Assembly begins critical look at Anchorage port plan
Faced with a looming price tag of nearly $2 billion to fix its port, unsavory funding options and competing claims, the Anchorage Assembly is again examining every aspect of rebuilding one of Alaska’s most critical pieces of infrastructure.
The Assembly began its third review of plans to rebuild the municipal-owned port, which the body officially renamed the Port of Alaska in 2017, during a Feb. 20 Assembly Enterprise and Utility Oversight Committee meeting where representatives from several civil engineering firms were invited to present their thoughts on the current port modernization project.
Assemblyman and committee co-chair Christopher Constant characterized the informal meeting as a “crowd-sourcing” session for Assembly members to gather high-level design concepts and other information that could be carried forward.
Notably, Jim Campbell, president of the Anchorage-based firm PND Engineers Inc., said he believes major components of the new construction estimated to cost more than $1.4 billion can be done for just more than $300 million.
PND engineered the docks for the original Port of Anchorage intermodal expansion project in the mid-2000s using its proprietary Open Cell Sheet Pile design.
Construction work on the port expansion project was halted in 2010 and never resumed after extensive damage to installed sheet pile was discovered.
PND was part of a complex web of contractors on that project that were sued by the municipality in early 2013 based on a study that found the Open Cell Sheet Pile design was not suitable for the project given the challenging construction conditions and seismic requirements at the Anchorage port.
The suitability study was conducted by CH2M Hill, which is now named CH2M and is owned by the international firm Jacobs Engineering Group.
PND leaders have long been adamant that their design was sound and it was improper installation that led the sheet pile to fail. There is little dispute amongst those who have followed the port developments that there were problems with construction techniques in the 2008-09 timeframe. However, the suitability study concluded those issues were on top of fundamental design flaws.
PND settled with the city for $750,000 in early 2017. Campbell said at the time that the relatively small sum validates the company’s claims about the sheet pile design.
“We still maintain, to this day, that the original design was not flawed,” Campbell said Feb. 20, later adding that PND’s sheet pile has been used successfully at ports across Alaska, including Kodiak and Dutch Harbor.
He also highlighted the fact that CH2M is managing the current port modernization — with a more traditional pile-supported dock concept — only after drafting the report that deemed the previous design faulty.
Officials in former Anchorage Mayor Dan Sullivan’s administration said in 2014 that CH2M was best suited to lead the second iteration of port reconstruction given its knowledge of the issues and the company did not know it would get the larger management contract when it was conducting the suitability analysis.
The current port modernization schedule blends complex logistics and needs-based construction to keep regular port users reasonably happy during construction while also replacing some of the oldest infrastructure first.
It calls for first building a new petroleum and cement terminal, or PCT, over the next two years at a cost of $223 million. A new PCT must be done first in order to free up space for when the adjacent cargo docks — used twice weekly each by TOTE Maritime and Matson Inc. — are rebuilt. It is also on the oldest part of the dock structure, according to Port Director Steve Ribuffo.
Some sections of the pile-supported docks have been in place since 1961 and have far exceeded their initial 35-year design life as the saltwater they stand in has gradually taken its toll and badly corroded the steel support pilings.
The PCT work is being partially funded with unspent money from the first project and court settlements, but city officials also recently proposed drastic increases to the port’s fuel and cement import tariffs to cover the cost of borrowing up to $200 million through revenue bonds for the remainder of the work.
The proposed tariff changes were met with initial skepticism from members of the Anchorage Port Commission, an advisory body, because of the broader negative economic consequences they could have, commission members said.
Municipal Manger Bill Falsey said while the tariff rate hikes are among the least appealing options for funding the project, they would act as a user fee increase and are one of the few ways for the city to fund the project without state or federal help.
City officials regularly cite the how critical the port is to Alaska, not just Anchorage, as justification for help in paying for its overhaul. It’s estimated that roughly 90 percent of the goods destined for delivery across mainland Alaska are imported across the port’s docks.
“It is the one need that beats all other needs,” Falsey said Feb. 20. “This is core, basic infrastructure.”
The Legislature and former Gov. Bill Walker approved $20 million for the port last spring; however, with Gov. Mike Dunleavy’s emphasis on reducing spending to close the state’s $1.6 billion budget gap, the prospect of future state appropriations is uncertain.
CH2M’s cost estimate for the modernization project has gone from approximately $500 million in late 2014 to more than $1.9 billion today. The company’s Jeff Bool told Assembly members that risk contingency accounts for nearly $300 million of the overall projection and built-in price escalation — given the current schedule calls for work through 2028 — adds another $202 million.
Building the PCT should help refine the overall cost estimate, Bool said.
“As we bid out the work on the petroleum cement terminal we’ll know what the larger costs are and we can forecast more accurately what these future facilities might cost,” he said.
Additionally, he noted that larger federal tariffs on foreign steel have increased the cost of the fundamental building material by roughly 30 percent over the past two years.
Bool and others have also said the city could reexamine the self-imposed criteria of a 75-year design life and building the PCT and one cargo terminal to withstand a catastrophic earthquake with the ability to be back in service within a week after such an event.
Regular port customers have also requested amenities and equipment that add to the cost.
“We have time to affect change in the cost,” Bool said.
Some observers have suggested TOTE and Matson — which both call on the port every Sunday and Tuesday — could adjust their schedules, thus allowing Anchorage to build just one new, heavy-duty cargo terminal instead of two.
Representatives from those companies did not respond to requests for comment, but Port of Alaska spokesman Jim Jager said the shippers have made it clear to port officials that their schedules can’t be changed.
The logistics of getting fresh produce and other regular, time sensitive cargoes to the Port of Tacoma, combined with labor issues with longshoremen there challenge the feasibility of spreading the trips throughout the week, according to Jager, and Alaska’s relatively small market size reduces the incentive to try.
Essentially, the shippers call the shots in this situation.
PND’s Campbell insisted the city could build two basic, pile-supported docks off of the north backlands — the area CH2M contends is unstable, which PND disputes — for roughly $300 million and cut approximately $1.1 billion out of the cost.
The concept is very similar to what the company did in Kodiak and the same Matson ships call on both ports, Campbell noted.
He said Anchorage should “take what you’ve got there instead of throwing it out. If you actually just figure out how to address the problems from before and build something there it’s a big cost savings.”
The current plan calls for removing much of the roughly 30 acres of fill that created the north backlands area during the expansion project at a cost of $253 million. The port leases much of the area for lay down and temporary storage now and officials want to keep part of it intact for those reasons.
Bool characterized the north end demolition as “very high risk work” and the $253 million estimate includes about $50 million in risk contingency as a result.
“We’ve got over a million yards of fill to remove and dispose of in the Inlet,” Bool said. “There’s a lot of unknowns, it’s risky and it’s a very expensive demolition.”
Scrapping the whole north backlands area could actually be cheaper than trying to stabilize and preserve a portion of it, he said, but that’s another decision for port and city officials to make.
Constant said in an interview after the meeting that the Assembly committee will hold weekly meetings at least through March to get perspective on the current plan from all the port’s stakeholders.
Keeping on the current construction schedule won’t be as important as settling on an appropriate scale project, he said.
“At $2 billion there’s utter shock in every direction and very little appetite for that type of project,” Constant said.
However, port officials say the current maintenance program for badly corroded piles can keep the port open for about another 10 years before operations will have to be curtailed for safety reasons, meaning much schedule slippage would just add another challenge to the work.
The full Assembly must approve any major port changes.
PND’s proposals will be considered, but the company has a high bar to clear given its history at the port, according to Constant.
“They really have to make their point; it doesn’t mean we shouldn’t listen,” he said. “No decision is going to be made based on what PND tells us.”
Elwood Brehmer can be reached at [email protected].