With All Due Respect....

With All Due Respect Episode 51

February 21, 2022 Andrew Halcro
With All Due Respect....
With All Due Respect Episode 51
Show Notes Transcript

Alaska's infatuation with big mega projects continue to distract from the hard work of building a better economy. Maia Nolan Partnow has some thoughts on Sarah Palin"s recent fashion turn in court. AIDEA,  Alaska's only true economic development agency has grown arrogant and lazy.


Show 51
 
Data and descriptions shared from:
 https://www.adn.com/commentary/article/new-alaska-rail-line-peters-out-forest-after-consuming-184-million/2016/02/02/
 
 
 Introduction
 
 
With me as always as…
 My bro in the know

Exchange

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Disclaimer

Content

 
Today on With All Due Respect
…Alaska’s political class
…has long had a fixation 
…about big mega projects
…and fantasizing 

…about the next boom
 
 ….meanwhile the hard work of improving
 …Alaska and our economy remains undone
 
 …I’m going to explain how
 …Waiting for Godot
 …continues to be our
 …state motto
 
 
 In Life
…our podcast fashionista
 …Maia Nolan Partnow
 …casts her eyes towards New York city
 …and has a fashion review on Sarah Palin’s
 …recent courtroom style
 
 And in closing comments
 …it’s time to blow up AIDEA

 
…The Alaska Industrial Development Export Authority
…Alaska’s only true 
…economic development agency
…no longer serves 
…the needs of Alaska’s economy
…and their bizarre addiction 
…to losing on big bets
…has cost this state dearly 
…in money and progress
 
…It’s time to blow it up
…and rebuild it 
…into something that actually 
…works for Alaskans
…instead of outside interests
 
 
  (Horn honk)

There’s our ride
 …so hop in
 …and let’s talk some politics

 

Politics
 
 

Alaska’s political leaders
 have always seem to be betting
 with public money
 on the next big thing
 and in the process
 distracting from the real
 work of building Alaska’s economy
 
 In order to understand this in context
 …we need a history lesson
 
 History lesson
 
 
 In December of 1998
 a month after I had been elected to
 the Alaska State Legislature
 I was invited to lunch by
 former Gov. Bill Sheffield
 who at that time
 was President of the Alaska Railroad
 
 As incoming freshman I was
 ..co-chair of the transportation committee
 …so we met to discuss railroad priorities
 
 During the lunch the conversation turned
 …to the topic of the proposed Anchorage rail depot
 
 At this point,
 …former Alaska U.S. Senator ted Stevens
 …had procured $28 million for the construction
 …and the railroad
 …were undertaking the economic study
 
 Let me repeat
 …they got the federal appropriation
 …before they did any economic analysis
 
 
 So we proceeded to have a very
 lively debate over the viability
 of this project.
 
 Now a little history
 …there are a lot of things
 …in this world I don’t know
 …but one thing I know
 …is the Anchorage Airport
 
 …I started working at the airport
 …when I was nine years old
 
 …when I started washing cars
 …for the family business in
 …1974 our office
 …was right in the middle
 …of what is today the
 …off ramp
 
 First
 …I asked Sheffied
 …how he could be committing
 …to a project without seeing
 …the project’s economic analysis
 
 he brushed it off
 …saying anyone could see the
 …future was bright for the project
 …cruise ship passengers from Seward
 …locals catching the train to avoid parking
 …yaddah yaddah yaddah
 
 
 …Sheffield argued that
 …8,000 people work at the airport
 
 …but I reminded him
 …that this is a airport
 …not a General Motors factory
 
 8,000 don’t all work at the airport
 …at the same time
 ….
 …nor do they all work at the airport

…some as far as two miles away
 …from the terminal
 
 So how do they 
 get to their place 
 of work from 
 the main terminal
 once they get off the train?
 
 It never made any sense.
 
 Also
 …the entire concept was counterintuitive
 …to supporting the tourism economy
 
 Taking cruise ship passengers 
 directly from the boat to airport.
 
 Taking them away from 
 spending money 
 on the road
 
 
 
 A few months later the
 …projects economic analysis was
 …released to the public
 …and sure enough
 …it was as bad as
 …I thought it would be
 
 So
 on January 1, 2000 
 I published Op/Ed
 in the Anchorage Daily News
 about how the project’s
 analysis showed inevitable failure
 if it were to be built

 

For instance
 the analysis predicted the train would carry
 100,000 local residents per year
 to the Anchorage airport within a few years
 
 Let me repeat
 …100,000 local residents per year
 …would load their luggage on to
 …an Alaska Railroad locomotive
 …and ride to the airport
 
 But then report stated
 that these numbers
 were highly unlikely because
 there was no infrastructure.
 
 Think about this
 …you’d have to drive to the downtown depot
 …park
 …and then catch a train to the airport
 
 …now just think
 …about everything wrong
 …with that entire concept
 
 …In my column I predicted the depot
 …would be abandoned in just a few years
 
 The Airport rail depot opened in 2003 and
 …closed a few years later
 …without carrying
 …one local resident to the airport
 
 A $28 million dollar waste.
 
 
 meanwhile at that very same time…

 We were being sold on the Alaska Seafood plant 
 powered with cash from AIDEA.
 
 AIDEA financed the plant in the late 1990s 
 with nearly $50 million
 and once construction was completed
 the facility was leased 
 to Alaska Seafood International.
 
 I saw this deal from two different angles:

I was president of the Sand Lake Community Council
 in 1997 they were pitching the idea
 
 I remember the pitch well
 Alaska’s location meant 
 fish could be shipped anywhere. 
 The average American family 
 was spending 15 minutes
 to prepare dinner
 so pre-packaged fish dinners 
 would be a hit.
 and on and on 
 
 

Then the plant was completed and opened
 …just a I got elected to
 …represent Sand Lake 
 …in the Alaska State Legislature 
 
 …Every year 
 …in committee 
 …we’d hear testimony
 …from commerce and AIDEA
 …folks
 …about how they were
 …one fish away from 
 …making a profit every year 
 
 Every year
 …the same thing
 …we’re almost there
 
 

The plant opened in 1999
 the business never made money
 and within six years AIDEA
 had sold the facility in a fire sale
 for $25 million and it’s now
 a church that pays
 no local property taxes
 which thus causes private
 property owners to pay more.
 
 
 Alaska mentality is that
 – economics don’t matter
 
 Because we’re Alaskans
 …we believe that we have
 …the ability to force
 …the economics into being
 
 There is a long list of
 …development fantasies
 …that we’ve been indulging
 …
 …pinning our future economic hopes
 …on the next big white elephant
 
 First we start with…
 
 ANWR
 
…For four decades we’ve been told this mirage in the desert was real
 …I remember twenty years ago in the legislature
 …we’d say 
 …“wait until gas hits $2 per gallon…then they’ll want ANWR.
 
 Well gas is at an average 
 of $3.51 per gallon 
 and it has no interest
 
 After 40 years of promises 
 it opened for leasing in 2020
 however few showed up but AIDEA
 
 In fact after being told for forty years
 that the oil & gas industry would be
 beating down the door to develop
 not one major oil or gas company bid.
 
 Why?


 Because there are too many other
 …development opportunities
 …major oil companies
 …that are
 …less risky financially
 …and
 …won’t piss off their
 …shareholders
 …lenders
 …or customers
 
 ANWR is not going
 …to happen in our lifetime
 
 But yet AIDEA
 …spent $12 million on leases
 
 
 Then we have the…

Alaska Natural Gas Pipeline

 In 2007 the State of Alaska 
 through AGIA awarded $500 million 
 to TransCanada to
 make this dream come true
 
 

The strategy was going to build a
 $40 billion pipeline based on faulty economics
 and then force the producers
 to pay for the cost of the pipeline
 and provide the gas.
 
 At that time a KTUU survey showed
 58% of respondents thought it would be successful
 
 From the moment of introduction
 for the next three years
 many of us argued
 it was a fool’s errand
 because it ignored
 both legal and
 fiscal realities
 
 So
 …trying to quiet their critics
 …I was invited to a meeting
 …with Palin’s commissioners
 …Tom Irwin, Marty Rutherford
 …and then Lt. Governor Sean Parnell
 
 Irwin kept going on about how
 …they were going
 …sue the oi companies
 …and if that didn’t work
 …they’d take back oil leases
 …and by God we’re
 …gonna build
 …this pipeline
 
 …and I was like
 …dude no you are not
 …you don’t have the legal right
 …to extort private companies
 …to pay for the most expensive
 …oil and gas project in U.S. History
 …it ain’t gonna happen bro
 
 Finally I looked across the
 table at Sean Parnell
 …and asked if he was
 …buying into this fantasy
 …and he just shrugged his shoulders
 
 Five years later AGIA died a quiet
 …but expensive death
 …ironically
 …under Governor Sean Parnell
 
 Today there are other iterations
 and other dreams of a natural gas pipeline
 
 Not in our lifetime
 Too expensive
 
 Other alternatives to
 an 800 mile pipeline through the Arctic
 
 Then of course we had the…

 KABATA Knik Arm Bridge And Toll Authority
 
 

In 2003, the Alaska Legislature created the Knik Arm Bridge And Toll Authority
(KABATA) to develop a method of construction,
financing, design, operation and maintenance of the bridge.[4]

Ten years later
 a legislative audit found that KABATA had overestimated potential revenue from tolls
 leading to basically mothball the organization
 
 In ten years…
 KABATA burned through $100 million dollars
 
 

But losing a $100 million  is a deal
 …compared to our next 
 …white elephant
 
 

Point McKenzie Rail Extension

 

The rail spur was supposed to connect
 …the little-used Port MacKenzie
 …to the main Alaska Railroad line near Houston
 …a distance of 32 miles.
 
 Since 2009
 …Alaskans have spent $184 million
 …on the Point MacKenzie Rail Extension Project 
…but it is $120 million short of completion. 
 
 
The $184 million dollars spent
…has created 
…a road to nowhere
…that ends in the 
…middle of a forest
…five miles short
…of it’s planned destimation
 
The truth is
this was a fantasy 
of the valley legislative
delegation years ago
…this was not a project 
…the railroad asked for
…and in fact had quite 
…a few other priorities
…at the time


 Recently more pie in the sky 
 …proposals have resurfaced:
 
 

First we start with the…

 West Susitna Road

 
AIDEA the state’s only
true economic development agency
…is considering a 
…100 hundred mile road to
…speculative mining developments
 
The road is projected to cost over
$300 million and so far
over $9 million in public
money has already been invested
 
Now
you might say Andrew 
its more than speculative 
there are reportedly discoveries
and I’d say 
yes so were there discoveries 
at Mustang and AIDEA still lost $70 million
 
So let’s see what that
…this road might mean
…to Alaska’s economy
 
Now remember
…a constant theme
…in a resource development state
…like Alaska 
…is that tax policy matters.
 
The more stable the tax rate
…the more companies understand
…their tax exposure 
…and can assess the profitablity
…of potential developments
…and take measured risks
 
Right?

Okay.
 
 

According to the State of Alaska:
 
 State mining taxes haven’t been raised since 1955
 65 years of stable state taxation
 
 The mining industry pays 
 $49 million in yearly mine fees
 (by reference the insurance premium tax Alaskans pay is $59 million,
 while cruise ships and the rental car industry generates $36 million)
 
 


 Now…some will say
 …what about indirect jobs
 …what about fuel taxes 
 …what about local taxes
 
 What about them?


 Every industry provides
 …those same economic benefits
 …but yet most are not subsidized
 …with state dollars
 …and most haven’t had sixty five years
 …of tax stability
 
 
 Look
 …This isn’t an attack on mining
 …my resource development bonafides
 …are unassailable
 
 …I’ve lost a few friends by
 …being a leading advocate
 …for oil tax reform eight years ago
 
 …but this makes no damn economic sense
 …and mining pays too little as it is
 
Especially 
 …if you’re basing your argument on
 …this project creating jobs for Alaskans 
 
 …In 2020 the state of Alaska reported
 …there were 3641 total metal mining jobs in Alaska
 
 In addition the State of Alaska 
 …also publishes a report every year 
 …entitled non-resident workers in Alaska.


 Now for years we’ve heard 
 …the complaints about the oil patch
 … oil industry 35% non-resident work force
 
 So would it surprise you that 
 …metal mining has a
 …39% non resident workforce
 
 
 …the state of Alaska
 …also reports 
 …that the average non-resident worker makes 10% 
 …more than the resident worker in quarterly wages
 
 …so 39.4% of metal mining employees 
 …are non-residents and make ten percent
 …more quarterly wages
 
 


 Some proponents 
 …including AIDEA
 …point to 
 …the Red Dog Mine road
 …in Northwest Alaska
  
 But Red Dog was different
 One good solid company
 they had money
 they knew they would be responsible
 for paying it back
 
 The West Susitna Road 
 just like the proposed 
 Amber mining road
 would be counting on 
 the cost of infrastructure 
 to be repaid by users 
 who have yet to show up
 
 Once again
 …the build it and they will come approach
 …an approach that has failed this state
 …for decades on everything from 
 …seafood to wood chips
 
 
 

Next 

…we move to Governor Dunleavy’s
 proposal to deal with the Port of Alaska

 As we all now the Port of Alaska is 
 Alaskans lifeline  
 and it’s ability to continue
 operating efficiently has been
 burdened by long running 
 structural problems.
 
 It's an old port
 …and it costs a lot of money to fix.

 

Knik Arm Port Authority

Governor Dunleavy 
is proposing $175 million to
create a port authority 
and they decide how to
divvy up the cash
 
How does that even work?
 
Seriously
Could there have possibly
been any less thought
put into this proposal?
 
The Port of Alaska 
…handles 80% of Alaska’s 
…shipping containers and vans
…and is in desperate need of repairs
 
Point McKenzie 
…has seen only 14 ships 
…in the last 20 years
…the structure has
…been falling apart
…and in fact the port
…never should have
…been built to begin with
 
So just how 
is $175 million
and a joint port authority 
going to
change the economics 
of Port McKenzie?
 
It does not.
 
It’s only going to 
divert scarce resources 
from the only port
that actually matters
to the economy of Alaska
 
The fact is the port at Point McKenzie
never should have been built
according to the project’s
own economic analysis
 
Even before the port was built
…their consulting firm noted
…that it was a risky investment
…and
…even with the rosiest assumptions
…the port would still lose millions every year
 
But Mat-Su politicians
…believed they could make the economics
…of the port work by 
…poaching coal shipments from Seward
…cargo shipments from Anchorage
…and dreamed about exporting 
…low cost bulk resources
…like woodchips

….which we all know
…is not a market Alaska 
…has ever 
…been able to compete in
 
And 
…now the governor’s plan
…is to throw good money after bad
…trying to breathe life into a port
…that never should have been built
…instead of prioritizing addressing
…one of the biggest threats 
…to Alaska’s supply chain


 
 

Ladies and Gentlemen,
 
 
 

But we’re not close,
 and the reality is we’ve never been close
 
 
 Alaska is 63 years old.
 
 We need to grow up.
 We need to recognize that 
 we can no longer live 
 like a 63 year old
 still living in his 
 parents basement 
 and still
 fantasizing about 
 becoming an astronaut
 
 Just three years ago Governor Dunleavy
 proposed cutting education funding by 25% 
 and the University of Alaska by 44%
 
 The state was so broke three years ago
 …that it couldn’t invest in education
 …it cut transportation 
 …and community support
 …all while those cuts 
 …shifted tens of millions
 …on to the backs of local taxpayers
 
 

But today
 …the state is wasting time and money
 …chasing projects that will
 …never materialize
 …while we completely ignore 
 …the hard work
 …the real work
 …of fixing Alaska’s economy
 
 
 Alaska's infatuation with white elephants 
 …are a systemic problem 
 …going back for decades
 …but they remain
 …a powerful aphrodisiac to politicians

I get it.
 
 What’s sexier?
 …
 …Hearing that ANWR 
 …is right around the corner 
 …and the free lunch will continue
 
 or 
 
 …hearing a five year plan to 
 …strengthen education, 
 …invest in communities 
 …and address the outmigration 
 …that threatens Alaska’s economy.
 
 The dream 
 …is always sexier than the reality.
 
 Unfortunately
 …we live in reality.
 
 And the reality is 
 …we have an entire
 …closet full of ceremonial gold shovels
 …and broken promises
 ….that Alaska spent billions collecting
 …that haven’t produced
 …a damn thing 
 …other than lost time and money
 
 For the last twenty years
 …the repetition of failed
 …public investments
 …in politically motivated projects
 …has been mind numbing
 
 The airport rail depot - $30 million
 The seafood plant - $50 million
 KABATA - $100 million
 AGIA - $500 million
 The Knik Arm Rail Extension - $200 million
 
 

And yet over the 
 …last twenty years
 …while we’ve wasted 
 …money on
 …trains that would never arrive
 …Fish dinners that would never be served
 ..and
 …bridges that would never be crossed
 
 We’ve lost
 …population
 …opportunity
 …outside investment
 …and we are no better
 …off with our social infrastructure
 
 
 It's time to grow up 
 and realize 
 the economy Alaska needs
 requires being realistic
 not continuing to propose
 the next big fantasy project.
 
 It's time to realize that
 if we’re ever going to reverse
 the dangerous outmigration trends,
 It’ requires improving education,
 community development and addressing
 Alaska’s nagging social problems
 
 
 Fixing Alaska’s economy
 is going to be hard damn work
 and is not going to be accomplished
 by throwing another golden shovel
 in the closet.
 
 
 


Life:

Recently,
 former Governor Sarah Palin
 was the plantiff in a high profile
 trial against the New York Times
 …and
 the podcast’s own fashionista
 Maia Nolan Partnow
 has some thoughts
 on the former governor’s
 courtroom fashion
 
 
 
 
 Closing comments:

…It is time to blow AIDEA up

AIDEA is a public corporation of the State of Alaska, 
 created in 1967 by the Alaska Legislature 
 
 The original purpose of the agency was
 "in the interests of promoting the health, security, and general welfare 
 of all the people of the state, and a public purpose, to increase job 
 opportunities and otherwise to encourage the economic growth of the state”
 
 However
 over the last fifty five years
 AIDEA has become a
 development dinosaur
 and no longer serves 
 the interests of Alaskans
 as well as no longer meeting the needs
 of Alaska’s changing economy


 This is an agency that
 spends too much of its time swinging
 for mega project homeruns
 while consistently striking out
 
 Their addiction to 
 large controversial projects
 that do little to help Alaska’s economy 
 except line the pockets 
 of international companies 
 can no longer be ignored.
 
 This is an agency that has
 gotten so arrogant they
 actually have an enemies list.

This entire agency needs
 …to be gutted
 …and refocused
 
 Let me tell
 you my personal experiences
 at ACDA
 that bring me to that conclusion
 
 In 2018 after I first caught
 wind that Nordstrom was looking
 to pull out of downtown Anchorage
 my agency immediately began working on
 a pitch to save the store.

 

At that same time we had been chasing
 JC Penney to buy their parking garage
 and so we created an idea that we
 believed would save Nordstrom.
 
 We proposed tearing down the JCP garage
 redesigning a smaller more modern footprint for Nordstrom
 and combining the site with a hotel and parking.
 
 Then
 …we proposed reimagining the old Nordstrom
 …building into a cool food hall
 …possibly working with Simon Mall
 …to consolidate their food court into
 …the new space thus
 …giving them the opportunity to 
 …reimagine their food court 
 …into something that would draw
 …people to the mall
 
 But while we had the capacity
 to buy the building 
 we didn’t have the $2.5 million
 to tear it down.
 
 So I went to AIDEA.


 Our pitch was simple
 …lend us $2.5 million
 …for the teardown costs
 …thus creating a platform for
 …a $60 million project
 …and the revitalization 
 …of downtown Anchorage
 
 They’re response
 …that’s not what we do
 
 One year later
 …we went back to AIDEA
 …with another pitch
 
 The old Cyrano’s Playhouse Theatre
 …in downtown Anchorage
 …had been for sale for years
 …so after doing our due diligence
 …we realized what a fabulous opportunity
 …this would be to jumpstart re-development
 …on fourth avenue
 
 The beauty of the Cyrano’s property was
 …that although the commercial space previously
 …occupied by the theatre was empty
 …
 …the building hosted 12 apartments
 …whose rents would cover the cost of debt service
 …
 …so while we were redesigning the commercial space
 …for a prospective tenant
 …the rents would cover the assumed debt
 
 …so we pitched to AIDEA
 …we need to borrow $1 million
 …to buy Cyrano’s
 we said…
 …look we can cover the debt with rents
 …this location is a part of downtown
 …that desperately needs redevelopment
 …and 
 …we are currently meeting with
 …prospective new tenants 
 …who are excited about the possibilities
 
 AIDEA’s response was
 …that’s not what we do
 
 Why not?

AIDEA replied
 …Because the building contains housing
 …and we don’t lend on housing
 
 But it’s mixed use I argued
 …50% is commercial space
 …and the pro-forma shows
 …that the apartment rents
 …will actually pay the debt
 …until we bring the commercial
 …space on line
 
 I’m sorry they said
 …that’s not what we do
 
 No…what AIDEA does
 …is ignore the small deals
 …that make money and sense
 …and instead
…chase mega deals 
 …where $50 million seafood plant
 …turns into a $25 million church
 …or a $70 million investment
 …in a speculative oil development
 …turns into dust.
 
 AIDEA is broken
 The entire organization has
 become lazy, arrogant
 and no longer meets the needs
 of Alaska’s changing economy
 
 The management needs to go
 …the board needs to go
 …and the next governor
 …needs to reset that agency
 …to better serve the economic 
 …development needs of Alaska
 
 

AIDEA is broken
 …and the entire agency
 …needs to be blown up
 …and rebuilt.

 

(Closing Music)