McCabe proposes bonds to complete Port MacKenzie rail, develop mining infrastructure

An amendment to a bill made by Rep. Kevin McCabe, R-Big Lake, in the House Transportation Committee would allow the state’s Alaska Railroad Corp. to issue $58 million in revenue bonds to finance the completion of the Alaska Railroad extension to Port MacKenzie.

The railroad can borrow on financial markets to finance infrastructure, but the debt has to be approved by state lawmakers.

McCabe’s amendment would also allow the Alaska Industrial Development and Export Authority, or AIDEA, to finance up to $300 million for infrastructure to support mining. AIDEA’s borrowed must also have legislative approval.

Although no specific project has been identified by the state industrial authority it is likely that the funds would be used to help finance a 90-mile industrial road, the West Susitna Access Project, to reach an areas west of Skwentna where a company has made discoveries of gold and antimony, a critical mineral.

The amendment for Port MacKenzie and the mining infrastructure was made to House Bill 122, a bill authorizing the state’s Alaska Railroad Corp. to issue bonds for its planned Seward cruise ship dock.

McCabe’s proposal has raised eyebrows in the state Capitol, catching some legislators by surprise. Rep. Frank Tomaszewski, R-Fairbanks, sponsor of HB 122, said he will seek to remove the mining language at the House Finance Committee, where the bill will go after leaving the transportation committee.

The West Susitna Access Project is a political hot potato because of the opposition of recreational cabin and lodge owners in the area, as well as environmental groups, who don’t like the idea of a road reaching into undeveloped lands.

Nova Minerals, an Australian company, is exploring the discoveries. AIDEA would not sell bonds and build the road, however, unless NovaMinerals can develop a mine large enough to pay for the road though tolls charged for trucking ore concentrates. Similarly, bonds for the Port MacKenzie rail extension will not be sold unless shippers have signed contracts to use the rail and would pay for its use.

In other developments, the House Finance Committee is continuing work on amendments to the operating budget. Rep. DeLena Johnson, R-Palmer, is cochair of the committee for the operating budget, HB 268. When the committee work is done the bill will move to the Rules Committee and the House floor where there will be another an extended amendment effort.

A large number of proposed changes to the budget, through amendments, were debated over several years with the focus on a number of items left out of the initial draft budget. As was expected, there were proposals to increase the 2024 Permanent Fund Dividend including to a “full” PFD according to the outdated 1980s formula that is still on books.

After lengthy discussion the proposal was turned down. Its opponents argued that the full PFD can’t be afforded in the current tight-revenue environment. The Legislature typically appropriates a PFD that can be paid for with the funds available, which last year resulted in a dividend of about $1,300.

“It’s highly unlikely that this size of dividend will materialize in the final budget, because there’s such an extensive amount of issues that haven’t been expensed yet,” Sen. Bert Stedman, R-Sitka, said at a briefing for reporters early last week. Stedman is the Snate Finance Committee cochair and is in charge if the operating budget.

In its draft budget being debated in the House Finance Committee, a $2,300 dividend was proposed, but this will change. Johnson said last week that the finance committee’s draft creates a balanced budget with a small surplus.

But Stedman said the list of items yet to be included in the House budget, such as public employee union contractsm adds up to $342 million

With a more modest PFD, “we have a a high likelihood that we can maintain that dividend going forward into the future,” he said.

Whatever version of HB 268 that emerges from the committee will undergo another grueling amendment process on the House floor, including on the PFD. After the House the budget goes to the Senate, which has meanwhile been working quietly on its own version. Finding more money for the capital budget is a prime concern, as well as finding money for items left out of the House budget.