$453.5M in transportation bonds on ballot

Voters will be asked in November to approve $453.5 million in new state general obligation bonds for port and highway projects around the state.

General obligation bonds commit the state itself to repayment from any source of revenue, in contrast to revenue bonds issued by the state, or any other Alaska government, which are tied to revenues from the project being funded for repayment.

Because it is a general commitment of public revenues, the state constitution requires that general obligation bonds be approved by voters in a state election.

The ballot question appearing in November will ask permission to borrow $195.4 million to fund 18 port and port-related transportation projects around the state, and also $254.5 million to finance highway and road projects in different regions.

As is often the case, the Legislature made substantial changes in its 2012 session to the bond proposal that was submitted by Gov. Sean Parnell in January.

Parnell had proposed a $350 million bond package for six port projects only. Lawmakers added port projects – no surprise in an election year – but also reduced funding Parnell had proposed mainly in two high-profile projects in Southcentral Alaska, to allow money to be spread around the state.

There was deep concern in the Legislature, and also by the governor, that running the pricetag for the bond package too high, and with too many projects added, would push the cost past the threshold voters would accept in November.

Partly because of that worry, legislators added the highways section of the proposal, out of the belief that including road improvements would make the package more attractive to voters.

The state has other sources of funds for highways, mainly the federal highways transportation program that pays 90 percent of costs.

However, having the state fund some highway projects directly, whether from bond proceeds or by a state capital appropriation, has advantages.

A big advantage is that it allows projects to be done faster, since federally-funded projects are done on a schedule. In some cases state funding also avoids the red tape that often accompanies federally-funded road projects,

The federal funds aren’t lost, of course, because they can be shifted to other projects.

However, in the Legislature’s brokering of the bonds proposal there were some big losers, as well as some winners.

The governor had proposed $200 million of his $350 million total go to help the Port of Anchorage finish its expansion (the Anchorage Municipality, on behalf of the port, had asked for $300 million).

The Legislature pared this to $50 million.

Parnell also asked for $110 million in the bond package to largely complete the Alaska Railroad extension to the Matanuska-Susitna Borough’s Port MacKenzie.

Lawmakers cut this to $30 million. Parnell asked for $10 million for the City of Emmonak so that western Alaska coastal community could build a barge dock to increase the efficiency of unloading fuel and general freight for the Lower Yukon region.

Lawmakers cut this to $3 million. Parnell’s proposal for $10 million to the City of Seward for port improvements related to a planned relocation of Community Development Quota fishing vessels to Alaska from Seattle survived and is in the ballot proposal, along with $10 million Parnell proposed for a continued expansion of a port facility in Bristol Bay.

Parnell’s $10 million proposal for dock improvements in Ketchikan was changed. It was taken out of the bond package and funded instead by a state capital appropriation.

With the money taken from the Port of Anchorage and Mat-Su rail extension, as well as the reduced funding for Emmonak, legislators approved bond money for a variety of other, smaller port projects.

Kotzebue and Nome, which have influential legislators – Sen. Donny Olson and Rep. Reggie Joule – received $10 million each; $10 million for Kotzebue’s Cape Blossom Road and port will allow planning and engineering to start on this long-planned deep-water port for the community.

Nome has a city dock, but the $10 million in the bond issue will fund planning and permitting for an extension. Both Kotzebue and Nome are plagued by shallow water offshore requiring some of Nome’s freight and all of Kotzebue’s to be offloaded offshore to shallow-draft “lightering” barges, which raises costs.

Other parts of the bond proposal contain $15 million for boat harbor upgrades in the Haines Borough, which is represented by Rep. Bill Thomas, who co-chaired the House Finance Committee.

Sitka, represented by Sen. Bert Stedman, who co-chaired the Senate Finance Committee, would get $7.5 million for a dock at the city’s Sawmill Creek Industrial Park.

Sand Point, on the Alaska Peninsula, would get $2.5 million for local road reconstruction; St. George in the Pribilof Islands would get $3 million for harbor reconstruction; Togiak, a western Alaska coastal community, would get $3.3 million for a waterfront transportation facility; Bethel would get $4 million for harbor dredging; Newtok, another western Alaska village threatened by coastal erosion, would get $4.1 million for an emergency evacuation road.

Many of these smaller western Alaska projects were ushered through under the guidance, indirectly and directly, of Sen. Lyman Hoffman, co-chair of the Senate Finance Committee.

Kodiak would receive $15 million for a pier replacement. Kodiak is represented by Senate President Gary Stevens.

The diversion of funds from the Anchorage port project and Mat-Su rail extension arose partly because legislators last spring were unclear of whether the Anchorage port had a clear plan for finishing construction and repairing defects from earlier work.

The port is now working with the U.S. Army Corps of Engineers, who has retained CH2M Hill, on a plan for finishing the project.

Similarly, there were questions by some legislators about the commercial justification for the Mat-Su rail extension, and whether there would really be the use of the extension, and the port, that the borough believes will be the case.

The surprise in the Legislature’s bond deliberations is over how Emmonak lost out in the funding. The $10 million for that community’s dock was enough to get the project completely built. Unlike most of the other small projects in the bond package, Emmonak was “shovel ready” with all the engineering work done, according to Christine Klein, Calista Corp.’s Chief Operating Officer. Calista was working with Emmonak on the project.

It’s uncertain how much Emmonak will now be able to do with only $3 million.

However, some of the other projects, such as Kotzebue’s Cape Blossom road and port, also had separate funding in the Fiscal 2013 state capital budget, although it will take more money to get that project actually built.

Some of the other projects in the bond proposal also had separate appropriations in the capital budget, legislative sources said.

As general policy, there is always a healthy debate over whether it is better to borrow money for capital improvements and pay interest or whether, if the state has the cash, it is better to just pay for the projects and avoid the interest payment.

It’s a judgment call in the end. With interest rates very low, borrowing at this time seemed attractive to the governor and lawmakers.

Updated: 
11/11/2016 - 1:35pm