On Monday Gov. Bill Walker signed into law a capital budget for the 2018 Fiscal Year, which had been adopted by the Legislature in a brief special session on July 27.
The new budget includes $5,000,000 in the Municipal Harbor Facility Grant Fund, precisely what will be needed for Wrangell’s Harbor Department to proceed with an overhaul of the facilities at Shoemaker Bay Harbor.
“We’re excited,” said Wrangell harbormaster Greg Meissner. The aging facility has about passed its useful life, with a portion already closed off to moorage. The project proposes a complete replacement of the wood and iron floats with more durable materials, with a reconfiguring of spaces to better accommodate modern craft.
Designed by PND Engineers several years ago, the initial cost estimate for the Shoemaker project was $10.7 million, which has subsequently crept up to $11.6 million. With state funding to make up nearly half of the cost, the rest will have to come through city reserves and bonds.
The Wrangell Assembly had in June 2015 approved a spending plan for the improvements project, including the issue of revenue bonds for $2.5 million. The plan’s approval had been necessary to applying for the state facility grant, for which Wrangell’s proposal had been subsequently ranked second among other Tier I applicants for FY17.
The Shoemaker project was passed over that year, as the fund had only $5 million apportioned to it and Kodiak’s – in the number-one spot – had required $1.6 million. Partial funding of projects is not an option, so Wrangell was subsequently bumped. It did receive top billing for the FY18 program, however, so inclusion of $5 million in the governor’s draft budget released in December was an exciting prospect.
Of threat to that sum, the Legislature had a long session ahead of it to negotiate a budget amid a multi-billion-dollar spending deficit. Its biggest cuts over the past several years have been to capital projects. Since FY15, the state has cut back on its General Funds’ operating budget by 12 percent, whereas its capital expenditures were reduced by a full 79 percent in that timeframe.
Speaking before the start of the session in January, Sen. Bert Stedman (R-Sitka) and Rep. Dan Ortiz (I-Ketchikan) had each explained that inclusion of the $5 million in the governor’s draft was a positive sign, as it would be easier to leave those funds in the budget than it would be to add more in. This had proven to be the case during talks for the FY17 budget cycle, when Wrangell officials had testified to the Legislature requesting the addition of $1.6 million to the harbor fund.
“The port and harbor money is there, the full $5,000,000 is there, so Wrangell will get it all for their project,” said Ortiz last Friday. “That’s good news, good news for Wrangell.”
He credited Stedman’s standing within the majority caucus and his own place on the House Finance Committee with maintaining the facilities funding through the regular session and several special sessions that followed this year. “That harbor project has been a long time in coming. I’m just glad to see it going forward at this point,” Ortiz commented.
City finance director Lee Burgess explained bonding will be Wrangell’s next step, to be applied for through the Alaska Municipal Bond Bank Authority.
“They kind of guide us through the process,” he said.
Under the financing plan approved by the Assembly in 2015, the city would aim at issuing bonds for $2.5 million. Over the course of 20 years, annual repayments could run at around $182,000, in part through stall rent monies currently deferred to the harbor reserve fund.
Stall revenues are approximately $450,000 a year, with the additional stalls to be built into a new Shoemaker bringing in an additional $25,000. Forty-eight percent of this revenue goes toward the reserve fund, from which the money to repay the debt would come. In this scenario the Harbor Department would still reserve some money for future use.
The project’s start would depend on how soon the funds could be collected. Beyond the $7.5 million to come from the state and city bonding, the Harbor Department would attempt to cover the rest with its available harbor replacement and commercial fishing reserve funds. $800,000 would come from monies earmarked for harbor maintenance at Meyers Chuck by the Legislature when Wrangell had assumed responsibility for its dock. The deal had transferred $1.4 million to the borough for the project.
If the bonding process proceeds quickly enough, Meissner has hopes bids for the work will go out by this winter.
In addition to the harbor grant funds, Walker’s capital budget contains appropriations totaling $1.4 billion, which his office adds is the smallest capital budget passed since 2000, and leverages $1.2 billion in federal funds for a variety of projects.
“The Legislature came together in a spirit of bipartisanship to pass this legislation, and I’m glad to honor their cooperative agreement by signing the capital budget without vetoes,” Walker commented in a release after his signing. “However, our work is not yet done. We need new revenues to address our fiscal crisis and put Alaska back on a path to stability. We cannot cut – or veto – our way out of this crisis.”
On that topic, Ortiz expected the governor to call a fourth special session later this year. “What I’m hearing is the middle of October,” he said.
The intent of the new session would be to generate additional revenue for the state’s operations. The operating budget passed last month by legislators still leaves a deficit to fill, to the tune of $2.5 billion. Several iterations of a reconfiguring of the Permanent Fund were put forward in both chambers this year, proposing a percent-of-market-value draw from the fund that would enable dividends to still be paid out while also funding agency operations.
“That will certainly be part of it. I think that’s where there’s already a consensus among the folks in both the Senate and the House,” Ortiz commented. Other options could be considered by lawmakers, but the state’s available savings is depleting rapidly.
“In order for that session to have success, there’s going to need to be acceptance on the part of the Senate that added revenue needs to happen. Otherwise we could go there and nothing could happen,” said Ortiz. “I think that if we can just generate as much as $250-300 million a year, that would be a step in the right direction, and it would be a message to our bond raters and to other folks in business that we are on a road to a sustainable fiscal plan. If that message is sent, it will be huge for everybody.”
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