With All Due Respect #51

With All Due Respect #51: Failed Mega Projects, Palin in Denim & Time to Reset AIDA

21/2/2022 12:25 PM

Listen Here

Data and descriptions shared from:
https://www.adn.com/commentary/article/new-alaska-rail-line-peters-out-forest-after-consuming-184-million/2016/02/02/


Introduction


With me as always as…
My bro in the know

Exchange

Tell our listeners about the app you’re working on

Disclaimer

Content


Today on With All Due Respect
…Alaska’s political class
…has long had a fixation
…about big mega projects
…and fantasizing

…about the next boom

….meanwhile the hard work of improving
…Alaska and our economy remains undone

…I’m going to explain how
…Waiting for Godot
…continues to be our
…state motto


In Life
…our podcast fashionista
…Maia Nolan Partnow
…casts her eyes towards New York city
…and has a fashion review on Sarah Palin’s
…recent courtroom style

And in closing comments
…it’s time to blow up AIDEA


…The Alaska Industrial Development Export Authority
…Alaska’s only true
…economic development agency
…no longer serves
…the needs of Alaska’s economy
…and their bizarre addiction
…to losing on big bets
…has cost this state dearly
…in money and progress

…It’s time to blow it up
…and rebuild it
…into something that actually
…works for Alaskans
…instead of outside interests


 (Horn honk)

There’s our ride
…so hop in
…and let’s talk some politics

Politics

Alaska’s political leaders
have always seem to be betting
with public money
on the next big thing
and in the process
distracting from the real
work of building Alaska’s economy

In order to understand this in context
…we need a history lesson

History lesson


In December of 1998
a month after I had been elected to
the Alaska State Legislature
I was invited to lunch by
former Gov. Bill Sheffield
who at that time
was President of the Alaska Railroad

As incoming freshman I was
..co-chair of the transportation committee
…so we met to discuss railroad priorities

During the lunch the conversation turned
…to the topic of the proposed Anchorage rail depot

At this point,
…former Alaska U.S. Senator ted Stevens
…had procured $28 million for the construction
…and the railroad
…were undertaking the economic study

Let me repeat
…they got the federal appropriation
…before they did any economic analysis


So we proceeded to have a very
lively debate over the viability
of this project.

Now a little history
…there are a lot of things
…in this world I don’t know
…but one thing I know
…is the Anchorage Airport

…I started working at the airport
…when I was nine years old

…when I started washing cars
…for the family business in
…1974 our office
…was right in the middle
…of what is today the
…off ramp

First
…I asked Sheffied
…how he could be committing
…to a project without seeing
…the project’s economic analysis

he brushed it off
…saying anyone could see the
…future was bright for the project
…cruise ship passengers from Seward
…locals catching the train to avoid parking
…yaddah yaddah yaddah


…Sheffield argued that
…8,000 people work at the airport

…but I reminded him
…that this is a airport
…not a General Motors factory

8,000 don’t all work at the airport
…at the same time
….
nor do they all work at the airport

…some as far as two miles away
…from the terminal

So how do they
get to their place
of work from
the main terminal
once they get off the train?

It never made any sense.

Also
…the entire concept was counterintuitive
…to supporting the tourism economy

Taking cruise ship passengers
directly from the boat to airport.

Taking them away from
spending money
on the road



A few months later the
…projects economic analysis was
…released to the public
…and sure enough
…it was as bad as
…I thought it would be

So
on January 1, 2000
I published Op/Ed
in the Anchorage Daily News
about how the project’s
analysis showed inevitable failure
if it were to be built

For instance
the analysis predicted the train would carry
100,000 local residents per year
to the Anchorage airport within a few years

Let me repeat
…100,000 local residents per year
…would load their luggage on to
…an Alaska Railroad locomotive
…and ride to the airport

But then report stated
that these numbers
were highly unlikely because
there was no infrastructure.

Think about this
…you’d have to drive to the downtown depot
…park
…and then catch a train to the airport

…now just think
…about everything wrong
…with that entire concept

…In my column I predicted the depot
…would be abandoned in just a few years

The Airport rail depot opened in 2003 and
…closed a few years later
…without carrying
…one local resident to the airport

A $28 million dollar waste.


meanwhile at that very same time…

We were being sold on the Alaska Seafood plant
powered with cash from AIDEA.

AIDEA financed the plant in the late 1990s
with nearly $50 million
and once construction was completed
the facility was leased
to Alaska Seafood International.

I saw this deal from two different angles:

I was president of the Sand Lake Community Council
in 1997 they were pitching the idea

I remember the pitch well
Alaska’s location meant
fish could be shipped anywhere.
The average American family
was spending 15 minutes
to prepare dinner
so pre-packaged fish dinners
would be a hit.
and on and on

Then the plant was completed and opened
…just a I got elected to
…represent Sand Lake
…in the Alaska State Legislature

…Every year
…in committee
…we’d hear testimony
…from commerce and AIDEA
…folks
…about how they were
…one fish away from
…making a profit every year

Every year
…the same thing
…we’re almost there

The plant opened in 1999
the business never made money
and within six years AIDEA
had sold the facility in a fire sale
for $25 million and it’s now
a church that pays
no local property taxes
which thus causes private
property owners to pay more.


Alaska mentality is that
– economics don’t matter

Because we’re Alaskans
…we believe that we have
…the ability to force
…the economics into being

There is a long list of
…development fantasies
…that we’ve been indulging

…pinning our future economic hopes
…on the next big white elephant

First we start with…

ANWR

…For four decades we’ve been told this mirage in the desert was real
…I remember twenty years ago in the legislature
…we’d say
…“wait until gas hits $2 per gallon…then they’ll want ANWR.

Well gas is at an average
of $3.51 per gallon
and it has no interest

After 40 years of promises
it opened for leasing in 2020
however few showed up but AIDEA

In fact after being told for forty years
that the oil & gas industry would be
beating down the door to develop
not one major oil or gas company bid.

Why?


Because there are too many other
…development opportunities
…major oil companies
…that are
…less risky financially
…and
…won’t piss off their
…shareholders
…lenders
…or customers

ANWR is not going
…to happen in our lifetime

But yet AIDEA
…spent $12 million on leases


Then we have the…

Alaska Natural Gas Pipeline

In 2007 the State of Alaska
through AGIA awarded $500 million
to TransCanada to
make this dream come true

The strategy was going to build a
$40 billion pipeline based on faulty economics
and then force the producers
to pay for the cost of the pipeline
and provide the gas.

At that time a KTUU survey showed
58% of respondents thought it would be successful

From the moment of introduction
for the next three years
many of us argued
it was a fool’s errand
because it ignored
both legal and
fiscal realities

So
…trying to quiet their critics
…I was invited to a meeting
…with Palin’s commissioners
…Tom Irwin, Marty Rutherford
…and then Lt. Governor Sean Parnell

Irwin kept going on about how
…they were going
…sue the oi companies
…and if that didn’t work
…they’d take back oil leases
…and by God we’re
…gonna build
…this pipeline

…and I was like
…dude no you are not
…you don’t have the legal right
…to extort private companies
…to pay for the most expensive
…oil and gas project in U.S. History
…it ain’t gonna happen bro

Finally I looked across the
table at Sean Parnell
…and asked if he was
…buying into this fantasy
…and he just shrugged his shoulders

Five years later AGIA died a quiet
…but expensive death
…ironically
…under Governor Sean Parnell

Today there are other iterations
and other dreams of a natural gas pipeline

Not in our lifetime
Too expensive

Other alternatives to
an 800 mile pipeline through the Arctic

Then of course we had the…

KABATA Knik Arm Bridge And Toll Authority

In 2003, the Alaska Legislature created the Knik Arm Bridge And Toll Authority
(KABATA) to develop a method of construction,
financing, design, operation and maintenance of the bridge.[4]

Ten years later
a legislative audit found that KABATA had overestimated potential revenue from tolls
leading to basically mothball the organization

In ten years…
KABATA burned through $100 million dollars

But losing a $100 million  is a deal
…compared to our next
…white elephant

Point McKenzie Rail Extension

The rail spur was supposed to connect
…the little-used Port MacKenzie
…to the main Alaska Railroad line near Houston
…a distance of 32 miles.

Since 2009
…Alaskans have spent $184 million
…on the Point MacKenzie Rail Extension Project
…but it is $120 million short of completion.


The $184 million dollars spent
…has created
…a road to nowhere
…that ends in the
…middle of a forest
…five miles short
…of it’s planned destimation

The truth is
this was a fantasy
of the valley legislative
delegation years ago
…this was not a project
…the railroad asked for
…and in fact had quite
…a few other priorities
…at the time


Recently more pie in the sky
…proposals have resurfaced:

First we start with the…

West Susitna Road


AIDEA the state’s only
true economic development agency
…is considering a
…100 hundred mile road to
…speculative mining developments

The road is projected to cost over
$300 million and so far
over $9 million in public
money has already been invested

Now
you might say Andrew
its more than speculative
there are reportedly discoveries
and I’d say
yes so were there discoveries
at Mustang and AIDEA still lost $70 million

So let’s see what that
…this road might mean
…to Alaska’s economy

Now remember
…a constant theme
…in a resource development state
…like Alaska
…is that tax policy matters.

The more stable the tax rate
…the more companies understand
…their tax exposure
…and can assess the profitablity
…of potential developments
…and take measured risks

Right?

Okay.

According to the State of Alaska:

State mining taxes haven’t been raised since 1955
65 years of stable state taxation

The mining industry pays
$49 million in yearly mine fees
(by reference the insurance premium tax Alaskans pay is $59 million,
while cruise ships and the rental car industry generates $36 million)


Now…some will say
…what about indirect jobs
…what about fuel taxes
…what about local taxes

What about them?


Every industry provides
…those same economic benefits
…but yet most are not subsidized
…with state dollars
…and most haven’t had sixty five years
…of tax stability


Look
…This isn’t an attack on mining
…my resource development bonafides
…are unassailable

…I’ve lost a few friends by
…being a leading advocate
…for oil tax reform eight years ago

…but this makes no damn economic sense
…and mining pays too little as it is

Especially
…if you’re basing your argument on
…this project creating jobs for Alaskans

…In 2020 the state of Alaska reported
…there were 3641 total metal mining jobs in Alaska

In addition the State of Alaska
…also publishes a report every year
…entitled non-resident workers in Alaska.


Now for years we’ve heard
…the complaints about the oil patch
… oil industry 35% non-resident work force

So would it surprise you that
…metal mining has a
…39% non resident workforce


…the state of Alaska
…also reports
…that the average non-resident worker makes 10%
…more than the resident worker in quarterly wages

…so 39.4% of metal mining employees
…are non-residents and make ten percent
…more quarterly wages


Some proponents
…including AIDEA
…point to
…the Red Dog Mine road
…in Northwest Alaska
 
But Red Dog was different
One good solid company
they had money
they knew they would be responsible
for paying it back

The West Susitna Road
just like the proposed
Amber mining road
would be counting on
the cost of infrastructure
to be repaid by users
who have yet to show up

Once again
…the build it and they will come approach
…an approach that has failed this state
…for decades on everything from
…seafood to wood chips


Next

…we move to Governor Dunleavy’s
proposal to deal with the Port of Alaska

As we all now the Port of Alaska is
Alaskans lifeline  
and it’s ability to continue
operating efficiently has been
burdened by long running
structural problems.

It's an old port
…and it costs a lot of money to fix.

Knik Arm Port Authority

Governor Dunleavy
is proposing $175 million to
create a port authority
and they decide how to
divvy up the cash

How does that even work?

Seriously
Could there have possibly
been any less thought
put into this proposal?

The Port of Alaska
…handles 80% of Alaska’s
…shipping containers and vans
…and is in desperate need of repairs

Point McKenzie
…has seen only 14 ships
…in the last 20 years
…the structure has
…been falling apart
…and in fact the port
…never should have
…been built to begin with

So just how
is $175 million
and a joint port authority
going to
change the economics
of Port McKenzie?

It does not.

It’s only going to
divert scarce resources
from the only port
that actually matters
to the economy of Alaska

The fact is the port at Point McKenzie
never should have been built
according to the project’s
own economic analysis

Even before the port was built
…their consulting firm noted
…that it was a risky investment
…and
…even with the rosiest assumptions
…the port would still lose millions every year

But Mat-Su politicians
…believed they could make the economics
…of the port work by
…poaching coal shipments from Seward
…cargo shipments from Anchorage
…and dreamed about exporting
…low cost bulk resources
…like woodchips

….which we all know
…is not a market Alaska
…has ever
…been able to compete in

And
…now the governor’s plan
…is to throw good money after bad
…trying to breathe life into a port
…that never should have been built
…instead of prioritizing addressing
…one of the biggest threats
…to Alaska’s supply chain



Ladies and Gentlemen,


But we’re not close,
and the reality is we’ve never been close


Alaska is 63 years old.

We need to grow up.
We need to recognize that
we can no longer live
like a 63 year old
still living in his
parents basement
and still
fantasizing about
becoming an astronaut

Just three years ago Governor Dunleavy
proposed cutting education funding by 25%
and the University of Alaska by 44%

The state was so broke three years ago
…that it couldn’t invest in education
…it cut transportation
…and community support
…all while those cuts
…shifted tens of millions
…on to the backs of local taxpayers

But today
…the state is wasting time and money
…chasing projects that will
…never materialize
…while we completely ignore
…the hard work
…the real work
…of fixing Alaska’s economy


Alaska's infatuation with white elephants
…are a systemic problem
…going back for decades
…but they remain
…a powerful aphrodisiac to politicians

I get it.

What’s sexier?

…Hearing that ANWR
…is right around the corner
…and the free lunch will continue

or

…hearing a five year plan to
…strengthen education,
…invest in communities
…and address the outmigration
…that threatens Alaska’s economy.

The dream
…is always sexier than the reality.

Unfortunately
…we live in reality.

And the reality is
…we have an entire
…closet full of ceremonial gold shovels
…and broken promises
….that Alaska spent billions collecting
…that haven’t produced
…a damn thing
…other than lost time and money

For the last twenty years
…the repetition of failed
…public investments
…in politically motivated projects
…has been mind numbing

The airport rail depot - $30 million
The seafood plant - $50 million
KABATA - $100 million
AGIA - $500 million
The Knik Arm Rail Extension - $200 million

And yet over the
…last twenty years
…while we’ve wasted
…money on
…trains that would never arrive
…Fish dinners that would never be served
..and
…bridges that would never be crossed

We’ve lost
…population
…opportunity
…outside investment
…and we are no better
…off with our social infrastructure


It's time to grow up
and realize
the economy Alaska needs
requires being realistic
not continuing to propose
the next big fantasy project.

It's time to realize that
if we’re ever going to reverse
the dangerous outmigration trends,
It’ requires improving education,
community development and addressing
Alaska’s nagging social problems


Fixing Alaska’s economy
is going to be hard damn work
and is not going to be accomplished
by throwing another golden shovel
in the closet.



Life:

Recently,
former Governor Sarah Palin
was the plantiff in a high profile
trial against the New York Times
…and
the podcast’s own fashionista
Maia Nolan Partnow
has some thoughts
on the former governor’s
courtroom fashion




Closing comments:

…It is time to blow AIDEA up

AIDEA is a public corporation of the State of Alaska,
created in 1967 by the Alaska Legislature

The original purpose of the agency was
"in the interests of promoting the health, security, and general welfare
of all the people of the state, and a public purpose, to increase job
opportunities and otherwise to encourage the economic growth of the state”

However
over the last fifty five years
AIDEA has become a
development dinosaur
and no longer serves
the interests of Alaskans
as well as no longer meeting the needs
of Alaska’s changing economy


This is an agency that
spends too much of its time swinging
for mega project homeruns
while consistently striking out

Their addiction to
large controversial projects
that do little to help Alaska’s economy
except line the pockets
of international companies
can no longer be ignored.

This is an agency that has
gotten so arrogant they
actually have an enemies list.

This entire agency needs
…to be gutted
…and refocused

Let me tell
you my personal experiences
at ACDA
that bring me to that conclusion

In 2018 after I first caught
wind that Nordstrom was looking
to pull out of downtown Anchorage
my agency immediately began working on
a pitch to save the store.

At that same time we had been chasing
JC Penney to buy their parking garage
and so we created an idea that we
believed would save Nordstrom.

We proposed tearing down the JCP garage
redesigning a smaller more modern footprint for Nordstrom
and combining the site with a hotel and parking.

Then
…we proposed reimagining the old Nordstrom
…building into a cool food hall
…possibly working with Simon Mall
…to consolidate their food court into
…the new space thus
…giving them the opportunity to
…reimagine their food court
…into something that would draw
…people to the mall

But while we had the capacity
to buy the building
we didn’t have the $2.5 million
to tear it down.

So I went to AIDEA.


Our pitch was simple
…lend us $2.5 million
…for the teardown costs
…thus creating a platform for
…a $60 million project
…and the revitalization
…of downtown Anchorage

They’re response
…that’s not what we do

One year later
…we went back to AIDEA
…with another pitch

The old Cyrano’s Playhouse Theatre
…in downtown Anchorage
…had been for sale for years
…so after doing our due diligence
…we realized what a fabulous opportunity
…this would be to jumpstart re-development
…on fourth avenue

The beauty of the Cyrano’s property was
…that although the commercial space previously
…occupied by the theatre was empty

…the building hosted 12 apartments
…whose rents would cover the cost of debt service

…so while we were redesigning the commercial space
…for a prospective tenant
…the rents would cover the assumed debt

…so we pitched to AIDEA
…we need to borrow $1 million
…to buy Cyrano’s
we said…
…look we can cover the debt with rents
…this location is a part of downtown
…that desperately needs redevelopment
…and
…we are currently meeting with
…prospective new tenants
…who are excited about the possibilities

AIDEA’s response was
…that’s not what we do

Why not?

AIDEA replied
…Because the building contains housing
…and we don’t lend on housing

But it’s mixed use I argued
…50% is commercial space
…and the pro-forma shows
…that the apartment rents
…will actually pay the debt
…until we bring the commercial
…space on line

I’m sorry they said
…that’s not what we do

No…what AIDEA does
…is ignore the small deals
…that make money and sense
…and instead
…chase mega deals
…where $50 million seafood plant
…turns into a $25 million church
…or a $70 million investment
…in a speculative oil development
…turns into dust.

AIDEA is broken
The entire organization has
become lazy, arrogant
and no longer meets the needs
of Alaska’s changing economy

The management needs to go
…the board needs to go
…and the next governor
…needs to reset that agency
…to better serve the economic
…development needs of Alaska

AIDEA is broken
…and the entire agency
…needs to be blown up
…and rebuilt.

Other recent stories from Andrew Halcro/With All Due Respect:

About & Contact

The writers and artists at True North are independent voices, publishing what they choose, when they choose. Each is his or her own editor and publisher. We are collected here for the benefit of readers looking for thoughtful, timely, out-of-the-mainstream commentaries on contemporary issues in Alaska life and politics. If you’d like to join our roster of regular contributors, or submit a single piece for publication, email us at the address below.

Email True North
This Site Built & Maintained by Abo Dabo Brand