
To accomplish the Project Work, the Parties agree to share information for
evaluating the technical, cost, and schedule aspects of the Project in order to assist
the Parties in determining whether, how and when to proceed with the Project.

3.2

The Parties hereby agree to collaborate with each other on the following tasks:
3.2.1 Acquire Border Crossing Lease. Securing a border crossing lease is a
necessary step in consolidating the transportation corridor between Delta
Junction, Alaska and the Canada border. To this end, A2A Rail will submit
an application with the DNR to acquire a lease on state lands at the Canada
border. A2A Rail will submit a lease application to the DNR by December
31, 2019. ARRC shall submit a letter to DNR in support A2A Rail’s efforts
in obtaining the border lease from DNR.
3.2.2 Initiate Process to Identify a Transportation Corridor. A2A Rail will
continue to conduct an inventory of all existing data related to the
transportation corridor between ARRC’s existing railroad utility corridor
and the border of Alaska and Canada. The parties recognize that ARRC’s
current railroad utility corridor ends at Eielson Air Force Base in North
Pole, Alaska. The parties further recognize that although ARRC holds a
federal license to construct and operate an extension of its current railroad
utility corridor between North Pole and Delta Junction, Alaska, only small
components of that extended corridor have been identified and acquired by
ARRC. Therefore, the Project must include a component of identifying and
developing a transportation corridor between North Pole and Delta
Junction, as well as between Delta Junction and the Alaska-Canada border.
This process will include identifying (a) data gaps; (b) environmental and
archeological issues; (c) effects on and service to adjacent communities and
potential intermodal transportation connections; (d) ways to minimize
construction costs; (e) availability of construction materials; (f) safety
concerns; and (g) grade and alignment standards. A2A Rail will also
develop a GIS and complete a legal description of the proposed
transportation corridor and land that can be developed for terminal, station,
and maintenance facilities, switching yards, and other purposes necessary
for the Project. ARRC shall cooperate with A2A Rail in this effort,
including by sharing relevant data and information that could be helpful in

EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

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 identifying a potential transportation corridor from North Pole to the
Alaska-Canada border.
3.2.3 Obtain Mineral Closing Order For Transportation Corridor. The Parties
acknowledge that obtaining Mineral Closing Orders (“MCO”) from DNR
along the transportation corridor pursuant to AS 38.05 is essential to ensure
that the Project is able to move forward in an expeditious and efficient
manner. Once A2A Rail has gathered sufficient information to identify a
potential transportation corridor, or segments of a potential transportation
corridor, it will begin the process to secure temporary MCOs from DNR.
ARRC shall support A2A Rail’s effort in obtaining MCOs.
3.2.4 Collaboration on the 460 Process. Alaska Statute 42.40.460 sets forth a
process (“460 Process”) by which the ARRC can delineate, reserve, and
ultimately obtain title to state lands along a transportation corridor between
ARRC’s existing railroad utility corridor and the border of Alaska and
Canada. Once A2A Rail determines that it has sufficient information to
satisfy the requirements set out in AS 42.40.460(b), the Parties will jointly
initiate the 460 Process. For the reasons stated in Section 3.2.2, above, the
460 Process must include portions of the transportation corridor between
North Pole and Delta Junction, as well as between Delta Junction and the
Alaska-Canada border.
3.2.5 Negotiate a Cost Sharing Agreement. After executing the Master
Agreement, the Parties shall promptly proceed in good faith to negotiate a
cost sharing agreement, which will contain the following provisions:
3.2.5.1

Except as expressly stated otherwise in Article 3.2.8,
A2A Rail agrees to bear the cost of the Project Work
identified in this Article 3. ARRC, in turn, agrees to
cooperate with and support the effort to obtain
authorizations and permits from federal, state, tribal,
and local governments. The cost sharing agreement
will contain performance requirements and will
terminate if A2A Rail fails to meet certain milestones
or stage gates. The cost sharing agreement will also
protect A2A Rail’s ownership over the engineering
and environmental studies that it has generated or will
generate to advance the Project. ARRC hereby agrees
that the intellectual property, proprietary information,
and engineering and environmental work paid for by

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 A2A Rail is the sole and exclusive property of A2A
Rail. A2A Rail, in turn, understands that ARRC may
need to retain custody of A2A Rail’s intellectual
property to secure the transportation corridor and rightof-way. The cost sharing agreement will also provide
a timeline and process for A2A Rail and ARRC to
jointly develop a budget for Project-related costs
associated with ARRC’s participation in the Project,
including but not limited to costs related to the 460
Process, and a procedure for that budget to be
approved by A2A Rail. This budgeting process shall
be completed before substantial work takes place with
respect to the 460 Process. ARRC will submit
invoices to A2A Rail for any Project-related costs that
are the responsibility of A2A Rail under this Article
3.2.5.1 and/or under the Cost-Sharing Agreement in
accordance with the procedures established in the Cost
Sharing Agreement. A2A Rail shall pay to ARRC the
invoiced amounts within a reasonable time period to
be specified in the Cost-Sharing Agreement, if the
invoices are consistent with a budget that has been
approved by A2A Rail in accordance with the budget
procedures established in the Cost-Sharing Agreement.
The foregoing rights and obligations of the parties in
this Article 3.2.5.1 are conditioned upon A2A Rail first
demonstrating, to ARRC’s reasonable satisfaction, that
A2A Rail has the financial qualifications to establish a
transportation corridor under the 460 Process.
3.2.5.2.

Use of grants. Any grant received by A2A Rail or
ARRC for the benefit of the Project from any private
or governmental body shall be applied to reduce costs
of the Project.

3.2.5.3

Remedies. The Parties will negotiate as part of the
Cost-Sharing Agreement commercially reasonable
remedies, including remedies in both law and in equity
that will apply if one of the parties, in the absence of a
material breach of the Cost-Sharing Agreement by the
other party, fails to meet its material commitments

EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

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 under the Cost-Sharing Agreement. To guide the
parties in developing said remedies, the parties hereby
acknowledge and agree that the following actions or
omissions by either party are inconsistent with the
intent and purposes of the transaction contemplated in
this Master Agreement and in the Cost-Sharing
Agreement and may cause either party to suffer
damages, losses or other harm: (1) failure to initiate,
complete or, in the case of A2A, to fund the 460
Process as contemplated in the Cost-Sharing
Agreement; (2) election to proceed with the Project
without the other party despite the other party’s
continuing performance under the Cost-Sharing
Agreement; (3) failure to proceed with the Project
despite the other Party’s continuing performance under
the Cost-Sharing Agreement, assuming that A2A has
adequate funding to continue the Project; or (4) nonmutual termination of the Cost-Sharing Agreement
before its expiration date without due cause.
3.2.5.4

Lease Option Agreement. Once DNR conveys the
transportation corridor and associated rail land across
state land identified by the ARRC pursuant to AS
42.40.460(c), it is the Parties’ intent that ARRC shall
execute a lease agreement with A2A Rail, at A2A
Rail’s option, in consideration of A2A Rail’s
expenditures that allowed the ARRC to acquire the
transportation corridor from DNR. To memorialize
this intent, the Parties will negotiate, as part of the
Cost-Sharing Agreement, a lease option agreement.
The lease option agreement shall include provisions
that effectuate the parties’ intent and purposes with
respect to the eventual lease agreement, as set forth in
Articles 3.2.5.5 through 3.2.5.13, below. The parties
recognize and acknowledge that the ARRC Board of
Directors must approve the lease option agreement
before it can take effect.

3.2.5.5

Exclusive Grant. A2A Rail shall be granted the
exclusive right to (i) design, build, operate, and
maintain a single or multiple track railroad and

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 railroad operations-related telecommunications
corridor within the railroad utility corridor granted by
DNR; and (ii) construct improvements and facilities
necessary for and intended to be used in the operation
of a railroad, including fiber optic cables, and other
utilities (power, water, and wastewater) along the
railroad utility corridor and associated rail land. The
exclusive grant to A2A Rail contemplated hereunder
shall not include a right to permit, construct or operate
any facilities, including but not limited to fiber optic
cables, and other utilities (power, water and
wastewater) for purposes other than operating a
railroad on ARRC land, which right shall be fully
retained by ARRC. Notwithstanding the foregoing,
the lease option agreement shall require any lease
agreement to obligate ARRC to cooperate, as
necessary, with public utilities to provide A2A Rail
with reasonable access to non-railroad related utility
facilities on ARRC land on terms to be determined
between A2A Rail and said public utilities. The
parties agree that ARRC shall not be responsible for
costs associated with delivering said non-railroad
related utility facilities to A2A Rail. The parties
acknowledge that, notwithstanding the foregoing, A2A
Rail shall, under the lease agreement, have the right to
enter into leases or permits with utilities to the extent
the facilities in question are located on lands not
owned by the ARRC. Nothing in the lease option
agreement or in any eventual lease agreement shall
obligate any fee or rent collected by ARRC for the
construction, maintenance and operation of utility
facilities in the transportation corridor to be used to
reimburse or offset any costs of the Project or of A2A
Rail’s operation of a railroad.
3.2.5.6

Term. The lease option agreement will provide that
the lease agreement, if it commences, will be for a
term of years for A2A Rail’s exclusive right of use, as
defined in 3.2.5.5, with said term to commence on the
execution of the lease agreement and to end ninetyfive (95) years after such commencement date. The
lease option agreement also will require the lease
agreement to contain a provision stating that A2A Rail

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9

 shall have the option to extend the term of the lease
agreement for five (5) additional ten (10) year terms by
notifying ARRC at least one (1) year in advance of the
expiration of the initial term and at least one (1) year in
advance of the expiration of each subsequent ten (10)year extended term; provided, however, that during the
entirety of any extended term, ARRC shall have the
absolute right to terminate the exclusive right of use
upon one (1) years’ written notice to A2A Rail if the
transportation corridor, or any part of it, becomes
necessary for ARRC’s railroad purposes.
3.2.5.7

Maintenance, Operation, and Administrative
Expenses. The lease option agreement will provide
that the lease agreement to be entered into by the
Parties, if and when A2A Rail exercises the option,
will require A2A Rail to maintain the railroad utility
corridor as required by the United States Surface
Transportation Board’s decision and all regulatory
requirements from the Federal Railroad Administration
and/or other local, state or federal regulatory agencies
with appropriate jurisdiction. The lease option
agreement will further provide that the lease will
require A2A Rail to be fully responsible for all
activities on the proposed railway and will defend,
indemnify and hold ARRC harmless from any and all
regulatory and other legal action resulting from A2A
Rail’s actions and omissions on the portion of the
railroad constructed and operated by A2A Rail. The
above-described indemnification obligation shall be in
addition to, and not in limitation of, any other
indemnification obligation on the part of A2A Rail
provided for elsewhere in this Agreement, in the CostSharing Agreement, or any other agreements
contemplated by this Master Agreement or entered into
by the parties in furtherance of the Project.

3.2.5.8

[Intentionally left blank.]

3.2.5.9

Abandonment. The lease option agreement will
provide that the lease agreement will contain a
requirement that, should A2A Rail file for
abandonment or an equivalent proceeding before the

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10

 STB or a legacy regulatory authority of some or all of
the leased rail line after construction, A2A Rail shall
advocate in such proceeding for the entire contiguous
rail corridor subject to said Abandonment proceedings,
including areas beyond the A2A Rail lease, to be
transferred to ARRC. The lease option agreement
shall further provide that any lease agreement will
state that if such a complete transfer is not approved by
the STB or other regulatory authority, and A2A Rail
intends to sell areas of the transportation corridor
and/or rail facilities located outside of ARRC land,
ARRC shall have a right to purchase said
transportation corridor and/or rail facilities for the
lesser of (i) consideration matching any bona fide offer
made for said transportation corridor and rail facilities
(i.e., a right of first refusal); or (ii) fair market value as
determined by appraisal.
3.2.5.10

Sharing of Maintenance, Operation, and
Administrative Expenses. The lease option agreement
will provide that, under the eventual lease agreement,
ARRC will not be financially responsible for project
components beyond its direct control and A2A Rail
will be solely responsible for costs associated with the
maintenance, operation, and administrative expenses
for the railway between North Pole or Delta Junction,
as discussed in Article 3.2.2, and the Canadian border.
The lease option agreement will further provide that
any lease agreement will require that, notwithstanding
the foregoing, the parties will, if necessary, negotiate
sufficient track rights for ARRC between North Pole
and the Canadian Border to enable it to accommodate
any moves for ARRC’s current and future customers
between any location on ARRC’s current rail system
and any location on the newly-constructed rail line
between North Pole and the Canadian border,
including but not limited to moves for the U.S. military
in the vicinity of ARRC’s Tanana River Rail Bridge
near Salcha, Alaska.

3.2.5.11

Assignments. A2A Rail shall have the right to assign
its interest in the lease option agreement subject to
ARRC’s approval, which shall not be unreasonably

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11

 withheld subject to the conditions set forth in this
Article 3.2.5.11. The specifics of said assignment
rights and obligations shall be set forth in the lease
option agreement, but, subject to ARRC’s approval,
which shall not be unreasonably withheld, and subject
to the conditions set forth in this Article 3.2.6.7, A2A
Rail shall have the right to assign its interest in the
lease option agreement to (a) any of its affiliates or (b)
a third party, provided that such affiliate or third party
demonstrates either (i) for an assignment made before
or during the 460 Process, the same financial
qualifications as A2A Rail demonstrated pursuant to
Article 3.2.5.1 of this Agreement; or (ii) for an
assignment made after the 460 Process is completed,
the financial qualifications necessary to complete
permitting, construct and operate the new rail line. If
the lease option agreement is assigned to another party
pursuant to this Article 3.2.5.11, any period of project
inactivity immediately preceding the assignment shall
be tacked to any period of inactivity immediately
following the assignment for purposes of the project
inactivity provisions of Article 3.2.5.14. For the
avoidance of doubt, ARRC’s approval right set forth in
Article 3.2.5.11 does not apply when A2A Rail
encumbers its interests in the option to lease to finance
the Project.
3.2.5.12

Insurance and Indemnity. The lease option agreement
will require any eventual lease agreement to include
standard insurance and indemnity provisions, which
shall be substantially similar to such provisions
included in ARRC’s standard ground lease template,
although insurance policy limits shall be reasonable
given the length of the leased transportation corridor
and the uses to be made thereof.

3.2.5.13

Rent and Other Consideration.
The parties shall negotiate in good faith language in
the lease option agreement that sets both the initial rent
and the rent adjustment provisions to be included in
any eventual lease agreement. The parties intend that
both the initial rent and any rent adjustment provisions

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12

 shall allow ARRC to comply with all statutory
requirements pertaining to the leasing of ARRC land,
while at the same time being conducive to the
continued development of the Project. The parties
further intend that such rent provisions shall reflect the
fact that A2A Rail will be using the corridor solely for
the purpose of exercising its exclusive right to operate
a railroad as defined in Article 3.2.5.5, while the right
to make other uses of the corridor shall remain with
ARRC, as also provided in Article 3.2.5.5.
Notwithstanding the foregoing, the lease option
agreement shall not require A2A Rail to pay rent on
the value of any improvements it constructs and owns
within the corridor. The lease option agreement will
provide that A2A Rail shall be entitled to certain rent
credits which may offset, in part or in whole, some or
all installments of rent paid under an eventual lease
agreement. The source of the rent credits; the
calculation thereof; any restrictions on such credits
with respect to amount, time period or Project phase;
and any accounting requirements related to such
credits shall be negotiated by the parties in good faith
and included in the lease option agreement.
3.2.5.14

Cost-Sharing Agreement Pre-Construction Inactivity
Provision. The cost-sharing agreement shall provide
that, should the Project become inactive for the
period(s) set out below, ARRC shall have the right, at
its sole option, to terminate the Cost-Sharing
Agreement and withdraw from the Project without
penalty. In that event, any and all improvements made
within the railroad utility corridor granted by DNR
between North Pole and the Alaska-Canada border and
all intellectual property relating to permitting, design
and operation of those improvements and/or the
railroad utility corridor would transfer to ARRC at
ARRC’s sole discretion. Inactivity for purposes of this
Article 3.2.5.14 will be defined in the Cost-Sharing
Agreement and shall include, at a minimum, the failure
of A2A Rail to (i) obtain the permitting necessary to
construct the rail line between North Pole (or Delta
Junction) and the United States-Canada border within
twelve (12) years of the effective date of the issuance

EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

13

 of the environmental impact statement Record of
Decision or (ii) engage in meaningful physical
construction of permanent railroad improvements in
the railroad utility corridor for a period of seven (7)
years after the consummation of permitting. The CostSharing Agreement shall further provide that the
foregoing right for ARRC to terminate will not apply if
A2A Rail’s failure to meet the periods designated
above was caused by the ARRC’s actions or
omissions, or by a force majeure event, as defined in
the Cost-Sharing Agreement. In addition to the
standard definition used in commercial force majeure
clauses, the definition of “force majeure” in the CostSharing Agreement shall include, but not be limited to,
delays caused by litigation or the failure to timely
receive permit approvals or other governmental
authorizations, despite the exercise of due care and
diligence by A2A Rail.
3.2.7 Presidential Permit, Environmental Reviews, and Permitting
Processes. The Parties acknowledge and agree that the Project Work set
out in Article 3 will be controlled and used by A2A Rail to (a) obtain a
Presidential Permit; (b) advance the state and federal environmental review
and permitting processes; and (c) secure the necessary authorizations from
the United States Surface Transportation Board. The Parties agree to work
together with federal and state agencies and tribal governments to identify
ways to streamline the environmental review and permitting process.
3.2.8 Upgrading Existing ARRC Infrastructure & Transportation Agreement.
3.2.8.1.
As noted in Recital C to this Agreement, A2A Rail intends to
connect and interchange with the ARRC at the end of its existing mainline
at North Pole (or at Delta Junction, if the ARRC has completed its
permitted expansion to Delta Junction at the time the Project is
constructed), which provides access to ports at tidewater. In support of
that intent, the ARRC will (a) identify capital improvements to its existing
infrastructure needed to satisfy A2A Rail’s Operating Plan, as defined in
Article 3.2.9 of this Agreement, including upgrades to ARRC’s yard, track,
and bridge capabilities, rolling stock, and signaling; and (b) initiate design
and engineering work to upgrade its existing rail system for the Project. To
pay for the upgrades, the Parties will enter into a transportation contract
that provides ARRC with guaranteed minimum revenue substantial enough
to carry bond debt. The transportation contract will provide A2A Rail with
EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

14

 a cost recovery mechanism, such as a division of freight revenue, in the
event that A2A Rail finances or funds the improvements. The Parties
recognize that ARRC will face substantial risks associated with funding the
design and construction of infrastructure improvements to its existing rail
system before the Project is completed and freight transportation resulting
from the Project commences. Those risks include, but are not limited to,
the risk that A2A Rail could fail to complete the Project. In the latter event,
ARRC likely would be unable to repay any bonds it had issued in
conjunction with infrastructure design and construction related to the
Project. In light of these risks, A2A Rail shall provide a performance bond
sufficient to allow ARRC to complete construction of ARRC’s Projectrelated upgrades and improvements to its existing infrastructure should
A2A Rail be unable or unwilling to do so, along with an agreement that
ARRC would own said upgrades and improvements if they are completed
pursuant to said performance bond.
3.2.8.2
While ARRC may choose to fund infrastructure
improvements to ARRC’s existing system necessary to accommodate the
Project, if and to the extent A2A Rail funds any of said improvements at
ARRC’s request, the transportation agreement described above will
incorporate a division of revenue to compensate A2A Rail for carrying the
costs and risks associated with designing, permitting, and constructing
those improvements.
3.2.8.3
The transportation agreement described above shall also
include (a) an undertaking on behalf of both ARRC and A2A Rail to use
best efforts to include, in all transportation contracts with shippers for the
leased rail line of A2A Rail and the contiguous rail line of ARRC, a firm
commitment minimum number of railcars per year (with monetary
payments for failure to achieve the minimum commitment), and (b) a
guarantee from A2A Rail to ARRC that, if, in any year during the term of
the lease agreement, the number of railcar loads on the line is insufficient to
provide ARRC with sufficient revenue to cover its payments for all debt
incurred to fund the improvements described in Section 3.2.8.1, A2A Rail
will fund any shortfall on a dollar-for-dollar basis for such year.
3.2.9 Joint Operating Agreement.
3.2.9.1
Once ARRC initiates the 460 Process, the Parties shall
develop and execute a Joint Operating Agreement that sets forth the
obligations and rights of the Parties with respect to freight to be moved via
EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

15

 the Project onto ARRC’s rail system, with A2A Rail operating on the
segment of the transportation corridor constructed in conjunction with the
Project and ARRC operating on its existing rail system. The Joint
Operating Agreement will include provisions describing how freight rates
will be negotiated by the parties, which rates shall be reasonable pursuant
to the regulations and practices of the United States Surface Transportation
Board, which shall be the arbiter of any dispute of the parties regarding
whether such rates are reasonable.
3.2.9.2
In furtherance of the foregoing, A2A Rail shall, as soon as
possible following the date of execution of this Master Agreement and in
no event no more than thirty (30) days after that date, provide ARRC with a
complete copy of A2A Rail’s current proposed operating plan for the
transportation corridor and associated facilities to be developed pursuant to
the Project (“Operating Plan”). A2A Rail shall thereafter provide ARRC
with copies of any and all updates and revisions to the Operating Plan;
provided that no such updates and revisions shall substantially alter the
basic operating parameters set forth in the initial Operating Plan unless both
parties mutually agree to the change. A2A Rail acknowledges and agrees
that substantive changes to the Operating Plan may require modifications to
infrastructure planning on ARRC’s existing rail system, which in turn could
affect transportation rates to be charged by ARRC to A2A Rail on the
existing ARRC rail system. A2A Rail shall provide any and all reasonable
information requested by ARRC following the receipt of the Operating Plan
or any revision thereof in order that ARRC may better understand or verify
the viability of the Operating Plan. If ARRC objects to the Operating Plan,
the parties will consult in good faith in an attempt to address said
objections.
3.2.10 Financing Agreement. The Parties will explore potential financing options,
including use of the ARRC bond financing and Canadian Infrastructure
Bank financing, or other similar financing sources, as a tool that can help
meet the investment requirements for (a) upgrades to ARRC’s existing
infrastructure to enable enlarged freight capacity and (b) investments in
developing the new Project transportation corridor. To the extent ARRC
bond financing is used for any purpose other than upgrading ARRC’s
existing infrastructure, A2A Rail shall fairly compensate ARRC for making
its bonding capability available to support the Project. Such compensation
shall include, but not be limited to, bond issuance fees and all other costs
related to the issuance of the bonds. In furtherance of the foregoing, when
EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

16

 A2A Rail supplies ARRC with the Operating Plan described in Article
3.2.9, it shall include a proposed financial model that includes disclosure of
A2A Rail’s financial statements, subject to the restrictions of Article 4.3.
ARTICLE 4: OTHER PROJECT-ENABLING TERMS
4.1

Alignment of the Parties is critical to the success of a Project of this scope and
magnitude.

4.2

Project-enabling contracts negotiated between the Parties will need to be of
sufficient duration to (a) support investment decisions of the Parties, (b) permit
realization of a competitive economic return, (c) enable necessary financing, and
(d) support sales agreements with customers. In addition, Project-enabling
contracts will include standard cooperation clauses whereby the Parties will
cooperate with one another on technical, permitting, and engineering matters to
achieve efficiencies and share data to effectively manage resources and to jointly
pursue the Project.

4.3

Subject to the limitations stated in this Article 4.3, each Party shall, and shall
cause its officers, directors, employees, agents, counsel, accountants, financial
advisors, consultants and other representatives (together “Representatives”), to
cooperate and provide such information as is reasonably necessary for the
performance by the other Project Party of its responsibilities in Article 3 above.
The Parties recognize that ARRC internal financial information is for the most part
public information, while A2A Rail’s internal financial information is generally
non-public. Given that dichotomy, and each Party’s need to review and
understand the other Party’s financial situation, the Parties agree that any nonpublic information that is reasonably requested by one Party from another will be
produced under the protection of a reasonable and enforceable confidentiality
agreement that appropriately restricts the disclosure and use of such information
by the receiving Party. Notwithstanding the foregoing, neither Party shall be
required to disclose to the other Party any legally privileged information. Nor
shall either Party be required to disclose to the other Party information that is
subject to confidentiality obligations owing to third parties except to the extent and
in the manner allowable under the terms of said confidentiality obligations.
ARTICLE 5: OTHER UNDERSTANDINGS

5.1

The Parties recognize that this Master Agreement does not address all of the
matters that must be dealt with or all of the terms and conditions needed to finalize

EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

17

 project enabling contracts among the Parties concerning the Project. The Parties
intend to work together and use commercially reasonable efforts to reach
agreement on additional terms and conditions acceptable to the Parties including a
safety plan and community outreach efforts.

ARTICLE 6: MISCELLANEOUS
6.1

Term and Termination. This Master Agreement will become effective as of the
Effective Date and terminates on December 31, 2027, unless extended by mutual
agreement of the Parties. Any extension of this Master Agreement pursuant to this
Article 7.1 shall have no effect on the calculation of any period of project
inactivity under Article 3.2.5.14; any periods of inactivity immediately before and
immediately after such an extension shall be tacked for purposes of such
calculation.

6.2

Amendments and Modifications. No amendment, modification, supplement, or
variation of this Master Agreement will be effective unless in writing and signed
by or on behalf of each Party.

6.3

Survival. This provision (Article 6) will continue in full force and effect
notwithstanding termination of this Master Agreement.

6.4

Governing Law. The laws of the State of Alaska, without giving effect to its
conflicts of laws principles, will govern all questions concerning the construction,
validity, and interpretation of this Master Agreement.

6.5

Forum Selection Clause. Any action based on this Master Agreement shall be
brought in an appropriate state or federal court of general jurisdiction located at
Anchorage, Alaska.

6.6

Assignment. This Master Agreement is not assignable; provided, however, that
A2A Rail shall have the right to assign this Agreement to an affiliate with the prior
written approval, which may not be unreasonably withheld, of the ARRC.
“Affiliate” means any person or business entity that such Party controls, is
controlled by or is under common control with A2A Rail, and where “control”
means the power to direct management and policies.

EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

18

 6.7

Counterparts. This Master Agreement may be executed in any number of
counterparts and this has the same effect as if the signature on the counterparts
were on a single copy of the Master Agreement.

IN WITNESS WHEREOF, the authorized representatives of A2A RAIL and ARRC
execute this Agreement on the dates stated below.
THE ALASKA RAILROAD CORPORATION

THE ALASKA TO ALBERTA RAILROAD
DEVELOPMENT CORPORATION

By:

By:

Name: _____________________________

Name:

Title: ______________________________

Title:

Date:

Date:

EXHIBIT A TO ARRC RESOLUTION NO. 2019-24

19

 Adopted:

Resolution No. 2019-25

Relating to Funding to Purchase Van
Loaders for TOFC Operations (AFE No.
10777)

WHEREAS, the Alaska Railroad Corporation (“ARRC”) conducts trailer-on-flat-car
(“TOFC”) freight transportation operations as part of its freight business; and
WHEREAS, TOFC freight operations include the loading and unloading of trailers onto
and off of flat cars; and
WHEREAS, such TOFC loading and unloading operations require the use of van loaders
that lift and carry trailers; and
WHEREAS, ARRC’s current fleet of van loaders is effectively obsolete, lacking modern
safety devices; experiencing catastrophic failures that result in damaged trailers, delays
and increased safety risks; breaking down regularly; no longer being supported by the
manufacturer; and operating at reduced profitability; and
WHEREAS, modern van loaders include updated safety equipment not found on ARRC’s
current outdated van loaders, including forward and rearward facing cameras, blind spot
detection, self-adjusting backup alarms, onboard overload protection, operator seatbelts
and ground level emergency stop buttons; and
WHEREAS, replacing ARRC’s aging, outdated van loaders with modern van loaders will
result in safer, more efficient and more reliable TOFC operations, which in turn will reduce
safety incidents, damage claims and delays, improve ARRC’s service to its TOFC
customers and increase the profitability of ARRC’s TOFC freight line; and
WHEREAS, new van loaders, because of the improvements in safety, efficiency and
profitability noted above, will provide ARRC’s TOFC freight operations the critical
additional capacity it needs to grow TOFC freight volumes in the future; and
WHEREAS, AFE No. 10777, in the amount of $1,500,000, will fund the replacement of
two of ARRC’s obsolete van loaders in 2019, with the attendant benefits described above;
and
WHEREAS, funding for this project is 100% ARRC internally funded; and

 WHEREAS, the authority of ARRC’s President & Chief Executive Officer to approve an
unbudgeted capital expenditure is limited to matters with an estimated total cost of no
more than $300,000, with higher estimated cost matters requiring Board approval
pursuant to ARRC’s Approval Authority Guide.
NOW, THEREFORE, BE IT RESOLVED, that the ARRC Board of Directors has
considered the proposal to fund the replacement of two TOFC van loaders as presented
by ARRC Management and hereby approves AFE No. 10777 in the amount of $1,500,000
for the purposes stated therein.

 Alaska Railroad Corporation

Authorization for Expenditure Form

For Accounting Use Only

 

 

/0777

 

Page 1

 

General Information:

Included in Capital Budget:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Functional User(s):

Jamie Fetterman

Capital Budget Year: 2019
AFE Title: Van Loader Replacements
Total Amount 1,500,000
Prepared By: Ron ThompsonlJamie Fetterman Source of Funding ARRC 1,500,000
Resp. Center (Name): Internal Servce Fund Source of Funding -
Resp. Center 1461 1462 Source of Funding 
Depreciation Center: 1462-ISF-Equipment Maintenance Grant Number
Line of Business: Corporate Grant Name
Spending Timetable: AFE History:
2019 1 500,000 Amount Date Prepared
2020 Original AFE 1,500,000 c/lqliq
2021 Supplemental #1 -
2022 Supplemental #2 -
2023 Supplemental #3 -
Total 1500300 Supplemental #4 -
Other Information Supplemental #5 -
Useful Life (Years): 20 SUPP'ementa' #6 
Annual Depreciation: 75,000 Supplemental #7 
Estimated Annual Operating Costs - Total 1'500'000
mired Smiles tor 
(if applicable} Last Name(s] (Print) Signature Date
Project Manager: Deanna McGuire c? 727% 
Responsible Owner: Ron Thompson .. 1 Cl I Q1
Owner Department: Don Freestone 
. I .



 

 

 

 

 

 

 

 

 

 

 

Chief Operating Of?cer: Clark Hopp (5 )2 I 
Grant Administration: Shawnessy Leon p4 
Chief Financial Of?cer: Barbara Amy Accounting Department. Wendy Richerson 1 T. . 270/?
CEO President: Bill O'Leary 7m? 
Board of Directors: Jon Cook

 

?Original Form Must Be Returned to Accounting?

 

Alaska Railroad Corporation For Accounting Use Only

 

Authorization for Expenditure Form /07 7 7

 

 

 

Page 2

 

Is this project related to health andlor safety? Yes if yes describe:

 

 

 

New equipment technology comes up?tted with multiple safety features such as cameras that are forward and
rearward facing for blind spot detection, device self-adjusting and directional backup alarm that becomes louder than
the ambient noise in the work environment warning equipment is in reverse movement, onboard overload protection
alarm, operator environment air ride seat and seatbelt, and ground level emergency stop button to shut immediate
operations in case of emergencies. These new age safety features reduce the exposure of human error. In turn
creating a safer work environment for the operator and employees working around the equipment.

 

Scope of Work:

 

The acquisition of two units that meet or exceed current capabilities of our Letoumeau Van Loaders.

 

ARRC Business Justi?cation:

 

The need for new Van Loaders is required to sustain and capitalize on our current trailer service ARRC offers. New units will be able to broaden our
current capabilities by:

A. Safeg - It is key to any successful endeavor. With a history of catastrophic failures and lost loads the risk associated with the continuance of our
current units is undesirable. These antiquated machines lack the built in safety features that new units offers.

B. Supmrt current oErations - This has become cumbersome with the current Van Loaders. While TOFC has kept up with the volume, the
unreliability of the Van Loaders reduces the productivity and ef?ciency of the department.

C. Reduced maintenance and failure - A machine that spends less time in the shop and more time in the ?eld means higher return on investment.
Reduced maintenance requires less man hours per unit allowing Heavy Equipment to focus their time on other more pressing railroad needs.

D. Reliability and support - Due to the current state and age of the Van Loaders it is not uncommon to accrue large quantities of overtime,
damage claims, and initial terminal delays. The LeToumeau Company has not supported these machines either in parts or technical support for
many years. The obsolescent nature of the Letoumeau van loaders demands more cost of ownership and takes away from the pro?tability of the
services ARRC provides.

E. Productivity - Productivity is essential to TOFC operations. Enabling our current crews to more ef?ciently load and unload a train means
dependability and reliability to the customer and allows focus on other customer demands that could turn into new revenue generating opportunities.
F. Future growth ls dependent on providing our customers with a reliable and consistent service. With renewed units this goal is achievable and
puts ARRC on course to handle higher volumes of trailers with less man hours, and focus on other customer commodities ARRC is currently
handling and future revenue opportunities. The TOFC department is one of the top contributors of revenue to the railroad. With large margins of
potential growth, strategic updates to its equipment ?eet is critical. Focusing on the highest priority service, this is the ?rst step towards a more
efficient and pro?table future.

 

Alternatives Considered:

 

With the unique nature of these machines the market of alternative options that ?t the needs of the ARRC are not
feasible. The ability to maintain and build on our trailer service is dependent on updating the ?eet.

 

Preliminary Budget:

 

Line Description Amount

 

Equipment 1 ,500,000

 

Labor (Fully Burdened}

 

Materials

 

Contracts

 

6969696999


Other Expenses

 

 

 

Total 1,500,000

 

 

Note: All health andlor safety related project(s) should be the highest ranked project(s) in the department.

 

Alaska Railer Corporation For Accounting Use only 

 

 

 

 

 

 

 

 

 

Ca ital Bud et Re uest
9 
. Page 3
GENERAL INFORMATION:
Sponsoring Department Mechanical Asset Function Replacement Project
Department Priority Ranking I of I Multi-Year? I Yes If so, how many years? I 2
Is the project identi?ed in the Transit Asset Mamgement Plan? Yes - in the Equipment Replacement Plan

 

 

Is this project related too or in support of an ongoing project, future project or strategic imitative(s) another project depends on
this one having been completed)?

This strategic initiative plays a key role in the 480v articulated ?at car project. The need to increase the number of 480v equipped ?at
cars was the cause of higher KFFIRefrigerated trailer demands. The Van Loaders are the machines that load and off load these cars.
This service and the supporting equipment such as the articulated ?at cars and generators vans are dependent on these machines.

 

What areas of business and/or ARRC Departments will bene?t from or be effect by the funding of this project?

 

The trailer service provided by the ARRC will bene?t by meeting customers' expectations consecutively. TOFC, Transportation,
Mechanical, Marketing, and Customer Service will all prosper from this project 



 

Has the cost estimate been reviewed by Projects Department? I Yes

 

What is the incremental annual revenue from project?

 

When will incremental revenue begin? I I

 

What is the duration of associated cash flows? (Years)

 

What is the estimated annual cost savings from project

 

 

What kind of Cost Saving (labor cost. maintenance cost etc)?

 

Cost savings from lowered maintenance will allow Heavy Equipment to allocate more of their personnel to omer railroad demands.
Transportation will be able to put trains together faster, effectively reducing the call time and saving crew expenditures. The need to
load trailers onto ?at cars at the ramp due to their weight overtoading our current Van Loaders will cut down on car switches, multiple
TOFC crews to load and secure the trailer, and Carman's time for inspecting the load and securement. Newer units are also more fuel
ef?cient reducing the amount of fuel consumption per year.

 

Will the Project replace an existing asset? 7 Yes

 

If asset is replaced, describe the replaced asset?

 

2 1983 LeToumeau 26820H 26840H Van Loader Forldiftleontainer Handlers.

 

 

 

 

 

 

When will the existing asset be taken out of service 2021
Will the existing asset be sold or surplused? Yes

What is the estimated value of the existing asset? $30300

What is the estimated useful life of the asset (in years)? 20 years

What is the residual value of the asset at the end of its useful life? $50,000

 

If ?re project is not selected for funding, will it affect the following years operating budget?

 

If not selected for funding high maintenance cost will continue, will have to continue the maintenance program verse replacement
program, maintaining custom modi?cations that continue to fail due to age and technology, and continued incidents of damage to
customer and ARRC property will continue to rise.

 

If you are having difficulty identifying the costs, incremental revenues or cost savings, please explain in your own words how you
believe that the pgject will enhance pro?tability.

 

Pro?tability will increase from this project in multiple ways. Less upkeep, faster hydraulic functions, more reliable machine, capability
of higher lifting capacities will allow for additional revenue, offers the ability to run two units at the same time, less crew time to load a
train will allow the crew to do more work in a work day with the same number of people.

 

 

 

 

Alaska Railroad Corporation For Accounting Use Only

 

Capital Budget Request [0 7 7 7

 

 

Page 4

 

IMPROVES CUSTOMER SERVICE QUALITY

 

Describe the service quality issues that the Project will resolve

 

The addition of new Van Loaders will provide a more reliable service to our customers and entice them to ship more product with us with
con?dence. The ability to lift heavier trailers will also bring in additional revenue during road restrictions. The addition of this capability
allows us to better serve our customers in an area we cannot currently.

 

Should the Project not be selected, what would the effect be on the business?

 

The effect on business would be detrimental. With strict deadlines that our customers have to meet it is imperative that our service does
not interfere. With several trailers being left behind in the past due to Van Loader breakdowns the tolerance of our customers will lessen
forcing them to truck their goods over the road.

 

What alternatives exist to the project that could also address the service quality issue?

 

None.

 

 

AIDS IN ECONOMIC COMMUNITY DEVELOPMENT,

 

Describe how the Project aids in the development of the Alaska economy, if applicable

 

With the recent opening of Costco in Fairbanks and a population spike at Eielson AFB, TOFC has seen an increased trailer volume on
days that are historically low. In addition, Exploratory drilling that the oil ?eld is engaging in on the North Slope means that the need for
goods will soon follow.

 

Describe how the project aids in the development of a speci?c rail belt community, if applicable

 

NIA

 

 

 

BUDGETING 8: SCHEDULING

 

Scalability: Can the project be scaled down to a smaller dollar investment?

 

Research has shown that out of the available manufacturers for these machines the estimate re?ected in this AFE is the smallest dollar
investment.

 

Phaseability: Can the project broken into multiple phases for consideration across multiple budget year?

 

Yes, this AFE re?ects multiyear phases.

 

If project is phased does that phasing effect either the pro?tability or general operations?

 

As long as the phasing is done in two machine increments, general operations will still bene?t.

 

 

 

YEAR mew}:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan Feb Mar Apr May Jun Jul Auq Sep Oct Nov Dec
1.500.000
Total 3 1,500,000
ACTIVITY BASED QUDGET:
Cost Code Amount
1,500,000
-
-

5 
-
Total 1,500,000

 

 

AMENDED LEASE SUMMARY
LESSEE: Ship Creek Development, LLC

CONTRACT NO: 20180

INTRODUCTION: The Board previously approved a 95-year Ground Lease, effective July 1, 2017, and
also approved an amendment of the Ground Lease in 2018 to decrease the area of the leased premises
with an option to expand the leased premises back to the full original leased premises. Lessee paid $50,000
for the option, which is scheduled to expire on June 30, 2019.
LEASE DESCRIPTION: The proposed modified leased premises consists of a parcel of land located west
of Christensen Drive and north of 2nd Avenue situated within the ARRC Anchorage Reserve, containing
29,313 square feet, more or less, in the current leased premises, and a total of 119,100 square feet, more
or less, if all options are exercised. Lessee has requested that its current one-time option be replaced with
a series of five (5) phased options to expand the leased premises annually over a five (5) year period.

KEY CONTRACT PROVISIONS:
Commencement Date (Original Lease): July 1, 2017
Lease Term: Ninety (95) Years
Current Lease Area: 29,313 square feet (reduced
from previous 119,100 square feet)
Proposed Phased Option Areas
July 1, 2019 (start of Lease year 3). Total premises
area, including Phase 1 option area: Approx. 44,707
sq.ft.; annual rent in accordance with the existing
contract terms including a 1% increase per sq.ft.
July 1, 2020 (start of Lease year 4) Total premises
area, including Phase 2 option area: Approx. 63,268
sq.ft.; annual rent to reflect a 1% increase per sq.ft.
from previous year’s annual rent.
July 1, 2021 (start of Lease year 5) Total premises
area, including Phase 3 option area: Approx. 85,843
sq.ft.; annual rent to reflect a 1% increase per sq.ft.
from previous year’s annual rent.
July 1, 2022 (start of Lease year 6) Total premises
area, including Phase 4 option area: Approx.
100,611 sq.ft.; annual rent to reflect a 1% increase
per sq.ft. from previous year’s annual rent.
Amended Lease Summary, ARRC Contract No. 20180

July 1, 2023 (start of Lease year 7) Total premises
area, including Phase 5 option area: Approx.
119,100 sq.ft.; annual rent to reflect a 1% increase
per sq.ft. from previous year’s annual rent.
Proposed Total Option Area: 89,787 square feet
Prior Annual Rent: $20,160.00
Rental Rate: 8%
Rent Adjustment: In addition to rent adjustments
described above for exercised of phased options,
Ground Lease provides for annual rent increases
beginning Lease year 8 on the following schedule:
annual increases of 1% of the prior year’s annual
rent through lease year 20, 32 through 50 and 62
through 80; annual increases of 1.5% of the prior
year’s annual rent in lease years 21 through 30, 51
through 60 and 81 through 90. For lease years 31
and 61, annual rent will be adjusted per fair market
value appraisal; however, any annual rent increase
in those lease years shall not exceed 130% of the
prior year’s annual rent.

Page 1

 PUBLIC NOTICE:

Yes for original lease; N/A for this proposed modification

LEGAL REVIEW:

Yes

INTENDED USE:

Residential Condominium Units

SUMMARY AND RECOMMENDATIONS: This is a request to modify an existing lease.
The original leased premises consisted of approximately 119,000 sq. ft. In 2018, the
Lessee requested and the Board approved a reduction in the leased premises area to
29,313 sq. ft., with the remainder of the original leased premises made subject to a lease
option that is scheduled to expire on June 30, 2019. Due to slow unit sales commitments
on condominium units, the Lessee now requests to divide the current option area into five
(5) separate phases, which would be subject to a series of five annual options with
deadlines to exercise each option falling on June 30 of each year, beginning with the
Phase 1 Option in 2019 and ending with the Phase 5 Option in 2023. Lessee would be
required to inform ARRC on or before June 30 of each year that it intends to exercise its
next phased option. If Lessee elects not to exercise any particular phase option, then
both that option and any remaining phased options will expire. For example, if Lessee
exercises the Phase 1 option in 2019, but elects not to exercise the Phase 2 option in
2020, then the options for Phases 2 through 5 will all expire on June 30, 2020. In
consideration for ARRC granting the phased options described above; Lessee will
complete certain improvements necessary for complete development of the leases
premises and phased option areas and will provide ARRC with a security interest in those
improvements.
APPROVED:

Andy Behrend
ARRC Board Secretary

Amended Lease Summary, ARRC Contract No. 20180

Board Meeting Date:

Page 2

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2 01

60

e3

S

120

L ROAD COR
PO
T I ON
RA

ALASK
A

R OA D C O

RP

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Contract No. 20180 - Exhibit A
Proposed Option Areas
Concept 1 - Overview

REAL ESTATE DEPARTMENT, LAND SERVICES

ALASKA RAILROAD CORPORATION

E S T . 19 1 4

IL

AMB
DAS
DAS

DRAWN BY:
CHECKED BY:
APPROVED BY:

1" = 60'

DATE:

2019-06-18

Anchorage Terminal Reserve

SCALE:

Lot 2 & Patent 50-2017-0047 USS 408, Block 122, Lot 1

ARRC title - Deed 2010-061306-0 USS 408, Block 122,

ES
T . 19 14

I
RA

RA

N
T IO

1 Inch = 60 Feet

30

e1

s
Pha
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ft±
pos
Pro 75 sq
5
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d
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ft±
pos
Pro 94 sq
3
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Are

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5
22,

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AL A S

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has
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ed
pos sq ft±
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761
19,

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has
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pos sq ft±
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18,

se 4

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f
p
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s
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po
Pro 94 sq
3
,
15

60

e3

120

L ROAD COR
PO
T I ON
RA

KA
ALASK
A

R OA D C O

RP

Contract No. 20180 - Exhibit A
Proposed Option Areas
Concept 2 - Overview

REAL ESTATE DEPARTMENT, LAND SERVICES

ALASKA RAILROAD CORPORATION

E S T . 1 9 14

IL

AMB
DAS
DAS

DRAWN BY:
CHECKED BY:
APPROVED BY:

1" = 60'

DATE:

2019-06-18

Anchorage Terminal Reserve

SCALE:

Lot 2 & Patent 50-2017-0047 USS 408, Block 122, Lot 1

ARRC title - Deed 2010-061306-0 USS 408, Block 122,

ES
T . 19 14

I
RA

RA

ON
TI

1 Inch = 60 Feet

30

e1

s
Pha
d
e
ft±
pos
Pro 92 sq
9
20,
RA

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