Naomi Klouda

Entrepreneur turns off millennial path of college or bust

Joseph Lurtsema’s entrepreneurial success began at age 19 when he parlayed his knowledge of peaks in the Chugach Mountains into a tourism gig. At the end of taking international or Lower 48 visitors on a personalized hike up places such as Wolverine or Flattop, he drove them downtown to a day’s finish over hotdogs from a favorite street vendor. That business, from 2013-26, filled summers between semesters. The millennial never had to take a paycheck from a traditional boss. Also, contrary to the stereotype, didn’t live in his parents’ basement. “I paid rent and had a roommate,” he said. Lurtsema made enough to support himself and the $1,000 monthly insurance premium to cover his LEEP Alaska Hiking Tours. Now, at 23, he’s operating Lurtsema International LLC, which employs three people. The purpose of this business is to develop digital marketing strategies that utilize social media for building clients’ target audiences “and convert said audience into paying customers and clients,” he said. “I manage the posts, content, information, and other items for my client’s Facebook, Instagram, Twitter, LinkedIn, Pinterest, and other platforms.” In his hiking days, he learned how to market himself. Now he does it for others. “I took people from all over the world on different adventures throughout Alaska. From day tours to multi-day backpacking trips, I hopped in my car with people from Iran, Russia, Philippines, India, Australia, to facilitate a guided hiking tour to let them discover Alaska’s wonders,” he said. “I learned how to market my company using a variety of platforms. My experience running this company gave me an appreciation for marketing, and I soon learned that I preferred marketing my company more than actually guiding hikes.” Lurtsema also found that he couldn’t justify continuing his University of Alaska Anchorage studies, initially setting his goal to be a neurosurgeon. He quit three years in. “It broke my parents’ hearts,” he acknowledged. He also ran out of money, moved back home for a few months and he went to work for a traditional boss. “From September 2016 till July 2017 I worked for a local magazine company to sell paid advertisement spots for the magazine. During my sales efforts, I met amazing people at networking events. I went to the 2nd Annual Young Professionals Group hosted by the Anchorage Chamber of Commerce. From that event alone, I quadrupled my income from the connections I made,” he said. At the chamber events and through other networking, he met mentors who taught him more about marketing. He finished classes, courses, and other exercises on social media marketing. With support from a small network of business owners, friends and family, he officially launched Lurtsema International LLC. Millennials at work Lurtsema has thought a lot about what it means to be a member of the millennial generation — by some definitions those born between 1978 and 1998. Since the “Baby Boomers” — those born in the years after World War II — millennials are likely the most scrutinized generation. They are the first one in history growing up totally immersed in a world of digital technology, which is said to have shaped their identities and created lasting political, social and cultural attitudes. According to a new Pew Research Center analysis of the U.S. census data, millennials surpassed the previous Generation X in 2015 to become the largest share of the American workforce. Pew also calculates that nearly half of all workers ages 25 to 29 completed a college degree. But where do they work? “That’s the biggest problem that I see,” Lurtsema said. “I feel like our public education system failed millennials.” His generation was “scammed” into buying a bill of goods in the purchase of an expensive college education that came with $300 textbooks “that change every few semesters to a new edition.” Trade schools and specialized programs are offering better paying jobs. And they don’t come with a hefty tuition, he notes. “Everybody is getting a bachelor’s of arts degree these days,” he said. “There are so many degrees that make no sense. There’s one that’s Lesbian Dance Theory, I kid you not. I’m not saying that’s a bad degree, I’m saying ‘are you going to get a job?’ Unless you’re a professor in that subject, I don’t think so. “Parents, educators and society have inflated the idea that once you get this college degree you’re going to be set for life, you’re going to live a dream life.” Instead, Lurtsema knows people who have bachelor’s degrees that are working at McDonald’s. And yes, they often live with their parents. (Pew Research Center calculates 15 percent of 25- to 35-year-olds live with their parents.) “As a millennial, I see that, and I see it happening while I’m at school (college) and I say I am setting up myself for failure,” he said. “And a lot of millennials are like this: Here’s the main road. It’s all paved and nice. To the right is a rough, bumpy, dusty road but it leads to the happiness people are seeking.” The bumpy road without college is scary. “Going down it is totally against everything I was taught since I was born. So it takes a lot of courage, drive, motivation and support,” he said. It was his dream to call the shots in his own life by establishing a business based on his interests that would also serve others. When he quit college, everyone was telling him to go back. “Everybody,” he said. “I had maybe one or two people that were on my side. You can put this on the record because I think this is important for millennials to hear, too. Both of my parents were distraught. My dad (Mark Lurtsema) is one of the most supportive people I know. But if you asked if he would want me to go back to college, he would say yes. It brought him and my mom to tears when I quit.” According to what Lurtsema researched, of those raised in the 1960s and 1970s, only 20 percent went to college. That meant their chances of working in their targeted career were excellent. But today’s statistics haven’t caught up with the reality, he said. Many more go to college now, given grants of financial aid and other programs. The market is now oversaturated with college graduates and the demand to employ them isn’t in their favor, he said. He faults the education system for failing to teach basic economic skills like balancing a checkbook. “I knew how to do calculus. But I didn’t know how to balance a checkbook,” he said. “And we are taught nothing about investing.” Lurtsema, a newlywed who married Marria Obina on Nov. 25, is now in the process of buying a condo. Marria is soon to graduate from UAA with an accounting degree. Their dream is to buy an RV at some point, and combine business and adventures on the road. “I’m a millennial with traditional values that have a modern twist,” he said. “We are married, then we are buying a house and we will have kids. That’s the order and that’s the nuclear-stable family. But there’s a twist.” Outside that framework, they want to plan far less traditional career paths. Demand for tech skills Lurtsema’s quest to find a lifestyle-career has led him to seek out an Anchorage entrepreneurial ecosystem that supports his and other millennials’ efforts. One great group, he said, is the Young Professionals Group hosted by the Anchorage Chamber of Commerce. (They meet the second Tuesday of every month). Lurtsema attends meetings of Business Networking International, which has two local chapters. His group is BNI Connectors, which meets 7:30 a.m. every Wednesday at the New York Life Building on Northern Lights. Another tie-in is the U.S. Small Business Administration Alaska Division Office that offers a lot of support and help for new businesses. “I’ve been lucky to connect with SBA Director Nancy Porzio, who is bringing me on to teach small businesses how to utilize social media for their own business,” Lurtsema said. The dates haven’t been set yet. He will be showing small businesses how to grow by increasing their social media footprint. In creating his own business, Lurtsema found there’s a national market need that can be reached from Alaska. In fact, Amazon is soon to offer services-for-purchase and Lurtsema is signing on. “A lot of these companies rose up, but they aren’t doing such a great job for their customers,” he said. The rule of thumb is to make contact with your target audience groups at least three times a week. Then track the results carefully. In his case, he uses a variety of apps to measure market response. He makes weekly reports to his clients and he says they’ve seen results. “I can track everything down to the smallest demographic,” he said. He creates the Facebook account and other social media for his clients. Then he or his employees handle all the interactions. He charges a flat rate of $750 a month per client, and figures he can handle 20 clients between himself and his two employees. His clients range from a local organic restaurant to a furniture store in Seattle. But the Seattle market, which charges up to $3,000 per month for the services that Lurtsema provides, allows him to charge more but still be competitive in the market with a $2,000 fee. Lurtsema doesn’t have a desk or an office. That’s the part that truly separates him from other generations: no furnishings to frame his workday. “Everything I need is right here,” he said, holding up his iPhone. He’s loaded it with apps that go with his work, and can do his work everywhere he goes. “I think it’s fantastic,” he said. “It’s simpler. It’s organized. It’s a lot cleaner.” Over time, he said he’s learned that even though he was raised to believe that gong to college was best, “this business I’ve created has been the number one accomplishment I’ve done. And I don’t need society to tell me otherwise.” Naomi Klouda can be reached at [email protected]

Health care cost transparency rules gain advocates

Officials say they’ve seen benefits of a health care cost transparency ordinance passed by the Anchorage Assembly last February, and now Ketchikan is exploring a similar measure to receive price tags for care. At its Dec. 21 meeting, the Ketchikan City Council heard from PeaceHealth Ketchikan Medical Center, its main local provider, on questions of price transparency. In a statement, Chamber of Commerce President Chelsea Goucher called for an ordinance that would require healthcare practitioners to disclose estimated medical costs to patients prior to receiving treatment. The Ketchikan Chamber advocates an ordinance similar to Anchorage’s to help create better market conditions for consumers, to increase consumer satisfaction and to help mitigate the increasing trend of “medical tourism” to access services in other locations. The Nov. 28 letter stated that the chamber believes the Anchorage ordinance’s requirements are reasonable and can be easily met by any reputable practitioner. “The Anchorage ordinance has been implemented successfully, and is being adhered to by a wide range of service provides, both large and small,” wrote Goucher. Another problem in Ketchikan was that, until recently, the hospital’s billing questions had to be addressed in a time zone four hours away at the other end of an 800 number. That meant additional lag time in getting billing questions answered and lack of transparency, City Council member Janalee Gage said at the meeting. “Then when you get the bill, it doesn’t tell you what the procedure was for. They don’t send receipts to verify you paid. Billing comes from various places around the country,” Gage said at the Dec. 21 meeting. PeaceHealth is a nonprofit health care system, similar to Providence Hospital, with Catholic medical centers in Washington, Oregon and Alaska. Ed Freysinger, the new chief administrative officer for PeaceHealth Ketchikan, told the council the hospital has undergone several changes in billing since he took over in August, including relocating billing tasks to Ketchikan. He told the council he’d like to see a broad debate between all stakeholders before the council adopts a new ordinance. No action was taken by the Ketchikan City Council at the Dec. 21 meeting, but the ordinance, proposed by member Judy Zenge, came at numerous public requests, Gage said. “A lot of people go south for their medical; when it’s cheaper to fly south and see a doctor than it is to stay in town, that tells you it’s expansive,” Gage said. Gage predicts an ordinance will come. “People in the city really want it. Many in Anchorage posted their price lists, but we haven’t had anything like that in Ketchikan,” she said. Providing care for public workers brings extra pressure to bear, Gage said. The City of Ketchikan employs 50 people and pays about $1.5 million annually for health insurance. Powerful spotlight DJ Wilson, executive director of State of Reform, which tracks developments in health care legislation in the Pacific Northwest and Alaska, noted that statewide legislation to create better transparency is stalled. He speculated that local ordinances would also put a powerful spotlight on transparency. But short of a statewide law, what can municipalities achieve? So far, the Anchorage Department of Health and Human Services hasn’t levied any fines on doctors or facilities, said Melinda Freemon, director of DHHS. The ordinance went into effect on April 29 and carries with it a $100 a day fine for non-compliance by doctors or facilities. The Municipality of Anchorage spent $54.5 million on health care in 2016. As one of the muni’s biggest expenses, it paid that amount to insure 5,130 employees and their dependents, said Karen Norsworthy, acting employee relations director. A big motivator for the Assembly to pass its ordinance was bringing down costs, City Manager Bill Falsey said at the time. Employees request this information directly from their medical providers, so the MOA doesn’t have data, on how many employees are requesting the pricing prior to receiving health services, Norsworthy said. Soon after its passage, Falsey said the hope was that standard economic theory would take over. That’s the theory that when price transparency is introduced, prices correspondingly go down. And people might shop around, he added. The ordinance requires health care practitioners and facilities in Anchorage to provide cost estimates to patients who request such information. Upon request by a patient, and within 10 business days from receiving the request, it requires health care practitioners and facilities to provide a written or electronic estimate of reasonably anticipated health care charges to treat the patient’s condition when receiving nonemergency medical services. It also requires health care practitioners and facilities to post a sign in patient waiting areas with specific language regarding requesting cost estimates. It’s meant to help everyone in Anchorage, not just municipal employees, a resolution accompanying the ordinance stated. Providence and Alaska Regional hospitals said they are in compliance with the law by having the notice posted at sites around the hospital, according to their websites. Then, to really put a few sharp teeth into the concept, the assembly added a notice that must be posted by at all medical facilities stating the possible fines of $100 per day up to $1,000 total. Upcoming transparency bills Palmer Republican Sen. Shelley Hughes’ Senate Bill 119 has a ways to travel, as it is currently still in the Labor and Commerce Committee where it was sent April 24 after being introduced. But SB 119 generated enthusiasm among constituents who testified for the need to enact the “Alaska Health Care Consumer’s Right to Shop Act.” This bill would authorize the Division of Insurance to collect, analyze and maintain databases of information related to pricing, but also risk factors for certain conditions, morbidity and mortality rates, and other public health functions. It also seeks a price transparency requirement from medical practitioners and facilities. Hughes is hoping to see this bill advance when the Legislature reconvenes in January. House Bill 123 made it further along, passing 34-6 in the House and it is now in the Senate Health and Social Services and Judiciary committees. That bill would require health care providers to “annually compile a list, by procedure code, including a brief description, in plain language that an individual with no medical training can understand of the 25 health care services most commonly performed by the provider in the state in the previous calendar year and the undiscounted price charged for each of those health care services.” SB 119 carries some of the same wording. Rep. Ivy Spohnholz, D-Anchorage, sponsor of HB 123, hopes the legislation moves on to the Senate floor this session. “It’s the top of my priority list,” Spohnholz said. “Health care costs make up 18 percent of the GDP (Gross Domestic Product) and it’s even higher in Alaska. It’s something we really need to get a handle on. This will help consumers make choices for themselves.” Naomi Klouda can be reached at [email protected]

YEAR IN REVIEW: Onsite consumption decision delayed; voters reject bans

The advocates of allowing onsite cannabis consumption gained some ground this year, but no final decision was made. After running out of time in its two-day meeting in Anchorage Nov. 14-15, the Marijuana Control Board postponed action on the issue until next April. In the closing minutes of the meeting at the Dena’ina Civic and Convention Center, board member Loren Jones made a motion to postpone the previously scheduled onsite consumption vote. This third attempt to pass a measure, brought forth by industry representative Brandon Emmett, would allow businesses patterned on bars to open for the public to allow people to socialize and legally consume marijuana products. The board voted 3-2 in July to approve sending Emmett’s measure out for 60 days of public comment. But Jones put the brakes on, recommending that a new subcommittee be appointed to take up regulations deciding how the public facilities would function. “I don’t want to do this on the fly,” Jones said. “We received 550 pages of public comment that I haven’t even been able to read yet. There are fiscal implications with enforcement staff.” Board member Mark Springer of Bethel, representing rural residents, agreed that it would be better to concentrate on what’s involved in passing the new regulations when there is more time to go through the finer details. But Emmett expressed disappointment that was echoed by business owners. “We’ve debated this for a couple of years. It’s been out for public comment, and motions have been approved,” Emmett protested. “We should no longer waste public resources on this issue. If this is something that’s not in the public interest then let’s vote on it. If the board’s not interested in approving it, then we need to vote it down. We need to settle it.” After reviewing comments and further work on how the public facilities would be regulated, the board likely will take a vote again at its April meeting, Emmett said. No. 2: Prohibition votes fail Voters on Oct. 3 rejected propositions to ban commercial marijuana operations on the Kenai Peninsula and in Fairbanks, where most of the state’s cultivation farms are located. Voters on the Kenai Peninsula went against the prohibition 5,232 to 2,941, or 64 percent to 36 percent. In Fairbanks, voters sent two ballot proposals to defeat. The Fairbanks North Star Borough results were 9,488 against to 4,080 in favor, or 70 percent to 30 percent. The votes weren’t close in any of the voting jurisdictions, noted Cary Carrigan, the executive director of the Alaska Marijuana Industry Alliance. In the City of Fairbanks, voters cast 2,912 against the ban prop and 1,313 votes in favor, similar to the borough at 69 percent to 31 percent. At stake if the measures passed was a significant portion of the state’s cultivation facilities. When the Marijuana Control Board met in Nome in September, it approved 27 new licenses in the Fairbanks and the Kenai Peninsula boroughs. More than 30 businesses in Fairbanks and another 20 to 25 on the Kenai Peninsula were believed to be in line to shut down if the measures passed, according to a count of businesses licensed with the Alaska Marijuana Control Office. In the state and on the peninsula in 2014, the question of legalizing marijuana held narrow margins. The statewide ballot proposition that legalized it in 2014, known as Proposition 2, passed by six percentage points, while voters in the Kenai Peninsula’s four districts rejected it by about two percentage points, according to the Peninsula Clarion. The strongest rejection came in the district containing Kenai and Soldotna, where voters were 4,169 to 3,558 against legalization. Two of the peninsula’s voting districts, however, voted yes — the district roughly south of Kenai, Soldotna and Cooper Landing, and the district south of Kachemak Bay. In Fairbanks, part of the effort to ban cannabis businesses involved community concerns that there were “too many” retail shops and cultivators in the Fairbanks area. After voters in Fairbanks upheld legal operations, Fairbanks Mayor Jim Matherly announced that part of the next chapter would potentially involve limits on the number of marijuana businesses in the city of Fairbanks through a city ordinance. No. 3: Tax revenue closes on alcohol Total taxes collected on the new Alaska industry of marijuana cultivators and product manufacturers was $4.7 million from the first legal sale in October 2016 to this past November, according to the Alaska Tax Division. Numbers from a budget report by Alcohol and Marijuana Control Office Director Erika McConnell to the Marijuana Control Board Nov. 14 showed that the state still takes in more from alcohol taxes than marijuana tax, but the two were growing closer; she showed figures indicating that for the same time period in 2017, alcohol taxes tallied $2.2 million while marijuana taxes came to $1.5 million. She gave these figures when it met in Anchorage for the second time this year, at the Dena’ina Civic and Convention Center. Statewide annual tax collected on marijuana buds and trim steadily climbed between October 2016 and November 2017. The new industry contributed just over $10,000 in taxes its first month when a handful of newly licensed cultivation facilities began paying $50 per ounce for the bud and $15 per ounce for other parts of the plants. From October 2016 to October 2017, $3.7 million in taxes total was collected from marijuana growers. Tax division numbers from fiscal year 2017 report $1.75 million in taxes from 44 marijuana operations. In fiscal year 2018, which began July 1, $2.9 million in taxes was collected from 75 operations. The state also recorded that 76 percent of the facilities paid in cash, said Kelly Mazzei, a supervisor in the Tax Division. This is because marijuana is still illegal on the federal level, so banks are not handling transactions from the Alaska businesses, she said. Naomi Klouda can be reached at [email protected]

Capstone brings telemedicine Downtown

A health clinic in downtown Anchorage, at the heart of the 5th Avenue Mall, may seem an unlikely sight at first glance amid the Christmas tinsel. Near the giant JC Penney department store, Capstone Express is right where it’s needed most, said Dr. Wade Erickson, the doctor who opened it. Downtown is filled with people working in offices, shops and restaurants, or living in condos, homes or mixed-use developments. Not to mention the thousands of tourists who pack the streets in the summer. But there is no health clinic to serve them in a pinch. “The new telemedicine clinic affords tourists, mall employees, downtown workers, and shoppers of all ages the benefit of fast, effective treatment in a location where there are no other viable medical service options within the central city grid,” said Erickson, the physician who started the Capstone Family Medicine in Wasilla in 2003. Staffed by a medical assistant and a receptionist, the location ties in via video streaming with Capstone’s Boniface Parkway clinic in Anchorage. A physician reached remotely via video and other medical equipment linkups can diagnose an illness that acts as the first line of defense. “A lot can be done there, but it is all minor,” Erickson said. “The beauty of it is that the majority of things that can be done with telemedicine are things people don’t want to spend a lot of money on: Looking at whether a cold is pneumonia or the flu. Seasickness patches. Minor illnesses that impact their trip; forgotten prescriptions.” Once a patient is seen and diagnosed, they might be sent on their way with the question answered and medicine acquired, or might require more follow-up at the Boniface clinic. The 650-square foot clinic is open during mall hours and comes equipped with a small pharmacy of medicines that would be prescribed for an array of illnesses. No appointment is necessary. Erickson said he’s waited for more than 10 years for bandwidth to increase for telemedicine to stream sufficiently. And he’s waited for the cost of telemedicine to go down through GCI and other telecom’s expanded rural infrastructure. “Now that has happened,” he said. Clinics throughout rural Alaska already hook into hospitals and larger health centers through telemedicine in the Indian Health Service. But no such options yet exist for remote lodges in Alaska that see heavy tourist traffic, or for general population individuals living rural wilderness lifestyles, he noted. Using this model, Capstone can further expand this service to remote parts of the state. But first Erickson is starting with getting out the word — and examples of how it works — before the public eye in Anchorage. Next stop: a Dimond Center clinic and kiosk is expected to open in spring 2018. To get the word out, Erickson said they’ve put up a telemedicine display at the Capstone Boniface clinic to educate patients. “We’ve been telling hotels, giving out brochures they can put in their hotel packets, and let the cruise industry know,” Erickson said. “Downtown retailers know. We’ve been doing this by hand, going around to individual businesses in the central grid area.” The vision of serving remote locations will be on exhibit through the Downtown location. “You want to have better access to health care, to help figure out whether a person should be medevaced or shipped back to Anchorage by interacting with a physician to figure out how best to treat the person,” Erickson added. The Capstone Family Medical Centers can help individuals access the software for a stethoscope and video camera that interface with the Captstone system. The cost savings from avoiding an emergency trip out of a remote location alone would pay the cost of equipment, he said. On the other end, physicians are on call 24-7. Ultimately, telemedicine also has options for individual parents in Anchorage and for the Anchorage School District. If a child is frequently asthmatic or suffers chronic ear problems, for just two examples, the first line of defense could occur from the comfort of home or the school nurses’ office to save a trip to the doctor, Erickson said. Using an otoscope on location, a remote physician can listen to the child’s lungs. In the Lower 48, telemedicine is practiced in several new examples. Erickson once saw a clinic in a Target store and other malls. “I was really looking forward to bringing this model to Alaska,” he said. Naomi Klouda can be reached at [email protected]

YEAR IN REVIEW: SBA chief hits Alaska, entrepreneurship ecosystem blooms

Alaska’s small businesses gained a boost during the July visit of a top official from the President Trump administration, head of the Small Business Administration Linda McMahon. McMahon visited five local businesses that had gained from SBA loans and other programs in Anchorage on July 20 during her two-day trip to the state. On her “Ignite Tour,” McMahon said she wanted to view firsthand American businesses that benefited from the SBA loan program. She also wanted to mentor companies and startups about programs the SBA offers for government contractors, vets, women entrepreneurs and established companies that want to grow. One of her stops was at the 49th State Brewery, where owners David McCarthy and Jason Motyka were able to show her their popular downtown restaurant and brewery. The co-owners won their second Small Businesspersons of the Year Award in 2017 and met McMahon during their Washington D.C. visit to receive their award. One of the biggest benefits of McMahon’s visit was getting word out about the SBA resources available to help small businesses expand, McCarthy said. “The SBA loan program is self-sufficient. One of the greatest advantages of the loan is that it extends over a longer period of time than a traditional bank would allow,” McCarthy said. “The SBA has a lot of programs to educate them to be more successful.” Other business stops McMahon made were at Kaladi Brothers Coffee Co., the Ulu Factory, Heather’s Choice Meals for Adventuring and Wild Scoop Ice Cream. McMahon also spent a day in rural Alaska where SBA programs have helped small village corporations. She spent July 21 in Bethel touring local facilities and meeting with local business owners and CEOs at Yuut Elitnaurviat, translating to the “People’s Learning Center” for job training. McMahon then took a crowded boat to Kwethluk for lunch where she visited the construction site of the village’s new state-of-the-art school. No. 2 First GEIR The University of Alaska Anchorage welcomed its first occupant of the Global Entrepreneur in Residence program, Nigel Sharp, who’s racked up a string of accomplishments, including inventing a mouse cleaner and founding an international technology start-up. Sharp’s position at UAA involves mentoring entrepreneurs and connecting or creating new startup resources. Community members, students and faculty are able to consult with Sharp. His first day in the 18-month position was June 19. UAA will be in distinguished company with GEIR programs already established at Colorado, Massachusetts and New York universities. The position is funded by private contribution. Sharp lost no time immersing his role into the community of startups and programs meant to lift more good ideas off the ground. Among his accomplishments in six months are founding the Ocean Technology Innovation Sprint, or OTIS, program based on the Google Ventures Sprint process that engages designers, engineers, marketers, finance and startup enthusiasts. They then formed interdisciplinary teams to build on ideas and innovation that solve big challenges in Alaska’s blue economy. He also created an Alaska Innovation Map as a directory to inventory entrepreneurial resources in the state, facilitated a Fairbanks Startup Weekend, an Anchorage Startup Weekend, and created two Founders Circles that give participants the opportunity to share their experiences with peers. Sharp is a British-Armenian entrepreneur and technologist, born in England and raised in Scotland and Ireland. He co-founded an international technology start-up Lionsharp, which produces Voiceboard, the world’s first gesture and voice-controlled presentation tool. Akstartup.com will launch sometime after the new year, a site where Sharp’s innovation map will be available, along with an events calendar to guide startups and an innovation network of mentors. “I’ve been impressed with the energy and ideas, the commitment to diversify the Alaska economy,” Sharp said. “Everything we’ve done has potential for continuation. The next phase for Alaska will be exposure to more startup methodologies and lean tool sets.” No. 3: Building a ‘blue economy’ From the annual Business Plan Competition to Startup Weekend and laying foundation for a blue economy, this year saw many opportunities launch for new technology and service sector companies aimed at diversifying Alaska’s economy. The community was given a look at four new graduates of Launch Alaska’s 2017 businesses, its second group to complete the program, when they gave demonstrations to investors Oct. 13 at the Bear Tooth Theatre. Threat Informant Managed Services, 60Hertz, Helix and Attently completed this year’s business accelerator designed to propel them toward success. The four-month mentorship came with $75,000 toward gearing up each business, and potential for up to $1 million from other investors. It lent each of these startups access to 50 mentors both nationally and locally, Launch Alaska Executive Director Issac Vanderburg said. The “Blue Economy” became more than a phrase this year, a concept of sustainably developing Alaska’s vast ocean resources that came from the Bering Sea Fisherman’s Association in its formation of the Alaska Ocean Cluster Initiative. The blue economy vision is that by 2040 Alaska would grow by 50,000 jobs and $3 billion in wages, approximately equal to the oil and gas industry today, said founder of the Alaska Ocean Cluster Initiative, Joel Cladouhos. Alaska’s blue economy includes existing traditional sectors such as fisheries, coastal tourism and oil and gas, as well as additional “new” blue economy sectors such as ocean technology, renewable energy and marine biotechnology. International and local speakers took up the many issues of blue technology and economy in September at OCEANS ’17, an international conference sponsored by cutting edge ocean technology-based organizations and businesses. At the first collaboration between team members to develop products under the blue economy banner, the Ocean Technology Innovation Sprint took place Oct. 27 after five teams worked 40 days honing business plans. Sharp and Cladouhos shepherded and mentored would-be entrepreneurs. Five good ideas emerged from the contest: a seaweed nutrition bar, a new weir-based fish counting system, a generator powered by tidal energy, an education app to help people certify for marine occupational licensing positions and a fish recognition system to reduce bycatch waste. No. 4: SBA hosts Amazon The year rounded out in a workshop by the Small Business Administration Alaska Division office that brought Amazon north for the first time. Kyle Walker, the head of new business strategy for Amazon Exclusives from the Seattle headquarters, gave plenty of advice for entrepreneurs hoping to crack the code of a global market. Amazon is now opening a “big door” to Alaska’s small business entrepreneurs, inviting them to sell their goods and services via the shopping giant’s network. While there’s talk or hopes that the e-commerce giant might open an Alaska branch — and according to Amazon spokesman Erik Fairleigh, that’s not out of the question — the big topic of the day was how to use Amazon’s network. The panel discussion offered advice on e-commerce from Jon Bittner, the director of the Small Business Development Center; Cat Mason, a SCORE mentor; Zoi Maroudas, founder of Bambinos Baby Food of Anchorage; and Chris Fischer, co-owner of Alaska Beach Stone Lamp of Homer.

Mandate repealed, but insurance policies to take ‘HIT’ in 2018

Just weeks before a new 2.6 percent tax is to be levied against businesses and individuals, the Alaska Chamber says there’s not a moment to lose in convincing Congress it’s a bad idea. Known as the Health Insurance Tax, HIT, or officially as the “health insurance provider fee,” the tax will be collected from Alaska’s 69,000 small businesses that employ about 141,000 private sector workers, according to the Chamber’s numbers. The excise tax was enacted in the Affordable Care Act legislation that Republicans in Congress failed to repeal this past summer and aimed at health insurers to collect an estimated $14.3 billion in 2018. It was postponed from 2015 to 2017, so it hasn’t been imposed yet. Without action by Congress, which repealed the individual mandate to buy health insurance as part of the tax overhaul passed Dec. 20 and needs to pass a spending bill before the current continuing resolution expires on Dec. 22, the HIT tax goes into effect at the turn of the new year and will impact companies that help provide their employees insurance, said Chamber President Curtis Thayer at a news conference Dec. 14 meant to raise awareness and rally businesses to let the potential impact be known. It won’t only be levied against businesses, Thayer noted. It will be collected on any health insurance policy purchased on the federal exchange as well Medicaid Advantage plans. Premera Blue Cross-Blue Shield, Alaska’s lone insurer on the individual market, verified there will be an impact if the tax is levied in 2018. “We agree that if it’s reinstated, the tax would add approximately 3 percent to premiums. We are working closely with our clients and customers, keeping them updated on the potential impacts to their healthcare premiums,” said Melanie Coon, head of corporate communications at Premera. Linda Peters, owner of ProComm Alaska LLC, sees the tax as another big hit on businesses even as they try to grow. “The health insurance tax is just another obstacle to this growth, because it directly raises the price of the healthcare we purchase for our employees and their families,” she said. Peters said if the tax does take effect, it is “several thousand dollars I have to pull from other areas of my company’s budget, including funds reserved for wage increases, hiring additional staff and fixing worn down equipment.” Thayer said the Alaska Chamber, which employs three people, will be charged the tax on its Blue Cross-Blue Shield Premera insurance plans. Thayer quoted an August 2017 study by Oliver Wyman, a global management consulting firm that crunched the numbers. It estimated the tax should raise premiums by 2.6 percent in 2018 by acting as a pass-through tax. It amounts to $500 per family for small businesses and $158 per year for an individual purchasing insurance on the exchange. Another $245 would be collected for seniors and disabled individuals on Medicare Advantage. Chamber members are asking the congressional delegation to support efforts to suspend the tax. “It’s a matter of drawing attention to it, not only to our delegation but other states as well,” Thayer said. “Ideally, we’d like to say ‘make the tax go away.’ But Congress has a way of kicking the can. That’s the path of least resistance. We need a permanent solution but we know we’re not going to get it. So for now, we are asking the tax be suspended again for another year.” Repeal and replace efforts by Congress this past year didn’t address the HIT, nor did it take a fresh look at the Cadillac tax set to take effect in 2020, Thayer noted. The “Cadillac” tax is a 40 percent excise tax on employer plans exceeding $10,200 premiums per year for individuals, and $27,500 for families. It’s called the Cadillac tax because it is supposed to hit only the “best” insurance plans that cover the most, but because of Alaska’s high premium costs it effects nearly every policy in the state. The purpose of both taxes is to help fund the ACA, Thayer said. He warned that if the HIT is suspended again in 2018, both taxes will be stacked atop each other and cause a double whammy on small businesses in the following year. The Chamber is urging Sens. Lisa Murkowski and Dan Sullivan, as well as Rep. Don Young, to work with their colleagues to delay the tax so small businesses aren’t hit with it right after the holidays. To illustrate how the tax strikes local businesses, Tim Agosti, owner of his family’s 50-year company, Refrigeration and Food Equipment Co, said he employs seven people. His number of employees fell outside the mandate to provide insurance, but he provides it as a job benefit. But it comes at a high cost. “The cost is $18,000 per-year per an employee,” Agosti said. “The co-pay is $350 per month per employee. An additional 2.6 percent would go on top of that, and they’re already maxed out in what they can or should be paying.” Agosti was able to buy into the larger employee pool insurance policies at Aetna. Steve Colligan, owner of 3GLP Co., also supplies insurance for his employees. Each expense increase makes it harder to operate a small Alaska business because profit margins are already thin in what’s considered an Alaska recession, he said. “This aims right at small businesses, right at the individual market place and right at the Medicaid Advantage folks. I don’t think this was thought out clearly,” Colligan said. Naomi Klouda can be reached at [email protected]

Judge OK’s counsel to probe Rogoff finances

A federal judge ruled Dec. 15 that the public trustee in Alice Rogoff’s Alaska Dispatch News bankruptcy case may hire a Seattle legal firm with expertise in recovering assets and move ahead with a probe into Rogoff’s finances. U.S. Federal Bankruptcy Court Alaska Division Judge Gary Spraker didn’t buy into an argument by Rogoff’s attorney that such a move would be a wasted expense. Public trustee Nacole Jipping is obligated to examine the affairs and records of Alaska Dispatch News LLC and requires special legal expertise to do so, her attorney, William Artus, had argued in asking Spraker’s permission to hire extra counsel. “To suggest the distribution would be smaller if (another attorney is hired) is not sufficient basis, or any basis for that matter, to not employ special counsel,” Spraker said in response to Rogoff’s bankruptcy attorney, Cabot Christianson, who argued extensively in written and oral arguments against hiring Bush Kornfeld of Seattle. Christianson claimed Rogoff would be the recipient of 88 percent of any money recovered during the Chapter 7 process because she is owed $16.6 million in “loans” she claims to have made to the Alaska Dispatch News. Therefore, she would see the biggest losses in a lower monetary recovery after contingency fees are paid out. “To Ms. Rogoff, it’s just crazy. It’s just crazy if you look at it from the other creditors’ small benefit, after an increase in attorney fees,” Christianson argued. The other unsecured creditors are those dozens of individuals and businesses owed a collective $2.3 million by the former Alaska Dispatch News. Rogoff owned the Alaska Dispatch News for three years from 2014-17 before filing bankruptcy on Aug. 12. The newspaper was sold to the Binkley Co. a month later for $1 million and the company has returned the paper to its original name, the Anchorage Daily News. Spraker further warned Christianson he hadn’t yet ruled on Rogoff’s claim that she will be owed $16.6 million. “You’re jumping to the end,” he told Christianson. After the what’s known as a “2004 examination” takes place in court, Spraker will decide whether to allow Rogoff’s claim as the largest creditor of her former company. That step comes perhaps several months away, after the examination into many financial documents by Jipping, the public trustee, is complete. Rogoff’s attorneys have until Jan. 15 to produce the required financial documents. Christianson so far has given the trustee tax returns for the Dispatch in the years 2014-16, some 2014-15 financial statements, the closing documents for the purchase of the Anchorage Daily News, the sale of property to GCI, and loan documents drawn by Northrim Bank for a $13 million loan that was used for the purchase of the newspaper. Christianson also accused Jipping’s attorney of jumping the gun in allowing Bush Kornfeld to help author legal responses, saying the firm had already started “ghostwriting” for Artus before the judge gave them approval to hire the firm. “It’s a stealth thing by a front man while we get these documents solely designed for litigation,” Christianson complained. If the judge didn’t allow the hire of Bush Kornfeld, “I want it to cease,” he said of the so-called ghostwriting. In granting approval to hire the firm, Spraker said he was permitting them to continue to consult. Christine Tobin-Presser, an attorney with Bush Kornfeld, joined the hearing via video to speak about documents they will need in order to make a thorough examination of finances leading up to bankruptcy. Tobin-Presser has worked for the firm since 1998 in a practice that “emphasizes commercial creditor-debtor issues” as well as Chapter 11 bankruptcy reorganizations and liquidations, according to a biography on the Bush Kornfeld website. Artus had asked to hire special counsel from Bush Kornfeld LLP to represent the trustee “in analyzing and potentially pursuing avoidance actions.” This is a legal phrasing that boils down to whether there are assets out there that can be claimed from third parties that formerly belonged to Rogoff. The prevailing legal concept is that if that property has monetary value, that value should go to the people owed money, Presser-Tobin later explained. Presser-Tobin will help Jipping analyze what apparently are “voluminous” documents pertaining to finances leading up to Rogoff’s Aug. 12bankruptcy. After the Sept. 11 sale of the Dispatch to the Binkley Co., much of the financial bank statements and earnings/losses reports were transferred to the new owners as well. Christianson complained about the “burdensomeness” of the requested documents and some of the problems client Rogoff is having fulfilling the court order to produce them since the documents aren’t in her possession. The GCI purchase of the Anchorage Daily News headquarters, and rental agreements, for example, are on a CD that encompasses 560 pages, Christianson said. Other documents, such as the Northrim Bank transactions, and emails produced by Rogoff while she was publisher of Alaska Dispatch may have proprietary information that isn’t pertinent to the bankruptcy, Christianson said. Rogoff’s personal attorney, James Lister of the Washington, D.C., firm of Birch Horton Bittner &Cherot, also wants to keep separate any documents requested that may be personal to Rogoff, and documents related to the business. Bankruptcy laws address the limited liability corporate holdings, in this case, the Alaska Dispatch News. They cannot, in most instances, address Rogoff’s personal wealth. In fact, Lister argued in a motion asking the judge to deny a 2004 rule exam that “it would be unfair to Rogoff for the Trustee to … (require) the Debtor to produce documents regarding Rogoff’s business affairs that the Debtor does not have.” But Spraker showed little patience about complaints on difficulties retrieving documents. He proposed that since the trustee, Jipping, now has access to Alaska Dispatch bank records and even email, it is up to all the attorneys to agree on how they will access the financial information. After the 2004 examination documents have been thoroughly combed through, then a public 2004 exam will be scheduled at a later date to be determined by Jipping and her attorneys, Spraker said. At that time, Rogoff will be asked questions in court based on what is found in the financials. In overruling Rogoff’s objections to having her finances examined in the 2004 proceeding, the judge is allowing a new phase into Rogoff’s finances as it relates to decisions that may have caused the companies’ debts. Artus had written that he read Rogoff’s objection to having her finances examined as a look into details “that may uncover fact that would lead to liability on the part of Ms. Rogoff, individually.” Artus also clarified that Jipping isn’t asking to examine Rogoff’s personal finances. But this is proving a sensitive point since Rogoff’s divorce from billionaire David Rubenstein was finalized on Dec. 8. Rubenstein’s established wealth is $3 billion. The divorce settlement amount was not made public after being completed in the state of Virginia. A new list of people owed money was released on Dec. 19 with instructions to go out to them for filing claims by March 19, 2018. It lists all original 186 people or businesses owed money. Several of those, such as back rent payments to GCI and Arctic Partners, were paid off, as was a municipal tax bill, according to Rogoff’s filings. The clerk of the bankruptcy court sent the notice: “Creditors who wish to share in any distribution of funds must file an original proof of claim with all supporting documentation and send or deliver it to the Bankruptcy Court.” Naomi Klouda can be reached at [email protected]

On first visit to state, UPS chief touts Alaska role in Asia trade route

UPS International President Jim Barber told an Anchorage group the right timing for his first trip to Alaska had come for a number of reasons, including the hub’s expanding importance in connecting to China and Asian-Pacific communities. Barber, the head of the United Parcel Service International, spoke Dec. 8 before the Alaska World Affairs Council at the 49th State Brewing Co. Barber has been president of UPS since 2013, previously serving as president of UPS Europe. In that role, he helped oversee the second wave of international expansion for UPS that began in the mid 1990s. Barber spoke of UPS’ continued commitment to use Anchorage as a critical “node” in its global logistics operation. In Alaska, UPS employs 1,200 drivers. It lands 110 flights each week. And it pays between $10 million and $15 million per year in landing fees to Ted Stevens International Airport in Anchorage. “On this first trip to Alaska, I came for a couple of reasons,” Barber said. “It was time to get up here and continue to support it in different ways… here there is a great connecting point to the Asian Pacific and China.” Barber cited the statistic that 1 in 10 Anchorage jobs is tied to the airport. It is the fifth-largest airport in the world in terms of cargo throughput. In terms of logistics, Alaska is already a global player, he said. But Alaska could ship more goods to the Far East, given huge demand. “Alaska is a unique node for us as we shift to the concept of China and e-commerce,” he said. China, with its 1.4 billion people and its model of consumerism “is one that is most interesting to me,” Barber said. “It’s an economy whose middle class of 335 million people is bigger than the U.S. population and it is growing and it is continuing to grow. It wants what we have.” He predicts their demand for Western products and services will ultimately swell the economy and change the world in the next 20 to 30 years. Another factor is that of the world’s 50 wealthiest per capita cities, nine are in China. Barber’s Alaska visit, therefore, “focused in the past couple of days on how we at UPS need to support that growth model. Our airplanes that go full come back 20 to 25 percent full of similar product. The more we can do to change that, it will continue to help us invest in Anchorage and Alaska.” He encouraged Alaskan entrepreneurs to keep their products in mind for this huge Chinese market. Despite protectionist trade talk coming from Washington, D.C., UPS believes a lot of good comes from international trade, Barber said. “We don’t plan to back up, regardless of what you hear in Washington and what you hear in London,” he said. While acknowledging it is indisputable that the U.S. lost jobs to overseas manufacturing, he doesn’t want to see the U.S. nix the North American Free Trade Agreement, or NAFTA, in a “backwards move.” “Our job is to refresh it. When we talk about NAFTA it does need to be refreshed, particularly with Mexico,” he said. “But we must do it respectfully.” In fact, after reduced corporate taxes, Barber said his second big Christmas wish is for an easing in world trade relations. In May 2018, Barber said UPS plans to launch a product in the China market, but he declined to say more. UPS made news earlier this year when it provided a grant of $800,000 plus logistical support through the UPS Foundation in a partnership to get vaccines to poor countries, Barber noted. With the robotics company, Zipline International Inc., UPS undertook drone flights in Rwanda starting in August. The drones delivered blood and vaccines to half the transfusion centers in the country, saving lives. UPS will look at using drone technology in the future, but for now, the “culture of UPS” is about the human relationships grounded to communities, he said. Another new technology has transformed UPS’ bottom line and makes customers happy: the On-Road Integrated Optimization and Navigation tool, or ORION. The technology helps UPS drivers determine the optimal way to deliver and pick-up packages. The system relies on online map data, customized by UPS, to calculate miles and travel time to plan the most cost-effective routes. For every mile reduced, costs are also reduced. ORION has helped save UPS $50 million, which also is a reduction in the company’s carbon emissions. A good retail season bodes well for UPS this year. But keeping up with the seasonal spike of 750 million packages to deliver “takes every breath we have to keep up,” Barber said. He would like to find new ways to streamline so that the high e-commerce demand for package delivery can be done “in a way that makes everyone happier.” UPS has adapted and moved forward, and pulled back when necessary, he said. They hire about 100,000 new employees in the fleet each season. Robots may seem the wave of the future, but Barber said that concept keeps him awake at night because of what UPS will lose in its community connections and jobs. Barber mentioned a friend in the wholesale grocery business. He built his own robots to move groceries through a 500,000-square foot warehouse in New York. “There used to be 600 people moving groceries through the building. He can run that building with four people and robots do the rest,” Barber said. “In a logistics industry, robotics hasn’t yet come.” UPS is able to win the hearts and minds of communities by being on the ground in 220 countries, he said. The 110 flights through Anchorage a week is part of the global network, but to “become part of the fabric of a community happens by having feet on the ground,” he added. UPS is bringing on 14 new Boeing 747-8 cargo freighters, and many will flow through Alaska in the coming year. During a question and answer exchange, Barber was asked about establishing an Anchorage distribution arm of UPS. He didn’t rule it out. “In your move as a state from oil and gas to what it will be in the next 100 years, certainly logistics is part of what it will be in the future,” he said. “We don’t have any plans to leave. As UPS continues to grow, Anchorage and Alaska will also be benefactors.” Naomi Klouda can be reached at [email protected]

RCA outlines limits of authority over broadband in report

Whether there should be rules allowing the Regulatory Commission of Alaska more authority over telecoms’ broadband service was one of the basic questions of a report sent to Legislature on Dec. 1. The RCA’s “Broadband Report to the Alaska Legislature,” a 29-page document, was sent to members of the House and Senate Finance committees and the Legislative Finance Division and posted to the agency website. The RCA conducted a study of where Alaska residents still lack broadband internet access and where there are more complete connections. The study required input produced by telecoms GCI, Alaska Communications, AT&T and a dozen others who bury fiber optics or set up cell towers across Alaska’s vast topography. In the end, the first map showing the completed networks was produced in a snapshot that answers the first question raised by Rep. David Guttenberg, D-Fairbanks: Where are the holes? The short answer to that comes at a glance: the multi-colored lines that crisscross and circle coastal Alaska show not much is there to help the Aleutian Chain and two huge donut holes in the middle of the state are separated by the Yukon River. (Communities along the Yukon are connected.) South of the Yukon, Interior Alaska villages such as Ophir to Lime Village lack connections. North of the Yukon River it’s the entire Kobuk region, including Huslia and Hughes. East of the Haul Road, an entire segment from Kaktovik in the north to Chicken in the south lacks infrastructure. In June, Guttenberg attached an order to the budget asking the RCA to study broadband and financing gaps. In response, the RCA issued its Aug. 9 request for companies providing broadband service in the state to answer any or all of two dozen questions the commission had about the current status of broadband infrastructure and what the state could do to help expand coverage, among other things. The seven-page questionnaire inquired about communities where broadband is available and at what download speeds from those providers. But it was a task that started out with questions about its own authority, the commission acknowledged in its final report. State utility regulators with power over telephone, electrical and gas services don’t currently have much of any authority over broadband. The Federal Communications Commission has asserted its authority over broadband and interstate traffic that carries it, largely preempting a state role in regulation. The RCA’s primary authority is over landlines — yes, the old technology that connects phones to the walls. But today, that network of landlines, or wirelines, still matters as the backbone to carrying video, text, voice and data information from one place to the next. “Many people don’t have landlines anymore, but it’s still essential to carry the calls whether that’s from a wireless tower getting on fiber transport to get to where the call is going,” said Alaska Telephone Association President Christine O’Connor. The RCA is enabled under statutes adopted in Alaska in 1990 “to facilitate competitive long distance, focused on ensuring voice service rather than promoting broadband,” the report explains. “RCA regulatory authority over networks is complicated by the fact that mixed-use facilities are used to provide multiple services, with some services outside RCA regulatory authority due to federal preemption.” The FCC has claimed broadband jurisdiction and inter-state traffic, it explains. The FCC defines broadband as “high speed internet access that is always on and faster than traditional dial-up access.” Funding shifts also occurred: the Universal Service Fund subsidies formerly went to telephone carriers to help customers access landline service. In 2009, the policy shifted to focus from ensuring universal voice service to promoting next generation broadband capability. But USF funding goes to the RCA also, known as Alaska Universal Service Funds. A significant amount of USF funding from the FCC – in its various channels such as Connect America – was used to increase broadband capabilities throughout Alaska. Charts in the report explain the USF funding that flowed into the state over the past five years: $46 million in wireline support; $390 million through Lifeline, E-rates (schools and libraries) and Rural Health Care programs (telemedicine); and $1.6 billion in USF support to the Alaska carriers through 2016-2025. But the report concludes that in order to fill in the gaps, millions more will be needed because the lack of broadband occurs in roadless stretches hindered from access by their remoteness and terrain. How much each carrier charges for what internet speeds is also part of the report, some of the first public comparisons of prices by telecoms that often compete. Commissioner Norman Rokeberg, speaking at a November RCA hearing, said finishing the report was difficult because of our “lack of ability sometimes to get the cooperation we’d like.” In fact, the report states, “several regulated telecommunications companies with ISP (internet service provider) affiliates argue RCA regulatory authority does not allow any level of broadband service or network oversight, disputing RCA ability to compel the filing of network information related to broadband.” Two of those were Alaska Communications and the Rural Coalition (made up of Adak Eagle Enterprises, Arctic Slope Telephone Association Cooperative, Cordova Telephone, Interior Telephone, Ketchikan Public Telephone, Mukluk Telephone and seven others). Yet, as the report notes, those same entities also had appealed to the RCA to study practices by GCI when telecoms wanted to challenge what they considered GCI’s monopoly in certain regions of the state. Reviewing what powers the RCA has should be one of the outcomes of this report, the commissioners conclude. “The RCA is one of the few states that has not reviewed regulatory policies after the federal shift to broadband,” according to the report. ATA’s O’Connor said the matter has already been decided in 41 other states; Alaska is indeed behind in this. The RCA percolated ideas down to four questions that, according to a staff memorandum to the commissioners on Nov. 21, the hope is the Legislature will clarify the RCA’s future role over broadband: • Does the RCA have the ability to compel telecoms to file broadband information? • Should the RCA divert its own USF funds to help pay for broadband? • Should the RCA reduce regulatory oversight of providers? Should the RCA address consumer complaints? What aspects of service should remain under RCA oversight? • Should the RCA step in to identify improved access through such measures as reducing right-of-way permitting fees to help encourage broadband deployment? The RCA report notes that plans are on the horizon for further buildout. The RCA believes supplemental reports can handle the task of showing “how and where the recipients of federal support are planning to attack them… and could flesh out in greater detail the communities that will receive improved internet service and those that will have to wait to determine when or if they will be served.” Read the full report at rca.alaska.gov. Read the full report at: http://rca.alaska.gov/RCAWeb/ViewFile.aspx?id=5474a6ad-e182-4574-a1f5-d1410e5beac9 Naomi Klouda can be reached at [email protected]

Salvation Army wins grant to escalate addiction fight

The Salvation Army’s red kettles collect quarters and dollars that may not look like they’d add up to much. But in the face of Alaska’s drug epidemic, those for whom the bells toll include people in treatment. Because the Salvation Army has a track record for casting a wide social safety net and delivering addiction treatment programs, it was a logical step to award an Alaska Department of Corrections contract for treatment programs at two of the state’s largest prisons to the Salvation Army. The prisons are the Hiland Mountain Correctional Center in Eagle River, a women’s prison, and the Goose Creek Correctional Center in Point MacKenzie. The announcement on Dec. 7 means a $10-million, four-year contract was awarded to the Salvation Army by the Alaska DOC. Treatment will be aimed at a total prison population of 2,000 people in its first year, said Autumn Vea, the DOC’s criminal justice planner for substance abuse treatment. The announcement involves a partnership between DOC and the Salvation Army to provide evidence-based substance abuse treatment services. Another 14 substance abuse counselors and two dual diagnosis behavioral counselors will be added to the Salvation Army’s staff to fulfill the contract. “The contract is very specific,” said Pat Ventgen, the Salvation Army’s program administrator. “It specifies a pre-selected curriculum for use. All are evidence-based, which means they have research behind them that they are effective.” Commissioner Dean Williams talked about the epidemic proportions of Alaska’s current plight while making the announcement. “As a state, we continue to fight high rates of alcoholism and drug abuse — issues that have plagued our communities. Drug and alcohol addiction drives the crime rate, and devastates families. Our inmate population reflects these tragic facts,” he said. Alaska’s dismal record of prisoner deaths — 25 inmates died in an 18-month period in 2014-15 — has caused the DOC to re-examine the way it handles inmates suffering drug withdrawals and other health conditions related to their addictions. Williams was the author of the report that analyzed the 25 deaths for the DOC and concluded there were errors on the part of prison officials in several of the deaths. Gov. Bill Walker called the report’s findings “disturbing” in his announcement Jan. 28, 2016, after he had fired former DOC Commissioner Ron Taylor. Williams was named to replace him. In addition to other named problems, state prisons and jails lost their primary provider for treatment programs in early 2015. Akeela Inc., bowed out of its contract, leaving DOC scrambling. At the tail end of 2017, they are just now launching a nationally tested treatment program. Lost contractor Prior to issuing a new request for proposal, or RFP, to gain a new treatment contractor, DOC filled in using professional staff to help offenders complete treatment before being discharged. DOC also split up the RFP by regions so the “whole prison system for treatment doesn’t crash if you lose a contractor,” Vea said. For the Anvil Jail in Nome, the Norton Sound Health Corp., gained a $300,000 contract to provide treatment. In Kenai, the Cook Inlet Tribal Council on Drug and Alcohol Abuse was awarded a $600,000 contract for Wildwood Correctional Center. Elsewhere in the state, DOC pays fees-for-services but does not contract out treatment, Vea said. After granting the contracts to the Salvation Army for the two largest prisons, the DOC is starting over implementing a new program for all 12 prisons. DOC also is training guards and other staff in the new treatment programs, Vea said. Therapeutic communities will be segregated from the general prison population at Hiland and Goose Creek, which will require staff training about what this kind of therapy “communities” entails. “We’re retraining everyone,” Vea said. “Especially those that work in the segregated housing unit where inmates get the support of other offenders in that same level of care.” The DOC was granted $1 million as part of the 2016 criminal justice reform under Senate Bill 91. Vea said the $1 million went toward the state contract with the Salvation Army to help fund the $2.5 million allotted for this year. The total budget for substance abuse is $5.572.9 million. So far, no money was appropriated after the opioid epidemic was declared by Walker or President Donald Trump, Vea said. But new procedures aimed at those who suffered opioid addictions started immediately in the prisons in March after the governor’s declaration, she said. The Salvation Army contract calls for starting with about 600 women inmates at Hiland Mountain and 1,400 male inmates at Goose Creek. The number of inmates targeted in this first round of treatment ranges from an intensive curriculum aimed at about 364 inmates per year at Goose Creek to another 27 people who are under dual diagnosis in what’s called the Charlie Pod. About 200 to 400 can be accommodated in a program aimed at opioid addictions, Vea said. At Hiland, the Salvation Army will be treating women segregated into a therapeutic community. “Prison is a good place to receive treatment. They aren’t as distracted, though there are times when they will need to mingle with the general prison population,” she said. Track record The Salvation Army’s Clitheroe Center in Anchorage opened in 1976. Today the facility has 42 beds in a residential program that provided treatment to 221 clients in 2016 and 294 in 2017. The outpatient program treats another 30 to 40 people per year. Clitheroe operates on a $3 million annual grant from the Department of Health and Social Services, $300,000 from insurance and Medicaid, $150,000 from miscellaneous grants, and $225,000 in cash fundraising. Another $425,000 comes from in-kind donations. Of the 294 clients receiving help in 2016, 17 percent had opioid dependence as the primary diagnosis, Salvation Army Communication Director Robert DeBerry said. Another 30 percent had opioid dependence as a secondary diagnosis. The Clitheroe Center has long experience in treatment methods, but in administering this new prison program, it will use the pre-selected DOC curriculum. Called “A New Direction,” it was developed by the Minnesota Department of Corrections. The individual programs are gender specific. They all fit in the category “cognitive behavioral therapy,” Ventgen said, which stresses the use of interventions and techniques focused on thinking patterns. As thinking patterns change, so does behavior. “We bring to the table our emphasis that we reach out to each individual as an individual and integrate them into our network of support,” Ventgen said. “Clitheroe is based in Anchorage but we have offices throughout the state. We can be there to help them in their recovery and other difficult issues as they reenter society, with housing, food, family support.” The Salvation Army oversees emergency housing for families as one of its most expensive programs. It transitioned 109 families to permanent housing in 2016 after a limited 90-day stay. The cost for that program is $3,700 per individual to stay at McKinnell House, which has 16 units and a capacity of 75 beds. The ability to continue on helping represents a “warm handoff” from prison to a stable life, he said. “People in recovery need a great deal of support.” Christmas programs Back to the role the Red Kettles serve in the Salvation Army’s safety net: this year’s goal is $700,000, which would put it slightly better than the collection from 2016, DeBerry said. At the annual Season of Giving Luncheon, which is the Red Kettle kick off, they raised $164,000. “That was a fantastic start to the season,” DeBerry said. Along with quarters and dollar bills, mystery gifts are slipped into Red Kettles ranging from “gold coins and diamonds to large cash donations and even wedding rings,” DeBerry said. The money goes to operational funds for all of the Salvation Army’s programs, including Clitheroe Center. “That way no one is turned away because they can’t pay,”DeBerry said. Donations go a long way because 82 cents on the dollar is put into programs, not administration, he added. ^ Naomi Klouda can be reached at [email protected]

With repeal pending, IRS will enforce mandate on 2017 taxes

Republicans in Congress are aiming to repeal the health insurance mandate tax penalty before the holidays, but the IRS still plans to enforce it when people file their 2017 returns next year. Here’s the message from the IRS: “For the upcoming 2018 filing season, the IRS will not accept electronically filed tax returns where the taxpayer does not address the health coverage requirements of the Affordable Care Act,” wrote IRS Spokesman Anthony Burke, in response to a question from the Journal. “The IRS will not accept the electronic tax return until the taxpayer indicates whether they had coverage, had an exemption or will make a shared responsibility payment. In addition, returns filed on paper that do not address the health coverage requirements may be suspended pending the receipt of additional information and any refunds may be delayed.” Burke emphasized that “taxpayers remain obligated to follow the law and pay what they may owe at the point of filing. The 2018 filing season will be the first time the IRS will not accept tax returns that omit this information.” According to the IRS, 19,970 Alaskans paid the penalty taxes instead of purchasing health insurance in 2015 and a similar number is likely for 2016. The tax, called a penalty, fine or the individual mandate, is one Congress may ditch in the current tax reform bill. For 2017 it comes to $695 per individual and $347.50 per child, or 2.5 percent of annual income. The penalty payments by Alaskans in 2015 totaled $12.5 million. The IRS is prohibited by law from garnishing wages or other means to collect the penalty tax, but it can reduce the amount of refunds by the amount of the penalty owed or deduct it from future refunds. More Alaskans chose to pay the penalty than those who purchased health insurance on the federal exchange this year. Premera Blue Cross-Blue Shield estimates it currently has 16,000 enrolled on its various levels of plans, according to senior spokeswoman Melanie Coons. If, in its sweeping tax reform bill the individual mandate is removed, relief won’t arrive from the penalty until 2019 or whatever effective date is attached to the legislation, said Matt Shuckerow, spokesman for Sen. Dan Sullivan. The IRS breaks down the Alaska income groups of those who paid the fine, or “health care responsibility payment,” as Burke said the tax is called by the IRS. Some 4,230 of those earned an income between $10,000 to $25,000. These people would likely qualify for Medicaid or Medicare but apparently didn’t apply. If on either of those government programs, they wouldn’t have to pay the penalty. Twice that many, or 8,420 Alaskans, are in the $25,000 to $50,000 income bracket. Just more than 5,000 earned an income in the larger ranges between $50,000 to $100,000. Another 40 listed an income between $500,000 and $1 million. Some 6.5 million people across the country also paid the individual mandate penalty, according to the IRS. Of those 79 percent make less than $50,000 a year. Sen. Lisa Murkowski wrote in a recent editorial that Alaskans paid more than $9 million to the IRS under this penalty in 2014, and over $12 million in 2015. She favors getting rid of the mandate in the new tax reform bill. Sullivan and Rep. Don Young also have spoken in favor of ridding the tax. “There are Alaskans making the calculated risk to go without insurance and pay the tax,” she wrote. “They prefer to take a gamble, pay for care out of pocket, and hope nothing too bad happens because the insurance available to purchase is unaffordable. Eliminating this tax would allow Alaskans to have greater control over their money and health care decisions.” Murkowski wants to protect gains made in certain provisions of the Affordable Care Act while giving states more control. “(That’s) why I have been working for bipartisan solutions to the health care challenges we face. Instead of taxing people for not being able to afford coverage, we should be working to reduce costs and provide options,” Murkowski wrote. But insurance companies, hospitals and doctors have disagreed about removing the mandate on the fear that people need that “stick” along with the “carrot” of premium subsidies or they won’t join insurance pools. Fewer people sharing costs, Premera’s President Jim Grazko has said, helps drive Alaska’s high costs of insurance. Another reason Alaska’s costs are high is because the individual market risk pool includes people who experience chronic illnesses and consume a majority of the health care services in the state. Sullivan, in a Nov. 30 press conference, said he has spoken to Gov. Bill Walker’s office about the impact of losing the mandate. He spoke to people “focused on health care and they don’t think removing the mandate will increase premiums in the state hardly at all,” Sullivan said. He also said the mandate is a regressive tax on middle class and working families, pointing to the statistic provided by the IRS that shows 80 percent of those who paid the penalty earn less than $50,000 a year. Coons said that since open enrollment began Nov. 1, Premera saw a surge in web traffic and phone call inquiries the first two weeks of open enrollment. The insurance company has ad campaigns letting people know the price of premiums have dropped, thanks to the Section 1332 “innovation” waiver Alaska was granted under the Affordable Care Act provisions. When Alaska gained the waiver in July, $48.9 million in federal funds will go to the Alaska Reinsurance Program, or ARP, in the coming year, which when combined with $11 million in state funds allowed Premera to lower its rates for next year by more than 21 percent. The five-year waiver will send about $332 million to the ARP. The ARP was created by the Legislature in 2016 and with $55 million in funds collected from every insurance policy sold in the state, Premera was able to reduce the 2017 rate increase from 42 percent to 7 percent. Further optimal financials allowed Premera to repay the Alaska Division of Insurance $25 million into the ARP, as announced Nov. 29. Premera is also the lone company offering Alaskans individual insurance plans on the federal exchange after three companies exited in 2016. With lower rates, the 1332 waiver uses the savings from smaller premium subsidies paid by the federal government to cover the costs of 33 expensive medical conditions. These remain in place even if Congress removes the insurance mandate. Premera was able to reduce Gold plans in 2018 by 26.7 percent. Still, the costs Alaskans pay for insurance, even with the federal subsidies, is often three times higher than a resident of Washington state, who pays in the $300 per month range, according to the Seattle Times. Insurance Division Lori Wing-Heier noted in the Nov. 29 announcement that Alaska has gone from the most expensive premiums in the country to the fourth-highest for 2018. Silver plans for Alaskans will go down an average of 20.6 percent, though the reduction was to amount to 29.0 percent before CSR funding was eliminated, Coons said. Bronze plans will go down an average of 23.9 percent. To show how that cost reduction translates, Coons said that for the Preferred Plus Silver 3000 HSA plan, a 40 year old non-smoker in Anchorage paid $879 in 2017, in 2018 they will pay $709. Naomi Klouda can be reached at [email protected]

Fairbanks workshop ponders faster internet solutions

Residents of 17 townships in Minnesota formed a cooperative — not so different from the old electric co-op model — and created RS Fiber to bring broadband to some 6,000 households. Town voters agreed to fund RS Fiber’s $45 million network by bonding for seed money and borrowing from private investors, including local banks. Seven years later, they had fast, reliable broadband via, in some instances, towers built onto existing grain elevators and municipal water towers, Mark Erickson of Gaylord, Minn., told a gathering Dec. 2 in Fairbanks. A “Building Better Broadband” workshop organized by Rep. David Guttenberg, D-Fairbanks, brought two experts north to talk about how their communities pursued alternatives after getting left behind in the internet age. Small markets often don’t pencil out for telecoms to invest in rural pockets of America. As a result, “gigabit cooperatives” like RS Fiber have emerged to fill the gap. “The point for me is that there are other things we can do if the providers won’t do what we need,” Guttenberg said. He’s taken perhaps the most active role as critic of Alaska’s telecoms, which he says are not building out fast enough to help Fairbanks and rural areas keep economic and educational pace with urban Alaska. In June, he attached an order to the budget asking for the Regulatory Commission of Alaska to study broadband gaps. The workshop was Guttenberg’s latest effort to explore new options. The central issue, as Guttenberg identifies it, is inconsistent coverage across the Fairbanks area. “There are gaps all over Fairbanks between this service plan and that service plan and it’s creating inefficiencies,” he said. “If they don’t want to fix it, maybe we will.” In a second example Guttenberg’s workshop brought to the Interior, a small Missouri electric cooperative decided to build and operate a fiber optic network to serve residential and commercial members of its co-op. Ralls County Electric Cooperative, or RCEC, won an economic stimulus grant from the American Recovery and Reinvestment Act, the 2009 “stimulus” package from which GCI also received some funding for its TERRA broadband build-out in Alaska that was completed this summer and now serves about 45,000 residents in Western Alaska. The $9.5 million grant, with a matching $9.5 million loan from the same program, paid for the electric cooperative to form a subsidiary known as Ralls Technology. It serves more than 1,000 households and is building out to serve neighboring communities, said Bob Winsel, a systems administrator at RCEC. Why the gap? Christine O’Connor, the executive director of the Alaska Telephone Association, said a five-year period during which Universal Services Funds, or USF, were cut to Alaska telecoms is a big part of the problem. She attended the Fairbanks meeting, and has had several discussions with Guttenberg about the lagging broadband issue. “We did have a slowdown in deployments during a five-year hiatus on support that was dramatically cut,” O’Connor said. ATA is an advocacy organization that includes about 20 small and large telecom members that operate in Alaska, from GCI to Mukluk Telephone Association. “Right when they were trying to deploy new broadband they sustained 20 percent in cuts,” O’Connor said. More recently the telecoms shared in new funding streams, including the 10-year, $1.5 billion Alaska Plan. While some programs were cut this year, including Rural Health Care funding that subsidizes hospitals and clinics, others rebounded, O’Connor said. “Plans they had started back before the funding cuts were all finalized late last year. Now there is a ton of deployment by different telecoms. But there was that window when projects weren’t moving forward,” O’Connor said. During that time, those connected to internet were working on 1 or 4 megabit speeds, too slow for downloading a new Word program and certainly impossible for streaming Netflix or gaming. Alaska Communications, one of the three companies providing broadband for Fairbanks, is planning a 2018-2025 build out to provide 32,000 homes in the Fairbanks North Star Borough and in the Kenai Peninsula Borough with new fiber optic services. The funding stream that allows this for Alaska Communications comes from the Connect America Fund, one of the Universal Services Funds to help rural disadvantaged communities. “The goal is to build out the network as quickly as possible,” said Alaska Communications Director Of External Affairs and Corporate Communications Heather Cavanaugh, who also attended the meeting to give information about the build-out. The Anchorage telecom is promising at minimum a 10-megabit download speed and 1-megabit upload speed. The Federal Communications Commission decided on a threshold of 25 megabit-per-second internet connection speed as sufficient to support a household. To qualify for Connect America Funding, the minimum speed Alaska Communications must provide is 10 megabits; that’s enough that multiple people in a family can stream a video and be on the internet at the same time. “We’ll be doing our best to reach even higher speeds in this initial build and to upgrade over time,” Cavanaugh said. Customers in Fairbanks have worked with “4 and some have 1 megabits, which is why they are frustrated with slow service,” Cavanaugh said. “That’s why we worked hard to secure the USF-Connect America Funding so that we could install the broadband in the more rural communities and in the North Star Borough. “We’ve wanted to upgrade and improve speeds for a long time.” Faster speeds doesn’t just relate to Netflix. It improves education, health care, safety and the quality of life for many Alaskans, Cavanaugh said, in alignment with Guttenberg’s goals. Another near-future deployment is OneWeb’s partnership with Alaska Communications to provide low earth orbit, or LEO, satellite connections. The 900 LEO satellites will begin to be deployed in 2018 and early 2019, with Alaska access set to be available in late 2019, according to the timetable estimate offered by Alaska Communications CEO Anand Vadapalli. That will mean multiple options and different technology for different locations in areas that can be served with high speed internet, Cavanaugh said. The Matanuska Telephone Association, which owns AlaskaConnect, also has offered its internet services in Fairbanks and CEO Michael Burke presented at the Fairbanks workshop. “MTA is doing some fiber optics in Fairbanks. The challenge is more in the outlying areas. The message I wanted to portray (in Fairbanks) is that if the business model made sense, it would have already been built,” Burke said. He saw a lot of difference between the Lower 48 gigabit cooperatives’ and Alaska’s situation. “They can probably do construction year-round,” he said. “They don’t have these vast distances to get infrastructure.” During the period from 2011-2016, the FCC pushed a broadband goal of better build-out in rural Alaska, but at the same time, “cut the funding to do it,” Burke said. “There was a disconnect on the policy and it was creating real problems.” MTA has a similar problem to Alaska Communications in Fairbanks: customers waiting for faster-speed upgrades. The initial infrastructure was built but doing upgrades to create faster service and adding in new customers was slow coming. “Now the funding is stabilized, but it didn’t actually happen until late 2016. Now we have the funding and we’re trying to build out as fast as we can,” Burke said. “We have invested in $25 million on new fiber infrastructure to get better broadband to MTA customers. There’s 20,000 to 25,000 customers, new or that we’re upgrading, as well. It’s been pent-up demand.” Additional issues are about to make timing out infrastructure improvements more difficult and costly, Burke said, whether it would be for any future co-op or for telecoms. The Department of Natural Resources is raising right-of-way studies by 600 percent, Burke said. The Alaska Railroad has also revised right-of-way annual fees, he said. Currently, telecoms are using a fixed wireless solution with fiber optic combination. “I could see a business model where you get business to the customer then plan down the road for fiber or better infrastructure,” Burke said. “That’s the challenge.” A Fairbanks co-op? Guttenberg has issued a challenge to telecoms to fix Fairbanks’ internet issues or the community will look at other options. “We’re going to put the workshop presentation out there for web viewing and see what happens,” Guttenberg said, meaning he wanted others in Alaska to know more options. “No one model works everywhere. Every community is a different situation.” At the end of Erickson’s presentation on RS Fiber, Guttenberg said he spent some time showing Erickson around Fairbanks. “In his opinion, looking at us, he said ‘you have all the tools to look at a solution,’” Guttenberg said. “It is time to look at the options, see what has worked elsewhere, and get to work on solutions here in Alaska.” ^ Naomi Klouda can be reached at [email protected]

GCI, Alaska Communications weigh in on net neutrality repeal

While many are watching what the Federal Communications Commission will do in its upcoming vote on net neutrality, local carriers predict Alaskans won’t see much different in what’s already an “open internet” policy. Christine O’Connor, the executive director of the Alaska Telephone Association, said the rules of net neutrality over the past two years caused confusion among Alaska’s nearly 20 large and small telecom member companies about what it was supposed to do. “As far as net neutrality, I don’t expect ATA’s member companies’ practices to change,” O’Connor said. “The uncertainty of the existing rules has been a concern in the last couple years, so I think returning to the light touch regulatory status the Internet had until 2015 will be welcome to most members.” FCC Chairman Ajit Pai has advocated for eliminating net neutrality in a Dec. 14 vote when the FCC conducts an open commission meeting in Washington, D.C. Fourth on its list of agenda items “Restoring Internet Freedom,” does not mention the words “net neutrality:” “The Commission will consider a Declaratory Ruling, Report and Order, and Order that will restore Internet Freedom by returning broadband Internet access service to its prior classification as an information service, and reinstate the private mobile service classification of mobile broadband Internet access service. The item also will eliminate the Commission’s vague and expansive Internet Conduct Standard, along with the bright-line rules. Additionally, it will modify the transparency rule to promote additional transparency, while eliminating burdensome and unnecessary requirements.” But in plain language, Pai says he made this proposed rollback because current FCC rules have “depressed investment in building and expanding broadband networks and deterred innovation.” Pai vowed that “the federal government will stop micromanaging the internet” and to “simply require internet service providers to be transparent about their practices so that consumers can buy the service plan that’s best for them.” A bevy of complaints from groups and individuals herald the move as one that will yank consumer protections spelled out in 2015 and adopted by the FCC. The fear is that the internet becomes a commodity in the hands of big companies rather than an open road traveled by consumers. The concern is that big telecoms can charge for faster internet services or charge fees for access to certain sites in an effort to steer markets, according to the National Consumer League, which issued testimony for the upcoming Dec. 14 meeting. For example, companies like GCI and Alaska Communication, two of the larger entities in this state, could charge in a multi-tiered system that limits lower-cost users from access to fast internet because they don’t pay as much. But GCI and Alaska Communications have pledged they won’t do that. “GCI customers won’t experience a change,” said spokesperson Heather Handyside. “GCI has never wavered in our belief that customers should be in control of their own internet experience. We’ve adhered to that philosophy for more than two decades — long before the 2015 Net Neutrality order — and we will continue to adhere to that belief regardless of any decision made in Washington, D.C.” GCI contends that, on the principal of “open internet,” it doesn’t “block, prevent or otherwise impair our customers’ freedom to direct their own online activity. This is a commitment we stand by unequivocally. And that will not change,” Handyside said. Alaska Communications spokesperson Heather Cavanaugh said “nothing is changing in the foreseeable future for our company or our customers as a result of this pending policy change.” She said the company believes good public policy encourages innovation, investment, and allows free market principles to work. “Alaska Communications does not prioritize or discriminate against common Internet traffic regardless of source, destination or type except as required for network management,” she wrote in an email. But could there be changes? Cavanaugh said that while the company doesn’t “speculate on pending regulation, we do not anticipate changing our practice of not prioritizing or discriminating against common Internet traffic.” One of the key questions posed prior to passing the so-called net neutrality FCC order was this: who regulates the internet? In 2015, under President Barack Obama, the FCC passed the open internet order, which treated the regulation of broadband as a utility, similar to electricity or gas companies that go before regulatory bodies to justify and ask permission for raising rates on their customers. But unlike utilities, no agency was in charge of regulating the rates charged by internet providers. Until net neutrality, the FCC had not stepped up to take a position, O’Connor said. Among other rules, companies were officially banned from offering tiered services — fast and slow lanes for different service in an attempt to preserve “net neutrality” — the principle that all traffic online should be treated equally. An ombudsman was even established by the FCC to police complaints about net neutrality. O’Connor said the discussion in Alaska has continued somewhat in requests to the Alaska Regulatory Commission as the logical body to hold telecoms to some level of accountability over internet services provided to customers. But the FCC has asserted its jurisdiction over internet matters just as it is the commission that allocates federal subsidies. Yet, there remains a gray area where the RCA retains some jurisdiction of its own, and there are plenty of questions, O'Connor said. One request was for a legislative report to be completed by the RCA by Dec. 1, inserted in the 2018 budget in late June by Rep. David Guttenberg, D-Fairbanks. He wanted the RCA to document broadband coverage gaps in Alaska to provide the Legislature with information. But a major aspect of the problem, for Alaskans at least, “is that you have to have internet in order to care about net neutrality,” Guttenberg said Nov. 28. He has contended that though Alaska’s telecoms share in billions of federal subsidy dollars, broadband services aren’t universally available in Alaska. “There are huge gaps and holes in Alaska broadband availability in certain areas of the state,” Guttenberg said. “More than $200 million comes to Alaska in Universal Services Fund subsidies each year. But in my area (Fairbanks) it’s a broken system.” Guttenberg oversaw a public dialogue over the weekend that focused on Alaska’s lack of broadband as an economic downfall plaguing certain communities. “If it’s gotten this far, odds are it’s going to pass,” Guttenberg predicted of net neutrality repeal. “But in Alaska things are different on that topic because you have to have internet before you can care about whether or not there’s net neutrality.” Equal access to the internet hasn’t been achieved by Alaskans, he argues, and Guttenberg points out that Pai is no stranger to Alaska’s broadband problems. Pai has taken extensive enough tours in Alaska to claim broad knowledge. When he wrote his dissenting opinion about the Alaska Plan — which will pour $1.5 billion in Alaska telecom projects between 2016-2026 — he had this to say: “I have seen firsthand what broadband means for Alaska. I have toured the Arctic Regional Supercomputing Center in Fairbanks. I have touched the fiber optic cables that have brought high-speed Internet access and economic growth to the Mat-Su Valley. I have spoken with the board of the Alaska Native Tribal Health Consortium about how telehealth allows the Southcentral Foundation in Anchorage to connect native Alaskans statewide. “I have heard what broadband means to the Gwitchyaa Zhee Gwich’in Tribal Government and have seen what it’s meant for Tatitlek, a traditional Alutiiq coastal village. And I have met patrons of the Tuzzy Library and students at the Ilisagvik Tribal College in Barrow, 320 miles north of the Arctic Circle, about how the Internet has helped keep tribal communities informed and intact.” But he argued that Alaska’s broadband problem wouldn’t be solved by the Alaska Plan because there were too many middle mile gaps in services between broadly scattered communities. ^ Naomi Klouda can be reached at [email protected]

Juneau physician secures three licenses for cannabis operation

Editor’s note: The story has been updated with a correction from Dr. Perez’s attorney Jana Weltzin about her statements to the board on whether Perez has ever issued a prescription for medical marijuana. Weltzin stated incorrectly that Perez had never written a prescription for medical marijuana, which has been legal in Alaska since 1998. In fact Perez told the board in response to questions that he’d issued “a handful” of medical marijuana prescriptions over the past 10 years in accordance with current Alaska regulations. Weltzin’s incorrect statement has been removed from the article and she provided the following statement from her client: “Mr. Perez understands that Alaska has two statues for the use of marijuana. He has the full intention to follow both guidelines as described by state regulations.” Dr. Norvin Perez, a medical physician at the Juneau Urgent and Family Care Center, was approved for three marijuana business licenses during the board’s two November meetings in Anchorage. All three — cultivation, manufacture and retail — will all be housed under the same roof in a building Perez owns. It is the same building that holds the Juneau Urgent and Family Care Center in an industrial-commercial zone of Juneau called Old Dairy Road. The application was unique, noted Marijuana Control Board Member Loren Jones, also of Juneau, because it’s the first time the board has licensed a practicing physician for multiple marijuana operations. “It’s a very unusual situation where he is a doctor at Juneau Urgent Care and he will own the marijuana businesses in the same building,” Jones told fellow board members. There’s inherent tension between Alaska’s medical marijuana laws outlined in Alaska Statute 17.37 and the new recreational marijuana laws, outlined in AS 17.38. The primary one — at least for board members asking Perez questions while scrutinizing his application — is that business owners are prohibited from written and advertised claims about marijuana’s curative powers. Many violations issued by the Marijuana Control Office enforcement agents over the past year have been against businesses caught advertising claims that cannabis can help with ailments ranging from anxiety to cancer. Mark Springer of Bethel, the board member representing rural Alaska, asked the doctor if he was aware that in establishing the businesses, he’s in the recreational industry where health claims are not permitted. Perez said he did. “I appreciated his transparency,” said Brandon Emmett, a board member from Fairbanks representing the cannabis industry. “He will need to be cautious about how he operates his business. He’s got to have a clear line between his role as a physician and a role running his business, cautious about not bleeding the two into one another. I personally don’t see a conflict.” Attorney Jana Weltzin, representing Perez before the Marijuana Control Board, wanted to be clear: “He recognizes there are medicinal values. However, he will not be talking about the curative, medical or therapeutic value (in his business). There is no connection between the two.” Alaskans are seeing a dichotomy between medical and recreational marijuana, Weltzin said after the meeting. “I don’t think I can explain why this is an issue,” she said. “Medical marijuana has been established in our state before I was born. Medical marijuana has been lost in the dust of the recreational market. If the industry is smart, they will lobby for rights, to give rights to medical users, in the recreational market. Right now we don’t have that.” Weltzin specializes in the new body of law related to recreational marijuana that the board has adopted since it formed in 2015. “The medical marijuana statue allows gifting and not exchanging marijuana for money,” she said. “Recreational authorizes sales for compensation. One is a commercial market and one is a gift market. That is the distinction.” Why the commercial market cannot advertise marijuana’s curative powers relates to the board’s attempt to remain neutral. Another reason, said Springer, is that “we’re not regulating a medical program. There’s no mention in the proposition or the statute of medical marijuana.” The scope of regulations the board oversees relate to “people over 21 years old, and for recreational purposes,” Springer said. Other attitudes also seem to be at play in keeping out talk of medical marijuana. “It’s an attempt to not encourage people to over consume,” Weltzin speculated. “If you tell everyone broccoli and carrots are extremely healthy, people will eat more broccoli and carrots. If people hear, ‘hey, this is good for you, it will cure your pain and help you sleep better,’ people would consume more. I think the intent was probably to temper over-consumption.” A cultivation license for Green Valley Enterprises in Juneau applied for by Perez was approved Nov. 15. It met with extensive questioning by board member Jones, who represents public health interests. In a 3-2 vote that nonetheless approved his operation plans, the board was split with Springer and Chairman and Soldotna Chief of Police Peter Mlyarnik against. A second license for a retail store to be called Glacier Valley Shop, and a third for manufacturing marijuana products also was approved for Perez at a special meeting Nov. 28-29 after more than two dozen applications including the two for Perez weren’t ruled upon at the regularly scheduled Nov. 14-15 meeting. The board approved the final two in a vote of 4-1, with Mlyarnik the lone vote against. A cannabis operation cannot be within 500 feet of a school, a recreation or youth center, a building where religious services take place, a correctional center or a rehab clinic. But the law doesn’t say anything about a hospital or medical facility, Jones pointed out. The Juneau Borough scrutinized the three cannabis business operations before granting a conditional use permit, or CUP. ForegetMeNot Enterprises Inc., under which the three businesses are organized, was granted a CUP by the Planning Commission but the matter never went before the borough Assembly because Juneau delegates permitting to the Planning Commission. “I mentioned (to the board) there wasn’t much controversy (in Juneau), but I found it rather strange. I am on the local (Juneau) Assembly and I believe in the local process. There was nothing under our rules that I could justify a ‘no’ vote,” Jones said. Jones therefore voted to approve all three applications. Naomi Klouda can be reached at [email protected]

Lower claim costs lead to large reimbursement

Alaska received a reimbursement check for $25 million from the lone company offering insurance on the individual market after lower-than-expected claim costs in 2017. The payment to the Alaska Reinsurance Program, or ARP, came as part of a memorandum of understanding between the Alaska Division of Insurance and Premera Blue Cross Blue Shield. The company offered to make the reimbursement after finding that health insurance claims filed by Alaska customers in 2017 were trending at a 10-year low, according to Premera spokeswoman Melanie Coons. Just a handful of customers can cause dramatic swings in the amounts paid out in claims, Coons said, given that only around 16,000 are currently enrolled on the insurance exchange in Alaska. To further make costs unpredictable, “30 percent of the customers enter or leave the market each year,” she said. At various times, the enrollment numbers climbed past 18,000, then back down again. The ARP, operated by the state, covers claims in the individual market for people with one or more of 33 identified high-cost conditions. This isolates the pool so that high costs are not distributed over the entire insured population under Premera’s plans. Now, the $25 million is going back into the ARP to address the higher costs in the isolated pool, said Lori Wing-Heier, director of the Division of Insurance. This in turn should bring costs down for the entire pool, she said. Wing-Heier directed the administrator of the ARP, the Alaska Comprehensive Health Insurance Association, “to use the contribution from Premera to fund high-cost health insurance claims in the individual market.” Gov. Bill Walker praised the agreement, which he said he believes will go toward stabilizing the individual health insurance market in Alaska. “The success of the reinsurance program has driven insurance premiums the right direction – down. Because the 2017 claims were lower than anyone expected, this agreement will pass benefits back to Alaskans,” Walker said in a news release. Along with Medicaid expansion, the ARP has been one of the key factors in alleviating what had been skyrocketing rates in the individual health insurance market in Alaska, said Wing-Heier, who had explained the Alaska process before a senate panel in September that looked at ways to amend the Affordable Care Act. With a potential premium hike of 42 percent facing Alaskans in 2017 after increases of nearly 40 percent in 2015 and 2016, the Legislature passed House Bill 374 in 2016 to establish the ARP. The Legislature subsequently appropriated $55 million to fund the program, which allowed Premera to raise rates by 7 percent instead of 42 percent. The lower rates in 2017 subsequently helped the state receive a Section 1332 “innovation waiver” under the Affordable Care Act because the lower premiums required less federal money in subsidy payments to the roughly 90 percent of customers on the exchange who qualify for assistance. Because it would not add to the federal deficit, the 1332 waiver will have the federal government pay for about 80 percent of the ARP in 2018. Alaska’s contribution to the ARP in 2018 was to be about $11 million with $48 million paid by the federal government. Because of the waiver and the ARP, Premera announced in October that rates for 2018 in Alaska will decline by 21 percent next year. Back in April, Premera officials told the Journal they expected to draw on the full $55 million appropriated by the Legislature in 2017, but the company found that implementation of the reinsurance program and a decrease in the overall claims submitted led to more favorable market conditions than either Premera or the division expected, Wing-Heier said. The resulting reimbursement from Premera will provide additional support to Alaska’s individual health insurance market, continuing efforts to stabilize the tenuous market. “Premera’s preliminary 2017 results are better than expected, which indicates that the market may be beginning to stabilize. However, with a small pool of Alaskans in the individual market, it is difficult to predict whether the trend will continue,” Wing-Heier said. “We will continue to work on additional measures to contain costs and increase enrollment numbers so that all eligible Alaskans can access affordable health insurance.” As for next year’s insurance exchange enrollment numbers, those could climb if the first weeks of open enrollment hold. Coons reported new enrollment and many inquiries that haven’t yet been quantified. Open enrollment into the insurance exchange closes on Dec. 15. For more information, go to HealthCare.gov or contact Premera. Naomi Klouda can be reached at [email protected]

Marijuana board rejects rule aimed at lease agreements

A measure that would have prohibited marijuana businesses from making agreements with their landlords to pay part of their revenue as rent was rejected by the Marijuana Control Board on Nov. 27 after a surge of public protests. The board voted 3-2 against the proposed new regulation. Chairman Peter Mlynarik and board member Loren Jones voted to change the law, which would have required landlords to pass criminal background checks and be named on the business license if they accepted profits in exchange for rent. The vote was a major victory for people who testified overwhelmingly in favor of the way the current regulation is written. Of the hundreds of licenses granted so far in Alaska for cannabis business operations, Alcohol and Marijuana Control Office Executive Director Erika McConnell had estimated that as many as a third or more involved this kind of lease arrangement. Kelly Wilmes, a managing partner in TOPROK LLC, told the board that many landlords and building owners had already relied on the rule as it is written when they invested money and formed business relationships. “Our group has personally invested$250,000 and (it) would create a financial hardship as we would be forced to repay the funds from our personal pockets with no reimbursement from our original investment,” she wrote to the board. The investment firm manager said destabilizing the foundations of current businesses would make it hard for them to survive. Two investment partners, Todd Zietlow and John Scott Young, wrote of the “tough decision” they made to partner with the owners of a marijuana business during the current downturn in the Alaska economy. If any change were made, they advocated “grandfathering” in provisions for percentage-based leases already approved. McConnell pointed out that licensees and applicants who use percentage-based leases could move to graduated leases and thereby achieve a similar effect “without involving the landlord in a financial interest in the business.” But the bottom line according to submitted public testimony is that raising capital from banks isn’t an option. Brandon Emmett, who holds a seat representing the marijuana industry on the board, said if the new regulation went into effect, he could foresee landlords opting out of their arrangements, which would cause a big financial shake-up to the new industry. “Many of these landowners or landlords are people who had empty space they just wanted to fill in the down-turned economy,” Emmett said. “They didn’t really have much thought about the industry and many were approached by operators. I could see them saying ‘no, not really that interested in getting further involved,’” if the new regulation required them to be on the license. Though he voted against it, Jones said he understood why people felt keeping the regulation in place is important. “I understood the feeling was that by removing the percentage lease allowance, it took away potential capital funding for startups. This wasn’t unheard of in the real estate world for a lot of different kinds of startups,” Jones said. The underlying concerns behind the recommended change was that too many unnamed and unknown investors could leave the door open for a criminal element to enter the legal Alaska cannabis industry. “There will be other issues that come up on the topic of financial interest. Most of us were just looking for a background check so we could know whether a person was going a little too far,” Jones said. Extended meeting The board met four days in November, divided between two, two-day Anchorage meetings in order to get through about 50 applications and four complicated violation hearings. This was a larger batch of applicants than other meetings and required twice the meetings in order to “not hold up the applicants,” Chair Mlynarik had said when the board voted to add a special two-day meeting in Anchorage after getting through just 22 of 50 applications from Nov. 14-15. “We’ve had so many doggone license applications that we just couldn’t get through them all,” said board member Mark Springer of Bethel, who holds a seat representing rural Alaska on the board. “Some of these applications require more attention then others. What really can take a while is when we do a manufacturer, looking at and approving each individual product they are going to make. Some submit photos and ingredients for 30 or 40 products.” These range from lollypops to cookies to specialty drinks containing cannabis. On Nov. 28, one applicant out of Soldotna, Fire Eater Sideshow Food LLC, submitted 90 products intended to be manufactured for retailers. The company will need to return to the board at its Jan. 24-26 meeting in Juneau after completing the application with more details. Emmett said other reasons also meant the board put in double duty this time. “We’ve had quite a few license applications, but also the board has evolved and we are asking more questions after a number of applications were tabled or denied,” Emmett said. If the applicants are better vetted at the meetings, the burden is lessened on the Marijuana Control Office staff and alleviates problems later on, he said. The board also passed regulation that allows licensed cultivators and product manufacturers to provide employees small samples for the purpose of quality control testing. It also requires that the amount taken from the inventory in the form of samples must be documented and retained by the licensee, as must documentation from the employee on a specific form required by the board. Another new regulation requires that all cannabis business owners report to director McConnell if any employee or other person steals money or marijuana or marijuana products from the operation. It adds this level in addition to any police reports that are made. Springer said the idea behind this regulation is to allow the board to keep tabs on crimes that may be occurring in or to businesses “for their protection.” It also embodies the board’s enforcement role and accountability to the public for what happens at cannabis operations. Another regulation requires reporting to McConnell when testing equipment at labs fail. There are only two marijuana testing labs in operation in Alaska, Steep Hill Alaska and CannTest LLC, both in Anchorage. The labs test for potency in marijuana samples, microbes, solvents and terpenes, or the oils that give cannabis plants diversity. The definition of an Alaska resident regulation will go out for public comment, as will questions on who sets the standard for odor emissions. Current regulations for license applications have the same residency standard as for the Permanent Fund Dividend, which is one calendar year of living in the state. The board is also looking at charging an operator if multiple inspections are required due to not being prepared for the scheduled inspection. More meeting documents can be found at commerce.alaska.gov/web/amco. For a complete list of items, when they are prepared to go out for public comment, go to https://www.commerce.alaska.gov/web/amco/MarijuanaRegulations/MarijuanaRegulationsPublicComments.aspx Naomi Klouda can be reached at [email protected]

Rogoff hires additional legal help to fight financial probe

A Washington, D.C., attorney hired by Alice Rogoff in her Alaska Dispatch News bankruptcy case is arguing against subjecting Rogoff’s finances to deeper scrutiny until more specifics are spelled out. Attorney James Lister of Birch Horton Bittner &Cherot’s Washington D.C. office argues in a Nov. 28 filing that Rogoff, the former owner of the ADN, wasn’t given ample time to produce financial documents, as requested, by Dec. 6. He also argues that bankruptcy laws allow his client to be told which people are to be witnesses. And, in a third point of the motion, seeks for Rogoff to be “more properly noticed including stating the due date for any objections.” Nacole Jipping, the public trustee in the liquidation portion of the bankruptcy, has asked the court to allow her attorney William Artus to hire additional counsel from a specialty firm, Bush Kornfeld LLP in Seattle. A flurry of back-and-forth filings in November by Rogoff’s bankruptcy attorney Cabot Christianson argued against hiring the firm. The Bush Korfeld law firm could eat up proceeds that should go to the biggest creditor: Rogoff herself, he argued. A hearing was to be held on Nov. 27 for the judge to rule on those arguments. But that hearing was postponed to Dec. 15. Bush Kornfeld LLC was to be hired on a contingency fee. At the heart of the new arguments is the question of whose financial documents are being examined in what’s known as a 2004 examination: Rogoff as an individual or the “debtor,” the separate entity Alaska Dispatch LLC. A 2004 examination provides a broader, more formal process to look in detail at debts accrued leading up to the bankruptcy. Creditors can use the exam to find property that wasn’t listed as part of the bankruptcy estate. It could look at bills racked up just prior to filing bankruptcy, according federal bankruptcy rules. Lister argues that in opening up a 2004 scope of examination and list of documents to be produced, the trustee “is exploring whether she has viable causes of action against Rogoff or her major lender, Northrim Bank, particularly with regard to the GCI sale.” The “GCI sale” refers to Rogoff selling the building on Northway Drive that housed the ADN staff and printing press to aid her acquisition of the newspaper from McClatchy for $34 million in April 2014. In a related pleading, Jipping and Artus argued the $14.5 million sale of that building to GCI benefitted Rogoff — by having to pay less to acquire the paper — at the expense of the Alaska Dispatch. Getting rid of the newspaper’s headquarters meant she then had to lease three properties: one for her staff, one for a new press and the Northway Drive building for the working press that printed the daily. Artus wrote on Nov. 15: “Ms. Rogoff appears to have redirected at least $14,500,000 of the Debtor’s real estate asset proceeds for her own use, only to then provide funds back to the severely undercapitalized debtor and assert a claim in favor of herself. And Ms. Rogoff caused the debtor to incur substantial unsecured indebtedness while it was operating a business that did not earn enough revenue to pay its debts.” Jipping, through attorney Artus, is asking to see documents relating to the sale of the Anchorage Daily News headquarters at 1001 Northway to GCI when Rogoff originally purchased the ADN in 2014. She also requested documents on Northrim loans that Rogoff guaranteed, including communications between the bank and Rogoff. A $13 million Northrim Bank loan enabled Rogoff to pay toward the $34 million purchase of the newspaper. At the time of the bankruptcy, she continued to owe just over $9 million on that loan. This makes Northrim Rogoff’s largest secured creditor. Another collection of dozens of small businesses and individuals are owed about $2.3 million. “Rogoff thus has good reason to believe the Trustee’s Rule 2004 Motion implicates her personal interests, as well as her role as a corporate representative of the corporate Debtor ADN,” Lister argued on Nov. 28. “However, the Trustee’s Motion does not name the parties to be examined or specify which persons are to produce documents, and thus Rogoff can only guess how the Trustee wants to involve Rogoff in the Rule 2004 examination(s).” As Christianson argued in previous filings, Lister continued the assertion that Rogoff is the largest unsecured creditor. She “loaned” the Alaska Dispatch LLC $16.6 million to keep the paper afloat and therefore is entitled to 80 percent of whatever proceeds come to pay back the bills at the end of the trustee’s liquidation process, Lister said. Lister wants to know more about where Jipping’s 2004 inquiry is headed. “Until more is known about the Trustee’s intentions, it is premature for Rogoff to assert substantive objections to the scope of the examination or the list of documents to be produced,” he wrote. ^ Naomi Klouda can be reached at [email protected]

Report finds potential for insurance savings under consolidated coverage

The state or federal government covers 340,000 people in Alaska and retirees out-of-state, spending $3.5 billion per year between Medicaid and federal and state employee groups. Uncle Sam pays $1.51 billion for 42 percent of those people as Medicaid, associated with the federal Medicaid match, the portion of Medicare payments estimated to cover eligible state retirees, and federal funds associated with the individual market. Alaska pays $2.05 billion a year, covering its share of Medicaid and 58 percent of all government employees. Could there be considerable savings in consolidating these groups by creating a Health Care Authority, or HCA, to oversee it? Sen. Pete Kelly’s omnibus Medicaid reform bill, Senate Bill 74 passed in 2016, required the study into an HCA as a way to help the state bring down costs and achieve efficiencies. PRM Consulting Group, the Pacific Health Policy Group and Mark A. Foster &Associates analyzed public employee health plans, Medicaid and the Alaska insurance market to find possible answers. Key findings were presented before a breakfast group at Commonwealth North Nov. 17 by Emily Ricci, the chief health care policy officer at the Alaska Department of Administration and Mark Foster, the principle consultant at Foster &Associates. Ricci summarized the 400-page Health Care Authority Feasibility Study, compiled during six months in 2017 for the Alaska Legislature. The study concludes that there are definite benefits of establishing an HCA. It would consist of people in the Medicaid program, Alaska school districts, state retirees, all union bargaining groups, political subdivisions (first and second class cities, and boroughs) and those in the individual market, Ricci said. But the study poses serious questions for consideration as it relates to Medicaid integration or coordination in an HCA. “It will be challenging, managing billions of dollars in annual spend,” Ricci said. Some employees may balk at joining a reconfigured mandatory pool for insurance, she added. But given the huge current costs to the state and benefits of finding better values, the bottom line of the report is that there are good reasons to pursue an HCA. The idea will need further analysis and vetting, however, to avoid unintended consequences, Ricci said. An HCA is an entity that would be operated by a board of directors to identify opportunities to coordinate plan administration and consolidate purchasing for individuals whose health benefits are funded directly or indirectly by the state. It would have the ability to buy insurance on behalf of marketplace users and government employees. A larger pool of participants and ratepayers would theoretically lower costs for all involved, Ricci said. The study addresses the statutory requirements outlined in SB 74 and are intended to begin the conversation on the difficult discussions of what Alaskans see as the future for publicly funded health care, Ricci said. Washington and Oregon provide models for a similar system, but Ricci said the study concludes there are no fitting modelsout there for Alaska to adopt. Currently a patchwork of policies divide the state pie this way: $615 million per year for Medicaid recipients; $546 million for retired public employees; $307 million for State of Alaska employees; $315 million for school districts, $65 million for University of Alaska employees; and various political subdivisions at $216 million. A key finding is that Alaska pays 60 percent more than the Kaiser Family Foundation and other local governments in western states. Consider that the State of Alaska, UA and school districts currently manage, administer and procure their own health coverage. The cost was found to be $21,738 per employee per year in 2017 according to PMR Consulting Group’s study. This compares to an estimated national average of state employee health plan spending at $13,907 per employee per year. “The extraordinarily high and rapidly escalating cost of Alaska public employee health plans places a huge strain on public personnel budgets and presents a strategic challenge for Alaska public employers seeking to attract and retain employees by offering competitive wages and benefits — as benefit costs rapidly escalate they tend to crowd out wage growth, especially among entry level positions and early career employees,” the study found. Savings could be found in consolidating a wide range of health policies, Ricci said. They could move to a more simplified tier system. School district health plans, which vary considerably, also could benefit from better efficiencies, Ricci said. There may be a provider bid process to bring competition into the purchase of health care. Foster, who analyzed Alaska markets, was tasked with providing peer review analysis and developing purchasing strategies. He told Commonwealth North he serves on the board of a small telephone company in Southeast Alaska that is headquartered in Washington state. Because Alaska health coverage costs more, he wanted to continue coverage in Washington. He eventually had to move into the Alaska insurance pool. “It’s a problem. You go to get coverage and every year you look at the risk pool — annual cost escalation is inevitably higher,” Foster said. To analyze costs, he looked at public and private claims data by employer to find out why are costs so high. “Do we have a utilization problem of high utilizers collectively? Or do we have a price challenge, where the prices charged are higher?” He said. “ When I drill into that data, I find a very high price challenge.” Prices for many specialty medical procedures and revenue for commercial payers were four times higher than other markets like Seattle, Foster said. He then compared price escalation in Alaska and western states by looking at hospital and physician and clinical services. “Hospitals escalated at 3 percent. In western states, their cost was 2.9 percent. Physician and clinical services was a different story,” he said. Where 2.5 percent increases were found in western states, in Alaska, the cost escalation from 2009-14 was more than 6.5 percent, he found. “When I drill down into physician and clinical services, I find particularly high costs and escalating for that time period,” he said. His state claims look extended into 2016, and again he saw another rapid price escalation. Foster believes the findings show there are opportunities with respect to price, “if you consolidate market power. That’s the basis if my analysis.” As he looked back at prices and supply, Foster also saw a relatively rapid increase in new doctors and specialty clinics. This is creating a better environment for competition, which could start to force prices down. “We’ve been adding more per population than other places. Based on that, we do have room to squeeze the price,” he said. Price negotiations and consolidation could bring savings on the order of 5 percent to 15 percent. Already, he said he learned of price discounts as more specialists in 2016-17 joined Alaska health networks. “There is some price flexibility in the market by consolidating on the buy side. Public health trusts have had some success negotiating prices,” he concluded. Extensive public discourse, stakeholder engagement, and full legislative buy-in will be required for the state to move forward with any of these recommendations, Ricci said. Public comments on the report closed Oct. 30. On Dec. 4, an addendum to the report will be released that will include comments. To read the report, go to http://doa.alaska.gov/hca.html. Correction: This story was updated to clarify the amount of federal spending is also associated with the federal Medicaid match, the portion of Medicare payments estimated to cover eligible state retirees, and federal funds associated with the individual market. Naomi Klouda can be reached at [email protected]

Claiming self as biggest creditor, Rogoff objects to outside firm

The latest development in former Alaska Dispatch News owner Alice Rogoff’s bankruptcy case has her objecting to hiring a Seattle law firm for the trustee on the grounds that it would cost money that wouldn’t then go toward the $16.6 million she says the estate owes her. A flurry of filings from Nov. 7-15 begins with William Artus, attorney for Chapter 7 trustee Nacole Jipping, making a motion for a rule 2004 examination. That process would allow attorney-client privileges to pass to the bankruptcy trustee. The motion asks for all loan documents, guaranty documents and security documents to be handed over for a deeper look at Rogoff and the Alaska Dispatch News’ separate and joint finances. Rogoff, married to billionaire David Rubenstein, owned the Alaska Dispatch News for three years from 2014-17 before filing bankruptcy on Aug. 12. The newspaper was sold to the Binkley Co., a month later and the company has returned the paper to its original name, the Anchorage Daily News. Artus also asked the judge’s permission to bring an attorney onboard to help in the effort to recover funds. The money would go to satisfy Rogoff’s debts to unsecured creditors worth just more than $2.3 million for dozens of individuals and businesses. Artus asked to hire special counsel Bush Kornfeld LLP to represent the trustee “in analyzing and potentially pursuing avoidance actions.” The bankruptcy estate currently has no assets, Artus wrote. The Binkley Co., which purchased the Alaska Dispatch News on Sept. 11 for $1 million, had first pick at the assets. What’s leftover amounts to two presses that aren’t easy sells, unused paper products and miscellaneous equipment. The estate would not be responsible for paying the proposed special counsel’s fees unless it obtains a recovery for the estate, he added, because Bush Kornfeld would be working on a contingency basis. Artus must receive the judge’s permission before hiring special counsel. Bush Kornfeld LLP is a Seattle law firm specializing in Chapter 11 proceedings. The firm was named one of U.S. News Best Law Firms for 2012-15, according to its website. But Rogoff’s attorney, Cabot Christianson, filed an objection. He stated that the judge shouldn’t allow the trustee to hire Bush Kornfeld because “the proposed employment does not provide a benefit to the general unsecured creditors collectively, and unreasonably confers a small benefit to a small portion of the unsecured creditors while imposing a large cost to the bulk of the unsecured creditor body.” Rogoff is the largest “unsecured creditor body,” according to Christianson. She has filed a proof of claim in the amount of $16.6 million, contending that’s how much the now-bankrupt entity Alaska Dispatch News LLC owes her. The sum is for Rogoff’s net cash infusions into the operation in 2015, 2016 and 2017. “All of the due-to-Rogoff amounts are cash loaned by her to the company for operating expenses. No portion of the claim is for the cost of acquiring the newspaper in 2014,” Christianson wrote. Christianson reached for a $100 analogy to show how the breakdown would be unfair to his client: Rogoff would be in line for 88 percent of any recovery amount while her unpaid creditors would get 12 percent. Therefore, she would be deprived of a higher percentage of proceeds if another attorney is brought on board and consumes 33 percent of whatever money is recovered as a contingency fee, he contended. Artus responded that this argument seems to prefer that dozens of smaller creditors receive “zero recovery,” as “better than a limited recovery.” And that’s at odds with the trustee’s legal role to be thorough in looking at all avenues for finding funds to pay Rogoff’s bills to dozens of people and businesses, he said. Artus also broadened his legal arguments to get toward separating what is Rogoff’s personal loan and what was a loan made for the business. He responded to Christianson’s claim on Nov. 15 that it appears Rogoff borrowed the ADN purchase money from Northrim Bank for her own benefit. “It appears that Ms. Rogoff caused the debtor (Alaska Dispatch News LLC) to liquate $14.5 million” by selling the Anchorage Daily News building on Northway Drive to GCI, Artus wrote. “In other words, the value of the real estate was removed from the debtor and used for the benefit of Ms. Rogoff without any apparent corresponding benefit to the debtor,” Artus argues. Longtime Anchorage Daily News staff, such as former managing editor Pat Dougherty, have argued that selling the building where the press was located and staff had worked since 1986 was the first step in a series leading to the huge financial losses for the company under her ownership. The sale of the Northway Drive building forced the Rogoff to eventually rent three facilities: one for her staff, another for a new press and, in order to continue to use the old press, a lease on the building housing the press that she sold to GCI. A key question is whether selling the building benefited the limited liability corporation or Rogoff. In order to acquire stock through her own subsidiaries, Roggoff personally borrowed $13 million from Northrim Bank to help finance the purchase, Artus argues. That money from Northrim Bank, added to the $14.5 million for the Northway Drive building paid by GCI, plus about $7 million of her own money was how Rogoff purchased the Anchorage Daily News for $34 million, she disclosed in court filings. “Ms. Rogoff caused the Debtor to guarantee her personal obligation to Northrim Bank without any apparent corresponding benefit to the Debtor (Alaska Dispatch),” Artus wrote in reply to Rogoff’s objection. According to bankruptcy rules, Rogoff didn’t make a capital contribution because the money she provided came as loans that the Alaska Dispatch would be obligated to repay, Artus argued. “While the accounts were in the name of the debtor’s parent, AK Publishing LLC, the debtor’s own declaration makes it clear that, regardless of the names on the accounts, the accounts were the debtor’s. Rogoff testified to this at a recent meeting that AK Publishing LLC has no revenue of its own. Any suggestion that the accounts do not constitute property of the Estate ignores the substance of Ms. Rogoff’s own sworn statements,” Artus wrote in his filing. Christianson had essentially argued in his $100 analogy that Rogoff should be the priority to be paid back if any funds are recovered at the end of the Chapter 7 process, Artus contended. But the trustee’s role is to represent “all of the estate’s creditors and is charged with maximizing the recovery of estate property for creditors as a whole,” he wrote. Her primary job is to “marshal and sell the assets, so that those assets can be distributed to the estate’s creditors.” It’s not Rogoff’s responsibility to decide which bills get priority, Artus argued. “Every unsecured creditor is entitled to be paid its pro rata share of whatever the trustee can recover, whether the creditor holds 1 percent or 99 percent of the total amount of allowed claims.” Artus makes an additional claim that Rogoff appears to have redirected at least $14.5 million of the Alaska Dispatch News LLC’s assets “for her own use, only to then provide funds back to the severely undercapitalized debtor and assert a claim in favor of herself.” He assets that Rogoff “caused the debts while operating a business that did not earn enough revenue to pay its debts.” The court can ultimately determine that Rogoff’s claim should take a lower priority over the unsecured creditors. In any case, it’s the trustee’s role to fully investigate the financial affairs of the failed Alaska Dispatch and until then, “the ultimate allowance or priority of any particular claim cannot be determined,” Artus wrote. A court hearing was set for Nov. 27 to decide on employing Bush Kornfeld as special counsel. A deadline of 10 a.m. Dec. 6 was set for the financial documents in the rule 2004 to be handed over to the trustee. Naomi Klouda can be reached at [email protected]

Marijuana board still grappling with landlord arrangements

When the Marijuana Control Board combed through licenses applications for new cannabis operations at its Anchorage meeting Nov. 14-15, residency and landlord issues continued to trip up applicants. Only Alaskans can buy into a marijuana operation, per state law. The board has long expressed concerns about hidden ownership interests that could bring non-residents or a black market element into the legal industry. “We want a well-regulated industry and one that we know who the owners are,” said board member Loren Jones of Juneau, who holds a seat reserved for a member from public health. “And that we know they have the requisite residency and fingerprints on file, and they can’t be an owner if convicted of a felony.” A new regulation drafted in July but not yet approved seeks to revise the definition of “direct or indirect financial interest” in order to have a more transparent industry. Currently, landlords can take a percent of profit in exchange in lieu of rent. But they don’t have to be listed on the license, and therefore, there’s no fingerprint record or background check on them. The board scheduled an extra meeting Nov. 28-29 to finish going through about 30 more applications on the agenda that weren’t reviewed at the Nov. 14-15 meeting. They meet at 9 a.m. at the Crime Lab, at 4805 Dr Martin Luther King Jr Ave., in Anchorage. The landlord issue is up for a vote: the board is looking at eliminating percentage lease or rent agreements from the exemption of direct or indirect financial interest. Under this scenario, any percentage lease or rent agreement could be created but the landlord would have to be a licensee meeting the same standards as the operator of the business. The board has already approved many businesses on a percent-of-profit in lieu of rent arrangement. If the new regulation passes, the board also needs to decide how and when the existing licenses with these leases should come into compliance, or if they should be grandfathered in, said Alcohol and Marijuana Control Office Director Erika McConnell. A couple of new license applications illustrated the problem. X-Tracted Laboratories Royal Mountain Extracts LLC of Talkeetna proposed 80 percent of its net income go to the owners of the property in lieu of rent. The landlords, who only recently moved to Alaska and purchased the property on Commercial Drive in Talkeetna in March, are not yet Alaska residents. Residency, as defined by the board, is the same standard as eligibility for the Alaska Permanent Fund Dividend that requires a full calendar year living in the state. Therefore, the landlords can’t be on the application because they aren’t Alaska residents under the PFD standard. McConnell brought this application to the board’s attention. “When landlords have a percentage interest in a business, it places them in a position to exert influence in the business in a manner that is intended to be limited to licensees,” she wrote. Dan Nelson and Joe McAneney would be the licensee. The board asked questions about the plans at its Nov. 14-15 meeting, and recommended the landlords, Samuel Benson and Christina Tersine, wait until they achieve residency before the application is complete. Nelson, appearing with his attorney, agreed to wait until January and withdrew his application. But if the board passes its new regulation at its special meeting Nov. 28-29 in Anchorage next week, its new definition would require the landlords go through the same application process as the owner once they are officially Alaska residents. A landlord in Houston accepting income instead of rent on a limited cultivation facility was allowed to move forward after the board approved the applicant Arctic Farm LLC. But McConnell also brought this application to the board’s notice. “The lease shows that the landlord would initially receive 100 percent of the facility’s revenue less taxes and expenses, i.e. all of the profit,” she wrote. “Once the marijuana facility pays $175,000 in rent, the rent would be reduced to 50 percent of the facility’s profit,” she wrote of the plan. In this case, the landlord is Northern Lights Land LLC, owned by six people with shares ranging from 2.8 percent to 60 percent. “It appears that the high percentage on the percentage-based leases is a means to funnel profits from the marijuana business to people who are not licensees,” McConnell wrote to the board. “Despite the exemption, the landlords clearly have a financial interest in the business and should be licensees.” But the license applicant, Jonathan Cortez, explained that the land had been developed by the landowners (including family members). They have no decision-making interest in the business. The board approved the application after a long question-answer session that looked at the ownership issues. Board member Nick Miller, an industry representative from Anchorage who owns Alaska Buds, said it’s a common practice throughout Alaska to help startups through these lease-for-profit arrangements. Even malls do it to attract retail businesses, he said. “I’ve been told by realtors that this seems to be a common tactic used for startups in other industries when they don’t have a lot of capital upfront,” Miller said. “If someone owns a building, it’s standard practice. That’s okay but we still need to know who is making the decisions.” The board requires applicants also to show that a provision exists in the lease that if they default on rent, the owner can’t come in and take away marijuana products. Applicants were repeatedly quizzed by the board on whether their lease agreements contain that provision. Another applicant, Hempco LLC of Nikiski, has a prominent landlord. Mike Navarre, the former Kenai Peninsula Borough mayor, owns the property that Hempco licensee Jenny Foster is leasing. Navarre is now the commissioner of the Department of Commerce, Community and Economic Development after a recent appointment by Gov. Bill Walker. His office oversees the Alcohol and Marijuana Control Office. The public comments on the regulation are available on the Alaska Alcohol and Marijuana Control Office webpage. ^ Naomi Klouda can be reached at [email protected]

Pages

Subscribe to RSS - Naomi Klouda