Voters reject rail lease, stalling Skagway port

In a surprise, Skagway voters rejected a proposed new lease for the White Pass & Yukon Route Railway on municipal-owned land in Oct. 6 municipal elections, and this has complicated a $23 million Skagway port redevelopment project planned to be underway in 2016.

The new lease, had it passed, would have reduced the White Pass lease from 78 acres to 2.7 acres, giving the municipality control of uplands and tidelands needed for the port redevelopment.

Under the plan, aging docks and upland facilities would be replaced and the port expanded.

White Pass would also have contributed $2 million to a cleanup of known lead contamination in submerged soils in the port which is a human health hazard and an impediment to federal permits for the redevelopment, city officials said.

The vote was two-to-one against the new lease, which caught municipal officials off guard, Mayor Mark Schaefer said. Schafer had campaigned for the new lease and was reelected, ironically against an opponent who campaigned against the lease.

Before taking any steps to salvage the redevelopment, called “Gateway Skagway,” municipal officials plan a post-election survey to understand why the new lease, which would have greatly benefited Skagway, failed to such an extent.

“We need to know why people were against it. Was it the term of the lease, or the monetary value, or just that people in the town were mad at White Pass,” Schaefer said in an interview.

White Pass & Yukon Route Railway has been a major employer in the small Southeast Community virtually since the early 1900s and the Golf Rush, hauling ore from mines in Yukon Territory until recent years and now a popular tourist railroad and attraction.

Over the years local citizens may have come to resent the company for varied reasons.

However, the new lease negotiations brought the municipality and the railway together on terms that would have benefitted both parties, said Chad Gubala, a consultant to Skagway on the port project. Skagway owns lands around the port and leases to the railway, which then sub-leases to other tenants including industrial users.

The new lease would have greatly reduced the size of the White Pass leasehold, which the company wanted so as to focus on its tourist operations, and would have given the municipality more say on the company’s management of its leases including environmental oversight of tenants.

Under the current lease the municipality has limited influence over how the railway manages the leases, Gubala said. The company agreed to and supported the new lease terms, however.

The old lease will expire in 2023 but had voters approved the revision the city would have gotten direct control of lands for the port project, and in return White Pass would have a new lease term, although with smaller acreage.

Gubaba said it is possible that parts of the port project can still be done even with the current lease but that it will be more complex. Schaefer said the municipality will wait until the post-election survey is done and also work to clarify issues related to the contamination, an estimated 80 tons of lead, before sitting down with the railway.

Dealing with the contamination and also controlling continued contamination from onshore sources is the top priority, the mayor said, because the municipality may become legally vulnerable if nothing is done. The contamination is the result of years of loading lead-zinc ore concentrates from Yukon mines into ships at the Skagway port.

Updated: 
11/24/2016 - 3:13pm

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