New report outlines path forward for Port Modernization Project

Outlining a path to the future for the Port of Alaska -- a recent Municipal report revealing how long improvements could take, how much they'll cost … and who's going to pay for them.

The price tag has gone up almost 300 percent since 2014: Originally estimated at $485 million, the cost of the Port of Alaska Modernization Project is now $1.932 billion. But, authors of the new Municipal report say costs for upgrades to Alaska's largest cargo port will eventually pay for themselves in money saved.

"When the program cost was presented as increasing from $485 million to $1.9 billion this year, it raised widespread concern about how can we afford this program?" said co-chair of the Anchorage Assembly Enterprise and Utility Oversight Committee Suzanne LaFrance.

The question of "How much will I, the consumer, have to pay for these repairs?" changes with every new analysis. But, LaFrance makes it clear that if this project is to be properly financed it’s going to take support from residents, port users, businesses, state and federal funders.

"With almost half of all goods coming into Alaska coming through the Port of Alaska, it's a critical piece of infrastructure," LaFrance said. “We’ll likely engage stakeholders from other parts of the state. The intent is to brand this as a statewide port.”

The Assembly hired a consultant to shape the Port's future and find revenue sources to pay for the project. The report was conducted between April and Sept. by Vice President of Alaska Ascent Bernard “Roe” Sturgulewski. It shows that making the Port more seismically resilient is crucial, but pricey.

"We looked at different elements that contributed to the cost increases, and seismic was definitely one of the drivers," Sturgulewski said.

Imagine investing billions into a new port and losing it to the first big earthquake -- Sturgelewski says if you're going to build this, build it right.

“Anchorage is highly dependent upon goods and services coming into the community. And for the last 50 plus years, we’ve had good access to the Port,” Sturgulewski said, “but if that were to stop it would be very difficult for the community.”

Sturgulewski says if completed, the Port would have four new seismically resilient berths for ships to load and unload, and the northern extension of the Port would be totally reconstructed. The Assembly has given the green light on upgrades to the Petroleum Cement Port – that’s a $42 million project for trestle, piling and deck structure upgrades, according to LaFrance. That construction will begin in 2020.

Full construction means convincing consumers across the state to buy-in. Sturgulewski says it’s crucial “… to get their political support, to allow us to gain other state and federal funding."

Here’s where your tax dollar may come into play -- the report outlining numerous potential forms of revenue to pay for the project:

- Municipal General Obligation Bonds – These could collect $60-$75 million on voter approval

- Municipal Budgeting -- The city could contribute at least $50 million over five years

- State Obligation Bonds -- These could generate $300 million over three years, if the state buys-in

- Municipal Revenue Bonds – These could generate about $24 million by 2023, but according to the report are tied to Port tariff increases.

Both the Municipality and Port users agree tariff rates can't fully fund upgrades. However, they're approaching a window on a new five-year tariff agreement, and they’re expecting rate changes to help pay for the upgrades. According to the report, Port users anticipate changes in the tariff structure, and have worked those changes into corporate financial planning.

But these changes likely won't make it to your dinner table.

The report reads:

"It would be economically unwise to assume a large tariff hike will pay for needed changes and the cost will be passed on to consumer goods in a market where things are generally more expensive than the rest of the country,” it says, adding the caveat, “tariffs should be considered a revenue stream that is one piece of the entire picture of financing the Port."

The Muni has proposed to bank the income from potential tariff increases and use it to raise other funds as a match, saving up enough to do some of the large-scale projects.

Sturgulewski says project construction could start in a year's time, and be completed within ten -- but first, key compromises must be made.

"There needs to be alignment between the users and the administration on tariffs,” he said, “and I'm hoping that could occur within the next four to six months."

Port users were not available for interviews but reiterated that tariffs would not be the be-all source of funding for this project. They would have to give the okay for any increase in tariff rates.

A McDowell Group study for July 2019 found an estimated public investment of $1 billion to extend the life of the Port by 50 years would amount to freight cost savings of $2.7 billion, compared to relying entirely on Seward for shipment of goods. That report does not include necessary port facility and transportation infrastructure improvements.

Users and Assembly members will be discussing the report recommendations at the Oct. 17 Enterprise and Utilities Oversight Committee meeting.