State expected to cover any shortfall in Knik bridge funding

KABATA wants an initial $150 million set aside.

August 18, 2011 

Consultants on the billion-dollar Knik Arm bridge project were pretty clear Thursday the financial plan for the bridge is for the state to foot the bill for any difference between how much money is collected in tolls and how much the private developer will be paid.

"Any difference between tolls and the (developer's) payment -- that is made up by the state," said Grant Holland, vice president for Wilbur Smith Associates, which did the traffic forecast for the Knik Arm Bridge and Toll Authority.

KABATA officials want an initial $150 million from the state to create a reserve for expected shortfalls in the first few years the bridge is open. Bridge authority chairman Michael Foster said in a Thursday interview that KABATA traffic forecasts show the toll revenue should at that point be enough to refill the reserve, but if not the Legislature would be asked for more.

The question is whether the Legislature will agree to put the state on the hook for a project that many lawmakers say was not supposed to need any more state government money. Wasilla Sen. Linda Menard did introduce a bill this spring to give the initial $150 million in state money for the project, as well as another bill to make bridge financial obligations into "obligations of the state." The bills didn't pass this year but will be considered in the upcoming legislative session.

Holland and an executive from Citigroup discussed the project Thursday with the technical advisory committee for AMATS, the city-state planning board for Anchorage transportation projects. At least some of the committee members were skeptical of the project and irritated that no one from the Knik Arm Bridge and Toll Authority was there to answer questions.

KABATA chief financial officer Kevin Hemenway attended the first 20 minutes but left, citing a commitment.

The committee members said they need details on the financial plan for the bridge because it is a requirement of the Federal Highway Administration for projects included in AMATS' long-term plan. They plan to ask Hemenway to come back next week.

Citigroup executive David Livingstone told the committee that the construction is $715 million, with a cost of $1.063 billion including associated expenses.

KABATA is currently looking for a private developer who would borrow money to pay for the bridge construction and operate the bridge in exchange for annual payments from KABATA. The amount of the payments would be determined as part of the bid process for choosing a private developer. The idea is that KABATA would make the payments using the tolls that drivers pay to use the bridge ($5 each way, with the cost of the tolls rising 2.5 percent each year.)

The initial $150 million requested from the state is meant to cover the shortfall between the expected toll revenue and the payments to the developer in the first few years of operation. The executives from Citigroup and Wilbur Smith Associates said the bridge should at that point break even, and then start creating surplus money the state can use for other projects.

Jamie Kenworthy, a bridge critic and former director of the Alaska Science and Technology Foundation, argued during Thursday's meeting that's all based on unrealistic assumptions, including that there will be 36,000 trips a day by 2035 over the toll bridge between Anchorage and what is now mostly undeveloped land in the Matanuska-Susitna Borough near Point Mackenzie.

The Wilbur Smith study for the project figures there will be 26 percent more households in the Mat-Su than have been forecast by the Institute for Social and Economic Research at the University of Alaska Anchorage, Kenworthy said.

Wilbur Smith Associates vice president Holland, who described his company as "being one of the premier traffic and revenue consultants in the world," responded that it's staking its reputation on the study. KABATA chairman Foster said in a Thursday interview that the traffic forecasts incorporate ISER data as well as the latest 2010 Census numbers and that the bridge authority believes the numbers are credible, as does the Alaska Department of Revenue.

The bridge project has other challenges in addition to the willingness of the Legislature to appropriate money. The Municipality of Anchorage has sued over the design of the project and the financial plan includes federal loan funds yet to be authorized.


Reach Sean Cockerham at scockerham@adn.com or 257-4344.

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