The Anchorage Assembly approved two significant measures this week to facilitate funding and the completion of a longstanding overhaul of the state’s main port facility.
“If you’ve been on the journey of the Port for the past decade, you know these two items represent significant milestones,” Assembly Vice Chair Meg Zaletel stated following the votes at a special Assembly meeting on Wednesday afternoon.
One of the ordinances allows the city to sell up to $1.1 billion in revenue bonds to finance construction work at the Don Young Port of Alaska as part of the ongoing modernization project.
Unlike general obligation bonds, which are repaid through local property taxes for community projects such as road improvements and school upgrades, revenue bonds are a form of long-term debt that is repaid through collected fees.
In this scenario, the fees will come from surcharges on materials that flow through the port, which are typically passed on to consumers as part of the prices they pay for groceries, fuel, and other goods imported to Alaska via the port.
Consumers in Alaska already bear these fees for the cargo arriving at the port, implying that with future revenue bonds, they are likely to see an increase in these fees over time.
Assembly Chair Christopher Constant likened the financial arrangement to receiving pre-approval for a mortgage: while the municipality can sell up to $1.1 billion in bonds, this does not imply that the debt has already been incurred.
“This wasn’t a blank check,” Constant remarked on Thursday.
“It is authorizing the line of credit.”
Any significant bond sales will undergo Assembly approval before funds can be allocated to different stages of construction in the coming years.
However, progress on rebuilding the facility has faced a frustrating dilemma, with potential financiers needing assurance of advancement before committing funds, even though those funds are necessary to initiate progress.
This involves protracted back-and-forth in federal court decisions regarding a large award to the Municipality of Anchorage for faulty construction work related to an earlier modernization effort nearly two decades ago.
In 2021, a court ordered the federal Maritime Administration to pay the city $367.4 million.
But last December, that decision was overturned on appeal, causing a significant delay in financial expectations that city officials originally counted on for the costly work of removing existing docks and pilings to make way for new constructions.
Meanwhile, the city has secured approximately $500 million in state and federal funding for the project, which has a total estimated cost between $1.8 billion to $2.2 billion.
“Over the past several years, it has become very clear that applying for, securing, and finalizing State of Alaska and federal grant monies is a long and challenging process.
Waiting for these processes to come to fruition could delay the Port of Alaska Modernization Program and reconstruction of the two terminals,” the LaFrance administration outlined in a memo to the Assembly.
“This ordinance will provide us with the budget that we need to enter into contracts for the entire reconstruction of Terminal 1 and Terminal 2, based upon current cost forecasts.”
The second measure, which also received unanimous approval from all 12 Assembly members, granted a contract for the removal of the current Terminal 1 wharf and the construction of a new one that will enable cargo shipper Matson to unload freight using updated cranes.
Under the contractual agreement, Manson/Michels Joint Venture has committed to a timeline for completing various phases of work to finish Terminal 1 by December 2029.
The agreement features a not-to-exceed amount of $807,456,515, beyond which the contractor will be responsible for any extra costs incurred.
Though the port is managed by Anchorage municipal officials, it serves as a critical state infrastructure asset.
Nearly 50% of Alaska’s cargo passes through the aging and severely corroded docks, with an even higher percentage of the cement and fuel essential to residents arriving through a terminal updated in 2021 as part of the modernization project.
The bond provision should enable the municipality to borrow sufficient funds to cover the construction of the second terminal, which is presently in the design phase, according to Constant.
Should additional federal or state funding become available, or if the city is successful in its ongoing litigation against the Maritime Administration, it may result in a reduced need to sell bonds to complete the project.
The twin measures were described by the LaFrance administration as comprising the “largest municipal capital project” in the city’s history.
“This just feels like a historic move forward,” LaFrance remarked to the Assembly after the votes were passed on Wednesday.
“Never before has voting on industrial infrastructure been emotional.
But it is today,” Constant replied.
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