The state’s no longer on the hook to guarantee to cover all financial losses for the private contractor who will build and operate the proposed Knik Arm Bridge. Oh wait. News flash! Yes it will.
Two years ago the promoters of the Knik Arm Bridge promised this billion dollar project would be built, paid for, and operated by a private contractor, which would recoup its costs with tolls. Then the Mayor of Anchorage and Governor changed their minds. Now they want state money to subsidize the private contractor. Then, a funny thing happened on my way to work last Friday. Well, it happened at work.
Originally Senate Bill 80 and House Bill 158 included a controversial provision that required the state to guarantee that the private contractor would not lose money on this project. If tolls (for a bridge few will use because the free Glenn and Parks Highways will result in a shorter commute to the Wasilla-Palmer population centers) don’t cover the cost of construction and operation, the state would have to subsidize the contractor for all losses. Jamie Kenworthy, former head of the Alaska Science and Technology Foundation, estimates that this could potentially cost the state $1.5 billion. He’s become an expert on the project.
On top of that, promoters want an outright $150 million appropriation from the state to cover more toll shortfalls. On Friday the provision requiring the state to subsidize construction and operation cost shortfalls came out of the House Bill. Wow! I was interested. So I asked if the state would still bear potential liability for this project. I was told no.
But then Government Hill Community Council president Bob French testified the state was still on the hook for this $1.5 billion in potential contractor loss liabilities. He explained that the traffic estimates were overstated. So I asked the good folks at the Knik Arm Bridge and Toll Authority (KABATA) about this discrepancy, as they indicated the state would bear no liability.
Bob was right. While this provision had come out of the bill, the KABATA folks failed to tell me they would put the same controversial subsidy provision into the contract on this project, even though it had been removed from the bill. I felt a bit misled. But I also felt fortunate Bob and Jamie have taken the time to keep KABATA honest.
By the way. The company that projected there will be enough toll traffic to pay for this bridge has a history of overstating traffic figures. They did so when helping promote the Whittier Tunnel, which the state now loses money on. And they’ve done that on other projects, according to at least one study.
So, whatever your opinion is on this project, beware. The subsidy provision you’re on the hook for isn’t in the bill anymore. But KABATA intends to stick it to you in the contract – something they should have admitted while I cross-examined them with Bob and Jamie’s help.
As always, call if you have any questions.