Anchorage Daily News

The Port of Anchorage plays a vital role in Alaska commerce, and a responsible port expansion project should move forward. However, in just six years project costs for the proposed expansion have ballooned from $146 million to at least $700 million. With interest on debt and rising construction costs, this is easily a billion dollar project. What should surprise us all is that in light of these skyrocketing costs, no one seems willing to ask the pertinent questions that should precede a government-subsidized project of this size and cost.

The first question for any project of this size should be: "Do we need it?" Port director Bill Sheffield insists we do. Yet according to the port's own statistics, tonnage crossing the Anchorage dock has actually decreased since 2005, and a 2006 port report found the four main berths are in use only about half the time. Furthermore, there is no evidence -- such as signed leases, throughput guarantees or dock usage guarantees -- that port use will increase under the proposed expansion. Other port expansion projects across the nation are required to show discernible need. But Port of Anchorage plans rest on an unsubstantiated "build it and they will come" philosophy that has little basis in realty.

The next question for a project this expensive is: "Can we afford it?" Port officials insist the project will be funded through a combination of federal and state earmarks and port revenue and bond proceeds. Approximately half the project cost is slated to come from federal earmarks -- which are increasingly controversial -- and another $100 million from state funds. But there are no firm commitments, except perhaps on the local side. On April 15, the Anchorage Assembly authorized the port to assume $75 million in debt, which, if paid out over the term of the debt at current interest rates, will equal more than $135 million. Equally important, once that debt is assumed within the port's operating budget in 2009, the port will show significant financial losses -- totaling more than $10 million between 2010-2014.

Alaska has been down this road before. In 2003, economist Ginny Fay reviewed Alaska's failed government-subsidized mega-projects, including the Delta Barley Project, the Susitna Hydro Project, the Healy "Clean Coal" Plant, and the Alaska Seafood International Plant. In assessing why they failed, Fay found marked similarities among the various projects:

• The disregard for economic feasibility and the belief that an infrastructure project is "economic development";

• A belief that if subsidized enough, a project will become viable;

• Rather than relying on markets to determine economic feasibility, these projects reflected the "vision" of a small number of "visionaries";

• The perception that a current windfall would last forever (such as high oil prices or congressional earmarks); and

• Significant influence by parties with vested interests in a project in its planning and development, thus the lack of an arm's-length economic viability test.

Unfortunately, all these trademarks for failure are evident in the proposed Port of Anchorage expansion. The only difference is this project alone could cost as much as all the others combined. After spending more than $125 million on the defunct Alaska Seafood facility in Anchorage, former AIDEA board chairman Mike Barry said in 2005, "We can look backwards and see that (public) agencies are at some peril when they go against the laws of economics."

The proposed Port of Anchorage expansion is bucking the laws of economics. As governor, Mr. Sheffield signed off on a tariff agreement for the Trans-Alaska Pipeline that cost Alaskans billions of dollars, leading the Anchorage Daily News to label it perhaps the "most expensive governmental mistake in Alaska's history." Can we afford a similar mistake with the Port of Anchorage?

Gov. Sarah Palin has an opportunity to inject some leadership into this discussion by vetoing port funds tucked into the state budget bill. And the Anchorage Assembly -- especially those newly seated members -- have a special obligation to ensure the needs and finances for this project are clearly defined before diving headlong into the largest project in Anchorage history.

Julie Jessal is an educational consultant and a resident of Government Hill.

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