Despite a critical legislative audit and a bill in Juneau that would wipe out its existence, a state agency set up to build a bridge across Knik Arm is pushing onward to demolish homes and a lodge and to acquire additional properties in the project's path.
The latest targets include two popular Government Hill businesses -- the Subway restaurant and the Tesoro station -- that don't want to move.
The Knik Arm Bridge and Toll Authority, the agency known as KABATA, says it needs them out of the way to build a tunnel through Government Hill to move traffic on and off what is still a bridge without the legislative approval it needs for its financing.
Steve Adams, who owns Subway franchises across Anchorage including the one at issue, said he wants the restaurant to operate until and unless the bridge became a reality.
"If I sell you the business, let me lease it back," Adams said. "You don't know that the bridge is going to go through."
To which KABATA always responds: "Nope, we want to tear it down," Adams said.
Tesoro likes its location on Government Hill and has no plans to move either, said Matthew Gill, external affairs manager for Tesoro Alaska.
Both are in negotiations with the bridge authority, a state agency run largely on federal dollars that as a last resort can seize property for a public purpose, as long as it pays fair market value.
The right-of-way acquisitions come as concerns are growing about the project's future. The state audit found that KABATA's projections for traffic and tolls are unrealistic. Auditors warned that tolls may fall short of what is needed to repay construction costs and that the state would be on the hook.
KABATA officials say they are confident the bridge will be built and are moving ahead.
"The project is a state of Alaska project. It's a priority of the state. We can't build it until the right-of-way is acquired," said Michael Rovito, the authority's legislative liaison.
Before Rovito got that job, he was chief of staff for then-Sen. Linda Menard, a bridge booster from Wasilla. Some of the strongest support for the bridge has come from the Mat-Su delegation, which includes the Senate president, Charlie Huggins.
Why disrupt the community before making sure the project will get the needed financing and actually be built?
"The project is a go," said Judy Dougherty, KABATA's deputy executive director. "I'm not following you."
But KABATA's actions upset bridge skeptics and opponents, including Government Hill residents.
"We think that's just a travesty," said Stephanie Kesler, president of the Government Hill Community Council. "They are spending all of this money on something that certainly doesn't need to happen now."
The timing of the property acquisitions and demolitions is suspect, she said. "We strongly believe they are doing this to create the appearance of momentum and inevitability."
SIX-LANE TUNNEL
A bridge over the narrow entrance to Knik Arm between Anchorage and Port MacKenzie long has been a dream of Mat-Su boosters eager for a shortcut to undeveloped Mat-Su Borough land.
A decade ago, the Legislature created KABATA as a state corporation to push the toll-bridge project it now calls Knik Arm Crossing. KABATA employees work for the state Department of Transportation and Public Facilities and get state paychecks.
KABATA says the project's first phase will cost $710 million to $750 million and includes a 1.7-mile, two-lane bridge with supports having the strength and width to expand to four lanes. Initially there will be more than eight miles of new access roads.
The tunnel cut under Government Hill could be covered on top with trails, parking or playgrounds. The tunnel will be built to six lanes, bigger than needed at first so that the community won't have to be disrupted again to expand it, Rovito said.
Eventually, the authority expects to expand the bridge to four lanes and build more access roads, including extending Gambell and Ingra streets for a new viaduct to Government Hill.
Construction costs will come to about $1.1 billion for the complete, four-lane bridge and access roads, KABATA says.
The legislative audit released in April said the complete project, based on KABATA's own numbers, would cost $1.6 billion. KABATA says that includes financing costs and $150 million from the state to cover early-year shortfalls in tolls, which the authority says would be repaid. Critics maintain the real costs could be much higher.
If the financing can be secured, the project would take four years to build and would create 1,500 construction jobs, according to the authority.
So far, the authority has spent $78.5 million to take the project through initial steps, including approval of the route by the Federal Highway Administration. It has about $50 million on hand.
BIG QUESTIONS
KABATA bravado aside, the bridge is in legislative limbo and there's no guarantee it will ever be built.
This year, Rep. Mark Neuman, R-Big Lake and a member of the KABATA board, tried to push through a measure establishing a state reserve fund to pay a private developer when toll revenues fall short. The authority said the bill was necessary for the bridge to get financing.
But the critical audit, released eight days before the end of the legislative session, threw his House Bill 23 off track.
While KABATA says it needs $150 million from the state to go forward, the state could be on the hook for much more, legislative auditors found. KABATA used "unreasonably optimistic" traffic and toll projections, the audit said.
The framework for the project is a type of public-private partnership that is untested in Alaska. KABATA says once it gets legislative approval, it will pick from its short list of three business groups that want to finance, design, build and operate the bridge. The state would be obligated to make regular payments -- through tolls and when they fell short, other funds -- to the developer for 35 years once the bridge opened.
The state's credit rating would be at risk if it failed to pay, acting Revenue Commissioner Angela Rodell, a KABATA board member, told the House Finance Committee in April.
Neuman's bill would cap the total state obligation at $1.1 billion. That amount reflects an extreme scenario, KABATA says, such a bridge collapse in an earthquake. But others, including Lois Epstein, an engineer who has studied traffic issues for years, assert the bridge's cost likely could end up much greater.
In April, state Rep. Mia Costello, R-Anchorage, got the House to override Neuman's measure with one to shift the bridge project to the Alaska Housing Finance Corp., a favored agency of legislators, to increase oversight and provide more financial expertise.
"It's a leadership change and a direction change because I think that experience in the financial markets is going to matter with this project," Costello said in a recent interview. The state needs to "put our best team on it."
Her proposal would wipe KABATA out of existence a year after its transfer to the housing agency. Now both the House bill, with Costello's amendment, and a pro-bridge measure pushed by Huggins, the Senate president, await the Senate Finance Committee in 2014.
"It all came to a sudden halt at the end of last session," state Sen. Kevin Meyer, an Anchorage Republican who co-chairs the Senate Finance Committee, said in a recent interview. "It's personally not a priority of mine. It's more of a Valley project."
But, Meyer said: "It is Charlie's bill and Charlie has got some stroke with the Legislature, at least the Senate."
KABATA maintains it was the audit that is flawed, not its traffic studies. It expects a report from a contractor reviewing the socioeconomic data underlying its optimistic toll and traffic projections by late November or early December. Its traffic consultant, CDM Smith, will then use those numbers to rework traffic and toll projections if necessary, KABATA says.
SIEGE ON THE HILL
For now, the focus is on Government Hill.
The community council last year called for the bridge authority to stop all right-of-way work until its financing was secured. More recently, two Democratic legislators whose districts include the area have been grilling KABATA about the push to acquire and bulldoze buildings.
"We also do not believe demolition of homes and the highly used Tesoro and Subway businesses should proceed, against owner wishes, to the detriment of the community, until a project is approved and funded," Rep. Les Gara and Sen. Johnny Ellis wrote in August to KABATA executive director Andrew Niemiec. "That has not happened yet."
So far, KABATA has spent $2.9 million to buy properties including vacant land in the Mat-Su and property on Government Hill: two Erickson Street duplexes and the Sourdough Lodge, an old motel-turned-apartment building. One of the duplexes is where former Anchorage Assemblyman Charles Wohlforth raised his family. KABATA is closing on a fourth property, behind the Sourdough.
The authority must tear them down because vacant properties pose a public safety risk, Niemiec wrote to Ellis and Gara. The authority isn't in the business of being a landlord, Rovito said.
It relocated residents. Some renters forced to move bought homes elsewhere, better off than they were before, Dougherty of the bridge authority said.
The Wohlforth family moved out of their Erickson Street duplex in 2002, 14 years and four children after moving in. Even then, they felt worn down by the threat of the bridge, Wohlforth said. The old home, built in 1959, has history, including plywood re-purposed from old military signs.
"It is heartbreaking to contemplate that cozy, well-loved house being bulldozed, especially when there is no reason for it," said Wohlforth, who no longer owns the place.
Engineers from DOT's public facilities branch are preparing contract documents for the demolition, DOT Commissioner Patrick Kemp wrote to the Government Hill Community Council in August. The debris will be hauled away and the empty lots reseeded.
"It is not unusual for pre-construction activities, including right of way acquisition, to be performed in advance of securing construction funding," said Kemp, who is on the KABATA board.
The decade-old legislation that created KABATA demonstrates the Legislature wants the bridge, he wrote. "To date there has been no action by the Legislature that would bring this intent into question."
Now KABATA is turning its attention to Subway and Tesoro. Both sit on land leased from the Alaska Railroad Corp.
SUBWAY SATURATION
Adams, the Subway franchise owner, said his Government Hill store has only been open a few years but it's in an "A location" and is part of the community, as evidenced by the school-business partnership with Government Hill Elementary School. The restaurant has about 16 employees, including some who live on Government Hill.
KABATA wants to move the business, but where would it go? Adams said.
"We've got stores all over town. We're pretty saturated," said Adams, who owns 26 of the Subways in Anchorage and Eagle River and is part owner of a 27th, in Girdwood. "They don't want to give you any money for your business. They don't want to give you but $10,000 to move it."
He said he supports the idea of the bridge, especially if it opens up land for more affordable housing. "I just think they are getting the cart before the horse."
Ultimately, the bridge authority will get the Subway, he said.
"They can take me out honestly whenever they want," he said. "You now how that works with eminent domain."
The community is fighting hard to stop the bridge, or least slow it down, Kesler said.
"I think the financial future of that bridge is tenuous at best," she said. "At some point the governor and the Legislature will realize it is a financial house of mirrors."
Reach Lisa Demer at ldemer@adn.com or 257-4390.
By LISA DEMER