Port's deep dock goes on ballot

MAT-SU -- Through a last-minute change, Valley voters will get a chance to vote on whether or not to accept $10 million from the state for construction of the deep-water dock at Port MacKenzie.

The port project was not originally slated to appear on the October ballot. The borough assembly was, at its Tuesday meeting, set to approve three items that would have allowed construction of the deep dock to move forward. NPI LLC, who plans to use the deep dock to ship wood chips from the port to paper mills in Asia, had agreed to give the borough $3 million to buy items for the dock that will take several months to arrive. The assembly had planned a public hearing Tuesday about that arrangement, along with a use agreement. Also on the agenda was an ordinance to issue $10 million in certificates of participation to build the dock.

But when the assembly met Friday at a work session to discuss the upcoming port topics, new information was on the table. Borough Manager John Duffy said staff from the Alaska attorney general's office contacted the borough and said issuing certificates of participation was not the proper route to go in using the state funding promised through House Bill 528. They recommended issuing general obligations bonds instead, which require a public vote for approval.

Putting the matter to a vote would take care of one move that some, both in the audience and on the assembly, objected to -- using the borough administration building as collateral. Wednesday, Borough Finance Director Tammy Clayton said it's not an uncommon practice to use borough assets as collateral -- the borough's new public safety building on Lucille Street and Swanson Avenue in Wasilla was used as collateral for its own construction. With a project that costs $10 million, the borough has few other big-ticket assets to use as collateral, and combining several assets worth less is possible, but getting a title report for each adds up, Clayton said. The port may have qualified, she said, were it not for another financial stipulation.

"It has to be essential to the operation of the borough," Clayton said. "We have to have a public safety building, and we have to have an administration building."

Although the funding for the project was passed by the Legislature, a caveat in the HB 528 leaves open a possibility that the funding could be reduced. The bill says the funds are contingent upon appropriation of the Legislature, which, Duffy told assembly members Tuesday, could mean funding may be reduced or withheld. He recommended moving forward with the project anyway, as he believes it is a gamble worth taking. If the state were to refuse to pay the yearly $900,000 payment of the bond and the borough simply raised the mill levy to cover the cost, it would mean an additional $25 per $100,000 in property value to borough residents.

A more likely scenario, he said, is that the state reduces their share, and asks the borough to pay a portion of the payment. Duffy said he was confident the port could shoulder a portion, if not all, of the payment -- especially if the deep dock were in place. The borough is paying close attention to Anchorage's efforts to expand its port, and is hoping to secure a contract to supply gravel for the expansion. If that happens, Duffy said, it could mean approximately $4 million a year during a four-year period.

"I believe the benefits outweigh the risks on this," Duffy said.

Borough Assistant Manager David Germer explained some of the details of the arrangement, and told the assembly the situation was nearly a win-win. The borough has a commitment from the state to fund dock construction, NPI LLC has agreed to put $3 million toward the development of the project, and the company also plans to invest another $8 million in a conveyor system to load ships from the dock -- a system that can be used for more than just wood chips.

Although borough assemblyman Bill Allen suggested the borough take a close look at NPI's financial statements, most assembly members appeared to favor moving ahead with the project. When the matter went to a public hearing, many audience members asked the borough to wait and examine the matter thoroughly, but some asked them to move ahead on the project.

"Port MacKenzie now!" said Big Lake resident Jay Nolfi. "We've had three years to get this finalized. I hope I'm not detecting any delay tactics."

The assembly was expected to cast their final vote on the matter after a 7 p.m. public hearing Thursday.