Construction

Unions, companies, labor officials mull worker shortage with major projects on horizon

How quickly things can change. Alaska, still inching its way out of a three-year recession that cost the state more than 10,000 jobs, could soon be a facing a labor shortage in some of its trademark industries, according to state workforce development officials. “We’ve got this sort of perfect storm of challenges where we have a downturn in our economy; we have an aging workforce, including oil and gas workers; we have stagnant wages in Alaska and there’s a boom going on in the Lower 48 pulling a lot of our workers (away),” state Department of Labor and Workforce Development Commissioner Heidi Drygas said in an interview. Most of the estimated 10,100 jobs the state has lost since 2015 were in the tightly connected construction and oil and industries, which together lost about 6,900 workers, according to state figures. At the same time, workers in those industries are at a premium in the Lower 48, where the shale oil boom continues and has helped spur a generally robust economy. Most oil companies in Alaska contracted some during the three-year price downturn and some delayed projects. Others, however, focused on exploration on the belief the price would eventually rebound. Armstrong Energy and Repsol combined to make the large Nanushuk formation oil discovery on the central North Slope, which ConocoPhillips has parlayed into multiple other prospects. The four recent discoveries made by those companies — two smaller prospects and the Nanushuk and Willow projects with potential for more than 100,000 barrels per day each — along with a couple other developments that have been in the works for years are expected to be the drivers of North Slope labor demand Drygas and others are concerned the Alaska workforce might not be able to meet. ConocoPhillips expects to need up to 700 construction workers per winter for its $1.5 billion Greater Mooses Tooth-2 oil project in the National Petroleum Reserve-Alaska from late 2019 through early 2021. Initial work laying gravel will begin at GMT-2 this winter. Hilcorp Energy also received federal regulatory approval Oct. 24 for its long-anticipated Liberty manmade island oil project, which will offer another 200 or more construction jobs per winter during the coming years. But those two are just the start. ConocoPhillips submitted a master development plan for its major Willow prospect in the NPR-A to the Bureau of Land Management last summer. While the company is still in the early planning stages on Willow, ConocoPhillips Alaska officials estimate it will generate “thousands of construction jobs” and hundreds of long-term operations positions once it is online — likely in the mid-2020s based on the company’s current schedule. The Nanushuk project, now led by Australian-based Oil Search after its acquisition of an operator stake in the Armstrong-Repsol discovery last fall, is expected to need a construction force of nearly 1,500 workers. Oil Search Alaska President Keiran Wulff said the company expects to make a final investment decision sometime in 2020. Additionally, Donlin Gold is slowly compiling the remaining permits it needs to build the world-scale open-pit gold mine it has planned in the Kuskokwim drainage. That project, with a 315-mile natural gas pipeline, two port developments, and a road to go along with all the on-site infrastructure, is expected to generate upwards of 3,000 construction positions. Finally, the far more controversial Pebble mine could add another 2,000 construction jobs to the state in the coming years if it is ever approved. Drygas said she is already hearing from some union hall leaders that they are starting to run out of skilled laborers. Doyon Associated President Warren Christian said Oct. 26 during the Labor Department’s Rising to the Challenge: Preparing Alaska’s Workforce forum that his pipeline development company was pretty much at full capacity last winter and already has at least as much work lined up on the North Slope for the next several years. Donlin spokesman Kurt Parkan and others who spoke at the event emphasized that finding workers with soft skills, such as the ability to pass a drug test and show up on time, can be the biggest obstacle to filling open jobs. Drygas said the state wants to encourage young people to look at careers in the trades, saying the “college for all” mantra espoused by many today is a “pervasive” problem in recruiting them. “We’re about to ramp up on some pretty significant projects in Alaska. We have all this work going on on the North Slope; we have a boom in military construction in the Interior and other Interior build out projects. We have an expansion of mining at Fort Knox and Kensington; Donlin Gold looks like it’s going to come online and they’re all happening at the same time,” she said. “It’s going to be challenging but it’s a pretty incredible opportunity too.” State economist Karinne Wiebold said strictly by the numbers, those jobs will be filled, but that could require recruiting Outside workers, something Drygas is constantly trying to avoid. Wiebold noted that Alaska’s construction sector has historically been comprised of upwards of 20 percent nonresident workers and in the oil and gas sector the figure rises to nearly 30 percent Outsiders. How many Alaskans left those industries to find similar work in the Lower 48 is largely an unknown and would be a very difficult figure to calculate, according to Wiebold. “It’s definite that some folks have left and it’s definite that some folks are still in Alaska but working in different industries,” she said. That forecast doesn’t even include the $43 billion Alaska LNG Project and the nearly 12,000 construction jobs it could add to the state. It’s largely understood that AK LNG would necessitate bringing in significant Outside labor help. State budget cuts have also contributed to the worry of a future worker shortage. Drygas said the Labor Department budget, which was one of the hardest hit in the Legislature’s effort to reduce the state’s multibillion-dollar deficits, was reduced 38 percent in the first couple years of Gov. Bill Walker’s administration. And many of those cut funds were meant for training programs, according to Drygas. She said those training programs, such as the Alaska Construction Academies, can be expanded on relatively short notice, adding that the University of Alaska has already cut tuition on its career and technical education, or CTE, courses by 25 percent in hopes of attracting more students. Fairbanks Central Labor Council President Doug Tansy said his union hall, part of the AFL-CIO, put all of its available laborers to work this year by April, largely due to the roughly $500 million worth of military construction projects being done at Interior installations. Tansy added, however, that about 60 of the union’s Alaska workers are on jobs in Seattle and Portland because they can simply make more money Outside which Drygas and Christian reiterated. They said wages for trade jobs are currently about 20 percent more in the Lower 48 than they are in Alaska. “Pretty much anyone who works in the Lower 48 in the pipeline industry has a job,” Christian said, and it’s expected to stay that way for at least another five years. Tansy said the 2008 global recession, which mostly missed Alaska, led to less CTE training down south and has now “created a wildfire of opportunity” in a rejuvenated economy. He sees the same scenario playing out in Alaska, just a few years later. A state capital budget plan — in addition to addressing deferred maintenance and basic infrastructure needs — could also spur Alaskans to return to the construction trades, Drygas stressed. “If there was an infusion of money for projects right now we can ramp up fairly quickly but what it’s going to take is everyone singing from the same sheet of music and that is we have to invest in this; we’ve got to invest in Alaska’s infrastructure and we’ve got to invest in training programs and training opportunities,” she added. Drygas reiterated that her message to the next governor’s administration would be to “invest in Alaska’s future” through a somewhat larger capital budget and workforce training programs. “We have to invest in young Alaskans and in training — ensuring that we have Alaskans first in line to work in these jobs,” she said. Elwood Brehmer can be reached at [email protected]

Steep drop in state workers’ comp rates to save $35M

Come 2019, Alaska workers’ compensation insurance rates are expected to fall the most in 40 years, according to state managers. Gov. Bill Walker’s office announced Oct. 4 that workers’ compensation insurance premiums should decrease an average of 17.5 percent statewide starting in January and worker’s compensation voluntary loss costs similarly could drop 14.8 percent. The proposed rate decreases for 2019 follow a 5.4 percent average rate decrease this year from 2017 and workers’ compensation premiums are down roughly 25 percent since 2015, according to the governor’s office. Workers’ Compensation Director Marie Marx said the reductions should save employers an estimated $35 million or so statewide. State officials are attributing the favorable trend to fewer claims and medical cost reductions. “These proposed rate reductions are welcome news for Alaska businesses — lower workers’ compensation costs reduce the burden on the small businesses that strengthen our economy,” Walker said in a formal statement. “Thank you to the Alaska state Legislature and the Department of Labor and Workforce Development for their work on payment reform, contributing to significant rate reductions for 2019.” The rates are proposed by the National Council on Compensation Insurance and subsequently reviewed and approved by the state Division of Insurance. Marx said employers of oil and gas pipeline workers would see some of the most significant reductions at more than 26 percent versus current rates, while rates could drop for clerical workers — typically with fewer on-the-job dangers — in the 9 percent range if the proposals are approved. Automobile technicians should see rate reductions of about 13 percent, for example, she added. Following approval by the Legislature in 2014, the Alaska Workers’ Compensation Board approved new practices and fee structures for paying medical providers for procedures paid for through workers’ compensation insurance in October 2015. The fee structure changes put provider reimbursement rates more in-line with general group health insurance rates, according to Marx. It replaced a system of paying medical service providers at the 90th percentile of “usual and customary” fees in a given region. Alaska was the 33rd state to adopt the new payment system, Marx said at the time. At the time, Alaska also had the highest workers’ compensation rates in the nation, state officials said. “Alaska has some of the highest medical, if not the highest, medical costs in the country and workers’ compensation was right at the top and we’re bringing it down with the reform over a number of years,” Marx said in an interview. Alaska Chamber CEO Curtis Thayer noted that the reimbursement rate revisions were based on Medicaid guidelines. He said that it’s correct rates are going down — a very good thing — but stressed the credit should go to employers and their workers for not needing to file as many claims as in years past. “It’s just the fact that our employers are providing a safer working environment,” Thayer said. Reforming the state’s workers’ compensation program has been a major policy initiative of the Alaska Chamber for several years. Last session the Legislature also took on other aspects of the workers’ compensation system when it passed the governor’s House Bill 79, which Walker signed in August. Among other things, the legislation clarified who is an independent contractor and who needs to be covered by workers’ compensation insurance and eased the process for obtaining workers’ compensation exemptions, reporting data and making payments. Thayer said HB 79 “brought Alaska into the 21st century” but did nothing to address premiums. He said the Chamber will continue advocating for caps on legal fees for workers’ compensation cases and other changes, such as treatment guidelines. “There’s a lot of work that’s been done but a lot of work that still needs to be done,” Thayer said. ^ Elwood Brehmer can be reached at [email protected]

INSIDE REAL ESTATE: Anchorage construction activity down sharply

The Municipality of Anchorage building safety report, which compiles all new construction activity requiring a building permit, was recently released for the first four months of 2018 and it is not good news for the construction industry. All construction activity is down 19.7 percent when compared to the same time span in 2017. The report categorizes all residential types as well as commercial activity, including alterations (remodeling) and change orders. The permits value the cost for vertical construction only according to a formula internal to the department and does not necessarily reflect market value. It also does not include any valuation for the land. Its purpose is to provide fee income to development services and to assure the public of its health and safety in both commercial and residential construction. Most of the 19.77 percent decline has come from the commercial sector. Residential construction permits have actually stabilized with even a slight increase in activity. Unfortunately, this new bottom of “normal” still doesn’t help Anchorage’s housing crisis. Eight new single-family starts in 2018 have increased the number to 54 from 2017. Duplex permits are down 50 percent and 67 new multi-family permits were obtained year-to-date, an identical number to 2017. A multi-family permit is categorized as any building with three or more units. Spinell and Hultquist Homes remain the largest builders in Anchorage, clearly outpacing all other builders with 14 permits for Spinell and 13 for Hultquist Homes. Combined they make up 50 percent of all residential activity for single family and duplexes. Spinell also builds in the Matanuska-Susitna Valley and Eagle River while Hultquist Homes has a division in the Seattle area. In single family, the owner/builder outpaces both of Anchorage’s leading builders with 12 permits. An owner/builder is usually someone from the trades who does not have a residential endorsement. An owner builder may also be someone who hires a general contractor to build their home but obtains the financing and permit in order to keep more control of the project. The permits also track elevator applications which are down from 82 to 43, almost a 50 percent drop. No mobile home permits have been issued so far this year, which clearly indicates a lack of consumer confidence in the long term financial sustainability of trailer parks which are, ultimately, an interim land holding use. Structural, electrical and mechanical/plumbing permits have all increased substantially. Given the overall decline in permit valuations, perhaps that is an indication that now is a good time for owners to consider remodeling as general contractors try to keep their employees engaged and prices reasonable while waiting out the third year of Alaska’s real estate recession. Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

Federal fund injection boosts effort to relocate Newtok

Few in Alaska have the expertise to move an entire village, but a process at work now getting Newtok nine miles downriver to Mertarvik is a proving ground for figuring it out. The project is still massively expensive, now estimated to cost $100 million to $120 million, but it is about a quarter of initial guesses of as much as $400 million to move Newtok’s 350 people from their eroding village. Two recent developments have kept the effort advancing. One is the completion of an environmental impact statement on April 19 for the layout of Mertarvik. With it is a plan for how the village will be designed including the airport, a drinking water lagoon, fuel storage tanks, housing, a school, clinic and stores. The other addresses part of the funding conundrum. When Congress passed the omnibus budget in March, $15 million was added to the Denali Commission’s $15 million operating budget. The money is to go to help villages harmed by climate change. Since President Obama’s visit to Alaska in 2015, the Denali Commission has been designated the federal go-to agency to handle all village relocations. “But this was the first time we had the money to go with it,” said Jay Farmwald, the director of programs at the Denali Commission. The new village site is located nine miles south of Newtok on Nelson Island. It’s out of the way of the tidal activity of the Ninglick River, which feeds into the Bering Sea and is susceptible to storm surges. Newtok is surrounded by the Ninglick River on two sides. Though one year 300 feet of shore side slid away, the usual erosion rate is 70 feet per year. In the past 20 years, houses built on pilings sunk to ground level as the erosion came in two ways: melting permafrost couldn’t hold them up any more and water flooded in. A very real possibility is that Newtok residents may require evacuation before Mertarvik has services such as electricity and water available, said Romy Cadiente, a Newtok village relocation coordinator. “It’s not so simple as planning a move at some date in the near future. There’s a lot of planning, a lot of planning,” Cadiente said. “We’ve been blessed with the team that we have to help facilitate this huge movement. We’re in the process in getting a facility and we have scenarios and contingencies in the event we can be ready and provide for the folks if we have to move right now.” Newtok leaders say it’s important to stay together as a tribe in the face of advice that individual families should move away from their disappearing village lands. “Back in 2004, or even before when Newtok decided to relocate, elders told us why you cannot move,” said Andy Patrick Sr., the president of the Newtok Traditional Council who was born in 1947. “When they first planned this, they offered to send us to Bethel or wherever, and divide us up. But the elders told us to stay as one. We are an independent tribe, one of the 229 federally recognized tribes. We need to stay together, not divided.” Housing first The Denali Commission is focused on getting homes put in as its top priority, Farmwald said. “We’re using all of the $15 million allocation to move Newtok,” Farmwald said. “Most of the money will be spent on new houses and services to the houses.” An additional $5 million from the Denali’s budget also will go toward installing services at Mertarvik. At least two other villages among an identified 31 are in emergency mode for needing to move due to climate change’s loss of permafrost and the resulting erosion biting away at their lands. But with Mertarvik, Farmwald said, “we are setting down a template to help the next villages.” That template is currently a written plan that shows what the new village layout will be once completed. Villagers supplied their preferences for how public buildings should be grouped. Costs so far were contained by partnerships. For example, rather than each agency conducting its own required survey work — geotechnical, topographical and environmental — the Denali Commission did it. The geotechnical work cost the Denali Commission $450,000 to gather about 90 percent of the subsurface information needed to design Mertarvik infrastructure, including the airport, said Don Antrobus, an engineer in the U.S. Public Health Service who is on loan to the Denali Commission. “There are significant economies of scale if the money is released in one pot. Every project needs geotechnical, subsurface surveys,” he said. “It’s very expensive to mobilize the equipment. When you do a larger geotech investigation for the airport, road, school, landfill, lagoon — you only pay that cost once. If you do it project by project, then each agency needs to do its own geotechnical work and that’s expensive.” Now the Department of Transportation won’t have to do a separate “mobilization,” for example, Antrobus said. Mobilization is expensive in itself, meaning getting a drilling rig, equipment and crews on the ground, plus supplying food and housing for them while they do the survey work. Further cost savings came when surplus barracks from Joint Base Elmendorf-Richardson were donated last December. The pre-fabricated, single-story barracks are to be taken apart this spring and are expected to be barged to Mertarvik next summer. But the cost to barge and assemble them there is $4.5 million, of which Denali Commission is paying the bulk. The estimated cost is $450,000 each for newly constructed HUD, or Housing and Urban Development, homes. The barracks, once reconfigured into homes, will supply 13 houses, Antrobus said, at an average cost of $346,000 each. “It’s not free. But it’s about 75 percent of what new construction costs,” he said. The buildings are in good shape and together with the seven already built, there will be 21 homes by the end of summer 2019, if all goes as planned. More than 80 homes will be needed. Another partnership also has been a major contributing factor in saving time and money that resulted in the first road built at Mertarvik. The Department of Defense Innovative Readiness Training, or IRT, program performed the road building exercise in 2009 and returned each year through 2013 (except 2012) to build a bunk and kitchen camp for workers and storage buildings, as well as the site work for the Mertarvik Evacuation Center. They also opened a rock quarry that was used to build the road and will be used in foundation work for buildings. The IRT provides military personnel with real-world training opportunities on projects that benefit communities. At the time, the program manager, Lt. Col. William Morgan said the relocation effort of the village of Newtok provided a winning situation for both Newtok and the military. “To do something so far away from home, up in an Alaskan tundra that’s difficult to get to by boat or by air — this is exactly the type of challenge that will enhance our ability to go to war in the future, to do other engineering projects in remote locations,” he said. Their work resulted in a permanent road built to a white-rock quarry that will serve multiple construction needs as infrastructure and housing go in. When the IRT troops left, the road-building equipment they brought with them was left at Mertarvik for future work. The equipment belongs to the Tribe and was paid for by a grant. “That’s another opportunity for economy of scale,” Antrobus said. “If projects are done project-by-project or agency by agency, each brings equipment and when he leaves he takes it with him.” The IRT work amounted to a donation to the village, Antrobus said. The military transported, housed and fed more than 20 troops while they worked. When finished, the Mertarvik Access Road was built with gravel topped by polyethylene road mats, a technology used by oil companies on Alaska’s North Slope for road development on tundra. The 1,000-pound 8-by-14 foot polyethylene mats interlock to form a strong, stable and uniform surface over tundra. They cut down on dust and can be moved. Funding for the road came from the Department of Transportation and the Bureau of Indian Affairs. The Department of Commerce and Economic Development provided the majority funding and the U.S. Army Corp of Engineers provided $430,000 for a $7.5 million Mertarvik Evacuation Center, which is currently a platform on pilings. “This summer we will put on an exterior shell and plumbing and mechanicals,” Antrobus said. The MEC will be able to house Newtok residents should they need an emergency evacuation from their village anytime soon. It will also double as space for a clinic or a temporary classroom for kids. Currently there are seven homes built at Mertarvik. One is a prototype house designed by the Cold Climate Housing Research Center and funded by a BIA grant. The house is extremely energy efficient and moveable, since it was built on a skiddable foundation that can be towed across ice or tundra. All together, figuring out how to put new infrastructure in place without too many agencies stepping over each other is proving more economical, Antrobus said. “Over time, there have been some really astronomical cost predictions for this move, he said. “It has not cost anywhere near that.” In total, $47 million has been committed or spent on the move, including the projects completed to date. Back in Newtok Federal and state agencies continue to fund projects in Newtok. A certain number of people will need to live there for another five or 10 years, Antrobus said. One is an upgrade on the Newtok airport runway by the Alaska Department of Transportation and Public Facilities. The contract is for $1.8 million to resurface it, said spokeswoman Shannon McCarthy. Another is a water treatment plant improvement by the Alaska Native Tribal Health Consortium. Water from a lagoon source has been threatened in the flooding, Antrobus said. Newtok remains one of the villages on “honey buckets.” “One was a project that had funding to identify a new water source for Newtok. That was implemented last summer before we went into the winter,” Antrobus said. “There’s other money available for Newtok for improvement to the water treatment plant to heat it and keep it from freezing. Those projects will be done.” In the meantime, Newtok residents have gone through a lot of water insecurity issues. A $580,000 ANTHC project last year and this year paid for relocating the water supply plant to keep it safe from saltwater intrusion, said Gavin Dixon, an ANTHC engineer. The work is meant to help ensure water availability until the move. They are still on honey bucket style sewage. The only public place to fill water buckets and wash clothing wasn’t functioning properly and so the ANTHC work this summer will restore it to working order, Dixon said. “There’s been a lot of sickness from the water situation. It’s a public health solution to stabilize the village until they move.” It’s not a waste of money, Antrobus added, though the goal is to abandon the village as soon as possible. “Several hundred people will be living in Newtok for a period of time. It costs $100 million to $120 million to move and we don’t have anywhere near that,” he said. Even so, there isn’t much that can be moved when the big day to do it finally comes, Antrobus said. Of the 70-some homes at Newtok, “most are in poor or very poor condition.” “None of the homes can be moved,” Farmwald said. The design of the Newtok school was a modular building that can come apart in big wall panels, Antrobus said. “There’s the potential to take it down and transport it across the river and reassemble them. There’s been an analysis about what it would cost and it is not less than new construction,” he said. The Denali Commission and Newtok Planning Group are still exploring what other public buildings might be moved, and the means and methods to get them across the river on the ice. The problem is not being able to predict whether the river will freeze hard and deep enough to skid heavy buildings across it, Antrobus said. “The river freezing hasn’t been reliable,” he said. “Last year it did freeze, but late in season. The previous year it didn’t freeze.” Such is the conundrum of climate change, said Cadiente. “It’s happening faster than we can move,” the village relocation coordinator said. ^ Naomi Klouda can be reached at [email protected]

NANA strengthens in-state business holdings

NANA Development Corp. has bought back into Alaska after a challenging financial period pushed the company to sell several of its subsidiaries. Vice President of Operations Eric Billingsley said in an interview that the Alaska Native corporation pulled the Alaska branches of WHPacific Inc. and GIS Alaska back under its umbrella after selling the Outside offices of the companies. The moves are part of NANA’s broader overhaul of its business model to focus its commercial sector on growth in the state. NANA Development Corp. is the business arm of NANA Regional Corp., which is the Alaska Native corporation for the northwest region of the state. The former Anchorage office of WHPacific has been renamed Kuna Engineering and GIS Alaska’s fabrication facility in Big Lake is now again known as NANA Construction. “We’re glad to have these companies back operating inside of NANA,” Billingsley said. He called the 27-acre Big Lake tract the best fabrication facility in the state given its large size and location, which allows truckers hauling materials to and finished products from the facility to avoid the congested areas of Anchorage and Wasilla. Leaders of the parent company have been encouraged by the gradual but consistent increase in oil prices — now to the mid-$70s per barrel compared to less than $50 per barrel a year ago — as well as recent oil discoveries by ConocoPhillips and other companies exploring on the Slope as indicators Alaska’s oil patch is set to resume growth. “We believe in the state. We believe in the opportunities going forward and we want to continue to prove the services across the gamut to everyone involved, not just to oil and gas but to broad-based commercial businesses as well,” Billingsley said. Kuna Engineering currently has 37 employees and NANA Construction has a workforce of about 190, according to NANA spokeswoman Amy Hastings. She wrote in an email that employment at NANA Construction should remain steady for the foreseeable future and Kuna’s workforce could increase slightly given its work with Teck Resources. The Kuna Engineering team over the years has come to provide a large portion of the engineering work Teck needs at the Red Dog mine, according to Billingsley. Teck operates the Red Dog zinc mine north of Kotzebue, which is located on NANA Regional land. Last year Teck announced that a prospect it had been exploring on state land about 7 miles northwest of Red Dog could be another world-class zinc deposit near what is already a world scale zinc mine if further exploration drilling proves out the resource estimates. Red Dog is one of the largest zinc mines on Earth. Teck is also in the midst of a $110 million upgrade to Red Dog’s mill to increase its production capacity by about 15 percent. Increased zinc prices have helped NANA Development rebound from several tough financial years, according to company leaders. NANA Development, which has roughly 15,000 employees through its subsidiary companies, is also heavily involved in the federal contracting sector. In 2016, the company’s losses in the oil services sector of $61.5 million were part of an overall net loss of $109 million, according to the corporation’s annual report. The corporation absorbed losses in 2014 and 2015 as well. It sold NANA Oilfield Services to shipping and logistics giant Saltchuk in 2016 and also saw Moody’s downgrade $300 million of its corporate debt, citing deterioration in its core businesses, namely oil and gas. NANA sold off WHPacific’s Lower 48 offices last year after holding the company for many years prior. It purchased Grand Isle Shipyard Inc., or GIS, in 2011. GIS was focused on oil and gas support in the Gulf Coast region, according to a NANA release at that time. GIS was then merged with NANA Construction. NANA also operates NMS, a camp services and facilities management firm, and NANA WorleyParsons, an engineering and project management company. Both are significant support service providers on the North Slope. Billingsley said he thinks NANA is in a unique position as a resource owner and an active participant in the resource industry through its support service companies. Keeping businesses like Kuna and NANA Construction also help the parent company and resource owner ensure that development costs are reasonable, according to Billingsley. “There is a suite of services Teck needs to operate the mine and we have the skills and the opportunities to take advantage of those and contract those; so those dollars stay with NANA and we’re also able to provide wages and opportunities for our shareholders,” he said. Billingsley noted that NANA has provisions in its agreements with Teck about using its support companies, but typically doesn’t leverage those provisions. “We want the economically preferable provider and if we’re not, we need to reevaluate some decisions,” he commented. In addition to supporting Teck at Red Dog, Kuna is engaged in rural development work, such as alternative energy projects for Alaska villages. “Really, we believe in Alaska, so all the pieces that weren’t Alaska we just let go,” Billingsley said. Elwood Brehmer can be reached at [email protected]

JBER, Downtown Fairbanks among opportunity zone selections

Geographic tracts identified as 25 federal Opportunity Zones were announced April 19 by the state’s Economic Development office in a move to spur private projects in distressed areas of the state. To be eligible, each tract’s population had to meet the criteria according to the U.S. Census data, said Britteny Cioni-Haywood, the director of the Alaska Division of Economic Development. “The criteria was a poverty rate of at least 20 percent or a median family income in the tract that was 80 percent or lower than the statewide median income,” Cioni-Haywood said. The median family income in Alaska is currently at $69,825. An individual median salary is $34,187 in Alaska. The federal poverty level is defined as an income of $12,060 to $16,643 per individual or $24,600 to $33,948 per family. The program was created by the 2017 Tax Cuts and Jobs Act, which established Opportunity Zones or OZs. U.S. Treasury Secretary Steven T. Mnuchin has said the “resulting benefits will be jobs and economic growth to move these communities forward and provide a brighter future.” The Treasury Department identified 60 low-income tracts in Alaska out of 167 tracts overall. The state Division of Economic Development then was asked to whittle the list down to 25 that are now qualified as federal Opportunity Zones. Letters of application came from community leaders and investors. The criteria for selection are based on economic hardships, geographic representation, project feasibility, alignment with existing initiatives and community support. In the next 10-year life of the federal OZ designation, investors can defer taxes on any prior gains, so long as the gain is reinvested in an investment vehicle called the Qualified Opportunity Fund. The IRS is currently working on guidance for businesses on how to take advantage of the tax credit, according to the Department of Revenue, which issued a news announcement April 9 after the first round of newly enrolled OZs were announced. Certain Alaska tracks may come as a surprise: the Joint Base Elmendorf-Richardson is one. Fort Wainwright and downtown Fairbanks where a performing arts center construction is planned are other designated tracts. Disadvantaged areas ripe for investment to create jobs and better family incomes were identified from the North Slope to Bering Strait to the Upper Kuskokwim and down to Hoonah, Wrangall and Prince of Wales Island. The tracts selected don’t include cities such as Nome, Kotzebue, Utqiagvik, Craig or Klawock in the south where income opportunities are higher than other areas. Seven are in Anchorage, including Spenard, Fairview, two areas of Muldoon, Midtown, and Ship Creek. On JBER, a proposal by J&L Properties is to build new housing units for military personnel. State Reps. Gabrielle LeDoux, R-Anchorage, and Ivy Spohnholz, D-Anchorage, and Sen. Bill Wielechowski, D-Anchorage, all advocated for J&L Properties as “a leading Alaska real estate and development firm” that has “expressed a tremendous interest in this designation for possible development projects,” their letter stated. They represent districts that include an area of East Anchorage where J&L also has proposed more housing. Anchorage’s census tracts 10, 14, 19, 20 and 21, known as Fairview, Midtown and Spenard neighborhoods, were identified in “numerous community plans,” wrote Emma Kelly, the business and economic development director for the Anchorage Economic Development Corp., in the application. “The City of Anchorage, in partnership with AEDC’s Live.Work.Play. initiative as well as Anchorage’s near-complete Comprehensive Economic Development Strategy… all identify benefits that would result from increased private sector investment in areas including housing, education, transportation, crime and safety,” Kelly wrote. Fairbanks tracts are in the area where housing will be needed for some of the anticipated 1,635 new personnel arriving at Eielson Air Force Base with the stationing of 54 new F-35 fighter planes, said Jim Dodson, president and CEO of the Fairbanks Economic Development Corp., or FEDC. The two new F-35 fighter jet squadrons are expected to arrive in 2019 and 2020. After analyzing the vacancies available in the Fairbanks, North Pole and Salcha areas, the FEDC concluded each of these borough communities need more housing to accommodate the squadrons, Dodson said. In Fairbanks-North Pole area, 200 to 500 housing units need to be built, Dodson said. “Analysis shows there will be a need for 900 housing units to house the crews and we have some of that in vacancies,” Dodson said. “But we’ve needed some community assistance to encourage building housing.” The FEDC has been conducting outreach to entice investors so far slow to move into Fairbanks to build the necessary housing, he said. “Maybe the tax cuts will help,” he said. Fairbanks North Star Borough Mayor Karl Kassel wrote of the hardship the area has endured, as cited in the April issue of Alaska Economic Trends. Some of the largest employer cuts were from the University of Alaska Fairbanks where 500 people have lost their positions and numerous retail jobs were lost when Sam’s Club and Sports Authority closed. Kodiak also made a strong pull to become enrolled as a federal OZ, but Kodiak wasn’t selected. No tracts on Kodiak Island were selected in the final cut of 60 communities to 25 OZs. City Mayor Pat Branson, in her letter nominating Kodiak, listed the need for “redevelopment” projects for seafood and tourism, expanded wind capacity on Pillar Mountain and a new seafood processing plant. Areas of the Kenai Peninsula also were not selected, though several qualified. “There were only 25 tracts that could be nominated,” Cioni-Haywood said. “Many factors were taken into account to select the 25. We would have loved to nominate all of the eligible tracts. There were many worthy projects but the federal restriction of only 25 tracts made it impossible to nominate all of them.” In Southeast Alaska, Hoonah, Angoon, Haines Borough, Wrangell and Metlakatla all occupy tracts that were selected as federal OZs. Alasks Power & Telephone was one of the businesses advocating for selection; plans in Southeast include increasing broadband capacity for Skagway, Haines, Prince of Wales Island and Metlakatla, wrote AP&T President Michael Garrett. Prince of Wales Island-Hyder Census Area in Southeast Alaska has nearly 17 percent living in poverty and annual unemployment for the past eight years has between 11 and 13.4 percent. Two investment projects pushed in its nomination are Dotson Ridge rare earth mining project that would recover rare earth elements essential for components needed in high tech domestic and military applications, wrote Craig City Administrator Jon Bolling. Another is an Angoon hydro project. Many projects named in the OZ applications are shovel-ready, Cioni Haywood said, and had been sought by communities for several years prior to the creation of OZs. OZs were first envisioned by the Economic Innovation Group, or EIG, a Washington D.C.-based bipartisan public policy organization founded in 2013 that describes itself as an entity that “brings together leading entrepreneurs, investors, economists and policy makers” to address “America’s economic challenges.” EIG lobbied Congress to set up OZs based on similar programs in the past: the “empowerment zones” of President Clinton’s era and the “enterprise zones” of the President Reagan era. A recent analysis by the Brookings Institute raises questions, and warnings, about how OZ investments might not work as intended. The tax incentives could become a sweet deal for projects that already promise return on investment, but not so much in “deeply impoverished areas where rents and property values are stagnant,” wrote author Adam Looney. He warned against turning a low-income neighborhood into a more upscale one via housing projects if it displaces low-income people and creates fewer places instead of more where they can afford to live. Naomi Klouda can be reached at [email protected] Correction: The original version of the story stated that AT&T was pursuing a project in Southeast. It is actually AP&T, Alaska Power & Telephone.

Labor Dept. prepping for AK LNG job demand

Building a $43 billion project naturally requires a lot of labor. More specifically, the Alaska Gasline Development Corp. estimates its $43 billion Alaska LNG Project will generate upwards of 18,000 new jobs in the state over about six years of construction. Nearly 12,000 of those jobs will be directly dedicated to the project itself: 1,300 heavy equipment operators; 1,500 pipefitters and welders; 2,300 general laborers; and 3,500 truck drivers to move countless types of materials, modules and construction equipment — not to mention the 807 miles of steel pipe. Hundreds more electricians, carpenters, ironworkers and engineers will also be needed, as well as 1,600 people to feed, house and otherwise support those swinging hammers and welding pipe, according to AGDC. With Alaska LNG construction ramping up in a big way in 2020 based on the gasline corporation’s timeline for the project, the direct workforce should peak in 2023 at the aforementioned roughly 12,000 workers and fade to about 6,000 during the last major year of work in 2025. While certainly not all of the $43 billion will be spent in the state, another 6,000 or so indirect jobs could be generated as a side effect to all of the Alaska LNG Project dollars flowing through the state economy, AGDC predicts. The project will also require roughly 1,000 personnel to keep it up and running, with 85 jobs at the North Slope gas treatment plant; 330 pipeline maintainers; up to 400 individuals at the project’s Anchorage headquarters and 240 people manning the LNG plant in Nikiski. The new Gasline Workforce Plan outlines how the state Department of Labor and Workforce Development will make sure all of those jobs can be filled. Department of Labor Commissioner and AGDC board member Heidi Drygas acknowledged that Alaskans aren’t likely to fill all of those positions — there simply aren’t enough people in the state — but said one of her top priorities these days is assuring all Alaskans who do want to work on the project have the opportunity to do so. And that starts with the message that a gasline, the Alaska LNG Project, is real this time. “Yes, it’s been 40 years since we first started talking about a (gasline) project like this, but we finally have a team in place that can bring it to fruition and it’s exciting,” Drygas said in an interview. She noted that those already employed in the construction trades and the oil and gas industry should be able to easily transition to the Alaska LNG Project if they so choose, but individuals without that experience should be looking into training opportunities now. To that end, AGDC President Keith Meyer has stressed the message of “get ready” to those who want to be a part of the project. Alaska’s current recession would seemingly have expanded the workforce available to work on the project as most of the roughly 11,000 jobs lost over the last two years have been in the oil and gas and construction sectors. According to Labor Department data, the closely tied industries have contracted by a combined 7,100 jobs since 2015. However, Drygas said the lack of jobs in those industries in the state today is actually a challenge to assuring the needed labor force is in Alaska when work on the gasline gets going. “(Construction workers) have to have some jobs available leading up to the pipeline project. That is a barrier that we face right now when we are lacking the capital budget that we have seen in years past come out of the Legislature,” she said. Oil and gas and construction workers displaced by Alaska’s economic downturn could have gone elsewhere for work in the active Lower 48 economy or shifted to a different industry to find employment. Alaska’s robust network of technical education institutions, from the renowned state-run Alaska Vocational Technical Center, or AVTEC, in Seward to the unique Fairbanks Pipeline Training Center, the Alaska Construction Academies, the university’s numerous vocational programs and other regional training centers, provides residents many more avenues to prepare themselves for a gasline than when the Trans-Alaska Pipeline System was built in the mid-1970s, Drygas emphasized. The trick is getting young people into their classes. Nearly a quarter of the state’s current workforce in gasline-related occupations are nonresident workers and more than 30 percent are beyond 50 years old, according to the Workforce Plan. “We need to reinvigorate that interest in construction jobs again and that is part of our Gasline Workforce Plan, to educate students — all Alaskans — but we are going to target students in high school to make sure they are aware of the opportunities in apprenticeships, in process technologies, engineering with the university, with any number of jobs, but we really do need to address the issue of an aging construction workforce,” she said. Adding another layer of challenge to that effort is the fact that the state’s ongoing multibillion-dollar budget deficits have pushed the Legislature and the administration to cut the Labor Department’s discretionary budget by 37 percent since 2015, and the majority of that has come out of workforce training programs, according to Drygas. The Alaska Construction Academy budget, for example, has been cut from $3.4 million to $1.8 million, she added. Started in 2006, the construction academies are meant to introduce high school students and adults to career options in the industry through entry-level training. “We’re hoping that in better economic times we’ll be able to fund some of these programs again because that will directly impact our workforce development efforts for this gasline. We have too many construction workers retiring; we have to educate young Alaskans about opportunities in the trades,” Drygas said further. “And sure, it’s not for everyone but I think a lot of young folks just don’t know about it. What they Alaska Construction Academies did so well is to discover young talent in the construction industry.” In-lieu of state funding, the department is applying for more federal Labor grants that it would administer to support training in the trades statewide. Some legislators and representatives for Alaska trade unions have expressed concern that the joint development agreement AGDC signed in November with three large Chinese companies could preclude Alaskans from many of the jobs the project will offer. The joint development agreement indicates Sinopec, a state-owned oil and gas giant with nearly as many employees as Alaska has residents, could have roles in the final engineering, design and construction of Alaska LNG and although nonbinding, the agreement appears to be the framework for a deal that could underpin the project. Drygas said she is totally confident in AGDC President Meyer’s pledge to prioritize Alaska hire on the project. “One of the best ways to ensure Alaska hire is through a project labor agreement and the governor and President Meyer are committed to utilizing a PLA on the project,” she said. Project labor agreements are a pre-hire bargaining agreement of sorts that government entities or their contractors sign with labor unions to offer work to members of those unions. “When you know more about the leadership team in place at AGDC and the governor’s commitment to ensure Alaska receives the benefits from the project — I understand those concerns and I’m glad people voice those concerns but I am not concerned about that,” Drygas said. Elwood Brehmer can be reached at [email protected]

Oil sector leads construction spending rebound

The last couple years have been tough for Alaska contractors. While it took about two years to really be felt as money on large multi-year and preplanned projects continued to be spent, the precipitous fall of oil prices in late 2014 led to construction spending declines of 18 percent in 2016 and 10 percent in 2017 year-over-year. Not only did the price collapse hit contractors working in the state’s oil fields, but state capital spending has all-but disappeared since the oil revenues the State of Alaska relies on dried up as well. Similarly, Alaska’s construction industry workforce has declined by 17 percent since peaking in 2014 with a year average of 17,800 jobs, according to the state Labor Department. Last year the industry averaged 14,900 workers. It’s worth noting that those figures do not reflect construction jobs classified within the oil and gas sector, which has seen its workforce shrink by 5,000 jobs, or more than 30 percent, over the same period. However, there are signs of a turnaround. The 2018 Alaska Construction Spending Forecast, compiled by the University of Alaska Anchorage Institute of Social and Economic Research estimates “on the street” spending will increase 4 percent to more than $6.5 billion this year. Authors Scott Goldsmith and Linda Leask wrote in the report for the Association of General Contractors-Alaska that the modest increase will be driven by a rebound in spending by oil and gas companies that will more than offset continued declines in infrastructure investment by other sectors. At more than $2.5 billion, oil and gas company spending will be up about 15 percent from 2017 on the back of improved and stabilized, if not robust, oil prices in the $65 per barrel range, as well as continued work on a burst of potentially large oil discoveries in recent years and more favorable federal policies. For reference, Alaska oil and gas capital spending peaked in 2014 at $3.9 billion, according to ISER. “Perhaps the most significant recent federal policy change affecting Alaska is the decision to open the 1002 (coastal plain) region of the Arctic National Wildlife Refuge to exploration,” Goldsmith and Leask wrote. “That decision — along with the opening of federal offshore lands to leasing — will not immediately lead to spending, but it does demonstrate a renewed federal interest in the petroleum industry in Alaska.” ConocoPhillips has led greenfield activity on the Slope of late and is drilling five exploration and appraisal wells this winter, the company’s busiest exploration season in 15 years. Additionally, the company is finishing work on its roughly $1 billion Greater Mooses Tooth-1 development, which is scheduled to start producing oil late this year. Industry leaders in Alaska have said spending has been cut to the point where company’s budgets are again stabilized and at least incremental investment is a possibility. Further, Gov. Bill Walker has a bill in the Legislature to pay off the state’s $800 million-plus oil and gas tax credit liability in one lump sum, which administration officials believe could spur additional oil and gas activity if it passes. Walker has also proposed an $800 million capital projects plan to address the state’s deferred maintenance backlog, estimated at roughly $2 billion, and provide a small economic stimulus across the state. However, the funding source for the plan is a proposed temporary payroll tax that is politically unpopular and it’s unlikely the plan will pass this session. The mining industry is also projected to be on the rebound with $239 million of capital projects, up 6 percent from 2017 after years of subdued activity worldwide, according to the forecast. Teck, which operates the Red Dog mine north of Kotzebue, is exploring a large new zinc deposit and Trilogy Metals is continuing work on its prospects in the Ambler Mining District, also in Northwest Alaska. The U.S. Army Corps of Engineers is also expected to release a final environmental impacts statement for Donlin Gold’s massive gold project along the Upper Kuskokwim River later this spring. A favorable decision for Donlin will not mean more spending this year and company leaders have acknowledged the economic viability of the remote mine is very sensitive to gold prices, but if it goes forward Donlin likely represents $5 billion of work over several years of development. Another positive will come from the federal government in the form of Defense spending, which with six large military installations in the state is a significant contributor to the construction industry. The feds are expected to spend $630 million on Defense projects in Alaska this year, an 11 percent increase from 2017, according to the forecast. Missile defense work at Fort Greely will eventually add to the number of interceptor missiles at the Army base. The Air Force is in the midst of $325 million of work to install a long-range discrimination radar system at Clear Air Force Station near Nenana. Further work is also ongoing at Eielson Air Force Base in Fairbanks to prepare for the 2020 arrival of the first squadron of F-35 fighters that will be stationed at the base. The 2018 National Defense spending bill signed by President Donald Trump in December approved nearly $170 million in projects for the F-35 bed-down and $200 million for a new missile field at Fort Greely. Surface transportation spending, particularly on roads and highways, should be up about 6 percent to $667 million, Goldsmith and Leask project. While most surface transportation funding comes from the federal government with a small state match and is generally pretty stable year-to-year, the increase this year is due in part to money from a $453 million state bond package approved in 2012 finally “hitting the street.” “It can take considerable time for transportation appropriations to become cash on the street, so state funds from past capital budgets and bond sales are still contributing to current spending,” the forecast states. “Consequently, the level of spending this year will be a little higher than last.” Much of that money will fund major projects on the Glenn, Seward and Sterling highways. Capital spending in other sectors and industries is generally expected to fall by up to 20 percent year-over-year as bare-bones state capital budgets and the third year of Alaska’s ongoing recession continue to constrain investment. ^ Elwood Brehmer can be reached at [email protected]

LNG tank construction a sign of progress for Interior gas project

Backhoes are back digging in south Fairbanks as construction work is again underway on the Interior Energy Project. Ground-turning work on the effort to expand the natural gas supply to the region had been on hold since the summer of 2015 as IEP leaders looked revise the scope of the project in the face of challenging economics brought on by lower oil prices. The last physical work on the project involved laying gas distribution lines in North Pole and Fairbanks. Contractors for Pentex Alaska Natural Gas Co., which owns Fairbanks Natural Gas, began foundation work in the final days of December for a $48-million, 5.25 million-gallon LNG storage tank. As of March 1, excavation for the tank foundation has been completed, which meant removal of up to 15 feet of silt and ice-laden material at the site near the Tanana River. In place of the topsoil, a series of conduit loops and three feet of insulation have been laid. They’ll be buried under a new bed of gravel that will support the tank, according to Pentex CEO Dan Britton. The conduit will support a passive cooling system known as a “thermosyphon” to keep the permafrost under the foundation frozen and stable if Fairbanks’ climate warms significantly over the next 75 years, which is the planned life of the tank. The insulation and a separate heating loop will act as a barrier between the LNG tank, its super-cold contents and the ground below. Natural gas turns to LNG at about 260 degrees Fahrenheit below zero. Britton noted that while it is counterintuitive to refrigerate the ground beneath a facility that is as cold as the dark side of the moon, the whole system needs to be monitored and controllable. “The concern from the geotechnical engineers is that if we didn’t have an ability to create a thermal break, the LNG could make the ground too cold. It could take it from our desired temperature of about 28 to 30 degrees (Fahrenheit) down to zero, -10, -15 and then it will become a wick for water,” Britton explained during the March 1 Alaska Industrial Development and Export Authority board meeting. “They don’t want us to be wicking water from outside the foundation into the foundation and creating ice lenses and jacking the tank.” He added that if the thick layer of insulation works as intended, the glycol heating loop would be an idle insurance policy. AIDEA purchased Pentex and Fairbanks Natural Gas in early 2015 and is in the process of transferring it to the borough-owned Interior Gas Utility as part of a $331 million plan to integrate the utilities and expand natural gas availability in Fairbanks and North Pole. The tank itself will be a double-walled, fully contained facility with plenty of redundancy. Britton said the request for proposals Pentex issued last summer was for a single-wall tank because the large size of the site and its isolated location meant a single-wall design with an outer containment system would be adequate. However, when Boston-based Preload Cryogenics submitted a comparably priced bid for a double-wall tank, there was no reason not to go with the more robust protections, according to Britton. The outer wall of the roughly 100-foot diameter tank will be 10-inch thick reinforced concrete. The primary inner tank will be made of roughly one half-inch thick welded steel plates The steel comprising the tank will also be about 9 percent nickel to keep it from becoming overly brittle when in contact with the super-cold LNG. “If the inner tank were to breach for some reason the outer tank is designed to contain the full capacity of the LNG. It’s also designed to handle cryogenic temps,” Britton said. Between the walls will be about 3 feet of insulation — largely perlite similar to the white grains found in potting soil. Many important facilities have backups for key parts installed. Fairbanks LNG tank will be no different, other than the fact that it will have backups for the backups. Britton said the tank would have three pump wells, each fully capable of keeping the system operating on its own. Likewise, there will be double redundancy in its vaporizers. They system is also designed to accept LNG from the truck tankers if need be. “In the event we have a problem with the line from the tank feeding the vaporizers we can take LNG directly out of the trailers straight into the vaporizers and into they (distribution) system,” Britton said. “(We’re) trying to put as much redundancy in the system as we can.” More than just a visible indicator for area residents that the long-delayed Interior Energy Project is closer to reality, AIDEA board member Gary Wilken of Fairbanks has called the LNG tank the heart “of the Interior Energy Project.” That’s due in large part to the fact that just the storage tank will allow Fairbanks Natural Gas to nearly double the amount of gas it can provide customers even without additional gas supply. When the tank is finished in late 2019 — in time to capture a $15 million LNG storage tax credit from the state before it sunsets — it will allow Pentex to run its Titan LNG plant in the Mat-Su Borough full-bore nearly all year because it will now have a place to hold the LNG. That means LNG produced during the low-demand summer months can be stored and drawn down during the winter. Currently, with just several small portable storage tanks, the Titan plant, capable of processing about 1.5 billion cubic feet of gas, or bcf, per year, must be run to match immediate gas demand from end users. In recent years that demand has been for between 750 and 900 million cubic feet of gas per year, according to Britton. The 5.25 million gallon LNG tank will allow Pentex to run the Titan plant to process up to 1.4 bcf of gas, he said, allowing for a few weeks of maintenance downtime each year, he said. Britton described the tank as providing a “direct line of sight” to when more natural gas will reach Fairbanks customers. Finally, while the overarching contract for the tank went to an Outside firm, there is no shortage local contribution to the construction. “We have a lot of work that’s being completed by Alaskan contractors and Alaskans,” Britton emphasized. He listed 10 Alaska companies that are subcontractors for Preload Cryogenics on the project. Great Northwest Inc., a Fairbanks-area general contractor handled all of the site preparation and gravel fill. Anchorage Sand and Gravel is casting the outer tank panels, which will be trucked north to Fairbanks. Three of the 85-foot long concrete test panels will be started later this month and the first will head to the site in early June when spring weight restrictions on the highways are lifted, according to Britton. Elwood Brehmer can be reached at [email protected]

Duluth, Dave and Buster’s cushion recent Anchorage job losses

Ax throwing and log sawing contests vied for crowd approval outside but it was probably the flannel shirts or underwear inside that stole the show when Duluth Trading Co. staged its grand opening March 1. Duluth took over the 24,500-square feet former home of Sports Authority at 8931 Old Seward Highway, which closed in 2016. After an investment of $800,000 in renovations performed by local contractors H. Watt &Scott Inc., it took about a month to set up the store and hire 50 individuals, said manager Erik Hansen. The Wisconsin-based clothing company wanted a big Alaska entrance for its grand opening. One sure need when scouting out the store’s location was a high-visibility spot near a highway where motorists would frequently spot the brand name, Hansen said. It didn’t hurt when the festivities included its standard live shows that involved throwing axes and chopping wood. Inside, product lines spouted rhymes — “Crouch without the Ouch” pants and “Dry on the Fly” coats — had drawn hundreds of customers standing five deep by each cash register. “It’s been non-stop busy since we opened,” Hansen said. Duluth is opening just after some big names — Sports Authority, Sam’s Club and now, Sears — have exited the Anchorage market. But other big name stores are moving in to hire nearly the same number of workers displaced by a sum total of the closings, said Anchorage Economic Development Corp. CEO Bill Popp. What’s happened in Anchorage with the loss of big box stores involves corporate decisions based on a national level, Popp said. “It was impacted by what was going on in Alaska and may have been sped up a process … but it was not only the Alaska recession,” he said. He sees Dave &Buster’s — set to open March 19 — as a trendy entertainment chain and Duluth as “true retailers.” But each is very much customer experienced-base, he added. “Duluth is fun, energetic, engaging. The same will be true with the Dave &Buster’s model. These will be two good contributors to the economy,” Popp predicts. Between the two newcomers, about 350 jobs are getting filled, Popp said. When Sam’s Club closed, just fewer than 300 people lost their retail jobs. Sears’ economic descent in Anchorage meant steadily shedding jobs until near the end it employed just more than 100, meaning a more gradual loss of jobs for the economy to absorb, he said. “The job losses are replaced already,” Popp said. The next employment opportunity comes in constructing and filling the 60,000-square-feet of space now occupied by Sears where a grocery store will go in, Popp said, which will mean a few hundred jobs. Guitar World will be employing a “couple dozen” people as well, Popp said. Anchorage is likely to see additional national attention from companies that don’t yet have a presence here. “That is traditional in a business cycle, when a town is in a weakened economy,” Popp said. “Construction costs are down. Contractors are willing to sharpen pencils more sharply in terms of bids. Rent is cheaper. So a smart business operator who has the cash and financial ability to do so will take advantage of the bottom side of the cycle.” In releasing the AEDC 2018 economic forecast this January, Popp predicted the recession is “moderating quite a bit and potentially will end later this year, barring unforeseen circumstances.” The new mall businesses will help, he said. “They will help to moderate the losses and end the recession. Returning to growth, however, that’s different, That has to come from state fiscal policy to return to more robust growth,” Popp said. “But on a local level, retail wise, these are positive signs for retail and the service economy.” The recent bankruptcy declaration by the group owning Humpy’s Great Alaskan Alehouse, the Williwaw, Flattop Pizza and Bootleggers 8 Star Saloon is “concerning” in what it may forebode about the Anchorage service economy, Popp said. “There are signs of weakness in employment and we are hearing anecdotally they are struggling. I’m worried we will see a couple of those closing,” Popp said. “The recent announcement of bankruptcy by Humpy’s — that’s some of the concerns we have in that sector.” On the other hand, Popp added, it’s normal in a down economy for consumers to reduce dining out, even for businesses to tone back the lunch and catering dates. That trend negatively impacted local restaurants’ profits, he said. Alaska tested A line of 25 or so waited in single-digit temperatures for the doors to open at Duluth. “One man said he’s a big fan of our catalogue and took the day off work so he could be here for the opening,” Hansen, the manager, said. Alaska was a good match for Duluth’s product lines, Hansen said. “Three years ago they came here for a trades panel discussion and saw we would definitely have a customer base here,” he said. The trades panel is a made up of industry representatives from construction, commercial fishing and extreme outdoor adventuring like dog mushing. Duluth consults these representatives to gain feedback that then goes into how it manufactures outdoor gear after trials. Its Alaska Hard Gear line, which takes up a 1,600-square foot chunk of store space, was manufactured with the help of such feedback. The lines are manufactured by companies in and outside the USA, Hansen said. “We gained product feedback to see what’s needed: Is it the right length? Is it too heavy? If a coat is too heavy, they won’t wear it,” Hansen said. Wall illustrations of people wearing the apparel aren’t models but actual Alaskans who wore the clothing and evaluated its durability in a hardcore industry workout. Commercial fishermen from Sitka, construction workers and a dog mushing woman dominate the wall space. In 1998, the company was founded by brothers Bob and Dave Fierek in Belleville, Wis., after they designed a tool organizer they called the Bucket Boss. Still a best-seller, the tools can be tossed unsorted in a bucket. “Then you can organize them easier with the kit like this around the bucket,” Hansen said as he demonstrated. Since 2001, Duluth Trading Co., has been owned by investor Steve Schlect, now its CEO. The Anchorage location marks its 32nd store. Dave &Buster’s opening nears Duluth’s opening is to be followed by another major anchor for South Anchorage at the Dimond Center in Dave &Busters Sports Bar, a popular bar-restaurant chain from Texas that also prides itself on doing things large. Dave &Buster’s opens March 19, said Jared Hilliard, manager. They’ve hired about 300 service workers, though interviews conducted and wrapped up March 5. Some 1,400 people applied over the past few weeks, according to the company. The restaurant’s entry to Alaska required more than raising the roof at the Dimond Center. It also required legislation that was signed by Gov. Bill Walker in 2016 declaring the tokens or tickets that can be won in gaming are not classified as gambling. The 44,000-square foot business is to be located on the second floor of the Dimond Center, down the hall from the Regal Cinema movie theaters. The location will have a sports bar, dining, arcade gaming area and private dining areas for parties and events, said Dimond Center Marketing Director Brenda Steil. The $21 million investment was split by the Dimond Center owners the Ashlock family ($11 million) and Dave and Buster’s ($10 million), she said. The construction contracts were given to local companies. Between construction and Dave &Buster’s hires there were nearly 600 jobs created by this Dimond Center expansion, Steil said. The redesign of space involved major changes to the mall’s northern edifice and lifting the roof, which was built in the original mall design of 1977. Local companies WB Architecture, MCN Construction Inc. general contractors, BBFM Engineers, Allied Steel Construction Inc., RSA Engineering and Steel Erectors were all involved, with only one outside contractor, Rooflifters of Miami, Fla. Sears Mall transition Sears at its namesake the Mall at Sears is closing down, with plans for a new Safeway store to take up a majority of the space. Albertson’s, which purchased the Alaska Safeway chain of grocery stores in 2014, removed a main mall anchor when it closed down its Safeway store at the western end in 2015, said Linda Boggs, the mall’s marketing and leasing specialist. “I guess they missed it. Now they want to put it back in, but at the opposite end,” Boggs said. The mall, owned by national group Seritage Growth Properties, is giving out few details on its plans for releasing the space to new retailers. A press release the company put out stated only that Sears was closing in April and that the lease of 145,680 square feet in the store area and 17,390 square feet in the auto center for were each up for lease, all with the ability to subdivide. The western side of the mall — where the Carrs store formerly leased space — is currently in need of a company to lease it, Boggs said. A new name also is on the way to replace “The Mall at Sears,” Anchorage’s second oldest mall, built in January, 1968. (Montgomery Wards in the Northern Lights Center was first, built in the early 1960s.) “Just in time for its 50th anniversary, we will be revealing the new name,” Boggs said. “It will be something simple.” The public will hear about the new name in a “few weeks” she said, after the decision and the new signs are made. They also are waiting for Sears to close its doors sometime in April. Naomi Klouda can be reached at [email protected]

Homer grad finds career path at AVTEC

HOMER — Career in a year. That’s the motto at the Alaska Vocational Technical Center in Seward also known as AVTEC. “That catch phrase is one of my favorites,” said AVTEC plumbing and heating instructor Tim Shearer. “We teach skills that every employer is looking for. And not just skills, but also communication skills, job skills, all those skills that prepare a person to be successful.” That’s exactly what T.J. Thomas was looking for when increasing the number of employees at Anchorage-based Living Waters Plumbing and Mechanical. “Honestly, and I speak for pretty much anywhere in Alaska, any company is hungry for qualified and skilled technicians, right out of school with some experience that we can utilize. That is definitely a bonus,” said Thomas, one of the owners of Living Waters. Opened more than a year ago and with a crew of eight, the company serves Anchorage, the Matanuska-Susitna Valley as well the Kenai Peninsula and areas in between. The AVTEC philosophy also fit the bill for Luka Schulz, a 2016 Homer High School graduate, whose story illustrates how Alaska’s employee base is growing through a hometown-to-workplace collaborative effort. “I didn’t know what I was going to do,” said Schulz of the uncertainties he felt as classmates applied for college. Enter Monica Stockburger, Homer High teacher and coordinator of FOL, the school’s Focus on Learning program, and Cam Wyatt, the school’s career technical educator. Stockburger and Wyatt took time to talk with the student, assess his strengths, and offer possibilities Schulz hadn’t considered. “We felt he was a unique kid that had the brains to do anything he wanted to do, but we knew we had to find the right fit,” said Stockburger. As an instructor, Wyatt had witnessed Schulz’s ability to work with his hands, his interest in working independently, the ease with which he completed CTE classes, and his lack of interest in going to college. Putting it together, Wyatt suggested refrigeration as a path to Schulz’s future. In some ways, it followed the footsteps of Schulz’s father. After attending Paul Smith College in New York, Steve Schulz has had a career in the building trades, with his son often working at his side. “They did a lot of building things together, tinkering on dirt bikes and snowmachines,” said Schulz’s mom, Sharon. Her son did fine in school, “but he really preferred hands-on more than anything. So that’s why the teachers suggested maybe a trade school would be more interesting for him that a four-year college.” Stockburger and her husband Mike are active with Homer Marine Trades Association, a nonprofit whose membership promotes marine-related businesses and activities through numerous channels, including the annual award of a $1,000 scholarship for vocational education and skill training. Formed in 2011, the association also participates in Homer High’s FOL program. Stockburger helped Schulz complete the scholarship application and, after being named the recipient, Schulz applied it toward AVTEC’s refrigeration program. He began the 686-hour, four-and-a-half-month course of study in January 2017. Half classroom and half hands-on, the fast-paced program encompasses installation and repair of air conditioning and refrigeration systems, and diagnosing and repairing electrical controls. Once he completed that program, Schulz then enrolled in AVTEC’s plumbing and heating courses, another 686-hour, four-and-a-half-month program. “I had learned a lot, but didn’t know a lot about electrical systems and felt I could use some more experience,” said Schulz. An AVTEC discount for taking the programs consecutively helped with the cost. Also half hands-on and half in the classroom, the plumbing and heating program is divided into sections on electrical, natural gas-fired, oil-fired and hydronic heating systems; electrical plumbing and heating; and plumbing. The last week of the class is devoted to welding. Fortunately, Schulz had covered that during his refrigeration study, because in December 2017, one week short of graduation, he was hired by Living Waters. A division of the Alaska Department of Labor and Workforce Development, AVTEC offers 20 fields of training. In fiscal year 2017, which ended last June 30, 245 students attended AVTEC’s long-term programs and 1,145 were enrolled in short-term programs like refrigeration and plumbing and heating, according to Rachel James, job placement specialist in AVTEC’s Counseling Department. Students average 25 years of age and represent 187 communities, with 55 percent from Southcentral Alaska. In fiscal year 2016, 90 percent completed training/education and obtained employment in their field. In 2017, the completion rate increased to 97 percent. “AVTEC’s mission is to prepare students with career and technical skills required for success in the Alaska workplace,” James said. Students also are offered help refining career goals, developing job-search skills, resume writing and job interview techniques, as well as what Shearer considers soft skills. “Our advisory board, people in industry, keep us up to date on trends, advancements and technology. A lot of what I get from them is the importance of an employee that’s easy to get along with, shows up on time, is clear-headed and has a respect for authority,” Shearer said. “Luka fit that mold. He was an ideal student. He really had an appetite to learn, to be good and it showed.” Looking back, Schulz said, “I made the right decisions, got employed right away and am using my knowledge so I feel comfortable, but I know the right questions to ask if I’m stumped. That’s what AVTEC gave me, the knowledge to ask the right questions.” Thomas is happy to have him. “He definitely has a good attitude and just wants to work hard and make this a career,” said Thomas. “He’s setting himself up where within four or five years, he’ll be taking home $40-plus an hour in his check with a whole package of almost $80 with benefits.” Now retired, Stockburger continues to help students navigate school application hurdles and remains active with Homer Marine Trades Association. The association’s application for the 2018 scholarship is available at homermarinetrades.com. “This is what people in the teaching profession wait for, the moment in time when they get a call or hear about a young person being successful,” said Wyatt, who was awarded the Association for Career and Technical Education’s 2015 Promising Practice Award and named the 2016 Secondary SkillsUSA Advisor of the year. He is now principal of the Mesa County School District 51 Career Center in Grand Junction, Colo. “Career technical education is rebounding on a national level,” he said. “Homer High School continues to understand that and develop that area of the school.” Schulz recognizes the importance of that local support. “It definitely made a big impact,” he said. “It was really nice that I actually got a scholarship from my hometown.” AVTEC’s 2018 job fair will be April 15. Employers interested in participating should contact James at 907-224-6172. McKibben Jackinsky is a retired journalist and freelance writer who lives in Homer, Alaska. She is the author of Too Close to Home? Living with ‘drill, baby’ on Alaska’s Kenai Peninsula, published in 2016 by Hardscratch Press.

Bradley hydro expansion moves forward with AEA approval

The Alaska Energy Authority board of directors unanimously approved a $46.4 million expansion of the Bradley Lake hydroelectric plant at its Aug. 10 meeting in Anchorage. The board’s vote allows the AEA to move forward to pursue financing and developing the Battle Creek diversion project at the headwaters of Kachemak Bay, a move that will boost production by about 10 percent and add 37,300 megawatt hours per year to its current output. That’s equal to powering an additional 5,200 homes. The project has received approval from the Federal Energy Regulatory Commission, and is “shovel ready,” AEA Executive Director Michael Lamb told the board. Now it is up to the energy authority to decide between five funding options. The least expensive involves New Clean Renewable Energy Bonds or NCREBs. The most expensive involve financing from the utilities for a project estimated to be complete by 2020 but will not be paid off for 30 years or more. The board’s decision means moving swiftly ahead in its application for a U.S. Treasury Department allocation that would cover 70 percent of interest on the hydro project. The allocation would come from leftover American Recovery and Reinvestment Act funds in President Obama’s 2009 economic stimulus package. The request is for NCREB funds that were made available to expand renewable energy projects under certain criteria. Between 2008-2009, $2.4 billion in NCREB funding was made available to U.S. utilities. “There aren’t many of those funds left, but there is enough,” Fred Eoff, the director of PFM Financial Advisors LLC of Seattle, told the board. AEA board member and Deputy Commerce Commissioner Fred Parady advocated “moving ahead as quickly as possible to get in line for the lowest possible financing.”   There’s a lot of variation between the five options, said Eoff, whose firm is advising the authority on possible financial arrangements to fund the Bradley Lake hydro expansion. Interest rates range between 1.47 percent to more than 5 percent, depending on which financing scenario is chosen. Among the various financing options, interest totals ranged from $12.4 million to $50.9 million over 30-year life of the financing. “There’s a wide disparity in the total and the reason for that is that the most effective financing available would be from the Treasury Department, a 70 percent subsidy equal to 70 percent interest costs over a 30-year period,” Eoff said. “That radically reduces the cost of financing.” AEA would then pay the lower costs — around $12 million for financing the $46.4 million over 30 years. “But that is only if they are successful in their application to the U.S. Treasury and are granted an allocation of congressionally-authorized limits,” Eoff said, referring to the NCREBS funding. “There is not a lot of capacity left, so we have to submit the application at the earliest date possible. Until they get an answer from Treasury, we don’t know if that’s available. But we do believe the characteristics of the project — clean renewable energy — meets the criteria established.” Lamb told the board that the application is already in the works. Another factor that could influence the cost of borrowing money is Alaska’s poor credit rating, which was downgraded in July by two different agencies after the Alaska Legislature failed to come up with a long-term fiscal plan.  “A score of AA- or AA+ affects the interest, and the cost of the project would go up or down based on that,” Eoff told the board, in response to a question from Parady about what impact the state’s economic situation could have on the Bradley Hydro financing. Eoff, whose firm also acts as financial advisor for the Alaska Industrial Development and Export Authority, the Yukon Kuskokwim Health Corp., and the Alaska Municipal Bond Bank Authority, said he is optimistic that this year’s credit rating is “as low as it will go, and it will stay in the A category.” If it did decline to BBB rating, the bonds would be sold at a higher interest. “The Alaska credit rating is the bell weather of everything that goes on up here,” Eoff said. If AEA does not receive NCREB funding, one option is to issue taxable bonds. Another option is for Chugach Electric Association financing. CEA has offered to finance, procure and manage the project for all the participating utilities “if necessary,” according to an agreement signed July 1 by CEO Lee Thibert. The project has the support of all six Bradley Lake utility associations: Homer Electric Association, Chugach Electric Association, Matanuska Electric, Seward Electric Utility and Golden Valley Electric Association and Anchorage Municipal Light and Power. All will have the ability to tap into the power generation, but so far, four have agreed to help plan the funding and development: CEA, HEA, MEA and the City of Seward. The Battle Creek project consists of constructing a 16-foot high, 60-foot wide concrete dam to divert water into a five-foot diameter, high-density polyethylene pipe. The pipe — using natural gravity — would carry the water 1.7 miles to the Bradley Lake facilities. A 2.9-mile gravel road would be built to access the dam. It would be located atop buried water pipe to make the most use out of the pipeline corridor. The water from Battle Creek would be stored in Bradley Lake, thus providing additional water to be run through the existing powerhouse, said AEA Owned Assets Manager Bryan Carey. In other AEA board action, members accepted the resignation of Lamb, effective Aug. 15. Current AIDEA Executive Director John Springsteen will serve as interim director for AEA as well as his AIDEA role. AEA has started accepting applications for the new executive director. Naomi Klouda can be reached at [email protected]    

Vigor works to cut turnover by training local workforce

Vigor Industrial, operator of shipyards in Ketchikan and Seward, has embraced training of a local workforce as its key strategy in reducing a costly problem with turnover of skilled workers, company officials say. In 2015, with a $101 million contract in hand to build two new, 280-foot state ferries and an increasing workload from the fishing industry, Vigor experienced a 46 percent turnover. Within a year, Vigor managed to reduce that rate to 23 percent, and the downward trend continues in 2017, said Doug Ward, Vigor’s manager of Alaska business development. In 2016 Vigor employed 191 people in Ketchikan, with the number steadily growing as the shipyard attracted more business. Ward said Vigor’s key strategy in reducing turnover is an intensive focus on growing the resident skilled workforce, mostly by upgrading skills of people already working in the shipyard. The company has brought in new local recruits, too, a result of Vigor’s on-the-job training for entry workers and its involvement with the Alaska Construction Academy, which offers instruction and certifications in construction and shipyard skills. Last January, Vigor announced an expansion of its efforts through Maritime Works, a coalition of Alaska marine industries aimed at fostering workforce development in the state’s big maritime sector, including the seafood industry. The expansion of Vigor’s program in Ketchikan is the first initiative under the Maritime Works initiative, although other partners in the group also have efforts underway. Ward said a special feature of Vigor’s program is an expanded use of technology on the shop floor, in this case apps on mobile cellphones that have increased productivity and improved safety at the Ketchikan shipyard. This year the procedure is being expanded to the training programs. In safety, workers with apps loaded in their cellphones photograph potential safety problems and distribute them instantly for corrective action, if that is needed, Ward said. The procedure helped Vigor reduce its recordable injury incidents from about 13 three years ago to 1.8 in 2016, he said. A similar gain, this time in productivity, resulted when Vigor applied the cellphone apps to design changes needed when parts being fabricated in the yard don’t fit or work as the design team intended. Photos from the shop floor instantly communicate the problem to the entire production and engineering team, as well as the naval architects, resulting in corrected drawings being made available in hours rather than days or weeks, Ward said. Now the procedure is being extended to Vigor’s on-the-job training. “To our knowledge we are the first to be doing this,” he said. For training, the smartphone with its app will provide two major benefits. One is that it gives a worker on the shop floor access to learning materials, including videos, while learning on the job. This increases the efficiency of the training, Ward said. Second, and most important, it provides a way to easily document the training. “It provides direct evidence, a record, of the training, which is critical in getting the final certification,” he said. In a related development, Vigor has applied for its fourth annual agreement to be a participant in the Alaska Construction Academy, a network of training entities for construction skills operating in several parts of the state, except that the Ketchikan branch focuses on shipyard skills. For Vigor, the affiliation with the construction academy brings a formal relationship with the state Department of Labor and Workforce Development and training providers like the University of Alaska and AVTEC in Seward. The construction academies statewide, however, are going through radical changes with the sharp reductions in state budgets. Previously, appropriations of state funds from the Legislature supported the programs, which were operated by the Alaska Construction Foundation, nonprofit education arm of the Associated General Contractors Alaska. With state funding cut, AGC’s foundation has had to exit the program, which has now been passed to the state Department of Labor and Workforce Development for overall administration, although there is less state money available this year. Several of the academies in rural areas are now to be operated by regional workforce training centers, and in Ketchikan by Vigor, with the needed funding scraped up from competitive grants, national and state philanthropies and employer investments . Ward said a key factor in the Alaska Construction Academy, in its several locations, has been the ability to certify training under the National Center for Construction Education and Research, or NCCER, a construction industry program which issues certificates for about 70 construction-related skills and maintains a national database of certificates. Several years ago shipyard skill certifications were added. Recently representatives from Jobs For the Future, a national group, visited Ketchikan to introduce formal apprenticeship in the occupation of welder/fitter. The loss of state funding for the academies was a real threat to Alaska workforce development, Ward said. Several nonunion Alaska contractors like Peak Oilfield Services and CH2M depend on the NCCER certifications for their craft workers. “I was very worried that with the demise of funding for the construction academies would result in the NCCER certification for Alaska lapsing. The initiative to maintain it through the Department of Labor and the Maritime Works has become very important,” Ward said. To give Maritime Works an organizational structure, a relationship was established in 2014 with the Alaska Process Industries Career Consortium, a long-established industry nonprofit that works with the industries that operate industrial plants, like oil and mining companies. “This was a natural fit for Maritime Works,” Ward said. “APICC has a proven, 20-year track record working with industry and training providers like the University of Alaska.” APICC will provide management of any funds received to support Maritime Works and will also coordinate outreach efforts, particularly with schools. Tim Bradner is co-publisher of Alaska Legislative Digest and a contributor to the Journal of Commerce. He can be reached at [email protected]

Hotels spring up as visitor numbers keep climbing

Alaska has some of the highest hotel occupancy rates in the country on average in the short four-month period from May to September, enough to warrant yet four more hotels on the Anchorage landscape in addition to three that went up last summer. The Hyatt House on C Street opened in May and the company is breaking ground for two more hotels on land cleared at nearby 46th Avenue. Last summer saw My Place on Old Seward across from the University Center open. A new Aptel Hotel opened near the Northway Mall. And Home2 Suite opened in 2016 near Motel 6, also on C Street. “Hotel Row,” as C Street is dubbed, isn’t finished becoming one long string of hotels in its stretch from International Airport Road to Northern Lights. Senior City Planner Francis McLaughlin said the city didn’t plan it that way, but a thematic draw in the area makes sense in its proximity to the airport and its zoning allowance for hotels. The Alaska visitor industry has sustained hotel growth, said Alicia Maltby, executive director of the Alaska Lodging and Hotel Industry Association. The 24,000 hotel rooms in the state are soon to be boosted by another couple hundred rooms at least, she estimates, in the new structures. More than half of the statewide number is in Anchorage. “If the occupancy rate isn’t 62 to 67 percent or better, the hotel investors are not going to gamble by building,” Maltby said. Anchorage has a consistent record for hotel occupancy over the past three years, especially since new tourism records were achieved at nearly 2 million visitors in 2016. But the summer months saw increasing demand for hotel rooms, and some hotels unable to keep up with that demand, she added. Records for the Anchorage Municipality’s 12 percent bed tax collected city wide shows more than 8,000 rooms were rented per quarter, or 65 percent occupancy and higher. As of May 22, $3.7 million was collected in the first quarter 2017 on 8,178 rooms. In the breakdown, $1.6 million in taxes came from “upper class” rooms and $1.7 million came from mid-market rentals. Another $196,748 came from economy class. Compare that with peak season in the third and fourth quarter. Anchorage took in $7 million and $10 million respectively after rentals of 17,400 rooms collectively. In 2015 first quarter, 7,985 rooms were rented at Anchorage’s hotels and a collection of $3.8 million is shown in city tax records. That year, 2015, also saw, peak-season, tax collection of $7 and $10 million in second and third quarters on 16,860 rooms. “Hotel occupancy in Anchorage has been pretty consistent largely due to the good marketing efforts. Anchorage is a convention destination,” Maltby said. “The bed tax fund was used to build the Dena’ina Center. Iditarod brings a good crowd. The AFN (Alaska Federation of Natives) comes to Anchorage and Fairbanks, alternating years. We have ‘Staycations’ now and business travel as well as corporate events. Sales teams do a good job to keep occupancy up.” Another hotel is going up on a 3.5-acre site near Office Depot and Lowe’s off C Street, this one a Hyatt Place Hotel where 148 rooms are planned, McLaughlin said. The Ted Stevens Anchorage International Airport also is getting into the hotel business. Currently it is in a 60-day period accepting requests for proposals, said Tom Hubble, the airport leasing and concessions business manager. “The idea is to walk from the airport into the hotel without going outside,” Hubble said of the concept. Possible locations have been proposed between the airport’s South Terminal and North Terminal or by the train depot at the airport. Hubble expects the estimated $40 million to $60 million project to go up for bid later this year, with hope for construction to begin in 2018. Kenai Peninsula The Kenai Peninsula, which received more than 1 million visitors in both 2015 and 2016, looks like it could support more hotels to the casual visitor, said Shanon Davis, director of the Soldotna Chamber and former director of the Kenai Peninsula Tourism Marketing Council. “The whole Peninsula could support the development and we do have new properties opening up, new B&Bs, a new lodge in Seward and an extended one at the Fox Island Wilderness Lodge and the Alaska Wild Land Adventures at Cooper landing,” she said. But no new hotels proposed for the region could mean a couple of factors, Davis said. One is that it takes time for investors to feel confident that “now is the right time to buy and to expand.” That’s not to say there aren’t big investments, such as in the transfer of the Kenai Landing, formerly owned by Jon Faulkner, who owns Land’s End in Homer. It was sold to Ron Hyde, founder and chief executive officer of PRL Logistics. The historic cannery went through a year of intensive design and preservation work and was renamed “Cannery Lodge.” “We have a tremendously diverse amount of lodging on the peninsula,” Davis said. “Cabins along the Kenai River, B&Bs. Definitely, that is what is saving the area as far as having enough rooms. Except for three weeks in July when the kings and reds are good at the same time, we seem to have enough rooms for everyone.” The outlook is for continued good visitor numbers to the Peninsula this summer, she said. One continued complaint expressed by several Peninsula communities is that cruise ship passengers by-pass their towns en route to Denali National Park or elsewhere by bus or train. “A new hotel built by Holland America or Princess is one thing I think a lot of us would like to see,” Davis said. Southeast No new hotels are going up in Juneau, at least, none were publically announced, said Juneau Chamber of Commerce Executive Director Craig Dahl. But big investments are going into hotels in the land-locked seaside capital of the state. A multi-million dollar renovation at the Goldbelt Hotel rebranded it to the Four Points by Sheraton Hotel and put millions of dollars in the local economy. It was purchased by the owner group, YC Rivergold Hotel LLC, in July 2015 with the intent to rebrand it as Four Points, said General Manager Aimon Indoung. “The hotel was built in 1976 and there is no room to add space since we are downtown,” Indoung said. The 106-room hotel saw bathroom overhauls and major design changes, she said. Sitka will see a 71-suite Aspen Hotel open on July 15, adding a fifth hotel to the popular southeast Alaska town that sees seven to eight cruise ships per week. Sikta Chamber of Commerce’s Eileen Chanquet said rooms sell out at the Westmark, Totem Square, Super 8 and Sitka Hotel during the summer. “We’re excited to get another hotel up and running,” she said. My Place Hotel in Ketchikan opened this spring, adding 64 rooms to availability, said Chamber Director Bill Swift. This is the chain’s second Alaska hotel; the other one is located on Anchorage’s Seward Highway. Naomi Klouda can be reached at [email protected]

Construction season ramps up with nearly $1 billion in projects

Summer 2017 brings $976 million in construction contracts for 128 projects in 45 communities across the state as the season for both tourism and construction gets underway. The dollars — 90 percent federal with a 10 percent state match — will pay for Alaska Department of Transportation and Public Facilities highway and airport improvements. Federal monies so far have remained at consistent levels in recent years, said department communications director Meadow Bailey. The good news for the Alaska Department of Transportation is that many projects are coming in lower than bid estimates. DOT’s Jill Reese, public information officer for special projects, said competition for projects is intense. “It’s due to the shift in vertical construction to horizontal,” she said, referring to the decrease in capital spending construction due to the recession currently underway in Alaska. “Firms that normally work on tall buildings are bidding on road projects that they hadn’t in the past,” Reese said. This allows federal dollars to stretch further. Summer travelers out of Anchorage heading south get a big break this summer from road construction projects, while the majority of road projects are focused north. Some of the most involved projects that started June 2 include: • Dalton Highway MP 362-379 Reconstruction: This is the third in a series of projects to reconstruct 52 miles of the highway south of Deadhorse. This project includes widening, spot repair and resurfacing the highway from Miles 362-379. The construction contract is $32 million, the contractor is Cruz Construction Inc., and the project will be completed in September 2018. • Haines Highway MP 3.5-25.3 Reconstruction: This is the first in a series of projects to reconstruct the highway from Mile 3.5-12. The construction estimate is $40 million to $50 million, the project will go out to bid this summer, and the project is scheduled for completion at the end of 2018. • Seward Highway: Dimond to Dowling Reconstruction: This project involves reconstructing the New Seward Highway from four to six lanes between Dimond Boulevard and Dowling Road, improving frontage roads, and Sandlewood Place, including adding pedestrian facilities and bike lanes. During construction, two new bridges will be built across the highway connecting 76th Avenue to Lore Road. The construction contract is $55.9 million, contractor is QAP, and the project will be substantially complete in fall 2018. • Sterling Highway, MP 58-79 Rehabilitation: This project will rehabilitate the Sterling Highway from Mile 58-79. Improvements include resurfacing, widening shoulders, adding passing lanes and wildlife viewing structures. During construction, staff will replace the culvert at the East Fork Moose River with a bridge, and install a pedestrian undercrossing for the Skyline Trail. The construction contract is $54 million, the contractor is Granite Construction, and the project will be complete in October 2018. North of Anchorage: On the Glenn Highway, expect repaving from Highland Road to Eklutna in the evening hours from 7 p.m. to 5 a.m. Be alert to lane restrictions and reduced speeds. Work on 14 miles of road is expected to be finished by August. Parks Highway from Church Road to Pittman Road undergoes construction beginning June 6 from 8 p.m. to 6 a.m. Between MP 44.5 and 48.8 a two-lane will be expanded into a four-lane divided highway with a new bridge at MP 46.5. This is set to be finished by August. Parks Highway MP 91.2 to 92; MP 100 to 100.8: DOT is improving the railroad crossings at these points with new overpasses going up over the rail crossings. This is set to be finished by October. Parks Highway MP 239 to 252: The highway segment leading to Denali National Park includes repaving, and installing new signage and guardrails. Expect delays and watch for the pilot car. This is the third season after mitigating rock fall hazards by removing loose rocks south of Glitter Gulch. The department is hoping to be finished by July because this is a high traffic area. Expect minor day delays and most work at night. Elliott Highway MP 107.7 to 120.5: Highway reconstruction between Fox (about 10 miles north of Fairbanks) and Manley Hot Springs involves a realignment to improve sight distances and drainage improvements to reduce icing and overflow. Richardson Highway MP 24 to 35: Resurfacing has begun on this 11-mile stretch that involves culvert replacements and asphalt grinding. Upon completion, new asphalt will surface this gravel road. Tok Cutoff MP 75.6: DOT is putting in a replacement bridge over the Slana River. Expected to be complete in October, drivers should be alert to a detour during summer months. MP 64-67 Taylor Highway: Reconstructed road surfacing by DOT on the three-mile stretch to the Chicken Bridge takes place Monday through Sunday 7 a.m. to 7 p.m. Expect delays of up to 20 minutes and be alert to the pilot cars. DOT is working on a new bridge over Chicken Creek. South of Anchorage: Travelers get a break from construction this summer on the segment from Anchorage to Girdwood. The next project in the planning stages involve the segment from MP 105-107 at Windy Corner. The goal is to take out a dramatic corner for safety issues, Reese said. This has been controversial, according to public testimony. “Some people think it will be unsightly to take out the rock. But we see it as a safety issue,” Reese said. “This project won’t begin until 2018 at the earliest.” The Alyeska road that leads from the Seward Highway to Arlberg Road is a minimal project but due to heavy summer traffic, is listed as one to keep in mind. Road structural improvements and guardrail replacements could cause delays. Also in design is the segment from MP 90-75, Girdwood to Turnagain Pass, which is getting safety improvements in the form of eventually replacing eight bridges. Watch for 15 miles of construction to make more passing areas and straighten dangerous curves. Sterling Highway MP 114-135: Ending at Ninilchik, this stretch will cause some single-lane traffic and delays throughout June in what DOT hopes is a one-month project to upgrade storm drains, guardrails, signage and repave. Traffic interruption will be minimal. Kalifornsky Beach Road from MP 16-22 will be seeing more road improvements. On this section is the ear that was damaged in a 2015 earthquake. The plan is to resurface from MP16 (just west of Bridge Access Road) to Milepost 22.2 (just west of Sterling Highway). In addition, improvements will be made to the existing traffic signals at Bridge Access Road and Poppy Lane and new signals will be installed at Ciechanski Road and at Gas Well Road. MP 79-58 in the Skilak Lake area involves a shoulder-widening project with added passing lanes. DOT also will replace a culvert with a bridge for fish passage purposes. Naomi Klouda can be reached at [email protected]

INSIDE REAL ESTATE: Anchorage commercial permits up in 1Q

The Municipality of Anchorage has reported that the total value for all categories of building permits in the first quarter of 2017 has increased by $15.26 million when compared to the first quarter of 2016. This increase is directly related to commercial permits rather than residential permits, which remain at historic low levels. New commercial activity for the first quarter of this year includes a $27 million-plus permit for an ODOM Distribution Warehouse. Other permits include a veterinarian office/ER building at 2545 Tudor Road awarded to Watterson Construction; Hyatt Place Hotel at E. 101 Tudor Road for $16 million; $1.47 million for an office building in mid-town and Anchorage Wastewater Utility’s new waste water facility on Artillery Road in Eagle River. Several building/alteration permits also increased commercial activities. They included a $2.3 million Bristol Design Building Services permit for West 111 16th Avenue; a Cook Inlet Elder Housing permit for $1.32 million on Cook Inlet Housing Authority’s Muldoon campus and a First National Bank Alaska Midtown permit for $3.5 million. Davis Construction and Engineers has been awarded a contract for $2.5 million in the Providence Medical campus and the MOA has pulled a $7.4 million alteration permit at 8800 Bald Eagle for the Municipal Light and Power plant. Anchorage housing permits continue to dribble along at the bottom of the market with continued historic low numbers. For the first quarter of this year, only 27 single family permits were issued, just one more than last year. Only 12 duplex units were permitted — down two from last year. So far this year only one four-plex has been permitted. This lack of housing continues to be the sore spot in our local building industry. All commercial/residential/alteration and addition permit valuations do not include any land values. The permit value is the value estimated by the MOA to establish the cost of the permit and is also used to determine the tax assessed value. All builders and developers continue to grapple with the new Title 21 regulations and the increased permit values may be due in part to these new regulations. ^ Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

Changes at Anchorage operation won’t hurt rural utilities, AEA says

Rural utility operators are worried changes to how the Alaska Energy Authority handles their powerhouse projects will hurt the reliability of electrical service in communities across the state, but AEA officials say the fears are the result of a simple misunderstanding. The usually quiet public testimony portion of the authority’s March 30 board of directors meeting was dominated by utility managers and local government administrators from small bush communities pleading with AEA directors to not close the authority’s north Anchorage warehouse. The 6,100 square-foot building just off of Commercial Drive is called a warehouse, but it has long served as a shop for AEA staff to assemble the tiny, modular diesel-fired power plants that are then shipped to many of the state’s smallest towns and villages. A March 1 internal memo from new AEA Executive Director Michael Lamb directed closure of the warehouse within 30 days as a means to reduce the authority’s operating costs, maximize private sector contracting and consolidate it operations with the Alaska Industrial Development and Export Authority. Those goals follow legislative intent language in the 2017 fiscal year budget directing AEA to wean itself off of unrestricted general funds by 2019. AEA also administers federal grants and other state funds designated for specific programs. Unrestricted general funds are the discretionary spending portion — and the majority — of the state budget. The authority got about $870,000 of the roughly $4.3 billion unrestricted general fund budget for 2017, according to Lamb. That money mostly goes to AEA’s general rural energy support work, which provides technical assistance to rural utilities and can be a parts or expertise backstop for small utility operators when the power goes out in their community. About half of Alaska’s 200 rural communities have their electrical needs covered by larger cooperatives, such as the Alaska Village Electric Cooperative, or other groups. Many of the remaining communities don’t have a customer base to stand up a self-sustaining electric utility and also lack the technical expertise to maintain electric infrastructure, which is a fundamental issue AEA has been working to improve over the years. To that end, AEA has upgraded electric reliability and generation efficiency in 81 communities and is in the development phase on another nearly 20 projects through its Rural Power System Upgrade program, which has been funded through a variety of means depending on the project. All of the testifiers at the AEA board meeting said the five authority staff that had worked at the warehouse were invaluable for the round-the-clock service they provided. White Mountain Mayor Daniel Harrelson said simply, “Without your support and guidance we wouldn’t have electricity in White Mountain.” An electrician by trade, Pelican power plant operator and Mayor Walt Weller said he has worked directly with AEA’s field and warehouse staff to upgrade the small Southeast town’s diesel and hydro plants. “I can’t imagine any changes to their operations that could make it more efficient,” Weller said. Other supporters of AEA’s rural utility work said the authority is driven not by profit but to do what’s best for communities and noted its mission is to lower energy costs in Alaska, not push money to private contractors. AEA leaders said they were pleased to hear of the deep appreciation for their efforts, but the internal changes could actually improve the service many are afraid of losing. “The core services discussed in testimony by the utilities that called in at the board meeting, those services will not change,” spokeswoman Katie Conway emphasized. Chief Operating Officer Kirk Warren said in an interview that the warehouse staff has been moved into AEA’s main Midtown Anchorage office building, which it shares with the Alaska Industrial Development and Export Authority. That will actually give them more time to respond to utilities’ needs as they won’t also be spending time assembling powerhouses, he said. Warren stressed that the circuit rider, community assistance and emergency response programs among the “fundamental reasons that AEA exists” and all that is really changing is where the technical experts will spend their days and who how AEA contracts for work. He added that the warehouse — which is state-owned and therefore has no monthly lease payment — will still keep emergency generators and other power plant parts. “The savings will come, as de minimus as it is, in reduced utility costs and our ability to actually make (warehouse staff) feel like they’re a part of our organization,” he said. The private firms that AEA will contract with to assemble the powerhouses will even be able to use the warehouse space if they choose, according to Warren, and an AEA employee will be on-site when that occurs. The only things really changing are that AEA will not be acting as a parts expediter when it contracts for utility repair services and staff will not be turning the wrenches on the electrical generation units. “We’re statutorily obligated to abide by what the Legislature has told us to do and there’s language — to the maximum extent possible we will contract with the contracting community,” Warren said. He also said AEA hopes to have internal policy evaluations and changes finished by the end of the state fiscal year, which is June 30, to know how much unrestricted funding support it will need in the future. Elwood Brehmer can be reached at [email protected]

Denali Commission directed to work on shutdown plan

Here’s the task handed to Denali Commission federal co-chair Joel Neimeyer: What would it take to shut down 17 years of the Denali Commission’s work in Alaska if funding is eliminated in 2018? On March 31 by close of business day, Neimeyer was required by the Office of Management and Budget to summarize how he would close down the federal agency created in 1999. President Donald Trump’s initial budget submitted to Congress, the so-called “skinny budget,” calls for eliminating the $15 million budget that funds a myriad of projects in rural Alaska. Moving the eroding village of Newtok, gaining flush toilets, replacing bulk fuel storage tanks, finishing 40 power plants are among the Denali Commission projects that would halt. “I had a Friday deadline to work on the shutdown plan,” Neimeyer said, referring to March 31. “We are doing this in a timeframe, along with the other 19 federal agency heads who are working on a shutdown plan.” Trump’s initial budget is to be followed by a more detailed budget in mid-May. In the meantime, the skinny budget shows a preview of what to expect. It proposes to shut down 19 agencies, including the three sister programs that shoulder similar funding work in disadvantaged parts of the US: the Appalachian Regional Commission, the Northern Border Commission and the Delta Regional Commission. Other agency heads under the same orders include the National Endowment for the Arts and the Public Broadcasting System, which have garnered the bulk of the publicity. While Denali Commission funding often came under fire as suspected pork, and was created by Alaska’s powerful late Sen. Ted Stevens in 1998, this is the first time the agency has been asked to visualize the tools needed for its own shutdown, Neimeyer said. “The agency is criticized as duplicative. Some believe other agencies can easily do the work that we do. We’ve had our funding (proposed for eliminating) a handful of times,” Neimeyer said. Each fiscal term around this time period in preparation for the president’s May budget, Niemeyer is usually outlining his budget request for projects. “This is the first time I’ve been asked to write a shutdown plan,” he said. Sen. Lisa Murkowski and Rep. Don Young’s offices have sought to calm panic by reminding constituents and agencies it’s Congress that ultimately decides the budget, not the president. Murkowski made an outreach to Alaskans early on in the budget process. “This budget request is the first step in a long process through which Congress decides which programs to fund and how much funding those programs should receive,” Murkowski said. “The President’s budget expresses his priorities, and we will consider them, but it is the congressional budget and appropriations committees that will establish our priorities and fund them over the coming months.” From the House, Young gave a similar message. “Congress holds the power of the purse and it holds top line funding among our agencies. Ultimately, we will see how that shapes out,” said Matt Schuckerow, Young’s communication director. “This is not the full budget. He (Young) doesn’t want everyone to get up in arms as he begins. He will keep the Denali Commission on his radar.” Currently, Young is working with House and Senate Appropriations on priorities and figures for funding. There will be major reforms and policy provisions that make changes to the way the previous administration operated, Schuckerow said, but he doesn’t support eliminating the Denali Commission. In defending the commission, a big obstacle is the constant need to educate colleagues about how Alaska differs from the rest of the country, Shuckerow said. “Of his (434) colleagues in the house, over half have served less than seven years. It is always an education campaign given the number of folks who are new here. Is it over? No, it’s always ongoing,” Shuckerow said. “Over half weren’t here when the Affordable Care Act took place.” Murkowski plays a vital role on the Senate Appropriations Committee, as did Stevens when the Denali Commission was created. She too has pledged her support, and it won’t be the first time she’s fought to keep its line item in the budget. Keeping the commission alive, however, meant devolving from an all-time $150 million budget at its peak to its current $15 million. The money went for building new clinics, teacher housing, new power plants, new fuel storage and new roads. Its mission under the Denali Commission Act of 1998 was to “deliver services of the federal government in the most cost-effective manner by reducing administrative and overhead costs.” Broadly, that meant providing job training and economic development in rural communities, providing power generation, transition facilities, modern communication systems, water and sewer systems and other infrastructure. The most critical projects on Neimeyer’s mind are the 55 villages in various stages of bulk fuel storage replacements and the 40 power plant projects listed for either an energy-efficient upgrade or replacement. He’s also concerned about all the years of funding and work that went into getting the sinking Newtok village to higher ground and three other villages slowly disintegrating into the sea. The herculean move to get Newtok’s 300-some villagers to their new site on Nelson Island (nine miles away) is further along than relocation efforts for Shishmaref, Kivalina and Shaktoolik, Neimeyer said. Newtok is becoming a tiny island between the Ningliq River and a sinking bog to the north because of melting permafrost attributed to climate change. The new village is named Mertarvik. “We’ve been helping Newtok the last two years in the move to the new site,” Neimeyer said. “Shishmaref, Kivalina and Shaktoolik, also want to move. Newtok has site control while the others do not have land selected. That’s the next phase of work. Land selection and securing the site. It’s a long process. It’s not a short process at all. That’s what we see on the horizon. Those three may not get assistance. No federal agency has the authority or funding to develop a new community site.” The biggest criticism of the Denali Commission is that it does work that could be done by other agencies. It was also criticized as a “congressional experiment that hasn’t worked out in practice,” by former Inspector General Mike Marsh. It’s an “unnecessary middleman,” Marsh wrote in a seven-page report to Congress. Alaska’s congressional delegation was able to raise a strong rally for the Denali Commission’s work, and saved its funding. Then President Barak Obama breathed new life into efforts prior to his 2015 Alaska visit. He designated the commission as a “one-stop shop for matters relating to coastal resilience in Alaska.” Neimeyer maintains the commission’s work isn’t duplicative. Federal agencies have a 50-state model with tight controls over what kinds of projects are eligible and how the funding needs to be spent. That model doesn’t necessarily allow for Alaska’s diverse economic, social and climatic plight. “It doesn’t work in rural Alaska; that’s the difference we bring. We can adjust our investment. We’re able to customize investments,” he said, according to the priorities seen in critical needs. Whether the Denali Commission can survive the upcoming budget process should be known or at least hinted at by October, Neimeyer said. “More likely we won’t know until the end of the year,” he said. Shuckerow notes that Congress hasn’t followed a set schedule for passing budgets in recent years. Deadlines such as the upcoming April 28 date for government shutdown if the budget for the remaining portion of 2017 isn’t passed are becoming more of the norm. “We’re funded until the end of April. Once we come up with funding for rest of 2017, then we will work on 2018,” Shuckerow said. Naomi Klouda is a correspondent for the Journal. She can be reached at [email protected]

Military brass stress looming Real ID deadline in briefing

JUNEAU — Alaska’s top military brass were in Juneau March 23 for their annual briefing to the Legislature’s Joint Armed Services Committee. Air Force Lt. Gen. Kenneth Wilsbach and Army Major Gen. Bryan Owens had some key messages to convey. One is that Alaska’s $3 billion-plus military industry will be stable for the foreseeable future; a second is that the big construction programs at Interior Alaska defense installations are on track; third is that there are no Army reductions planned, for now, at Joint Base Elmendorf-Richardson. Another message the generals hammered home, however, is that Alaska had better get its act together on the federal Real ID program or civilian workers will face big hassles getting on bases beginning in June and all residents will face the same boarding aircraft for domestic flights in December. Without state identification that complies with the federal Real ID Act or a U.S. passport, Alaskans seeking entry to bases will have to be met and escorted, Gen. Wilsbach told legislators. “Not only will they have to be escorted into the base but the escort will be required to remain with them for the entire time they are on base,” Wilsbach said. It could be a big problem, particularly for construction workers now building facilities for F-35 interceptors at Eielson Air Force Base. Wilsbach said he has no flexibility in enforcing the federal ID law, and that he hopes the construction schedule at Eielson, and also projects underway at Fort Wainwright and Clear Air Force Station, aren’t jeopardized. Legislation proposed by Gov. Bill Walker that would allow Real ID-compliant identification to be issued in Alaska has been languishing in House and Senate committees all spring, but on the same day Wilsbach spoke (Walker also sent out a press release) the Senate State Affairs Committee moved Senate Bill 34. However, House version HB 74 is still in the State Affairs Committee. What has stalled the bills to day, and earlier efforts to comply with the federal law, is a concern for privacy, since Real ID requires a background check as a security measure. In fact, Alaska passed a law in 2008 barring the state from spending any money to comply with the federal Real ID law. The generals’ immediate concern is getting civilian workers who don’t have the IDs or valid passports to their jobs on base but Walker said Alaskans’ biggest hassle will be the inability to board aircraft. “Alaskans who want to visit family, attend a funeral or take a vacation will need a passport or federally-approved form of identification to fly, even within Alaska and the rest of the U.S., unless our state complies with the federal Real ID requirements,” Walker said in his March 23 statement. “For many, passports can be difficult and expensive to get,” but the pending legislation would allow the state to enact minimum security requirements and issue Real ID-compliant drivers’ licenses at local Division of Motor Vehicles offices, Walker said. On other issues, the two generals, also joined by Alaska’s U.S. Coast Guard commander Rear Admiral Michael McAllister and the state Adjutant General, Major Gen. Laurel Hummel, detailed upcoming exercises and projects planned for 2017. Wilsbach stressed the importance of Alaska’s ample spaces available for training, particularly in the air. The Air Force hosted 16 nations to four Red Flag air combat training sessions in 2016, which are held at Eielson Air Force Base but with some aircraft and support from JBER. More Red Flag events are planned in 2017. Another exercise in 2016 was Arctic Chinook, a major search and rescue drill, with multinational partners, simulating response to a cruise ship incident in remote Arctic waters. Wilsbach said the voyage of the cruise ship Crystal Serenity through Arctic waters last summer has raised concerns over how well prepared military and civilian agencies in Alaska are to a problem at sea requiring mass evacuation of passengers. Another Arctic voyage for the Crystal Serenity is reported to be planned for 2017. Gen. Owens, of the Army, mentioned several Army exercises including a Feb. 22 airdrop of 128 soldiers near Deadhorse, on the North Slope, in wind chill temperatures of minus-60 degrees Fahrenheit. “This was an exercise to test our ability to insert forces in full-on winter conditions. After landing, paratroopers moved out on skis and snowshoes across frozen tundra. Soldiers also tested the capacity to provide mission command and communications at high latitude locations,” Owens told the joint legislative committee. Air Force Gen. Wilsbach said the Eielson AFB preparation for arrival of F-35 interceptors is going full-bore with $298 million in projects to be underway in the current federal fiscal year 2017 involving building or renovation of 35 buildings. The total investment through fiscal year 2019 will be $512 million, Wilsbach said. Many of the projects for Eielson are still out to bid but the first major contract, awarded in December, is to Watterson Construction for a $19.8 million F-35 flight simulator facility at the base, according to the U.S. Army Corps of Engineers. A second, $11.3 million contract for earth-covered magazines for munitions, will be awarded March 31, the corps said. The first of the F-35s will arrive in spring 2020 and the last in 2022, Wilsbach told the legislators. “3,500 people are being added to Eielson’s population, and that will effectively double the base population,” he said. For JBER, in Anchorage, Army Gen. Owens said he is unaware of any planned force changes for the Army, and particularly the 4-25 infantry airborne combat brigade that was threatened with a major drawdown two years ago. “We’re hearing of no changes, up or down, for at least two years. But that’s not to say it couldn’t happen in some future budget cycle,” Owens said. Alaska was home to 27,764 Department of Defense personnel in fiscal year 2015, the most recent year for which data is available, according to the department’s Office of Economic Adjustment annual “Defense Spending by State” report. In that year, total defense-related spending was $3.3 billion including $1.7 billion in payroll. The bulk of the military personnel were in the Anchorage area, with 16,463, and another 9,571 were in the Fairbanks North Star Borough. The remainder were spread in other communities, particularly those with a Coast Guard presence. Tim Bradner is co-publisher of Alaska Legislative Digest and a contributor to the Journal of Commerce. He can be reached at [email protected]

Construction forecast down 10 percent

Those who attended the 2017 Associated General Contractors of Alaska forecast on Thursday heard many of last year’s talking points: Construction forecasts are down, again, the Legislature is at fault, again, but things aren’t as bad as they seem. Again. Every year the University of Alaska Anchorage Institute for Social and Economic Research, or ISER, compiles data for AGC to project how much job-creating construction will happen in recession-struck Alaska. In 2017, ISER professor emeritus Scott Goldsmith said construction spending will fall another 10 percent from 2016, from $7.1 billion to $6.5 billion. This will in turn drop the overall number of construction jobs to roughly 15,000, the lowest level in a decade. Last year, ISER projected an 18 percent decline in spending from 2015, bringing the year back to 2013 spending levels. As with last year, AGC-Alaska Executive Director John MacKinnon described the short-term outlook for state construction spending with the word “challenging.” Also like last year, MacKinnon said the recession won’t be as bad as the oil price-driven recession in the late 1980s. “We’ve got a lot of good here,” he said. “We’re a lot more resilient. In ‘86 we were a lot younger demographic. The impact of the economy in 1986 was a lot more severe that it is today.” Spending cuts ISER lumps construction spending into public, which includes federal, state and local spending, and private, more than 60 percent of which is the oil and gas industry. As with last year, the oil and gas sector will see a 15 percent dip in spending, rounding this year’s spend out to $2.4 billion. Utilities, the largest chunk of non-oil and gas private construction spending, will go down 1 percent in 2017, driven mainly by fewer projects by telecommunications companies. The second-largest non-oil and gas private sector, healthcare spending, stands out with a huge projected growth of 55 percent, which is itself carried in large part by record-breaking amounts of federal money. This growth is largely attributed to the Yukon-Kuskokwim Health Corp.’s new $287 million clinic and hospital in Bethel. YKHC received a $165 million U.S. Department of Agriculture loan for the project, the largest single loan the USDA has ever approved, according to corporation leaders. Residential construction spending will drop 21 percent to $277 million, driven in large part by statewide declines in residential homebuilding demand. According to statistics, Anchorage, in which 40 percent of Alaska’s population lives, had fewer residential construction permits in 2016 seen since 2000. Statewide, every other area is seeing the same pattern with the exception of the Mat-Su Valley, according to Goldsmith and municipal records. Public construction will go down 12 percent from last year, with every category except national defense taking a hit. National defense is the largest bracket in public spending, as Alaska’s federal defense budget is larger than that of any other state, according to Goldsmith. More than $561 million was appropriated by Congress for the 2017 fiscal year for military projects at Eielson Air Force Base in Fairbanks includes a new flight simulator in preparation for new squadrons of F-35 fighters and upgrades to the base’s heat and power plant. Upwards of $1 billion will be invested in missile defense systems over the coming years at Clear Air Force Station near Nenana and Delta Junction’s Fort Greely. Highways and roads, the next largest public building sector, will go down 4 percent. Especially hard hit in the public domain is education, which ISER forecasts a whopping 48 percent decrease in construction spending. Looking for the upside Capping both sides of the spending projections were appeals to positive thinking and state solutions. Goldsmith agreed with MacKinnon, saying Alaska’s situation isn’t as bad as people may think, or that it can’t get any worse. Anyone who says different doesn’t know what he’s talking about, Goldsmith said, contending economists who predict a gloomy outcome. “I am not sure I would buy this,” Goldsmith said of an Alaska-Dispatch News article written by columnist Charles Wohlforth, citing Northern Economics vice president Jonathan King and warning of another three years of recession with a “smaller, poorer Alaska” on the other side. “I think any economist who tells you he knows what’s going on is not being entirely honest with you,” Goldsmith said. “We’re not sure what’s going on. What it does tell us is that the economy is at this moment fragile, and we don’t want to do something to cause it to go off a cliff if we can avoid it…that headline might be a little bit of an overstatement.” Goldsmith went on to claim that oil and gas spending cuts are “hitting a floor,” and that state and local construction spending “can’t go down any lower, right?” Goldsmith’s analysis teetered slightly, acknowledging that oil and gas spending “will probably not turn around anytime soon, and neither will state spending.” However, Goldsmith said, “it looks like we may be starting to bottom out in terms of oil and gas capital expenditures.” Goldsmith bases this perception on oil prices, which have risen to more than $50 per barrel and he said may move higher, and outlook for certain Alaska producers. “There’s been some drive to reduce costs, not only in Alaska but nationwide,” he said. “That makes things look a little more attractive. ConocoPhillips announced they would be spending the same this year as last. Several of the companies like Caelus and Armstrong pulled back last year because the price was low, and they may be taking a second look at this and starting to bring those projects back.” As with last year, MacKinnon and Goldsmith used the opportunity to appeal to the Legislature to find a solution to the $3 billion budget gap being discussed in Juneau. Legislative gridlock and the State of Alaska’s spending habits, he said, fed both a negative reality and a pessimistic outlook. After Goldsmith warned the Legislature not to “kick the can” on a budget fix and cause economic uncertainty, MacKinnon pointed to an oil price analysis that shows a fairly steady $50-per-barrel trend. “We used to be able to get along great at $50 a barrel, but that was before we had bad spending habits in the state of Alaska, and we’re going to have to change those habits very soon,” he said. “Last year we predicted an 18 percent drop (in construction spending). Lack of action on the part of the Legislature helped us meet that goal.” DJ Summers can be reached at [email protected]

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