Alaska Railroad tops among infrastructure legacy for Sheffield

Photo/Courtesy/Rep. Don Young

Editor’s note: This is the second in a two-part series profiling former Gov. Bill Sheffield by Journal reporter Tim Bradner, who has been covering the oil industry and state politics for more than 30 years.

When you hear Alaska Railroad locomotives sound their horns and see those gold-and-blue cars, that’s Bill Sheffield’s legacy.

Were it not for Sheffield, who was governor from 1983-87, Alaska would not have a railroad today.

The federal government would likely have sold it for scrap.

“Bill Sheffield saved the railroad. There’s no doubt,” said John Shively, Sheffield’s chief of staff when he was governor.

Sheffield, a successful businessman, ran for governor in 1982 with two goals: Instilling financial discipline in a state government beset with bloated spending, and to build Alaska’s infrastructure.

He was partly successful in the first goal and much more successful in the second.

Infrastructure builds an economy and jobs, Sheffield believes. Economists have long known that but Sheffield learned it up close and personal during his depression-era upbringing in the Pacific Northwest.

He watched Franklin Roosevelt ‘s projects help bring the nation out of the depression. Sheffield’s own family benefited from the jobs Roosevelt’s policies created. It was a lesson he took to heart.

As governor, Sheffield oversaw the creation of more infrastructure than any Alaska governor, all of it still operating and successful.

Some projects were mainly his efforts. He also facilitated projects others had initiated. For those that made sense, Sheffield made sure what was started was finished.

The important thing is that these things happened, and on Sheffield’s watch.

Here’s a partial list:

The Red Dog mine road and port in Northwest Alaska, started under Sheffield, made the world’s largest zinc mine possible and lifted northwest Alaska out of economic depression.

• The Klondike Highway, connecting Skagway to Canada, made Skagway a tourism and mineral ore-shipping center.

• The AC Couplet in downtown Anchorage, a huge project that provided better street connections from downtown to Elemendorf Air Force Base and the city’s port.

• The Ketchikan Shipyard, now an important marine service center, started as an initiative to have state ferry vessels get major maintenance done in the state.

• The state’s only maximum-security prison was also built in Seward under a plan worked out between the state and the city, which financed the construction.

• Of real importance today is the Bradley Lake hydro project near Homer, built during Sheffield’s term, which today supplies the least-expensive electricity to the Southcentral-Interior electrical grid.

• Also, several large hydro projects near Ketchikan, Wrangell and Petersburg, Kodiak and Valdez started under the prior administration of Jay Hammond were completed by Sheffield.

There were poorly-planned projects shut down, too, such as an ill-conceived, large state-subsidized agriculture project near Delta. Sheffield also had to terminate the large Susitna dam project, something he hated to do it, he says. It had become too large and uneconomic, and the financial community wouldn’t fund it without a guarantee from the Permanent Fund. A scaled-down new version of Susitna, now called Watana, is again proposed.

Sheffield thinks a lot now about his earlier decision.

“If we had more time, if we had been able to scale the project down by a third, basically what is being proposed now, I might have come to a different decision. But probably not. I think about it a lot, though,” he said.

Restoring the rails

The Alaska Railroad is Sheffield’s crowning infrastructure achievement, however, and the one he is most proud of.

Just as Sheffield was taking office in 1983, the federal government had announced that it wanted out from ownership of the Seward-to-Fairbanks rail link, which was losing huge amounts under federal ownership.

“The feds said they were going to shut it down. It was losing too much. If they had scrapped it, it would have been a disaster. A lot of people felt the railroad is important, but there were no private buyers,” Sheffield recalled.

Sheffield asked Dave Walsh, an Anchorage assemblyman, to go to Washington, D.C., to work with the late Sen. Ted Stevens on a possible state purchase deal.

This required state approval, but that didn’t come without a political fight in the Legislature.

Sheffield, a lifelong Democrat and major fund-raiser for Democratic candidates, had made enemies among Republicans in the Legislature and this led to some Republican senators fighting a key part of Sheffield’s plan, which was to have the railroad run as a separate business, not a state agency.

Sheffield’s business experience told him the railroad would be a big money-loser if it had to operate like an agency. It would need constant subsidies, like the state ferry system, he believed.

Sheffield’s plan prevailed, however, and the deal went through.

There were some final hitches:

“At the last minute,” Sheffield said, “(the federal government) balked at letting us have the receivables (money owed the railroad from customers). I decided to let them keep the money so we could get the deal through.”

The state did receive a fee, about $500,000, for collecting the money owed, but the bulk of the money collected was turned over to the federal government. 

The purchase, for $22.5 million, was widely viewed as a good deal. Along with the trains and track came valuable real estate, including in Anchorage’s downtown Ship Creek industrial area.

There wasn’t much cash that came with the deal — the federal government had kept it — and the railroad’s track and train equipment were in bad shape, having been allowed to run down.

The actual takeover from the federal Department of Transportation went smoothly although the state also discovered that since the federal government had exempted itself from federal safety standards all the windows in the train cars had to be replaced to be shatter-resistant.

“That cost us about a million dollars,” Sheffield recalls.

Sheffield’s interest in the railroad was to transcend his governorship. After leaving Juneau, Gov. Tony Knowles asked him to be on the railroad’s board in the early 1990s as its chairman. Sheffield also played an interesting role in the resurrection of the White Pass & Yukon Railway, in Skagway, as a tourist attraction.

All that came after the biggest fight of Sheffield’s political life, though.

Under fire

It was midway through his governorship, in the mid-1980s, that Sheffield endured the most difficult and stressful period of his life aside from the loss of his wife, Lee, to cancer in 1978. This was an unsuccessful impeachment drive in the Legislature.

It all started as an alleged ethics violation in what was certainly a failure to follow proper state procedure, but once the issue was in the Legislature it was driven by politics.

The impeachment became a media spectacle and a huge distraction for Sheffield and his top administration officials, effectively side-tracking major initiatives. The affair also cost Sheffield several hundred thousand in personal legal bills — $300,000 of which was later repaid by the state at the instigation of Gov. Steve Cowper, who followed Sheffield.

In the beginning there was a possible ethics breach that was appeared serious at the time but seems trivial today when compared with what came later, the legislative bribery scandals in 2007 and 2008. In fact, at the time Chicago columnist Mike Royko poked fun at the  Alaska newspapers for making such a big deal of it, as did newspapers in Louisiana, home to more serious political scandals.

It started when a friend and supporter of Sheffield’s from Fairbanks, union leader Lenny Arsenault, talked to the governor about a site for consolidated state offices in Fairbanks. The two were in a car looking at buildings that could be used.

Consolidation and relocation of scattered state offices to a central location was a big priority for Fairbanks business and community leaders at the time, as well as the Fairbanks legislative delegation.

Pete Spivey, Sheffield’s press secretary, recalls that specifications for the site set out in local endorsements by business leaders fit the building Arsenault showed Sheffield.

Sheffield didn’t know Arsenault had a 2 percent ownership of the building.

“But even if I did, it wouldn’t have made any difference. The building fit all the specifications that were being asked for,” by Fairbanks leaders, he said.

In any event, phone calls were made to state procurement offices from the governor’s office, where Shively and others had grown impatient with bureaucracy.

That shouldn’t have happened. But Spivey remembers top people in the administration being very impatient with bureaucracy.

“People got tired of just sitting and waiting for something to be done,” Spivey recalled. “But when you push too hard, people in agencies start writing memos to the file.”

One of those was leaked to the Fairbanks Daily News-Miner, where reporter Stan Jones broke the story.

It created a sensation.

Shively acknowledges the matter wasn’t handled well.

“We were all new to government then,” he said.

Spivey recalled, “Reporters sensed the governor, or someone, had done something wrong, so it was a legitimate story. But I also know how reporters can feed off each other in pursuit of a story, and adopt each others’ opinions.”

The state Attorney General, Norm Gorsuch, asked that a special prosecutor in the Department of Law investigate the affair so that it would be free of any taint, since the governor appoints the attorney general.

The special prosecutor, who worked within the Department of Law, convened a grand jury to consider whether a law had been broken. One thing that caught the grand jury’s attention was a statement by Arsenalt that he had met with Sheffield in his office on the matter but Sheffield said he doesn’t remember the discussion.

After deliberating the matter the grand jury decided no law had been broken. Still, a recommendation was made that the Legislature conduct its own inquiry.

The Senate convened a special committee and three weeks of hearings were held that were absolute torture for Sheffield and other top administration officials, recalls Laurie Herman, Sheffield’s long-time executive assistant.

Famed Watergate attorneys were hired by both the Senate and Sheffield, at great expense.

Politics played a role, of course. Republican senators were out to damage Sheffield and his ability to raise money for Democrats, Sheffield is convinced.

Senators involved in the issue later told people privately they knew there weren’t sufficient votes to bring an impeachment action, according to one source familiar with the proceedings.

“But they wanted to let Sheffield swing in the breeze,” the senators told the source, who asked not to be identified.

Anchorage Republican Sen. Tim Kelly, who had kept himself above the partisan spirit of the impeachment drive, finally helped bring the issue to a close in the Senate with no action taken.

However, the media coverage, combined with the bad feelings left from unpopular budget cuts Sheffield made after oil revenues had collapsed earlier, did serious damage to Sheffield’s hope for reelection in 1986.

He lost to Cowper in the Democratic primary that year.

After leaving the governor’s office, Sheffield thought once again about retirement. He didn’t think long about it, though, and his interest in transportation infrastructure continued.

Back on track

Sheffield’s little-known connection with the White Pass & Yukon Railway came after he had left the governor’s mansion. The railway, used to haul mineral ore, had been shut down for years.

Sheffield had a continued connection with Holland America Line — the tour company that purchased Sheffield’s hotels now under the Westmark brand — and he and the company approached the owners of the defunct railroad with a plan for a summer-only operation to carry tourists on the historic line.

The plan didn’t go forward, but, interestingly, the White Pass & Yukon took the cue and itself developed the summer tourist rail service, which operates today.

Meanwhile, Sheffield was appointed to the Alaska Railroad’s board and quickly immersed himself in efforts to get money for long-needed capital improvements.

It was during this period that Sheffield launched a successful initiative with Ted Stevens in the U.S. Senate to get the railroad qualified for federal train funds that went to other U.S. railroads, but not Alaska’s.

Under state ownership the railroad was gradually rebuilding its capital assets, which had been allowed to deteriorate, by devoting its modest annual profits, of $8 million to $10 million a year, to improvements.

“Whatever we made as a profit was our capital budget,” Sheffield said. “Railroads are capital intensive. You need good ballast (crushed rock foundation), good ties and good rail so you don’t have accidents and train derailments.”

With Sheffield as board president (he was later named CEO by the board) the lobbying in Washington, D.C., intensified to get the railroad included in federal funds that go to support U.S. passenger railroads but from which Alaska had been excluded.

Initially this was because the federal government had argued the Alaska Railroad was primarily for freight, and its passenger business was mainly for tourists, in the summer. Sheffield and Sen. Stevens argued the all-year nature of the railroad’s passenger service was vital to isolated communities, and wore down the resistance.

Even so, the railroad never got its full entitlement based on its track miles. It initially received funding for 10 percent of its miles, around Anchorage, and 60 percent of its miles in the 2005 transportation bill.

If the Alaska Railroad were treated like other U.S. passenger railroads it would receive about $70 million a year. The funding eventually amounted to $36 million a year at its peak, a partial victory for Sheffield and Stevens.

All this went into rebuilding track, roadbed and getting the railroad into proper shape, much of what has been accomplished.

“It’s a fine railroad now, although we still have things to do,” Sheffield says.

Federal funds for the railroad are still endangered. Funding was almost cut again in the latest reauthorization, in 2012, of the federal Surface Transportation Act.

Rep. Don Young saved the day by getting on the House-Senate conference committee on of the bill and persuading his colleagues of the importance of the funding. Sheffield was once again involved in that lobbying, helping Young, now as the railroad board vice chairman.

Rail to port

Sheffield tried again to retire after being the railroad’s CEO, but it wasn’t long before the phone rang again. It was Anchorage Mayor George Wuerch, asking Sheffield to go to lunch.

Wuerch wanted to persuade Sheffield to become director of the city-owned Port of Anchorage, he recalls, and for Sheffield to use his well-known fundraising abilities on a project to repair and expand the port, which was in a rundown condition. Sheffield took on the job in 2001.

The events that followed are well known. A major port expansion was launched — Wuerch and Sheffield felt a limited repair job and modest expansion wouldn’t be enough — and for a while Sheffield and Stevens worked successfully to bring in federal and state funds.

Things went awry.

An odd management scheme where the federal Maritime Administration, or MARAD, the conduit for the federal funds, actually managed the construction, created problems. Sheffield was the chief fundraiser and public face of the project, but it is uncertain now — the lawyers will sort it out — who made critical decisions.

The project cost grew, and Stevens lost his Senate race in 2008.

Mistakes in construction by a contractor — and a fatality for one worker investigating damage — pointed to serious problems.

Finally, Anchorage Mayor Dan Sullivan had enough. He insisted on a reorganization of the project to include himself and the port director, Sheffield, in management decisions.

That is now done, although Sheffield is no longer port director, having handed those keys to a new director, Rich Wilson.

Solving the construction problems and finishing the expansion will be a costly job. Sheffield can’t say anything because of pending litigation, but the project review, now under way, is complicated by conflicting views, and personality issues, over the particular design used in the expansion.

Wuerch thinks the personality disputes will get worked out and a common-sense solution to the port repairs will be developed. The port is in serious need of repairs, he said. It is very vulnerable to collapse in a major earthquake.

Two barge unloading docks and a rail spur already completed in the expansion could be used in the event of a collapse of the main dock, but it would still be a serious problem for Anchorage, he said.

Refusing to retire

Is Anchorage port director Sheffield’s last career? Not likely.

Sheffield, 84, is widely admired for refusing multiple opportunities for comfortable retirement.

“Sheffield just isn’t the kind of guy who will sit around in the sun, or just play golf down in Palm Springs,” John Shively said. “He will always come back to Alaska, ready to go to work.” 

In fact, the former governor has a new project — infrastructure once again — in helping promote a small in-state gas pipeline from the North Slope. That’s something Alaskans will need if a big gas pipeline is delayed again.

Tim Bradner can be reached at [email protected].

02/14/2013 - 8:43am