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With mine project looming, Western Alaska villages consider a new borough

  • Author: Lisa Demer
  • Updated: May 18, 2016
  • Published May 14, 2016

BETHEL – In one of the poorest parts of Alaska, where fewer than one in 10 students meet state standards for reading and math, residents are wrangling over whether a new path might lead to a better life. They are debating whether to form a borough.

In Southwest Alaska, the issue is as basic and divisive as anywhere the question of new government is raised. Even some helping to draft a charter worry that a borough would be expensive and oppressive; others hope it could be part of the answer.

No one would be exploring a borough if not for the biggest economic development project ever proposed in the Yukon-Kuskokwim Delta, the Donlin Gold mine. Any borough in the area would rely on Donlin revenue, just as the Kotzebue region relies on the Red Dog Mine, those involved say.

The borough effort is being led by The Kuskokwim Corp., an Alaska Native corporation for 10 villages that owns the land where the mine would be built. Its villages are in a mountainous region along the middle Kuskokwim River, starting with Lower Kalskag on up to Stony River. Fewer than 1,500 people live there.

"If we have a borough, most of the people understand we want to limit the power of a borough severely," said Doug Carney, 66, of Sleetmute who first came to the region in 1973 as a homesteader and is helping with the charter, a sort of local constitution. He'd prefer no borough at all: "First off, government never has enough money; you know that."

Indeed, the Northwest Arctic Borough and Red Dog's operator now are in court, fighting over taxes.

Others see benefit from local funds for firefighting, search and rescue and other basic services.

"Not just schools. There are a lot of other things the borough can provide to make life better," said Darren Deacon, 37, who is from the region and also is part of the borough charter group. "It is a chance for people out here to lead and change their own destiny for the better."

'Cusp of change'

The Kuskokwim Corp. isn't pushing a borough but rather is trying to position residents to be ready to capitalize on Donlin should the mine be built, said Andrea Gusty, vice president of corporate affairs. A borough will only be created if residents want it, she said.

"Donlin is on TKC land. Donlin is on Calista land," Gusty said, referring to Calista Corp. mineral rights. "We just want to make sure that the benefit of any sort of development stay in our communities."

Federal earmarks are virtually gone. The state is in a budget crisis.

"We're on this cusp of change." Gusty said. "We're seeing less and less and less for our communities."

The corporate board is looking at a borough in part to bring decision-making to those who live there.

"We're not only committed to making money for shareholders," Gusty said. "We're committed to helping communities thrive."

Most people haven't thought about a borough before and opinions are flying, sometimes with little information, Deacon said.

"It's something new," Deacon said. "People tend to think about the seasons out here, the fishing and then the hunting and the berry picking and whatnot."

The boundaries match those of the Kuspuk School District, which supports the formation of a borough and the process being used to examine one. School Board president Wayne Morgan works as Donlin's community relations coordinator in Aniak. Efforts to reach him were unsuccessful.

Donlin: Up to the people

Home-rule boroughs, like what Kuskokwim is considering, have three required areas of responsibility: education, planning and taxation. They also are free to offer other services including public safety, transportation and recreation. The borough must provide a minimal level of local funding to the school district, replacing some of the state dollars, which are under threat, Gusty said.

One benefit, supporters say, would be local bonding for new schools when locals see the need, rather than waiting for the state Legislature to come up with the money. The Northwest Arctic Borough has bonded for $100 million in school construction over the years.

With little private property and few jobs in the region, those behind the Kuskokwim effort aren't even considering property taxes.

"In the Lake and Peninsula Borough, the resource that is taxed is fish production and also lodges," Gusty said. "In our region the industry would be Donlin. There's really nothing else."

No Donlin, no borough, she said.

Donlin Gold is neutral on the matter.

"It is a topic for the people in the region to decide what they want to do," said Donlin spokesman Kurt Parkan.

Taxes or other payments to the borough would be absorbed into operating costs – up to a breaking point.

"Any added cost to the project has to be something that is factored into its ultimate viability," Parkan said.

Donlin developers won't make a decision on whether the mine is a go until after environmental reviews are complete and key permits are in hand, Parkan said. That likely won't be until 2019.

Own camera crew

The distrust of more government goes long and deep in Alaska. Early political leaders envisioned boroughs as the foundation for local government services, including schools. But except for Bristol Bay, no regions organized that way until a law passed in 1963 forcing the creation of eight boroughs, including the early Anchorage Borough.

When the Deltana borough was proposed for the Delta Junction area in 2007, it was voted down 9 to 1. The study of a proposed borough in Nenana drew dozens of agitated residents to a 2013 community meeting, where they dismissed any suggestion that a borough could do good.

But in Southeast, residents have decided in recent years to organize boroughs, including in Skagway, Wrangell and, most recently, Petersburg in 2013.

Now most Alaskans live in one of 19 boroughs, from tiny Yakutat, with 631 residents, to Anchorage, with more than 300,000. But most land in the state is not in any organized borough.

In Southwest Alaska, The Kuskokwim Corp. began holding meetings in each of its villages about a year and a half ago to discuss the possibility. This year, it is picking up the bill for each village to send two representatives to multi-day meetings in Anchorage, where a charter document is being drafted. So far two rounds have been held, including one in May.

Carney and another group member, Mark Matter of Aniak, were concerned that the effort might be rigged to benefit Donlin by writing into the charter a system to collect payments in lieu of taxes. That could mean less money for any borough, Carney said. They hired a camera crew to document the positions being staked out. Carney said he's taking part as damage control, to limit the size of borough government and to protect residents from taxes and land-use rules.

The next meeting will be in the fall, after berry picking and hunting.

'The scary part'

Boroughs – Alaska's equivalent of counties in the Lower 48 – can be created two ways: through a constitutional provision that gives the decision to the state Legislature or by a public vote in the affected area.

"We're doing it the second way," Gusty said.

Either way, a proposal must first clear the state's five-person Local Boundary Commission, which must consider the state's best interests along with whether an area has the financial means and a stable population.

Some middle-Kuskokwim residents find reason to be skeptical at every turn. They say assertions that middle-river residents need to carve out a borough before Bethel beats them to it just aren't true – a borough that included the Bethel-based Lower Kuskokwim School District would too expensive to be supported by Donlin mine, they say.

Some worry that the borough effort is moving so fast that one might be created even if the mine isn't a go.

"They could bypass the vote if they wanted, take it right to the Legislature," said Matter, a gold miner who serves on the charter group. "And we could be stuck in a borough without any operating mine. That's the scary part. That's why a lot of people are upset right now."

Those supporting a borough argue it would ensure local control, but as it is, "nobody is telling us what to do," Matter said. "There's no place left on Earth where we have this kind of freedom. People can build their fish camps where they want. They can use trails where they want without having to go get permits or pay for the use of it."

The Kuskokwim Corp. says planning wouldn't necessarily mean zoning and permits.

"We're not saying, 'Mr. Smith, you must move your smokehouse because it is in a commercial zone,'" Gusty said.

Still, if Donlin is built and enough taxes can be collected, a borough would make sense as a way "to build up our communities," Matter said.

The process is years away from a vote, Gusty said. Residents are asking good questions and will get a chance to refine the charter once a draft is done. If they decide they don't want a borough or want to wait, that's fine, she said.

Permanent fund?

The Kuskokwim effort is similar to the genesis of the Northwest Arctic Borough, which formed in 1986 to take advantage of Red Dog, a lead and zinc mine.

Red Dog's operator, now Teck Alaska Inc., for decades has served as the sole local revenue source for the entire borough. A new tobacco tax is taking effect in July but is only expected to generate about $300,000 a year, borough attorney Matt Mead said. That compares to $11 million to $12 million a year from Red Dog for the borough and schools through a negotiated "payment in lieu of taxes" agreement set in 2011, according to Teck Alaska.

"Most Assembly members are not satisfied with the terms of the 2011 agreement," Mead said. "I think it's safe to say that agreement has not kept pace with the public service needs in the region."

Unable to negotiate a higher amount, the borough decided to implement its long-paused mine production, or severance, tax starting this year. The dollar amount depends on the price of zinc and lead but Red Dog says it would be $30 million to $40 million a year for the borough and schools. The borough's economists estimate the amount, at current zinc prices, would be significantly lower.

In January, Teck sued the borough.

"All we are asking is for the Borough to work together with us to achieve a reasonable payment agreement that is based on the needs of the Northwest Arctic Borough and supports the continued prosperity of both the people and communities of Northwest Alaska and the mine," Red Dog said in a written statement Friday.

The mine has been operating more than 25 years. One challenge is that the borough didn't create a permanent fund early on, to sustain public services as mining tapers off or as needs grow, Mead said. It considered creating one a few years back, but the revenues weren't high enough.

He sees the Kuskokwim region on a parallel track. His advice: Consider a permanent fund from the start, which might require a borough-set production tax, rather than a negotiated amount.

"It can be tough to change that course," he said.

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