POINT MACKENZIE -- The state of Alaska paid nine farmers more than $8 million to clear a path for the as-yet-unfinished 32-mile railroad line slated to cross Point MacKenzie farmlands en route from the Matanuska-Susitna Borough port to the Parks Highway.
The rates paid to the farmers in the railroad's path appear -- at least at first glance -- to vary widely, and run as high as as $115,120 per acre when calculated based on the land needed for the railroad.
The rail extension project aimed at bringing new industry to Port MacKenzie is about two-thirds complete, but still needs $121 million. Legislators facing a multibillion-dollar shortfall from low oil prices provided no new funding this past legislative session. Borough officials say there will be no new rail construction without new funding.
'Tremendous disparity'
The planned rail route crosses the 14,000-acre Point MacKenzie Agricultural Project on its way from Port MacKenzie to the Parks Highway north of Houston. The borough is building the line with the Alaska Railroad Corp., which will operate it. Money has come via state grants.
Along with the rail line, plans also call for a terminal reserve area described as a limited version of the railroad's Ship Creek operation, with sidings for mile-long trains to pull off the main corridor, maintenance and office buildings as well as crew quarters.
Progress on the rail project hinged on extensive right-of-way acquisitions where the rail corridor crosses private or Alaska Native corporation lands. The borough hired consultant HDR to broker land agreements.
Part of the high per-acre costs stem from the fact the borough had to buy three farms just to acquire enough land for the rail corridor, even though any tracks will occupy only a fraction of the land.
Land payments made to farmers between 2013 and spring 2015 varied from $10,000 for just three acres to more than $2.8 million to buy an entire 600-acre farm outright, though the project only needed 156 acres for the rail project, according to a borough land acquisition document. The cost of each acre needed for the rail corridor ran from $2,908 for that small parcel to $115,120, where the borough paid almost $1.4 million to acquire a 300-acre farm -- but needed just 12 acres for the right of way.
The per-farm breakdown and more than $8.2 million total payout didn't reach the public until borough officials presented it upon request during a June meeting of the Alaska Board of Agriculture and Conservation in Palmer.
"Two Point MacKenzie farmers, they just about hit the ceiling when they heard these numbers," said Ben Vanderweele, a Palmer farmer who chairs the seven-member board that promotes Alaska's agriculture industry. "Even as an outsider, it's totally unbelievable. There is tremendous disparity between the different values that they paid for certain larger farm acreages."
Fair value for unique farms
The borough official handling the acquisition said the property value calculations were fair, sound and based on established standards.
Brad Sworts, the borough's acting capital projects director, said a contractor negotiated with landowners using both state guidance and federal rules on right of way acquisition, which includes provisions to relocate landowners with primary residences on the property. Certified appraisers using uniform standards determined fair market value, Sworts said.
Each parcel was unique, he said, with differently valued improvements including wells, irrigation systems, acreage cleared of timber, buildings, specialized dairy equipment, fences or access roads. Some purchases were "sliver" parcels, while other properties ended up split by the rail corridor so the borough had to work out compensation for separating that portion from the main farm.
And some acquisitions involved entire farms.
The borough paid to acquire the entire 600-acre Hecker and Byler farms even though the right of way needed for the rail project was 156 acres.
Sworts said in an email that's because the right of way took enough of the farms that they "could no longer function at the same business level (at the same scale of operation) that the owner required."
The borough decided to buy the entire 300-acre Trytten farm though the project only need 12 acres because that was the only "practical way to clear the title issues," he said.
Condemning path across farm project
The rail project crosses state agricultural project lands, a $25 million attempt at state-subsidized dairy production that became one of Alaska's unsuccessful forays into large-scale agriculture. Farmers hacked a Midwestern landscape of fields and windrows from rolling birch forests. The project began in 1982; by 1991, all 19 farms had failed.
Today, farmers who acquired the land after that period say shallow soils make Point MacKenzie mostly a good place to grow timothy hay and livestock.
Agriculture covenants on the farms that the borough acquired for rail right of way limit activities to farm-related ones. Railroads don't fit that category. So the borough is now in state court, suing the Alaska Department of Natural Resources to remove the covenants.
That's the first time in Alaska such a tactic has been tried to clear farm-only restrictions, according to assistant state attorney general Robert McFarlane.
The state and borough agreed that the suit was necessary, officials on both sides say, but would need to agree on the value of the covenants should a judge approve the condemnation.
Room to grow
Several property owners involved in the acquisition said they thought the process was fair, though one said she was concerned about the lack of fencing to keep hunters off her family property.
One of the farms is owned by Lynn Gattis, a two-term state legislator who lives in Wasilla but farms hay at Point MacKenzie with her husband, retired pilot Richard Gattis.
The Gattises received $500,000 for the 50 acres the railroad plans to take, removing access to one of three tracts. That's about $11,000 an acre, the lower end of the per-acre payments.
Lynn Gattis said she was in session when "the wheeling and dealing and speaking to the borough happened" so her husband dealt with it. The couple was satisfied with the payment they received and didn't directly ask what others were getting, though word got out.
"My husband did say that some people got more, based on federal law," she said.
That was the case with Todd Hecker, whose 600-acre farm sits at the future terminal reserve area.The borough acquired 156 acres from him. He leaves behind a house, a barn and a working farm.
Hecker is spending the summer cutting hay on his old farm while clearing fields at his new one -- right across the road. The roughly $2.8 million Hecker got from the railroad project paid for the move, but also paid for his father's relocation off the property. He's spent the past year taking down trees and burning the new land.
"It's been a project to go from land that's cleared and planted to trees that are 50 foot tall," he said.
Hecker called dealing with borough contractor HDR "pretty straightforward" and dismissed grumbling at the state Board of Agriculture as a bid to preserve farmland at the expense of progress. He believes the rail project will generate jobs and opportunity.
"Where's the Valley going to grow, if it doesn't grow out this way?" he said.