Benefits outweigh risks in borough, NPI deal

Spectrum, by John Duffy

There seems to be some confusion pertaining to the proposed agreement between the Matanuska-Susitna Borough and NPI LLC, and what the agreement entails. I wish to provide more information to members of the public with the hope of providing more factual and accurate information about this important project.

Briefly, the proposed agreement with NPI would provide the borough with a one-time, up-front $3 million payment in consideration for awarding NPI a 10-year (with option to renew) exclusive right to load certain bulk commodities via a conveyor system with an articulated loader. NPI will purchase and install, at their own cost, an articulated loader and conveyor system, estimated to be $8 million. This is an exclusive right to load bulk materials only, products like gravel, coal and wood chips, but not manufactured goods or containers. Since this exclusive right is strictly limited to the loading of bulk materials, the bulk materials could be owned by any private or public firm. Moreover, there will be absolutely no exclusive use of the dock itself allowed. Any business or individual will continue to be able to use the dock. In fact, we encourage such use as it adds to the strength of our port district.

The $3 million one-time payment must be used to purchase long lead items such as structural steel components for the construction of a deep water dock at Port MacKenzie. Two years ago, the state Legislature passed, and the governor signed, House Bill 528 which contained the state's willingness to reimburse the borough up to $10 million for the construction of a deep water dock at Port MacKenzie and upgrades to Point MacKenzie Road. As envisioned by HB 528, the state will reimburse the borough 100 percent of the $10 million bonds. Should the voters approve the sale of the bonds this Oct. 7 the assembly will then authorize the issuance of $10 million in bonds for construction of the deep water dock. Under HB 528, the borough will request, on an annual basis, 100 percent reimbursement from the state for the debt service payments.

As with any business transaction, there are risks and benefits involved with the proposal, the principal risk being that the state fails to appropriate the funds to repay the state-authorized bonds. In a worst-case scenario where absolutely no wharfage fees, dockage fees or royalty payments are received by the borough, and where the state fails to reimburse debt service payments, the borough would be required to make the payments which would equate to a 0.22 mill levy.

A review of the likely outcomes, both short and long term, suggests that the overall benefits outweigh the potential risks. For instance, supplying the 9 million tons of gravel for the Port of Anchorage expansion would provide more than enough revenues to pay back the bonds. And there are other projects in the works that require large quantities of gravel that Port MacKenzie could easily provide. Furthermore, NPI is in the wood chip business, which will generate between $250,000 and $500,000 in wharfage and dock fee payments each year. There are also default, insurance and remedy provisions within the agreement that protect the borough's interests. This project will also create needed jobs and economic opportunities for our borough residents.

Lastly, the commercial development of Port MacKenzie will create a marine port and industrial complex that will increase the assessed value of borough property and thus reduce the tax burden on residential property owners. I hope this letter provides a better understanding of the proposed agreement.

I would be more than happy to discuss the issue further. Just give me a call at 745-9689.

John Duffy is the Mat-Su Borough manager.