Alaska Railroad, hospitality industry react to governor’s vetoes

ANCHORAGE, Alaska (KTUU) - Restaurant worker shortages and impacts on the Alaska Railroad’s Seward Passenger Dock & Terminal replacement project are some of the concerns now surfacing after the governor vetoed five bills on Thursday.

After consulting with Attorney General Treg Taylor, Gov. Mike Dunleavy felt the best course of action was to adhere to the constitution and veto the five bills passed by the Alaska Legislature after midnight on May 16, the constitutionally mandated deadline to adjourn the session.

One of the governor’s bills vetoed was House Bill 122, which would have enabled the Alaska Railroad Corporation to secure financing for its $137 million passenger dock and terminal facility replacement project in Seward through the legislature authorizing the issuance of $75 million in revenue bonds.

Sen. Gary Stevens, R-Kodiak, said this was the veto he was most concerned about Thursday, particularly how the veto might impact the project’s future.

Meghan Clemens, director of external affairs for Alaska Railroad Company (ARRC), said on Friday that shortly after the end of the session, it concluded that the post-midnight bill passage would likely not satisfy the authorization requirement for bond issuance, so an alternative funding solution was identified.

She said the $137 million project, known as the Port of Tomorrow, will be secured through a mix of ARRC internal funds (sourced from Dock Improvement Fees assessed to cruise passengers), $60 million in revenue bonds (authorized by the legislature in 2022), and a commercial loan.

Clemens said a 30-year pier usage agreement with Royal Caribbean Group will secure both the bonds and commercial loan.

“Honestly ... we had the idea of a commercial loan option in mind, but had been thinking that bonds would be both simpler and more cost-effective for this project,” Clemens said.

Furthermore, she said the impact of adding the commercial loan to the bonds does increase the debt service over the 30-year term by an estimated $15 million.

According to the ARRC, the Seward cruise port is critical infrastructure for Alaska’s travel industry: 188,124 passengers cruised to or from Seward in 2023.

Clemens said the funding was necessary because the Seward dock facility is rapidly approaching the end of its useful life.

“The issues currently just relate to the age of the existing infrastructure down there. The current dock that we have in Seward, serving as our passenger dock, dates back to 1965. it was constructed in the aftermath of the 1964 earthquake,” she said. “So we’re coming up on 60 years of that asset in the water, which is really pushing the lifetime for a marine asset like that. So it’s time for something new.”

Upon completion of the new facility, the Seward Company — which is building and funding the project’s construction — will sell it to ARRC for a fixed price of $137 million.

Anchor tenant Royal Caribbean Group will have preferential berthing rights and Alaska Railroad will own and operate the facility.

Clemens said construction on the new terminal is scheduled to begin upon the conclusion of the 2024 Alaska cruise season. Pier construction is slated for fall 2025 to ensure an uninterrupted summer 2025 cruise season, and the grand opening of the project is slated for spring 2026.

The new facility will include a 68,000-square-foot turn port terminal building and a 750-foot, state-of-the-art, two-berth floating dock.

The governor also voted for HB 189. The bill was designed to address a shortage of hospitality industry workers. It includes language allowing employees between the ages of 18 and 20 to serve alcohol in restaurants.

Sarah Oates of Alaska CHARR, a hospitality leader for workforce development in the state, says she is concerned about the immediate impact the governor’s veto could have on the industry.

“I have heard people talking about closing their doors because they don’t have enough workers for a while,” Oates said. “There were a number of businesses that didn’t open it all this summer, and some — a lot of businesses I’m sure you’ve already heard that have significantly decreased their hours.”

Furthermore, Oates said some in the hospitality industry were already seeing 18- to 20-year-olds interested in being servers. She said CHARR is currently exploring both options and has been communicating with lobbyists and the bill’s sponsor, Rep. Jesse Sumner, R-Wasilla.

“This is a huge deal for our industry. So if there isn’t a special session that ends up being called, we will definitely be hoping for swift action by the legislature by next session,” Oates said.

Other bills the governor vetoed include bills to protect documented vessels from duplicative registration requirements, prohibit discriminating against individuals on the basis of their political affiliation or expression, and allowing private employers to exclusively use electronic payroll systems.

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