Stream of cash for bridge over Knik Arm is drying up

Congress, governor, Legislature balk at putting more money toward the project.

Anchorage Daily NewsJanuary 18, 2012 

WASHINGTON -- The billion-dollar Knik Arm Bridge project has financial problems, with no more money coming from Congress and the Alaska governor and a key state legislator balking at putting state money on the line for the project.

Backers of the bridge say they are making great progress and have already started negotiating to take over ownership of businesses and homes in the Government Hill neighborhood of Anchorage that stand in the right-of-way of the project.

But they also say they need an initial $150 million in state money and for the state to agree that future financial obligations made by the bridge authority will become the "obligations of the state."

It will be a big issue for the Alaska Legislature, which started its annual 90-day session Tuesday.

Sitka Republican Sen. Bert Stedman, who has huge influence over state spending as chairman of the state Senate Finance Committee, said this week that the proposal seems too much like giving a blank check to the bridge authority.

"I don't think it's acceptable for the state to have open access to the treasury on projects like that," Stedman said. "You could get private builders to build anything if the state guarantees the debt obligations. That's a nonstarter."

Alaska Gov. Sean Parnell is also taking the position that the bridge authority has not made the case.

"The pending legislation needs more public scrutiny to determine whether it is a wise way to finance the Knik Arm Crossing," Parnell's spokeswoman, Sharon Leighow, said this week.

Alaska Sen. Mark Begich has concerns about the financing as well, his spokeswoman said this week. Begich wrote a letter to the governor this fall in which he warned that Congress won't be coming to the rescue.

"With the current federal spending deficit and federal earmark moratorium, I do not anticipate additional federal funds for the project will be available in the future," Begich wrote. "I am also concerned existing federal funding allocated for the project may be at risk if the project does not make significant progress."

Alaska Rep. Don Young, who secured the original federal earmark for the bridge, remains a big supporter. "However, given the current earmark moratorium, Congressman Young will not be seeking directed Congressional funding for the project," Young spokesman Luke Miller, said Wednesday. "With that being said, Congressman Young supports efforts to pursue grants and other sources of funding by (the bridge authority.)"

The original congressional earmark for the Knik Arm Bridge was about $231 million, before what Begich referred to as the "national public outcry." The bridge was ridiculed as one of Alaska's two "Bridges to Nowhere" and Congress stripped the earmark.

But Congress went ahead and let the state have the federal money anyway to use on any transportation project. And the Alaska Legislature decided to put $93 million of that previously earmarked federal money into the Knik bridge.

The money is fueling the operations of the bridge authority, which has about $40 million left.

The bridge would run from north of downtown Anchorage across Knik Arm to mostly undeveloped land near Point MacKenzie in the Matanuska-Susitna Borough.

Opponents say the bridge won't save commuters time between Anchorage and the Mat-Su hubs of Wasilla or Palmer. They dispute that enough drivers will pay the toll, which is to start at $5 each way and go up, and say the state will end up on the hook.

Bridge supporters say it will open up land for housing and economic development, provide a second route into the growing Mat-Su Borough, and relieve future costs of upgrading the Glenn and Parks Highways with projected population growth.

Bridge authority chairman Michael Foster said the "blank check" complaint is a myth. Foster said the most the state could ever have to pay is $1 billion, and that's if it decides to take over the bridge from the private developer as soon as it opens.

But such a state takeover isn't the plan, Foster said. The plan is for the private developer to borrow money to pay for the bridge construction and then for the developer to operate the bridge over the course of a 35-year contract with the state.

The state would make annual payments to the developer out of the tolls that drivers pay.

The bridge authority says it needs the initial $150 million in state money to cover a projected shortfall in toll money in the early years of the bridge. More state money would be needed to pay the developer if the shortfall lasts longer. But Foster said the state could buy out the developer at any time, with the cost of doing so starting at $1 billion the day the bridge opens and gradually going down the longer it's in operation.

Foster said he's working with state legislators and the governor to come to an agreement on financing.

"The project's going well. We're in the right-of-way acquisition process, we have some permits we're still continuing to work on," he said.

He has strong support in the Mat-Su delegation, with Big Lake Republican Rep. Mark Neuman and Wasilla Republican Sen. Linda Menard listing the bridge financing legislation as a top priority.

Menard wrote in her most recent constituent newsletter the "project has gained crucial momentum." The bridge authority is considering three consortiums, including global construction firms and investment groups, as potential developers.

"I can't wait for the private partner to be chosen and the bridge to be built," Menard wrote to her constituents."

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