The construction of the Lynn Canal Highway connecting Juneau, Haines and Skagway, first proposed more than 50 years ago, is back in the news. Apparently, Gov. Bill Walker is considering moving ahead on the most recent version of this project (labeled Alternative 2B). This should be good news to most Alaskans who want to see more affordable and convenient transportation options available in the Southeast region and throughout our state.
The perceived imminence of the governor's decision has prompted a flurry of hysteria from project opponents who claim that the state cannot afford to build a 50-mile road that would connect Juneau with the rest of Alaska and the continental road system. Nothing could be further from the truth.
Fact: The $574 million cost of this project will not reduce our Permanent Fund dividend. Nor will it reduce spending on needed public safety concerns and social services, or take food from the mouths of babes. Ninety percent of the project cost is paid for by the federal government with highway transportation dollars. The state match was appropriated years ago.
Opponents also worry we won't have funds left over for other transportation projects around the state – causing them to be delayed or canceled.
Fact: There are no other shovel-ready projects of significant size on the horizon that can utilize federal matching funds. Alaska has not built any new roads in decades and it becomes more difficult each year just to find qualifying projects. Over the project construction life, only 12 percent to 15 percent of federal highway dollars would be needed each year – leaving plenty of money for maintenance and upgrade projects that qualify.
But I digress. The two primary points detractors seem obsessed with are (1) the project's "poor economic return" and (2) their contention that annual maintenance and operating costs are too high. Both of these arguments reflect a basic misunderstanding (or deliberate misconstruing) of numbers in the Environmental Impact Study (EIS).
Regarding project economic return, everyone realizes that most roads are not designed to "make a profit." So the fact that this road project does not shouldn't surprise anyone.
The EIS reflects that the cost-benefit ratio of the Lynn Canal Highway project is .28 – which opponents claim means "the state would get 28 cents worth of value for every dollar it spends." But opponents know that this ratio only measures the actual dollar savings to users — $118 million –- certainly nothing to sneeze at but only a portion of the benefits of the project. And if measured against the actual state investment, that ratio would show a return of more than 200 percent.
Fact: User benefits (savings in travel costs), while substantial, do not take into account resulting lower freight costs and economic activity in the region that will generate new employment and tax revenue at the state and municipal level. Furthermore, it ignores the substantial 75 percent reduction in the state subsidy for every vehicle using the current ferry system in Lynn Canal.
But the greatest distortion that opponents perpetuate is that the annual operating costs of preferred Alternative 2B greatly exceed the annual operating costs of the "No Action Alternative"– by almost $5 million per year.
If opponents had actually read the EIS, they would know this is not true. The $5 million difference between operating costs only refers to expenses; it does not account for revenues of each alternative. When revenues are accounted for, the net difference is only $2.7 million annually – cutting the cost almost in half.
Furthermore, this number does not take into account the additional fuel taxes that will be generated based on a tenfold increase in vehicle traffic transiting northern Lynn Canal. A conservative estimate of this additional state revenue based on the current 8.95 cents per gallon would be hundreds of thousands of dollars. If the current gas tax is doubled to 16 cents per gallon, as has been proposed by Walker, upwards of $1 million in additional revenue could be realized.
Again, as with the cost-benefit ratio, opponents also ignore additional revenues derived from any increased economic activity as well as the 530 jobs and hundreds of millions of dollars in payroll created during construction – at a time when our state desperately needs it to help offset the bleak budget picture due to declining oil revenues.
No legitimate fiscal argument exists against this road project. When weighed against the alternative of a ferry-only operation in Lynn Canal, the choice is clear.
At nearly the same annual net cost of taking no action at all, building this road will increase capacity and convenience exponentially while lowering transportation costs throughout the region. Just as important, this will strengthen our existing ferry system – allowing mainliners to serve other ports more frequently – while lowering overall costs.
Isn't that the definition of fiscally responsible?
Win Gruening retired as senior vice president in charge of business banking for Key Bank for the state of Alaska in 2012. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. After serving as a pilot in the U.S. Air Force flying in the Pacific and Vietnam, he began his banking career. He lives in Juneau.
The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email firstname.lastname@example.org. Send submissions shorter than 200 words to email@example.com or click here to submit via any web browser.