Alaska Railroad runs on dwindling revenue

It seems everyone in Alaska loves the Alaska Railroad. The blue and yellow engines and the "Vista Dome" passenger cars excite a sense of romance for many people. Hearing the train whistle (two longs, a short and another long for normal operation) and seeing those huge engines (a 4000-plus ID number indicates 4,000 horsepower) and getting a wave from the engineer have made many a young person's afternoon. Countless Alaskans have joined summer tourists for a train ride.

Alaskans are justified in their pride for the railroad, which seems to be efficiently and responsibly run. But the ARR may be falling on hard times. According to its annual report, net income is down from $14.3 million in 2013 to a projected $9.3 million for 2016. Freight revenue (43 percent of total revenue in 2015) has been declining because of canceled contracts and a slowing state economy. Passenger traffic is up some, but in 2015 it was only 17 percent of total revenue. A quarter of annual revenue comes from federal grants. As the state continues to absorb the blow of slumped oil prices, so will the ARR need to adjust.

It's something of a miracle there's any Alaska Railroad at all.

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It's difficult to convey the national euphoria for Alaska at the ARR's creation. The gold rush era, following the great Klondike strike in 1896, generated the impression that Alaska was an investor's sure thing. Alaska's population jumped six-fold from 1890, to 30,000 non-Natives in 1900 (and 30,000 Natives), almost all of the increase coming after 1896. Gold seemed to flow from Alaska like manna from Heaven. Soon, J.P. Morgan and the Guggenheim mining combine committed to developing the rich copper deposit in the Wrangell Mountains, and made plans for other mining ventures and a transportation network throughout Alaska, beginning with their Copper River and Northwestern Railway (notice that "Northwestern"; that would have been toward the Yukon River and Nome).

The 1909 Alaska Yukon Pacific Exposition in Seattle manifested this enthusiasm for Alaska. Sponsored by the Seattle Chamber of Commerce's Alaska Bureau, The Seattle Times, the state of Washington and King County, this mini-World's Fair promoted Alaska as the investment bonanza of the century. With exhibits as well from Canada and Japan, the fair showcased all of Alaska's resources the sponsors thought could be commodified (turned into consumer goods): gold, copper, other minerals, furs, fish, forests, coal. Basically a showy sales pitch, the affair was a major success.

And, briefly, it worked. Building on the Alaska mania, and citing the population figures for 1910, which counted again 30,000 non-Natives in the territory, Alaska delegate James Wickersham persuaded Congress that Alaska needed a people's railroad to compete with the one planned by the Guggenheim trust.

The government line was expensive. By the time construction was complete, it had cost somewhere between a tenth and a fifth of the total federal budget (once again giving the lie to the persistent myth that the federal government neglected Alaska).  Expectations were high that the railroad would further spur investment and population. While it was being built, Wickersham met with leaders of Athabascan Indians along the route to warn them that a flood of white men would come because of the railroad and take over all their land.

But that didn't happen; few new investors took the gamble and the non-Native population stayed the same. Even before the road went into operation, planners realized Alaska had no commercial agricultural potential (because of economies of scale), that Matanuska coal was substandard and that there wouldn't be sufficient mining investment for support. Gold production peaked in 1906.

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The government decided to operate the railroad nonetheless, as a people's service. But it couldn't turn a profit, and in the 1930s a congressional investigation concluded that the whole enterprise was a fool's errand.

Only when it hauled freight for the military during World War II did the road finally show a profit. But when the state bought it in 1985 for $22.3 million, $70 million was needed for repairs and deferred maintenance. Continuing state investment has produced today's showcase railroad.

It will likely survive the current doldrums; it always has. But it could become a romantic indulgence, reminiscent of those earlier days.

Steve Haycox is professor emeritus of history at the University of Alaska Anchorage.

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