With all the articles on the Knik Arm bridge project, you might assume that bridge proponents had put out a simple budget showing how the bridge would be paid for. Unfortunately, you would be wrong.
With numerous public hearings on the Knik bridge by the Anchorage Planning and Zoning Commission, the muni Assembly and the state-muni metropolitan planning organization known as AMATS, and a side trip to court, you might also assume that someone would require the Knik Arm Bridge and Toll Authority (KABATA) to provide a number for what the debt service on the bridge would be.
But you would be wrong again.
Here's the hidden bottom line: Bridge deficits could eat up all existing Anchorage state and federal transportation funds for as far as the eye can see.
What KABATA has said is that there will be 8,400 trips a day in the first year the bridge opens, with $8.8 million in net toll revenue. But $8.8 million will not cover a likely $44 million in annual debt service for a $650 million, 6 percent bridge bond amortized over 37.5 years.
Bridge trip numbers are likely to be much less than predicted by KABATA, however, thus reducing revenues. When the U.S. Department of Transportation analyzed KABATA's bond application in April 2008, it predicted a "risk adjusted case" starting with approximately 6,000 trips a day (about 30 percent less) the first year, with traffic growing more slowly than KABATA's estimate. In late 2009, UAA's Institute of Social and Economic Research lowered its Mat-Su Borough population growth rate projections by 35 percent in 2030, a key input into KABATA's and U.S. DOT's earlier bridge trip numbers.
KABATA already has run through nearly $50 million of the original $114 million in federal and state-match funds. Applying the leftover funds to the $686 million estimated bridge construction cost and the U.S. DOT estimate of toll revenue, the bridge deficit in the first nine years of bridge operations would be $202 million. A simple spreadsheet on these numbers is posted at www.knikbridgefacts.org.
Since Anchorage receives a total of about $22 million a year in federal and state funds to support its transportation needs -- roads, potholes, buses and bikeways -- the $202 million in bridge deficit over the bridge's first nine years would equal more than the total Anchorage transportation expenditures over that time period ($198 million).
KABATA has, however, issued a complicated spreadsheet showing that over the first 61 years of bridge operations -- using its inflated traffic counts -- eventually bridge toll revenues could pay for the loan. KABATA's financial case is like going to the bank asking for a 61-year loan on a $686,000 house (instead of a $686 million bridge) with only $8,800 a year to make $44,000 a year in mortgage payments. You would be telling an incredulous loan officer that in 30 or 40 years you are really going to make some money so you can afford the big house now.
But wasn't the bridge supposed to be a public-private partnership?
With KABATA now hinting that the state will need to guarantee adequate toll revenues to attract a private partner, Alaska is about to see a whole new definition of "privatization" wherein the public is exposed to the full downside of a state revenue guarantee on the toll shortfall and the private sector gets the construction contract and any upside.
With KABATA now pitching the project as a regional or state project, both Anchorage and Mat-Su Borough officials should ask the state what impact bridge deficits will have on their existing state and federal transportation funds.
Following a public hearing, the Assembly will vote tonight on whether or not the bridge should become a long-term, post-2018 project. Keeping the bridge in the short term would mean continuing a foolish investment of public resources.
Jamie Kenworthy is a retired investor living in South Anchorage. He was the executive director of the Alaska Science and Technology Foundation.
By JAMIE KENWORTHY