In the last two months KABATA Executive Director Andrew Niemiec has resigned, two competing financial plans are now in play, and none of the KABATA promised backup from their “new” socio-economic data has yet been made public.
Last month Revenue Commissioner, KABATA Board member, (and former First Southwest Senior Vice President) Angela Rodell released a new finance plan from consultant First Southwest Company (FSC) that showed a lower project cost than the public-private partnership plan (P3) that KABATA has pushed for over seven years. Click here for Lisa Demer’s Anchorage Daily News article which discusses the FSC plan.
Consultant First Southwest contrasted KABATA’s plan for a P3 project that had a maximum state payment of $3.2 Billion project being paid off in 35 years, with a direct state bonded project with a $689 million maximum state payment and no private partner, being paid off in 18 years. The First Southwest plan, click here, has the state appropriating $300 million up front. That amount is not included in the current list of state Department of Transportation projects. Instead, First Southwest calls for the $300 million to be diverted to the bridge from other state transportation projects.
Both the KABATA P3 plan and the FSC plan count on about $300 million in a low interest federal TIFIA loan that KABATA has now been turned down for 5 times. Furthermore, the First Southwest plan envisages that a TIFIA loan would be backed only by expected toll revenues. No recent federal awards have been made without a public or private backing for the TIFIA loan.
First Southwest was paid approximately $50,000 to produce the four page plan which included no spreadsheet or backup analysis to show the timing of toll revenue, debt payments, and obligations. For a critique of the First Southwest Plan by financial analyst Jamie Kenworthy sent to Commissioner Rodell on January 7, 2014, click here. The Department has yet to reply to that analysis, nor have they yet indicated whether any backup financial spreadsheets were provided to the Department or whether they consider the $50,000 contract now complete.
Governor vs Legislative Project Proponents?
Governor Parnell and the leading legislative proponents of the project may have different views of which plan should be pushed forward. In an Anchorage News interview, click here, the Governor indicated he preferred state bonding to the P3 structure since it would be lower cost and the P3 market had changed. Because Alaska has AAA credit, the state can borrow at lower cost than the Bridge contractor, and the First Southwest plan has the state putting $300 million in an up front “down payment”, the Governor is probably correct that the First Southwest Plan lowers the project’s cost. However, because the state now instead of the private contractor will be responsible for toll collections and maintenance, operating costs will be higher and those extra costs were not mentioned in the First Southwest plan.
However, the claim from the Governor and bridge proponents that “the market has changed” is curious reasoning to apply to the Alaskan project. Based on past bills submitted by KABATA, no contractor has ever been willing to take the risk of financing the project without a state guarantee to make up for expected toll shortfalls. With the recent bankruptcies of national P3 projects due to unexpected toll shortfalls, the market has in effect now come to the position Alaskan contractors and KABATA have held all along – state guarantees are required. Click here for an Alaska Dispatch article for additional detail.
Chief legislative bridge proponents, Mat Su legislators Senate President Charlie Huggins and House Finance Member Mark Neuman, according to the Alaska Dispatch article, still favor the P3 approach and seek to keep KABATA in charge of the project. However, the House-passed bill from last session moved the project to the Alaska Housing Finance Authority. No word has yet come from the legislature on whether or not new bills will need to be filed to accommodate the new public finance plan.
The debate over the two finance plans has made clearer that a dollar spent on the bridge is not available for other transportation projects. With a predicted dramatic drop in state revenues, it is not clear if a majority of both houses has the will to finance such a big ticket item in an election year.
Amidst confusion over bridge plans and oversight, 4 key questions will hopefully be answered before the legislature votes on whether to move the Knik Arm Bridge forward:
4 Key Questions
1. Where’s the new Finance Plan?
KABATA bought statewide media last year to publicize getting new “independent” socio-economic data after the Legislative, Budget and Audit Committee (LB&A) criticized the undocumented and optimistic old data behind KABATA’s “unreasonably optimistic” traffic and toll projections.
The new contractors, Cardno and Agnew:Beck were scheduled to finish producing new population and employment data by December 1, 2013. Then CDM Smith — the holdover traffic and revenue consultant heavily criticized in the audit — would then massage that socio-economic data to produce a new toll revenue forecast, and Citigroup – another holdover consultant – is then expected to release a new finance plan for the project.
Will the Senate or its committees hold hearings and vote on a KABATA bill without seeing a new finance plan based on the new data?
2. How different will the AMATS and KABATA numbers be?
Future population and jobs predictions are closely related to traffic and toll projections. The higher those projected traffic and toll numbers, the lower the Bridge can be projected to cost the state.
Last month, state demographer Eddie Hunsinger estimated that the Mat-Su Borough has grown an average of 2.35% a year since the April, 2010 Census. Click here to view the figures. At that rate, the Mat-Su will have 155,000 people by 2035.
KABATA originally projected 250,000 people for Mat Su in 2035. Then KABATA lowered the number to 200,000 after Anchorage Metropolitan Area Transportation Solutions (AMATS, the local transportation planning organization) questioned the projection of 250,000. (The state and ISER’s Scott Goldsmith, two years ago, separately estimated about 170,000 people in Mat Su in 2035.)
In December’s announcement of a new proposed town site near the bridge, Mat Su officials were apparently trying to show a potential scenario with high population density to justify optimistic bridge traffic projections. According to an Anchorage Daily News article (click here) questions on how the sewer and water infrastructure for the denser development would be paid for were ducked by local officials.
KABATA and the Muni of Anchorage now have a signed agreement to share socio-economic data. Because AMATS receives federal transportation planning funds, the bridge must have consistent cost and socio-economic data to fit with the 2035 AMATS adopted transportation plan. For the last 4 months KABATA has declined to brief AMATS on its data and plans. But KABATA acting Executive Director Judy Dougherty is scheduled to brief AMATS on February 13, 2014.
Will the new KABATA numbers be consistent with AMATS numbers and risk showing too little toll revenue to justify the state’s cost estimate? Or will KABATA again have higher population, job, and toll numbers and be inconsistent with the Anchorage-adopted transportation plan?
3. Why does the state plan from First Southwest show the revenue from 4 full lanes of traffic crossing a 2 Lane Bridge?
The First Southwest plan shows a $706 million cost for a 2 lane Bridge. But the plan is also based on 20 years of CDM Smith’s 2011 revenue projections which shows 36,000 trips a day when the maximum a restricted 2 lane highway can handle is 20,000 trips a day. (The Glenn Highway today carries about 30,000 trips a day between Mat-Su and Anchorage.) In December 2012 when KABATA had to give the LB&A auditor a finance plan, it showed a four lane bridge and approach roads with a total project cost of $1.6 Billion, not $706 million.
Will there be one media article or legislator to raise the issue that the new state plan STILL relies on the cost of 2 lane bridge with the revenue from traffic that can only fit on 4 full lanes?
4.What is the fate of KABATA’s remaining funds?
To date, KABATA has spent about $80 million with about $35 million of federal match remaining. The Governor’s FY2015 budget request for $55 million for KABATA included those federal funds. In a session likely to be dominated by talk of austerity and cutbacks, if at some point legislators decide they do not wish to provide the state guarantee required under either bridge plan, the leftover $35 million could be put in play. Those formerly earmarked federal funds are now state funds and can be spent on any eligible transportation project.
Former Government Hill Community Council President Bob French in his remarks to the Anchorage legislative caucus, highlighted both the project’s confused status and the choices ahead for the legislature, click here to read the remarks.
If the project does not receive the state guarantee to move forward, is this the year when the KABATA funds are reallocated to projects which can be built to meet existing transportation demands?
Or is it more likely that KABATA will continue to exist for a few more years spending the last of the earmarked funds on salaries, consultants, and PR?