Editor's note: "This Week in Alaska Business History" revisits events that shaped our past.
"Those who cannot remember the past are
condemned to repeat it."
- George Santayana,
1863-1952
Auditors query railroad project
A legislative audit of the Alaska Railroad's development projects in Anchorage's downtown Ship Creek industrial area raises questions of whether ambitious private investment targets can be met.
The audit also questions whether the railroad and the Municipality of Anchorage are in compliance with the $5.5 million state appropriation for infrastructure improvements to encourage commercial development in Ship Creek.
Unspent portions of the money will have to be returned to the state treasury in 1995 if private investment benchmarks required by the appropriation, which are separate from investment targets in the railroad's development contract with Michigan-based LoPatin & Associates, cannot be demonstrated.
The report, complete by the state Legislature Audit Division last November and made public mid-January by the Legislative Budget and Audit Committee, says the railroad, so far, has spent $533,000 more than the projects have brought in. It also probes partnership problems in the Comfort Inn hotel project, in which the railroad took a 40 percent equity stake.
In 1992, the railroad entered into an ambitious Ship Creek development project with LoPatin that called for four centerpiece projects: a major tourism facility, an upscale hotel, an office building and residential housing.
Controversy over zoning variances led to a one-year delay in moving forward with major parts of the project, Mark LoPatin and railroad officials told the legislative auditors. Still, the master lease agreement requires LoPatin to secure $7 million in investments by March 1995.
LoPatin told auditors it expects a commitment from a major national hotel corporation in March or April, in time for construction to begin later this year. The company hopes to begin construction on an office building and residential housing units in 1996, it told auditors.
A $55 million theater and museum complex, the Northern Crossroads Discovery Center, is to be financed with tax-exempt revenue bonds issued by the railroad, and requires the railroad to have a third-party assessment of the project's economic viability before bonds are taken to market. The railroad told auditors it expects the feasibility study will be complete in the spring, in time for financing and a start of construction later in the year.
-Compiled by Claire Chandler
