YEAR IN REVIEW: Port project, King Cove, Alaska-Virgin merger
Anchorage municipal attorneys settled half of their tangled litigation over the long-failed Port of Anchorage expansion project but it was more of the same for port officials trying to drum up hundreds of millions of dollars for the scaled back but badly needed modernization plan.
In less than a week starting Jan. 26, municipal attorneys filed documents in U.S. District Court of Alaska announcing settlements with four defendants — CH2M, GeoEngineers Inc., Integrated Concepts and Research Corp., and PND Engineers Inc. — stemming from the lawsuit filed in early 2013 seeking damages for the failed construction project.
The municipality started resolving the case in June 2016 when it settled with MKB Constructors, a construction company that partnered with Quality Asphalt Pavement to install the PND’s proprietary Open Cell Sheet Pile dock design, which was at the heart of the court dispute.
Work on the project — started way back in 2003 — was halted in 2010 and never resumed after extensive damage to installed sheet pile was discovered.
In total, the Municipality of Anchorage settled the port lawsuit against the contractors for $19.35 million.
The legal battle now turns to Federal Claims Court, where the city is also suing the U.S. Maritime Administration, claiming its management incompetence over the project led to the construction problems. The city is seeking upward of $300 million in that case but it is progressing very slowly.
Port officials are moving ahead with the new plan to replace the existing docks, but that is expected to cost roughly $700 million. They are hopeful phase one — mostly a new fuel and cement terminal — of the five-part project can be done with the $127 million left from the first project.
Without the new docks the port has about 10 more years before the steel sleeves now being installed to patch the corroding dock supports start rusting away themselves and begin to limit operations, they say.
And that’s if an earthquake doesn’t knock it offline sooner.
In June, a cruise ship was docking at the port when a 57,000-pound fender fell off the dock because the steel supports gave way due to corrosion. Luckily, that was the worst of it.
As a result the city is examining all options to pay for the new project since state support has to date been nil. That could even include selling the to port to private investors if someone else is looking for a $700 million burden, however slim that prospect might be, according to Port Director Steve Ribuffo.
In a ceremonial attempt to drum up funding support the Anchorage Assembly changed its name to the Port of Alaska on Oct. 24, a gesture intended to emphasize the importance of the ailing infrastructure to all of Alaska, not just its largest city.
Gov. Bill Walker included $40 million, with a requisite municipal match, from the state for the port in his $1.4 billion plan to address the state’s backlog of infrastructure maintenance — a start — but that has many political hurdles to overcome.
No. 2: King Cove road revived
Proponents of a road from King Cove to Cold Bay feel renewed hope under discussions with Interior Secretary Ryan Zinke’s administration for a different land swap than was proposed in the past.
Discussions involve setting up a federal lands appraisal process on 200 to 300 acres owned by the King Cove Corp. that could be swapped with the federal government for land to complete the road with an 11-mile connection through the Izembek National Wildlife Refuge to reach Cold Bay and its all-weather airport.
Under previous administrations since 1997, the community has struck out at attempts to gain the road. At issue is the wildlife refuge designation and its habitat for 98 percent of the Pacific black brant goose worldwide population, according to the Interior Department.
Alaska’s congressional delegation and several Alaska governors have pushed for the road between the small, isolated communities, as it would link King Cove to the large runway at Cold Bay and provide a safer route to Anchorage for those in urgent need of medical care in a region known for treacherous weather.
In June the Alaska Department of Transportation began survey work to identify the least impactful route for the road through the refuge, which took a few weeks.
By July the U.S. House passed standalone legislation with bipartisan support approving the land swap.
The Alaska DOT estimates the road will cost about $30 million, which will likely be paid for by the state.
Sens. Dan Sullivan and Lisa Murkowski are likely to pick the legislation effort back up in the New Year after the major tax and budget issues are resolved in Congress.
No. 3: Alaska-Virgin merger materializes
The parent company to Alaska Airlines, Horizon Air and now Virgin America started the year by reporting a $911 million profit in 2016, a seventh consecutive year of record earnings.
However, the rest of the year was a little more turbulent for the growing company trying to compete with the industry’s giants.
Profitability was not the issue; Air Group continued to report solid financials but its airline’s trademark service started to suffer.
Alaska Airlines has long been the top on-time domestic carrier, but since bringing Virgin America into the fold in the fourth quarter of last year those numbers have fallen. Through September, 82 percent of Alaska Airlines flights arrived on time, which is down 6.5 percent year-over-year.
For Virgin America-flagged flights the numbers are worse. Just more than 67 percent of Virgin flights have been on-schedule this year, a decrease of 9.3 percent.
Additionally, Horizon Air continues to face the same problems retaining pilots as many regional carriers across the country, an issue that forced the airline to curb its schedule in August and September, Air Group CEO Brad Tilden acknowledged in October.
Also in October, company officials said after a roughly four-year experiment, Horizon will stop its service in Alaska next March. The regional carrier has been operating flights for Alaska between Fairbanks, Anchorage and Kodiak. Horizon’s routes in the state will be picked back up by Alaska Airlines Boeing 737s.
Alaska Airlines is also spending about $100 million upgrading its rural Alaska terminals and is working on a new $40 million hangar at Ted Stevens Anchorage International Airport to accommodate its newer, larger 737s.
No. 4: DOT MOU
The Alaska and federal Transportation departments inked a deal in August allowing the state to assume permitting responsibility on federally funded projects, which should speed environmental reviews and save government money, according to the agencies’ leaders.
The memorandum of understanding, or MOU, shifts environmental assessment and environmental impact statement drafting from U.S. DOT sub-agencies to the state Department of Transportation and removes duplicative federal processes and “interagency squabbling,” DOT Secretary Elaine Chao said during a trip to Alaska.
The State of Alaska will still follow the National Environmental Policy Act processes with oversight from its federal counterparts, but will issue its own decisions at the end of the reviews. The standard 90-10 federal-state split on funding for large highway and airport projects still applies regardless of who is leading the studies, so the state will not be adding cost burdens, Alaska DOT Commissioner Marc Luiken said at the time.
No. 5: Railroad, MOA fight over funding
In April, the Alaska Railroad issued its 2016 financials and reported a $7.4 million loss, the railroad’s first annual loss since 1999, and blamed it on Anchorage Mayor Ethan Berkowitz.
That’s because Berkowitz refused to sign a letter agreeing to split federal transportation funds between the railroad and the city; the mayor said the railroad was getting the money on technicalities and the city could better use it for the true public transportation operations as the feds intended.
The standoff that started in 2016 had left more than $23 million with the feds — roughly $15 million for the railroad and $8 million for Anchorage under the earned split — for last year and the first half of 2017, as the Federal Transportation Administration would not release the money without the split letter.
However, by August the sides agreed to resume the historical funding split, with a property sale driving the resolution.
Berkowitz said the 20.2-acre railroad property, to be sold to the city for $1.5 million, is “a critical piece” of land that will help the city progress its much-needed overhaul and modernization of port infrastructure.
Because the railroad is owned by the state, the property sale will have to be approved by the Legislature and railroad officials will be in Juneau next spring to make that happen.