Bridge Financing Stalls

April 23rd, 2012

Even though there was a flurry of activity in the legislature in the last two months of session and at the Anchorage Assembly, the status of the Knik Arm Bridge is unchanged from last year. So the project remains in apparent financial limbo in regards to moving forward with an RFP.

Juneau: Legislature Fails to Pass State Guarantee for Bridge Financing

The Alaska legislature approved the Knik Arm Bridge and Toll Authority (KABATA’s) $1,417,700 operating budget for the fiscal year beginning July 1, 2013. However, the State Senate failed to act on House- passed Bill HB 158 which would obligate the state to make up expected toll shortfalls by guaranteeing payments on the expected 35 year agreement with the contractor. As a result, it is doubtful that KABATA has the state backed financial support it needs to release the RFP this year to the three consortiums eligible to bid for the project.

The Bridge project was not included in the state capital budget. The regular session of the legislature adjourned April 15 after legislators passed operating and capital budgets which now await final action by the Governor.

On March 20, 2012 the Mat Su Borough hired Eldon Mulder for $30,000 to lobby for the project through June (see p. 38 of Alaska 2012 Lobbyist Directory). Since October, KABATA has been supporting the Borough with $270,000 for two years of work for planning activities related to the Bridge.

On March 23 the House Finance Committee passed a substitute bill to last year’s HB 158 sponsored by Mark Neuman (R-Big Lake) that removed the controversial language from last year’s bill making any KABATA contract or bond “obligations of the state.” However, the revised bill handed out at the hearing inserted more complicated language for the state to fund a reserve fund which, after two hours of testimony from both sides and comments from Assistant Attorney General Jeff Stark, the committee came to understand had the same effect as last year’s open-ended state guarantee.

In a March 26 hearing on Senator Menard’s (R-Wasilla) bill SB 80, the Senate companion to HB 158, Senate Finance Chairman Senator Bert Stedman (R-Sitka) asked, “Where’s the data to convince the committee that the exposure to the state is worth it?” The Committee heard only from KABATA and its consultants, but committee members, after expressing a lack of confidence in KABATA’s numbers, did not take any action on the bill. Sen. Stedman termed KABATA’s presentation to the Senate Finance Committee as “frankly one of the worst presentations my committee members said they’ve ever seen in here.”

On April 11 the House passed HB 158 largely on a party line vote with most Democrats opposing after Rep. Les Gara’s (D-Anchorage) amendment failed that sought to remove any state liability for covering the expected toll shortfall. With no action from the Senate side on HB 158 or SB 80 and no attempt to put the Bridge in the state capital budget, it is now unclear whether KABATA’s draft 1000 page draft RFP will be released this year since no consortium has apparently expressed a willingness to finance the Bridge without the state taking some or all of the risk of covering the toll shortfall.

Anchorage: Assembly Reinstates Firewall between future Bridge costs and local transportation funding

On April 10 the Anchorage Assembly held a public hearing on the draft 2035 Metropolitan Transportation Plan (MTP) that the Anchorage Metropolitan Transportation Solutions (AMATS), the state-local transportation planning agency, has been working on since last fall. The AMATS draft MTP sent to the Assembly included the Knik Arm Bridge project and assumed:

  • KABATA’s traffic and toll numbers were accurate
  • HB 158,HB 159 SB 79 and SB80 would pass the legislature with its $150 million loan to the project
  • If the state has to make up for the toll shortfall, that it would not reduce future state transportation funding for Anchorage.

With expected cutbacks in federal support, the 2035 MTP is counting on state support for roads, public transportation and trails to increase from 18% of the total today to 56% in the future.

With all but one of a dozen speakers at the Assembly Public Hearing voicing skepticism about the Bridge project and resolutions from nine community councils opposing the project, most Assembly members expressed concern that projected Bridge deficits would impact needed state funding. The previous Long Range Transportation Plan had a “firewall” between the Bridge and other state funding to AMATS for Anchorage transportation projects.

Patrick Flynn’s ordinance to amend the MTP to restore the firewall by forbidding future local or AMATS funding to support the Bridge then passed 9-2 (Bill Starr and Chris Birch opposing) before the full Assembly unanimously passing the amended MTP. With Flynn’s amendment and changes to Eagle River projects, the amended MTP now goes back to the AMATS Technical and Policy Committees for further modification and adoption before submission to the Federal Highways Administration.

Further Developments

A number of other developments could affect the status of the bridge project in the coming year.

  • The Legislative Budget and Audit Committee has commissioned a wide scoped audit of KABATA including the reasonableness of the traffic and financial projections, an assessment of the project risks to be borne by the private and public sector, and any changes of scope and costs to the project since the original 2003 KABATA legislation. Click here for a copy of LB&A Chairman Representative Mike Hawker’s letter to LB&A staff. The audit is expected to be made public before the next session of the new legislature that convenes January, 2013.
  • The Alaska Department of Labor has released its annual state population projection for 2035 Mat-Su population 2035 population is forecast to be 160,693, a number consistent with the 159,050 from Scott Goldsmith of UAA’s ISER and used for the Anchorage MTP, see p. 5-2. KABATA’s traffic and toll consultant Wilbur Smith Associates (WSA) has not released the actual 2035 Mat Su population estimate that it used for the traffic and toll forecast underlying KABATA’s Financial Plan. But WSA did release Traffic Analysis Zone (TAZ) data which totals about 191,156 in the Borough in 2035 without including the area from Talkeetna north or the Chickaloon area. Click here for Scott Goldsmith’s graph comparing the history of Mat Su Population forecasts from KABATA consultants (Insight Research and Wilbur Smith TAZ data) and non-KABATA sources (ISER and ADOL).
  • KABATA Chair Mike Foster made a presentation on April 5 on the Bridge project to the Seattle Chamber of Commerce
  • KABATA has a maximum $50,000 RFP looking for a firm to manage existing and future Government Hill property, including an already acquired duplex. The RFP describes the property acquisition process as “dynamic.”