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Audit says Knik Arm bridge toll projections 'unreasonably' overstated

Richard Mauer

JUNEAU -- A legislative audit has concluded that the agency hoping to build the Knik Arm Crossing has "unreasonably" overestimated toll and traffic projections, adding serious questions about the bridge just days before the House is due to vote on a bill to advance the project.

The audit, released Saturday afternoon by the joint Legislative Budget and Audit Committee, warns that the overly optimistic forecasts increase the risk that the state could be on the hook for at least a portion of the $1.4 billion project.

The project is managed by the Knik Arm Bridge and Toll Authority, a public agency known by its initials, KABATA.

"The KABATA project is in serious jeopardy as a result of this audit," said Sen. Hollis French, a West Anchorage Democrat.

Democratic Rep. Les Gara, from downtown Anchorage, said the audit proves that critics of the bridge have been right all along. There's no reason drivers would pay a toll to use the bridge to get to most places in the Matanuska-Susitna Borough or points north because the Glenn and Parks highways would make for a shorter trip, he said

But a key backer of the bridge, Rep. Mark Neuman, R-Big Lake, said of the audit: "That's nothing. That's nothing."

Neuman said the bill to advance the project, House Bill 23, has numerous provisions to protect the state treasury. And he disputed the traffic numbers, saying they don't account for explosive growth in the region south of Wasilla.

In a statement released Saturday, KABATA also questioned the audit's traffic projections, saying they were based on a study for future Mat-Su schools and failed to consider likely growth in the Point MacKenzie area, near the west entrance to the bridge.

The KABATA statement said the auditors failed to review the cost "of doing nothing" by not building a bridge. Neuman, who sits on the KABATA board as a nonvoting member appointed by the House, said that do-nothing cost includes billions of dollars in safety and traffic upgrades that would be necessary for the Glenn and Parks highways.

The bridge is one of the many Alaska mega-projects that boosters have envisioned for decades. But while downtown Anchorage and Point MacKenzie seem tantalizingly close, the physical qualities of Knik Arm -- steep underwater slopes, silty bottom, extreme tides, moving ice and active fault zones -- make for a challenging project.

The current incarnation of a Knik Arm Crossing is a $1.5 billion project, including money already spent since KABATA was created by the Legislature in 2003. The two-lane toll bridge would be 9,200 feet long. The approaches on both sides of the water are part of the project, including an 800-foot tunnel cut through Anchorage's Government Hill neighborhood. The bridge would be expandable to four lanes should traffic warrant.

The project would be built by a public-private partnership financed through government loans and bonds. A contractor would be hired to construct the project. The state would own the bridge and approaches, paying back the contractor over 35 years through toll revenues -- plus state funds when there be shortfall.

The Legislative Budget and Audit Committee declared a closed session Saturday to review the performance audit on KABATA by the Legislative Audit Division. Perhaps a dozen curious legislators sat through the executive session under rules that allow noncommittee members to attend as long as they don't discuss the audit until it is published.

The public release came when the committee doors were reopened after 5 p.m.

"The audit concludes that KAC (Knik Arm Crossing) toll and revenue projections are unreasonably optimistic, and the projected cash flows to the State are likely overstated as a result," the 258-page document stated in its conclusions.

Because the state is on the hook and will have to pay the contractor regardless of toll collections, those conclusions "are important considerations for policymakers," the audit said.

A table prepared from KABATA's most recent financial plan predicts shortfalls in the first years of operations but that tolls would exceed expenses by 2036. The plan says the cumulative loss wouldn't be erased until 2047.

But the audit said the plan doesn't appear to match reality.

"Deficiencies in the assumptions and inputs used by KABATA for the toll and revenue projections likely overstate projected case flows," it said. "KABATA's risk analysis was too limited to provide assurance of achieving projected toll revenues."

Bob French, an engineer and Government Hill resident who has campaigned against the bridge, said of the audit: "It's a great amount of vindication for what we've been saying for years."

"The blank check that the KABATA bills (in the Legislature) would give KABATA are going to take money away from every project throughout the state, from schools, needed roads, ports, airports," French said. "As our revenues go down, if we're sending billions of dollars out of state (to the bridge contractor), it's not doing Alaska any good."

Reach Richard Mauer at rmauer@adn.com or 257-4345.

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By RICHARD MAUER
rmauer@adn.com