Senate approves minimum wage law

JUNEAU -- The state Senate voted May 16 to increase the minimum wage in Alaska to $7.15 an hour.The action was a reversal of a vote taken the previous day.Senators had voted down the measure 13-7 on May 15, with several opponents saying they did not like a provision that would automatically adjust the wage upward with increases in the Anchorage consumer price index. The Senate reconsidered the bill May 16 and approved it 19-1, with only Sen. Loren Leman, R-Anchorage, voting no.The current minimum wage is $5.65 an hour. The increase in House Bill 56 would take effect in January.The action means an identical citizens’ initiative to raise the wage will not appear on this fall’s general election ballot.Senators did not debate the issue and offered no explanation for their change of heart.There is speculation that Republicans would like to keep the minimum wage issue off the ballot because the measure could draw working-class voters to the polls, who are more likely to vote for Democrats. Rep. Pete Kott, R-Eagle River, has said that was not his motivation for sponsoring the bill.Kott had proposed a smaller increase in 2001 but changed his bill this year to match the ballot initiative.He has said it is better for the Legislature to address the measure than leave it to voters.That way, if legislators decide to change the inflation provision, they can do so next year, Kott said. If the change were made through a ballot initiative, they’d have to wait two years.The Senate and the House have also approved a bill that would let remote seafood processors deduct room and board from their workers’ pay even if that drops their take-home pay below minimum wage.

Exxon paves way for Pt. Thomson

Exxon Mobil Corp. says it will make a final decision on development of the Point Thomson natural gas and gas condensate field in 2003 or 2004 but it is going ahead with seeking permits for the $1 billion development project.About eight trillion cubic feet of natural gas and 400 million barrels of natural gas condensates are estimated to be recoverable from the field, Jack Williams, Alaska production manager for the company, told the Resource Development Council for Alaska Inc. in Anchorage May 16.Point Thomson is 60 miles east of Prudhoe Bay on the North Slope. Exxon Mobil, which owns 34 percent of the field, is operator for itself and other owners, which include BP Exploration (Alaska) Inc. and Chevron USA Inc.If the development goes ahead, about 450 people would be employed in construction in 2005 and 2006 with production beginning in late 2006. About 50 operations personnel will be needed, Williams said.The U.S. Environmental Protection Agency will be the lead agency on a federal environmental impact statement for the project, Williams told the council. Public "scoping" hearings are planned this summer in Anchorage and North Slope communities as part of the impact-assessment process.Point Thomson was discovered in 1977 but only the development of new technologies in gas compression and extended reach drilling have made it economic to develop the reservoir, Williams said.Over the years 19 exploration or appraisal wells have been drilled in or around the field, with 14 of those drilled into the reservoir sands containing the natural gas, he said.In contrast, only 21 wells will be needed to actually produce the field.The gas is at very high pressure in the reservoir. It is "wet" gas, with a high content of hydrocarbon liquids. The gas recycling project envisioned by Exxon Mobil would produce the wet gas, strip off the hydrocarbon liquids, and inject the so-called "lean" gas back into the underground reservoir, Williams said.The hydrocarbon liquids, or gas condensate, would be shipped through a new pipeline to BP’s small Badami field and then to Prudhoe Bay and the Trans-Alaska Pipeline System through the Badami pipeline. Adding the liquids raises the value of the crude oil somewhat when it is refined.Injecting the produced gas back into the high pressure reservoir will require compression technology that is leading-edge, Williams said. There is no other oil or gas field in the world where gas is injected into the underground reservoir at such high pressures, although there are several projects, like Point Thomson, that are under study, he told the council.At peak production, Badami would produce 75,000 barrels per day of condensate liquids, Williams said. Condensates have a lighter gravity than conventional crude oil and because of that are generally considered more valuable, he said.Exxon Mobil and its partners have spent $800 million on the project so far. Development would require another $1 billion.

Investor updates Bethel hotel, plans to build apartments

A Seattle-based businessman with real estate and hotel holdings in Alaska plans to bolster his recent investments in Bethel.Joe Brotherton, who recently renovated and reopened the former Kuskokwim Inn, plans to add another 40 rooms to the hotel, which now has 39 rooms, and build a 30-unit apartment building on the same property. The hotel was renamed the Long House Bethel Inn.Construction could begin in late summer, said Eric Ritner, director of operations for Brotherton Management-Alaska."We expect to invest another $3 million to $4 million in Bethel over the next couple years," Ritner said, noting the work on these projects.Bethel Native Corp. operates 110 apartments, although those don’t fill demand, said Al Newman, BNC controller."We’re always full. It’s probably a good thing for Bethel if there were more," he said.Brotherton Management began operating hotels in 1996 when it opened the 54-room Long House Alaskan Hotel in Anchorage. In 2000 the company purchased the 47-room Nome Nugget Inn.The move to Bethel came about when Brotherton Management executives saw opportunity."The company decided to pursue this because we have been traveling to and through Bethel for years, and we felt that there was an urgent need for quality lodging there," Ritner said."Bethel is expanding rapidly and serves as a hub for numerous villages in the region. Since we have expanded into the Bush hotel market with our Nome acquisition, Bethel seemed a natural next step."Brotherton, who travels regularly on business to Bethel, noticed the potential for renovating the Kuskokwim Inn. "I know how to build and operate small, rural Alaska properties, and Bethel was a market in need," he said.Brotherton organized the project with help from investors Chad Moore, director of sales at Uresco Construction Material Inc. of Anchorage, and Bethel resident and contractor Paul O’Brien.Renovations at the Kuskokwim Inn, originally built in the early 1970s, began in fall 2000, Ritner said. The company spent about $2 million to refurbish the hotel, which reopened Feb. 14, he said. Improvements included computer connections in guest rooms and a new meeting and conference room able to hold 224 people.Brotherton has other investments in Alaska. His property management company operates 293 apartments in Anchorage, among them the Independence Park Apartments. The company also owns and operates 90,000 square feet of commercial and office space, including Resolution Plaza and Elevation 92 in Anchorage and the Marine View Center, a Juneau apartment and office building.Brotherton also has a minority interest in the 140-room Fairbanks SpringHill Suites, which opened in 2001.A certified public accountant and attorney, Brotherton also operates a Seattle property management company among other business interests. His Alaska business ventures afford different returns."I love Alaska and my few involvements in the Bush have been the most satisfying," he said. "I still view Alaska as a land of opportunity for people with talent and ambition."

State approves API replacement

The state health and social services commissioner has cleared the way for construction of Alaska Psychiatric Institute’s 80-bed, $42 million replacement facility.Site preparation could begin this fall in Anchorage, said project manager Jerry Watkins from the state Department of Transportation and Public Facilities Central Region Construction and Operations. Construction could start next spring and be completed in early 2005, he said.Commissioner Jay Livey’s decision, recorded in a state public notice May 13, did not surprise API director Randall Burns."We’ve been going forward with the assumption that we were going to get it," he said.Work is under way on a construction plan, and a contract is scheduled to be awarded this summer, Burns said. As part of the bid process to choose a contractor for the major construction project, the state issued a request for proposals contained in two 3-inch-thick binders listing contract and facility requirements, Watkins said.Three companies are bidding on the design-build project, he said. Neeser Construction Inc., Davis Constructors & Engineers Inc. and Dick Pacific Construction, all with offices in Anchorage, are preparing conceptual designs and price proposals that are due May 28, he said.A technical committee and others will evaluate the designs for several weeks, then consider price proposals, Watkins said. The contract is set to be awarded in late June, he said.After earlier controversy about other possible Anchorage locations for the replacement facility, the new API will be built near the existing hospital on Providence Drive.Under the newly issued permit, API is approved to operate 72 beds and can operate another eight beds after maintaining an average 85 percent occupancy rate for two years.The state health and social services commissioner also approved a certificate of need for Renal Care Group of Alaska to build a new kidney dialysis center in Fairbanks.A new center, approved at 8,400 square feet, will quadruple the size of its current center in Fairbanks, said Jean Stephens, area administrator for Renal Care Group Northwest. The company also operates offices in Washington.The new center, at 1867 Airport Way, will continue to house 12 dialysis stations, she said.Construction on the new facility, which could begin in early summer, is set for completion later this year, Stephens said.State health department officials authorized construction costs up to nearly $1.8 million.The current facility is located in the Tanana Valley Clinic at 1001 Noble St.

Prices high, kings scarce in Copper River salmon opener

ANCHORAGE -- Fishermen received hefty prices for their fish as the celebrated Copper River salmon fishery opened May 16.Processors were reported paying $5.25 to $5.75 a pound for king salmon and $3 a pound for the more abundant red salmon. Last year on opening day, processors paid up to $4.60 a pound for kings and $2.75 for reds, according to the Copper River Salmon Producers Association, a fishermen’s union.The high prices were the result of market euphoria that annually builds around Alaska’s first major salmon run of the season, coupled with an usually short fishing period allotted the 500-boat fleet.High dock prices likely will drop off steeply within a couple of weeks as other commercial fisheries begin around the Alaska coast.State fishery managers allowed fishermen to wet their nets for only six hours, compared with 12 or 24 hours in past years. Initial reports were that the catch would not match the total last year.King salmon appeared to be scarce, though a surprising number of red salmon were landed for such a short period, fishermen said.Smaller first-day supply plus competition among buyers whipped up exuberant prices, said Terry Gardiner, president of NorQuest Seafoods Inc., a Seattle-based packer and one of the major Copper River buyers."We’ve never had such a short opener at the start,’’ he said.NorQuest projected a catch of about 4,500 king salmon and 66,000 reds.That compares with 6,141 kings and 72,274 reds landed on opening day last year, when fishermen had a 12-hour period, according to the state Department of Fish and Game.The high prices enjoyed by fishermen on opening day are sure to cost consumers in Seattle and beyond who crave the ballyhooed Copper River fish. In past years, cuts of fresh Copper River king salmon have retailed for $20 a pound or more.Fishery managers decided to go with a conservative, six-hour period.Water flow was low in the Copper River, with lots of ice remaining from winter. Low water tends to cause fish to linger at the 60-mile-wide mouth of the river. Managers try to avoid letting the fleet capture too many fish in distinct stocks heading to certain Copper River tributaries to spawn.The ice also prevents managers from operating a sonar fish counter at Miles Lake, 48 miles up the Copper River. Without that device, biologists don’t know how many fish have escaped upriver to spawn.

Petrochemical plant could help gas line

A study of the economic feasibility of building a petrochemical complex in conjunction with an arctic gas pipeline has found that such a project would enhance pipeline economics, Williams Cos. announced May 14.Williams conducted the study during the past year and considered locations near Fairbanks and in western Canada for a petrochemicals plant, using several scenarios to evaluate the proposed project’s economic viability. Among benefits to a community selected for a petrochemical complex would be a peak construction work force of 4,000 and a permanent work force of up to 400 people, the company said."The results confirmed our initial evaluation that a petrochemical complex, including gas processing and a plastics plant, could potentially enhance the economic viability of an arctic gas pipeline," said Phil Wright, president of Williams energy services unit. "Many significant assumptions will have to be realized for this conclusion to hold true but we will continue to evaluate market conditions."Wright said it will be at least three years before the company would need to spend any capital on infrastructure for the petrochemicals complex."In the meantime, we must continue to work to evaluate market conditions, as well as mitigate the risks associated with this critical group of projects," he said.A petrochemical project is contingent on commercialization of Alaska gas now stranded on the North Slope. Several groups are currently studying a proposed pipeline project that would enable the resource, estimated to exceed 35 trillion cubic feet of known reserves and 100 trillion cubic feet of total reserves, to be marketed in the Lower 48.The three North Slope gas producers, ExxonMobil Production Co., BP Exploration (Alaska) Inc. and Phillips Alaska Co., spent $125 million in 2001 to study the feasibility of a gas pipeline project. The producers concluded that the project is too costly at an estimated $19.4 billion under current economic conditions. Federal and state lawmakers are considering subsidies to enhance the pipeline’s viability.Chemical Market Associates Inc., an independent research firm, assisted Williams in performing its proprietary petrochemicals study."While locations in Alaska and western Canada appear to be potentially feasible, they each have different markets," said Rick Cornelius, CMAI vice president. "A petrochemical facility in Fairbanks would ultimately export most of the products to Asia, while a facility in western Canada would ship most products to the northern and Midwest regions of the United States."Michael Cathey, director of Williams’ arctic project, said the company is actively evaluating all the possibilities surrounding an arctic gas project.Williams Alaska President Diane Prier said in February the company could build a plant near Fairbanks or Alberta that would manufacture 1 million tons, or 2 billion pounds, annually of high-density and low-density polyethylene products. These products, essentially plastic pellets used in manufacturing finished plastic goods, are projected to be in short supply in Asia in the coming decade, Prier said.If a plant were built near Fairbanks, it would be located next door to Williams’ 200,000 barrel-per-day petroleum refinery in North Pole, said Jeff Cook, Williams Alaska senior vice president, May 14.The pellets would be shipped south to Anchorage via rail and barged to customers in Pacific Rim countries or on the West Coast, Cook said."That would be an additional $20 million a year in revenue for the Alaska Railroad," Cook said. Williams currently spends $35 million a year with the railroad to ship refined petroleum products via rail.Prier said the Fairbanks plant would use about 50,000 barrels per day of ethane, a natural gas liquids component, as feedstock for making polyethylene pellets. The ethane would be supplied by the 4.3 billion cubic feet per day arctic gas pipeline if it were built.Though Williams Alaska is keenly interested in the project, Cook said the company will keep open its options by continuing to work with local governments in Canada and Alaska, as well as with potential customers and "see how things go."Williams owns extensive energy operations in Alaska and Canada. In Alaska, Williams owns and operates petroleum terminals, convenience stores and a small interest in the trans-Alaska oil pipeline in addition to the refinery.In Canada, the company owns 14.6 percent of the Alliance pipeline system, which delivers 1.5 billion cubic feet per day of natural gas, including gas liquids, from western Canada to the Chicago area. It also owns extensive gas processing, production and storage capacity in Alberta and British Columbia.

Kenai group plans adolescent treatment center

Central Peninsula Counseling Services plans to build a $2 million, 36-bed residential treatment center for adolescents in Kenai.The Kenai City Council approved the project concept May 1, said James Shill, executive director of Central Peninsula Counseling Services."We hope to begin construction in spring 2003," he said.Company officials are now negotiating with city leaders for a long-term lease or purchase price for land, he said. The private, nonprofit group is considering five to 10 acres on Marathon Road near the Kenai airport.The proposal is the latest bid to meet the state’s need for psychiatric services for people ages 12 to 17. Two other health care providers, Providence Alaska Medical Center and North Star Behavioral Health System, also plan to build adolescent psychiatric treatment facilities in coming years.Currently, Alaska lacks enough services to meet demand, causing many to receive treatment outside the state. In fiscal year 2001 Medicaid paid for about 400 children and adolescents to receive inpatient mental heath care services in other states, according to state reports.That Medicaid cost to the state was about $17 million, according to Central Peninsula Counseling Services’ project presentation.On the Kenai Peninsula between five and 20 children and adolescents require such services at any one time, Shill said. Kenai Care Center already operates a six-bed facility, he said.Central Peninsula Counseling Services, which recorded $5.7 million in revenue last year, expects to generate revenues of $6 million in 2002, according to its business plan.The company started in 1975 and had about 10 full-time employees for its first decade before revenue and employment growth surged in the 1990s. It now employees 100 to 120 people, Shill said.The new adolescent residential treatment center would employ another 40 full- and part-time employees, he said. The new center would generate $3 million in additional annual revenue, Shill said."This will increase our size and our scope," he said. "It makes us better able to address the needs of the community."Risks to the proposed new venture include possible legislative reductions in the state Medicaid program and the difficulty of finding qualified nurses for the center in the midst of a statewide nursing shortage.

Construction under way on new military hospital

Joint venture general contractors Dick Pacific Corp. and Ghemm Co. have started construction on the new Bassett Army Hospital at Fort Wainwright near Fairbanks.In early May, workers began pouring concrete for the 32-bed, 269,000-square-foot hospital, said Bert Bell, president of Fairbanks-based Ghemm Co.Work on the $178 million construction contract should be complete by June 2006.Other project construction tasks this summer will include erecting steel over the clinic and enclosing the central energy plant, which Bell hopes will permit some winter construction.Because the project extends over years, the general contractors are setting up offices at the site."The bulk of the work is way out in front of us," Bell said.The U.S. Army Corps of Engineers Alaska District awarded the contract in February to build a hospital replacing the 50-year-old Bassett Army Hospital.The contract award, for one of the largest construction projects in Alaska, comes a year after the original bid and construction start timeline.Construction was originally to begin in summer 2001. However, the Corps canceled the process in January 2001 without awarding a contract, citing high prices received in bids.Last October the Corps restarted the bid process.When the current Bassett hospital was built it had 300 beds, but changes in health care and modifications have reduced that number to 43 beds.The new hospital will have even fewer beds since health care has evolved into outpatient rather than inpatient treatment.Services at the new hospital will include primary and urgent care, specialty clinics, pharmacy and laboratory services, Veterans Administration services, radiology, surgery, obstetrics, gynecology, pediatrics and family practice.

Dry hole leads to restatement by oil company

BARTLESVILLE, Okla. -- Phillips Petroleum Co. revised its previously released first quarter earnings May 10 to reflect a $77 million reduction in the value of its offshore assets near Angola because the first exploratory well there turned out to be dry.The Bartlesville-based company said the writedown widened its first-quarter loss to $102 million from the loss of $25 million it reported for the January-March period on April 26. The results of the drilling were not known until early May.

State court ruling halts exploratory drilling at Cook Inlet platform

ANCHORAGE -- Exploratory drilling at a new oil platform in Cook Inlet is in limbo in the wake of a ruling by the Alaska Supreme Court that the state made a mistake when it decided the Osprey Platform didn’t need a project-specific discharge permit for drilling waste.The high court’s ruling May 3 came two weeks after the same court granted a restraining order sought by Cook Inlet Keeper to stop the drilling of a fifth exploration well on Forest Oil Corp.’s Osprey, sitting above Cook Inlet near the western shore roughly across from Nikiski. The issue was whether the state was following the strict rules of the Alaska Coastal Management Act."We’re doing additional work on the other four wells while we wait for the situation to be cleared," said Dave Keyte, chief financial officer for Denver-based Forest. "We’ve got a lot of other work to do before we go into production."It’s not the exactly perfect way to deal with the situation. But we’ve got a project that’s a world-class oil field and one we intend to develop."Forest is spending about $130 million in Cook Inlet this year, more than half of the company’s entire capital budget.The unanimous Supreme Court said state regulators erred when they decided to allow discharge of drilling mud and rock cuttings from the platform under a general-discharge permit issued by the federal government.State regulators reasoned that the Environmental Protection Agency’s general permit for Cook Inlet covered discharge of drilling wastes, and that the permit had been cleared as consistent with the coastal management law. So the state didn’t do its own review.The court decided that approach was wrong."We think that with the state of technology where it is, this project should be a model for future development. That would include zero toxic discharges," said Bob Shavelson of Cook Inlet Keeper, a Homer-based environmental group. Drilling wastes contain heavy metals such as cadmium, mercury and lead that could harm the environment and the creatures in it, he said. "We know the discharges are toxic, and they’re relatively persistent."The high court ruled that the state has a duty to conduct a project-specific review."The state was comfortable going with a generalized statement of impacts," Shavelson said. "It’s common sense to want to know what the localized impacts will be from a specific project."How long it might take for the state to complete a new review of the Osprey exploration wasn’t clear. The court ruling could have an impact on a permit for development, as opposed to exploration, that was issued just days before the ruling, said Pat Galvin, director of the Division of Governmental Coordination, which handles the permits."The issue of discharging that material (drilling muds) isn’t an issue in development," Galvin said. Forest has agreed to reinject discharges from its production wells."Once they move to development, as long as they work off the permits they’ve gotten so far, it’s zero discharge," he said. Forest plans to drill upwards of 20 wells during the development phase, he said.

Seattle makes a splash in the cruise industry

SEATTLE -- Seattle, known for its planes, software and coffee, is starting to make a splash in the cruise industry, riding a new wave of interest in the Alaska market.Since the first cruise line began offering service in the summer of 2000, revenue related either directly or indirectly to the cruising industry has grown from virtually nothing to a projected $41.4 million by the end of the 2002 cruising season, according to the Port of Seattle.A total of 945 direct and indirect jobs have been created, which will result in personal income of about $22.2 million for the season, the port estimates. The business also will generate $2.95 million in state and local taxes this year.While the cruise industry is still in its infancy in Seattle, it’s a welcome boost to an economy battered by a downturn at Boeing Co. and an implosion in the region’s Internet/high-tech industry."People are now recognizing the need to do all sorts of things to bring people to town," said George Duff, a senior adviser to the Seattle Chamber of Commerce who worked for years as chamber president to bring cruising to Seattle. "It will be an industry that has an important role in the economy, and that will continue to be so even if Boeing goes back up to full strength."Seattle’s new status as a home port for cruising is bolstered by renewed interest in domestic travel as a result of the Sept. 11 terrorist attacks.Several cruise lines redeployed ships from the Mediterranean or the Baltics to the Pacific Northwest for the summer, including Holland America Line. Holland America is basing its MS Amsterdam in Seattle for the summer to serve that demand, said Rose Abello, vice president of public relations for Holland America, a division of Carnival Corp."We decided to bring her to Seattle, and she has been booking very, very well," said Abello.At the same time, Alaska is growing in popularity as a tourist destination, said John Hansen, president of the North West CruiseShip Association, a regional cruising trade group based in Vancouver.Alaska makes up about 9 percent of the world’s cruise market, and last year, a little more than 700,000 passengers cruised to the state. That number is expected to grow this year, Hansen said.Seattle also is growing in popularity as a tourist destination, said Michael Sheehan, a spokesman for Royal Caribbean Cruises Ltd. in Miami."That’s one of the things we look at in terms of a city we would sail from," said Sheehan, whose company began offering cruises from Seattle in 2000.Cruising is entering its third summer in Seattle, but the industry’s arrival here was eyed by officials at the Port of Seattle as early as the mid-1980s, said M.R. Dinsmore, the port’s chief executive.After years of trying to lure cruise ships, Port of Seattle officials decided on an "if we build it, they will come" strategy, investing about $20 million to build and then expand a cruise ship berth and facilities, Dinsmore said.Technology also cooperated in the form of new, faster ships. The new ships can make a seven-day, round-trip cruise to Alaska from Seattle with a stop in Vancouver, British Columbia. This allows them to comply with a U.S. law that prohibits foreign-flagged passenger vessels from making two consecutive stops at a U.S. port."It took the new technology, which made the vessels faster, to do that," Dinsmore said.Norwegian Cruise Line was the first company to make Seattle the home port for a ship, doing so in the summer of 2000 as it scheduled a full summer of seven-day cruises to Alaska."It was extremely well-received by both travel agents, who sell 95 percent of the product, and the consumer," said Andy Stuart, senior vice president of marketing and sales for Norwegian Cruise Line.The company plans 19 departures this summer, and will double capacity by adding another ship to the run in 2003, Stuart said.In 2001, Royal Caribbean entered the Seattle market, offering three- and four-night sailings, with stops in Vancouver and Victoria, British Columbia.Ship calls this season will total 79, up from 56 in 2001, port officials said. They hope for more than 100 next summer, Dinsmore said, as the port is in discussions with P&O Princess Cruises PLC.While the Seattle economy benefits when cruise ships make one-day visits, it’s the home port business that really makes an economic difference, port officials said.

Bonds, budget impasse extends session 2 days

An impasse over budgets and bonds prompted the Alaska Legislature to extend its session by two days as it neared the end of its regular session May 14. A special session on subsistence was to follow the conclusion of the regular session.Meanwhile, in the days leading up to May 14 lawmakers approved several business-related bills.One is House Bill 470, which makes technical changes in statutes to remove financing obstacles of builders of high-end condominium projects.A second measure, House Bill 246, makes numerous technical changes in state insurance laws, but most important, allows the state Division of Insurance to keep information from insurance investigations in other states confidential.That will allow Alaska to engage in insurance investigations with information from similar probes elsewhere, said state Division of Insurance Director Bob Lohr.A third bill, Senate Bill 181, limits a 1 percent home loan reduction by Alaska Housing Finance Corp. for single-family residences in rural communities to $250,000, but grants the preferential interest rate for multi-family projects occupied by teachers in rural schools.Just moments before the clock ran out on the 22nd Legislative session, the Senate approved a $2.3 billion operating budget by a party-line 14-6 vote and sent it to the House. After talk all session of deep cuts in state agency budgets, legislators cut only $6 million from state general fund appropriations to agencies compared with the current year, according to Legislative Finance Division data.Lawmakers voted to extend the session because they failed to resolve the state’s capital budget and a major school bond package that sparked tense negotiations with the GOP-majority and minority Democrats.Republicans had offered a package that would have included rural schools on a general obligation package that would go before the voters in November. Democrats wanted $35 million more for the state’s school funding formula and a plan to preserve an energy subsidy for rural communities."Our disagreement is about money, money, money," said Fairbanks Republican Pete Kelly, Senate finance co-chairman.Democrats counter that the GOP had allowed rural schools to erode and the state is far behind in aid to the Bush. Without Democrat votes, the Republican Legislature can’t access the state’s budget reserve."We’re looking for a solution that gets going on a backlog of rural school construction, but in the future moves urban and rural interests ahead together," said Senate Minority Leader Johnny Ellis, D-Anchorage.Ellis emerged from a closed-door meeting with House Speaker Brian Porter, R-Anchorage, and Senate President Rick Halford, R-Chugiak, declared negotiations at an impasse.The Legislature hasn’t had an extended session since 1987 when Gov. Steve Cowper called lawmakers back to work, said Bob King, press spokesman for Gov. Tony Knowles. The Legislature has never voted to extend its own session.Lawmakers spent the final hours of the session haggling over a budget deal, with senators and representatives walking quickly through the halls from one closed-door caucus to another.Legislative leaders emerged from a closed door meeting late May 14 with no resolution to key sticking points in approving the state budget by midnight. They voted to extend the session just before midnight, when the Legislature was to have adjourned.Halford had been pushing a multimillion dollar bond package that included a number of rural schools along with a plan to encourage urban school construction.But minority Democrats, whose votes are needed to access the state’s Constitutional Budget Reserve, remained entrenched.Democrats wanted $25 million in the state’s school funding formula along with more state spending to preserve the Power Cost Equalization program. Power Cost Equalization uses an endowment to subsidize high energy costs in rural areas.Republicans plan to use $15.7 million from the fund to subsidize high power costs, but Democrats complain that it eats into the principal of the endowment. They want state general fund assistance to support the fund.Ultimately, that proved to be too expensive, Kelly said. Republicans were unwilling to give more for the subsidy program and were satisfied with putting $10.9 million into schools through a grant program.The state faces an estimated budget deficit of $963 million next year and Republicans had fought to hold the line on spending. But that meant painful cuts in some services.Kelly said negotiations broke down quickly as the time drew near for lawmakers to adjourn this session. Republicans were unwilling to meet Democrat demands in a year when the focus had been to hold the line on spending.Democrat lawmakers wanted the bond package to include the top 19 rural schools on a state list of priority projects. A bond package offered by Halford included at least 11 schools.The Legislature was sued by plaintiffs who alleged discrimination in construction projects. Among the school projects on the list is the Akiachak district, where plaintiffs in the lawsuit live.The bond package also includes $61.7 million for University of Alaska system projects and $102.8 million in Grant Anticipation Revenue Vehicle bonds. Those GARVEE bonds allow the state to borrow against future federal highway dollars.The Legislature was scheduled to adjourn midnight on May 16. It would then go into a special session on subsistence.-- The Associated Press contributed to this story.

Choices abound in valuing firms

We often see business buy-sell agreements specifying that an appraiser be used to determine the value of the business or ownership interest. Many times, a real estate appraiser is called on to do this type of work. Although the appraisal of businesses and real estate are based on very common concepts, the terminology, analysis, valuation procedures and knowledge required for each discipline are very different.Business appraisal and valuation draws heavily on the theories and practice of applied microeconomics, especially the fields of corporate finance and securities analysis.A business appraiser must understand the implications of generally accepted accounting principles, be able to understand and interpret financial statements and business income tax returns, be familiar with securities laws among others as they apply to the entity being valued, and know where to find sources of data for particular industries.The business valuation discipline requires these elements be understood and applied along with other concepts from the fields of macroeconomics, business management, accounting, corporate finance and securities analysis.A business appraiser commonly values securities since the ownership of a business entity is often through a corporation, limited liability company or partnership. The shareholders, members or partners have no direct claim on the business assets as an owner of real estate generally would. Additionally, the value of a business interest is usually the owners’ net equity, whereas real estate is usually appraised as if it were free and clear.The general valuation approaches used in the two disciplines are very common. Their application, however, is very different, as is some of the terminology employed. For instance, net operating income to a business appraiser means net income after deducting noncash charges such as depreciation and amortization. To a real estate appraiser, it does not include a reduction for the noncash items.Cash flow, to a real estate appraiser, means income less debt service, that is, principal and interest. To a business appraiser, it means net income after all cash expenses but before depreciation, amortization and other noncash items. It is much more than merely adding back depreciation and amortization to net income as it must also incorporate the changes in working capital that affect the income statement.In the appraisal of noncommercial properties such as single family structures, empty warehouses and factory buildings, the replacement cost or market comparable approaches are commonly used. Similar to income producing properties, the value of an operating business emanates almost entirely from its ability to generate income.In this context, the valuation of income-producing real estate may be considered to be a special type of business valuation: the valuation of a business with a very limited use asset. One leader in the field suggests that when the business and real estate are virtually inseparable, valuation approaches associated with business appraisal are likely to lead to a more reliable value conclusion than those normally associated with real estate appraisal.Business valuation deals with the value of rights of ownership of a commercial, industrial or service organization pursuing an economic activity. A business is a complex and dynamic entity requiring the interaction of capital, labor and coordination of these resources to continue in existence.One type of capital is real estate. In most small-business valuation cases, the real estate is separable from the business. In these circumstances, the business is valued separately from the real estate with the business being charged an "economic rent" for the use of the real property.In addition to the effects of any real property, the business appraiser must also consider the values of the other assets -- financial, tangible personal property and intangible property ; liabilities -- actual and contingent; and owners’ equity -- various classes of common and preferred stock, limited partnership interests and the like.In most cases, estimating the economic income stream for an operating business is much more difficult than for an apartment complex, office building or similar income producing property. Additionally, once the income stream is determined, those for real estate tend to be capitalized at a lower rate of return than comparably defined income streams in businesses that are not real-estate oriented.Also, the risks of operating a business tend to be more complex to assess and quantify than those of operating real estate. On a market value basis, real estate investors may accept a lower rate of return from the cash flow stream because they expect an additional return in the form of appreciation in the value of the real property.Alternatively, a business investment usually includes machinery and equipment that will eventually become worthless through wear and tear and intangible assets that will typically become obsolete over time. Given this, the selection of appropriate discount or capitalization rates are more difficult in the business valuation area and also tend to be higher than for real estate.In real estate, values are often set by comparing the sales values of similar properties. Useful comparable transaction data are much harder to obtain for sales of businesses, especially small businesses, than for sales of real estate. Comparability between businesses is more difficult to determine because of the uniqueness of each business, a large number differing variables and the difficulty in measuring and quantifying subjective differences between companies.In performing a business valuation, the appraiser will consider many more factors than in a real estate appraisal due to the very different nature of the subjects.An aspect of business valuation that appears unique is that a business interest can have several different values at the same time, depending on which definitions of value and premise of value are employed. A business that is a going concern can have a far different value than one which is being liquidated, for instance. And its fair market value may be different from its value to investors. As can readily be seen, although there are similarities in the disciplines of business valuation and real estate appraisal, the areas of differences are quite pronounced.Mike Hanrahan is a certified business appraiser in Alaska and is a principal at Mikunda, Cottrell & Co. He can be reached via e-mail at ([email protected]).

Kodiak firm finds new use for World War II-era bunkers

KODIAK -- They were built during World War II to store fuel. Now the long-standing remains of nine concrete bunkers are home to a growing number of Kodiak businesses.Until recently, Kodiak residents paid little attention to the old naval bunkers at the base of Old Woman Mountain. Most were also unaware that the structures overlooking Women’s Bay belong to the industrial complex owned by the Lash Corp., a marine contracting company in Kodiak.Thanks to the imagination of Barry Still, owner of Lash, and the engineering ingenuity of Ure Bros. Construction, passers-by are doing double takes.Renovations on the first bunker began last September. Having relocated from the city of Kodiak to its current Bells Flats location, Lash intended to sell or lease out the parcels of approximately 1.4 acres each, complete with a huge concrete bunker. "We figured the bunkers would make premium storage facilities," said Dale Heath, Lash’s terminal manager.Then, after carefully studying the old structures, Still came up with the notion of renovating one of them into the company’s corporate office building. "Nobody ever paid attention to these old bunkers," said Heath. "But as soon as (Ure Bros.) began making noticeable progress, the phone started ringing off the hook. Everyone wanted to know what was going on."The idea of owning and reshaping a piece of Kodiak’s history is catching on among the island’s business community. In January, Ure Bros. began renovation of a second bunker belonging to Bob and Janet Johnson, owners of Tundra Plumbing and Heating. A local welding contractor is seeking a third parcel.Since the bunkers were built as storage depots for fuel, extensive environmental testing was required to ensure that the area was free of contaminants. "We learned that these buildings were probably never even used for their intended purpose," said Heath. "Even though they contained fuel pumping equipment, there was zero trace of any fuel residue."With testing out of the way, the renovation began. Changing out a cylinder of 12-inch thick concrete reinforced with iron rebar takes more than hard work; it also requires a lot of specialized equipment including a customized saw designed by an engineer at Lash. It also comes with a hefty price tag, which doesn’t seem to faze those companies who want to locate in what is becoming the islands’ trendiest business area.After completion, each bunker will have three levels with approximately 3,000 square feet total of interior space. The basic cylindrical shape of the structures remain, but the new owners are putting their own marks of individuality with floor plans and exterior trim.Still limited use of vinyl siding. "He wants to maintain something of the original look of the bunker," said Heath. A distinctive cupola caps the structure, filling the top floor with light.The bottom level will house their welding shop while a caretakers’ apartment will occupy the second floor. The top level will serve as the company’s office. When the new office opens at the end of May, customers will conduct business in a luxury suite surrounded by a century-old African red ironwood bar, a wraparound deck and a commanding view of Woman’s Bay. An onion dome created by Carl Hayes of Sunshine Plastics will adorn the roof."It’s a cool building," said Janet Johnson, surveying the work in progress. "You’ll never find another building that looks like this."Winn Mete is a free-lance reporter living in Kodiak.

Federal agency increases funding for community health centers

FAIRBANKS -- The federal government has increased the amount of money it spends on community health centers in Alaska for the second time in a year.The U.S. Health Resources and Services Administration has granted an extra $10 million to Alaska. The money could build new community health centers and help pay costs at existing centers.The new money is part of the federal government’s Frontier Health Plan, a program aimed at rural states. Sen. Ted Stevens, R-Alaska, said the extra $10 million came at his request. He also talked the agency into a $6.5 million increase last fall.Betty Duke, the agency’s administrator, announced the extra money at the Alaska Rural Health Conference in Anchorage earlier this month after two days of visiting health centers in Alaska, Stevens’ office said.The money "demonstrates this administration’s dedication to ensuring that all Alaskans, including those in the most remote areas of our state, have access to basic health services," Stevens said in a news release.In all, the federal agency will spend $23 million in Alaska this fiscal year. That level of spending is expected "to continue on an annual basis," the Stevens’ news release said.Groups must apply for a share of the additional $10 million by June 20.Community health centers provide primary health care at reduced rates for people with low incomes. The federal government’s Frontier Health Plan supports a dozen health centers and clinics around the state.Anchorage has two clinics, Fairbanks one. Six clinics serve communities in the Aleutian Islands. Sitka, Bethel and Talkeetna each have one.The agency funds such centers in areas where it finds a shortage of health-care professionals. With the new additions, its spending in Alaska will have doubled from a few years ago.

New surgical procedure among local advances

Alaska’s health care system now has a new heart-surgery technique and a higher-powered imaging system.At Alaska Regional Hospital in Anchorage, physician Pedro Valdes has started performing heart surgery called beating-heart surgery. This technique allows the heart to continue beating and blood to continue flowing naturally by using a mini pump, according to hospital officials.The method differs from traditional heart bypass surgery, which requires the surgeon to stop the heart for a short period to work on the blocked artery. A heart-lung machine takes over pumping and oxygenating blood. After the surgery, the heart’s beating is restarted.In the new procedure, the PARAFlow mini pump maintains blood pressure, blood supply and oxygenation when the surgeon lifts or manipulates the heart. The Alaska cardiovascular surgeon performed the first procedure in March and has handled three so far, according to hospital spokeswoman Kjerstin Lastufka.Lifestyles and disease create demand for cardiovascular services in Alaska, Valdes said. Cigarette smoking, obesity and poorly controlled diabetes can accelerate coronary artery disease, he said.Valdes learned the technique from other medical professionals and literature as well as visiting other cardiac surgery programs. The procedure is more technically challenging because of the movement of the heart, but since the heart continues beating, the surgeon does not have to rush to complete the procedure, he said.Advantages to the procedure may include shorter hospital stays, less need for blood transfusions and fewer complications, hospital officials said.Providence Alaska Medical Center, also in Anchorage, recently installed a new magnetic resonance imagery system, equipment used to scan the body and create images of internal functions. Hospital officials said this unit is the only one of its kind in Alaska.Work on the MRI installation began in mid-March and was completed earlier this spring, said Dave Pfeifer, director of the Providence Imaging Center. Patients began using the new system in mid-May, he said.The new Signa Infinity 1.5 T cost $2 million including installation, Pfeifer said."Not only is this MRI four times faster than older models, it can operate in two scanning modes at once," he said. "It has the ability to scan the whole body while also zooming in on specific areas."Such capabilities are important for stroke detection and cardiac studies, he said.The new MRI replaces a 4-year-old model that hospital officials traded in, Pfeifer said. Some companies refurbish older MRIs and sell them to smaller hospitals and or overseas.Providence has delayed installation of the first positron emission tomography, or PET, scanner in Alaska because of space constraints. PET scanners measure metabolic function, which allows detection of disease that would not be visualized with other imaging techniques, Providence officials said.The hospital received state approval last summer to purchase the PET scanner and remodel space for it. The project was to cost $3 million.However, expansion of the Providence Imaging Center may allow space for the PET scanner, said hospital spokeswoman Karina Jennings. That project would be complete in March 2003, and hospital officials aim to install and offer the PET scanner later that year, she said.

Fairbanks free clinic receives grant to expand

FAIRBANKS -- A free clinic here has received a $3.2 million federal grant to build a new $6.4 million facility.A new building would allow the Interior Neighborhood Health Clinic, now located in a former nursing home, to expand and offer mental health and dental care.The current facility is too cramped, said Cheryl Kilgore, executive director of the clinic, which has served the area since 1995.Last year, about 4,000 people received care at the clinic either free or at a low cost.The grant pays for half the cost of the new building. Kilgore said the clinic will rely on donations from businesses, foundations and the community to pay for the rest.The Denali Commission, a federal-state partnership created by Sen. Ted Stevens, R-Alaska, to fund community projects in Alaska, provided the grant for the new facility.

Hickel blames poverty on mismanagement of 'commons'

"Regardless of the beauty of the scenery, if an individual is cold, hungry or unemployed, he is in an ugly environment."-- From "Crisis in the Commons: The Alaska Solution" by former Alaska Gov. Walter J. Hickel, Institute for Contemporary Studies, Oakland, Calif., 2002, 290 pages, $21.95No stranger to national politics and well-known in Beltway circles, two-time former Alaska Gov. Walter Hickel recently penned a letter to President George W. Bush."I told him ’I support what you’re doing,’ " Hickel explained in a phone interview, " ’but next time, you should skip the war and go straight to the Marshall Plan.’ "Hickel’s point, that economic relief is essential to peace and prosperity, was apparently not lost on the president, who sought Hickel out at a White House reception shortly after receiving the letter to compliment him on its contents.That Hickel’s ideas should still be turning heads in Washington, even after years of being out of public life, is not surprising. The longtime Alaskan, who has been instrumental in Alaska’s evolution since before statehood, has devoted his life to making Alaska a better place for all -- not just the privileged few. In many ways, Hickel is synonymous with Alaska.With his recently released book, "Crisis in the Commons: The Alaska Solution," Hickel offers up a solution to human suffering not just for the country but for the entire world. His approach, gleaned from a lifetime of accrued practical knowledge, is as fresh as it is thoughtful. Above all else, though, it is warmly and deeply human."This is not a book against anything," Hickel said. "It’s just an idea because the world is owned in common. ... We have poverty because the commons is not managed to benefit all."Hickel’s concept of "the commons" refers to publicly owned land and resources. The crisis referred to in the book’s title is the way in which the commons is managed. In the book’s opening chapter, Hickel explains, "Our future depends on learning to use and develop this commons for the good of the total and not just for the few."It is an idea derived from a life lived in Alaska, where nearly 90 percent of the land is publicly owned and residents over the years have helped forge the nation’s only "owner state," as Hickel calls it."Using neither classic capitalism nor socialism, we have developed a new way to prosperity, based on common ownership and rooted in constitutional democracy," he writes. "Alaska today is a diamond, a brilliant star, a state with an outstanding quality of life, celebrating a glorious natural environment and a robust, healthy economy. We are now ready to share what we have learned with the world."Hickel puts forth, in a straightforward and common-sense manner, the idea that Alaskans have learned much from the "obligation of ownership." That obligation involves both being good stewards of commonly owned land and resources and electing leaders who will further the common good, rather than the good of their corporate sponsors.As governor of Alaska, first from 1966 to 1969, then again from 1990 to 1994, Hickel likened his role in protecting the commons for the good of all to being the foreman of a ranch."The governor here has got to be able to stand up to BP, or whomever, and say, ’This is the way we want it done,’" Hickel said. "You’ve got to be very careful."He took his knowledge to Washington in 1969, when he was called to serve by President Nixon, who gave Hickel charge of the entire nation’s commons as secretary of the interior.His experience as a world traveler also showed Hickel the negative impact of exploited resources."In Africa, I’ve seen tremendously rich countries with poor people. That’s the problem," he said.Now, Hickel’s simple thesis that there are, in the world’s commons, riches enough for all, is outlined with clarity, vitality and passion in an engaging, compelling and readable fashion."Crisis in the Commons: The Alaska Solution" is filled with hope and compassion. By sharing his remarkable vision for a better world, Hickel solidifies his stature as an Alaska treasure, offering up in the process a bounty of riches for the benefit of humanity.Stan Pitlo is the publisher of the Peninsula Clarion and director of Alaska newspapers for Morris Communications Corp.

Lawmakers put gas incentives on hold

After all the hue and cry this spring, Alaska lawmakers did nothing to help spur North Slope producers to commit to a natural gas pipeline during their 2002 regular session.As lawmakers completed their work on the session, bills that would provide incentives if the producers committed to a gas project, as well as to provide tax-free financing through Alaska Railroad Corp. bonds, remained in committee and died.House Bill 519, proposed by Rep. Pete Kott, R-Eagle River, was the most advanced of the incentive bills but became controversial because Kott proposed a grant of a property tax exemption during construction and the first two years of operation.After initial opposition, Gov. Tony Knowles agreed to support relief from property taxes as part of a broader negotiation of special fiscal terms for a gas project. Knowles also wanted the deal to be a deferral rather than a grant, so the tax would be repaid in the future.Kott agreed to make the exemption contingent on a pipeline developer applying to the state for a negotiated package of incentives, but held firm against the governor’s demand that the money be paid back.The two agreed that the incentive would only be available for a certain period, hoping to use it to stimulate the producers into making a decision to go forward with the project.In the end, however, there was no agreement and there were not enough votes for the bill to pass the House. It died in the House Rules Committee, which Kott chaired.Although the negotiation failed, Knowles felt it was a useful exercise because it set the starting point for a future incentive package, according to Bob King, spokesman for the governor.The principles for future negotiation involve a payback of deferred taxes, some form of in-lieu taxes paid to muncipalities to offset construction impacts, and Alaska-hire guarantees, he said.Also, the administration’s perception is that the producers may prefer to wait on state incentives until a gas tax-credit mechanism in the pending federal energy bill is approved later this year, King said.The other legislation dealing with gas project incentives, Senate Bill 360, would have set up a framework for negotiation of fiscal terms, but with no specific reference to the property tax. The bill remained in the Senate Finance Committee in the final days of the session.SB360 also had language related to access to the pipeline for new natural gas discoveries on the North Slope. Foothills Pipe Lines Ltd. of Calgary, Alberta had been working to get language in both HB519 and SB360 that was similar to provisions in the pending federal energy bill related to access to a North Slope gas pipeline. Foothills is the lead company in a consortium of pipeline companies working on a gas project separately from North Slope producing companies.The state Department of Revenue estimated that granting the exemption from property taxes for the years the pipeline would be under construction plus the first two years of operation, as originally proposed in HB519, would cost the state and municipal governments $750 million or more.If the exemption were limited to just the years of construction, which Knowles proposed, the cost to state and local treasuries would be reduced to about $450 million, and that would be paid back in the future.State and local property taxes have been determined by independent consultants to be one of the biggest economic burdens facing a large gas project.Pedro van Meurs, a Calgary-based energy consultant and an expert on fiscal systems who was retained by the state of Alaska, identified the property tax during construction, when a project is earning no revenues, as a major "front-end" burden on the project.Van Meurs suggested negotiating a revised fiscal system that would defer some taxes until later during production, to improve the marginal economics of a gas project. His recommendations were the basis for the Legislature’s adoption of the Stranded Gas Act in 1998.That law, designed for a liquefied natural gas project, expired last year, but another section of HB519 would have reenacted the statute and made it applicable to a conventional gas pipeline as well as LNG.Producer companies have been largely in the background in the controversy over HB519. Phillips Alaska Inc. and BP Exploration (Alaska) Inc. have said the property tax exemption would be "very helpful" to the project and gave their support to the legislation.But ExxonMobil Production Co., the third company in a gas project partnership that recently completed a $125 million study of a gas pipeline, said it does not support any form of government subsidies or support for the project.The main concern of the producer companies, they have maintained, is to gain clarity in state royalty and gas accounting procedures so that disputes later are avoided, and for the state to keep taxes stable on the project over the 30 years-plus it would operate.Clarity in accounting can be secured in agreements with state agencies, but tax stability would require approval of a special fiscal contract by the Legislature.The major support for the legislation has come from VECO Corp., an Alaska-based oil and gas services company. Bill Allen, VECO’s chief executive, was active in lobbying for the bill in the closing days of the 2002 session.

Entrepreneurs open Anchorage naturopathic practice

Two Alaskans who have opened a new health care facility have aspirations similar to other entrepreneurs. They relish creating and running their own business, Avante Medical Center LLC, at 915 W. Northern Lights Blvd.Jason Harmon, a naturopathic doctor, and Bethany Buchanan, a family nurse practitioner, opened their business in Anchorage last month and aim to eventually add another medical professional."Jason and I have done this for ourselves," said Buchanan, adding that they also aimed to develop a special facility for patients. Buchanan and Harmon also hope to offer employee benefits like medical insurance, profit sharing and raises within six months, Buchanan said."We both really want the employees to be happy because we know that’s the key to success," she said. "I am thoroughly enjoying being an employer."The company has four full-time employees: a registered nurse, a medical assistant, a receptionist-director and an office manager. The center will hire a contractor for massage therapy, Buchanan said. In another year or two, Avante Medical Center could add another naturopathic doctor or nurse practitioner, she said.Avante provides primary care with traditional and alternative treatments. Services and departments include family practice, women’s health services, massage therapy, allergy treatments, intravenous therapy and a supplement store.Buchanan earned a bachelor’s degree in nursing from the University of Colorado in 1991 and a master’s degree from the University of Alaska Anchorage in 1997 as a family nurse practitioner. She has worked nine years in Alaska, most recently at the Alaska Alternative Medicine Clinic LLC. Much of her work treats women experiencing menopause.Harmon also studied at the University of Colorado and graduated as a naturopathic doctor from Bastyr University in Kenmore, Wash. With family living in Alaska, he returned to the state in 1999 and worked for the Natural Health Center LLC in Anchorage. Harmon handles family practice services specializing in cancer patient treatment.While working at separate companies they referred patients to each other and recognized a shared enthusiasm for their field. They decided to open a business together and in September they began daily efforts to that end. Buchanan and Harmon, who act as medical directors for the center, are equal partners in the venture, she said.A bank loan financed most of the venture but a third came from private investors, Buchanan said."We really were lucky because people believed in us," she said.In January, Buchanan and Harmon found a 5,000-square-foot office in Midtown Anchorage and began designing and renovating it.Buchanan believes demand is growing for alternative medical services. A clinic where she previously worked treated 2,000 to 3,000 patients a year, Buchanan said. The demand for services should continue to increase as consumers become more aware, she said."We get good results and good feedback," Buchanan said.


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