Village announces suit against Red Dog Mine

Enoch Adams says he and many of Kivalina’s 380 or so residents have quit drinking from the Wulik River, fearing the operations at the nearby Red Dog lead and zinc mine have contaminated the water.In this village 90 miles north of Kotzebue and 465 miles west of Fairbanks, the river is key to the subsistence-based economy, said Adams."It tastes like soap," Adams said of the water from the Wulik, which is fed in part by a small creek that runs near the mine site. "Our fish are not as plentiful as they used to be."He is part of group that is threatening suit against Teck Cominco Alaska, operator of the mine, and employer of some village residents.Adams, a member of the Kivalina Relocation Planning Committee, has sought the help of the Center for Race, Poverty and the Environment, a nonprofit San Francisco-based legal action group that files suits on behalf of minority and disadvantaged people.The watchdog California group says that Cominco’s violations of federal water quality regulations have endangered the health of people in Kivalina, and are suing on behalf of village residents, according to a press release.Luke Cole, director of the Center for Race, Poverty and the Environment, said more than 3,200 violations of water quality regulations have been found over a 15-month investigation. The violations were reported by the mining company to the government."That’s what makes this such a fun and easy case, because they’ve already sworn to them," Cole said.Cole said the mining company faces at least $88 million in fines stemming from the violations.A lawsuit will be filed against the mining company by mid-September, Cole said.Charlotte McKay, spokesperson for Teck Cominco, said the company meets almost monthly with Kivalina residents and has never heard of the village group.Adams said the group was formed in 1997 and is made up of seven village residents, including former and current mine workers."They know we exist," Adams said.There have been violations of permit levels at the mine, and these have been reported by the company to the U.S. Environmental Protection Agency and the state Department of Environmental Conservation, McKay said."Substantially, all the discharges described in the notice (to sue) are the subject of compliance orders by consent negotiated between Teck Cominco Alaska and the relevant environmental agencies," McKay said.The discharges cited were reported by the company in monthly reports to regulatory agencies. Copies are sent to local communities, including Kivalina village, she said. Teck Cominco funds studies by the state Department of Fish and Game to monitor levels of metals in fish in the Wulik River and its drainage.In an October, 2001 report, the state Department of Health and Social Services said, "concentrations of heavy metals detected in water, soil, caribou, fish and berry samples collected from the Red Dog Mine do not pose a public health hazard to the residents of Kivalina and Noatak." Adams, who teaches social studies at the village high school, said fish kills have been witnessed and caribou and beluga migrations have changed in recent years.McKay said that samples of drinking water taken from the community of Kivalina since the opening of the mine in the late 1980s have consistently shown that water quality meets the state water quality standards.Marie Greene, president of NANA Regional Corp, the landowner at the Red Dog Mine, said the company keeps NANA informed regularly on environmental performance."From the mine’s beginning there has been oversight by both NANA and local Kivalina and Noatak leaders to ensure our subsistence resources are protected," Greene said.

Time-tested basics needed today

Seldom have there been times in history when a reevaluation in investment philosophy was so needed. With a stubbornly slow economic recovery and the integrity of accounting practices at industry-leading corporations in question, a return to the basics of investing may be critical to weathering the economic doldrums of the immediate future.Gone are the days of impulsive, blindly optimistic investing, envisaging hopes of riches propelled by unfounded dot-com dreams. Today, an approach to investing which requires devotion to fundamental, time-tested investment principles that have ridden out countless bear markets is needed more than ever. Boring as this strategy may sound, it works.Generally, diversification and asset allocation are considered the most important contributor to achieving portfolio management success.In its purest form, a portfolio is diversified if assets have been allocated across a wide range of categories carrying differing forms of risk. By diversifying assets and income destined for investment into several different market baskets, an investor significantly reduces the chance that any one item in their basket of assets will disproportionately unbalance their returns. Variations in asset categories include: cash, stocks, bonds, real estate and hedge funds.In recent years, many investors willingly tolerated putting all their eggs in a small number of high-flying baskets expecting quick gains, but instead experienced damaged portfolios. To prevent similar experiences, we must today force ourselves to add investments considered by many in the recent past to be dull.With the Dow Jones Industrial Average having lost more than a fifth of its value and the Nasdaq Composite Index having lost 73 percent of its value since both indices’ respective peaks in 2000, investors can scarcely afford to stomach more uncertainty without disciplining themselves through proper asset allocation.By combining assets and investments whose long-term historical performances do not correlate to one another, the properly diversified portfolio attempts to capture as much future risk-weighted performance growth as possible while simultaneously helping to shield investors from future market uncertainties. This is the foundation for the Noble Prize winning Harry Markowitz’s Modern Portfolio Theory.In an age when trust in the financial arena has wavered significantly and variables outside of the market’s control have made their impact felt, investors today may want to build their portfolios using fee-based professionally managed accounts.Such accounts are managed professionally by the same third-party money managers who often manage billions of dollars of our nation’s largest institutional investors. And unlike mutual funds, such funds are managed without commingling your money with others, allowing you to establish your own securities’ cost basis and organize your own customized tax planning.Your financial advisor’s relationship with you, too, becomes more objective when you move from a commission-based to a fee-based asset management platform. In today’s murky investment climate, a more objective approach will undoubtedly best serve the interests of not only the investor but also the financial advisor and markets.The premium placed on objectivity and trust has never been higher. An objectively inclined financial advisor can help you integrate your personal risk tolerance levels within your portfolio, implement proper asset allocation techniques, suggest combinations of professional money managers and provide portfolio rebalancing advice as necessary.Allan Johnston is regional manager for Wedbush Morgan Securities in Anchorage. He can be reached via e-mail at [email protected]

This Week in Alaska Business History

Editor’s note: "This Week in Alaska Business History" revisits events that shaped our past. 20 years ago this weekAnchorage TimesJuly 28, 1982Power authority to go ahead with intertieBy Ralph Nichols Times WriterThe Alaska Power Authority board of directors voted unanimously to proceed with the $130.8 million electrical transmission intertie between Anchorage and Fairbanks immediately despite the fact it has only $78.5 million available to begin the project.The action came after Sen. Mike Colletta, R-Anchorage, told the board it was the intent of the Legislature that work begin on the full project now.The APA will ask the 1983 Legislature for the additional $52.3 million needed to complete construction of the intertie.The APA had endorsed the concept of the proposed intertie and its configuration last fall, believing it would slash utility bills for railbelt consumers.The intertie will actually be a 175-mile-long electrical cable line between Healy and Willow.Power lines already carry electricity from Fairbanks to Healy, and likewise from Anchorage to Willow. This would complete the loop between the state’s two largest cities.Anchorage TimesJuly 29, 1982Native firm to expand coal searchBy Jeff BerlinerTimes WriterThe biggest coal exploration effort ever undertaken in Alaska is being planned by Cook Inlet Region Inc.With 8,000 acres of its land now under scrutiny for coal potential, the Anchorage-area Alaska Native corporation plans to expand the search for coal to 290,000 acres.Several companies are already studying the coal potential of the Beluga coal fields across Cook Inlet from Anchorage. But their exploratory efforts combined cover about 46,000 acres.George Kriste, CIRI executive vice president, said, OWe have talked to a number of companies and by the first quarter of next year, weOd like to see some exploration proceeding."This new thrust to find rich coal seams close to a potential port site is an even bigger effort than the multimillion-dollar effort which has been under way for several years in the Beluga field. Kriste said it is vital to find the best area to mine before trying to seriously interest a market in Alaska’s Beluga coal.10 years ago this weekAlaska Journal of CommerceAugust 3, 1992Firm considers Port MacKenzie for iron plantBy Margaret Bauman Alaska Journal of CommerceOfficials with Midrex Corp., a North Carolina engineering and technology firm, say they are considering a site near proposed Port MacKenzie for a multimillion-dollar direct-reduced iron plant.What attracted Midrex to Upper Cook Inlet was the potential source of natural gas at an attractive price and the potential development of Port MacKenzie, said Don Lyles, manager of project development and licensing for Midrex.If the site were chosen, the firm would need a long-term lease on about 100 acres, he said.OThey think there is a real opportunity here,O said Steve Minor, marketing director for the proposed port. OThe key to developing, one of these plants is land. They need land and a port with Panamax (size vessel) capacity,O he said.OThe real key is natural gas,O Minor said. OThey go through 40 million to 50 million cubic feet per day. They also consume 10-20 megawatts of electric power a day. Given that, Port MacKenzie is ideal.OAlaska Journal of CommerceAugust 3, 1992Mat-Su officials want north railbelt coalitionBy Margaret BaumanAlaska Journal of CommerceMatanuska-Susitna Borough officials are proposing a North Railbelt Coalition to undertake transportation projects needed to make area natural resources competitive on the world market.OIf the borough is ever going to progress and provide proper services for its people, it has to develop something,O said Matanuska-Susitna Borough Mayor Ernest W. Brannon, who has meetings planned with officials of the Denali and Fairbanks North Star boroughs.OWe are not providing adequate services now and the schools will take a hit in a year or two because we are getting more population and the welfare population is increasing,O Brannon said.The Mat-Su borough, with about 41,000 residents, currently has 17 percent unemployment and 33 percent of the population is on welfare, the mayor said.If officials from the Denali and Fairbanks North Star boroughs agree, OWe could have it done by yearOs end,O he said. OFairbanks is fairly pro-development and the Denali Borough has Usibelli Coal Mine and Mat-Su have quite a bit of coal. I canOt see any reason why they would not want to.O - Compiled by Ed Bennett.

Economy drives cement orders

The second of four scheduled cement ships from South Korea arrived in Anchorage July 11.With the whir of construction activities in the state, Wes Vander Martin has his fingers crossed, hoping four ships are enough this year.Vander Martin, operations manager for Alaska Basic Industries Inc., is part of a team that tries to forecast construction levels in the state, and order cement accordingly.Alaska Basic Industries and its sister company Anchorage Sand & Gravel Inc. are part of the North Dakota-based MDU Resources Group, which has similar companies in Hawaii and the Lower 48.Alaska Basic Industries is the sole cement supplier for much of Alaska, so monitoring the economy and accurately predicting how much cement is needed in the state is important. Too much cement and the company is stuck with storage fees. Too little, and construction projects come to a halt."In either case it’s bad for us," Vander Martin said. "We’ve been on both sides of the fence."Most times, however, the company’s predications are spot on.Last year, a spate of huge construction projects warranted five cement ships. Each 550-foot-long ship contains more than 26,000 tons of cement. The cement is off-loaded by huge vacuums and conveyors to silos near the Port of Anchorage, and then shipped by truck, rail or barge to companies and construction sites around the state.Each cement ship takes 10 or 11 days to empty, with workers off-loading it around the clock, Vander Martin said.Although the terms cement and concrete often are used interchangeably, cement is actually an ingredient of concrete. Concrete is basically a mixture of sand and gravel or crushed stone; the paste is water and cement, which is made by heating raw materials containing alumina and calcium and pulverized into a fine powder.Cement comprises from 10 to 15 percent of the concrete mix, by volume. Through a process called hydration, the cement and water harden and bind the aggregates into a rocklike mass.Years ago, cement was produced in Alaska. But in recent years, the state’s cement has come from China, South Korea, Puerto Rico, or Thailand, depending on market price and availability, Vander Martin said.Last year, the cement that came from Thailand drew some complaints from contractors because it set up too fast, Vander Martin said.Tom Frohlich, business manager for the Plasterers & Cement Masons Local 867 in Anchorage, said his union has some 130 members who work with concrete. Frohlich said another 20 to 30 percent of cement masons statewide are nonunion.Concrete work has been on the rise for years, and has been reflected in the union’s membership, which has increased about 15 percent in the last five years."Alaska is still a boom-and-bust state, but we’re growing at a nice pace," Frohlich said.Cement technology has improved over the years, allowing concrete to be poured year round, he said.New hotels, homes, commercial buildings, roads, bridges and military projects have called for increased cement, Frohlich said.Two years ago, according to Vander Martin, an entire cement ship was needed for runway and housing work at Eielson Air Force Base outside Fairbanks. Last year, a record 50,000 square feet of concrete was poured in one day at the new Lowe’s Home Improvement Warehouse in South Anchorage. The previous Alaska record had been about 30,000 square feet of poured concrete in one day for the federal building in downtown Anchorage. Gene Moe has had a hand in both of those projects, as well as countless others throughout the state during his 56 years as a cement mason.Moe, former owner of M&M Concrete Inc., said he has helped pour concrete for at least 70 percent of the buildings in downtown Anchorage, and has worked on everything from village basketball courts to the Sullivan Arena. He’s poured concrete for 13 hockey rinks in the state and at many of the buildings on the North Slope."Cement is an interesting thing, you know," said Moe. "Without it you couldn’t build Alaska."Moe has traveled around the world, and has poured concrete in several foreign countries."I enjoy looking at their flowers and their concrete," Moe said.In concrete technology, Moe said Alaska is at least 15 years ahead of Scandinavian countries that share similar climates. And Alaska masons are as good as they get, he said.Moe turned over the company to his son and daughter two years ago, but still works nearly every day pouring concrete to "keep in shape."Now 72, Moe credits the years of hard work in helping save his life two years ago when he was attacked by a bear on Kodiak Island on a hunting trip.Moe, severely mauled by the bruin, killed it with a hunting knife. "My life was saved by the grace of God and concrete."

Federal security teams evaluate 10 airports

Teams of federal contractors are visiting 10 Alaska airports to determine if passenger security checkpoints need to be overhauled and where explosive-detection machines are to be installed. Greg Warren, spokesman for the Transportation Security Administration in Washington, D.C., said the 10 Alaska airports are just a fraction of the nearly 500 airports nationwide undergoing security scrutiny.Alaska airports slated for inspection are Adak Naval Air Station, Ted Stevens Anchorage International Airport, Cold Bay Airport, Unalaska-Dutch Harbor Airport, Fairbanks International Airport, Juneau International Airport, Ketchikan International Airport, Petersburg Airport, Deadhorse Airport and Wrangell Airport.The Transportation Security Administration faces a Nov. 19 deadline for replacing private screeners with an all-federal work force, and a Dec. 31 deadline for inspecting all checked bags for explosives.Teams of three to five peoplewill visit each airport to draft plans for new passenger security screening and baggage screening checkpoints, if needed, and for installing the new explosive-detecting equipment.The teams, made up of contractors from the Boeing Co. and Lockheed Martin Corp., which also will train new security screeners, will be at each airport five weeks or longer, Warren said.The Transportation Security Administration will determine what level of explosive detection equipment will be needed at each airport. Airports could get equipment able to detect explosives in large volumes of baggage, or machines that can detect traces of explosive materials inside luggage, or both, Warren said.Inspection teams already have been established in Anchorage.In addition to explosive-detection machines, the Anchorage airport received a grant for two bomb-sniffing dogs, which are now on patrol.Dasty and Rick, two male German Shepherds, were paid for by an $80,000 grant from the Federal Aviation Administration.

Commission tackles rural issues

The development of rural Alaska is one of the most significant economic challenges facing Alaska today. Many of our fellow Alaskans live in conditions that are truly Third World. The challenge in rural Alaska is not just to build needed infrastructure but also to build economic self-sufficiency. Building rural Alaska is a task of great importance to all Alaskans, rural and urban alike.The Denali Commission, a consortium of state and federal agencies, has led the way in recent years in providing innovative solutions in the area of rural development. The commission was primarily established through the leadership of Alaska Republican Sen. Ted Stevens in response to a comprehensive federal-state research commission on the status of Alaska Natives. That commission painted a bleak picture of life in our rural villages. It reported that widespread social problems were largely the result of limited economic opportunities.The Denali Commission was established in spring 1999 and quickly set out to make life better for rural Alaskans. It set high expectations for itself in adopting the following vision statement: "Alaska will have a healthy, well-trained labor force working in a diversified and sustainable economy that is supported by a fully developed and well-maintained infrastructure."The commission has received generous federal appropriations that provide funding for rural infrastructure projects and economic development pilot projects.The commission chose "energy infrastructure" as its first theme and launched into a comprehensive program to upgrade rural bulk fuel storage faculties. It later added the theme of "health care infrastructure."Probably the greatest contribution of the Denali Commission is that it has established a new model for how government can work very quickly and powerfully in addressing a series of complex and difficult problems.The commission came onto the scene at a time when much of the public had come to a point of despair regarding the ability of government to effectively address those problems. The commission has consciously set out to do things in a different way. Effective ways in which the commission has created this "different way," include the following: vision, narrow focus, staff morale and responsiveness, and contract execution.VisionThe commission fulfills its mandate primarily by administering discrete grants. However, the commissioners have created a sense that each grant agreement is helping to change Alaska history. This ability to link each little puzzle piece to the big picture is called "vision." Vision is something that is greatly needed in Alaska today and the commission is supplying it.Narrow focusThe commission has been very wise to focus initially on a few narrow areas such as bulk fuel storage. This has allowed the commission to have clear, visible impact. If the commission had attempted to address too many different areas, it would not have been as effective. Now that the commission has clearly established its credibility, I believe that it can broaden its scope specifically into policy areas that have an impact on village economic vitality.Staff morale and responsivenessStaff members of the commission display enthusiasm and a passion for the work that they do. After a decade in which Alaskans have shown a decreasing amount of respect for government and for their civil servants, it is very important to have a government institution such as the Denali Commission where people can be truly excited about their jobs. This gives hope, inspiration and direction to other government institutions.Contract executionMost people assume that executing grant agreements with a government agency will take months and months. The commission has developed a streamlined process in which grant agreements are executed and funds are transferred in a matter of weeks from the time that the commission approves projects.The commission has not sacrificed fiscal responsibility as a result of this streamlined process. This process has shown that government can be practical, responsive and sensitive to its grantees and partners.More than anything else, the Denali Commission has given us hope. It has given up hope that our complex rural economic problems can be successfully addressed; hope that government can come up with innovative and exciting new ways to operate; and hope that we are moving forward rather than backward during a time of economic challenge.The members of the Denali Commission are: Jeff Staser, the federal co-chairman and the full-time chief executive; Lt. Gov. Fran Ulmer, the state co-chairwoman; Julie Kitka, president of the Alaska Federation of Natives; Mark Hamilton, president of the University of Alaska; Kevin Ritchie, executive director of the Alaska Municipal League; Mano Frey, executive president of the Alaska AFL-CIO; and Richard Cattanach, executive director of the Associated General Contractors.David Hoffman is the president and chief executive of Anchorage-based Alaska Growth Capital. He can be reached at 907-349-4904 or via e-mail at [email protected]

Funding agencies dismayed by shutdown of power plant

The Alaska Industrial Development and Export Authority, owner of the idled $292 million new-technology coal power plant at Healy, says it is looking at "all options" for getting the plant restarted, according to Bob Poe, the agency’s executive director.An impasse between AIDEA and Golden Valley Electric Association of Fairbanks, the former operator of the plant, is continuing, Poe said.There have been no talks or negotiations between the state authority and Golden Valley on an agreement to restart the plant.AIDEA, which is paying about $9 million a year to maintain the plant and to make the payments on bonds issued to finance the plant, is now considering bringing in another company to operate the facility."One way or another, the power would be used by consumers in Interior Alaska," Poe said.Meanwhile, both the U.S. Department of Energy and the senior manager for aerospace and defense contractor TRW, who developed the new coal-burning systems used in the plant, expressed dismay that the 50 megawatt plant isn’t operating. The energy department invested $117.5 million in the plant to test new clean-coal environmental systems.Jack Hardgrove, the now-retired TRW manager, said its systems haven’t been given a fair trial, and that operating experience would demonstrate lower costs and an even better environmental performance than was shown in tests of the plant.Hardgrove described the Healy plant as "a national asset" that should be operating to demonstrate the new environmental systems. Those could be used to retrofit large, polluting coal plants in the Midwest, he said.The plant cost $292.3 million to build, including $117.5 million in Department of Energy coal research funds and a $25 million cash appropriation from the state of Alaska, with the balance funded by revenue bonds issued by AIDEA. The plant began operation in 1997 and after a start-up phase performed a year-long series of tests of the technology for the Department of Energy.Golden Valley and AIDEA performed a 90-day commercial operating test, which ended in December 1999. The plant was shut down shortly thereafter when Golden Valley and AIDEA agreed to seek funds for retrofits.The issue now is what those retrofits would consist of. Golden Valley wants to gut the new equipment and replace it with more traditional coal-burning systems. AIDEA wants a more limited retrofit of those parts of the plant which consultants said experienced problems.Golden Valley says the new coal-burning and emissions-control systems in the plant don’t work. AIDEA disagrees."Every consultant we’ve hired to look at this says the technology does work and that the plant needs more time operating to work out the bugs," said Poe. A limited retrofit to solve problems that have been identified would cost far less, he said.Hardgrove said the controversy involves the coal-handling system and not the new coal-burning and environmental systems developed by TRW and engineering firm Babcock & Wilcox Co.For its part, the Energy Department is satisfied with the project. "From the technology point of view, it exceeded my expectations," said Robert Kornosky, manager of the project for the agency’s National Energy Technology Laboratory.The new technology systems include a clean coal combustion system; a slagging combustor developed by TRW that limits formation of nitrous oxides; and a spray dryer absorption system developed by Babcock & Wilcoxthat removes sulfur dioxide and particulates.TRW had performed small-scale tests of its new coal-burning system at combustion rates of 40 million British thermal units per hour. To successfully scale this up nine or 10 times to a utility-scale test at 350 million Btu per hour at the Healy plant "was a tremendous success," Kornosky said.Tests conducted during an extended demonstration of the plant showed nitrous oxide and sulfur dioxide emissions at about two-thirds to half of the levels allowed under the air permits for the plant. Carbon monoxide emissions were also very low, Kornosky said.Hardgrove thinks that with improvements to the plant’s systems, the environmental performance could be increased substantially. He also thinks the technology may show a reduction in heavy metals in coal emissions, which could also be tested by the Energy Department if the plant were operating.Kornosky believes the slagging combustor and a spray-drier absorber developed by Babcock & Wilcox holds promise for many older coal plants in the Midwest.These now blend high-sulfur coal mined locally with low-sulfur coal shipped in from western states to meet air quality goals, he said.Some plants might be able to retrofit with the systems demonstrated by Healy to meet air quality goals and eliminate the import of low-sulphur coal from the West, Kornosky said.The plant demonstrated something for western coal plant operators, too. It showed that less-costly limestone can be substituted for injections of more costly lime to reduce sulfur dioxide emissions in spray-drier absorbers used in many western U.S. power plants.Another objective of the project was to demonstrate use of low-quality waste coals that now can’t be used by power plants, according to Tom Sarkus, director of the Energy Department’s Coal Power Product Division."We have a lot of coal in the U.S. and we should use as much of the resource as we can. If we can produce less waste, it makes a lot of sense," Sarkus said.He believes the disagreement between Golden Valley and the state over operating the plant has inhibited commercial sales of the new systems. "It would be a big help to have an operating plant as an ongoing demonstration," he said.Golden Valley, however, doesn’t want anything to do with the plant unless the new systems are entirely stripped. "This is a one-of-a-kind plant. There’s no other like it," said Steve Haagenson, president of the utility.A major concern of Golden Valley is dealing with operating problems that will crop up in new-technology equipment that isn’t used anywhere else, Haagenson said.Hardgrove argues that systems in the plant aren’t new. Slagging combustor technology has been around for years, he said. He believes Golden Valley’s management doesn’t understand that the systems are based on very reliable, proven technology.Poe said he’s somewhat sympathetic to this but says Golden Valley knew the plant was experimental when it signed the power purchase and operating agreements. "They knew what they were getting into," Poe said.TRW has also committed to support its technology, he said.Poe said its doesn’t make sense to spend another $125 million on top of $297 million already invested to replace the new coal combustion and emissions-control systems developed by TRW and Babcock & Wilcox.Alaska Republican Sen. Frank Murkowski inserted a provision in the Senate’s version of the energy bill passed this spring that would authorize a $125 million low-interest loan from the Energy Department to the state to make the conversion, including limited repairs.Poe said even a low-cost federal loan would have to be paid back, and the higher cost would make power from the plant extremely expensive.He said the repairs recommended by Harris Engineering, a consultant, would involve rebuilding parts of the coal-feed system that did experience problems.A firm that represented Golden Valley, Duke Engineering, essentially agreed with that assessment, Poe said.

Fund takes hit from WorldCom woes

The Alaska Permanent Fund Board of Trustees, stung by its second yearly loss in a row, including a $55 million loss from its investments in WorldCom, is planning to hire more lawyers so it can take the lead on future shareholder lawsuits.The trustees met in Nome during the first week of July. According to the Allen Moore, the fund’s chief investment officer, preliminary figures show the state’s saving account shrank by 2.2 percent during the fiscal year which ended June 30. That comes on top of a 3.3 percent loss the previous year.The fund recently slipped below $24 billion in value.The main reason for the losses has been the declining stock market. The fund invests just over half of its assets in stocks.Moore said that last year the fund lost 15.4 percent on U.S. stocks and 8.6 percent on international stocks.But the fund did well on its other investments, which helped keep the overall loss to a minimum. Moore said bonds rose 8 percent, non-U.S. bonds rose 10 percent and its real estate holdings jumped 10.2 percent."What helps us is not having all our eggs in one basket," Moore said. "We own a lot of bonds and real estate, which helped cushion things a lot."One result of the fund’s decline will be fewer dollars for the permanent fund dividend program. Last year, the trustees allocated $1.1 billion for dividends; this year, the amount will be $925 million, a decline of 17 percent. Moore said that doesn’t necessarily translate to a 17 percent decline in the actual dividend check amount, which is affected by other factors such as the number of applicants.Last year’s dividend of $1,850 was 5.8 percent smaller than the previous year’s dividend. A 17 percent reduction this year would result in a dividend of $1,535 if all other factors remained equal. Moore said he expected the dividend to be "in the fifteen-hundreds."Alaskans will thus feel the decline in the stock market in their own pockets. It’s a market that has been falling not so much for economic reasons but in response to a series corporate scandals, the most recent involving telecommunications giant WorldCom.Moore said that two of the permanent fund’s 11 money management firms has invested in WorldCom. "One got out in February, but the other got out in early May," Moore said. In addition, the fund owned three sets of WorldCom bonds.Those investments are now nearly worthless. Moore said the fund lost $13 million in WorldCom bonds and $42 million in the company’s stocks, for a total loss this year of $55 million.That’s nothing to sneeze at, and at their July meeting the trustees put in place a process that may eventually allow them to get some of that money back. They authorized hiring lawyers to monitor class-action shareholder lawsuits and, if appropriate, become "lead plaintiffs" in suits.Moore explained that the permanent fund has indirectly been involved in shareholder lawsuits simply by owning shares in a company. By becoming a lead plaintiff, however, the fund would be one of the primary parties in a lawsuit, meaning it would sit at the table when settlements are negotiated."While we can’t say for sure that we will ever become a lead plaintiff, we’ve taken steps to allow us to do so," Moore said.Moore said that the trustees have been concerned about the issue of "corporate governance," the responsible behavior by company boards and executives, for some time. He said the trustees held a workshop on the subject in May 2001 and have taken several steps since then to become more involved in how companies are managed.For one thing, the trustees have adopted a new policy about proxy voting, in which shareholders vote on various issues during company annual meetings. "What we’ve always done has been to give instructions to our money managers to vote our shares in our best financial interest," Moore said."We left it up to them. Now, we’re going to become more active in these issues. On certain issues, we will instruct them to vote a certain way."Secondly, the permanent fund has joined the Council on Institutional Investors, a shareholders’ rights organization made up of big institutional investors, which tracks companies and specializes in submitting proposals for proxy votes."They present the idea that the shareholders are truly the owners, and the board works for them, not the CEO," Moore said. "You’d be surprised how many CEOs think it’s obnoxious." Moore said the council is also an excellent source of information.Moore said the rash of corporate failures shows the trustees have been on the right track. "Enron came along, and then Tyco and all this other stuff. It has validated the board’s attention to corporate governance."

Chinese seafood buyers get first-hand look at Alaska fish industry

KODIAK -- Encouraging news for Alaska seafood is the prospect of new markets in China and Hong Kong. Recently a delegation of 11 seafood buyers from that region toured the state to get a first-hand look at seafood processing operations and hook up with potential suppliers.The trip was organized by the Alaska Seafood Marketing Institute and funded by a federal grant.The trip actually began in Seattle, a main hub of Alaska’s commercial fishing industry. Autumn Curry, ASMI’s Asian Marketing Specialist, said that’s where they began making business contacts. "We had sales meetings all day and everyone got a chance to do one-on-one negotiations. Then we moved on to Petersburg and that’s where they really saw the ground level where it all starts."While in Petersburg the group toured three plants and got a glimpse of halibut, salmon, shrimp and dungeness crab being processed. Then they moved on to Kodiak for more plant tours and a visit to Kodiak’s two fisheries research facilities.Yiliang Sun, a seafood buyer for a large Chinese company, said she’s hoping to stay in touch with her new Alaska contacts and do more business with them. As for which species she’s targeting, "First is Pacific cod, then yellowfin sole, salmon, also goeyducks and sea urchins," said Sun. Live urchins and goeyducks are of particular interest, but, she said, "of course price is a big factor."Asian consumers are leaning toward crab, according to Eddie Chu, a buyer from Hong Kong who said dungeness crab has already been introduced to Chinese and Hong Kong markets. "The next items to be promoted in China and Hong Kong would be king crabs since they are new and will be in demand there ultimately."After leaving Kodiak, the 11 seafood buyers traveled to Anchorage before heading home. During their weeklong visit they were treated to many receptions, all of which featured a variety of Alaska seafood.A call for processing workersDemand is high now for seafood plant workers, according to Laurie Fuglevog of the Alaska Department of Labor’s Seafood Employment Division in Juneau. She said the department’s Anchorage office is actually the main hub, and seafood work orientations are given twice a day there at this time of year.In recent weeks about 300 people have been sent to Bristol Bay and job orders are out for some 450 workers statewide. And despite about 9 plant closures this year, worker demand is steady, Fuglevog said.Cook Inlet Processing, a large Kodiak plant, closed this spring after being bought out by Ocean Beauty Seafoods. Maureen Butler of the Kodiak Job Center said that left a big hole along with other plant closures. "That affected nearly 200 workers in Kodiak and, remotely, Cook Inlet Processing in Uganik Bay did not open this year and Kodiak Salmon Processors in Larsen Bay is not processing this year."Last year Butler made contact with Bristol Bay plants through the Labor Department’s Traveling Seafood Workforce Program and said that allowed her to help the displaced workers. "For herring season we sent out over 90 workers from Kodiak to Naknek, and now for salmon they’re wanting some experienced workers."Butler was raised in a Kodiak fishing family and says she’s not surprised that despite talk of "gloom and doom" in the state’s commercial fishing industry jobs are readily available. "This is a seasonal type of employment so it’s up and down, and the prices are not good," she said. "We’re getting more and more boats and setnet sites that are looking for crew members and deck hands and it’s harder and harder to fill those positions. Some people would rather do seafood processing now than fishing."The Internet is a great way for job seekers to learn about openings statewide. The Labor Department has a comprehensive list of available seafood processing jobs, and applications can be printed off the site as well. Their web address is on the Chignik co-opIt happened first in the Bering Sea Pollock fishery -- the use of fishing co-ops where boats pool their catches and profits with the aim of cutting costs, ending the race for fish, and raising the bar on product quality.Now salmon fishermen in Chignik, located on the Alaska Peninsula, are trying out the idea. This system is unique for the state’s salmon industry and is being closely watched by harvesters and managers alike.This year 70 percent of the allowable commercial sockeye harvest will go to the co-op’s 77 seine boats, yet only 17 boats will actually fish. With roughly 100 permit holders, that leaves 22 boats from the competitive fleet vying for the other 30 percent of the catch. Each sector fishes during different periods.Rod Campbell is a Kodiak-based finfish management supervisor for the Alaska Department of Fish and Game who is on his fourth season managing the Chignik salmon fishery. He took part in the process which led up to the January Fish Board decision allowing the co-op to take place.Campbell said supporters are hoping that with a guaranteed catch quota co-op members can take their time and take better care of their fish, resulting in a higher price. But down time is a worry for the competitive fleet, which might go out and catch a lot of fish, but then sit on the beach for long periods of time waiting for another opening."This is a major concern for everybody as the year goes on, to be able to keep crews for the whole season, to able to have enough fishing time," Campbell said.He feels that in light of tough times for Alaska’s salmon industry the Fish Board was reaching for something new. Campbell is as anxious as everyone else to see how things will pan out. He said this October the Fish Board will assess things. "They will see both sides, not only the competitive and the cooperative fleets, but also hear from the processors how it worked and from the department’s perspective about how this season went."Over the winter the Fish Board could look at making whatever changes are possible under their jurisdiction. But next summer at least 51 permit holders must agree to join the Chignik co-op or the new system won’t be repeated. Alaska Salmon gets its dayThe last day of June this year was set aside as Alaska Salmon Day. The Alaska Seafood Marketing Institute approached the Legislature about the idea and Gov. Tony Knowles proclaimed June 30 as Alaska Salmon Day during the 2002 session.ASMI’s Laura Fleming said the special day is designed to boost summer retail sales in the Lower 48. "When stores are doing a promotion they want to get as many things going on in the store as possible, and you also want to offer a hook to food writers who might be writing about Alaska salmon in the newspaper," she said.Another good reason for the celebration said Fleming is to boost sagging spirits. "With all the hard times in the industry a lot of families and communities are really feeling the pinch. It’s nice to have something associated with salmon that’s a positive enjoyable thing."Marcia Lynn of KMXT Radio in Kodiak is filling in for Laine Welch, who is on vacation. She can be reached at [email protected]

Bush: America needs confidence in business leadership

Editor’s Note: Following are remarks by President George W. Bush delivered July 9 to business leaders at the Regent Wall Street Hotel in New York City.I’ve come to the financial capital of the world to speak of a serious challenge to our financial markets, and to the confidence on which they rest. The misdeeds now being uncovered in some quarters of corporate America are threatening the financial well-being of many workers and many investors. At this moment, America’s greatest economic need is higher ethical standards -- standards enforced by strict laws and upheld by responsible business leaders.The lure of heady profits of the late 1990s spawned abuses and excesses. With strict enforcement and higher ethical standards, we must usher in a new era of integrity in corporate America.The American economy -- our economy -- is built on confidence, the conviction that our free enterprise system will continue to be the most powerful and most promising in the world. That confidence is well-placed. After all, American technology is the most advanced in the world. Our universities attract the talent of the world. Our workers and ranchers and farmers can compete with anyone in the world.Our society rewards hard work and honest ambition, bringing people to our shores from all around the world who share those values. The American economy is the most creative and enterprising and productive system ever devised.We can be confident because of the amazing achievements of American workers and entrepreneurs. In spite of all that happened last year, from the economic slowdown to the terrorist attack, worker productivity has grown by 4.2 percent over the last four quarters. In the first quarter of 2002, the economy grew at an annual rate exceeding six percent. Though there’s much work left to do, American workers have defied the pessimists and laid the foundation for a sustained recovery.Yet our economy and our country need one more kind of confidence -- confidence in the character and conduct of all of our business leaders. The American economy today is rising, while faith in the fundamental integrity of American business leaders is being undermined. Nearly every week brings better economic news, and a discovery of fraud and scandal -- problems long in the making, but now coming to light.We’ve learned of some business leaders obstructing justice, and misleading clients, falsifying records, business executives breaching the trust and abusing power. We’ve learned of CEOs earning tens of millions of dollars in bonuses just before their companies go bankrupt, leaving employees and retirees and investors to suffer. The business pages of American newspapers should not read like a scandal sheet.The vast majority of businessmen and women are honest. They do right by their employees and their shareholders. They do not cut ethical corners, and their work helps create an economy which is the envy of the world.Yet high-profile acts of deception have shaken people’s trust. Too many corporations seem disconnected from the values of our country. These scandals have hurt the reputations of many good and honest companies. They have hurt the stock market. And worst of all, they are hurting millions of people who depend on the integrity of businesses for their livelihood and their retirement, for their peace of mind and their financial well-being.When abuses like this begin to surface in the corporate world, it is time to reaffirm the basic principles and rules that make capitalism work: truthful books and honest people, and well-enforced laws against fraud and corruption. All investment is an act of faith, and faith is earned by integrity. In the long run, there’s no capitalism without conscience; there is no wealth without character.And so again today I’m calling for a new ethic of personal responsibility in the business community; an ethic that will increase investor confidence, will make employees proud of their companies, and again, regain the trust of the American people.Our nation’s most respected business leaders -- including many gathered here today -- take this ethic very seriously. The Business Roundtable, the New York Stock Exchange, the NASDAQ have all proposed guidelines to improve corporate conduct and transparency.These include requirements that independent directors compose a majority of a company’s board; that all members of audit, nominating, and compensation committees be independent; and that all stock option plans be approved by the shareholders. I call on all the stock markets to adopt these sensible reforms -- these common-sense reforms -- as soon as possible.Self-regulation is important, but it’s not enough. Government cannot remove risk from investment -- I know that -- or chance from the market. But government can do more to promote transparency and ensure that risks are honest. And government can ensure that those who breach the trust of the American people are punished.Bold, well-considered reforms should demand integrity, without stifling innovation and economic growth. From the antitrust laws of the 19th century to the S&L reforms of recent times, America has tackled financial problems when they appeared. The actions I’m proposing follow in this tradition, and should be welcomed by every honest company in America.First, we will use the full weight of the law to expose and root out corruption. My administration will do everything in our power to end the days of cooking the books, shading the truth, and breaking our laws.Today, by executive order, I create a new Corporate Fraud Task Force, headed by the deputy attorney general, which will target major accounting fraud and other criminal activity in corporate finance. The task force will function as a financial crimes SWAT team, overseeing the investigation of corporate abusers and bringing them to account.I’m also proposing tough new criminal penalties for corporate fraud. This legislation would double the maximum prison terms for those convicted of financial fraud from five to 10 years. Defrauding investors is a serious offense, and the punishment must be as serious as the crime. I ask Congress to strengthen the ability of SEC (Securities and Exchange Commission) investigators to temporarily freeze improper payments to corporate executives, and to strengthen laws that prevent the destruction of corporate documents in order to hide crimes.Second, we’re moving corporate accounting out of the shadows, so the investing public will have a true and fair and timely picture of assets and liabilities and income of publicly traded companies. Greater transparency will expose bad companies and, just as importantly, protect the reputations of the good ones.To expose corporate corruption, I asked Congress four months ago for funding to place 100 new enforcement personnel in the SEC. And I call on Congress to act quickly on this request. Today I announce my administration is asking Congress for an additional $100 million in the coming year to give the SEC the officers and the technology it needs to enforce the law.If more scandals are hiding in corporate America, we must find and expose them now, so we can begin rebuilding the confidence of our people and the momentum of our markets.I’ve also proposed a 10-point Accountability Plan for American Business, designed to provide better information to shareholders, set clear responsibility for corporate officers, and develop a stronger, more independent auditing system. This plan is ensuring that the SEC takes aggressive and affirmative action.Corporate officers who benefit from false accounting statements should forfeit all money gained by their fraud. An executive whose compensation is tied to his company’s performance makes more money when his company does well -- that’s fine, and that’s fair when the accounting is above-board. Yet when a company uses deception to hide reality, executives should lose all their compensation -- all their compensation -- gained by the deceit.Corporate leaders who violate the public trust should never be given that trust again. The SEC should be able to punish corporate leaders who are convicted of abusing their powers by banning them from ever serving again as officers or directors of a publicly-held corporation. If an executive is guilty of outright fraud, resignation is not enough. Only a ban on serving at the top of another company will protect other shareholders and employees.My accountability plan also requires CEOs to personally vouch for their firms’ annual financial statements. Currently, a CEO signs a nominal certificate, and does so merely on behalf of the company. In the future, the signature of the CEO should also be his or her personal certification of the veracity and fairness of the financial disclosures. When you sign a statement, you’re pledging your word, and you should stand behind it.And because the shareholders of America need confidence in financial disclosures right away, the SEC has ordered the leaders of nearly a thousand large public companies to certify that the financial information they submitted in the last year was fair and it was accurate.I’ve also called on the SEC to adopt new rules to ensure that auditors will be independent and not compromised by conflicts of interest.The House of Representatives has passed needed legislation to encourage transparency and accountability in American businesses. The Senate also needs to act quickly and responsibly, so I can sign a good bill into law.Third, my administration will guard the interests of small investors and pension holders. More than 80 million Americans own stock, and many of them are new to the market. Buying stock gives them an opportunity to build wealth over the long term, and this is the very kind of responsible investment we must promote in America. To encourage stock ownership, we must make sure that analysts give honest advice, and pension plans treat workers fairly.Stock analysts should be trusted advisors, not salesmen with a hidden agenda. We must prevent analysts from touting weak companies because they happen to be clients of their own firm for underwriting or merger advice. This is a flat-out conflict of interest, and we’ll aggressively enforce new SEC rules against this practice -- rules which take effect today.And the stock markets should make sure that the advice analysts give, and the terms they use, have real meaning to investors. "Buy" should not be the only word in an analyst’s vocabulary. And they should never say "hold" when they really mean "sell."Small investors should also not have to have the deck stacked against them when it comes to managing their own retirement funds. My pension reform proposal would treat corporate executives the same as workers during so-called "blackout periods," when employees are prohibited from trading in their accounts. What’s fair for the workers is fair for the bosses.My reform proposal gives workers quarterly information about their investments. It expands workers’ access to sound investment advice, and allows them to diversify out of company stock. The House has passed these measures; I urge the Senate to do the same.Tougher laws and stricter requirements will help -- it will help. Yet, ultimately, the ethics of American business depend on the conscience of America’s business leaders. We need men and women of character, who know the difference between ambition and destructive greed, between justified risk and irresponsibility, between enterprise and fraud.Our schools of business must be principled teachers of right and wrong, and not surrender to moral confusion and relativism. Our leaders of business must set high and clear expectations of conduct, demonstrated by their own conduct.Responsible business leaders do not jump ship during hard times. Responsible leaders do not collect huge bonus packages when the value of their company dramatically declines. Responsible leaders do not take home tens of millions of dollars in compensation as their companies prepare to file for bankruptcy, devastating the holdings of their investors.Everyone in a company should live up to high standards. But the burden of leadership rightly belongs to the chief executive officer. CEOs set the ethical direction for their companies. They set a moral tone by the decisions they make, the respect they show their employees, and their willingness to be held accountable for their actions. They set a moral tone by showing their disapproval of other executives who bring discredit to the business world.And one of the principal ways that CEOs set an ethical tone is through their compensation. The pay package sends a clear signal whether a business leader is committed to teamwork or personal enrichment. It tells you whether his principal goal is the creation of wealth for shareholders, or the accumulation of wealth for himself.The SEC currently requires the annual disclosure of a CEO’s compensation. But that information is often buried in long proxy statement seldom seen by shareholders. I challenge every CEO in America to describe in the company’s annual report -- prominently, and in plain English -- details of his or her compensation package, including salary and bonus and benefits. And the CEO, in that report, should also explain why his or her compensation package is in the best interest of the company he serves.Those who sit on corporate boards have responsibilities. I urge board members to check the quality of their company’s financial statements; to ask tough questions about accounting methods; to demand that audit firms are not beholden to the CEO; and to make sure the compensation for senior executives squares with reality and common sense. And I challenge compensation committees to put an end to all company loans to corporate officers.Shareholders also need to make their voices heard. They should demand an attentive and active board of directors. They should demand truly independent directors. They should demand that compensation committees reward long-term success, not failure. Shareholders should demand accountability not just in bad times, but especially in boom times, when accountability frequently breaks down. Shareholders are a company’s most important constituency, and they should act like it.The 1990s was a decade of tremendous economic growth. As we’re now learning, it was also a decade when the promise of rapid profits allowed the seeds of scandal to spring up. A lot of money was made, but too often standards were tossed aside. Yet the American system of enterprise has not failed us. Some dishonest individuals have failed our system. Now comes the urgent work of enforcement and reform, driven by a new ethic of responsibility.We will show that markets can be both dynamic and honest, that lasting wealth and prosperity are built on a foundation of integrity. By reasserting the best values of our country, we will reclaim the promise of our economy.Leaders in this room help give the free enterprise system an ethical compass, and the nation respects you for that. We need that influence now more than ever. I want to thank you for helping to restore the people’s trust in American business. I want to thank you for your love of the country. And I want to thank you for giving me the chance to come and address you today. May God bless you all.-- The White House

Employees take pride in Day of Caring work

Employees will be more productive and supportive of their company when they see their company cares about them and their community. This is a pretty simple concept, one that has proven true time after time. It’s also a basic principle of corporate social responsibility.To me, being a responsible corporation means operating ethically, turning out quality, dependable products, treating employees with respect and giving back to the community. We’re fortunate here in Alaska that so many business leaders endorse and practice this concept, which is vital to a truly healthy society.Still, I’ve heard some business-people say that community involvement is overwhelming or distracting, especially if they haven’t done it before, or that it’s difficult because they don’t feel they have the staff to manage a project.But there are easy ways to get started and such a program need not be a distraction but a way to focus employee attention on their jobs in a very positive and enjoyable context. Here is a suggestion on how to get your company’s program going. It’s one you might want to get into your calendar now.United Way’s annual Day of Caring is an opportunity for local businesses to connect with nonprofit agencies by offering their employees’ time to help with community projects. Without the generous support of volunteer labor, many of these projects couldn’t happen, or if they were completed by the nonprofits themselves, the effort would drain the agencies of funds that should be used to carry out their mission.These projects can range from painting and construction to cleaning up flower beds for the winter.This is a two-way street, however. I’ve personally discovered, and research around the country confirms, that people are better employees when their company offers them quality volunteer opportunities. And the benefits don’t stop there.Businesses benefit through increased employee morale and renewed "esprit de corps." Employees benefit from the team-building activity in a refreshing and invigorating way. They take pride in a day of hard work, knowing they have helped their community. The nonprofit organization benefits by gaining access to a dependable source of skilled, volunteer labor for a critical project and the beginning of a relationship that can open the door for future business or individual support.Let me give you an example. Recently a Phillips Alaska employee stopped by my office to inquire about the needs of a local nonprofit organization. His work team got involved with Day of Caring last year and helped build a staircase for the agency.He glowed with pride when he talked about his team’s accomplishment. The employee said he enjoys driving his son by the agency’s building and showing his child "his" staircase. This employee has stayed involved with the organization and came to me as a strong and convincing advocate for increased Phillips Alaska support.In Anchorage, Day of Caring takes place each year on the second Wednesday in September to complement the annual fundraising campaign for United Way. This year that day is Sept. 11, a date that takes on special significance with last year’s terrorist attacks. I can think of no better way to observe the day than sending thousands of volunteers into the community to help their neighbors.So I urge you to join us and many other local businesses in this year’s Day of Caring. Call United Way for details and find out how easy it is to put together a work team.If you are not part of a company, consider creating your own Day of Caring by dedicating that day to making your community a better place. Read to a child, paint a fence, clean up an elderly person’s yard, pick up trash in the park -- do something to make this day a little better and a little brighter.Together we can make Sept. 11 the Day of Caring and demonstrate corporate social responsibility at its best.Nancy Schoephoester is manager of philanthropy and community services for Phillips Alaska Inc. She can be reached via e-mail at [email protected]

Retail grocers building stores in each other's back yards

The newest locations of Alaska’s two grocery titans are taking shape this summer, each in the other’s back yard.Fred Meyer and Carrs-Safeway should open their stores by spring.Fred Meyer is building its 10th Alaska store in Eagle River, a market served solely by grocery competitor Carrs since Alaska Marketplace closed in 2000.In Anchorage, Safeway, which owns Carrs Quality Centers, has started construction of a larger store to replace its location at Old Seward Highway and Dimond Boulevard. The new store is being built on Abbott Road, near a store Fred Meyer opened in February.Safeway operates 21 Carrs stores in Alaska.Construction on the new Carrs store began in early June, said Scot Swan, construction manager for Carrs-Safeway in Alaska. Roger Hickel Contracting Inc. is the general contractor. By mid-July foundations had been installed, and exterior walls were going up. Installation also was under way on sewer, electric and telecommunications lines, he said.In early August, efforts will focus on other structural work, from columns to roofing, he said."The goal is to get it enclosed before winter," Swan said.Glenn Peterson, Alaska district manager for Safeway, hopes to open the new store this year but that an early 2003 opening is more probable.The new store will measure about 64,000 square feet, larger than the current 40,000-square-foot store. Employment will probably climb from about 110 workers now to nearly 140, Peterson said.Abbott Road, 88th Avenue and Toloff Street, which are adjacent to the store site, will be altered to accommodate additional traffic, Swan said.The older Carrs store is due to be leased to new tenants, he said.In Eagle River, builders are finishing site work on the Fred Meyer store, which began in May, and are installing the store’s foundation, said company spokesman Rob Boley.Walls are scheduled to be raised in late July, he said."We hope to have the building enclosed by October," Boley said.Company officials also aim to complete paving of the parking lot this fall, he added.Engineered Structures Inc. of Boise, Idaho, is the construction manager, coordinating efforts of Alaska contractors, he said. Fred Meyer intends to open the store next spring, Boley said.The store will measure 175,000 square feet, have a gas station and employ about 200 full- and part-time workers, similar to the South Anchorage store the Portland, Ore.-based retailer opened earlier this year. Interior layout will also mirror the Anchorage store on Lake Otis Parkway and Abbott Road.However, the Eagle River store will include different features like a drive-up pharmacy window and exterior design elements to meet the city’s design standards for large retailers, Boley said.Fred Meyer officials had considered building a store in Eagle River for several years and studied other sites, he said.The new store is being built at the Old Glenn Highway and Northgate Drive, near the north Glenn Highway exit to Eagle River."It’s a growing community," he said. "We know we have a lot of people from Eagle River who like to shop our store in Muldoon."

Fred Meyer attracts smaller businesses

Several small retailers are building new stores near two competing grocers in South Anchorage, where retail real estate prices have tripled.The corridor runs along Abbott Road, between Lake Otis Parkway and the New Seward Highway, and is led by major grocery retailer Fred Meyer. The Portland, Ore.-based company, which opened the store in February, will be joined by Carrs Quality Centers, which is building a nearby replacement store to open by early next year.Bruce Chambers, broker at Chambers Commercial Real Estate, has seen the area grow in the past few years and played a role in attracting Fred Meyer. He has also watched the effects of that growth."Prices (in that area) have tripled in the last three years," he said.At the edge of the Fred Meyer parking lot, construction is under way on a Carl’s Jr. restaurant, Xpress Lube, Great Clips hair salon and Blockbuster Video. The Fred Meyer building also includes several tenants: Alaska USA Federal Credit Union, Cafe del Mundo, Papa Murphy’s Take ’N’ Bake Pizza, Perfect Look hair salon and Vista Optical.MCN Construction Inc. of Anchorage began building the 2,900-square-foot Carl’s Jr. restaurant in late June, said project manager Gary Keyes. It is the national chain’s first Alaska restaurant, and the franchisee plans to open nine others in the state.Construction is scheduled for completion in October, Keyes said.Located between the Carrs construction site and Fred Meyer, an Alaska franchisee in May opened Chili’s Grill & Bar, another national chain.In 1995 Chambers studied the retail real estate market in South Anchorage and noticed the Dimond Center had developed into a super regional center, surrounded by the highest level of retail options. Such an area, by real estate industry definition, excludes grocery stores since "people do not want to fight traffic," Chambers said.He recognized the area was becoming less suited to grocers and pinpointed 20 acres just east of Dimond Center on Abbott Road, pitching it to Fred Meyer. Construction was delayed while Pioneer Broadcasting relocated a radio tower from the site, Chambers recalled.Now the South Anchorage area has many consumer retail services, from groceries and gas to dry cleaning, he said.Chambers expects the growth to continue. Several lots are available at the new Carrs site, he said. About 10 parcels remain plus a larger one considered for a town center, he said."I think you will see that entire area built out within five to seven years," Chambers said.

Anchorage saves $7.6 million with bond sale

On June 17, the Municipality of Anchorage held a bond sale and a whole bunch of Alaskans showed up.For the first time, the city was offering bonds to individuals in denominations of $5,000, with a preference given to Alaska residents. According to municipal officials, Anchorage residents, brokerages and financial institutions bought $10 million of the bonds, with Alaskans in the rest of the state buying another $5 million.Individuals elsewhere in the country bought another $41 million in Anchorage bonds that day.The next day, big investors were allowed in the door and by noon June 18, the entire $342.3 million in tax-exempt bonds were sold.The sale was the biggest in the municipality’s history. It culminated a year-long effort by the city and the Anchorage School District to work together to improve the city’s bond rating and save transaction costs by holding one big combined sale.Leading the effort were Tony Price, the city’s senior finance officer, and Janet Stokesbary, chief financial officer for the school district. The school district can’t issue bonds directly; instead, the municipality does it for them, since school bonds are backed by the city’s creditworthiness.Price formerly worked for the Alaska Housing Finance Corp., where he gained extensive experience in issuing bonds, including retail sales with an Alaska preference. He was part of a bond management group created by the city’s chief fiscal officer, Kate Giard, to directly oversee city bond issues formerly handled by contractors. Giard said the city currently has about $1.2 billion in outstanding bonds to manage.Price and Stokesbary began meeting last August to formulate a policy for municipal bond sales. In order to get the top rating for the bonds, and thus the lowest interest, they knew that the city and the school district needed to have a reserve account. The bonds, which have maturities ranging from one to 20 years, will yield an average of 4.5 percent to investors."We needed to establish the reserve in case there’s an unanticipated event," Price said. What the bond rating agencies were looking for was one-twelfth of the annual debt service set aside. It’s like always keeping one mortgage payment in a savings account."It provides reassurance to the investor," said Stokesbary.Over the winter, all parties signed on to the reserve account policy, and in April, Price and Stokesbary went to New York to explain it and the planned bond sale to the two bond rating agencies, Moody’s Investors Service and Standard & Poor’s Corp.Stokesbary said the agencies were impressed with the cooperation between a city government and a school district, and awarded the second-highest bond rating, AA, to the bonds.The city subsequently bought insurance to increase the rating to the highest possible rating, AAA.The bond sale combined several elements. It included $54.4 million in voter-approved city bonds to pay for everything from new roads to upgrading the city cemetery. The school district portion went to pay for three voter-approved bonds totaling $131.8 million, including money for construction of a new South Anchorage High School.In addition, a total of $156.2 million in existing city bonds were refinanced, which will generate an eventual savings of $7.6 million to city taxpayers.That had Anchorage Mayor George Wuerch and Anchorage School District Superintendant Carol Comeau smiling at a ceremony held to mark the signing of the many documents required to complete the sale.Wuerch said he was amazed at the level of local participation in the sale. "It is wonderful to see our residents demonstrate such strong confidence in the financial management of the municipality," Wuerch said in a press release.One of the brokers who took orders for the bonds was the Anchorage office of Allan Johnston, the Wedbush Morgan Securities Inc. regional manager, said making bonds available to local residents an "excellent idea.""It’s good for the the community to have local investors involved," Johnston said. "It provides more local accountability and results in better decision-making by everyone."Johnston said the timing of the sale was also good. With the stock market in free-fall, investors are turning to high-quality bonds. "We have clients who are interested in stable, tax-free income," he said. "There’s more interest these days in things that are boring, like bonds. People these days are more interested in preserving capital than making big gains."

Broken belly pod? Palmer firm can do composite repairs

Certified Aircraft Composites LLC is much more than its name suggests.While the Palmer-based company specializes in repairing aircraft, there seems little the family-owned business won’t or can’t do when it comes to projects in composites, fiberglass, plastics or metal plating.Steve Apling has made everything from life-sized composite moose heads to miniature fiberglass glaciers, but aircraft-parts repair and reconstruction is the company specialty, as its name suggests. Apling is Alaska’s only Federal Aviation Administration-certified composite repairman. At 31, he has 20 years’ experience, growing up with the business run by his mother and general manager Donna Aber and stepfather Phil Aber, the company’s shop manager.For two decades, Donna Aber worked at a fiberglass shop in Anchorage but three years ago started her own business in the Matanuska-Susitna Borough area.The new business is the state’s first and only FAA-certified repair station for composite and fiberglass aircraft parts, Donna Aber said. Historically, if an aircraft owner needed a fiberglass or composite part like a nose bowl, belly pod, tail cone fairing or cowling repaired it had to be shipped to the Lower 48. With Alaska having the largest general aviation fleet per capita in the United States, the business made sense.Fiberglass has been used on aircraft at least since the early 1950s, Donna Aber said. Modern techniques and newer materials such as carbon fiber and Kevlar can make the old parts stronger and lighter than ever before.Work comes from all parts of the state and requests come from the Lower 48 but shipping costs have prohibited the company from expanding beyond Alaska, she said.Many of the parts also are of awkward size and often are fragile, so shipping a job out of state is impractical, Phil Aber said."If it’s broke when it comes up, it’s no big deal," Donna Aber said.The company recently moved to a new 4,000 square-foot building off the Parks Highway between Palmer and Wasilla. The building, twice the size of the company’s old headquarters, has high bay doors, large enough to fit and work on large boats, a service that has taken off surprisingly well, Donna Aber said.A large boat lift has been added to ease movement of the vessels into the shop and to suspend them for work on hulls.In addition to large boats, the company does a good share of repair work on smaller watercraft like canoes, kayaks and Jet Skis.Snowmachines, with their fiberglass and composite cowlings, also are an in-demand repair item.The company also specializes in ultralight aircraft parts, like fuel tanks. Its retail shop sells an assortment of plastics used for anything from bushings and bearings to runners for dog sleds. The retail shop also has materials and tools for do-it-yourself builders of boats, ultralights and experimental aircraft.Sometimes, however, the work is better left in the hands of a professional, like Apling.One customer, who had a moose stomp on his canoe, attempted to patch the hoof-sized hole himself but gave up and brought the boat in after his repair attempt proved less than perfect.Another customer recently purchased an antique meat grinder that had its old Bakelite housing broken in shipment. The meat grinder’s manufacturer, Hobart, while still in business, no longer had parts for the old machine, nor could it reproduce Bakelite, an early-era plastic.Apling was able to reproduce the housing out of a newer material that looks nearly identical to the original.The company also says it has the only gold-plating service in Alaska. Along with 24-karat gold, the company can plate in nickel, platinum, copper and silver.Guns, motorcycle parts and jewelry are popular plating items. If it’s a metal alloy, it can be plated, Phil Aber said.One woman recently had the company gold-plate the drain to her whirlpool, so that it would match the faucets and other fixtures in her bathroom, Donna Aber said.The company’s eclecticism helps pay the bills, said Donna Aber, adding that the sheer variety of work also makes the job interesting."You never know what a customer is going to want when they walk in," says Phil Aber. "When you’re a small business it’s always a struggle," Donna said. "You’ve got to do everything you can to make a living. ... We never get tired of what we’re doing."

More businesses outsourcing their payment processing

You’ve put in the required blood, tears and sweat, and your business shows it. Your client list has expanded, and the incoming payments are beginning to swamp your small business office. The overhead is higher than you expected, and you’re worried the sheer volume of transactions might affect the quality of your service. Do you hire more help? Pare down your client list? Both those options will cost you money.There is a better alternative. You can save yourself time, aggravation, and in some cases, even money by outsourcing your payment processing services.If you’ve never considered it, outsourcing might seem like a big step. In reality, however, the opposite is true. Outsourcing lets you take a step back, simplifying and streamlining your operation. It lets you focus on what you do best -- growing your business and earning more money -- while experts handle the paperwork.In fact, outsourcing payment processing has so many advantages it’s becoming a growing trend among small- and medium-sized businesses. Many of Alaska’s most prominent businesses have already come to realize the benefit of having someone else take care of this chore for them.How it worksThe premise is simple. You rent a post office box, print the address of the box on your remittance envelopes, and give your outsourcing partner (generally a bank or other financial institution) permission to open the box. At that point, your work is basically done.The bank retrieves payments from the box, processes them and deposits the money directly into your account. The payment records are collated and delivered to you, usually in an electronic format compatible with your own financial software.If handled properly by a reputable company, this entire process should be transparent to your customers. If you live in Anchorage, Fairbanks or the Matanuska-Susitna Borough, for example, it is likely that some of your monthly utility payments are already being handled in this fashion.Variations on a themeGenerally speaking, there are two variations on payment processing services, each of which is geared toward a certain type of business.The first type, sometimes called "wholesale" processing, is geared toward businesses that receive relatively few payments, typically less than 1,000 per month, in relatively high dollar amounts -- doctors’ offices, for example. These businesses generally use a wide variety of different nonstandardized envelopes and remittance slips, which must be processed manually by the outsourcing partner.The second variation, sometimes referred to as "retail" processing, is oriented toward businesses that do a high volume of transactions in what are generally low amounts -- a telephone or electric utility, for example. These businesses receive a lower rate in return for formatting their return envelopes and remittance slips in a very precise way. This allows them to be efficiently processed by machine. The bank then passes the savings on to the customer.CostsBecause it handles payments for many different businesses, the bank operates on an economy of scale that should allow it to offer very reasonable fees to each individual client.The whole arrangement, a good deal to begin with, becomes even better when it results in a net savings for your business. When deciding whether payment outsourcing is right for you, remember to factor in these considerations: Cash flow: One of the most important benefits to outsourcing is that the bank, upon receiving your payments, can deposit them into your account immediately. This works to your advantage because the funds can begin drawing interest sooner. A high volume of transactions, even at a low per-transaction dollar amount, can mean significant savings in the long run, which translates to more money in your pocket. Time and expense: Outsourcing will reduce the time and related expenses you and your employees currently spend processing payments. Every hour you save can then be reinvested back into your business. Accuracy: Because your payment processing is being handled by experts, it may well reduce the number of costly errors made on the receiving end. Security: Outsourcing separates payment processing from bookkeeping, which may provide better controls for smaller businesses.Of course, every business is different, and yours has its own unique needs. But advances in technology have brought outsourcing to the point where it can help even small- and mid-sized businesses with their operations.Alan Dablemont is vice president of deposit services at First National Bank Alaska. He can be reached at 907-777-4685.

Ambassadors hope North, South Korea can eventually be reunited

Ambassadors representing South Korea and the United States stressed the value of an eventual unification of North Korea and South Korea during a recent appearance in Anchorage. Still, current talks toward that goal are stalled.Yang Sung-Chul, Republic of Korea ambassador to the United States, and Thomas Hubbard, U.S. ambassador to South Korea, spoke July 11 at The Anchorage Hilton Hotel. The event was coordinated by the Alaska World Affairs Council and the state Division of International Trade and Market Development. South Korea is a major Alaska and U.S. trading partner.The diplomats agreed the United States plays a role in reuniting the nation, despite concerns over North Korea’s development of long-range weapons threatening other countries."We believe a strong, vibrant Korean economy is important to U.S. interests," Hubbard said. "South Korea is clearly one of the most successful and outstanding countries, but as a divided nation, Korea faces tremendous challenges no other nation faces."A strong Korean economy is important to Alaska, which lists South Korea as its No. 2 export market behind Japan. In 2001, 18 percent of Alaska exports went to South Korea or $463 million.Alaska leads U.S. Pacific states in exports to the country, Hubbard said.Yang pledged to push for reopening a South Korean consulate office in Anchorage. An office opened in 1982 but closed in 1999 during the country’s financial crisis.Yang, who was appointed in 2000, also expressed his belief that Alaska and South Korea can expand their business relations.In another look to the future, Yang envisioned an eventual end to separation between North and South Korea, despite recent setbacks. "We must be resolute, no matter how disheartening the process may be," he said.Yang described the contrast between the two halves of the divided region, which share a common language and culture. While South Korea is now the world’s 13th largest economy, North Korea has become one of the world’s poorest nations and a major recipient of food aid. North Korea also has the world’s fifth-largest standing army, he said."The contrast between South Korea and North Korea stems from fundamental leadership choices," Yang said.The different government systems have determined each nation’s economic destiny, he said."The world has changed. Communism is a thing of the past, especially the breed (of communism) in North Korea," Yang said.Although peace between the two countries may not be achieved soon, working with the United States and other countries may offer the best hope, Yang said.Economically, South Korea has recovered from its financial crisis in 1997 due to government reforms in the last four years, he said.From a nearly 7 percent drop in gross domestic product in 1998, South Korea rebounded in 1999 with gross domestic product climbing by almost 11 percent, then 9 percent in 2000. Last year the gross domestic product grew by 3 percent."The Republic of Korea is fast becoming a dynamic hub of Asia and the world," Yang said.The United States recently withdrew from talks with North Korea, but Hubbard believes the door to dialogue with North Korea remains open.He also praised Alaska’s role in promoting trade between the United States and South Korea. The state could be important to South Korea’s development of transportation and cargo operations as well as tourism, Hubbard said.

Usibelli says it's not to blame for test coal quality

A number of problems have been cited with a 90-day operating test of the Healy Clean Coal Project in 1999, which, among other things, was designed to burn coal of lower quality than used by other power plants.One was that average quality of the coal supplied to the plant by Usibelli Mines Inc. was too good -- specifically, it was 3 percent higher than the target quality required for the test.An article in May 12 issue of the Journal of Commerce reported that Usibelli was unable to supply the quantity of "waste" coal needed for the test.Steve Denton, Usibelli’s General manager, said this was incorrect. He said that his company was able to supply more than enough waste coal for the test. Waste coal is lower-quality coal that is found around higher-quality coal that can be sold commercially.One of the objectives for the Healy plant is to demonstrate a commercial use for very low-quality coal that cannot now be sold.In a May 16 letter, Denton said the higher quality coal occurred partly because personnel from the Alaska Industral Development and Export Authority and Golden Valley Electric Association were feeding higher quality coal into the plant to "blend up" the mixture.However, the higher coal quality had nothing to do with the operating problems of equipment in the plant, Denton said."Usibelli actually went beyond our initial scope of work for the 90-day test and, in good faith, advised and assisted AIDEA and GVEA in coal-blending techniques," Denton wrote. "However, blending of the coal delivered to the plant was in total control of AIDEA and GVEA."Art Copoulos, AIDEA’s project manager now in charge of the Healy plant, said there were also problems with the coal-feed system in the plant, particularly with fans used to help push pulverized coal into the combustion unit.In a Dec. 28, 1999 letter to AIDEA from Harris Group Inc., an independent consultant hired to review results of the operating test, Dennis Swann, the company’s senior vice president, recommended a redesign of the coal feed system.Harris Group found that the new-technology combustor units performed as expected, and that a retrofit is unnecessary, Swann wrote.

WorldCom could cost GCI millions

Embattled telecommunications giant WorldCom is still paying its bills to Anchorage-based General Communication Inc., but WorldCom could owe the Alaska company as much as $25 million if it goes bankrupt.GCI officials briefed investors July 12 during a conference call about the potential impacts of severe financial woes of WorldCom, GCI’s largest customer.In 2001, GCI billed WorldCom $60 million, and WorldCom voice and data traffic represented 16 percent of the Alaska company’s overall traffic, said Ron Duncan, GCI president. WorldCom also owns 5 million shares of GCI stock. Amid turbulent stock market conditions, GCI’s stock price, which was $8.64 June 17, closed at $5.75 July 16.If WorldCom files for bankruptcy, it could leave GCI with WorldCom bills of typically $15 million to $20 million, Duncan said. The receivables have ranged from $10 million to $25 million, he said.During July, though, WorldCom was still paying its bills to GCI, he said. The situation for the Alaska company is in flux pending decisions by WorldCom officials, Duncan said.Another possible impact would be if WorldCom customers begin switching to a different carrier, he said. However, Alaska telecommunications traffic is carried by GCI and AT&T Alascom, Duncan said. He predicted any such changes would be gradual.GCI officials also said its network has alternate routes and backup capacity in the remote chance of WorldCom shutting down its network. "We don’t believe that any circumstance that could befall WorldCom would have an operating impact on GCI’s network or GCI’s customers," Duncan said.GCI is compiling its second quarter results which ended June 30, company officials said. Those results will be released Aug. 7.Without adjustments for WorldCom impact, Duncan expected a strong second quarter. GCI’s long-distance and other business is healthy, he said.However, WorldCom’s disclosure of nearly $4 billion in accounting errors, and the subsequent collapse of its stock price, have affected the Alaska company."There’s no doubt the events of the past several weeks have increased the short-term risk to GCI," Duncan said.GCI was due to complete a refinancing effort when WorldCom announced its accounting errors, Duncan said. Refinancing would have provided funding for GCI projects in the next five years, he said. However, current conditions have meant scaling back that refinancing, which would have included expansion into the Lower 48, said John Lowber, GCI’s chief financial officer.GCI continues negotiations to complete the refinancing package, Duncan said. Despite the possible impacts, GCI’s president is optimistic about 2002 results. "We don’t believe that other than any amount written off for a WorldCom bad debt that the WorldCom effects will have a material impact on this year’s (earnings before income, taxes, depreciation and amortization)," Duncan said.

Housing agency puts bonding savvy to work

How do you turn $20 million per year into bonds worth $203 million? Ask the Alaska Housing Finance Corp., a state-owned corporation whose expertise in bonds has taken it far beyond issuing loans to home buyers.With a portfolio of more than 30,000 home loans and assets of about $5 billion, AHFC is one of the state’s biggest players in the mortgage industry.Formed after World War II to help provide housing to returning veterans, it rose to prominence in the 1980s as the primary source of affordable home loans during times of skyrocketing interest rates and then plummeting oil prices.With Alaska’s economy stable and more mature, private banks and mortgage companies have largely returned to the traditional mortgage business. AHFC buys many of those mortgages, and its ability to issue tax-exempt bonds has allowed it to continue offering below-market rates for first-time home buyers, low-income residents and veterans.Over the years, AHFC has issued about $13 billion in bonds, including about $11 billion in tax-exempt bonds. So it’s not surprising that when the governor or the Legislature is interested in turning a revenue stream into a big chunk of cash, they turn to the AHFC for advice."We get called on a lot," said Dan Fauske, AHFC’s chief executive.Most recently, Gov. Tony Knowles floated the idea of having the Alaska Railroad Corp. issue bonds to build a natural gas pipeline, thanks to federal legislation giving the railroad special bonding authority. Fauske said he and his staff reviewed and endorsed the idea before the governor went public with it. While not much has happened since the concept was first proposed, Fauske still thinks it has merit.Then there’s the story of the tobacco settlement between the tobacco companies and 46 states, including Alaska. Known as the Master Settlement Agreement, it was signed Nov. 23, 1998. It specified that the state of Alaska would get about $20 million per year as its share of medical costs associated with smoking.As Fauske and chief financial officer Joe Dubler remember it, three counties in New York state first had the idea of issuing bonds -- borrowing money -- and making the payments with the steady stream of revenue guaranteed by the tobacco settlement.Fauske calls the process "securitization" of revenue. "Twenty million dollars doesn’t do much, but securitizing it puts hundreds of millions of dollars on the table," he said. "You can build a lot of schools with that."In the end, that’s exactly what happened. The Legislature approved using 40 percent of the settlement money, and on Oct. 13, 2000, Alaska became the first state in the country to issue bonds to be repaid by the tobacco companies. The sale netted $93 million, which was spent building schools in rural Alaska."The Legislature said, ’Hey, that worked really well. Let’s do it again,’ " Fauske said. So on Aug. 2, the AHFC went to market with another 40 percent of the settlement and netted $110 million. The proceeds are being used for schools, ports and harbors, and University of Alaska buildings.Fauske said that while only six investors were interested in the first bond, the second was so popular that it was oversubscribed by 10 times, meaning only one-tenth of investors seeking the bonds were actually able to buy them. Fauske said the final 20 percent of the settlement will not be securitized. It is being used instead for anti-smoking educational campaigns.Fauske said one advantage of the tobacco bonds is that if they fail, investors can’t come back on either the state of the AHFC. The bonds were issued by an AHFC subsidiary created for that purpose called the Northern Tobacco Securitization Corp. and are backed solely by the ability of the tobacco companies to make their payments.Recently, four small tobacco companies filed suit challenging the Master Settlement Agreement. "If the MSA goes away, a lot of bondholders will be left holding the bag and we’re not going to give them their money back," Fauske said.That’s not true of Fauske’s first securitization project, which consists of general obligation bonds backed by the state. It was Fauske’s way of controlling the amount of AHFC profits taken by the Legislature every year, while generating funds for badly need capital projects.Fauske and his staff determined that of the approximately $100 million in profits generated by AHFC every year, the corporation needed to retain about one-fourth of that amount to maintain its reserves and keep its high bond rating. Another quarter is cash sent directly to the state’s general fund for appropriation by the Legislature.The remainder, fully half of AHFC’s annual profits, have been turned into bonds. In 1999, the agency generated $200 million, which has been used for various state capital improvement projects. Last year, the agency held another sale, netting $76 million.This year, the AHFC warned the Legislature that its income had declined because low interest rates for home mortgages had reduced revenues. The Legislature took the full, previously promised amount anyway, about $6 million more than AHFC had earned."Paying more than we make is not a good thing," Fauske said. "The state needs to deal with the fiscal gap. AHFC can’t do it."We have no problem paying a dividend, but it must be a reasonable amount that doesn’t harm the corporation."


Subscribe to Alaska Journal RSS