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.