Why the Bridge Failed: The Top 10 Reasons

May 31st, 2017

Better Question: Why Did it Last So Long?

Bridge Critics Summarize Expensive Lessons Learned

Clearly Saudi Arabia and low oil prices were the proximate causes of the Knik Bridge Project’s demise. See Governor Walker’s comments on the Day of Reckoning http://www.adn.com/politics/2016/06/29/walker-budget-vetoes-include-capping-permanent-fund-divdends-at-1000/ and later analysis http://www.adn.com/politics/2016/06/30/governor-shuts-down-work-on-knik-arm-crossing-susitna-dam/.

For a project that was turned down for a federal loan 7 times and, despite what proponents insisted on for over 10 years, had no one but the state holding the bag when toll revenues fail to measure up, the tougher question to answer may be why it was allowed to last so long. Over $100 million in state and federal funds were spent before the project was finally canceled by the Governor.

This web site has been maintained since 2007 to provide the public, media, and transportation planning professionals detailed information about the project. This final post summarizes the perspectives of those who fought the bridge for 12 years on why the project failed; and what lessons can be learned about how public processes function or do not function.

1. Three Key KABATA assertions were proven wrong

Three key assertions for the bridge did not stand up to scrutiny.

A. The Bridge would not shorten travel time between Mat Su and Anchorage

The original justification for the Bridge was to lessen congestion on the Glenn Highway and decrease travel time between Anchorage and the Mat-Su Valley. These arguments quickly unraveled when critics unearthed a simple map from Knik Arm Bridge and Toll Authority’s (KABATA) own traffic consultant (http://www.knikbridgefacts.org/images/maps/wsafigure5.gif ) showing motorists would save 11 minutes of time by taking the existing, free, Glenn Highway from downtown Wasilla to downtown Anchorage compared to a $5 one-way-tolled Bridge. And of course the Glenn was a better choice coming from Palmer and much faster if the trip from the Valley ended at the military bases or midtown rather than downtown.

B. The private sector did not hold or share the “downside risk”

L eading proponents of the Bridge, including Representative Mark Neuman (R-Big Lake), consistently claimed the private sector stood ready to invest hundreds of millions to launch the project. But the Public-Private-Partnership (P3) model (supported most strongly by Republicans in the Legislature) was ultimately scrapped because the P3 “Partners” wouldn’t invest their own money if they had to get paid from what the Legislative Budget and Audit Committee called “unreasonably optimistic toll revenues” alone. Legislators filed bills, fortunately never approved, that would have required the State to write endless “blank checks” to cover shortfalls. The details changed from year to year as KABATA came up with new financial schemes to try to back up their promises of it being a “free bridge, paid for by toll revenues”, but, as an example, in KABATA’s 2011 P3 financial “Pro-Forma”, the foreign contractors would “invest” only $76.8 million of their own money… and receive $914.6 million back in state guaranteed payments. Unfortunately, every bridge bill introduced directly put the state’s credit rating at risk by guaranteeing an unlimited amount of “availability payments” to the contractor or indirectly through an unlimited moral obligation to cover the toll shortfall necessary to repay federal and state loans. Even after the Governor canceled the project, Rep. Neuman, the co-chair of the House Finance Committee, continued to wrongly insist that the private sector was holding the downside risk of any toll shortfall.

C. KABATA’s Mat Su population and trip projections were consistently absurd

Population projections are used to project trips and therefore the tolls that are a key part of any project finance plan. The three different population studies commissioned by KABATA from out-of-state firms produced numbers showing a future Mat Su with 50-60% more residents than projected by either UAA’s ISER or the state’s demographer.

First, KABATA hired the little known firm Insight Research Corporation of Dallas Texas to estimate the Mat Su Borough would have 250,700 people by 2030. Their long report was largely ignored by State and Muni planners until a person sympathetic to the critics’ cause (the “first whistleblower”) pointed out the buried 250,700 number. The bridge critics then told anyone who would listen that the Borough would have to add the equivalent of Palmer, the Borough’s second-largest city, to the Borough every year for the next 23 years to get to 250,700 people in 2030.
Then, pressed for a more realistic number, KABATA hired consultant Wilbur Smith to estimate that the Borough would grow from its 2010 Census population of 88,995 people to 204,000 people by 2035. Wilbur Smith shoved future Borough growth away from the Palmer-Wasilla core to the unpopulated Point MacKenzie area (the western terminus of the proposed bridge) where Smith projected 13,828 jobs in 2035. For context, note that number was more jobs than the Kenai, Juneau, or Mat Su Boroughs have today. Viewed another way, Wilbur Smith had placed the employment equivalent of 2.4 Dimond Centers (the largest mall in the state) at Point MacKenzie.

Finally, after the State Legislative Budget and Audit Committee (LB&A) released its 2013 audit criticizing the unrealistic optimism of Wilbur Smith‘s population and toll forecast numbers, KABATA rehired the same firm which then subcontracted to Agnew::Beck to redo Borough population numbers. Agnew::Beck came up with 207,888 people in Mat Su by 2040. The Agnew::Beck figure differed significantly from HDR’s estimate prepared for the Mat-Su Borough transportation plan which put 7,177 people in 2035 at Point MacKenzie. KABATA’s consultants Wilbur Smith (now CDM Smith) put more than five times the number there by 2040 or 37,074. If Point MacKenzie had 37,074 inhabitants today it would be the state’s second largest city.

The Anchorage Metropolitan Area Transportation Solution (AMATS) Technical and Policy Committees could have used their expertise to resolve these significant discrepancies; however, those groups never acknowledged the continual necessity for KABATA to lower Mat Su population numbers, was accompanied by KABATA’s corresponding need to project ever increasing population and job numbers at Point MacKenzie. With no real oversight from these important committees, KABATA’s plans showed that about twenty years after the bridge opened it would carry between 36,000 to 40,000 tolled trips a day. This was the “magic number” necessary to show the project had sufficient revenue to pay off the expected federal and state obligations on a $1 billion bridge.

2. KABATA’s flawed strategy was to charge ahead without regard to cost or controversy

Having over $100 million in federal funds allowed KABATA to choose a consistent strategy: would keep spending to make it appear that the project was moving forward. But the perceived extravagance of that spending, and the questionable sequence of activities, created the pushback that eroded political support for the project. One can say that “Free Money” in search of a project, just about guarantees an unsustainable project.
From the very start, KABATA made a series of unforced errors:

A. Excessive Pay

In a 2006 decision, the KABATA Board of Directors set the pay of the Executive Director, Deputy Director, and new CFO at $129,000-$130,000 each, salaries larger than the Governor’s. The pay decision, made in executive session and not reflected in the minutes, drew unwelcome media attention to the new agency. http://www.alaskajournal.com/community/2006-10-08/knik-arm-bridge-board-gives-executives-pay-raises#.V8iJ7o-cF2s. Annual salaries for the project director and CF0 soon grew to about $160,000 + benefits.

In 2011, KABTA’s financial plan included a $1.6 million upfront payment to KABATA as a “success fee”. government finance officer who learned about this proposed payment became a quiet ally of the critics because a “success fee” is known in venture capital as a payment to the original entrepreneurs when a firm goes public. It is inappropriate to give a “success fee” to well-paid public employees who are taking no financial risk on a public project.

B. Demolish First, Financing Later or Never?

The decision to acquire and demolish homes and business to clear right of way on Government Hill for the project was viewed by KABATA as a necessary step in making the project appear “shovel ready”. But for a major public project that kept being turned down for the $300 + million federal loan necessary to finance the project and never received the key environmental permits for construction, demolishing homes seemed to put the cart before the horse. Eventually, the Sourdough Lodge and three homes were demolished but faced with bad publicity, Governor Walker intervened, saying “let’s not go and start tearing down buildings and closing businesses” for a hypothetical project.

KABATA apparently assumed it could create facts on the ground by acquiring right of way and demolishing structures. But this strategy instead stoked opposition from the Government Hill neighborhood that might otherwise have dissipated in the face of the apparently inevitable. The demolitions, and the decision of the Tesoro station owner to stop selling gas because his short term lease made it financially unfeasible to replace aging tanks, seemed to make the neighborhood, or at least the activist neighborhood critics, more determined to fight on.

C. Withholding Key Information

Despite KABATA’s web site hosting extensive links to project reports and promotional materials, the first single page budget for the project came from the critics, not the agency. In addition, KABATA’s first detailed financial plan for the project, authored by Citigroup, was handed to legislators by the critics, as it had not been included in the information packets for KABATA’s Legislative bills.

KABATA routinely withheld information on the seven federal loan denials (often packaged as just a step in the process to skeptical reporters). This strategy allowed critics (and not the agency) to make public critical information first, thusputting KABATA on the defensive. Legislators, the media, and sometimes even the Governor’s office and Commissioner of Transportation became accustomed to hearing first from critics or the media about unfavorable project information rather than hearing it first from KABATA.

KABATA also manipulated the discussion by ignoring pieces of information that could be used to critique the project. For example, KABATA’s plan was touse the existing A/C Couplet Bridge over Ship Creek and the Railroad Yard, even though the A/C Couplet Bridge is listed by the DOT&PF’s 2007 Bridge Inventory as “functionally obsolete.”It is also one of only 3 bridges in the state with the comment of “Fracture Critical”, meaning that it requires special inspections to ensure that it does not collapse. This weakness would have been exacerbated by increased traffic flows being projected by KABATA, but the issue was not addressed.

3. The Critics Held Together but not the Project Team

Opposing the Bridge for over 10 years was a consistent core group of four people who brought skills and experience in their day jobs in environmental engineering, transportation planning, and web based communication to the table. This team remained in almost daily contact, exchanging unearthed information, sorting out assignments, editing statements, and in general coordinating efforts. The four leaders were:

  • Stephanie Kesler and Bob French, who had different terms as head of the Government Hills Community Council.
  • Lois Epstein, who led the Alaska Transportation Priorities Project and then moved to an environmental group.
  • A fourth person with a legal background participated mostly behind the scenes.

They organized a much larger group of volunteers willing to write letters, testify at hearings, and contact public officials.

In 2008 Jamie Kenworthy, who had managed a state agency, drafted a simple project budget for the Anchorage Assembly. KABATA CFO Kevin Hemenway contradicted Kenworthy by telling the Assembly that the private sector would take the risk for any toll shortfall. When a subsequent Public Records Act (PRA) request revealed that Hemenway had authored the federal loan application asserting the state would cover any toll shortfall, Kenworthy’s “brief assignment” turned into an eight year commitment to track KABATA finances, and he became the fifth core leader.

Later, respected retired UAA economist Scott Goldsmith made public presentations on KABATA’s undocumented assumptions after KABATA repeatedly misconstrued his socio-economic projections and refused his requests to correct the misrepresentations.

Unlike the critics, the leadership of KABATA kept changing. There were three different chairs of the KABATA Board (George Wuerch, Mike Foster, and Janet Kincaid), three KABATA Executive Directors (Henry Springer, Andrew Niemiec, and Judy Dougherty), three Governors (Palin, Parnell, Walker) and four acting or confirmed Commissioners of Transportation (MacKinnon, Von Scheben, Kemp, and Luiken). One legislator commented to Bridge Critics that “You folks have been working on this bridge longer than anyone who is getting paid to do so!”

Concerned about the credibility of KABATA’s management of the project, the legislature in 2014 removed the project from the KABATA’s Board oversight. The legislature placed project management in the Department of Transportation but DOT&PF kept the same project leadership team in place, and there was little change in how the project was managed.

4. The Project Changed its Financial Structure 3 Times

The project changed its financial structure three times, which each new plan costing a few more millions for financial modeling by Citigroup and another traffic and revenue study by Wilbur Smith/CDM Smith.

  • First, the project was a direct state financed project. In 2005, Congressman Don Young (R, AK) obtained a $453 million dollar Earmark for the Knik Arm Bridge and the Gravina Island Bridge near Ketchikan, AK, when he was chair of the House Transportation and Infrastructure Committee. There was substantial hope that Don Young and Senator Ted Stevens (R, AK) would be able to obtain more federal funding to supplement the typical 10% of project costs provided by the State of Alaska. Although the agency had briefed Commissioners and legislators, no project budget had ever been made public. The first financial plan done by Citigroup showing projected toll revenue and bond payments was sent to Jamie Kenworthy by a state official who told him “I see no reason why you shouldn’t have it.” Each page was marked “Draft” and “Confidential”; neither label summarizing a condition that would exempt the information from the Public Records Act.

    The hope for additional direct federal funding disappeared after Hurricane Katrina hit Louisiana in 2005, and after Don Young’s Earmark was the subject of national ridicule as the “Bridges to Nowhere”. The direct state financing plan was finally canceled after the project was turned down for a federal TIFIA loan and state officials were reluctant to recommend state revenue bonds to the legislature since the original KABATA legislation precluded a state guarantee. KABATA staff had discovered there was no market for state revenue bonds dependent on tolls without an underlying state guarantee.

  • The second finance plan was a “public-private partnership” or P3. KABATA told legislators and the public that the private sector would share the risk or assume the full risk. What was explained to legislators only by critics was that the new KABATA bills required the state to guarantee 35 years of “availability payments” to the contractors who would then make the bond payments. So instead of being asked to guarantee a $1 billion plus in bonds for the project, the state was now being asked to guarantee 35 years of availability payments totaling a KABATA-estimated $3.2 Billion.

    Nevertheless, a bill offering a guarantee for the state to finance the project failed by only 1 vote in the House when two legislators were absent.

  • The third and final finance plan was to cancel the P3 Partnership that promised each of the 3 finalists a million dollars, even if they were not selected. Revenue Commissioner and KABATA Board member Angela Rodell commissioned her former employer, the New York office of First Southwest, to do a five page study (despite requests, no backup numbers on toll revenue and bond payments were ever provided) showing a state financed option would be cheaper than a P3 partnership.

    The consistent theme of all finance plans was that the project was essentially free. When the project repeatedly failed to secure federal TIFIA loans, and critics kept insisting the state still held the downside risk, the plans kept being changed without ever being financed.

    The result of all the changes in project leadership and the finance plan was more confusion about the status of the project and an increasing lack of credibility with the media, the public, and, to a much lesser extent, the legislature.

5. Enemies Accumulating

As Arthur Block, the author of many books on Murphy’s Law, wrote, “Friends come and go, but enemies accumulate.”
An unexpected large number of people familiar with the project stepped forward to help the critics. They were motivated by a variety of factors, but the three most important were:

  1. KABATA paid much higher salaries than regular Department of Transportation and other public employees.
  2. Contractor payments were large and do overs frequent. KABATA paid firms Wilbur Smith/CDM Smith and Citigroup over a million each time, to do at least 3 different versions of toll and revenue projections and financial plans. None proved credible to federal loan officials. Los Angeles law firm Nossaman and Associates was paid $1.2 M to put together a P3 partnership agreement which was soon canceled. Contractors and DOT&PF employees who watched while higher priority projects needed in the shorter term were starved for resources, grew privately acerbic about the double standard between the use of funds for KABATA and non-KABATA projects.
  3. Professionals, even those who still nominally supported the idea of a Bridge, were increasingly miffed by non-standard professional work.

Among the folks who stepped forward to help the critics were:

  • 9 individuals designated by the critics as “whistleblowers” because they had insider knowledge of the project and wanted to help behind the scenes. The first and most helpful whistleblower provided over a hundred hours of advice based on their knowledge of trip modeling and transportation planning in the Anchorage area.
  • Former CIA manager Terry Maynard doing volunteer work for the Reston Virginia Citizens Association became concerned about the accuracy of Wilbur Smith traffic and toll projections for the Dulles Toll Road. After noting that the Knik Bridge Facts web site had documented similar problems with Wilbur Smith’s work in Alaska, Maynard contacted bridge critics. Using data from a study by Transportation Research Board, (a federal entity), Maynard published in 2012 an 81-page report showing Wilbur Smith’s track record was to overestimate toll revenue by over 114% for the first five years a US project was opened, or less than half the toll revenue projected was ever realized. He wrote a chapter on the Knik Bridge project. AMATS officials didn’t read Maynard’s report but some legislators and Muni Assembly members did.
  • 3 “bond geeks” familiar with funding large public projects and credit markets reviewed Jamie Kenworthy and Bob French’s work that provided a number of editions of white papers on bridge costs and an alternative spreadsheet of the project using the same assumptions and structure of Citigroup’s plan.
  • Numerous contractors who were informed and concerned about ignored or misused data, and non-standard professional work by other contractors or inappropriate project management by KABATA staff. As one (then pro-bridge) KABATA consultant told a critic in frustration: “What KABATA doesn’t get is that the EIS (Environmental Impact Statement) is a process! You can’t skip steps or cut corners.”
  • A number of former and current employees of KABATA and the DOT&PF and planners with the state and the Muni did not step out of their government role, but took the time to explain the planning process, budget information, and traffic analysis to the critics.
  • A number of times at public meetings, bridge critics would challenge the numbers or process behind the project and a public official or employee would respond to refute or deflect the criticism. After the meeting, the same public employee in the elevator or parking lot would encourage a bridge critic to keep raising questions, provide more information, and sometimes even offer a private opinion on the project’s lack of merit.

    This disjoint between public statements of government employees and their private opinions was sometimes almost surreal. These conversations encouraged the critics to stay on task even as it provided discouraging feedback about how government functions when professionals assessing information felt the need to defer their judgments to Mayor Sullivan, Governor Parnell, and other elected officials who had already endorsed the project.

    6. Critics stepped in, when AMATS proved unwilling to examine the project’s finances.

    How AMATS handled the bridge project resulted in a sorry record for the Muni-State planning organization.

    A. AMATS was largely Missing in Action on the fight over Mat Su Population Numbers

    Planners from AMATS, the state, and Mat Su had almost endless numbers of meetings to try to resolve different population and employment numbers between themselves and between KABATA’s numbers and theirs. While AMATS planning staff insisted they did not have the time or resources to look into the reality of whether the large agricultural zoning at Point MacKenzie could even support the population and job numbers projected by KABATA, clearly AMATS needed to know whether the Bridge would be dumping less than 10,000 trips a day downtown in 2035 (an HDR-Mat Su number that surfaced from a PRA request), 16,800 trips a day (a number HDR estimated from earlier work on the Highway to Highway project) or 36,600 trips according to KABATA. But AMATS staff did not have the backbone, expertise, or political freedom to assess the reality of KABATA’s financial numbers. Instead they inserted in the 2035 Long Range Transportation Plan (LRTP) a convenient fiction showing the project would have no fiscal impact on non-bridge projects planned for the Anchorage area.

    B. AMATS budget plans ignored the elephant in the room

    AMATS receives about $25 million a year in state and federal transportation funding. Critics estimated that the toll shortfall for the first ten years would be more than AMATS funding. Who could believe that the $1-2 billion project would not affect local funding?

    In re-certifying AMATS in 2011 as a regional planning agency eligible for federal planning funds, the Federal Highway Administration (FHWA) Division Administrator criticized AMATS for not playing a stronger role to ensure consistent planning assumptions between KABATA, the state, the Mat Su, and AMATS. The USDOT Division Administrator wrote that “in order to make a complete determination that the updated (2035) LRTP is financially constrained, AMATS must determine that the sources and levels of funding for all projects are reasonable. Due to the size of the KAC (Knik Arm Crossing) project relative to a typical AMATS project, it is particularly important that the best available cost and revenue estimates by source from the KAC project be included in the next plan revision.” This was never done.

    When critics in 2011 made presentations to every Anchorage community council about the 2035 draft LRTP, no one questioned that the large project would affect the ability of AMATS to fund other projects, even those where existing demands to accommodate traffic and improve safety should have made those other projects a higher priority than a billion dollar plus bridge to vacant land.

    Whether pro or anti bridge, Anchorage Assembly members did not accept AMATS’ judgment that the bridge would not impact local transportation funding. In adopting the 2035 LRTP in 2011, a 9-2 Assembly vote sought to “wall off” Bridge finances from future AMATS funding. Nevertheless, the Bridge stayed in the LRTP and it remained in the current Statewide Transportation Improvement Plan without any further funding commitments.

    C. AMATS proved less concerned with KABATA’s numbers than federal loan analysts

    While AMATS committees allowed a briefing by critics comparing the numbers being used in preparing the 2035 MTP and KABATA numbers, AMATS didn’t follow up. Goldsmith and Kenworthy signed a Memorandum of Understanding with the Muni to provide a free analysis of KABATA vs. non-KABATA socio-economic data in return for AMATS traffic information. Goldsmith and Kenworthy provided comparisons of data and maps down to the neighborhood level of differences in population and employment numbers in the Mat Su. After 3 emails to AMATS Coordinator Craig Lyon, no briefing was ever scheduled for Goldsmith and Kenworthy to present this information to the AMATS Technical or Policy Committees. Clearly, AMATS staff didn’t care, didn’t know, didn’t want to know, or did not have the willingness to try to reconcile their data and traffic projections with KABATA’s data.

    In contrast, the federal loan analysts from the US Department of Transportation clearly were worried about the overly optimistic numbers KABATA used to predict that there would be sufficient toll revenues to pay off the prospective loan. In their last loan rejection letter, of 2/9/16 the CFO of the US Department of Transportation, Shoshana Lew cited the “aggressive assumptions in your traffic and revenue study” as a key reason for the loan denial. The critics were not surprised by this conclusion but for 10 years AMATS was largely missing in action on this important question because of the unwillingness of planners and staff to stand up to the elected officials on the Policy Committee and their representatives who supported the project.

    The US DOT conclusion in 2016 echoed the conclusion of the 2013 LB&A audit that KABATA’s numbers were “unreasonably optimistic.”

    7. The Media Moved from “He Said/She Said” to “Boondoggle Watch”

    Bridge stories until about 2012 largely had a he said/she said structure and reader comments were generally split between bridge boosters and critics. But as the loan denials accumulated, the 2013 LB&A audit was released, and reporters got used to receiving accurate project information on budget and socio-economic data from the critics, the media’s tone sharpened and they viewed the critics as information allies. And reader comments and letters to the editor shifted overwhelmingly against the project.

    Reporters now asked critics the two questions they could not answer, because it asked critics to know the mind and motives of bridge proponents. Why is this project still spending money? Where is the support for this really coming from?

    Critics had done research on the pattern of land ownership at Point MacKenzie. The media had disclosed in 2004 land purchases by Congressman Don Young’s son in law Art Nelson and Senator Stevens aide Trevor McCabe of 60 acres of Point MacKenzie land made just before Young announced the original $223 M earmark for the Bridge. But critics found no later large land purchases at Point MacKenzie that would represent the “smoking gun” of any one significant private economic interest that could explain the push for the bridge.

    The largest landholders in the Point MacKenzie area were the state, the Mat Su Borough, and the University of Alaska. KABATA Board Chair Mike Foster wrote the University of Alaska President a letter to point out the amount of University land in the area that would benefit from the bridge and suggested he rein in UAA Professor Scott Goldsmith’s opposition to the project. The President was amused and at a social function handed a copy of the letter to Goldsmith.

    As media reporting and editorials turned against the project, critics hoped forlornly that a giant expose could move the legislature to kill the project. But over the 12 years the Bridge project continued, the revenue model for print journalism continued to deteriorate with the result that few reporters had less time than ever to cover large, complicated projects.

    One story that at least one critic thought should have killed the project came in 2012. A key summary of all KABATA financial plans is a bond cover ratio showing that there was enough revenue to cover bond payments and other fixed payments. Of at least 12 variations of the finance plans done by Citigroup, that ratio varied between 1.25-1.40 or about $1.35 of revenue was expected to pay a dollar of expenses.

    The critics discovered that the consultants were counting on up to 50,000 tolled trips a day to cross the Bridge within 30 years after the 2 lane bridge was open. The official FHWA Highway Capacity Manual estimates about 22,500 vehicles are the maximum capacity for a restricted 2 lane highway at an acceptable service level. So the necessary bond cover ratio KABATA was counting on in its loan application to the feds used at least 4 lanes of revenue to cross a 2 lane bridge. When KABATA was given the chance to refute how the ratio was constructed and declined, this information was forwarded to the federal officials assessing the KABATA loan.

    Once the “4 lanes of revenue, 2 lanes of cost” problem was made public, KABATA shifted to a 2 phase project, with Phase 2 of the project costing about $500 million to expand the bridge to 4 lanes “when traffic warranted” with the project cost rising now to $1.5 billion. But the timing of counting over 22,500 trips a day to provide the revenue for a 2 lane bridge continued to be a problem. Critics continued to call this extra revenue “impossibly derived” rather than “fraud,” but no member of the media, AMATS or legislator ever raised the issue.

    Despite the increasingly critical media attention to the project, it became clear that people who wanted the bridge would not be influenced by factual critiques of the project. In particular, legislative support seemed stronger than was reflected in the media or polling. The legislature proved a lagging indicator of declining support for the project.
    Key reasons for continuing legislative support were leadership positions being held by Mat-Su Legislators, the strength of the pro-development bent of the Republican-led majority, the influence of the Associated General Contractors and to a lesser extent organized labor in pushing for its inclusion in a large capital budget, and even a KABATA budget which could afford a full time “legislative liaison” to lobby for the project In contrast, critics had the time and budget (on their own dime) to visit the capital at most two or three times a year.

    8. Critics Tactics Kept It Non-partisan and Focused

    Most of the critics were personally more on the left than the right of Alaska politics though, when speaking for the group, bridge critics constantly reminded themselves that it made little sense to link the bridge fight with other contentious issues.

    The tactics of the critics was informed by two Ivan Moore polls (paid for by critics) that showed that over a third of Bridge skeptics were small government, anti-spending Republicans, many based in the Mat-Su, Kenai, and especially Southeast Alaska. Men favored the Bridge by 10 points more than women. One of the initial key critiques of the bridge was negative impacts on the health of endangered Cook Inlet beluga whale and salmon caused the the construction and existence of the mile long earth causeways into the inlet that would constrict Knik Arm. But polling and conversations with decision makers soon led critics to focus their key arguments on the poor economics of the project.

    While letter writers often used the Bridge as their best example of misplaced budget priorities (laying off teachers vs. an unneeded Bridge, etc.), Bridge critics tried hard not to link their opposition to the project with broader political agendas on either side. Democrats Les Gara (D-Downtown) and Senator Berta Gardner (D-Midtown) were usually the biggest public bridge critics and put their comments in the misplaced priorities context. Rep Mia Costello (R-Sand Lake) was outspoken on the need for the Department of Transportation to take over the project from KABATA. Other key allies in getting information out about the potential state liability for the project were Senator Bert Steadman (R-Sitka), Senate Finance Member Danny Olson (D-Golovin) and former Rep Eric Feige (R-Chickaloon) who lost his 2014 primary to a candidate backed by the unions and the Associated General Contractors.

    The leadership of the House and Senate as well as the Finance Committees remained highly supportive of the project even as they came to question KABATA’s management. Senate Finance Co-Chair Anna MacKinnon (R-Eagle River) said in 2014 more in frustration over delays of key permits and no financial commitments, “I want to build a bridge.”
    Despite a minority of legislators from both sides of the aisle being critical of the project, at the end of the 2014 session after a bid to offer the project a direct state guarantee failed by two votes in the House, the project was moved to DOT&PF and the legislative majority overwhelming passed a new bill that was described as a “new plan” supported even by former project critics Reps Mike Hawker (R- South Anchorage) and Mia Costello. While the project remained contingent on a $380 M federal loan for about one third of the project costs, it now contained an unlimited “moral obligation” language and had a finance plan dependent on the same high toll and revenue numbers the federal loan officials later rejected.

    9. Facts really do matter.

    Eventually as noted above, the misrepresentations and assertions that counter common sense caught up with Bridge Boosters. When one side of an argument is spouting hyperbole without supporting data, and the other is citing numbers backed up by innumerable quotes and common sense examples, the preponderance of evidence becomes an important factor.

    Bridge proponents were often caught saying that using the bridge would cut the travel time from Anchorage to Talkeetna or Fairbanks. However, KABATA’s own data showed that without the half Billion dollars to build the Pt. MacKenzie to Houston road (a cost not included in the bridge finance plans or cost estimates, and not even mentioned in the Statewide Transportation Improvement Plan) it would be nearly 12 minutes faster, to NOT take the bridge. Not taking the bridge also avoids paying $2000 to $4832 (in 2051) per year in tolls.

    Even if the bridge and the Point MacKenzie to Houston road was built, KABATA’s own maps showed that it would be only 7 minutes faster to Talkeetna.

    It can be difficult to explain the manipulations that KABATA’s consultants used to try to justify how they were going to fit 35,000 average daily trips on a 2 lane bridge, but Alaska commuters from the Mat-Su to Anchorage easily understand that fitting the same traffic that they see every day on a 4 lane Glenn highway west of Eklutna, just won’t fit on that 2 lane bridge.

    Bridge Critics wondered over the years whether their critiques allowed KABATA to improve its plans and predictions. However, in the end, the continual gyrations and tortured “logic” used to support those ever-changing assumptions probably undermined KABATA’s credibility.

    10. “It’s a Process” and a long one

    An Environmental Impact Statement is required for large projects utilizing federal funding by the 1970 National Environmental Policy Act, or NEPA. The pieces and steps required by the law lead to a fairly drawn out process, and it is critically important to get involved at the earliest stage possible. Bridge critics nearly missed an initial meeting that helped establish the Government Hill Community Council as a “Consulting Party” with some rights and responsibilities that would have been lost if we had not attended those initial meetings.

    Some key “lessons learned” from the EIS process:

    A. Your participation in the pieces and steps is important

    From the earliest “project scoping” meetings, to “public meetings”, to “public comment periods” on each of the scoping, draft EIS, Final EIS, and Record of Decision and any Programmatic Agreement, Memorandum of Agreements, etc. are essentially a series of “check lists”, and to establish legal basis, it is important to participate in those meetings and to provide comments, even if you have no intention of filing suit.

    B. Data generated with public dollars is public information.

    Find out the requirements for a Freedom of Information Act (FOIA) and don’t be afraid to file a FOIA request when you are being stonewalled.

    C. Project consultants get paid to generate favorable data.

    Getting background or supporting information for that “unusual seeming” data may be a good candidate for a FOIA request.

    D. “Need” is a constantly mutating beast.

    For a project of questionable benefits or need, there can often be manipulation of the “Need” statements of the EIS, and questions about the underlying assumptions and justifications should always be included in public comments.

    E. “Alternative routes” means all possible routes.

    High costs alone cannot be used as a reason to avoid evaluating alternate routes.

    F. Alternative options always include the “no build” option.

    G. Political patronage and pressure can be huge obstacles to good public process.

    With large amounts of Mat-Su Borough owned land, the Mat-Su delegation’s desire to build things, and a simple concept of opening up empty land to new development, the Knik Arm Bridge and Toll Authority was established and funded with a single purpose, to build a bridge across Knik Arm. The initial $223 million “Earmark” from Don Young for the Knik Arm Bridge furthered that goal and provided KABATA with funding that didn’t have to fight with other state agencies to spend. That the Mat-Su’s Republican legislators were in position of power, where they could both lean on reluctant members, as well as act as gate-keepers for money being spent in the districts of those reluctant members probably did more than almost anything else in keeping such an unjustifiable project alive.

    Epilogue: Alaska Needs to Step Up Its Game in Assessing Mega-Projects

    The critics remain grateful to the Walker administration for canceling the project even as they are still somewhat incredulous it survived so long. More importantly, from what we have learned about how state government spent money during this project, we are not sanguine about how government in Alaska functions.

    Most of the critics believe that if development continues, a bridge might be built across Knik Arm sometime in the next 30-70 years. All of us believe that a number of institutional improvements are necessary now if Alaska is to improve its oversight of megaprojects and do a better job spending public funds.
    Improvements are needed at:

    A. AMATS

    AMATS needs to be a more professional planning organization driven more by fact-based, coordinated socio-economic data and less by politics. Other regions of the country have an executive director with a transportation planning background. AMATS lead is a coordinator of the state and Muni project transportation agendas and the organization is less leading a regional transportation agenda than coordinating the existing state and Muni agendas.

    B.The Alaska Department of Transportation & Public Facilities

    DOT&PF has largely functioned as its own internal, independent empire for a long time. DOT&PF is used to telling the legislators and the public which projects are “shovel ready” or not, which projects are scheduled when in the Statewide Improvement Plan, and using the complicated federal and state budget rules to justify the timing of all projects. All $223 million in the original Earmark set aside for the bridge could have been transferred after 2007 to any other state project which was eligible for federal transportation dollars. But over $100 million was spent for the bridge with DOT&PF managing (some might say manipulating) information and the statewide plan, so it never had to indicate any projects which had been postponed or canceled because of bridge spending. DOT&PF also never admitted that bridge spending and pulling engineers off other projects had any impact at all on what projects went to bid. The continuing result is politicians do not understand their choices and the department controls the agenda and timing of launched projects largely regardless of administration.

    For example, on July 1, 2016 Alaska was eligible to draw down more reallocated federal dollars than the state had the 10% match for. Despite a legislative hearing on the subject, the exact amount of missing match has not been made public nor necessarily even known to the legislature, the Transportation Commissioner or the Governor. Our current analysis is that the missing state 10% match is between $25-40 million. If DOT&PF had better priorities and prepared more shovel ready projects that realistically can be built, clearly identified the match needed to the legislature, and had wasted less money on the Knik Arm Crossing and other unrealistic projects like the road to Ambler, at least $250 million more in projects could have been bid this construction season. In this current recession, that $250 million number represents a political and bureaucratic failure largely programmed by how DOT&PF continues to function.

    C. Elected officials

    As a group, elected officials and their staffs do not do enough homework and are driven too much by their understanding of the politics involved rather than by any grasp of key project details. While critics found some outstanding exceptions to this judgment, there remain too many officeholders of both parties and too many holdovers of high level staff who have insufficient courage, analytical ability, willingness to understand large ticket items, and general know-how to adequately do their job.

Boondoggle Index – Knik Arm Bridge by the Numbers

April 11th, 2016

There are over $140 million in unobligated funds for the Knik Arm Bridge stashed away in past capital budgets that are now in play. Those federal and state funds can pay for approximately $275 million in transportation projects this construction season (state funds get an approximately 10:1 federal:state match). It’s time for the legislature to take those funds away from the KAC boondoggle and reassign them to this year’s capital budget for transportation projects.

Amount spent on Knik Arm Crossing (KAC) project from 2003 to June 30, 2015 1 : $101,166,523
Department of Transportation (DOT) estimated cost of approach roads, 2 lane no sidewalk bridge 2: $1.138 Billion
Number of times the US Department of Transportation has rejected KAC for low cost federal loan for 1/3 project costs of $380 million 3: 7
Number of construction permits KAC has obtained from NMFS, Army Corps of Engineers, and Coast Guard 4: 0
Percentage higher the Knik Arm Bridge and Toll Authority (KABATA) consultant projected growth in Mat Su population by 2040 versus separate estimates from the ADOL state demographer, UAA ISER, and McDowell Group 5: 60%
California-based traffic and toll firm accused in 2013 legislative audit of providing “unreasonably optimistic” traffic and toll revenue projections 6: CDM Smith
Firm that made “aggressive assumptions in your traffic and revenue study” cited in “suspending” further review of KAC loan request in 2/9/16 letter from by Chief Financial Officer of US Department of Transportation 7: CDM Smith
Amount KABATA paid to CDM Smith after the critical 2013 Alaska legislative audit resulted in KABATA promising a “fresh start” in paid statewide radio ads 8: $2,104,713.20
Minimum number of projects nationwide where actual traffic and toll revenue was about half of what CDM Smith had projected, resulting in projects that declared bankruptcy or had forced debt restructuring 9: 4
Population estimate by HDR for Point MacKenzie (west side of bridge) in 2035 Mat Su Transportation Plan 10: 7,177
Population estimate by KABATA/DOT for the same area in 2040 11: 37,074
Rank this 37,074 population would make Point MacKenzie in size of Alaska cities today 12: 2nd
Salary of KAC Project Director 13: $157,039
Salary of Governor 14: $145,000
Average daily vehicle traffic on 4 lane free Glenn Highway between Mat Su and Anchorage today 15: 30,460
Average daily vehicle traffic CDM Smith claims will fit on 2 lane tolled Knik Arm Bridge in 2046 16: 34,600
Amount of current and future state funds currently committed to Knik Arm Bridge that can now be transferred to other eligible Alaska transportation projects 17: $140,000,000
Estimated amount that DOT still needs in state funds for the 9% State match necessary to release the maximum amount of advanced federal construction funds 7/1/1618. 18: $25,000,000 – $40,000,000
Minimum amount of this match that could be put into Alaska economy this construction season if the Knik Arm Bridge were to be defunded now 19: $275,000,000
More highway work, ferry service, and jobs today versus more salaries and bogus studies tomorrow Priceless


  1. http://knikbridgefacts.org/wp-content/uploads/2016/04/Attach_A_from_Aug_31_2015_KAC_to_TIFIA_Letter.pdf
  2. Pg 2. http://knikarmbridge.com/wp-content/uploads/2015/06/8.25.2015-Knik-Arm-Crossing-Project_Non-Rural-3.50-percent.pdf
  3. KABATA/DOT TIFIA Letter of Interest Loan Applications rejected in 2005, 2008, 2010, 2011, 2014, and 2016 p. 31 http://www.akleg.gov/basis/get_documents.asp?session=28&docid=8512. TIGER grants rejected 2010, 2011, 2012, 2014, 2016
  4. After several negative comments from the Army Corps of Engineers during the EIS process, KABATA first formally applied for Army Corps of Engineers 404 Permit in September, 2011-pg. 35 (pg 31 on the sheet) http://www.akleg.gov/basis/get_documents.asp?session=28&docid=8512. KABATA Board minutes since 2014 reflect staff predictions that NMFS permit expected “within months” “nearing decision”, and staff “hopeful.” NMFS permits necessary before Corps and Coast Guard permits. The permit was discussed at the most recent KABATA Board meeting on 11/11/15, but that meeting ended up being only a “discussion” because there were insufficient members for quorum.
  5. State Demographer Eddie Hunsinger Alaska Department of Labor has 166,338 people Mat Su in 2042 Pg. 33 http://laborstats.alaska.gov/pop/projected/pub/popproj.pdf; “Spliced” Number of 151,241 for Mat Su 2040 adopted by Anchorage Metropolitan Transportation Solutions (AMATS) Technical Committee from McDowell and ISER number- http://knikbridgefacts.org/wp-content/uploads/2016/04/PC_SE_Explanatory_Memo_v2_11_19_717_AM.pdf p. 4. KABATA/DOT has 207,888 people in Mat Su 2040-pg. 25 http://knikarmbridge.com/wp-content/uploads/2015/06/Attachment-C-AMATS-SE-and-TR-Presentation12-8-2014.pdf. Since population = traffic = tolls, the argument of how large the population will be and where it will be located is critical to understanding if bond payments can be made or, more likely, the future legislature will have a choice between whether the state defaults on bond payments or the legislature has to appropriate annually the amount necessary to make up the toll shortfalls.
  6. http://www.adn.com/article/20130407/audit-knik-arm-bridge-revenue-forecast-unreasonably-optimistic
  7. http://knikbridgefacts.org/wp-content/uploads/2016/03/TIFIA-Letter-to-AKDOT-20160209.png
  8. State Checkbook: http://doa.alaska.gov/dof/reports/ckbkonline_reports.html Detail By Vendor FY-2014-2016.
  9. Southern Connector (SC), San Diego Freeway (CA), Indiana Toll Road (IN), Pocahontas Parkway (VA) http://knikbridgefacts.org/wp-content/uploads/2013/12/13-11-27-Bloomberg-20131127122836.pdf and http://usa.streetsblog.org/2014/11/18/the-indiana-toll-road-and-the-dark-side-of-privately-financed-highways/ KABATA also paid Los Angeles, California law firm Nossaman LLP $1.4 million for legal work (p. 488 http://doa.alaska.gov/dof/reports/resource/vn_detail_fy12.pdf) on the failed “public-private partnership” finance plan before KABATA gave up on the P3 model to finance the project and moved to a direct state funding. The Nossaman firm also put together the Texas State Highway 130 project which went bankrupt last month https://www.texastribune.org/2016/03/02/sh-130-toll-road-files-bankruptcy/. Nossaman did the legal agreements for the now bankrupt Indiana Toll Road and San Diego Freeway projects.
  10. http://knikbridgefacts.org/wp-content/uploads/2016/04/Handouts-w-Truncated-Traffic__Hwy_Manual.pdf
  11. http://knikbridgefacts.org/wp-content/uploads/2016/04/Handouts-w-Truncated-Traffic__Hwy_Manual.pdf
  12. http://www.geonames.org/US/AK/largest-cities-in-alaska.html
  13. http://doa.alaska.gov/dof/reports/resource/ctep/2015_comp.pdf
  14. https://ballotpedia.org/Alaska_state_government_salary
  15. Look at Eklutna Flats on this map: http://dot.alaska.gov/stwdplng/transdata/traffic_AADT_map.shtml
  16. Table 5-13 p. 158 http://knikarmbridge.com/wp-content/uploads/2015/06/Comprehensive-TR-Study-for-the-Knik-Arm-Crossing-Project-September-30-2015-No-Appendices-Compressed-v.4.pdf
  17. $136 M in federal Bridge funds unobligated as of and $5 M in General Funds as of 2/3/16 see pg.566, 767, 768, and 814 https://www.omb.alaska.gov/ombfiles/17_budget/PDFs/CASR/Capital_Appropriation_Status_Report_2-2-16.pdf
  18. DOT has refused to identify this amount in response to legislative inquiries but a DOT source has suggested this range.
  19. $136 M in federal Bridge funds unobligated as of and $5 M in General Funds as of 2/3/16 see pg.566, 767, 768, and 814 https://www.omb.alaska.gov/ombfiles/17_budget/PDFs/CASR/Capital_Appropriation_Status_Report_2-2-16.pdf which combined with General Fund operating funds for FY 16 and FY 17 that can also be used as 9% state match of advanced federal construction funds available on 7/1/16. Total approximately $275 M.

Media Activity in Response to TIFIA rejection Letter

April 1st, 2016

Significant media activity in the past two weeks in response to the TIFIA rejection letter of 2/09/2016.

Denial of Federal Loan Cancels Bridge’s Finance Plan: Project Apparently Dead

March 21st, 2016

On Feb 9, 2016 the US Department of Transportation turned down a Letter of Interest loan application for a $378 million TIFIA loan and $15 M TIGER grant. (See TIFIA letter here). By the terms of the passed KABATA Bill HB 23, the necessary state bonding for the project was contingent upon receipt of a low cost 3.5 % federal loan with no interest payments for five years for one third of the project costs. This is at least the seventh TIFIA application KABATA/DOT has submitted and it has yet to advance past the letter of interest initial review stage.

In its review of the KABATA/DOT application, TIFIA CFO Shoshana Lew cited “aggressive assumptions in your traffic and revenue study” in informing KABATA/DOT project financial officer Kevin Hemenway that TIFIA is “suspending review” of the application since the application could not meet “(US)DOT underwriting standards.” Many of the aggressive population and traffic count assumptions cited by TIFIA were documented in the 10/13/15 post below and are familiar to readers of this blog over the past five years. Per the state checkbook, in the past three years, KABATA/DOT has directed at least $2,242,636.04 to two major contractors for the new numbers – which TIFIA has now rejected: CDM Smith of California (the same traffic and revenue consultant criticized in the 2013 LB&A Audit of the project) and Cardno, Inc. of Portland, Oregon.

A copy of the press release from Scott Goldsmith and Jamie Kenworthy is available here.

Some legislators may find the timing on the delayed release of the loan rejection news to be curious. The TIFIA rejection letter to Kevin Hemenway was dated February 9, 2016. On February 16 Government Hill Community Council President Stephanie Kesler requested from the Director of the Knik Arm Crossing Project, all recent correspondence from TIFIA to KABATA/DOT. On March 9th, the Director made the February 9 letter available to Kesler.

Both houses of the legislature have now passed their version of the DOT operating budget for next year and the two versions sit in Conference Committee. The capital budget has yet to pass either house and the Department of Transportation lacks the 9% matching funds necessary to use all the federal funds available on July 1, 2016. So, the big question is: Will legislators keep their $168 million commitment to the bridge that now has no finance plan or will those funds be made available to fund additional projects and increase jobs this construction season?

AKDOT (nee KABATA) applies for Federal Loans and Grants

October 13th, 2015

Walking back his January, 2015 decision to halt spending on the megaprojects of the Juneau Road, Susitna Dam, and the Knik Arm Bridge, Governor Walker in July amended his earlier administrative order to allow further spending on the projects (see here and here for details).

The Governor’s decision allows the Knik Arm Bridge and Toll Authority (KABATA) project team (now housed in the Alaska Department of Transportation and Public Facilities (AKDOT) to apply for a $378 M federal TIFIA loan and a $15 M federal TIGER grant that could launch what AKDOT estimates is a $1.15 Billion project. If the federal money is acquired, 2014 Legislation allows the project to move forward requiring only the approval of the state’s bond committee. Click here for the AKDOT/KABATA project letter of interest application.

Knik Arm Crossing proponents state that Toll Revenues will be enough to pay back the TIFIA Loan. They also predict that toll revenues will eventually be high enough to make the State-Issued Bonds payments (although AKDOT/KABATA does admit that initially, the state will need cover the bond payments).

In stark contrast, we believe that analysis shows that toll revenues will be approximately only one quarter of the revenues predicted by AKDOT/KABATA. With just one quarter of the estimated tolls coming in, the Knik Arm Bridge will require annual subsidies from the State of Alaska to pay for: Operations & Maintenance, TIFIA loan payments, and servicing of the State-issued Bonds.

Below is a list of the AKDOT/KABATA toll revenue forecast flaws:

  • The Knik Arm Bridge traffic estimates performed for the Wasilla Bypass project were predicted to be 9,000 Average Daily Trips (ADT) in 2035, versus 36,000 ADT predicted by AKDOT/KABATA. 9,000 average trips is one quarter of AKDOT’s/KABATA’s estimate and is also what we predict.
  • AKDOT’s/KABATA’s population forecasts for the Point MacKenzie area are 80% higher than forecasts performed for AKDOT’s Wasilla Bypass project.
  • AKDOT’s/KABATA’s population estimates rely on growth assumptions that have not yet occurred in the Mat-Su Borough, and that will significantly raise taxes and raise the price of housing in the Point MacKenzie area.
  • AKDOT’s/KABATA’s previous population and employment predictions used wildly different assumptions than their current “model”.
  • AKDOT’s/KABATA’s financial plan still relies on toll revenues from traffic volumes than can only be accommodated by a 4-lane bridge. But the costs in the financial plan reflect the only the costs of building a 2-lane bridge.

KABATA/ADOT Application Predicts 60% More Growth in Mat Su than State Demographer

Whether the state can pay off the proposed federal TIFIA and TIGER loans and $287 M in state bonds needed to finance the project, depends largely on how many people live near the Bridge and are willing to pay a one-way $5 toll (rising 2.5% a year). The population estimates performed by AKDOT/KABATA consultants included in the federal application, is for 207,888 people in the Mat Su Borough in 2040. (p. 25 ).

Again, in stark contrast, Eddie Hunsinger, the Alaska state demographer, in April 2014, projected 166,338 people in the Borough in 2042. Also, the Anchorage Metropolitan Transportation Solutions (AMATS) adopted a 2040 population estimate of 155,000 from a McDowell report to be used for the upcoming Anchorage transportation plan.

With about 98,000 people in the Mat Su Borough today, the population figure used for the federal loan application projects over 60% higher growth rate in the Borough in 2040 than either the state demographer or AMATS. Click here for visuals developed by ISER’s Scott Goldsmith and Jamie Kenworthy illustrate the large differences between the Bridge proponent’s population number and other sources.

“Futuristic Concepts”, Quite Different from Reality

Neither the state’s official population projection nor the AMATS projection was provided to the federal TIFIA loan officials by AKDOT/KABATA. However the application included a “poster,” of a “vision” of proposed “townsites” near the Bridge from a February 2014 study paid for by the Mat Su Borough. The disclaimer included on that poster states: “This map illustrates a futuristic concept to be used for discussion and generalized planning purposes only.” The poster indicates the difficulty that AKDOT/KABATA has in getting the population density that they need, using the lot sizes that are typical for the Borough.

Outside of the Palmer/Wasilla core area, almost all of the Mat-Su Borough has been and is being developed using well and septic systems that require a minimum 1 acre lot size. To pack enough people near the Kink Arm Bridge (where it actually might make financial sense to pay a toll instead of using the free Glenn Highway), AKDOT/KABATA is instead predicting that the vast majority of new homes being built will have 2, 3 or even 5 dwellings per acre. There was some additional capacity built into the water treatment plant and sewage treatment plant for the Goose Creek Correctional Center, but it is clear that the available capacity would not be enough to support what is envisioned at the Point MacKenzie townsite. The poster also indicates that the Mat-Su Borough and the state (along with private developers) would be responsible for the costs of building additional roads, schools, water treatment and sewer plants necessary to support the population density projected by AKDOT/KABATA. Since the Mat-Su Borough has struggled to pay for updating their current sewage treatment plants, it is highly unlikely that Mat-Su voters will authorize the tax increases to pay for the 6 or 7 new water and sewer treatment plants needed for this “futuristic concept” to come true! Unfortunately for AKDOT/KABATA, those small lots and higher costs take away the major reasons people move to the Mat-Su Borough, cheaper housing costs, and a bigger piece of land to call your own. The need for new schools (Fire & Police Stations also) out on Point MacKenzie well before there is enough population to fill those schools will result in higher taxes in the Mat-Su Borough, further dampening growth rates.

AKDOT’s/KABATA’s Consultants “tweak” assumptions to create requisite cash flow – The Tail Wags the Dog.

We have previously pointed out the number of wildly different scenarios that AKDOT/KABATA and their consultants have created over the years to pump up needed toll revenues. For example: In 2012, we identified a striking inconsistencies in KABATA’s job predictions The estimate of the jobs in 2035 in the same two Traffic Analysis Zones (TAZ) on the Mat-Su side of the Bridge, was 13,828 in their 2011 prediction, but only 6,740 jobs in their 2007 prediction. And there was no explanation of the difference.

So where did that inexplicable doubling of jobs come from between 2007 and 2011? In 2007, KABATA forecasted Mat-Su’s 2030 population at 250,700? But in 2011 they forecasted the population at 200,000 in 2035 – a decrease of 5,000 even with an extra five years. So, with less population, but still needing to show high traffic counts, it appears that KABATA’s 2011 forecast manufactured a doubling of jobs at Point MacKenzie in order to justify both north and south bound traffic crossing the bridge. Assuming that there will be high levels of 2 way-traffic to “go to work” and go shopping at a massive mall and or to go to work at a huge new business center, was clearly an attempt to justify their predicted high toll revenues. The 2007 job estimates even included a Mall 2.4 times the size of the Dimond Center.

It is likely that reality will look different, because those same two TAZ zones are in the area at Point MacKenzie currently set aside for heavy industrial use. Those millions of square feet of retail shopping areas are completely incompatible with the Point MacKenzie industrial Special Use District (SPUD) that the Mat-Su Borough established in 2011.

That SPUD plan outlines land use consistent with the Pt. Mac Bulk Commodities Port: mineral and forest products processing, a petrochemical plant, metal fabrication for oil and gas modules, laydown yards to store pipe for the gas pipeline, power generation and other manufacturing industries. A possible liquefied natural gas (LNG) plant, coal loading, and tank farms are also proposed uses clustered adjacent to the Port. Clearly, homes and major business or retail areas should not be built directly adjacent to hazardous industries like 7 million gallon tank farms, LNG plants or coal loading/storage facilities.

Since KABATA’s 2014 socio-economic consultant showed a new population of nearly 7000 people in what the SW Borough Futures poster show as the Port MacKenzie Port Industrial Area (i.e. zero population), it shows that KABATA’s consultant understood the toll revenue need for a higher population near the Bridge, and assumed that the current Mat-Su Borough regulations on the Port MacKenzie Special Use District (and common sense) would be overturned to allow residential use adjacent to hazardous industrial uses. For the entire Port MacKenzie area, AKDOT/KABATA’s consultant is showing over 5 times the population that AKDOT estimated for the Wasilla Bypass project (see discussion below).

Whether it was big Borough populations in 2007, big retail in 2007, massive business/retail in 2011, or “futuristic” townsites and putting homes and businesses in industrial areas in 2014, it is clear that AKDOT/KABATA’s consultants continue to manipulate the numbers to generate the cash flow predictions needed to cover loan and bond payments.

A “Fresh Start”? Or still getting predictions that don’t pass the “Smell Test”?

A review of the state checkbook reveals that KABATA and AKDOT spent over $1.3 Million in the last two years on new studies by their consultants Agnew:Beck, Cardno, Inc, and CDM Smith. Agnew:Beck and Cardno, Inc of Portland, Oregon produced new population and employment forecasts which were the inputs to CDM Smith’s new traffic and toll revenue estimates. CDM Smith is the traffic and toll estimating firm that was criticized in the 2013 Legislative Budget and Audit for “undocumented” and “overly optimistic” assumptions that led KABATA to promise a “fresh start” on new numbers.

In 2014, CDM Smith estimated that there would be an average of 40,700 trips a day on the bridge in 2040. That number is essentially equivalent to the 36,000 trips a day CDM Smith projected for 2035 in 2012. (In analyzing the proposed Wasilla Bypass, HDR Inc. projected only 9,400 trips a day bridge in 2035 even though HDR also had a high number for Borough growth; their 188,000 people in 2035 is consistent with KABATA’s 208,000 in 2040.) Because Mat Su’s annual population growth has slowed down to 2.3% a year since the 2010 Census, a skeptic might suggest that KABATA’s continued persistence in showing much higher population, trip and toll forecasts compared than all other sources is driven by KABATA’s continuing need to show enough revenue to cover expected Bridge obligations.

Will Pt MacKenzie Be the State’s 2nd Largest City? KABATA’s Consultant vs KABATA

To project enough toll revenue to pay off proposed Bridge obligations requires both a high future Mat Su population and job growth and also requires that much of that growth will not be in the Borough’s current Palmer-Wasilla core but rather moved southwest to Pt MacKenzie at the proposed northern terminus of the bridge.

KABATA’s consultant HDR is in a unique position of creating socio-economic predictions for other AKDOT projects. HDR’s socio-economic predictions for those other AKDOT projects are in conflict with the predictions by Cardno / Agnew::Beck for AKDOT/KABATA. HDR put only 7,177 people at Pt MacKenzie in 2040; the AKDOT/KABATA number is over 5 times higher or 37,074 people. AKDOT/KABATA also projected twice the number of jobs in 2040 than HDR at Pt Mac: 8,930 jobs vs. 4,511. A 37,074 population at Point MacKenzie in 2040 (compared to only about 1,700 there today) would make Point MacKenzie the state’s second largest city, if Juneau and Fairbanks don’t grow much larger than their 31,000 residents each today.

Scott Goldsmith and Jamie Kenworthy took the local neighborhood (or Traffic Analysis Zone (TAZ) in transportation parlance) job and population estimates, and broke them into local regions to graphically illustrate the major differences between the Borough’s official transportation plan done by HDR and the numbers AKDOT/KABATA provided in their federal TIFIA “Letter of Interest” loan application. The numbers dramatically differ on where people will live and work in the future Borough between the numbers provided by DOT to the feds and the Borough’s officially adopted transportation plan. Click here for population distribution and here for location of jobs.

Still Showing “Impossibly Derived Revenue”

In 2013, we provided testimony to the Legislature pointing out that KABATA was counting on toll revenues from traffic that can only fit on a 4-lane bridge, while showing costs of financing and constructing only a 2-lane bridge. Those 4 years of “Impossibly Derived Revenue” are what we call the “2-lane cost/4-lane revenue” problem with KABATA’s past and current financial schemes. AKDOT/KABATA Project Leader Judy Dougherty has testified that traffic volumes greater than 20,000 ADT will result in congestion. The 2015 Knik Arm Crossing TIFIA applications included an effort by CDM Smith to respond to our criticism, and to calculate just how much that “congestion” will affect traffic volumes, but the application still relies on unusual assumptions that are clearly not based on reality: reference pages 5-13 and 5-14 and Table 5-10 in CDM Smith’s 12/5/14 Toll and Revenue report.

For some background, the FHWA Traffic Manual indicates that 22,500 Average Daily Traffic (ADT) is approximately the maximum that can fit on a 2 lane road or bridge. Exactly how traffic fluctuates over the course of a typical day is the factor that requires that “approximately the maximum” caveat. CDM Smith makes the following statement on page 5-13 of their 2014 Traffic and Revenue Study: “Hourly distributions of traffic were prepared using a combination of the period forecasts and the time of day pattern of traffic counted on the Glenn Highway. The hourly distributions were constructed so as to match the AWDT forecast and the AM and PM peak period forecasts. The hourly volumes (for the average weekday) were then constrained to a maximum hourly flow rate of 2,500 vehicles per hour. This process resulted in a 4.8% reduction in the AWDT for 2030, an 11.3% reduction in 2035 and a 16.7% reduction in 2040. The time-of-day pattern of traffic under these conditions is quite unusual. Traffic volumes increase to the maximum flow rate early in the morning and stay at that level throughout the day.”

CDM Smith’s statement doesn’t explain just how unusual that kind of a traffic pattern really is: Actual traffic patterns measured on the Glenn Highway in 2008 at the 6 lanes of Glen Highway traffic at the Anchorage Scalehouse had 38.55% of the typical South-Bound work-day traffic occurring between 6 and 9 am. Similarly, the North-Bound traffic had 38.20% of the day’s traffic that traveled between 3 and 6 pm. The Glenn Highway traffic at the Eklutna Flats was similar, and the hourly average traffic flows on that 4-lane highway give some good comparison’s to KABATA’s predictions:

For the hours ending at 7, 8 and 9 am, there were 2,352, 1,903 & 1,370 average hourly flows (both directions), and 1,928, 2,619 & 2,721 for the hours ending at 4, 5 & 6 pm. That average hourly traffic did not exceed 1,400 vehicles per hour for the remainder of the morning and afternoon, up until the evening “rush hour”. Compare those actual traffic patterns on a 4-lane highway to AKDOT/KABATA’s predictions that “Traffic volumes increase to the maximum flow rate (2,500 vehicles/hour) early in the morning and stay at that level throughout the day” on a 2-lane bridge. Commuters already complain about “rush hour” traffic on the 4-6-lane Glenn Highway at average hourly vehicle counts that are close to, or less than the vehicle counts that AKDOT/KABATA predicts will be able to fit on a 2-lane bridge! Not only is CDM Smith’s predicted traffic pattern NOT based on “the time of day pattern of traffic counted on the Glenn Highway”, the idea that their 2-lane bridge can sustain 2,500 vehicles per hour at any time is highly questionable.

Interestingly, the 29,386 ADT from 2008 Glenn Highway Traffic patterns are still basically representative of Glenn Highway Traffic today. The ADT at the Eklutna Flats measuring station has stayed at approximately 30,0000 ADT for the past 5 years. Clearly the Mat-Su Borough is developing its own jobs, reducing the bedroom community patterns of the past. The Alaska Division of Commerce backs up that information with statistics showing that the percentage of Mat-Su residents commuting outside of the Borough for work (including the North Slope, etc) dropped from 55% in 2011 to 44% in 2015.

Table 5-10 on page 5-14 of CDM Smith’s 2014 Traffic & Revenue forecast indicates that even with the “constraints on the hourly flow rates”, their revenue forecast still asserts that they can have 33,300 average daily traffic fitting on a 2-lane bridge in 2045, which is clearly not possible.

Furthermore, at 25,000 vehicles a day, if you use the 2008 hourly traffic rates measured on the Glenn Highway to estimate the hourly rates on the Knik Arm Bridge, there would be so many cars trying to use the bridge during “rush hour” that traffic would backup more than a mile on either side of the bridge. At 33,300 ADT there could be 6 mile backups in the morning and evening peak hours.
The AKDOT/KABATA paid over a million dollars for the CDM Smith report and those Toll Revenues form the basis for their 2015 TIFIA finance plan. The peak-non-peak flow in Anchorage shows the toll revenue projected over about 20,000 ADT is physically impossible. CDM Smith’s prediction that “Traffic volumes increase to the maximum flow rate early in the morning and stay at that level throughout the day” is a wholesale invention of a new traffic pattern for Anchorage where peak hours and non-peak hours have almost the same level of traffic and congestion.

The statement from the Citi financial plan pg. 3 sent to TIFIA, “Toll Revenue for Phase I is capped at the facility capacity and only grows by inflation adjustment to toll rates from when that point is achieved” is demonstrably untrue, since the revenue estimates come from CDM Smith Table 5-10 where up to 33,300 vehicles a day cross a 2 lane bridge that has a capacity of only 20,000 ADT.

What Happens Next? Why the Federal Loan Could be Approved

KABATA has been turned down for a TIFIA loan seven times at the preliminary “Letter of Interest” stage. However when the legislature passed HB 23 in 2013, it changed the financial structure from a public private partnership to a direct state finance structure. And it added language (37.15.260 1 g ) to have the Revenue Commissioner report annually to the legislature, stating the amount of money that will need to be appropriated to cover all Bridge obligations. That requirement is considered by bond attorneys to trigger a “moral obligation” of the state to cover all toll shortfalls.
In that scenario, the legislature would have a tough choice each session: appropriate enough funds to cover all bridge obligations or trigger a default by a state department and risk an almost certain downgrade to Alaska’s Credit Rating.

With the expected toll shortfall apparently guaranteed by a state that for now has a AAA credit rating, TIFIA loan examiners may not care how accurate AKDOT/KABATA’s population and toll revenue projections are since the state is essentially on the hook as the backup creditor. All of AKDOT’s/KABATA;s cost estimates have been based on a design that is only 35% complete. As that design works towards being 100% complete, the cost increases that are “normal” for a mega project of this scale (along with the toll shortfalls) means that IF the Kink Arm Bridge is built, Alaska could easily be looking a $2 billion hit to the State Budget.

TIFIA has told Congress that existing appropriations allow about $9 billion a year of project financing that covers up to one third project costs or TIFIA funds can launch about $27 billion of projects a year. A review of current letter of interest applications shows there may be too few projects chasing too much money. So the “Bridge to Nowhere” could have a fair chance of passing the letter of interest phase and moving to the credit analysis phase that often leads to loan approval.

Aides to the Governor have assured this blog’s writers that the Knik Arm Crossing, like the Juneau Road and Susitna Dam, is in a “parking lot” awaiting consideration only by future administrations. But the Transportation Commissioner’s endorsement of the project and the active status of the TIFIA loan request sends a different signal.

The question for Alaska is: IF the TIFIA loan is acquired, can Alaska afford to spend $2 Billion on a bridge to nowhere in an era of $5 billion dollar deficits?

Governor apparently manages Department of Transportation and not Vice Versa; Bridge Project on the Ropes

January 26th, 2015

The flurry of activity around the Knik Bridge project in the last two months has made two things clear: First, the Governor Walker appears serious about taking the Bridge out of his capital budget request; he ordered the Department of Transportation and Public Facilities (DOT) stop spending funds on the project. Second, despite attempted resistance from the Department, Walker remains in charge.

With oil below $50 a barrel, the Governor’s first step to getting control of an approximate $3.5-4 billion state annual deficit came on December 26, 2014 when the new Governor issued Administrative Order 271 to stop spending non-obligated and unencumbered funds on six megaprojects. Besides the Knik Arm Crossing, the other projects were the Ambler Road, the Juneau Access Road, the Susitna-Watana Dam, the Kodiak Launch Complex and the Alaska Stand Alone Pipeline project. See here for Governor Walker’s press release.

The DOT Push Back that Failed

A January 5, 2015 memo from holdover DOT Commissioner Kemp to Governor Walker’s new Office of Management and Budget Director, Pat Pitney with a copy to the Governor’s Chief of Staff, Jim Whitaker boldly defended his department’s projects. Kemp argued that both the Juneau Road and Knik Bridge were “long-standing goals of the state” that represented a “cost-effective opportunity.” He also said canceling both projects would “likely trigger” the requirement to repay the estimated $73 million in federal funds spent on the Knik Bridge and the $25 million in federal funds spent on the Juneau Access project. By arguing that the Knik Bridge could be funded by state and federal bonds and user fees, Commissioner Kemp was, in effect, backing up the controversially optimistic toll revenue forecast and implying the Bridge would have no impact on the state’s budget.

The resistance of DOT bureaucracy to the apparent cancellation of the two projects stood out among the other state departments and agencies reacting to the suspended six megaprojects.

Critics of Commissioner Kemp’s reasoning were not long in coming out. With DOT’s estimated cost of the Bridge at $1 Billion (critics say around $2 Billion), bridge critic Jamie Kenworthy said the mathematical logic of Kemp’s reasoning was that if you had put five cents into a project that did not make sense, should the other 95 cents follow? Others pointed out when costs ballooned on Anchorage’s Highway to Highway and the Knowles Coastal Trail extension projects, both were canceled by the state and FHWA without the state having to repay the federal funds expended. Faced with these past examples, DOT Transportation spokesperson Jeremy Woodrow backed off his earlier claim that refunding would be required, and instead admitted that past repayment issues had been settled on a case by case basis.

On January 12 the Governor fired Commissioner Kemp. The Juneau Empire and later the Alaska Dispatch and the Fairbanks Daily News Miner quoted the Governor’s spokesperson Grace Jong who made clear that both the Knik Bridge and Juneau Access projects were “on the block.”

The Subway Eminent Domain Fiasco: A DOT Left Hand/Right Hand Problem or an Out of Control Bureaucracy?

On January 8, 2015, DOT contractor HDR notified the owners of the Subway business on Government Hill threatening that if ”there is not some form of mutual agreement reached between the parties within 14 days” regarding acquiring of their property lease for Bridge right of way, the case would be referred to the Attorney General for instigation of eminent domain proceeding to acquire Subway’s interests in the property. The HDR letter copied Knik Bridge Director Judy Dougherty and the Attorney General’s Office.

The willingness of DOT to incur further legal and right of way costs appeared to contradict both the Governor’s December Administrative Order 271 to halt further un-obligated spending and the Knik Arm Crossing and Toll Authority’s (KABATA’s) November 14, 2013 Board resolution to let existing businesses operate until the project’s plans were nailed down.

It’s not clear whether DOT leadership, including Central Region Director Rob Campbell, knew that Knik Arm Crossing Director Judy Dougherty was continuing steps to take to acquire property. But the Governor reacted by canceling any further efforts to acquire more right of way, remarking “let’s not go and start tearing down buildings and closing businesses” for the hypothetical project. It is not known if the Tesoro Station on Government Hill received a similar eminent domain letter from DOT, as their property is also slated for demolition, should the Knik Bridge pass their financial and permitting hurdles.

Government Hill Community Council President Stephanie Kesler applauded the Governor’s decision to cancel the eminent domain proceedings while pointing out that DOT had still not canceled the contract to demolish two private homes and the Sourdough Motel. She asked that the DOT employees who ignored the Governor’s administrative order be held accountable. Senator Ellis (D-Anc) described the attempted taking of two operating business as a continuation of the Department’s “pattern of intimidation” of the neighborhood and Bridge opponents.

Summary: New Sheriff in Town and New Commissioner, but old legislature?

On January 23 the Governor announced that he had appointed former DOT Commissioner Marc Luiken to his former post. A former Elmendorf Vice Commander, Luiken reportedly had been fired by Governor Parnell after he had quantified the budget needed just to maintain DOT’s transportation infrastructure and argued for the priority of maintenance over new construction. While he had never publicly aired his differences with the Governor and his transportation aide Randy Ruaro, reports had circulated from aides that the Governor asked for Luiken’s resignation when it became clear that Commissioner Luiken did not share the Governor’s support for the megaprojects that had drawn such enthusiasm from the Associated General Contractors and local politicians, and particularly from the Mat-Su Borough.

On January 9, 2015, DOT proposed Amendment 13 to the Statewide Transportation Plan (STIP) that would drop the Knik Arm Crossing from the STIP, and transfer those funds to other projects, taking the necessary bureaucratic step of asking for public comment by February 13 on the proposed amendment.

With these actions by the Governor and the Department of Transportation, it has become clear that the Governor is focused on cutting the capital budget and a Commissioner is now in place who shares the new Governor’s priorities. But it is not clear whether the legislature will go along with the Governor’s priorities.

On January 22, 2015 the joint Senate and House Transportation Committees met to hear testimony and discuss the fate of the megaprojects. The legislators’ general discussion neither endorsed nor suggested trying to overturn the Governor’s decisions. Testimony from the Acting DOT Commissioner included the information that $84.8 million has been spent to date on the Knik Arm Crossing including $72.9 million in federal funds.

Also on January 22, 2015, the AP’s Becky Bohrer reported that the Senate Finance Committee had hired former Parnell Revenue Commissioner and KABATA Board member Angela Rodell on a 4 month, up to $100,000 contract, to provide advice on the retirement system, the gas line, and the state’s bond rating. A year ago Rodell had instigated the latest finance plan for the Bridge that proposed the state directly finance the project and testified in favor of legislation that passed committing state bonds to the project (contingent upon receipt of a federal loan that KABATA had been turned down for six times). Without the authority to incur further consultant costs, it appears that the administration cannot now pursue the letter of interest loan application.

But with the legislature now in session, the final story of the Knik Bridge project may not be over yet.

Parnell Administration Denies Records Appeal

November 24th, 2014

Reports Still Withheld: Consultants Hired for Data or Deliberations?

In what may be his final action on the Knik Arm Crossing project, on November 19, 2014 Department of Transportation and Public Facilities Commissioner Patrick Kemp denied the administrative appeal of Government Hill Community Council President Stephanie Kesler’s Public Records Act request for release of the long promised socioeconomic reports (see earlier posts below) on the project.

With the assistance of Assistant Attorney General David Jones and Knik Arm Crossing Project Director Judy Dougherty, Commissioner Kemp stated the reports are still incomplete and so Ms. Kesler’s June, and August 2014 PRA requests were not valid. Per the schedule announced by KABATA in mid-2013, the Cardno/Agnew::Beck socioeconomic report with new population and employment forecasts was to be a three month project which was due to complete over a year ago.

State records show both Cardno and CDM Smith have been paid a total over $1.3 million by KABATA and the Department of Transportation in the past two years, so it is not clear how just “chapters” and not the entire studies were allegedly complete. What is clear is that the reports are a necessary precursor to the revised federal TIFIA loan letter of interest. Unfortunately, delay in providing those reports severely limits opportunity for the public and local officials to comment on the new population projection data, estimated toll revenue, and the resulting revised financial plan before consideration of the plan by federal officials during the TIFIA application process.

The Knik Bridge project has been turned down six times for a needed federal TIFIA loan; the legislature’s commitment for state bonds and future transportation funds for what DOT&PF continues to claim will be a $894 million project, is contingent upon the receipt of an approximate $343 M federal loan.

In denying the administrative appeal, the state argued that it was entitled to the “deliberative process” case law exemption from the state Public Records Act because the consultant work was in effect embedded in the state’s decision making process. Commissioner Kemp did not cite any information from existing contracts with the consultants to back up the state’s claim that the consultants were to play a part in the decision making process. Rather, the “Statement of Services” in the 2013 RFP done for the revised population projections by KABATA made clear that the chosen consultant was to produce “data” and for the consultant to present their “findings” to the Department and the legislature.

When Knik Arm Crossing Project Director Judy Dougherty and the consultants present to Anchorage Metropolitan Area Solutions (AMATS) and Muni Planning and Zoning members on December 8, 2014, the public will presumably learn for the first time about the new foundational population and employment estimates for the project promised after a scathing LB&A audit came out in April, 2013. KABATA signed an agreement with AMATS in August, 2013 to provide AMATS socioeconomic data for the scheduled 2015 update by AMATS of the 2040 Long Range Transportation Plan (LRTP). Because, that data has not been shared with the Muni, AMATS has had to hire a separate consultant to produce independent revised population and traffic estimates to try to stay on schedule for the revised LRTP due to be completed in 2015. As explained in earlier posts, because the socioeconomic studies were not required to be coordinated with each other, there will now likely be three different assumptions used by the Mat-Su Borough, AMATS and DOT/KABATA for their various transportation effort.

Countdown to More Transparency?

Stephanie Kesler has 30 days from the November 19, 2014 denial of administrative appeal to take the Commissioner Kemp’s decision to the state superior court. By then some of the reports information may be released at the December 8 DOT presentation and there may be a new Department of Transportation Commissioner who has a different understanding of the state Public Records Act and more willingness to share project data with the public and local officials.

Key Reports Withheld, Gas Pumps Gone

October 28th, 2014

A column in the October 25, 2014 Alaska Dispatch News by Jamie Kenworthy highlights the two denied Public Requests Act (click here and here) and an administrative appeal (click here) for the Department of Transportation and Public Facilities for release of the long promised reports on the socioeconomic data used to justify the Bridge.

After a scathing legislative audit identifying “unreasonably optimistic” population and toll revenue projections, KABATA (Knik Arm Bridge and Toll Authority) promised a fresh start with new socioeconomic data and hired the team of Cardno/Agnew::Beck to make an independent estimate of the region’s population and employment. That new socioeconomic data was to have been completed by September 30, 2013, over a year ago, per KABATA’s own press release (click here). That due date continues to slip: The February, 2014 KABATA newsletter promised the updated toll and revenue forecast would be available “within weeks”. The new revised socioeconomic data was to provide the background for a revised traffic and toll revenue forecast, but that report was still missing at the end of April, 2014. Thus, the legislature approved the project without having any assurance that there would be sufficient toll revenues needed to pay off the necessary state and federal bonds. The Bridge financing bill, HB 23, committed the state to fund what KABATA estimates to be an $894 million cost to build a 2 lane bridge contingent upon receipt of a $341 M federal TIFIA loan for which the state has been turned down for now six times.

In this article, the Alaska Dispatch summarized the dispute over the withheld reports.The original Public Request Act (PRA) for the studies was filed by Government Hill Community Council President Stephanie Kesler on June 11, 2014 and renewed August 20, 2014, and appealed to the Commissioner of the Department of Transportation and Public Facilities (DOT/PF) on October 7, 2014. In an October 10, 2014 response to the appeal, DOT/PF acknowledged that by law the Department had 10 days but because the Assistant Attorney General who was familiar with the project was gone for two weeks, the response would likely to be delayed. From the state’s denials of the PRA request it is not clear whether the reports are complete or not. What may be likely is that the Cardno / Agnew::Beck forecast of population and employment data was completed a year ago. But Cardno, Inc may have forecasted lower numbers than necessary to pay off the bonds, so the toll and revenue consultant CDM Smith – the same firm criticized in the 2013 legislative audit – has had to model a number of new traffic scenarios to get the number high enough to show enough revenue to pay off the federal loan for which they are applying.

Political skeptics may interpret the withholding of the reports for which the two consulting firms were paid over $1.3 million in FY 13 and FY 14 (click here) as being dictated by the November 4 election. However the withholding of the socioeconomic report may be driven by larger financial considerations. To get the federal TIFIA loan upon which the project depends, the project needs an “investment grade” toll and revenue forecast. To pass that financial review the state must show that there are sufficient population and traffic numbers to produce the tolls to pay off the bonds on the proposed $341 M federal loan. Consequently, hiding the data may prevent critics from questioning the state’s numbers. Interestingly, DOT/PF recently stated that, “The change in direction for how the project would be financed (ie. TIFIA and bonds) changed the type of data and increased the amount of necessary information than was originally planned under the previous P3 funding method. As a result, the contractor and subcontractors have required more time to generate the report.” That directly conflicts with the testimony provided by Rep. Mark Neuman (R-Big Lake) during the March 12, 2013 House Transportation Committee hearing on HB23, where he stated that Standard & Poor had already provided an “investment grade” rating for the project.

Business chooses to dis-invest at property threatened by this Project without Financing

The only gas pumps on Government Hill have now been removed by Tesoro, who apparently made the decision that it does not make business sense to upgrade the station’s gas tanks while the Department of Transportation threatens to acquire the station for the right of way for the Bridge project.

The decision by Tesoro and its real estate landlord apparently caught the neighborhood, the state, and the Alaska Railroad which has a long term lease with the station’s owners off guard. Click here for the Alaska Dispatch article.

On November, 15, 2013 amidst an earlier kerfuffle with the neighborhood over acquisition of neighborhood homes and businesses for a project that lacked financing, KABATA issued a press release to highlight that the KABATA Board’s intent in “protecting the interests of the subtenants to remain in possession until construction begins.” As DOT spokeswoman Jill Reese, stated in the October 15, 2014 ADN article, “We had no intention whatsoever of not continuing their lease, and then not paying them for every bit of the relocation and expenses that they would have had.” She added that such compensation is required by federal law.

On Tuesday October 14, 2014 Melinda Gant, Vice President of the Government Hill Community Council, spoke with Matt Gill, Tesoro’s External Affairs Senior Manager. Mr. Gill stated that Tesoro was in the midst of a company-wide initiative to replace their single-walled underground tanks with double-walled underground tanks. However, Tesoro received notice from Brauvin Real Estate (Tesoro’s landlord) that the lease was being transferred from the Alaska Railroad to the Alaska Department of Transportation as a part of the Knik Arm Crossing’s right-of-way acquisition process. Mr. Gill then stated that given the uncertainty cast by the Knik Arm Crossing, Tesoro could not justify the investment in the double-walled tanks.

It appears that what economists call “uncertainty” has created a disincentive for Tesoro to make a long term investment in upgrading the business. While DOT’s public stance apparently commits the state to help keep a functioning local businesses alive until the Right of Way is needed, the practical effect for acquiring Right of Way before a large project is financed, discourages new investment in local businesses and leaves the neighborhood with no gas station in the interim.

Discontinuance of fuel sales by the Government Hill Tesoro is a severe blow to the neighborhood, its businesses, Government Elementary School and JBER. The station was almost always busy with vehicles filling up. Neighbors, soldiers and airmen, school parents, AT&T employees, business owners, and many others used that station. The uncertainty imposed on the Government Hill Business District by the potential lease transfer has had the direct effect of lost sales at this location and a loss of economic choice by local residents and one would imagine that Tesoro would like to recoup that lost business if possible.

The Government Hill Community Council is currently working with the DOT/PF and Tesoro to find a solution where the community can keep an important feature of the business district fully operational by providing the necessary “certainty” that had been taken away by DOT/PF’s pre-mature actions on Right of Way.

Protesters Greet Alaska DOT and Bidders at Knik Arm Bridge Demolition Sites

July 16th, 2014

During a site visit for potential demolition bidders on July 15th, over 50 local and city-wide protesters held signs and chanted their opposition to demolition of viable homes in the Government Hill neighborhood for an unfunded bridge. The Government Hill community is an historic residential area and the oldest neighborhood in Anchorage.

On July 3rd, the Alaska Department of Transportation and Public Facilities (ADOT) announced it would remove two homes and one former business located in the path of the proposed Knik Arm Bridge even though there is no likely financing for the bridge. The 164-page Specifications document for the estimated $500,000 to $1 million demolition project is available on ADOT’s website.

Following passage of HB 23, signed by the governor on June 20, ADOT took over nearly all Knik Arm Bridge and Toll Authority (KABATA) duties. This proposed demolition is the first step by ADOT to pursue the bridge in its new role. HB 23 requires the bridge to receive a low-cost federal “TIFIA” loan for one-third of its $1.6 billion cost, however, before the state can proceed with construction. KABATA has been turned down five times for a TIFIA loan, which typically goes to congested urban areas (e.g., Los Angeles, the Tappan Zee Bridge north of New York City).

Government Hill Community Council President Stephanie Kesler commented on the proposed demolition. “It is completely irresponsible and fiscally wasteful for the state to demolish viable homes and diminish our neighborhood for a project without a clear path for funding. Today’s protest shows that our community and our many allies are committed to fighting this bridge even if the properties are gone. We will not roll over and move on.”

Dan Bonney, a retired career military leader from Eagle River, stated that “Demolition of these properties is irreversible and foolhardy absent likely federal funding for the Knik Arm Bridge. Without overwhelming public benefits which I don’t see here, the state should not override local concerns.”

Local media coverage of the protest was extensive:

KTUU (NBC): Planned Knik Arm Bridge Relocations Spark Protest

KTVA (CBS): Bridging the gap on the Knik Arm controversy

APRN: Residents protest home demolition, Knik Arm Bridge

Anchorage Dispatch News: DOT plan to remove Government Hill homes sparks protest

Needed Right of Way? Or Demolitions to Create Facts on the Ground?

July 9th, 2014

Following a familiar public relations tactic to try to bury bad news by releasing it right before a long holiday weekend, around 3 PM on July 3rd, the Department of Transportation issued a press release announcing its intent to solicit bids to demolish 2 houses and the Sourdough Lodge on Government Hill.

The project is now dependent on a hard-to-get $300 million federal loan that KABATA has been turned down for five times and whose reapplication by the state is still pending. (Click here to assess the Bridge’s national competition. Note how almost all projects except the Knik Arm Bridge have had their reviews complete or have been asked for more information.)

The two houses to be demolished are considered livable while the Sourdough Hotel was a functioning business until KABATA acquired the property. AKDOT has yet to acquire two other commercial properties and enter into a long term lease for land owned by the Alaska Railroad.

With no financing plan in place for the project, and at least a year before right-of-way would need to be in hand, it is not clear why the state believes it necessary to demolish the structures soon for a project with an uncertain future. The KTVA report quoted Government Hills Community Council President Stephanie Kesler who noted the irony of tearing down livable housing in a city with a housing shortage.

Devin Kelly’s article today in the Anchorage Daily News quoted KABATA and now DOT spokeswoman Shannon McCarthy saying it would be more expensive to secure or rent the property than to demolish them now. Those statements, even if accurate on an accounting basis, would have been irrelevant if KABATA had waited for the project to be financed before acquiring the properties.