Senators eye new plan to fund bridge

MAT-SU — Lawmakers took a good long look at the latest plan to finance a Knik Arm bridge Wednesday.

“Are you much more comfortable with this approach than the approach that was put forward last year?” Sen. Mike Dunleavey, R-Meadow Lakes, asked the state Department of Revenue’s debt expert Deven Mitchell during a hearing of the Senate Finance Committee.

“Definitely,” Mitchell replied.

The bridge in question would link Anchorage with Point MacKenzie. Proponents see it as a necessary second link between the two communities, providing a shorter route to Fairbanks and the North Slope while also opening up land in Point MacKenzie to residential development. Opponents see it as a costly potential boondoggle. Anchorage residents in bridge’s path fear it will rip up Government Hill, the neighborhood where it is slated to land.

The project ran into trouble last year after a state audit of traffic numbers declared the Knik Arm Bridge and Toll Authority’s numbers inflated and the Legislature considered folding KABATA into the Alaska Housing Finance Corp.

The bridge will cost something on the order of $706 million to build; however, in accounting for change orders and cost overruns, the state’s contingency budget for the project would be $864 million.

That total would be broken into thirds with the state borrowing up to $300 in bonds and another $300 through the federal Transportation Infrastructure Finance and Innovation Act loan program. The rest would come from federal highway funds.

That TIFIA loan, Mitchell explained, comes from a program that expects to be paid back through toll revenue. If the revenue isn’t enough to pay it back, the federal government just waits longer for its money.

“There won’t need to be hand-wringing at this table if there are insufficient funds to pay the TIFIA loans,” Mitchell told the committee.

Mitchell said the revenue department is more comfortable with this financing plan. The previous funding mechanism was a proposed public-private partnership that asked the public to pay its private partner for any shortfalls it experienced in toll revenue.

“We were taking the same risk, but for a lot more money and so in this case we’ve reduced our potential exposure by hundreds of millions of dollars,” Mitchell told the committee.

DOT’s director of program development, Jeff Otteson, explained to the committee how federal highway funding works.

He said the state gets money from the federal government annually to apply to roads that are part of the federally highway system. Pulling from that money wouldn’t affect work on the smaller roads. He said the $50 million in federal funding dedicated to the project this first year accounts for 10 percent of the department’s budget. The next four years that figure would drop to $45 million, or 9 percent of the budget.

Some highway projects, he said, would get delayed.

“We have about a 12-year list of projects that are actively being worked on. If you add the Knik Arm Crossing project to that list it becomes 13-year list,” he said.

Some projects that would get pushed forward include work on roads like the Haines Highway or the Richardson Highway. Otteson said those roads were a high priority when it looked like the natural gas pipeline was going to run alongside them into Canada. Now that it looks like that line is taking a different route, the state sees the improvements as a lower priority.

“We can slow that down a year or two. We won’t be canceling these projects. We will simply be moving them out in time somewhat,” he told the committee.

Also, he explained, federal funding is “use it or lose it,” which means that if federal dollars are left over at the end of the year, the money is returned to Washington, D.C. If a project stalls or is delayed, DOT tends to take that money and shift it to another project rather than lose it, he said.

“It’s in our DNA at DOT,” he said. “We simply don’t want federal dollars to leave the state.”

A big project like a Knik bridge would be a useful sponge for those funds.

“The KABATA project becomes a natural place to send those dollars that get delayed by the natural slippage of a project,” Otteson said.

Just as it does among Alaskans in general, the project seemed to have its supporters and detractors on the committee. Dunleavy seemed most interested in getting from Mitchell the exact maximum dollar figure for the state’s liability under the new funding plan.

Mitchell said the worst-case scenario is the state would have to borrow that maximum of $300 million it was allowed and also have to pay $150 million in interest while toll revenues wouldn’t pay back the feds, leaving none available to pay back that debt. That would be the limit, one he stated with certainty.

“We know that we’re going to pay maybe $450 million for this project,” he said.

But Sen. Donny Olson, D-Golovin, was clearly not on board.

“Maybe you have a better, more objective way to allay the fears of those people like myself who see another white elephant in the offing,” he said.

Mitchell answered that he was just there to give out the numbers.

“From a policy perspective, that’s someone else’s job to figure out whether this is where you want to spend $450 million,” he said.

Contact Andrew Wellner at 352-2270

or andrew.wellner@frontiersman.com.