Capital investment picture mixed as businesses press Legislature for fiscal plan

Construction plans by a hotelier, an airline and other companies and agencies may prop up capital investments in Anchorage this year and offset the businesses that are expressing doubt about Alaska's economy and the failure, so far, of the Legislature to patch the state's huge deficit.

One of Alaska's largest private employers, telecommunications company GCI, said earlier this month it will slash spending on Alaska projects this year, to $165 million from $209 million in 2016. The company will focus on capital improvements to its networks in rural Alaska and the North Slope oil fields, officials said.

GCI said it cut back after the Legislature last year failed to pass a long-term plan to close the state's $3 billion budget deficit caused mainly by a crash in oil prices and declining oil production. Most of the state's unrestricted general fund revenue comes from oil company taxes and oil-lease royalties, and spending by the state and its employees has fueled Alaska's economy in rich years.

GCI's decision is about smart business, not politics, Heather Handyside, GCI corporate communications director, said Tuesday.

"A strong predictable budget is a foundation of the state's economy," she said, and it reassures businesses that communities will continue to thrive, Handyside said.

Despite the anxiety, other companies appear ready to move forward with 2017 spending plans, if cautiously.

Building permits approved through early March by the Municipality of Anchorage totaled $85 million, 52 percent higher than the $56 million permitted during the same period in 2016, though a permit doesn't necessarily mean construction will actually occur.

City officials said permits authorized so far in 2017 include:

• Construction by Hyatt of a 28,000-square-foot hotel in Midtown, at $16 million.

• Popular entertainment-and-restaurant chain Dave & Buster's 44,000-square-foot expansion of the Dimond Center to launch its first venue in Alaska, at $2.4 million.

• Southcentral Foundation's improvement of its primary care clinic in Midtown, at $5 million.

• Municipal upgrade to the Ship Creek water treatment plant, at $7.4 million.

The amount of permitted projects so far this year is surprising, said Bill Popp, president of Anchorage Economic Development Corp.

He doesn't expect the level of activity to continue, he said. But he added the state's increasingly diverse economy appears to be helping.

Some economic sectors continue to shine despite low oil prices that have thrown Alaska into recession.

"We have economic engines like tourism, the airport and health care offering opportunities for new investments," Popp said.

Still, concern in the business community is high, he said. Survey results from more than 300 Anchorage businesses polled late last year showed 69 percent of respondents were not planning capital improvements in the next two years, with many blaming the poor economy.

On Wednesday, the Senate passed a bill to tap some of the investment earnings from the $57 billion Alaska Permanent Fund to pay for state services, while setting $1,000 dividends for the next three years. The House also has proposed a measure restructuring the fund, though the House plan includes an income tax.

The lack of a fiscal solution generated more concern among businesses than low oil prices, Popp said.

AEDC wrote a letter to legislative leaders and Gov. Bill Walker on Wednesday, saying indecision during the last two legislative sessions has created a "crisis in confidence for the business community that is paralyzing investment decisions."

The economic pain will spread if lawmakers don't pass a plan that includes careful reductions and sustainable use of Alaska's large financial assets, including the Permanent Fund, to stabilize state revenue, the letter said.

Popp said businesses are reluctant to invest when they don't know how they'll be taxed, or whether the state will eliminate government services contractors.

"The solution should include all the tools in the toolbox, but the solution needs to be had now," he said.

Some companies said they were continuing with investment plans this year.

Alaska Airlines plans to start construction soon on a new, larger hangar at the Ted Stevens Anchorage International Airport, creating up to 180 jobs during the process.

The carrier will also upgrade 11 terminals in communities around the state. Both projects are part of the company's overall $100 million investment plan in Alaska between now and 2020, said Marilyn Romano, the airline's regional vice president for Alaska Air.

The company sees a "bright future" in Alaska, with large oil and gas resources still in the ground and significant savings to stabilize the state economy if leaders can reach agreement on a long-term plan, Romano said.

"That doesn't mean as a company employing more than 1,800 people in the state that we're not concerned," she said.

Anchorage-based Alaska Native corporation Cook Inlet Region Inc. has no plans to shelve investments this year, said Jason Moore, CIRI's senior director of corporate affairs.

The company is prepared to spend tens of millions of dollars adding 11 wind turbines to its project at Fire Island, beyond the 11 already there, if a utility agrees to buy the power, he said.

Moore said the company worries the lack of a fiscal plan, if one is not passed this year by the Legislature, will hurt the economy further, he said.

"Uncertainty weighs on businesses," he said.