MAT-SU — The Mat-Su Borough just wanted to streamline work on the Port MacKenzie Rail Extension last year.
Instead, it ended up spending $187,050 for haul road easements that violated state agriculture protections on one parcel, and turned out to be completely unnecessary.
The planned 32-mile route of the $300 million rail extension to the Parks Highway crosses the Point MacKenzie Agricultural Project that was initiated in the 1980s. The state sold off the shallow-soiled land at low cost, but with rigid farming-only covenants.
For now, the entire rail project is on hold. A federal appeals court temporarily halted work pending a decision on an unrelated lawsuit over the extension’s “purpose and need.”
But even before preliminary construction began near the port, the borough in September 2011 paid for the temporary easements on the farm parcels. The borough planned to build a haul road so Bristol Construction Services — with a $17 million contract to build the project’s first segment from the port — could transport gravel from a pit on Alsop Road to the project site.
The two-year easements crossed several parcels with three owners: Flyway Farm, operated by the Hanson family; Valley Utilities, operated by contractor Howard Nugent; and hay farmers Richard and Lynn Gattis.
The borough paid Flyway Farm $104,325, Valley Utilities $17,500 and the Gattises $65,225, according to borough records obtained through a public records request.
Lynn Gattis, a member of the Mat-Su Borough School Board, is the Republican candidate for Alaska State House District 9 in the greater Wasilla area.
The situation came to light this summer, and only because state agriculture officials discovered the Gattis easements violated state law as well as provisions of loans they took out from the state’s Agricultural Revolving Loan Fund. At that point, Bristol realized the easements weren’t necessary anyway. So in July, the borough removed all the easements without ever using them. The borough had no legal right to ask for the money back and did not.
“Because the project decided to pull back the construction easement, as far as I know the money was not returned,” said Brad Sworts, the borough’s pre-design division supervisor.
State officials said it was a $187,050 mistake and at least the borough should have known better.
State assistant attorney general Robert McFarlane points to a sentence in the Gattis construction permit that promised to “defend and hold harmless (the Gattises) from any use of said easement area that may conflict with any agricultural use restrictions upon the land.”
“The fact they had that in there kind of tells you (the borough) knew there might be a problem,” said McFarlane, who advises the Division of Agriculture on legal matters.
It was actually Richard and Lynn Gattis who requested that “hold harmless” language, Lynn Gattis said. The couple agreed to the easements to compensate for lost hay production and other issues like signs and potential trespass problems, Gattis said. They also understood that the rail extension was inevitable and the haul road would speed work. Candidate Gattis supports the extension.
“We’re trying to participate in a great state project that we ourselves believe in, but we don’t want to be the little guy that gets spanked for all that you’re asking of us,” she said of the hold harmless language.
Sworts said borough officials did know about the covenants, but they also knew numerous existing, but never constructed, public-use easements created during the agriculture district’s subdivision process crisscrossed the area.
“We didn’t know exactly how (the easements) would legally be interpreted,” he said. “We didn’t see why you couldn’t develop them. I guess it was up to the Division of Ag to decide whether they wanted to challenge any development of those.”
Even before the court delay, rail construction wasn’t scheduled to start in the area of the easements until this winter, Sworts said. But the borough wanted the easements in place to make sure Bristol wouldn’t encounter access problems once work began.
Sworts said he recognized that nearly $190,000 tax dollars in what turned out to be unnecessary payments is a lot of money. But he defended the borough’s decision to do so.
“The other side of the coin is if for some reason we issued the contract for Segment 1, and if for some reason the contractor couldn’t get to the alignment, it could cost us way more than that in delays and other issues,” he said.
Loans and covenants
It was the state agricultural loans on the Gattis property that drew the Division of Agriculture’s attention to the easements. Of the three property owners, only Richard and Lynn Gattis obtained financing from Agricultural Revolving Loan Fund money, McFarlane said. Since 2003, the couple has received a series of the state loans, moderate-interest funds that pay for everything from equipment to irrigation.
The Gattises hold $630,000 in 4.5 percent interest, 30-year state loans on the two parcels involved in the easements, according to deeds of trust filed with the state recorder’s office. The documents restrict them from transferring any interest in their property that might run contrary to the farming-only covenants placed on Point MacKenzie Agriculture Project fields.
The Legislature has the sole authority to remove the covenants altogether or from a particular parcel, McFarlane said. “The intention was this is supposed to be ag land. You bought it, you got an ag price, so we want you to use it for agriculture.”
Still, the protections are all too familiar to anyone working the Agricultural Project area.
Lynn Gattis blamed the easement situation, at least in part, on what she said she considers overly restrictive protections. You can’t even move gravel from one parcel to another to fix potholes, she said. But she said she rejects the suggestion made during a recent election debate that she would try to remove the covenants if elected.
“That’s self-serving,” Gattis said. “That doesn’t serve my district, greater Wasilla, and I absolutely never dreamed of it until I went to a debate and somebody brought that up.”
Longtime Point Mac dairy farmer Wayne Brost expressed similar frustration with the covenants. Most of the residents in the area don’t make a living entirely off agriculture anymore, Brost said. Some have moved away after failing to get relief from restrictions.
“There’s these guys that want to keep this land for agriculture at all costs,” he said. “I, and some of the other people, have a different view of that. There is a point in time where you use this stuff for the highest and best use. ... It’s not like ag here is a big contributor to our total economy.”
Surprise in the mail
Nearly a year after the borough cut checks for the easements, in June, the land-use conflict surfaced in a public forum.
State agriculture employees learned of the conflict between the borough easements and the Gattis loan in late April or so during a meeting with staff of the Division of Mining, Land and Water, McFarlane said.
“This agreement with the Matanuska-Susitna Borough is in direct violation of the agricultural use restrictions upon the land and your loan agreement with ARLF,” reads the May 8 letter from Amanda Swanson, the state’s Agricultural Revolving Loan Fund officer.
At a June meeting, the Alaska Board of Agriculture and Conservation instructed McFarlane send a letter to the Gattises. The letter instructed the couple to “remove the easements in 30 days or pay the entire balance due on the ARLF loans” before the next board meeting, according to meeting minutes.
The letter was motivated by an adherence to the board’s mission to preserve farmland, said Palmer farmer and board chairman Ben Vanderweele.
“It’s just that these Point MacKenzie properties have these agricultural covenants on them,” Vanderweele said. “We’re trying to protect agricultural lands.”
For Lynn and Richard Gattis, however, the letter came as a shock. Paying back the loans was a deal-breaker.
“Even with vacating the haul road easement, this is a big issue for us as we do not have the funds to payoff these ARLF loans totaling over $600,000,” Richard Gattis wrote in a June email to the borough.
Lynn Gattis said she would rather the state handled the whole thing better.
“I wish they had picked up the phone and said, ‘Hey Lynn, this could be a problem,’” she said. “I was surprised. I made assumptions that state ag works with other agencies.”
Gattis, who faces challenger Blake Merrifield on Nov. 6, said she was reluctant to get involved in a non-election news story so close to Election Day. She’d rather talk about the issues than agricultural covenants, she said. Asked to provide a copy of the June letter from the Division of Agriculture, Gattis said she’d be happy to — on Nov. 7.
Once the state’s opposition became clear, rail project leaders looked into the need for the haul road that was the reason for the easements. The Alaska Railroad’s special projects director, Clark Hopp, approached Bristol to see if they still needed the road.
Hopp said it became obvious after Bristol got the contract that they no longer needed the haul road because the company had located another materials source.
That prompted the borough’s decision to remove the easements.
“We decided it might be easiest just to stop the whole controversy between the landowners and the Division of Agriculture if we just cancelled the temporary haul road easements,” Sworts said.
On July 2, the borough officially released the easement on the Gattis parcels, as well as the Valley Utilities and Flyway Farms tracts. No work was ever done on any of them.
Gattis, asked if she had considered returning the money given her status as a candidate for public office, said she had not. She handles rentals herself, she said, and still collects money on a building if someone rents space and then doesn’t use it.
She and her husband abided by the terms of their contract with the borough, Gattis said.
“We did what we said we would do,” she said. “The end.”