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Hold your nose and vote 'yes' for state transportation bonds

  • Author: Matt Claman
  • Updated: September 29, 2016
  • Published November 5, 2012

Bond Proposition A asks voters to approve $453 million in general obligation bonds for transportation projects across our state. The biggest project on the list is a $50-million Port of Anchorage expansion that has been dogged by poor management, a potentially flawed design, and unanswered questions. The veil of secrecy that now pervades this project has no place in open, democratic government. If Proposition A only asked to fund the Port of Anchorage, voters should reject the proposition. We should support this innovative proposition because the remaining projects -- 89 percent of the funding -- do not share the troubles of the Port.

The bond proposition offers a sound economic opportunity for Alaska. We will earn more money by investing state savings than we will pay to borrow the money. The Alaska Permanent Fund, our best-known savings account, has a 28-year average return of 8.8 percent, and its rolling 10-year average return is over 6 percent. Earning 6 to 8 percent on our investment is better than savings banks offer today. On the borrowing side of the equation, the interest rate that AA-rated governments pay for tax-exempt municipal bonds is under 3.5 percent for a 20-year note. And for AAA-rated governments, like the state of Alaska, the current rate for a 10-year note is below 2 percent.

So even before adding inflation to the arithmetic, history shows that the state could be netting 4 percent or more by borrowing funds for the transportation projects and continuing to invest its assets. Add in the current inflation rate reflected in the Consumer Price Index of 2 percent, and the benefits of bonding increase even more because the state would make bond payments in future years with inflation-adjusted dollars. The math adds up: the state does not spend its principal, the state earns more interest on the money it keeps in the bank than it pays in interest on the bonds, and we gain the benefit of much-needed infrastructure improvements and repairs.

Americans use the same arithmetic every day as they pursue the dream of owning a home. With mortgage interest rates at an all-time low, the benefit of future payments in inflation-adjusted dollars, and the federal tax deduction for mortgage interest, we see the benefits of homeownership. By providing the tax deduction for homeowners' mortgage interest, Congress and the President encourage people across the country to own their home.

Sitting at the top of the list for the bond funding is $50 million for the Port of Anchorage expansion. Other projects have a smaller price tag: harbor dredging in Bethel ($4 million), harbor improvements in Haines ($15 million), road work in Sand Point ($2.5 million), road construction on the Glenn Highway ($35 million), highway improvements in Juneau ($5.5 million), and road construction in the Mat-Su ($15 million). None of the other projects have the history of problems that we read about every week regarding the Port of Anchorage Expansion.

Starting with a price tag of $360 million, which may soon exceed $1 billion, the port chose an "open cell" design that involved filling land behind interlocking steel sheets instead of the traditional dock-on-piling design seen throughout the world. Problems with the port expansion project first began to get public attention when many of the massive steel sheets failed. Then a bulldozer operator, working to inspect and repair the damaged steel sheets, died in August 2011 when ground collapsed underneath the bulldozer. The bulldozer slid into Cook Inlet and rolled on top of the operator.

The costs get higher and the news gets worse. There are questions about whether the municipality will need to scrap the entire open cell design and return to a dock-on-piling design. In an effort to gain a better understanding of the problems and the potential solutions, the municipality hired a local engineering firm to perform a comprehensive review of the entire project, including whether the open cell design is appropriate for the location in Cook Inlet. The $2-million study is complete, and the engineers delivered a 2,200-page draft report in October, but it remains hidden from the public. The municipality is claiming that a confidentiality agreement prevents it from releasing the report until 3 days after the Nov. 6 general election, but there is no evidence that the mayor asked the federal government to waive the confidentiality agreement. Confidentiality provisions are routinely waived or modified when circumstances change.

The Legislature had not approved the 2012 bond proposition that includes funding for the port expansion when the municipality contracted for the port study. The bond proposition is a changed circumstance that is a good reason to allow release of the report before the election. Indeed, the U.S. Maritime Administration recently released a summary of the study and explained its preliminary finding that the open cell design is not appropriate because the cell may not survive a major earthquake. Even after the federal agency reported the preliminary findings, the mayor continued his refusal to release the report because of the professed confidentiality concerns.

In the summer of 2012, the municipality hired an Outside law firm -- with no offices in Anchorage -- to look at legal issues and look for parties that may bear some responsibility for the problems. After paying the Outside law firm $500,000, the mayor recently asked the Assembly for an additional $2 million to pay the lawyers. The Assembly wisely limited the additional expenditure to $250,000.

The current status of the Port of Anchorage expansion raises questions that should be answered before Election Day. Do we need to start over with a dock-on-piling design? Why hasn't the mayor negotiated a voters-need-to-know exception to the confidentiality agreement? What is the likely cost of finishing the expansion project—whether with the open cell design or starting over with dock-on-piling design? Who will pay for the project? And what are we getting for $50 million?

But we will not have answers to any of the important questions about the port before November 6. Does the secrecy and uncertainty about the port expansion mean we should reject the bond proposal? Can we trust the government to properly manage this project in the future?

If Port of Anchorage Expansion was the only project in the proposal, it would be an easy "no" vote. But should one flawed project doom the remaining 89 percent of the projects? There are three reasons to support Proposition A despite the flaws. First, the cost to complete the work on the port -- whether finishing the open cell design or changing to dock-on-piling -- will exceed $50 million. Second, the economic benefits to the state from issuing bonds and protecting its assets may not be available in later years if interest rates rise. And third, state investment in a project that had relied primarily on federal funds will give our public officials even more reasons to give the project the scrutiny it needs -- with an open and public process that has been missing for many years.

The remaining 89 percent of the statewide projects justify taking a risk on the 11 percent allocated to the Port of Anchorage. With misgivings and many questions, and a renewed commitment to an open and transparent process after the election, Alaskans should vote "yes" on Proposition A.

Matt Claman is an attorney with Lane Powell, is a former Anchorage Assembly member, and served as mayor of Anchorage in 2009.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch. Alaska Dispatch welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)

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