AD Main Menu

Compass: Infrastructure needs boost the bond package contains

On Election Day Tuesday, Alaskans will be asked to approve Bonding Proposition A, a $453 million bond issue for state transportation needs, funding 36 projects in virtually every geographic area of our state.

The projects include infrastructure that will support economic development, along with bridge and intersection safety improvements, as well as funding for congestion mitigation and key connections in Anchorage that will allow for more efficient movement of traffic. The bond proposition also includes over $130 million for port and harbor improvements, dock replacements and rural roads. The entire list of proposed projects may be viewed at http://www.legis.state.ak.us/PDF/27/Bills/HB0286Z.PDF.

If the bond passes, it will supplement a reduced federal highway program and help stretch the dwindling supply of dollars for transportation projects in Alaska. Supplementing federal funds with this bond will help meet the infrastructure needs required to promote economic activity, minimize lost productivity from travel time and maintain safe thoroughfares. Also, some of the funding will help the economy in areas of Alaska that typically cannot generate the funds for much-needed local projects.

A significant benefit to use of state funds for infrastructure projects is the speed with which state and municipal officials can obtain environmental clearances and permits, develop design documents, and advertise projects for construction. Thoughtful application of state funds to projects of obvious need, along with robust public participation, can result in rapid project development and transportation solutions. This process is quicker than the federal process, not because steps are skipped but because processes can be conducted concurrently rather than individually as prescribed under the federal program.

Some voters may ask, "Why bonds? Why not pay cash?"

Bonding brings the costs and benefits of such infrastructure into the same time frame. Those who benefit from these roads, bridges and other facilities will be the same generation of Alaskans who are asked to budget for their annual debt payments. Secondly, the state will actually benefit financially by selling these bonds due to the difference between what the state will pay to bondholders, and the increased earnings on invested reserves of the state. A little understood benefit of bonds is the fact that Alaska can issue tax free bonds with lower interest rates at the same time they can invest in higher yielding taxable bonds without incurring any tax liability. There is typically about a 1.5 percent yield difference between the two classes of investments and it is applicable, regardless of how bond yields vary over time.

The bond issue will result in projects being built over the next several years, with most work completed by 2018. Thereafter, for another 15 to 17 years, while these projects are serving nearly all Alaskans in their daily lives, this same generation of Alaskans will be on the hook for repayment. Thus there is no generational transfer of responsibility--the very Alaskans who benefit most from these projects will be the ones responsible for the cost of bond payments.

The impacts of inflation are also a motivation to seek early construction of needed infrastructure. The cost of highway construction has risen sharply in recent years and each year saved in completing projects can result in large avoided costs; in recent years perhaps 5 percent to 10 percent or more. Thus, taking advantage of building now can literally save society as much in avoided construction costs as the cost of the project itself.

Finally, in addition to the above significant benefits, there is the simple principal that infrastructure is a required prerequisite for every sort of economic activity. Work at the Anchorage port, on major highways and fixing critical bridges will help ensure the overall economy can perform.

A 2008 public opinion poll suggested that three out of four Alaskans support the idea of state-funded transportation projects. We at the Associated General Contractors and American Council of Engineering Companies of Alaska agree. We urge you to review the bond package and vote for Bonding Proposition A on Tuesday.

John MacKinnon is executive director of the Associated General Contractors of Alaska. Frank Rast is the AGC's liaison for the American Council of Engineering Companies-Alaska.



By JOHN MacKINNON and FRANK RAST