DOD to spend $325M on Clear missile defense radar

Another big chunk of the roughly $1 billion the Defense Department is spending to upgrade the country’s missile defense system is headed to Alaska. Missile Defense Agency Director Vice Admiral James Syring said Feb. 23 to during a presentation to the Fairbanks Chamber of Commerce that more than $325 million will be spent at Clear Air Force Station over the next six years to install a new power plant and missile detection radar. Clear Air Force Station is a radar base located near Nenana along the Parks Highway southwest of Fairbanks. Much of the construction spending will begin in 2017, Syring said, when $155 million of work on the mission control facility and related infrastructure is started. In 2019, another $150 million will be spent on the station’s new power plant and fuel storage facilities. This year, the Missile Defense Agency plans to spend about $25 million building a 350-person man camp and decommissioning the Ballistic Missile Early Warning System, among other things, Syring said. That work will be contracted through the Alaska District of the U.S. Army Corps of Engineers. Syring said he expects much of it will be done by local contractors. Long Range Discrimination Radar, or LRDR, being developed by Lockheed Martin in New Jersey, will replace the early warning system. The LRDR will then be shipped to Alaska and installed at Clear. Syring said the man camp will be used from 2017 to 2021, with peak occupancy in 2019. Clear Air Force Station is on the electrical grid; however, the upgraded power plant is a backup facility that will be protected against electromagnetic pulse weapons that could be used to render electrical systems useless, Syring explained. “Everything we are doing here in Alaska is to expand our defense against that North Korea threat,” he said. Early in 2013 the Pentagon announced plans to add 14 interceptors to the 26 currently installed at Fort Greely near Delta Junction by 2017. Those interceptors are the country’s main defense against the intercontinental ballistic missile (ICBM) threats primarily coming from North Korea and Iran, according to Syring. He said the impetus for adding interceptors to Greely was a rocket launched into orbit by North Korea in 2012. A similar test several weeks ago demonstrated the temperamental country still has the capability to reach orbit and is still pursuing an ICBM feet. Repeating nearly every Defense official who references Alaska, Syring noted the state’s global position as key to its role in the missile defense program. “Why we are here is (Alaska’s) strategic and geographic location and there’s no two ways about it,” he said. Army Chief of Staff General Mark Milley said to Sen. Lisa Murkowski in testimony before a Senate committee Feb. 24 that he wants to delay a force reduction from Joint Base Elmendorf-Richardson planned for 2017 by at least a year because of increasing threats — North Korea included — in the North Pacific. Milley cited the ability of Alaska forces to reach East Asia within hours of deployment as a primary reason for keeping strong military resources in the state. Elwood Brehmer can be reached at [email protected]

INSIDE REAL ESTATE: Anchorage housing crunch pushes buyers to multi-family

According to the National Association of Homebuilders, there are nine groupings of homebuyers in America. Those nine groups include the young single, older single, single parent, young couple, mature couple, older couple, young family, middle family, and mature family. Each group is then broken down by income, age, and family description, including traditional or blended, in the family category. Alaska’s demographics fit well into these various groups with a growing population of the mature family (aging baby boomers) and the emerging millennials as young single, single parent, and young couple (with or without children). However, unlike communities in the Lower 48, such as Las Vegas and Phoenix, which are once again experiencing growth in new home starts, Southcentral Alaska is falling behind and failing to meet the housing demand for all of the home buying groups. According to the recent Building Owners and Managers Association presentation, Anchorage lacks hundreds housing units not built over the past five years. Even taking into consideration an estimated population dip of 1,800 in Anchorage (with an average family size of 2.65) Anchorage’s shortfall is still critical. With remaining Anchorage land having poor soils, wetlands, and topographical challenges, along with the ever increasing cost for the extension of roads, water and sewer, due to changing regulations of the type of pipe and required road insulation, Anchorage’s housing shortage will continue to spiral out of the affordability index for most of the nine home-buying groups. As a result, more and more homebuyers are going to be forced to turn to multi-family housing if they want the convenience of living relatively close to employment centers. But even those multi-family choices are limited to older, attached zero lot lines without adequate covenant, codes, and restrictions to preserve value; or 1980s condos, many of which have inadequate reserves and may face special assessments in the near future. Most multi-family zoned land (R2, R2M, R3, R4) has been eaten up by the duplex style condo, a plethora of which was built during the 1990s. However, a small but emerging market some buyers may turn to is the owner–occupied duplex, triplex, or fourplex. Whether brand new (if you can find one) or an older property, mortgage financing is readily available with as little as zero down for Veterans’ Affairs financing, or 3.5 percent down payment for Federal Housing Administration. Mortgage loan amounts for owner occupied duplexes are as high as $800,000. Thirty-year fixed rate mortgages are at 3.65 percent, and the preferred 15-year mortgage, if you can afford the monthly payment, which will save you tens of thousands of dollars over the lifetime of the mortgage, is only 3 percent. Brand new duplexes or fourplexes are going to be expensive. The two most expensive rooms of any home are the kitchen and bathrooms, and multi-family doubles or quadruples their numbers. However, savvy homebuyers in all groups are beginning to recognize the value of letting a renter help with the mortgage. Even if the renter only provides enough income for the taxes, insurance, and the rising cost of utilities, it’s a monthly cash contribution to the homeowner. I belong to the aging baby boomer group. As a tenant new to Anchorage, I lived in a duplex on Barbara Street. As an owner, I’ve lived in a Petersen Tower condo, on the hillside, an attached townhome, and a luxury single family home. I also owned and lived in a Bootlegger Cove fourplex that I regret ever selling, and for the past 19 years a duplex just five minutes from my office. I’m a good example of how our housing needs change as we pass through the various home buying stages. Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]  

Anchorage Assembly to reconsider marijuana land use rules

Anchorage marijuana regulations could get a makeover only two weeks after their final passage by the Anchorage Assembly, potentially revising the 500-foot distance marijuana businesses must be from sensitive areas and how that distance is measured. The Assembly will hold a meeting on Feb. 23 to reconsider its marijuana land use ordinance, which established zoning regulations for cannabis businesses including setbacks from schools. The Assembly will not take public comments, as they are not required for ordinance reconsideration. Assembly member Patrick Flynn called for reconsideration after noticing inconsistencies between an amendment he passed and those introduced by Assembly member Amy Demboski. “One amendment defined distance based on pedestrian routes from front door to front door, the other based on lot lines,” said Flynn. “We as a policy making body need to come up with a final answer so that we can resolve that incongruity and give clear direction to zoning.” On Feb. 9, Anchorage tightened certain regulations while holding off on others. Among other restrictions, the new regulations redrafted the measurement standard between marijuana businesses and sensitive areas. The Assembly narrowly approved a 500-foot separation distance from schools, which halved the earlier proposed 1,000-foot separation. However, that distance is no longer measured by the shortest pedestrian route, but “as the crow flies,” from property line to property line instead of from entrance to entrance. As a result, many businesses’ previously selected retail and cultivation buildings became illegal overnight. Industry panic ensued. Flynn said he’d been contacted by several people in the marijuana industry whose buildings ride the line of legally and illegally placed; one business planner’s building would be just less than 500 feet from the nearest school by shortest pedestrian route, but just more than 500 feet if measured by lot line. Cannabis business attorney Jana Weltzin said the Assembly’s actions made three clients’ buildings illegal. Demboski and Assembly chairman Dick Traini did not respond to calls for comment. DJ Summers can be reached at [email protected]  

Marijuana industry faces steep lease rates in tight market

Marijuana business can expect a hefty square footage price for retail, cultivation, and manufacturing leases within the Municipality of Anchorage once they open for business. On Feb. 24, the Alaska Marijuana Control Board will start accepting business license applications. In the meantime, several industry sources report being charged several times the average per square footage lease rate for their planned marijuana operations, or entering into lease agreements that give a percentage of business profits to the landlord. This follows an observed pattern of real estate investment in both Washington and Colorado, where real estate brokers and media reported industrial warehouse space in marijuana-zoned areas being leased up to four times the average rate. A combination of market factors and regulations drive prices up for marijuana-friendly buildings and make owning such buildings a lucrative enterprise. On Feb. 9, the Anchorage Assembly passed an amended land use ordinance requiring setbacks between marijuana business and schools, churches, recreational facilities, and child-centered facilities. However, the assembly will reconsider those land use regulations at a Feb. 23 meeting. Market rates for these zones go up as scores of marijuana businesses vie for limited space. The land restrictions create pockets of proper zoning in B-3 business zones for retail and industrial zones for cultivation facilities, largely concentrated in Midtown-Spenard and South Anchorage. Wasilla’s recent ban on commercial marijuana intensifies the demand for space in Anchorage as Mat-Su entrepreneurs look for opportunities farther south. In turn, landlords see an opportunity to charge two or three times the average rate, in keeping with real estate patterns in other states where commercial marijuana has been legalized. Because of residency restrictions on licenses, Outside investors eyeing Alaska cannabis have no other route beyond real estate speculation, seeking to make profits through lease rates. Beyond profit motive, investors have a familiarity with real estate they don’t have for marijuana. Lower 48 real estate investors already control a sizable portion of Anchorage industrial space. Seattle’s Slattery Properties owns 15 industrial buildings in Anchorage, and has been present in Anchorage since 1989. Slattery Properties recently outbid Chris and Rick Euscher, who are planning the marijuana cultivation facility RC Tinderbox, on an industrial building, leading to some industry speculation that the company plans to corner the cultivation market. Michael Slattery, the owner of Slattery Properties, said his company is not actively courting the marijuana industry, and that his properties’ conformity with marijuana zoning requirements is happenstance. “We have not purchased anything outside of our core competency,” said Slattery. “The properties we have purchased add synergy to the other seven properties we own in the Cinnabar Loop (in South Anchorage). It’s not our intent to specifically target that industry.” Insurance rates are too high for Slattery to want a large portfolio of marijuana businesses — Lloyd’s of London charges rates up to 250 percent above average for marijuana-related coverage — and Slattery himself said he has “moral issues renting to marijuana types.” The building in question sits in South Anchorage, home to the vast majority of marijuana-zoned industrial space. Slattery has owned properties in Cinnabar Loop dating back to 1989, according to municipal records. Though the company isn’t looking for marijuana clientele, Slattery said he does “keep an eye” on market trends. “I’m not saying we’re going to be looking for them, but as market forces bring the industry out, if they’re socially responsible, and if they meet the regulatory requirements…they need to go somewhere,” he said. Real estate investment and the resulting price increases for marijuana entrepreneurs has been a fixture of the market since Colorado legalized recreational marijuana in 2014. Investor networks from the Lower 48 say real estate is often the first choice for potential investors, as it doesn’t require any knowledge specific to cannabis business and bypasses the residency restrictions in each state. “Probably some of the most prominent and prolific investment in the cannabis industry has been done in real estate,” said Steve Berg, who co-founded ArcView Group, an investor network geared explicitly for cannabis business investment. “The residency restrictions many states prohibit or at least restrict the ability of non-state residents to acquire interest. But there’s nothing to stop them from being landlords to a cannabis companies.” Berg said cannabis investors view real estate as the least risky and least restrictive ways to seed their money. Residency restrictions like Alaska’s — which bans all non-resident money from Alaska marijuana licenses — channels investment dollars that might otherwise have gone directly into business expenses. Cannabis businesses make for attractive tenants, Berg said. Beyond the newness and novelty, they are sound investments, with business plans and good profitability. If regulations or market conditions turn the business belly up, the investor still has the building. “From a risk-reward perspective, that’s very attractive to many investors that are coming out… If it plays out in Anchorage as it does in every other jurisdiction, the areas zoned for cannabis business inevitably see premium lease rates,” said Berg.” Already-legal marijuana markets experienced both an organic growth in marijuana-zoned building values and an increase in marijuana-specific premium rates from landlords. Real estate owners raised prices on marijuana industry businesspeople in Washington when it rolled out its recreational cannabis industry. In Washington in 2013, Seattle area landlords charged marijuana real estate deals of 150 percent to 200 percent premiums, reported the Seattle Times. "One unnamed party recently paid a $50,000 premium — above the lease rate — for a storefront outside of Seattle," read the Times article. "Greta Carter, a Seattle marijuana activist who passed on the tip, said the leaser paid it because the location was a prime spot, albeit grudgingly. 'We’re accustomed to paying a premium in the cannabis industry, but you cross a line when you want $50,000 up front,' she said." In Denver, the “green rush” spiked prices for properly zoned industrial areas to highs not seen since 2004, reported the Denver Post. In 2015, industrial lease rates climbed to $7.05 per square foot. Like Seattle, marijuana tenants were often asked to pay two or three times the average lease rate. DJ Summers can be reached at [email protected]  

LIO saga continues with third-party analysis sought by Stevens

And the beat goes on. Legislative Council chair Sen. Gary Stevens directed the Legislative Affairs Agency on Feb. 11 to hire a third-party for an independent analysis of dueling financial conclusions as to whether the Legislature should stay in the Anchorage Legislative Information Office or move to the Atwood Building that houses executive branch agencies including the governor’s office. The meeting was anticipated to bring some sort of resolution to the at times ugly dispute over the $3.3 million annual lease the Legislature has for the year-old space, but Stevens said more information is still needed with contradictory cost-savings proposals for moving versus staying. “This has all been political to this point,” Stevens said. “There’s been political advice and we need financial.” The Legislature’s lease of the building has drawn intense scrutiny from many legislators and the public as the state faces an annual budget deficit approaching $4 billion. Stevens said he has already discussed hiring a third-party consultant with the council’s outside attorneys who have been in contact with potential independent finance experts. A proposal submitted Jan. 29 by 716 West Avenue LLC, the building owner group, argues the State of Alaska should purchase the building for $37.9 million to accrue maximum savings that would outpace projected savings of moving legislators into the Atwood Building. However, in a Feb. 5 memo to Stevens, Pam Varni, executive director of the Legislative Affairs Agency that handles business for the Legislative Council, disputed cost-saving figures for staying at the LIO compared to Atwood. A spokeswoman for the LIO’s owner group said in a statement that the group will gladly provide all necessary information for a third-party financial review and also will continue to work with the Legislature to find the best way forward for the State of Alaska. Stevens acknowledged the need to have the financial review complete in time for the Legislature to fund, or not, its current Anchorage LIO lease in the state operating budget, which is usually finalized in late April. The current year’s rent is paid through May 31. On Dec. 19, 2015, the council recommended to the full Legislature via a unanimous vote not to fund the lease in fiscal year 2017 if a solution to stay in the LIO that is cost-competitive with moving the legislative offices to the nearby state-owned Atwood Building could not be reached. During the brief Feb. 11 meeting the council voted to remove the lease funds from its 2017 budget to bring its actions in compliance with the December motion. The full Legislature could add the lease payment appropriation back into the state operating budget if the current Anchorage LIO is retained. The Legislature could also terminate the lease seemingly without legal ramification because of a clause in nearly all government contracts stating fulfillment of the agreement is “subject to appropriation,” in this case, by the Legislature. If the Legislature doesn’t fund it, for any reason, the lease or contract falls apart. Mark Pfeffer, the managing partner of 716 West Fourth Avenue LLC has indicated an intention to sue if the Legislature walks away from its obligation. Proposal vs. proposal In the LIO owners’ proposal, tax-exempt financing to purchase the building would be “considerably less” than the current lease payments of $281,000 per month the Legislature currently pays, and the equity in the building would serve as an accrued savings account for the state. Varni wrote to Stevens that the proposal overstates the costs of moving to the Atwood Building by $11 million over 10 years and by $16.3 million over 30 years by including costs for debt service that is currently set to expire in March 2017. She concludes that purchasing outright or financing a purchase of the building would cost the state from $22.5 million to $94.4 million over 30 years compared to moving to the Atwood Building. The 716 proposal creates a “statistical misperception,” according to Varni. “The purpose of statistics is to make something easier to understand; however, when used in a misleading fashion, may trick the casual observer into believing something other than what the actual data show,” she wrote. “In this instance, 715 West Fourth Ave LLC, asserts it is less expensive to stay at 716 W. 4th Avenue than the Atwood Building, based on unrealistic and erroneous debt service data.” 716 West Avenue spokeswoman Amy Slinker said in a statement that Varni’s memo lacks third party analysis. “The Department of Revenue’s professional review shows the ability for clear savings,” Slinker said. The 716 West Fourth Avenue proposal also states the building owners have secured a settlement to dismiss a lawsuit brought by Jim Gottstein, owner of the adjacent Alaska Building, against the LIO owner group and the Legislative Affairs Agency. Gottstein’s complaint alleges the LIO lease is illegal because it is neither an extension of an existing lease, nor 10 percent below market value, as statute requires for a long-term extension. To fully settle the suit the Legislative Affairs Agency must agree to waive potential claims to recoup legal fees, according to the proposal document. Last month, the judge in the suit denied Gottstein’s petition to receive a “whistleblower” award of 10 percent of any money saved if the lease is ruled illegal. Trial in the case is currently scheduled for March. The proposal stated that the suit could be settled Feb. 12, a deadline that passed after the Legislative Council meeting, but Slinker said the settlement offer is still on the table. The Department of Revenue analysis of the Legislature’s options based on figures provided by 716 West Fourth Avenue — buying the building outright, having another state agency purchase it, break the 10-year lease and move to the Atwood or keep the status quo — found a potential savings of more than 55 percent over the existing lease if another state entity finances the purchase for the Legislature. Another stopgap solution offered to lower the existing rent by 5 percent, or $169,000 per year, beginning July 1 until a purchase could be executed. A rent reduction would require lender approval. The owner group also notes it has approval to waive earthquake insurance on the building, which could save another $59,600 per year from the Legislature’s $3.3 million annual bill. Revenue’s examination of the options put the upfront cost to move out of the LIO and remodel 30,000 square feet of the Atwood at $3.5 million to $5.5 million, with an annual building operating cost of $664,000. Purchasing the LIO in some fashion would require the initial payment and then operating payments of $269,000 per year for 45,000 square feet of usable space. Legislative Affairs concludes the Atwood’s annual operating cost to be $613,000, based on Varni’s memo. State ownership would also save $231,000 per year in municipal property taxes; however, taking the building off the city’s tax roll has been a reason cited by legislators for why the council did not purchase it initially. The building houses off-season offices for 25 Anchorage legislators and is the de-facto home to much of the general Legislature’s out-of-session activity. The Legislative Council, then led by Rep. Mike Hawker, R-Anchorage, decided to rebuild on the old LIO building site in 2013 after numerous attempts to find existing suitable space that meets the unique needs of a public government body in Anchorage failed. The Legislature contributed $7.5 million towards the construction cost, so Pfeffer and his company ultimately funded $37 million, about $28 million of which is long-term debt and $9 million is Pfeffer’s cash equity position in the property, he has said. Appraisals of the six-story building plus its underground parking facility have been as high as $48 million, but numerous estimates put its value at $44 million. The customized office space cost $44.5 million to build in 2014, according to Pfeffer. His group first drafted and submitted terms for the state to purchase the building for $37 million plus closing costs Oct. 9; a proposal requested by the Legislative Affairs Agency. The original terms agreed to by Legislative Affairs attorneys set a Jan. 31 deadline to act on the sale option, according to correspondence between attorneys for both sides. 716 waived the deadline in its Jan. 29 letter on conditions that the council either vote to buy the LIO by Feb. 5 or appropriate funds for fiscal year 2017 rent in the state budget. Elwood Brehmer can be reached at [email protected]

Construction forecast down 18% to 2013 levels

Alaska’s contractors will begin to feel the effects of the new oil reality in 2016 as statewide capital spending declines about 18 percent from last year, according to a construction industry forecast. The University of Alaska Anchorage Institute for Social and Economic Research projects just more than $7.3 billion will be spent on capital projects in 2016. About $8.9 billion was spent on construction projects in Alaska last year. “Our short-term outlook is challenging,” Associated General Contractors of Alaska Executive Director John MacKinnon said during a Jan. 28 presentation in Anchorage. ISER compiles the industry data for AGC of Alaska’s annual spending forecast. MacKinnon noted that the contraction in outlays is neither positive, nor a catastrophe; it takes the industry back to 2013 spending levels. Statewide construction employment in 2013 peaked at 20,700 jobs in late summer and averaged 16,600 workers throughout the year, according to the state Labor Department. Preliminary Labor numbers show the industry averaged 18,100 workers in 2015. Not surprisingly, the spending decline will be led by the oil and gas sector, which is expected to be down 25 percent at $3.1 billion from an all-time capital spending high of $4.2 billion last year, according to ISER Professor Emeritus Scott Goldsmith. The annual wellhead value of North Slope crude has fallen from about $20 billion several years ago to $10 billion in 2015 and is projected to be roughly $5 billion this year, Goldsmith said. Less revenue translates directly, he said, into less spending on exploration and maintenance of existing fields. However, spending on oil and gas development projects is often separate from immediate price fluctuations, as evidenced by the record 2015 industry capital spend in Alaska while oil prices fell throughout much of the year. Several major projects, including Shell’s offshore Arctic exploration, the Point Thomson gas project led by ExxonMobil, and ConocoPhillips’ CD-5 oil development, mostly wrapped up last year, leading to an organic spending vacuum. A bright spot for this year is ConocoPhillips’ $900 million Greater Moose’s Tooth No. 1 oil project in the National Petroleum Reserve-Alaska, which was sanctioned late last year. The age of the North Slope fields — Prudhoe Bay is closing in on 40 years of production — also helps spur workforce demand that is disparate from oil prices, Goldsmith said. “One of the things that is a positive is that jobs in oil and gas related industries — construction related oil and gas — continue to grow as production declines,” he said. “Aging fields require more maintenance and smaller fields require more workers for a given barrel of oil.” Projections were mixed for other industries outside of the dominant oil and gas sector, which supports about 40 percent of the total capital spend in the state. Transportation spending, pegged at just more than $1 billion, will be down slightly due to less work on the state’s ports and harbors. The Matanuska-Susitna Borough’s Port MacKenzie rail extension, which has relied on state capital appropriations, is also stalled this year for lack of money. Large state capital appropriations in the 2012 and 2013 fiscal years have supported many projects across Alaska; however, expenditures from public-supported capital projects will fade in the coming years if the state continues with sparse capital budgets. According to ISER, money from public projects “hits the street” over six years after the initial approval, with peak monies available two years following the appropriation. Gov. Bill Walker’s administration has proposed a $500 million general obligation bond package to fund capital projects in the 2017 budget being debated in Juneau now. Utility spending is expected to be down by a third to $459 million in 2016 mainly because, similar to oil and gas, several large projects wrapped up in 2015. Matanuska Electric Association and Golden Valley Electric Association both commissioned new power plants in 2015 and Anchorage’s Municipal Light and Power is nearly done with its replacement plant started in 2014. Most of the utility spending will be from nearly 50 small projects going on across the state, according to ISER. Long-term, Alaska’s Railbelt electric utilities are currently debating whether major upgrades, estimated at upwards of $900 million, are needed for the region’s transmission system. Defense spending is projected to reverse a several year trend and increase by more than 25 percent to $552 million this year. Work scheduled 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. “Anytime that kid in North Korea starts playing with fireworks it bodes well for Defense spending in Alaska,” MacKinnon quipped. Construction spending by Alaska’s large mines will remain flat at about $180 million in 2016, despite depressed metal prices, Goldsmith said. He noted lower oil prices can help the bottom lines of the state’s mines, many of which are remote and rely heavily on diesel fuel for not only equipment but for electrical generation as well. “I was surprised to find that all of the existing world-scale mines in Alaska are spending at higher rates than they have in years past and that’s to upgrade their facilities, to expand their facilities to be able to take advantage of new discoveries that will extend the lives of their mines,” Goldsmith said. Health care’s capital spend will be down about 20 percent at $195 million, ISER projects, again, as new construction in Anchorage, Kenai and Ketchikan is completed. Alaska’s health care industry has grown steadily both on the capital and employment sides for more than a decade. One major hospital project expected to start this year is 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. Elwood Brehmer can be reached at [email protected]

Home sales decline around Alaska to end 2015

Home sales declined across much of Alaska in the fourth quarter of 2015, according to data provided by the Alaska Association of Realtors. Single-family transactions in Anchorage fell by 3.5 percent versus the last months of 2014, from 743 sales to 717. Condo sales fell by 9.6 percent in the state’s largest market, to 262 condos sold. Fourth quarter home sales fell by 4 percent in Fairbanks, 3.1 percent on the Kenai Peninsula and 2.6 percent in Southeast Alaska as well, compared to 2014. Average residential sale prices increased 2.4 percent to $358,400 in Anchorage and the average “days on market” also fell by 14.5 percent to 47 days, despite decreased sale activity. Condo prices in Anchorage fell by nearly 1 percent to $216,800. Single-family activity increased by 7.8 percent in the Matanuska-Susitna Borough and average sale price increased by 3.7 percent to $246,700. Along with that, the average number of days on the market for a single-family home in the valley fell from 73 at the end of 2014 to 63 in the fourth quarter of last year. Listing time in decreased by at least 14 percent for Southeast single-family homes and condos, as well as for Fairbanks, where the average single-family unit sold for $213,100 and spent just over two months on the market. Elwood Brehmer can be reached at [email protected]

Industry: Tongass timber forecast flawed

A U.S. Forest Service study projects growth in Tongass timber harvest over the next 15 years, but leaders of Alaska’s timber industry are saying the forecast is still too low. The draft Tongass National Forest Timber Demand report calls for a timber harvest increase from fiscal year 2014 of nearly 25 percent by 2030 on Tongass lands. Southeast mills took 39 million board feet of lumber from the national forest in 2014; the 2030 harvest is forecasted to be 51.8 million board feet. Alaska Forest Association Executive Director Owen Graham argues the demand analysis is based on a restricted timber supply, which artificially limits demand for Alaska forest products. “The analysis attributes the supply constraints to federal budgets and (National Environmental Policy Act) issues, but fails to acknowledge that its self-imposed standards and guidelines for its timber sale program have greatly increased the cost of harvesting timber sales,” Graham wrote in formal comments about the study. “These high costs are one of the primary reasons the agency has been unable to prepare economic timber sales.” Agriculture Secretary Tom Vilsack issued a memo in 2013 expressing an intent to transition to young-growth harvest in the Tongass National Forest within 15 years. That transition would be faster than was prescribed in the 2008 Tongass Forest Plan. Graham has said the industry needs to harvest at least some old-growth trees for about another 30 years to allow young, or second-growth, stands to fully mature, which takes about 90 years for most trees in Southeast Alaska. Young-growth stands are often more dense and thus hold more board feet of raw lumber. However, Alaska’s downsized timber industry in recent years has survived on high-value, “shop grade” lumber products from large spruce and hemlock trees harvested from the Tongass. Southeast sawmills will not be able to manufacture that high-value lumber from the 60-year-old, young-growth trees that would be available under an expedited shift away from old-growth harvesting, according to Graham. “The spruce custom-cut lumber that currently enjoys very high prices in the Pacific Rim markets will no longer be produced. Likewise, since shop grade hemlock lumber requires logs that are at least 16 inches in diameter, this high value lumber will also disappear,” he wrote. “What the (demand forecast) is missing is the most likely outcome of the transition strategy — the end of timber manufacturing in Southeast Alaska.” Allowing young-growth stands to mature another 30 years to age 90 would roughly double the harvestable volume per acre usable for Alaska mills, Graham said. Smaller logs can be exported to other markets, but that eliminates the value-added sawmill industry from the logging process, he said. The study forecasts the total Southeast timber harvest will increase from 120.6 million board feet in 2015 to 155.1 million by 2030. That includes timber sales from state land and Alaska Native corporation property, primarily the area Native regional corporation Sealaska Corp. Nearly all of the harvest increase will come from logs meant for export — 31 million board feet of the overall Southeast harvest increase of about 35 million board feet is in the form of export saw logs, based on the Forest Service projections. Sealaska, which gained 68,000 acres of formerly Tongass timberland in a conveyance from the federal government last year, exports nearly all of its timber as raw logs because it cannot process the logs in Alaska economically. Sealaska CEO Anthony Mallott has said the company wants to add timber processing and the new acreage will be an opportunity to study the economics of its entire timber business model. The study projects harvest from Southeast Alaska Native corporation lands will increase from 61.5 million board feet in 2015 to more than 80 million board feet 15 years later. Graham contends Sealaska is the only major private timberland owner in the region. According to Sealaska, it can now maintain an average harvest of 45 million board feet for the next 25 years, stretched from earlier projections of 45 million board feet 15 years. Sealaska is also interested in bidding on up to 20 million board feet per year of harvest from public lands. Further, Alaska’s Southeast State Forest has a maximum sustainable harvest of about 12 million board feet per year, according to state Forestry Director Chris Maisch. The study projects harvests from State of Alaska lands in the region to grow from 18.2 million board feet to 23.1 million board feet over the 15-year study period. The Alaska Mental Health Trust Land Office occasionally offers large timber sales upwards of 50 million to 60 million board feet from its Southeast properties. However, Trust Land Office Resource Manager Paul Slenkamp said the large sales are sporadic and none are expected for the next three to four years. Southeast Alaska’s timber industry is a shell of its former self. Average annual harvest from the Tongass ranged from about 280 million board feet to more than 400 million board feet during the late 1980s and early 1990s. The last year timber harvest from the 17 million-acre national forest exceeded 100 million board feet was 2000, which was the last full year before President Bill Clinton issued the Roadless Rule, restricting access to undeveloped tracts of national forests. At its peak, the industry supported more than 4,000 jobs in Southeast, today that number is down to about 300, according to Graham. Study co-author Jean Daniels, a federal research forester, said the demand forecast is a continuation of trends seen in related markets after the global recession in the late 2000s. The study was also kept independent from the Tongass Land and Resource Management Plan ongoing update process, Daniels said. “For the most part we tried to stay as separate from what was going on with the (Tongass environmental impact statement) process as possible to try to be as unbiased as possible with the results of the analysis,” she said. The Alaska Region of the Forest Service released a draft environmental impact statement for the Tongass Management Plan in November. The plan amendment calls for continuing the 15-year transition to young-growth harvest in the Tongass. Susan Alexander, a manager in the Forest Service’s Pacific Northwest Research Station, also helped pen the demand forecast study and said that Graham is looking at the forecast from the supply side, while the Forest Service attempted to figure out demand for all West Coast timber markets, with Alaska and the Tongass harvest subsets to the larger picture. “It’s a demand side analysis and I think that is sometimes confusing for people in Alaska who think that the supply equals demand, but it doesn’t, not from a theoretical standpoint,” Alexander said in an interview. Alexander and Daniels said they viewed Alaska as if timber supply was unconstrained and concluded that the cost of transportation has simply pushed Alaska out of the West Coast market. Demand is growing for lower value construction-grade lumber, but Alaska mills simply can’t compete with the rest of the Pacific Northwest. “Washington and Oregon have made all of the industry retooling necessary to be competitive in commodity markets and that’s a dimension lumber market where you’d be a price taker and Alaska has always been more competitive in the high-quality, shop-grade lumber,” Daniels said. Revamping Alaska sawmills to process dimension, or construction lumber from smaller young-growth trees would require hundreds of millions of dollars of investments and extremely high volumes of timber, Graham says. Additionally, those mills are highly mechanized, mostly eliminating the benefit of jobs in the industry, he argues. Alaska’s congressional delegation has criticized the Forest Service for pushing a quick transition to young-growth timber in the Tongass without helping Southeast mill operators transition their operations.   Elwood Brehmer can be reached at [email protected]

INSIDE REAL ESTATE: A snapshot of Anchorage housing as oil prices plunge

In Anchorage, a home in an upscale subdivision was recently put on the market for $25,000 less than the buyer paid for it 17 months ago. The seller is a relocation company most likely hired by an oil, or oil field service, company to dispose of a departing employee’s primary residence. The $25,000 amounts to a 3 percent reduction from the original purchase price paid by the employee to the builder.  Last week, for-sale inventory of single-family homes bumped up by over 20 homes. For the first time in several weeks, new inventory outpaced pending sales, according to recently published MLS statistics. So are these two scenarios indicative of a change in the housing market? The answer is both yes and no. As departing oil industry employees’ homes are sprinkled throughout the marketplace over the next few months, expect some good buys. Relocation companies do not like to hold inventory. It costs employers money, and depending on the relocation company’s contractual relationship with the employer, may reduce the relocation company’s profit. They like to sell homes “as-is where is” at a competitive price. If the average time on the market for a comparable home is 65 days, they like to price it to sell in 45. Their sold comps can drag a market down when used by an appraiser. But, like the home with the $25,000 price drop, most of these relocation homes are going to be priced over $500,000. It’s a good opportunity for the move-up buyer. The homes are generally newer, well cared for, and include appliances, window coverings, and landscaping. It is hard for builders to compete with these like-new homes, particularly when they are building in the same subdivision. The question is what remains when these well-priced homes are absorbed. Anchorage continues to have a housing shortage in all price ranges below $700,000. With a population of 300,000+, Anchorage should be building 900 new housing units a year. Yet, for the past several years, new housing units have averaged less than 500, including single family, duplexes, and multi-family. The new Title 21 rewrite, which went into effect in January of this year, will slow down any new permits for the first six months of this year as builders and developers grapple with the new requirements. Plus, there is no doubt that these new regulations will add to the cost of all housing types. It is not just a housing shortage but an affordability shortage as well. New homes under $500,000 will be in short supply and any four bedroom, 2.5 bath home with a double, or triple car garage, will be hard to find and ultimately, a good buy. Connie Yoshimura is the broker/owner of Dwell Realty. Contact her at 907-646-3670 or [email protected]  

Real estate market forecast sees softening in Anchorage

Anchorage’s commercial and residential real estate market looks to be relatively stable this year, although some softening is expected. Local realtors and brokers gave their best estimates for different segments of the Anchorage bowl real estate market at the annual Building Owners and Manager’s Association forecast luncheon Dec. 8. The overall office vacancy rate for Class A office space is projected to rise, on average, from 6.8 percent in 2015 to about 7.6 percent in 2016, but Anchorage is still doing well compared with the national average office vacancy a rate of 13.4 percent average, Per Bjorn-Roli, with Reliant LLC, told those at the BOMA luncheon. Lease rates are expected to remain stable 2016, at an average of $2.95 per square foot for all types of properties, Bjorn-Roli said. “The market will be a little softer, however, and tenants will be well positioned to ask for concessions like free rent periods and property improvements,” he said. “This happened in 2011, too,” when the local market was coming out of a mild downturn. About 157,000 square feet of new office space was added in 2015 in the Anchorage area with much of that in the Cook Inlet Region Inc. and Kuukpik Corp. new buildings in Anchorage’s Midtown. However, 30,000 square feet of the 157,000 square feet of space added in 2015 was absorbed by market growth, he said. Class A office space Downtown is actually tighter now than a year ago, he said, with 2.7 percent of space vacant now compared with 2.9 percent a year ago. In Anchorage’s Midtown, however, the vacancy rate for Class A space is up to 10.3 percent from 6.3 percent a year ago, with this mainly due to the CIRI and Kuukpik building additions, Bjorn-Roli said. Meanwhile, no major new commercial office projects are planned for 2016 and that should basically keep the market steady, with normal growth gradually absorbing the vacant space available. However, if the Legislature really follows through with its threat to cancel the lease on the new Legislative Information Office building on 4th Avenue it would open up a large block of Downtown space. Legislators are interested in moving the Anchorage  legislative offices to the state-owned Atwood Building on 7th Avenue, but this issue is far from settled. Many features of the new LIO building were custom-ordered by legislators, and that could impose conversion costs if there are new tenants. Bjorn-Roli said the financial shortfalls affecting state government won’t have any immediate effects on the commercial office space market because the state has the cash reserves to buffer shortfalls, at least for the next two years. “We see a two-year window for cuts and adjustments,” he said. “However, there is a dramatic increase in the ‘concern’ index.” But there is time for the adjustments and any impacts will be spread out. “State spending is a major driving force in the office market,” Bjorn-Roli said, so the magnitude of budget cuts will be watched closely. What may also cause effects would be reductions in oil and gas industry activity, but it’s hard to forecast this. BP has announced a workforce reduction, for example, but BP owns its office building in Midtown, so the reduction wouldn’t immediately affect the office market, he said. “We see few effects in 2016 but in 2017 it may become an issue,” he said. “Our conclusion overall is that the Anchorage area office market it healthy and stable, with some softening expected,” Bjorn-Roli said. It’s a similar story for markets for retail space market, Brandon Spoerhase, with BSI Commercial Real Estate, told those at the BOMA luncheon. Retail space markets are holding steady with lease rates overall averaging $1.55 per square foot in older buildings and a $2.65 per square foot average rate for newly-built space, said Spoerhase. The fourth quarter 2015 vacancy rate estimated at 5.5 percent compares very favorably with the national average of 11.3 percent, he said. Retail profit margins continue to be healthy, as demonstrated by national clothing retailer H&M’s 2015 opening in Dimond Center, which was the second most successful in the company’s history, Spoerhase said. Two major retailers still looking at Anchorage include Whole Foods, the upscale grocery chain, and Victoria’s Secret, the womens’ apparel chain. New arrivals include three national food chains, Smash Burger; Sonic Drive-In, Dave & Busters. One open space being eyed by national retailers is 40,000 square feet available at the former Carrs’ grocery store space in the Mall at Sears in Anchorage’s Midtown, Spoerhase said. Meanwhile, major malls like the downtown 5th Avenue mall, Glenn Square and Tikahutnu Commons in northeast Anchorage, have little or no remaining space, Spoerhase said.  “Glenn Square still has a couple of ‘pads’ still available, but the hunt is on for a food retailer that won’t compete with the existing food retail tenants,” Spoerhase said. The Fifth Avenue Mall is essentially full, and new retail growth has spilled out into adjacent space along 5th and 6th Avenues, he said. Meanwhile, Pfeffer Development’s U-Med retail development on Alaska Pacific University lands in the Midtown university and medical district is still set for a 2016 or 2017 groundbreaking, Spoerhase said. This is a build-to-suit development project, he said. Overall, BSI sees no significant change in the retail market in the next 12 months, Spoerhase said. In commercial construction, a number of small to medium-sized private and institutional new buildings and school projects are planned for 2016, Jonathan Hornak, of Cornerstone General Contractors, told those at the BOMA luncheon. Hornak ticked off a number of medium-sized projects expected to be underway this year, such as a $17 million Anchorage Museum addition. No major new projects are pending, he said. Four projects in the “rumor” category, which Hornak left unidentified, at least at the BOMA luncheon, include a reported 9,000-square-foot building in Wasilla and three buildings in Anchorage, one 6,000-square-foot facility, a second at 50,000 square feet and a third reported at 60,000 square feet.  Residential real estate meanwhile remains tight, as it has for some time. Speaking to both rentals and homeowner properties, Tyler Robinson, of Cook Inlet Housing Authority, said the apartment vacancy rate in Anchorage remains below 5 percent, but things are looser in the more expensive categories. “We haven’t seen many effects yet overall,” from low oil prices and tightening state budgets, “but we are starting to see impacts at the higher end of the market,” Robinson told those at the BOMA luncheon. Rents have been increasing for several years, with the average in 2012 for a two-bedroom apartment at $1,300 a month, up from $800 a month in 2000, he said. As for single-family homes, the average sales prices today is about $370,000, up from $188,000 in 2000. The tight supply is mainly a factor of inadequate building of housing. “Studies have indicated we need to be building 900 housing units a year, in all segments of the market, to keep up with demand. We’re actually building about 300 a year, so there’s a shortfall,” that translates to a very tight market, Robinson said. The Municipality of Anchorage hasn’t been a real help in this because developers get wrapped up in red tape and delays. One major apartment developer has struggled to get permits for a 36-unit project. In contrast, in other states, developers and working with local governments and nonprofits on a wide variety of projects that are often linked to green space and urban amenities and retail. Robinson mentioned an Oklahoma City riverwalk project that matched urban recreation and greenspace with mixed urban and retail development in an attractive project. Accomplishing that took partnerships, he said. In Anchorage, many private developers, “don’t feel welcome,” Robinson said.

$305B transportation bill grows annual outlays for Alaska

President Barack Obama signed into law the nation’s first long-term transportation funding bill in more than a decade on Dec. 4. The $305 billion Fixing America’s Surface Transportation, or FAST, Act provides five years of funding aimed at improving rail, road and marine infrastructure. It passed both the House and Senate by wide margins the day prior to being signed by the president. All three members of Alaska’s congressional delegation supported the legislation. Alaska is poised to receive more than $2.6 billion over the life of the FAST Act, with yearly allotment increases. The state took $483.9 million from the federal government for surface transportation programs in federal fiscal year 2015, which ended Sept. 30. In 2016, that figure jumps to $508.6 million; by the end of the FAST Act in 2020 it is $555.3 million, according to a release from Sen. Dan Sullivan’s office. Passage of the five-year bill gives funding certainty needed to make infrastructure investments in Alaska, Sullivan said. “The bill also includes reforms to our permitting system, which will help cut through project-killing red tape and streamline regulatory burdens,” he said in a formal statement. “This bill amounts to a big win for Alaska as it will allow us to not only address our infrastructure needs, but also promote and sustain economic growth throughout the state.” The legislation establishes a council of relevant federal permitting agencies tasked with determining best practices and modeling timelines for evaluation of major transportation projects in an effort to speed up federal regulatory approval, according to a conference committee summary. A pilot program will also allow up to five states to substitute their own environmental regulations in place of the National Environmental Policy Act, or NEPA, given the states’ laws and regulations are at least as stringent as those in NEPA. The FAST Act is a win for Alaska, as Sullivan noted, at least when it comes to dollars per Alaskan. A large, young state with limited transportation infrastructure, the $2.6 billion equates to more than $3,500 per Alaskan, while the rest of the country averages $956 per citizen. “We all recognize that Alaska is in the midst of a budget crisis, so being able to rely on federal funding for critical infrastructure projects, whether it be on roads, bridges, or ferries, is key to our state,” Sen. Lisa Murkowski said in a release. Murkowski served on the conference committee that resolved the final transportation bill. Rep. Don Young noted in a statement from his office that the last long-term surface transportation bill, SAFETEA-LU, was legislation he authored as chair of the House Transportation and Infrastructure Committee in 2005. He said the FAST Act is “far from perfect,” but, like Sullivan, added it makes several important reforms to streamline federal permitting. “The success of any state’s economy directly depends on their ability to move people and products safely and efficiently,” Young said. “That is especially true in a developing and geographically unique state like ours, which is why I worked so hard to secure numerous provision specifically beneficial to Alaskans — including $31 million annually for the Alaska Railroad, ample funding for our ferry program, and significant increases for the Tribal Transportation Program.” An error in the funding formula in the 2012 MAP-21 transportation bill that cost the Alaska Railroad Corp. $3 million per year is corrected in the FAST Act, which also grew the pool of passenger railroad formula funding. In all, the Alaska Railroad will get a $5 million increase in federal funding annually, according to a railroad spokesman. Railroads across the country will also have the opportunity to compete for $199 million in federal grants to aid implementation of the federally mandated Positive Train Control safety system, which is expected to cost the Alaska Railroad nearly $160 million by the time it is fully in place in 2018. The state-owned Alaska Railroad has spent more than $70 million to install Positive Train Control over several years and the Legislature authorized it to sell bonds earlier this year to further the work. Railroad spokesman Tim Sullivan said the railroad will likely apply for federal assistance, but added how that would play into the current PTC funding plan is still unclear. The previous year-end deadline for railroads to have Positive Train Control in place was pushed back to 2018 in a separate piece of legislation passed earlier this fall. The Alaska Marine Highway System, hit hard by state operating budget cuts, gets a little more for its capital improvement program. The state ferry system will receive $18.6 million annually for major work on its vessels, which equates to a $2.4 million increase over the five years of the FAST Act. Earlier versions of surface transportation legislation changed the funding formula for state ferry programs, which could have lessened Alaska’s take and caused concern in the Alaska Department of Transportation. The Tribal Transportation Program — $450 million per year under the MAP-21 extensions — will get an additional $15 million in 2016 and $10 million more in the following four years. A new federal freight program designed to fund freight-related highway improvements will send $80 million Alaska’s way over the duration of the legislation as well. As Alaska and other states legalize the sale of marijuana for recreational use, the FAST Act requires a feasibility study be done to investigate impairment standards for drivers under the influence of marijuana, according to a House Transportation briefing.

Anchorage port contractor claims no liability in failed project

A key subcontractor in Anchorage’s failed port expansion project wants out of a lawsuit first filed by the Municipality of Anchorage because it claims the city has no jurisdiction to recover lost money. Attorneys for Quality Asphalt and Paving, the contractor that led construction work at the Port of Anchorage in the late 2000s, argued in U.S. District Court of Alaska Nov. 20 that QAP already settled claims related to the project with Integrated Concepts and Research Corp., or ICRC. ICRC managed the project to update and expand dock and shore side facilities at Anchorage’s aging port on behalf of the U.S. Maritime Administration, or MARAD, a federal Department of Transportation agency commissioned by the municipality to oversee the project. The Port of Anchorage Intermodal Expansion Project began in 2003 as a $210 million endeavor, but problems installing the patented open cell sheet pile system chosen to build the docks exploded project costs over time.  Construction work at the port ceased in 2010. Ultimately MARAD spent $302 million of the money Anchorage, the State of Alaska and the federal government contributed to the project.  The city has about $130 million remaining from $439 million appropriated for the work and has begun a scaled back plan known as the Anchorage Port Modernization Project. QAP attorney Michael Geraghty said during the Nov. 20 hearing that a 2012 settlement in which MARAD paid ICRC $11.3 million for QAP’s and MKB’s work released the contractors’ claims and effectively ended their ties to the project. The municipality has said it was not party to the settlement and was even unaware of it at the time it was reached. Attorneys for the municipality have said Anchorage is looking to recoup more than $300 million in two outstanding lawsuits, one initially filed in 2013 against ICRC, project designer PND Engineers Inc. and CH2M, which purchased project consultant VECO Alaska, and another suit filed last year against MARAD in Federal Claims Court. By partnering with MARAD to execute the project on behalf of Anchorage, the municipality subjected itself to federal contracting guidelines that place responsibility for delivery with MARAD, Geraghty argued.  “You’re letting someone else decide if that work is acceptable for your benefit,” in the federal contracting process, he said. Geraghty also noted it should not be lost that the municipality has not submitted claims against QAP; rather, PND filed a third-party suit against the subcontractors. PND has long claimed the problems with the disastrous project come down to shoddy installation of its proprietary sheet pile design, not its suitability for the site. QAP and MKB are still waiting for PND to clarify its case against the contractors. The subcontractors contend the problems were issues of engineering and constructability and those responsibilities fall on the owner of the project, the municipality. QAP filed a motion for summary judgment in the case in August — the motion argued Nov. 20. Geraghty furthered his point by noting what he considers a simple conflict in the municipality’s stance; Anchorage is attempting to recover the same damages through its separate lawsuits against MARAD and the private project participants. Municipal counsel Donald Featherstun said that there are many material facts in dispute yet in this case; summary judgment can only be rendered when the facts are not in dispute and the only questions are interpretations of the laws at issue.  “The arena of government contracts is enormously complicated,” Featherstun said. He also contended that if QAP is allowed to walk away as a subcontractor without potential liability, the viability municipality’s case against the rest of the defendants goes too. Featherstun emphasized the point that the municipality was kept in the dark regarding 2012 settlement between MARAD and ICRC. “In effect, they were all hiding from (the municipality),” he said. Geraghty rebutted by asking why the municipality would sue MARAD and at the same time claim that MARAD released itself from claims through the settlement. Claiming a need to sort out federal contracting complexities as a reason for QAP to continue in the case is “a deliberate attempt to sandbag the court,” Geraghty said. A trial in the suit first against ICRC, PND and CH2M was once set for October of this year, but is now scheduled for September 2016. Elwood Brehmer can be reached at [email protected]

AGC-Alaska 2015 award winners recognized

The Associated General Contractors of Alaska, the state’s largest construction organization has named the top construction projects and safety award winners and recognized individuals at the association’s annual conference in Anchorage. Hard Hat Award: Jim Jansen, Chairman Lynden Inc., given to an AGC member who has demonstrated exemplary service to the Association, the community and the industry. Sustainability in Construction: A new award given this year to Davis Constructors & Engineers for the Davis Office Building. The Excellence in Construction awards sponsored by Parker, Smith and Feek are as follows. Vertical Construction: Under $5 million — Unit Company for CH2MHill Seismic Reinforcement; Between $5 million and $15 million — Neeser Construction for KTUU Channel 2 Northern Lights Media Center; Over $15 million — Cornerstone General Contractors for Boney Courthouse renewal. Transportation, Marine, Heavy Earthmoving: Under $5 million — Bristol Construction Services, LLC for Chester Creek at Muldoon Creek realignment; Between $5 million and $15 million — Hamilton Construction Alaska Co. for Parks Highway MP 237 Riley Creek Bridge Replacement; Over $15 million — Brice Incorporated for Kotzebue Airport and Safety Area Improvements Stage 3. Specialty Contractor: Vertical Construction — KLEBS Mechanical, Inc. for Coronado Park Senior Village, Solar Heated Domestic Hot Water System; Transportation, Marine, Heavy, Earthmoving: Davis Block and Concrete, Inc. for KLU#3 Furie Platform Grout Seal Remedial Work. Excellence in Safety awards sponsored by Wells Fargo are as follows. Large: Davis Constructors & Engineers, Inc.; Medium: Kiewit Infrastructure West Company; Small: American Marine Corporation; Individual: Steve Rowe, Cornerstone General Contractors, Inc. Associate of the Year: Alaska Digital Printing, Anchorage Stan Smith Volunteer of the Year: Jenith Flynn, Davis Constructors & Engineers. AGC is a 650 member statewide association for companies in the construction/contracting business including buildings, highways/utilities, heavy industrial and specialty areas. Construction is the third largest industry in Alaska, contributing more than $9.1 billion to the Alaska economy, and paying the second highest wages with more than 20,000 in the workforce. AGC is headquartered in Anchorage with an office in Fairbanks.

Bad for state budget, cheaper fuel helping local economies

Alaska’s economies appear to be unfazed more than a year after oil prices began to fall. In fact, Anchorage’s unemployment rate of 4.7 percent in September was the lowest in the city has seen for the month in 14 years, according to the Anchorage Economic Development Corp. Fairbanks was not far behind at 4.9 percent. Statewide, the seasonally adjusted unemployment rate, which accounts for seasonal swings in job availability, was 6.4 percent in September, down 0.4 percent from a year ago, the state Labor Department reports. AEDC President and CEO Bill Popp said state’s largest city has added about 2,000 jobs since last September, bringing total employment to 169,000 in a municipality with just more than 300,000 people. AEDC’s January forecast for flat employment in Anchorage this year was incorrect in a positive way, Popp noted. At that time, he emphasized that a steady number of jobs should be viewed as a good thing, given the uncertainty surrounding state spending and petroleum economics. “We’ve been seeing this starting to build up over the summer. We’ve been seeing a drop in unemployment rate and modest but continued growth in the job numbers and now we are feeling like if this trend continues, which we think it will, we’ll probably add 1,000 net jobs in Anchorage this year,” Popp said. He attributed the encouraging job numbers to a strong private sector. According to AEDC, nine of Anchorage’s 10 largest industries have seen job growth over the past year. The only industry to show a loss is the city’s small manufacturing sector, down a miniscule 11 positions from a year ago. Employment in the city’s oil and gas industry actually increased more than 150 positions over the past year; however, the loss of Shell’s Arctic business, announced Sept. 28, has not yet been accounted for. Statewide, oil and gas industry employment has continued near record highs in 2015, as have the number of construction jobs in the state, many of which are tied to oil and gas activity. Government employment in Anchorage has been flat in 2015. Business and professional services positions, which includes technical industries that benefit from public and private capital spending, are up 100 jobs from last September, according to AEDC’s monthly employment report. Popp said activity at Anchorage’s banks and credit unions is slower than would be ideal. He attributes that to the city’s ever-present housing issues. Single-family home inventories are the lowest they’ve been in five years — an average of 877 homes listed in September — which has continued to push the cost of buying a home in Anchorage up and price many prospective buyers out of the stalling market. With few houses being sold, lenders have little reason to hire, he said. Since oil prices and state revenue both began falling 16 months ago, state government employment — University of Alaska included — is down about 1,500 positions, Popp said, but only about 100 of those jobs have been lost in Anchorage. As an entire sector, government provides about 29,000 jobs in the city, and the decline in federal employment over the past few years appears to be slowing, he said. Anchorage has seen lower oil prices — more specifically lower fuel prices — benefitting some of its largest employers. Passenger traffic was up more than 8 percent during the summer months at Ted Stevens Anchorage International Airport. AEDC also expects landed cargo tonnage to increase about 10 percent this year and that growth to continue for several years. Anchorage Airport officials have said the bump in passenger traffic is likely due mainly to Lower 48 travelers spending energy savings on travel. Much the same can be said for the city’s hospitality industry. “One-in-5 jobs in Anchorage are benefiting from lower fuel prices,” Popp said. The airport and hospitality industries each support approximately 1-in-10 jobs in Anchorage, according to AEDC. Popp noted those estimates are conservative. “I think it shows us in a pretty good spot to start from as we face the headwinds of next year,” Popp said of Anchorage’s employment figures. Popp and Fairbanks Economic Development Corp. President and CEO Jim Dodson both noted that hidden in the low unemployment figures is the fact that Alaska’s population is unusually transient, and people unable to find work are more likely to leave the state rather than file for unemployment. Net migration in the state totaled a loss of about 7,500 people last year, many of whom were working-age adults, Popp said. Big swings in migration to and from Alaska are not uncommon, however. When the Lower 48 economy suffers people come to Alaska looking for work and when the U.S. economy as a whole improves, they tend to leave, according to state economists. How Anchorage and the state fare in 2016 and beyond will have a lot to do with what happens in Juneau and whether or not consumer confidence can hold on, he said. Anchorage consumers are generally content with the city’s economy and their current personal financial situations, according to AEDC’s latest quarterly consumer optimism survey. However, expectations for the economic future are exactly tepid, with consumers reporting uncertainty about what’s to come. “Right now, (consumer optimism) doesn’t seem to be manifesting itself into any kind of slowdown in the economy, but it’s something we need to pay really close attention to because if consumers lose optimism they’re going to stop spending,” Popp said. “It can have a pretty significant ripple effect if we are to lose that confidence.” Dodson and Popp also said further deep cuts to state government spending in the upcoming regular legislative session would do a great deal of harm to Alaska’s economy that relies heavily on government employment. State government employees make up 7.3 percent of Alaska’s current workforce, according to the state Labor Department. Further, local government — heavily reliant on state assistance — provides another almost 12 percent of jobs in the state. “There is some room for cuts in our view and not insignificant cuts (to state government), but they need to be well targeted and we need to be looking at revenue streams that can balance the books and put our fiscal house in order for the foreseeable future and then we start to address that uncertainty issue,” Popp said. Economies across the state are continuing along with business as usual in part because the impact of capital spending lags behind appropriations by a couple years, Dodson noted. The 2014 state fiscal year capital budget, with federal funding, was more than $1.9 billion. “I don’t think any of the communities are going to be exempt from the lack of state spending; that’s going to be something that affects all of us,” Dodson said. On the bright side, Interior Alaska has benefitted more directly from low oil prices. Heating, or fuel, oil, the region’s primary space heating energy source, has gone from about $4 per gallon less than two years ago to about $2.50 per gallon today. Historically, Fairbanks-area residents have allocated about 60 percent of their overall energy costs to heat, according to Dodson. At $4 per gallon, that equates to an average of $4,300 per year spent towards homes that rely on fuel oil. “There is a tremendous amount of spendable dollars left in our economy that were typically spent for heating our homes,” he said. Additionally, a resurgence in military spending in should help mitigate state cuts around Fairbanks. The pair of F-35 squadrons that are all but a certain to end up at Eielson Air Force Base are expected to bring hundreds of jobs and hundreds of millions of construction dollars to the Interior. At Fort Wainwright, a company of unmanned Gray Eagle aircraft will add nearly 130 base positions, while nearby Fort Greely and Clear Air Force Station are seeing an influx of money, too. The area’s economy has immense ties to its military bases; defense activity accounts for more than a third of Fairbanks’ economy, while state and federal civil spending total about 10 percent apiece, according to Dodson. “There’s no question about it; Fairbanks is a military town,” he said.

By the numbers: Updating Alaska LNG Project construction

Editor’s note: This update, provided by the Kenai Peninsula Borough mayor’s office, is part of an ongoing effort to help keep the public informed about the Alaska LNG project. Persily is a special assistant for oil and gas issues to borough Mayor Mike Navarre. Alaska LNG project teams played it by the numbers — really big numbers — in a presentation on construction plans to federal, state and municipal officials. Site preparations for the proposed liquefied natural gas plant and massive LNG storage tanks in Nikiski would require stripping up to 4 million cubic yards of loose soil, soft peat moss and other vegetation. That’s more than enough to cover a rough trail 10 feet wide, a foot deep from New York City to Houston. Crews would then need to excavate as much as 6 million cubic yards of frost-susceptible material — up to 6 feet deep in some areas — to prepare the site for construction. Some of the material could be reused as fill, while other material would need to be trucked in to complete the base. The two domed LNG storage tanks would each measure 305 feet in diameter, more than large enough for a Boeing 747 to spin around inside without scraping its wings. All of the numbers are approximate and subject to change as the project teams refine the design, they reminded participants at workshops held Sept. 2 and 3 in Anchorage. More than 20 Alaska LNG project team members were at the workshops to brief government agency officials and answer questions. Add in the jetty, the twin loading berths for LNG carriers and other components of the Nikiski project, and the preliminary numbers continue adding up: The project would use 800,000 cubic yards of gravel, 300,000 cubic yards of concrete, 300,000 cubic yards of armor rock, 100,000 tons of structural steel, 6,500 pilings, 7 miles of electrical wiring, almost 200 miles of aboveground piping, and 20 miles of buried pipe. The trestle to reach the loading berths could be as much as 3,200 feet long — more than half a mile — to reach water deep enough for the LNG carriers to safely maneuver. Though no substantial dredging would be needed for the jetty and loading berths, an estimated 1 million to 2 million cubic yards of dredging would be required at the temporary dock that would be built for offloading materials from barges and heavy-lift vessels during construction. The 250-megawatt, gas-fired power plant at the LNG plant site would generate enough electricity to run a city of several tens of thousands of homes. Peak construction workforce at the Nikiski site would be 4,000 to 6,000 workers. Planning work continues The LNG team reported that ongoing engineering and construction planning includes several goals: Limit truck traffic in the area as much as possible, limit dredging as much as possible, and maintain public access throughout the area as much as possible. The informational workshops were part of a series provided by Alaska LNG for regulatory agencies. The project partners — ExxonMobil, BP, ConocoPhillips, TransCanada and the State of Alaska — plan to submit their second draft of environmental and engineering reports to the Federal Energy Regulatory Commission in first-quarter 2016. The final reports and complete project application could come third-quarter 2016 as the partners work through regulatory and permit issues for the $45 billion to $65 billion project to move Alaska North Slope gas to market. In addition to the LNG plant at Nikiski, the project includes 806 miles of pipeline to reach the plant site from North Slope gas fields and a gas treatment plant to remove carbon dioxide and other impurities before the gas enters the pipeline. Alaska LNG has been buying up property around the proposed plant site in Nikiski, accumulating ownership or options on about 600 acres of the 800 to 900 acres needed for the operation. Team members reported that demolition could start later this month on some structures. They also are doubling their security patrols in the area in response to community concerns. The actual footprint for the LNG plant, storage tanks, power plant and other support buildings would total approximately 200 to 300 acres. The teams explained that the rest of the land is to provide a safety, noise and light buffer for neighboring property owners, plus work space to support the construction effort. Offloading facility comes first There is a lot of work to get to that first cargo. Before significant construction could begin, the material offloading facility would need to be built. The current plan, subject to change, has it just north of the LNG carrier jetty. With a 1,500-foot-wide frontage for offloading from heavy-lift vessels (called lift-on, lift-off) and a side facility with a 500-foot face for roll-on, roll-off deliveries, the freight dock could see 250 LNG plant modules delivered by 60 ships over a three-year period. Riprap — heavy rocks stacked atop each other — would be installed on either side of the facility to protect the shoreline. Each prebuilt module could weigh as much as 6,000 tons. Self-propelled modular trailers would haul the huge pieces to the plant site. The freight dock would be dismantled at the end of the project. Water depth at the proposed site for the offloading facility is only about 15 feet and would need to be dredged to 30 feet, the teams said. Estimates are that would require moving 1 million to 2 million cubic yards from the seabed. “We are continuing to study how we can minimize that,” a team leader said. The dredged area would measure about 3,200 feet by 1,500 feet, depending on the final design and seabed slope. The project continues to collect data on currents, waves, sediment, sea floor bathymetry and other conditions in the area. There are plans to excavate a sample pit in the seabed in the second quarter 2016 to measure how much and how quickly it fills in. Disposal sites for any dredging material are still being considered, including upland and at sea. Upland disposal could be used to protect the shoreline from erosion or for fill at the project site. Any decisions on disposal sites will be based on the composition of the dredged spoils and in close consultation with government agencies. In an effort to limit truck traffic on heavily traveled Kenai Peninsula highways, the teams reported that as much as possible construction materials arriving in Anchorage or Seward would be barged to Nikiski. Construction site services Even before the material offloading facility is under full construction, Alaska LNG would build “pioneer camps” at the plant site, the first housing for the first work crews. During construction, until the project builds its own power generating plant, Alaska LNG may buy electricity from a local provider — that’s one of the issues still undecided. Currently, Alaska LNG plans to drill its own water wells, estimating its maximum needs during peak construction at almost 400,000 gallons a day, or enough for 4,000 to 5,000 people, according to U.S. government water-use estimates. Current plans indicate no water would be withdrawn from Cook Inlet for plant operations, the teams said. The liquefaction equipment would be air-cooled, not water-cooled. Alaska LNG plans to build a secondary-level treatment plant on site for domestic sewage, and is still looking at options for proper disposal of industrial waste. The mission statement for handling construction waste is “reduce, reuse and recycle,” with the teams reporting there could be an estimated 7,500 tons of wood waste in addition to the 4 million cubic yards of vegetation from site clearing. The teams are working to determine “what can be handled locally, what can be handled on site, what has to be hauled away.”

AHFC uses new financing tools in Anchorage developments

Anchorage will soon have 72 new affordable housing units when the first developments done under the Alaska Corporation for Affordable Housing are complete. Residents began moving in to the 18-unit Susitna Square townhome cluster East Anchorage’s Russian Jack neighborhood earlier this month and the 70-unit Ridgeline Terrace development in nearby Mountain View should be done by the end of the year. The Susitna Square townhomes replaced 16 units of “old, worn down” public housing built in the 1970s through the federal Department of Housing and Urban Development, Alaska Housing Finance Corp. CEO Bryan Butcher said during a tour of the homes. Combined, the projects took $29.5 million to construct, and that money came from many different places, Butcher said. “To be able to put something together where the rent is at an affordable housing level takes a lot of levels of financing,” he said. It also would not have happened without the Alaska Corporation for Affordable Housing, an AHFC subsidiary. “(The Alaska Corporation for Affordable Housing) allows AHFC to have the powers to work more broadly with partners to put together projects for affordable housing,” Butcher said. On Susitna Square and Ridgeline Terrace, those partners included HUD, through its Neighborhood Stabilization Program, the Rasmuson Foundation, the mortgage arm of AHFC and KeyBank. A state appropriation through AHFC also contributed to the financing structure. About $2.6 million in grant funding from HUD, the state and the Rasmuson Foundation went into the $5.4 million needed for Susitna Square, according to AHFC. While not directly involved in the financing, Cook Inlet Housing Authority is managing the completed properties for AHFC. Formed after the passage of its enabling legislation in 2011, the Alaska Corp. for Affordable Housing gives AHFC an arm to meld private financing in its projects, which in the past had to be completely publicly financed. AHFC sold a tax-exempt bond to finance construction. A limited partnership was then formed with KeyBank, which purchased $10.5 million in federal energy and affordable housing tax credits from AHFC to become a direct equity investor in Susitna Square and Ridgeline Terrace. The bond is being paid off using federal and state assistance, according to AHFC. The credits fulfill KeyBank’s federal requirements under the Community Reinvestment Act for investment in low- and moderate-income housing, Key Community Development Corp. Vice President Jennifer Seamons said in an interview. “We get those tax credits to help offset our federal tax liability for the corporation, as opposed to receiving interest on a construction loan, but at the end of the day we are investing in real estate so there’s the investment component,” Seamons said. “So we need to make sure our limited capital we have to invest every year is invested in good projects with good sponsors in areas that we have a need to make sure that we are satisfying our investment requirements.” AHFC Planner Dan Delfino said KeyBank purchased the credits for 99 cents on the dollar. The 30 percent energy tax credits were available because of solar panels for hot water and electricity at Susitna Square, as well as the fact that all the units are at least 5 Star energy rated be the Department of Energy, Butcher said. Nationwide, KeyBank has more than $1 billion in similar investments. Annually, the bank invests about $200 million through its community development arm, according to Seamons. She called the partnership KeyBank’s “flagship project” with AHFC and Cook Inlet Housing and something that shows the bank’s commitment to the Alaska market. With such high construction costs in the state, she said there is really a need for these types of programs and partnerships to make developing affordable and senior housing feasible. “We continue to look for good opportunities in the Alaska market — and certainly building on the partnerships we have with Alaska Housing and Cook Inlet (Housing) and some of the other developers” in the state, Seamons said. The one-bedroom Susitna Square townhomes are being rented for $934 per month, while the two-bedroom units go for $1,182 per month plus electricity. They are restricted to tenants earning 60 percent or less of the median Anchorage income — $37,600 for one person or $43,000 for a two-person household. According to HUD, housing should account for 30 percent of a household’s income. “We routinely see people paying 50-60 percent of their income on housing,” Butcher said. The tight Anchorage housing market, with rental vacancy at less than 4 percent, was the primary reason AHFC went to work on its inaugural Alaska Corp. for Affordable Housing project there, he said. “This is something that as we work through the end of this cycle we’re going to be looking at potentially doing statewide,” Butcher said. “Of course, it all depends on funding.” AHFC’s Delfino said quality low-income developments are extremely difficult to pull off without direct grant assistance, but the public housing agency will not stop trying to pull together money from all sources, even if the state doesn’t contribute in the future. Elwood Brehmer can be reached at [email protected]

Carpenter Training Center growing to meet industry demand

It’s quiet these days around the Southern Alaska Carpenter Training Center in South Anchorage. To the center’s training coordinator Aaron Combs, that’s a good thing. It means his students are working. Just a few weeks ago, in early June, the Southern Alaska Carpenter Training Center yard was full of lumber and about 40 students building frames for concrete walls, the consummation of their first year of training. Combs said the initial six weeks of training attempts to touch on the basics of everything the apprentice-level students could encounter on a job site. “We’re trying to stay at least up with, if not ahead of where the construction industry is going, so our projects are relevant and (the students) are developing skills they’re going to be using on the job,” Combs said. He estimated more than 90 percent of the work demanded of center students is concrete, drywall and metal stud and framing construction on commercial-sized facilities. After six months on the job, the students return to the center for more advanced training. A year later, there is another round of progressively advanced tutorials, with a fourth and final intense, 40-hour per week training course six months after that. All of the six-week classes are scheduled early or late in the year to keep students on jobsites during the peak of Alaska’s summer construction season. The first-year students vary greatly in age and skill level. The 38-year-old Combs said he is waiting for the first class he teaches in which all of his students are younger than him. He took the first-year course in 1998. “The first class is always the hardest one for us to teach because we have those people that have 15 years experience all the way down to never touched a hammer before, never seen a tape measure before; we have that wide of a range,” he said. With four instructors for each class there is a 10-1 student-teacher ratio that allows for attentive instruction that first year. While the business climate in Alaska has quickly shifted from exuberant to hesitant with the decline in the price of oil, the commercial construction market has remained fairly strong, at least for the time being. Combs said all of his motivated and disciplined apprentices are in high demand — high enough demand that the training center is in the early stages of expanding. Pacific Northwest Regional Council of Carpenters spokesman Ben Basom said the union expects to have to replace about 40 percent of its workforce over the next seven years to keep up with attrition and retirement. “The Northwest Carpenters Union is in the process of expanding its training and apprenticeship program to include a new state-of-the-art training facility, which will train the present and future generations of carpenters in Alaska,” Basom wrote in an email. Tentative plans are to hopefully grow the 45-foot by 60-foot shop in order to have more space to train scaffold builders, millwrights and also house pile driver training, Combs said. According to Local 1281 Business Manager Scott Hansen, the ideal expansion would also include moving the Local into the facility as well if a parcel adjacent to the training center can be secured. The first year starts with simple math, all the way down to addition and subtraction. By year four, the focus is on reading blueprints and consulting with architects how to integrate design and construction, Combs said. “We don’t just train people to work, we train people to be the leaders in the industry, so we really want them to have all the skills to be that leader,” he said. After the fourth year, most classes have shrunk by about half, according to Combs. He said he certainly doesn’t want that high of a dropout rate and that application and acceptance standards are being evaluated so the carpentry school can keep more of its students for four years. The vast majority of the students that fall out of the program do so between the years one and two, he said, primarily because a lack of work ethic or ability to show up to a job on time is exposed. “Reputation is everything in this industry,” Combs said. “The construction community in Anchorage is pretty small. Once you make a bad reputation for yourself everybody knows it.” Those that can’t master the basics of being an available employee quickly find themselves out of work, he said. The students are members of the Anchorage Carpenters Union Local 1281. As a result, the classes are free, covered by union dues, outside of about $300 for books and $580 worth of hand tools. Hansen, also a graduate of the Southern Alaska Carpenter Training Center, said the basics taught early in the program is instruction that can be hard to find in on-the-job training. “Our goal, our mission, is to supply our signatory contractors with the best trained, safe workforce possible, so without an apprenticeship, without a training center — that’s a very important aspect of what we do,” he said. Elwood Brehmer can be reached at [email protected]

Construction around the state is steady so far

Building activity has been good, but not great, around the state as the construction season moves towards its peak. So far 2015 has mostly met projections said Associated General Contractors of Alaska Executive Director John MacKinnon. “As I look out there and see the work that’s going on I think we’re where we expected to be this year in construction,” MacKinnon said. “I fully expect things to taper off over the next couple years.” That’s because this year’s large private projects have been in the works for some time, while civil construction work going on this summer was funded in state and federal budgets several years ago. AGC of Alaska’s construction forecast released in January estimated $8.5 billion would be spent in the state’s industry this year, off about 3 percent from 2014. When the lean 2016 fiscal year capital budget and the others likely to follow fully take effect in a couple years, construction work will almost certainly wane, he said. Year-to-date building permit valuation in the Municipality of Anchorage is down 23 percent from 2014 at $233.2 million through May. Building permit data does not track the number or value of projects actually being built — only prospective work — but it is the primary means of tracking local vertical construction activity. The number of projects permitted so far this year in Anchorage is similar to 2014, however the value of the work is less. The 25 new commercial structure permits through May matches last year and the number of single family homes, at 107, is off just slightly from 119 a year ago. However, the number of duplex permit applications has fallen by more than half, from 48 to 22. The last year the permit value total was similar to 2015 was $240.9 million in 2012. However, it is still significantly better than the $144.6 million through May 2010. MacKinnon said what is happening now is the inverse of the private construction flourish after the passage of oil tax reform, Senate Bill 21, in 2013. “I see some caution out there because of the (low) price of oil and the resulting cuts that need to be done,” he said. MacKinnon has heard of projects being put on hold because of concern about the future of the state’s economy because of oil prices, he said. In the City of Fairbanks, the building permit values total $36.8 million so far this year, nearly three times the $12.2 million through May 2014. City Building Plans Examiner Stephen Anderson said much of the disparity is due to two major projects, a new school and a hospital addition. In April, the Fairbanks North Star Borough approved a $23.8 million contract to replace Ryan Middle School and tear down the old building. The school’s gymnasium was refurbished last year, he said. Other than the big projects, activity in Fairbanks has been similar to most years, according to Anderson. “It’s going to be a good, solid year, but no award-winner,” he said. The number of $1 million to $5 million commercial projects is on par with a normal year, as is residential construction, Anderson said. If the state Interior Energy Project succeeds in getting additional lower-cost natural gas or propane to the region in the coming years, Anderson said he would expect resurgence in the Interior’s building market. “It’s hard for me to imagine a world that wouldn’t bloom and flourish with affordable gas coming to Fairbanks,” he said. Finally, in Juneau, the number of permits is down, but the value is up through June 22. The City and Borough of Juneau reported 335 commercial and residential building permits issued through June 22 at an estimated value of $77.7 million. Last year, 395 permits valued at $40.7 million had been issued through the same date, which was in line with 2012 and 2013. The value increase this year shows up primarily in several new and renovated commercial projects.

Soldotna tentatively scheduled for road upgrades in 2016

SOLDOTNA — Pavement preservation preventative maintenance project. While it might be rough to say, it will hopefully mean smooth roads for Soldotna. At a chamber luncheon on March 31, Sean Baski, project manager for the Alaska Department of Transportation, discussed an upcoming road improvement project for Soldotna tentatively scheduled for 2016. The project will improve the Sterling Highway from Devin Drive near Fred Meyer to a third of a mile south past the Kalifornsky Beach Road turnoff. Baski said that the project would cost approximately $5 million, and about 90 percent federally funded. The road isn’t going to be completely overhauled; instead, the project will consist of grading, drainage, paving, curb repairs, signalization, striping upgrades, as well as improved sidewalk ramps consistent with the Americans with Disabilities Act requirements. Instead of completely digging up the road, constructions crews will mill off and replace the top couple of inches of asphalt. “We call this a “1R” project — just a resurfacing project,” Baski said. “So the whole goal is to do cost effective improvements. We’re trying to go in and spend our money wisely and really target, and make sure the pavement is in good condition.” Baski said this type of preventative work could give the road an additional 5 to 10 years of life. One of the new improvements is a stronger type of paving material — hard aggregate. Baski said that this type of aggregate is more expensive, but it has benefits. “It’s a little bit beefier rock than we normally use on everyday pavement,” he said. “It should last a little bit longer as far as rutting goes.” Aside from resurfacing the pavement, some light signals will have their loop detection signals replaced, including at the intersection leading to Kalifornsky Beach Road. The loops help detect when cars are present in order for smoother, more time-efficient signal changes. Baski stressed said that these replacements would not require excessive work. “Those loops are right underneath the asphalt, so we’re not talking about huge dig outs that require us to dig much of the road out,” he said. Baski said the DOT hopes the maintenance can be completed during 2016 while also minimizing traffic disturbances. “Generally we will try to limit traffic restrictions from July 10-28,” he said. “Also around the Kenai River Festival — you don’t want to have workers out there working.” While the details of the project have yet to be finalized, Baski said that most of the work would probably be done at night. Department of Transportation officials will monitor the work to ensure that reasonable access is provided to both businesses and residential buildings. The road improvements will not only allow for smoother transportation, it will have economic benefits as well. “Over time, we will have less liability for the state of Alaska in having to go in and do much deeper-seated work,” Baski said. “In the end, it will cost the state of Alaska less money. We’re very excited about that.”

DOT unveils options for $250M-plus Cooper Landing Bypass

The Alaska Department of Transportation and Public Facilities wants feedback on plans to move the Sterling Highway around Cooper Landing. DOT released a draft supplemental environmental impact statement March 29 with four alternatives to improve traffic flow and increase road capacity on a 13-mile stretch of the Sterling Highway. Cost estimates for the road construction options range from $250 million to $304 million. Cooper Landing is a Southcentral recreation mecca for Alaskans and tourists alike each summer. Significant amounts of additional traffic traveling between Anchorage and the southern portion of the Kenai Peninsula pass through the community as well. The project area encompasses the entire portion of the Sterling Highway in the Upper Kenai River valley — where it begins to follow the Kenai Lake shoreline near milepost 44 to its eastern intersection with Skilak Lake Road at milepost 58. That section of the highway contains numerous campground and trailhead turnoffs, driveways and side roads. It also includes the extremely popular salmon and trout fishing area at the mouth of the Russian River. The engineering services and consulting firm HDR Inc. prepared the environmental impact statement, or EIS, for the state. Three of the alternatives deviate from the current highway near milepost 46, a couple miles east of the Kenai Lake bridge. The “G South,” “Juneau Creek” and “Juneau Creek Variant” options would move the highway north of Cooper Landing and the Kenai River. The G South option would require a new bridge over the Kenai between miles 51 and 52. It would follow the current right-of-way through the rest of the corridor. The Juneau Creek plans keep the highway completely on the north side of the river through the project area and reconnect with the current road between miles 55 and 56. The “Cooper Creek” alternative is the only proposal that expands the highway to the south and uses the Kenai Lake bridge. It would relocate the Sterling farther south than its current path from mile 48 to mile 51 and from there it would follow the current right-of-way. A record of decision would likely come next year and construction would run for five years beginning 2018, based on the current project timeline. Cooper Landing Bypass alternative cost breakdown • Cooper Creek: $236.2 million for construction and $54.5 million in associated expenses for a total project cost of about $291 million. • G South: $250.4 million for construction and $53.1 million in associated expenses for a total project cost of $304 million (includes a new Kenai River bridge). • Juneau Creek: $205.4 million for construction and $44.2 million in associated expenses for a total project cost of $250 million. • Juneau Creek Variant: $211.6 million for construction and $45.4 in associated expenses for a total project cost of $257 million. (Associated expenses include permitting, design, utility relocations and right-of-way acquisition through private property.) Federal highway program funds would pay for the majority of the project, which would require a state match. The revamped stretch of highway would have 12-foot lanes, eight-foot shoulder sections, passing lanes and left-turn lanes — features the stretch of highway currently lacks. The Sterling Highway through Cooper Landing does not adequately meet DOT safety standards for a main thoroughfare as it is constructed. It is one of the only segments of the Sterling still in its original right-of-way from construction in 1950. Despite a winding, narrow roadway squeezed between mountains and river in several stretches, the Cooper Landing Bypass area has a crash rate 4.6 percent lower than the state average for similarly classified rural primary highways. From 2000 through 2009, the Sterling Highway has a crash rate of 1.72 crashes for every 1 million vehicle miles traveled per highway mile, while the state average was 1.80 crashes for the period. The winter crash rate was nearly four times higher than the summer even though average winter daily traffic through the corridor was 1,635 vehicles, compared with an average of 4,353 vehicles in summer. DOT spokeswoman Shannon McCarthy said crash rates increase on either side of the project area as drivers “jockey for position” on highway stretches with speed limits of 55 miles per hour. Much of the subject corridor is posted at 35 and 45 miles per hour and traffic often backs up as vehicles wait to turn off the highway. Signs put up by residents along the roadway through Cooper Landing encourage travelers to follow posted speeds and hold the slogan “We Drive 35.” Summer traffic volumes are expected to increase more than 80 percent from current levels over the next 30 years based on historical 20-year trends, according to the EIS. DOT has looked at upgrading the highway numerous times since the 1980s. The current EIS is a revision of a project proposed in 1994 that looked at revamping the Sterling Highway milepost 37-60. The eight-mile segment beginning at milepost 37 was ultimately redone and completed in 2001. Cooper Landing Chamber of Commerce President Stephanie Ferry said the project has been brought up so many times area residents are skeptical it will ever happen. Cheryle James, a Cooper Landing Chamber member and owner of Wildman’s general store at milepost 47, said she believes the money that would go the Sterling Highway project would be better spent on road work in more permanently congested areas such as Anchorage and the Mat-Su valleys. “Traffic is only busy here two or three months of the year,” she said. James suggested improving the existing roadway and expanding 35 miles per hour speed limit areas. She noted that the alternatives already include improving different segments of the current highway. The EIS states that some confined areas of the right-of-way would be difficult and costly to improve because of environmental concerns and loose soils on some slopes along the road. She added that the project would undoubtedly hurt local businesses, particularly those that are open year-round. Wildman’s is one of four shops in Cooper Landing open in winter, she said. Pulling traffic away from Wildman’s would likely cause her to cut her permanent staff of eight, according to James. She is one of the residents that isn’t convinced the project will ever happen because of the repeat work that surfaces every few years, James said. “We spent a lot of money on environmental impact statements over the past 30 years that basically told us the same thing,” she said. DOT is accepting public comments on the EIS through May 26. Comments can be submitted through the project’s website,, or at libraries in Anchorage, Kenai, Soldotna, Cooper Landing and Juneau. Elwood Brehmer can be reached at [email protected]


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