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 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]

USDA pumped $2.1B into state in last 8 years

A small federal office has quietly injected more than $2.1 billion into Alaska over the past eight years with almost no impact to the national debt. The U.S. Department of Agriculture Office of Rural Development has done that through its 35 programs that help fund everything from water and sewer systems in the most remote villages in Alaska to startup businesses in every corner of the state. The Rural Development Alaska progress report covering President Barack Obama’s time in office lists 236 communities in which the office has funded projects. Appropriately absent from that list is Anchorage, given the agency’s rural focus. Despite providing $2.16 billion in loans and grants since 2009, outgoing USDA Rural Development Alaska Director Jim Nordlund said one of the biggest hurdles for his staff is getting the word out that they are here to help. “It’s always been a constant challenge for us as an agency to let the public know, let Alaskans know, particularly rural Alaskans, what we do,” Nordlund said. “Everybody thinks USDA only deals with farms and farmers, but that’s not exactly true.” The office has managed to fund $775 million in housing projects, another $683 million in telecom and electric infrastructure development and nearly $300 million in water and environmental work over that time while being net neutral to the federal Treasury, as Nordlund is quick to note, because more than 75 percent of the $2.16 billion issued was in the form of loans. In Alaska the Rural Development programs are one of the biggest things the Agriculture Department does — outside managing two of the three largest national forests, of course. Nationwide, the Rural Development wing of the USDA has a loan portfolio of about $215 billion, which would make it the eighth-largest bank in the country, he added. The focus on loans is something Nordlund, a longtime Alaskan, said needs to happen more generally in Alaska particularly given the state’s massive reoccurring budget deficits that have evaporated almost all state grant programs. He acknowledges that some situations require grant funding or subsidies due to a lack of revenue for loan repayment but also said his staff often presents a loan option to an entity only to be turned down because the group wants free money. “I just think that as a state we need to be more creative in terms of looking at leveraging money, being creative with the use of loans, marrying loans and grants and tax credits in order to get projects done,” Nordlund said. “It’s that kind of creative financing and leveraging that’s going to have to happen in Alaska given the times that we’re facing and a lack of pure grant funding.” Nordlund added that he has seen a shift — slowly and reluctantly — among those looking for funds to accept that reality as the state’s fiscal situation has deteriorated rapidly over the past two years. Last year the Rural Development Office issued a $165 million loan to the Yukon Kuskokwim Health Corp. for a new clinic and hospital expansion in Bethel, the largest Community Facilities Program loan in the history of the program nationwide. And the loans are being paid back. According to Rural Development Business Programs Director Renee Johnson, Alaska’s $119 million Business Loan Guarantee Program finished 2016 with no delinquencies to report. The program has a 3.3 percent delinquency rate nationwide; and Johnson credited the Alaska results to the expertise and lending practices of the government office’s private lending partners. As a presidential appointee, Nordlund will be leaving the Rural Development Office when the Obamas vacate the White House. He said he hopes his successor can continue the work the agency has done over the past eight years and especially build on efforts to make home mortgages more accessible to village residents, a means Nordlund sees as crucial to improving rural Alaska’s housing stock. “There’s nothing more unique than rural Alaska,” he said. “The opportunity to serve rural Alaskans has really been a great honor and I’m going to miss this job a great deal but that’s just the way it goes.” Elwood Brehmer can be reached at [email protected]

Gov’s budget would cut Alaska Construction Academies

The Alaska Construction Academies might see a steep decline in funding next year if the Legislature accepts Gov. Bill Walker’s proposed budget cuts. The governor’s fiscal year 2018 budget, released Dec. 15, proposes a $600,000 reduction in general fund dollars for the Alaska Construction Academies, an Alaska Department of Labor and Workforce Development program that offers free basic construction training to high school students and adults in Anchorage, Juneau, Ketchikan, Fairbanks, the Mat-Su Valley and on the Kenai Peninsula. “This will also greatly reduce the number (of) Alaskans trained through ACA unless the department can identify federal and/or private funding to help backfill this reduction,” the budget detail states. The reduction leaves approximately $1.2 million left in the program. As a result, the Construction Education Foundation would be dissolved and the department would take over the administration of the sub-grants, which fund the individual construction academies, according to the budget detail. The Alaska Construction Academies have undergone cuts from the Legislature for the last several years. In the fiscal year 2015 budget, the Department of Labor had a $3.4 million budget allocation for the construction academies. The following year, in fiscal year 2016, the department had a $2.5 million allocation for the program, and in fiscal year 2017, the funding dropped by about $700,000. The biggest share of funds for the program have come out of the general fund in the past. The Construction Education Foundation is the nonprofit body receiving the funds from the Department of Labor for the program, said Kathleen Castle, the executive director of the Construction Education Foundation. The funds are not specially dedicated, but they are typically included in the budget, and the Department of Labor provides the funds to the foundation for the purpose of running the construction academies, she said. The academies got their start 11 years ago when the industry leaders noticed a lack of trained people in the workforce. Industry representatives worked with the Legislature to get some state funds for an education program to give workers some of the basic skills they would need to enter the construction industry, Castle said. “If … (a company) gets (workers) up to speed so they could read a tape measure and do some basic things, there was so much going on that they would get them up to speed and then they would move on,” she said. “…We were talking about the fact that there were so many people coming out of our high schools who didn’t know how to read a tape measure or anything.” At the time, there was more work available than many companies could handle. Oil revenues were high and the state financed large projects through its capital budget, sometimes in the billions of dollars. Even though the economy in the Lower 48 struggled after 2008, the economy in Alaska was still growing as oil prices rose, so more people moved to Alaska and created construction work as well. However, that’s not the case today. As oil prices have declined from more than $100 per barrel at the end of 2013 to a little over $50 today, the state government has been scrambling to try to bridge the gap created in the general fund. Walker’s proposed budget, which the Legislature is set to begin considering when the regular session begins next Monday, allocates $100 million for capital projects. The governor’s director of the Office of Management and Budget, Pat Pitney, told the Kenai Peninsula Borough Assembly in a presentation Jan. 3 that this is the basic amount required to meet the federal match. “That only covers match for federal items — housing, water, transportation, energy and so forth,” she said in the presentation. “It’s an unsustainable long-term capital budget. It’s really pretty too bad when $100 million is essentially no capital budget beyond meeting our match requirements.” The Associated General Contractors of Alaska’s annual construction industry forecast, compiled by economist Scott Goldsmith, projected the value of construction industry spending would decline by about 18 percent in 2016. So far, it looks like that prediction came true, said John MacKinnon, the president of AGC. However, in context, the industry was projected to grow about 18 percent in 2014 due to increases in oil and gas, Department of Defense and increased state projects. MacKinnon cited the Legislature’s passage of several industry bills providing stability for investors as the reason for the 2014 investments. “So much of that bulge, that investment uptick in spending was a result of the confidence that investors had,” he said. Now, with the downturn, some contractors are beginning to look for work outside the state if they can. Bids for projects are getting lower as contractors increasingly need work. State numbers don’t account for reductions in hours, which are decreasing for many workers, MacKinnon said. Highway work is fairly stable, but most of the reductions are coming from the private side, he said. What investors are looking for is stability, he said. “We’re seeing less money out there for work on the vertical side, less government investment in facilities. … That precipitates private investment,” he said. “When private money doesn’t have confidence in the investments made by government, then they pull back. There’s a growing lack of confidence in taking care of our fiscal mess.” On the Kenai Peninsula, the construction academy has a strong relationship with many of the employers. Now in its ninth year, the Kenai Peninsula Construction Academy provides classes like carpentry, plumbing and electrical work. All of the teachers in the program are licensed in what they are teaching, said Bob Hammer, the program coordinator for the Kenai Peninsula Construction Academy. “All of my teachers are business people,” said Hammer, a former carpenter who teaches the carpentry classes. “The electrician is a licensed electrician, same with the plumber.” Some of the budget reductions have already played out for the construction academies. They used to partner with high schools all over the state. This year, the construction academies have no contracts with the high schools, Castle said. Hammer said he is working on partnerships with the school district to keep high school students connected with the education. It’s important to get that point across to high school students — it’s hard to do anything without an education today, he said. Things are tougher for the employers as well. He has worked with them in the past to place graduates of the program into jobs, but there are fewer jobs now to give, he said. Even though the industry is on a downturn right now, it’s always important to get young people into the trades, he said. Even though there’s an estimated downturn for new construction, there is always infrastructure work. Some of the academy attendees, who range in age “from 18 to 40,” Hammer said, have expressed interest in other types of trades to diversify their skills. Recently, the academy expanded to offer classes in diesel mechanics as well, he said. “(The work) doesn’t stop the plumbers and the electricians,” he said. Castle said the intent of the cuts was not to eliminate the construction academy, but to have the coordinators look elsewhere for funding. The Construction Education Foundation is doing so but has not had to do so in the past, she said. “We’ve … been so lucky to have this heavy priority on the part of the state to fund our program,” she said. “It’s really a Catch-22 — the industry has been privileged by having all of these dollars for workforce development. “The industry hasn’t had to pick up the tab for it. Here we are where we’re seeing a decline in the state dollars, but it’s such a downturn time for the industry that’s it’s not a time to ask the industry. Especially when so many companies are laying people off.” Reach Elizabeth Earl at [email protected]

Anchorage settles for $12.6M with port contractors

Anchorage has settled out of court for $12.6 million with three subcontractors in the city’s failed port expansion project while a lawsuit against other players in the complex drama continues. Most recently on Oct. 19, Terracon Consultants Inc. and the Municipality of Anchorage filed a motion in U.S. District Court of Alaska notifying the court that Terracon had agreed to pay the municipality $1.95 million. Terracon reviewed a 2008 evaluation report of the Open Cell Sheet Pile dock design that the municipality claims was faulty. The settlement document notes that CH2M, which filed a third-party complaint against Terracon in November 2014, has not filed a claim of fault or breach of contract by Terracon. On Aug. 30, Quality Asphalt Paving, or QAP, agreed to pay the municipality $5.15 million to resolve its role in the lawsuit. QAP was hired along with its project partner MKB Constructors in 2008 by the Port of Anchorage Intermodal Expansion Project manager and former Koniag subsidiary Integrated Concepts and Research Corp. to install the Open Cell Sheet Pile dock support structure at the port. The Open Cell Sheet Pile is a proprietary design of the Anchorage engineering firm PND Engineers, which is also a defendant in the municipality’s suit filed in early 2013. PND contends the dock design failed due to faulty installation by QAP and MKB, while the contractors and the city argue the design wasn’t suitable for the Anchorage port from the outset. Judge Sharon Gleason dismissed QAP from the suit Oct. 17. Similarly, MKB settled with Anchorage for $5.5 million in June. All three settlements release the subcontractors from liability to the municipality, but not fault in the lawsuit trial, set for next April. ICRC and PND did not oppose QAP’s dismissal from the suit based on that understanding. PND filed a third-party complaint bringing MKB and QAP into the legal tangle in April 2015. CH2M, an international engineering firm which has dropped “Hill” from its name, is an original defendant in the lawsuit along with ICRC and PND through its purchase of VECO, a consulting firm that also evaluated the port design. In January 2014, the municipality hired CH2M to manage the ongoing and smaller scale $480 million Anchorage Port Modernization Project, which will eventually lead to the installation of a more traditional pile-supported dock structure, similar to what is currently in place. The $12.6 million in settlement funds will be split, with $7.6 million going towards the modernization project costs and $5 million being reserved for future port litigation expenses, according to Anchorage Port Director Steve Ribuffo. To date, the municipality has spent $25.4 million on the second port project from the $126.7 million left over from the nearly $439 million in local, state and federal funds raised for the expansion project. CH2M also issued the study in February 2013 that determined the Open Cell Sheet Pile was unsuitable for use at the Port of Anchorage. PND has repeatedly rebutted that study. In January Gleason ruled that MKB and QAP were subject to the lawsuit despite a 2012 settlement in which ICRC agreed to pay the U.S. Maritime Administration, or MARAD, $11.1 million to resolve a $17 million contract dispute. Because ICRC hired MKB and QAP, the subcontractors unsuccessfully claimed they were released from liability through ICRC’s settlement with MARAD. The municipality, however, was unaware of the 2012 deal at the time it was made, according to an October 2012 letter from then-Anchorage Mayor Dan Sullivan to MARAD Administrator David Matsuda in which Sullivan wrote he was “surprised and disappointed” to learn of the $11.1 million agreement. MARAD, a federal Transportation agency, was brought into the project in 2003 by the municipality to manage construction and be a vessel to acquire federal funding. Anchorage also sued MARAD in early 2014 in Federal Claims Court. Municipal attorneys have said the city is hoping to recoup up to $340 million from the two lawsuits. Originally intended to update and expand the Port of Anchorage’s aging docks, the expansion project was fraught with control and communication issues nearly from its outset. Those issues were manifested in construction problems and led to work being stopped partway through in 2010, which was never resumed. Elwood Brehmer can be reached at [email protected]

Housing First gets more money, but still in hole

A project to put a roof over Juneau’s most vulnerable residents just received a federal grant for $600,000. The U.S. Department of Housing and Urban Development awarded the money to Central Council of the Tlingit and Haida Indian Tribes of Alaska through its Indian Community Development Block Grant program. “We’re excited; $600,000 is a lot of money,” Myrna Gardner, Central Council’s business and economic development manager, said on the phone Monday. “Central Council is a stakeholder in the community. Regardless if it’s a tribal citizen or a community citizen, it’s still our people in Juneau and Southeast Alaska, and if they’re homeless and need help, we want to be a part of that,” she added. The 32-unit Housing First project will cater to Juneau residents who have barriers to housing stability, including individuals experiencing homelessness, mental health issues, developmental disabilities, chronic alcoholism and other substance-related disorders. The project aims to provide housing and resources without the caveat of sobriety or other preconditions of treatment. Anchorage and Fairbanks already have such housing. Central Council worked in partnership with the Tlingit-Haida Regional Housing Authority and the Juneau Housing First Project when it applied for the HUD funding. This was Central Council’s second attempt at the Indian Community Development Block Grant. “We really felt bad the first year when we thought we did a strong application and we weren’t successful, and so we were really crossing our fingers, dotting the I’s, crossing the T’s, checking everything and strengthening our application because we wanted to be a part of Housing First. We wanted to support it,” Gardner said. In order to not touch any of the $1.8 million bridge financing the City and Borough of Juneau appropriated to the project last year, Housing First still needs to fill a funding gap of about $1 million, said Mariya Lovishchuk. Lovishchuk is executive director of Juneau’s shelter and soup kitchen The Glory Hole, which is one of the five partner agencies working on the project. In order to do that, Lovishchuk hopes the second time is a charm for another grant application through the city. “The (Housing First project) board is planning on applying for another Community Development Block Grant,” she said. “You can apply for $850,000. We’re going to strategize with the city exactly how much to apply for because we really want to make sure we get it this time. We applied last year and we didn’t get it.” The Community Development Block Grant Program is a state program that provides financial assistance to communities for public facilities and planning activities that address health and safety issues, and reduce the costs of essential community services. Communities statewide compete for funding. Historically, the city has applied for these grants on behalf of nonprofits, said the city planning manager Beth McKibben. “In late summer we solicit proposals from the community,” she said. “It is my understanding that this year, Housing First is the only entity that has expressed interest in applying for a community development block grant.” McKibben said an application on behalf on Housing First would likely be more competitive this time around. It’s due in early December. “My understanding is that some of the things that were found to be deficiencies in their application last year have been rectified. For instance, they have more matching funds this year. Community Development Block Grant likes there to be lots of other funding available,” she said. In addition to the HUD grant, the Housing First project has received funding from the Alaska Housing Finance Corporation, City and Borough of Juneau, Alaska Mental Health Trust Authority, Juneau Community Foundation and Rasmuson Foundation. The land came from Tlingit-Haida Regional Housing Authority. Housing First broke ground in May on Allen Court in Lemon Creek and continues to make steady progress. The foundation is in, many of the constructed modules are up and the first wing is nearing completion, said Lovishchuk. Close to half of the $600,000 HUD grant will go toward building a medical clinic inside the building. Front Street Community Health Center is expected to move there. The Indian Development Block Grant to Central Council was one of 13 grants totaling just over $7 million that went to Alaska Native organizations. The funding will produce or preserve nearly 70 units of affordable housing and help fund the construction or renovation of several community facilities. Other Southeast grantees are the Organized Village of Saxman and Petersburg Indian Association. Nationally, HUD has awarded a total of $56.5 million in block grant funds to 77 Native American communities across the country. The Juneau Housing First project is expected to be completed May 2017. Lisa Phu can be reached at [email protected]

$27M in federal funds flow in for water projects

The U.S. Department of Agriculture Office of Rural Development is allocating $27 million for water and environmental programs around the State of Alaska after USDA-RD Undersecretary Lisa Mensah made the announcement on Aug. 30 at the Yukon-Kuskokwim Health Corp. in Bethel. The Alaska Native Tribal Health Consortium, Alaska Department of Environmental Conservation and the City of Bethel are among several agencies and organizations to receive grants and loans for rural sanitation and water projects. “I think that the funding being provided is significant,” said ANTHC Director of Project Management David Beveridge following a hectic day of traveling from the Bush to Bethel and back. “It is a huge investment in rural Alaska. It changes the quality of life and public health … homes that lack indoor plumbing have a health disparity as compared to those in the Lower 48.” Beveridge cited, for example, how much likelier it is for a resident to catch pneumonia and other illnesses when the only toilet available is a honey bucket. In many cases, however, honey buckets are the first and only resort because high ground water and permafrost pose technical challenges to building an outhouse or hooking up a septic system. In addition to cost, “there’s a question mark of how to get it done,” Beveridge said. The state is continually looking at alternatives via a pilot program, the DEC’s “Water and Sewage Challenge.” In 2011, more than 5,800 households in rural villages did not have a safe water supply. Five years later, although more households do have access now thanks to rural investment, the DEC estimates 3,300 homes in about 30 communities still lack indoor plumbing. In addition, Alaska currently has 18 designated StrikeForce counties, defined by the USDA as areas where more than 20 percent of the census tract is living in poverty. Since 2009, more than $2 billion has been invested in Alaska communities, with funds earmarked for water and sanitation projects, electric, housing, training programs and general facilities in rural areas. To receive a USDA-RD grant, the State of Alaska is required to make a 25 percent match. A complete list of grants awarded can be found on the USDA website. Following are details of two major projects out of the 55 projects to receive grants from this round of USDA-RD funding. Unalakleet, $6.62 million, DEC Powers Creek, heading north along the shoreline and located several miles from the city, is Unalakleet’s main water source. As storms roll in, soil rolls out, exposing the transmission lines buried on the beach to waves with immediate repercussions and repairs. “That is a temporary solution which only lasts until the next big storm,” said DEC Facility Programs Manager Bill Griffith. Griffith noted that the line did not have problems for more than two decades, but recently has been having issues every few years. It will not be possible to protect the transmission for too much longer, he said. In fact, the water source is projected to be lost completely in the very near future. Without a water source, there is no Unalakleet, a Bering Sea community with a population of 712. Because short-term measures leave residents in a precarious position, Unalakleet is unable to do long term planning, economic development or plans for basic housing. In response, the DEC evaluated various alternatives for the community and found that moving the transmission inland would not be as feasible as trying to develop well fields that are closer than the current source of water. “The problem is we do not know if we can find enough water to meet the demands,” said Griffith. Estimating seven wells may be required, the DEC is planning on drilling and testing sites this winter. Bethel, $1.7M grant, $913K loan The City of Bethel does not have pipes to empty toilets, so 80 percent of residents have holding tanks beneath their houses. Sewer trucks with hoses remove the refuse, taking all the human waste to a facultative lagoon, possibly the largest one in North America. One problem for Bethel is that the decades-old lagoon has never been dredged, and its jetty — literally a service driveway the trucks must use to make deposits — is crumbling away. “The lagoon is a complex project with many financial contribution sources all acting in a collaborative manner,” said Bethel City Manager Ann Capela, referring to funding being provided by various state, local and federal agencies including the U.S. Environmental Protection Agency, DEC, Indian Health Services, the state, and the City of Bethel. The entire renovation, totaling a little more than $8 million, must be completed under one umbrella project. “Once you start taking sheet pile off and digging around? The ground hasn’t been touched for 30 years. We do not know how the dirt will react,” Capela said. “We’re talking summertime, permafrost and soft sand, so we have to be prepared for any reaction from the ground.” In addition to lagoon renovation, three sewer trucks will be purchased to replace older models that have since been discontinued. Replacement parts for these models are not even available because the manufacturer is no longer in business. Two of these trucks are set to roll off the barge at the end of September. Design and engineering plans will begin in winter, with digging and construction scheduled to start in the spring of 2017. The Alaska Native Tribal Health Consortium is the recipient of 18 grants for multi-phase and stand-alone projects in rural communities around the state. These are four of the organization’s projects: Eek, pop. 256, $5.9M for water and sewer This is the latest of several grants to continue a multi-phase ongoing project. Currently no homes are connected, but the first set of homes is scheduled to be online by summer 2017. According to the ANTHC, one more application for funding will be required to finish out the project. Saxman, pop. 411, $3.22M for wastewater Wastewater in Saxman, a City in Ketchikan Gateway Borough, is currently discharged from three ocean outfalls. The grant will be used to eliminate these outfalls by installing sewage pump stations into the borough wastewater system. Kiana, pop. 369, $2.33M for water and sewer This grant for water and sewage services in Kiana, a City in the Northwest Arctic Borough, will service a number of homes in a subdivision that currently lacks access. Design starts this year, with 2018 construction likely. Golovin, pop. 161, $1.48M, water and sewer Last phase of a continuous project to provide indoor plumbing for homes in Golovin, a community east of Nome.  

Tustumena replacement accelerated to FY2017 funding

It’s looking like the M/V Tustumena could be headed for an earlier-than-expected retirement. The Alaska Department of Transportation and Public Facilities has moved up its federal funding request to pay for the 52-year-old Tustumena’s $237 million replacement from “after fiscal year 2019” to federal fiscal year 2017, which begins Oct. 1. The Seattle-based marine engineering firm Glosten finished designing the new 330-foot vessel in January. “It’s just a matter of awarding (the construction) contract and before we can do that we have to have funding for it,” Deputy DOT Commissioner Mike Neussl said. DOT made the change in the first amendment to its 2016-2019 Statewide Transportation Improvement Program document, which essentially prioritizes all of the department’s prospective construction projects and the plans to fund them. About $216 million of the $237 million for the new ferry will be federal money, with the remaining $21 million paid for with requisite state matching funds. The Alaska Marine Highway is part of the national highway system and therefore qualifies for Federal Highway Administration funds for road construction projects. Those federal dollars typically require a minimum state match of approximately 10 percent. The public comment period for the STIP amendment document ended Aug. 19, and barring changes will soon be incorporated into the overall construction plan, which was finalized last November. In the case of the Tustumena replacement, the funding request was advanced via a mechanism that allows the state to fund the project up front and be paid back over subsequent years if the project is approved by the FHWA. The STIP amendment calls for the state to fund the several-year project up front with $54 million in paybacks in federal year 2019 and another $108 million from the feds after 2019. Replacing the 296-foot Tustumena, which serves Homer, Kodiak Island and ports on the Alaska Peninsula and the Aleutians has become increasingly pressing as the aging ferry has shown more and more wear from years on the system’s most taxing route. Cracks near the bow in the structure of the vessel have forced the U.S. Coast Guard to put travel restrictions on the Tustumena, Neussl said. That means it won’t be hauling legislators and their wares from Whittier to Juneau this January. “The legislative cross-gulf run is not on the winter schedule, which was just released,” Neussl said. “We have an alternative plan to truck those vehicles to Haines and haul them from Haines to Juneau on the regular Lynn Canal ferries.” Replacing the Tustumena is all-but mandatory, despite the state’s $3 billion budget deficit, because it is the only vessel in the 11-ferry fleet with a vehicle elevator to match the docks on its route. “Nearly every port from Homer out to Unalaska-Dutch Harbor is a (privately owned) fixed-height dock,” AMHS General Manager  John Falvey said. “There are no floating docks out there. That would be a massive infrastructure change to keep all those communities in service with a new floating drive-on drive-off dock.” Additionally, the new vessel will carry 53 vehicles to the Tusty’s 34, which will add needed car deck space between Homer and Kodiak, Neussl noted. According to Glosten, the latest ferry design should reduce drag on the vessel’s hull by 20 percent and lead to notable fuel savings as well. Doug Ward of Vigor Alaska said during the MTAB meeting that the state’s twin 280-foot “Alaska class” day ferries being built at Vigor’s Ketchikan shipyard are about three to four months behind schedule for both to be done by October 2018. He attributed the setback in the nearly four-year build schedule to the contract employees the company hired not taking a liking to the Southeast Alaska community. “We had a lot of turnover in 2015,” Ward said. Vigor hired journeymen level shipbuilders from the Gulf Coast to teach generally younger, unskilled resident workers in the trade. However, the fair weather workers “don’t last very long in Ketchikan,” Ward commented. “We are a little bit behind schedule and I’m feeling pretty good that we’re going to be able to catch up and hopefully turn a profit,” he said. In May, Gov. Bill Walker’s office announced Port Alsworth 7th grader Malea Voran and Eagle River sophomore Taylor Thompson had won a statewide essay contest for Alaska students to name the Alaska class ferries, which will be the M/V Tazlina and the M/V Hubbard. State law requires AMHS ferries be named after Alaska glaciers. Elwood Brehmer can be reached at [email protected]    

CIRI, Golden Valley progressing on Fire Island Wind expansion

In about a year there could be a few more wind turbines dotting the horizon west of Anchorage, thanks to a Fairbanks utility. Golden Valley Electric Association and Cook Inlet Region Inc. jointly announced Wednesday that they have agreed to the framework of a deal that would double the number of wind turbines on Fire Island just off Anchorage in Cook Inlet. About a $50 million project, Phase 2 of CIRI’s Fire Island Wind project would add another 11 large turbines to the group that was installed in 2012. Golden Valley CEO Corey Borgeson said in an interview that his electric utility and CIRI have reached a term sheet but are still negotiating the finer points of what is ultimately an extremely complex purchase and sale agreement. He said he fully expects a contract to be finalized and added that he would “welcome the other utilities in joining” Golden Valley to purchase power from Phase 2 of the Fire Island project. “(The agreement) is not done yet but we’re very optimistic and committed to bringing this independent power producer online,” Borgeson said. CIRI, the Southcentral Alaska Native regional corporation, has been actively and publicly soliciting the Railbelt utilities to partner to expand its wind farm since the first 11 turbines came online in September 2012. Chugach Electric Association agreed to a 25-year deal to purchase power from Phase 1 of Fire Island for 9.7 cents per kilowatt-hour. The framework deal currently being discussed calls for a 25-year purchase agreement with an electricity price escalating from a base price potentially as low as 5.6 cents per kilowatt-hour, the joint release states. A final agreement would require approval from the Regulatory Commission of Alaska. CIRI’s push to get Phase 2 built is do in large part to its ability to capture a 30 percent federal Business Energy Investment Tax Credit for the capital cost of the project. CIRI Senior Energy Development Director Suzanne Gibson described the rough deal CIRI is working on with Golden Valley as “sort of our last gasp at getting (the tax credit) while the getting is good.” According to the joint release, CIRI expects to secure financing for the Fire Island expansion this fall and have the turbines up and running by October 2017. The Consolidated Appropriations Act signed last December, a federal spending bill, extended tax credits for numerous types and sizes of renewable energy projects, including Fire Island. Gibson said as long as it is completed by the end of 2017, CIRI expects to receive the incentive, as opposed to the original end of 2015 deadline. Phase 1 of Fire Island was also spurred by a $25 million state grant to fund most of the cost for the underwater transmission line to connect the wind farm to Anchorage. Gibson said the prospect of a significantly lower price for Phase 2 power is due in large part to infrastructure  — operations and maintenance buildings, roads, transmission lines — and personnel that are already in place from Phase 1. “It won’t be as expensive to add 11 more (turbines) from an operational standpoint,” she said. The 11 turbines on Fire Island today are 1.6-megawatt General Electric turbines. The new, more efficient turbines will be able to generate up to 1.85 megawatts each, if the project is seen to fruition, according to Gibson. The 15 percent increase in generating capacity should allow Phase 2 to provide about 54,000 megawatt hours of power per year, enough to power about 7,500 homes, she said. Borgeson and Gibson both said they believe CIRI and Golden Valley have gotten this far towards a deal now because several new gas-fired power plants in the Railbelt that have come online in the past couple years allow for better integration of highly variable renewable power. They also concurred that a general move towards better cooperation between the area utilities — power from Fire Island would have to move through the networks of three utilities plus the state-owned northern intertie before reaching Golden Valley — will help make the project possible. “We’ve created a (generating) system that’s robust and will allow for the expansion of renewable projects, which is great,” Gibson said. The Railbelt utilities presented their efforts to maximize efficiencies and minimize costs to the RCA during a Wednesday morning meeting when the Fire Island announcement was made.   Elwood Brehmer can be reached at [email protected]

Budget cuts manifesting through shuttered state services

From Kotzebue to Ketchikan, the State of Alaska is closing offices and programs as funding runs out. The Department of Labor and Workforce Development announced Aug. 15 that it would be closing AVTEC’s Anchorage campus immediately due to state budget cuts. Formerly the Alaska Vocational Technical Center, AVTEC is Alaska’s primary public vocational and technical college. Its main campus is in Seward. AVTEC’s Allied Health Program, which trained nurses and nursing assistants, is the casualty losing the Anchorage extension. “It is frustrating and disappointing to close a campus that trains Alaskans for rewarding careers in a fast-growing industry like health care. The department’s and AVTEC’s budgets have seen big cuts in the past couple years and we simply can’t afford to keep the Anchorage campus open,” Labor Commissioner Heidi Drygas said in a release announcing the closure. Heather Beaty, director of the Alaska Workforce Investment Board said in an interview that the Allied Health Program run out of Anchorage usually enrolled about 100 nursing assistant students each year. The registered nurse program was shuttered after the 2015 class graduated and the licensed practical nurse program was “put into abeyance” last November, Beaty said. “We’ve been looking for other funding sources to bring that program back online and had people on a waiting list hoping that we could do that, but the continued cuts to the budget caused us to close down all of the Allied Health programs at the campus here in Anchorage,” she said. There were 30 people on the LPN program waitlist, according to the Labor Department. AVTEC’s overall budget peaked in fiscal year 2013 — as did most state agency and program funding — at $16.1 million. By 2015 AVTEC’s budget was down slightly to $15.6 million and this fiscal year, 2017, it received $14.9 million from the Legislature. Beaty said closing the Allied Health Program saved the popular school $705,000 per year, but also meant cutting four full-time instructors. There are no plans to consolidate the program into the Seward campus. “If things changed I’m sure the department would reexamine (the Allied Health Program) because occupations in health care are growing fast and in high demand,” Beaty said. “It was a painful decision to have to close this program because they’re good careers for Alaskans with good wages and opportunities for advancement but we cannot afford it at this point.” As a whole, the Department of Labor budget has shrunk 16 percent from $195.5 million in 2013 to $164.4 million this fiscal year — more than half of which is designated federal money. The decline in Labor’s unrestricted General Fund, or UGF, budget has been sharper. The department has absorbed nearly a 40 percent UGF budget cut since 2013 and a 37 percent cut over the past two years to its current $15.3 million UGF level. The State of Alaska has run budget deficits driven by a loss of General Fund revenue in the $3 billion range the past years and a the drastic and sustained drop in oil markets indicates little end to the deficits in sight with status quo state spending and revenue. Gov. Bill Walker vetoed approximately $870 million from the 2017 budget June 29 after legislators failed to pass the key elements of his administration’s broad fiscal plan to balance the state budget by 2019. His line item vetoes did not directly impact the specific services highlighted in this story. It’s the UGF cuts that led to the Aug. 11 announcement that the Labor Department would be closing the Kotzebue Job Center to save $166,000 annually. That office was scheduled to close Aug. 19. Labor Commissioner Drygas said in a formal statement that the department would continue to assist Kotzebue residents who used the job center through online services. According to Beaty, 413 individuals utilized the Kotzebue Job Center in 2015 and it received 2,200 total visits from residents of the town of about 3,200 people. Job centers in Barrow and Seward were closed last year to save a total of $316,000 per year, a department release states. Beaty said individuals make use of the job centers for “anything from just coming in to do job searches online or filing for unemployment insurance or working one-on-one with our staff for more extensive training and support.” The “more extensive training and support” often includes assessments for appropriate training programs, updating resumes and sharpening interview skills among other things, she said. Beaty added that the department has tried to make sure Alaskans, particularly in rural areas, still have some access to employment resources. “In the case of Kotzebue we’ve donated a few of the computers that were in our office to Maniilaq Association (a local social service nonprofit) so that we can ensure the public still has access to those computers and the Internet connection to get online with our services,” she said. “In Seward, the job center was actually located on the AVTEC campus so that room is still open to the public with computers and a phone that they can use to connect with our Kenai Job Center staff for personal assistance.” Beaty also said she is not aware of any other closures on the immediate horizon, but if budget cuts continue in the 2018 budget the department will have to continue eliminating services and programs. “It’s a tough reality but these are the effects of this budget climate,” Beaty said. On Sept. 15, the Ketchikan Regional Youth Facility will close its doors and 15 full-time Division of Juvenile Justice employees will be let go, the state Department of Health and Social Services announced also Aug. 15. “Youth in detention will now have to be sent further away from their home communities and hard-working state employees will lose their jobs when the facility closes,” DHSS Commissioner Valerie Davidson said in a statement. “But given the financial realities we face in our state, we know closing the Ketchikan facility is necessary.” Young Alaskans at the Ketchikan facility will be transferred to the Johnson Youth Center in Juneau, according to a DHSS release. Juvenile Justice Director Rob Wood said low utilization — certainly a good thing when the topic is youth detention — contributed to closing the Ketchikan center as well. The Ketchikan Regional Youth Facility got $1.86 million in the 2017 budget that includes legislative intent language to convert the facility to an adolescent substance abuse and behavioral health treatment center. The $1.8 million was on par with previous year’s allocations. “It wasn’t being used being used enough as a detention center, so we were looking to see if we would be able to create a treatment program out of it that would have some Medicaid support and it just didn’t work out.” The Ketchikan center has had eight to 10 beds available for the past decade, but on average only three or four of those beds have been used most days, according to Juvenile Justice Division data. Statewide, juvenile detention and treatment facilities had capacity for 257 youth in 2015, down from 295 in 2006.  However, even as the number of available beds has decreased, so has the percentage of beds being used. Utilization of state youth detention and treatment facilities has fallen from about 85 percent of available space in 2006 to less than 70 percent in 2015. “We’ve just had low utilization largely because we’ve got a fairly small juvenile crime rate the last few years,” Wood said. “It’s hard to maintain programs that cost $1.9 million per year when you have those low numbers.” Elwood Brehmer can be reached at [email protected]

Employers begin programs to develop industry ‘cross-skills’

Alaska employer and training groups are taking another step in a long-sought goal: identifying “cross-industry” skills that will allow workforce training to focus on entry-level capabilities useful across several related industries such as petroleum, mining and maritime. It has not turned out to be a simple task, said Dave Rees, a retired BP workforce manager who chairs the Business Education Compact, a forum for employers and the job training community. Identifying cross-industry skills is a project taken up by the Business Education Compact as state and federal funding for training has become scarce. It’s now important to stretch dollars farther, and employers are being asked to contribute more of their own funds. Employers typically do focused, occupation-related training once a new employee is hired, but they need workers coming in the door with certain abilities and, ideally, preparation in some skills needed for the occupation. These are things traditionally left to public education and, at a very basic level, to parents. For starters, “We need people able to get to work on time, be unimpaired and have no criminal record. It’s really important that kids in high school know these things,” said Kris Norosz, government affairs director for Icicle Seafoods, a major Alaska seafood employer. Icicle, with its roots in Petersburg, hires many seasonal process-line workers needing only basic skills, but Norosz said the company also hires a wide variety of skilled professionals. Because many jobs are year-round the company prefers to recruit locally, where the company has plants. There are often difficulties in getting skilled workers at the places and times they are needed, she said. “Every industry has it choke points,” and for seafood companies it’s often in fields like refrigeration engineers, can line mechanics, electricians and port engineers, she said. These are jobs that pay well and are often year-around. In all technology-related occupations, which also tend to pay well, new recruits need math, science and computer skills along with soft skills like interpersonal communication and teamwork, which are seen as increasingly important by employers. All of these are common to most career paths, and all are typically taught in at the high school level. But things get more difficult at the next step in teaching entry-level skills in fields like instrumentation and maintenance. “There are a lot of career pathways that are now identified in specific occupation fields, but not across fields,” Rees said.  Even within one industry, such as oil and gas, separate skill preparation is still done for many kinds of technicians and operators. There is not enough that overlaps. Training for some occupations have obvious overlaps. Heavy equipment operators, for example, are employed in surface mining and in civil construction, Rees said, but even the equipment operator field can get specialized and computer skills are increasingly important with vehicles more reliant on “smart” information systems. Job fields like equipment maintenance are becoming more complex, too. Traditionally most heavy equipment was diesel-powered, but now electric-powered heavy equipment, as well as passenger vehicles and trucks, are becoming more common. In the future maintenance people will be diesel mechanics as well as electrical technicians. This illustrates the cross-skills gap, the need for trainers to teach both fields in one program. McDowell Group, a Juneau-based consulting firm, has been retained to help identify common skill-sets but an initial McDowell report published this spring wasn’t able to go far enough, said Kari-Ann Carty, executive director of the Alaska Process Industries Careers Consortium, or APICC, a group that helps coordinate technical training. A second report by McDowell is being commissioned that will zero in on some of the central questions. It will be published next spring, Carty said. Much of McDowell Group’s initial research was focused on federal job codes that describe occupations, but the second report will include results from interviews that should be more helpful, Carty said. The intent is to have McDowell Group publish updates of the report annually, she said. The federal job codes, which are often relied upon in government-funded training, are more related to specific craft skills. The real world of the workforce is one of employers wanting flexible multi-skill training.  Carty said one model for integrated training attracting attention is a “holistic” approach developed by Vigor Industries and the Alaska Construction Academy in Ketchikan and being done with local Southeast Alaska high schools. “This is well-rounded and flexible, involving multiple technical skills like welding and electrical. It is built around ship-building,” which is Vigor’s business, but students are finding jobs in a wide variety of Alaska maritime-support companies, many in other parts of the state, Carty said. Doug Ward, Vigor’s business development director, said his company targets Alaska recruits for its shipyards in Ketchikan and Seward because hiring locally, which also requires training, results in reduced turnover. The company has found that many skilled workers it recruits for Ketchikan from the Lower 48, where Vigor has other shipyards, find the adjustment to Southeast Alaska’s rainy climate difficult. The local-recruitment is having results for Vigor. “As of this week, we have 185 workers (in total) between ‘new build’ (the new Alaska-class ferries being built in Ketchikan) and repair, and 167 of those are local. We have 70 local workers dedicated to the new ACF ferries,” Ward said. Vigor is helping school districts in the southern Southeast region with pre-apprenticeship programs and the company also offers internships, he said. “In Ketchikan high school students take courses designed around the NCCER  (a national skills certification program) Core Construction Skills, like in welding, and participate in Maritime Career Day. In Wrangell, students are designing speed boats in AutoCAD and then building them,” Ward said. Internally, Vigor works with entry-level employees to upgrade to middle-skill and journeyman levels. Vigor and other marine-related companies are also working on industry-wide skills-training initiatives and in 2014, working with the University of Alaska, published a Maritime Workforce Development Plan, a requirement for industry-specific training to be recognized in many federal programs. The effort was also aimed at getting maritime recognized as a distinct industry in Alaska because many workers in marine-related fields are identified in other industries such as transportation or seafood, and this reduces the awareness of the industry’s importance in the eyes of the public and government officials. To date maritime employers have organized themselves into a loose alliance that includes companies like Crowley and Icicle along with Vigor, but the group is also aligning and may become a formal part of APICC, Carty said. To date APICC has been primarily focused on process control skills in the petroleum, mining and wastewater industries (seafood plants also rely on process controls) but the integration of maritime skill requirements, like vessel maintenance, will broaden the organization. This is important because APICC is an employer organization that is mostly privately-funded, and its purpose is to ensure that the training community, which includes the university and, more broadly, the schools, knows what employers need. This is new because until now employers have not been broadly or deeply engaged in any organized way. Too often, training policies and priorities have been influenced by federal and state labor agency officials and others, and while well-intentioned this doesn’t result in focused efforts. “We need to ensure that workforce plans are employer-driven so that employers know they can get the skill sets they need with new employees,” said Norosz. Tim Bradner can be reached at [email protected]

INSIDE REAL ESTATE: When buying or renting, how much is ‘pretty’ worth to you?

Buyers zip through online websites looking for the home of their dreams. They discard homes based on the exterior photo and move on to a dozen or sometimes a hundred different properties. At open houses, probably 50 percent of those who thought they were interested in the home, simply drive right by it, rejecting the outside appearance of the home. So, yes, pretty does matter whether it’s for a single family home and for a small investor looking to make his first duplex or four-plex investment. Anchorage’s housing stock is old. Really old. Not only does it suffer from economic and cosmetic obsolescence but it doesn’t always look that good, either. In the world of botox and LA inspired cosmetic surgeries, “pretty” adds value, but giving a home a new facelift can be expensive and return on value is usually 50 percent or less. What “pretty” does provide, however, is a faster marketing time or a slightly higher rental rate. However, probably nowhere in our housing stock is a “facelift” more important than in our local rental market, where the vast majority of which was built in the 1970s and 1980s. With a vacancy factor of 3.9 percent, a creep up from 3.5 percent in 2015, the vacancy rate is still below the national average but the average Anchorage rental rate for an apartment has only increased by $5, signaling a stall in rates while at the same time the existing housing stock needs that facelift. While on the other hand, builders and investors are hesitant to build and buy brand new rental units. In order to compensate for the higher cost of construction versus existing square footage values, units have to be built smaller but also “pretty.” Apartments built in the 1980s usually had two bedrooms and one bath in about 1,000 to 1,200 square feet. Today, there is considerable demand for three bedrooms and two baths packed into 1,000 square feet. You can count on the “micro” rental unit coming to Anchorage in the not too distant future, although it may be larger than the 200-square foot units recently approved by the New York City zoning commission. Small has value. Less square footage to heat. Better and more efficient mechanical systems. Better insulation. Less reserves for maintenance and repairs the first five years. As our market readjusts itself from the last few years of appreciation, more and more buyers will turn to owner-occupied duplexes and four-plexes. They will like the 27.5 years of depreciation and the pro-rata write off for insurance, advertising, office supplies, landscaping and utilities. But, like any other buyer, they will want to buy “pretty.”  Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at Contact her at 907-229-2703 or [email protected]  

Budget cuts take bite from job training programs

Budget cuts to state and university training programs have become a major concern for industry leaders who worry about the “graying” the workforce in Alaska’s key industries, and having enough future skilled workers. The concern is across-the-board, from oil and gas to mining, maritime, seafood — you name it. The skilled-worker gap is actually a problem now, even with the state facing economic uncertainties. “In many Alaska industries, from oil to mining, construction and health care, jobs remain difficult to fill due in part to a lack of qualified Alaska workers. All of these industries have challenges hiring in Alaska and must therefore recruit employees from outside the state,” Juneau-based McDowell Group, a consulting firm, wrote in a workforce report published this spring. Meanwhile, the state Department of Labor and Workforce Development, which coordinates much of the state and federal money for training, has seen its budget cut sharply, from $33.4 million in state funds two years ago to $22.4 million in the current year, state Labor Commissioner Heidi Drygas said.  State funds to three rural regional training centers, in Kotzebue, Nome and King Salmon have been cut sharply, as has money for the Alaska construction academies, which are in larger communities, Drygas said. The rural training center cuts are particularly unfortunate, she said. “These are areas with high chronic unemployment, and the training is focused mainly on jobs available in those region, like health care, construction and transportation, where workers now come mainly from other parts of the state,” Drygas said. There are other funds available to these centers, which are operated by nonprofits, but the state funds provide a base for operations. “They helped keep the doors open,” Drygas said. For major employers, however, a worry is that the rollercoaster ride down of commodity prices in resources like oil and gas and minerals may discourage young people from pursuing training they’ll need for jobs that will sprout again when the commodity cycle turns up. For example, there have been layoffs in petroleum and young people may see this as a sign that there’s no future in the industry, says Dave Rees, a retired BP workforce development manager who now chairs the Business/Education Compact, a forum for employers and people engaged in workforce development. “Young people may be discouraged, thinking that there will be no jobs. That’s not true, because there will always be people needed to operate the oil fields,” he said. “It is estimated now that a substantial part of the North Slope operations workers will retire in the next 10 years,” he said. The skilled technicians needed to replace those workers should now be in craft or university programs or taking classes in high school to get prepared, Rees said. In its report, McDowell Group said 6,566 resident workers in the oil and gas industry are expected to reach retirement age in the next five to 10 years.  The trend is similar in mining, where 47 percent of mechanics, 51 percent of mining materials engineers and 65 percent of mining machine operators are 45 or older, McDowell Group said. But even if young people are interested in careers in petroleum or mining they may see fewer opportunities for training due to reduced funding. The process feeds on itself because fewer applications made to training providers, whether private, union or university, will force training administrators to shrink or even cancel programs. Translated, this means that when an upturn comes trained Alaska workers won’t be available. Rees believes that employers will have to step into this void themselves, funding more entry-level preparation and basic workforce training. “We won’t be seeing a lot of state or even federal funding in this new era of tighter budgets,” he said. Entry-level career preparation and vocational schooling were functions traditionally provided in public education in high school or the university and previously, employers concerned themselves mainly with focused training once a new hire is on the job with a basic set of skills. Basic preparation was left to schools of various kinds. This model is changing, however. Workplace technology is more complex, requiring proficiency in computers, math and communication, both verbal and written, as well as skills generally related to an occupational field. With budgets under stress, schools and the university may be less able to provide these. The problem is nationwide. “Across many industries and across the nation a lot of employers face shortages of skilled workers even with rising unemployment. Workers that are available don’t have the skills,” McDowell Group said in its report. Alaska employers began waking up on this about 10 years ago, becoming more active in promoting career awareness in middle schools and vocational programs in high schools, and funding for advanced training in universities. Employers in key technology industries, such as oil and mining, realized also that they had to cooperate and find ways to share information, which can be sensitive because companies’ views of future business and workforce needs are highly proprietary. Training providers needed estimates of future needs because without these they couldn’t gear up to meet employers’ needs. At the same time students had to gain confidence there would be jobs in the end, or at least good chances, at the end of several years of training. Ways were found to do this. One initiative, led by the oil and industry, was the Alaska Process Industry Careers Consortium, or APICC, an alliance of industries that operate plants using process controls, were formed to work together and with training providers. APICC was formed to provide a mechanism for companies using process control technologies to work together, share information and work with training providers, and it has become a model for other industries. One outcome of the effort was creation by the University of Alaska of a two-year associate degree in process technology, which has been highly successful. About 200 have been enrolled in the process technology program in recent years at three of the university’s campuses, with about 70 to 80 graduates per year. Most of the graduates were snapped up by various companies, many looking to replace retiring skilled operations staff. APICC’s success spawned similar efforts in other industries such as in mining, where the human resources committee of the Alaska Miners Association is active. A maritime industry working group has been formed. Both are becoming involved in APICC, so that this organization could wind up serving several industries. Organizations that can facilitate collaboration are good because companies, and even industries, have not been good at translating the demographics of their workforce into projections for future needs, Rees said. “How many welders are we going to need? How many people in their 20s and 30s are now in training to replace retirees?” Rees asks.  Getting data has been difficult. One industry, health care, is considered better at projecting and recruiting for its needs for higher-level professionals like physicians and skilled nurses, Ress said, but even health providers face challenges in recruiting lower-skill workers including certain types of medical technicians and administrative workers. One health care initiative was the successful nursing program at the University of Alaska Anchorage. Individual companies have their own initiatives, meanwhile. Continental Motors, in Anchorage, has an active apprenticeship program in automotive maintenance. Another firm, Vigor Industries, operator of the Ketchikan Shipyard in Southeast Alaska, has its own training program in place and works with the local high school on a pre-apprentice vocational programs. Calista Corp., the regional Alaska Native corporation for the Yukon-Kuskokwim Delta, is meanwhile developing a maritime-related apprenticeship program with transportation companies like Crowley and Lynden Transport, which supply fuel and other services in the region. In another initiative employers in the technical industries, working through APICC, are identifying skills that are commonly needed across several industries. Once these are identified the available training funds can be focused, which could be  very efficient. Training, meanwhile, does pay off and sometimes fairly quickly. “A pipeline training program organized several years ago in Fairbanks by contractors provided training to 1,646 individuals and three years later 80 percent of these people were still working,” McDowell Group said in its report. Wage income for these workers increased 30 percent, or a total of $13 million in new income after the training. the report said. All employers also agree in encouraging career interest and readiness programs in schools, and volunteers from many companies spend time in classrooms talking about their industries. “All employers encouraging schools to develop programs on work readiness,” like being timely, dressing appropriately and learning communication skills, said Cary-Ann Carty, APICC’s executive director. The traditional vocational classes in many high schools have fallen victim to budget cuts but many school districts offer programs in centralized facilities, like King Career Center in Anchorage. APICC has further extended the idea by helping high schools and the university organized dual-credit classes in high schools where students can take certain classes and earn university credits toward an associate degree in process technology. Alaska Resource Education, a nonprofit widely supported by industry, works in elementary and middle schools to promote children’s interest in science and technology, and plans to expand into the high school levels. Rees said such career-awareness programs in schools pays dividends for employers because they help young people know if they are even interested in a field before starting training or apprenticeships. “It’s very inefficient for everyone if a young person gets into training or an apprenticeship and then decides the field is not a good fit. It’s better to find this out before hand through career programs in schools,” he said. Tim Bradner is a correspondent for the Journal. He can be reached at [email protected]  


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