Senate approves new finance plan for Knik Arm Crossing
This rendering shows the proposed 1.7 mile Knik Arm Crossing. The Senate has passed a new funding model for the project that is less reliant on tolls and would use federal loans and highway appropriations to construct.
The Senate passed the latest Knik Arm Crossing financing plan April 12 despite concerns voiced by some Democrats about traffic projections and spending habits involving the long-awaited and debated mega project.
House Bill 23, passed by the House late last session with a different funding model, must pass concurrence in that body before heading to Gov. Sean Parnell’s desk to be signed into law.
It passed the Senate by a 16-4 vote, with Democrats Johnny Ellis, Berta Gardner and Hollis French, all of Anchorage and Donny Olson of Nome as the only no votes. As of press time April 16, HB 23 was expected to pass the House in the final days of the session.
The current iteration of HB 23 calls for the bridge to be funded through three streams divided nearly equally for project costs estimated to be as much as $900 million: direct federal Transportation Infrastructure Finance and Innovation Act, or TIFIA, loans; federal State Transportation Improvement Program, or STIP, transportation appropriations; and bonds sold through the state Revenue Department. Toll revenue from bridge traffic would be used to first pay the TIFIA loans and then the revenue bonds.
Knik Arm Bridge and Toll Authority officials have estimated the 1.7-mile bridge from Anchorage to Point MacKenzie and associated connections will cost $782 million if construction starts next year. Contingencies in the plan allow for the project to move forward without issue if costs increase to $894 million, KABATA Executive Director Judy Dougherty says.
KABATA’s bonding power is capped at $300 million by the legislation and the state is “insulated” from the debt liability, Dougherty has said.
Numerous legislators, primarily Southcentral Republicans, have backed HB 23 introduced by Rep. Mark Neuman, R-Big Lake, as essential infrastructure legislation that will allow Anchorage to grow beyond the increasingly cramped “Bowl” to undeveloped land on Point MacKenzie.
Proponents also view the bridge as a safety need given that the often-busy Glenn Highway is currently the only road link between the Anchorage and the rest of the state to the north. The Knik Crossing would connect to the south end of Knik Goose Bay Road via Point MacKenzie Road and allow traffic in and out of Anchorage to bypass much of Wasilla on the Parks Highway.
The number tossed about in the Legislature as the cost to expand the Glenn Highway has been $600 million.
“If we don’t make this move what you end up doing is you stagnate and you end up with a place like Anchorage where people end up moving because they can’t afford to live there and their quality of life is not good,” Sen. Lesil McGuire, R-Anchorage, said during debate before the vote.
Olson was the lone opponent to the bill when it was in the Senate Finance Committee in the weeks prior. He continually questioned traffic projections and whether the cost would stay under the $894 million outlined in the bill.
On the Senate floor, French and Gardner joined with Olson and his concerns about the whether or not the state can afford the project.
KABATA has downplayed the importance of traffic projections under the new financing plan because toll revenue would not be needed to pay for the entire project.
Despite insistence from HB 23 proponents that the state would not have to front any money for the project, the Senate Democrats said they worry that the state will be on the hook for KABATA’s debt if the plan doesn’t pan out at a time when revenue is dwindling.
“If it was up to me I’d put this vote off until we know the outcome of the repeal effort for SB 21 (oil tax reform) and we know what the economic future of the state looks like,” French said.
He continued: “I’m starting to wonder when we’re going to start acting like we’re in deficit spending.”
Traffic and subsequent toll revenue projections were expected in late December. However, KABATA spokeswoman Shannon McCarthy said that was an aggressive goal and the plan change further delayed the study commissioned by the authority. She said April 14 preliminary numbers should be available “in the next few weeks” with final numbers ready in July.
During Finance Committee testimony, KABATA’s Dougherty said about 10,000 vehicles per day would be needed at a $5 toll rate to pay for the TIFIA loans and bridge maintenance. It’s currently thought about 6,000 vehicles per day would use the bridge immediately upon completion in 2020 with a quick ramp-up in traffic, she said.
“The question we have to ask ourselves is are we or are we not committed to making data driven decisions and if we are is it not appropriate to wait until we have updated data?” Gardner said.
Ellis and Gardner offered an amendment to the bill that would’ve put bond sales on hold until the traffic and toll revenue projections are released. The amendment failed 5-15, with Sen. Bill Wielechowski, D-Anchorage, joining those who voted against the overall bill as a supporter of the amendment.
If traffic doesn’t materialize, Dougherty has said the initial 20-year TIFIA loan term could be refinanced to 35 years.
The idea of the Knik Arm Crossing being a toll bridge was first floated as a way to finance the project under the public-private partnership, or P3, model, where toll revenue would be returned to private investors for up to 50 years.
A day prior to the HB 23 vote, the Senate approved a $55 million appropriation for KABATA as part of the 2015 fiscal year capital budget. The money to the state authority follows the governor’s budget proposal.
The Anchorage-to-Mat-Su link will be finished as a two-lane highway, with the corridor prepped for an expansion to four lanes when traffic demand requires.
If the bridge needs to be built out in the future — when daily traffic exceeds 21,000 vehicles per day — HB 23 gives KABATA the ability to bond for up to $500 million for improvements or expansion to four lanes. The Legislature would have to approve the bonds at that time.
Under HB 23 the Revenue Department cannot issue the $300 million of construction bonds for KABATA until the federal loans are approved.
If the House concurs with the Senate version of the bill, McCarthy said the KABATA board would formally change the authority’s direction to the new financing plan at its April 24 meeting. From there the TIFIA loan application would be submitted to the U.S. Department of Transportation within days, she said.
“It will be a real flurry of activity once we have a final resolution,” McCarthy said.
While KABATA has been turned down for TIFIA loans in the past, changes to the program included in the 2012 surface transportation legislation known as MAP-21 removed much of the subjectivity from the application process, according to McCarthy.
She said there is no reason to believe the authority won’t be approved for the loans in a timely fashion, as in the past the feds had been hesitant to commit money to a project the state hadn’t yet approved.
The same goes for the remaining environmental permits, she said. KABATA has an environmental impact statement that is valid through 2021 and the Army Corps of Engineers has been waiting to approve a wetlands permit for the project until it’s clear the state plans to move forward, KABATA says.
The National Oceanic and Atmospheric Administration must also approve the construction plan because of the presence of endangered Cook Inlet Beluga whales in Knik Arm at times. The four-year construction timeline would allow for work to be slowed or even stopped during parts of summer when the whales frequent the area, Dougherty has said, but little indication has come from NOAA as to how the agency will ultimately rule on the project.