Supporters seek $150 million for the Knik Arm bridge

GOAL: Agency seeks $150 million to secure private developer.

February 12, 2011 

Backers of the proposed Knik Arm bridge, which was designed to be funded through tolls, are now asking the state for $150 million in help for the project.

They've found a receptive audience in Wasilla Republican Sen. Linda Menard. She's introduced bills to provide the money and to say the state has a financial responsibility to back the effort.

A bridge connecting Anchorage to mostly undeveloped Mat-Su land near Point Mackenzie, with a price tag given by advocates of about $700 million, is among the most hotly debated development projects in Alaska. Critics call it a boondoggle and say it was not supposed to require state money.

Supporters say Anchorage is running out of developable land and the bridge would open the area for housing and industry and provide a new route to the growing Mat-Su.

The Knik Arm bridge is one of the two so-called "bridges to nowhere" that drew national controversy when Alaska's congressional delegation tapped money for them. The Knik bridge project ended up with $110 million in federal money. About $65 million of that's left, according to the Knik Arm Bridge and Toll Authority.

The Legislature created KABATA in 2003 to pursue the project. It's the agency now asking for $150 million in state dollars to advance the effort.

The goal is for the state to team with a private developer, who would borrow money to pay for the bridge construction and operate it in exchange for the state sharing revenue from the tolls. KABATA's chairman said the state money is meant to ensure payments to the private developer are covered during the first few years the bridge is open.

"We need it funded now in order to go to market for our private partner. We have to show them we have funds available for the (payment) in the initial years. Because that's when things are tight," said Michael Foster, chairman of the bridge authority.

Foster told legislators he expects the tolls that drivers pay will cover the payments after the bridge is open for about three years. The state will get its investment back and more with surplus toll money, the bridge authority says.

KABATA is estimating the tolls to use the bridge would be about $5 each way for passenger cars, with higher rates for commercial vehicles.

KABATA chief financial officer Kevin Hemenway said the $150 million in state money would go into a reserve fund to be saved until the bridge opened. Hemenway said the main purpose of the fund is to lower the cost of financing for the project. That will result in the best value for the state and the public, he said.

TOLL FORECASTS QUESTIONED

Critics argue the project depends on unrealistic assumptions about how much toll money will come in.

State Rep. Les Gara, D-Anchorage, said a bridge to Point Mackenzie won't save time for most commuters between Mat-Su and Anchorage, so they won't pay a toll.

"When people realize it's faster to take the Glenn Highway to Wasilla and Palmer, they quickly come to the conclusion that the tolls are going to be pretty high for the few people that use the bridge," said Gara.

The Knik Arm bridge would link to the Government Hill area of Anchorage, which Gara represents.

Government Hill Community Council President Bob French wrote legislators last week, saying KABATA's estimate for Mat-Su growth involves adding the equivalent population of Palmer every year for 20 years. It's far more optimistic than the prediction of the Institute of Social and Economic Research at the University of Alaska Anchorage.

French also questioned the forecast that nearly 20,000 vehicles a day would use the toll bridge three years after its proposed 2015 opening. He compared that number to the Transportation Department's average daily traffic count of 26,220 at the Old Glenn overpass on the Glenn Highway near Eklutna.

KABATA chief financial officer Hemenway, asked to respond to objections of Gara and French, said traffic forecasts for the project are based on the work of independent consultants Wilbur Smith Associates. Their work is respected nationally and bankable on Wall Street, he said, with studies that have supported about $30 billion in toll revenue financing over the past decade.

"We are very confident in our independent traffic and toll revenue studies and the project's ability to meet its obligations from toll revenue. Wilbur Smith Associates' green field investment grade traffic and toll revenue studies have averaged 96 percent of the base forecast and virtually none have underperformed by more than the minimum traffic required to cover project financing," he said in an e-mail.

Hemenway cited confidence in those studies when asked if the state might later need to put more than the $150 million into the bridge. "Over the life of the Knik Arm Crossing the state will recover its investment and earn a substantial return that can be used to invest in other transportation infrastructure," he said.

He did tell the Legislature's transportation committees, though, that if the reserve fund dropped far enough "it would be subject to appropriation for replenishment."

'VITAL INFRASTRUCTURE'

Menard, the legislator sponsoring the bills to give money to the project, didn't return a phone message. She is also a member of the bridge authority's board.

The AMATS committee, the panel that makes decisions on how to spend federal transportation money in Anchorage, included the Knik Arm bridge project in its long-term plan. But it did so only on the condition no more state or federal money is used.

AMATS said the financial plan prepared by the bridge authority indicated no more government money was needed for construction, operation and maintenance of the bridge.

But it looks like it does not much matter where AMATS stands at this point. Federal highway officials already signed off on the bridge, issuing a "Record of Decision" in December. Hemenway said it's not up to AMATS to decide.

"AMATS funding is not part of the Knik Arm Crossing financial structure," Hemenway said.

"This is a vital infrastructure project, a bridge that will connect Alaska and help create jobs and encourage smart growth and economic development, while improving the environment and the quality of life for the people who will be served," he said.

He said the state will own the toll revenue and give the developer an annual payment to finance, design, construct, maintain and operate the bridge. There would be bids to see which potential developer asks for the lowest payment.

The bridge authority says two international consortia have shown interest. One is headed by Bouygues Travaux Publics of France, the other by Macquarie Bank of Australia.


Find Sean Cockerham online at adn.com/contact/scockerham or call him at 257-4344.

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