The Municipality of Anchorage is trying to fix a funding problem that has threatened to halt progress on the huge modernization project underway at the Don Young Port of Alaska.
An unexpected delay with a critical environmental review has left the city burning through cash under a $97.5 million construction contract as crews and equipment idle at the facility, with tens of millions of dollars in federal grant funds at risk and the short summer construction season rapidly approaching.
The city was awarded $68.7 million federal grant in 2022 from the U.S. Department of Transportation’s Maritime Administration, or MARAD. At the time, the money was touted as a win by Alaska Sens. Lisa Murkowski and Dan Sullivan and welcomed by Mayor Dave Bronson. City officials have planned to use the money to pay for a critical piece of the port modernization program, North Extension Stabilization phase one, which was slated to begin late last month.
Contractors and equipment and have been staged on site and ready for weeks — starting at a cost of about $100,000 per day for the idle resources, according to a city memorandum — but if work begins before the environmental review is finished, the city forfeits the federal grant.
In order to keep the port modernization project on schedule, it’s possible the city could choose to walk away from the federal grant — and potentially lose tens of millions in matching funding from the state — if the required approvals from the Maritime Administration don’t come through in the next few weeks.
On Tuesday, the Anchorage Assembly unanimously approved a contingency plan put forward by Bronson’s administration that would allow the city to make up the budget shortfall using bonds, which would be repaid through surcharges.
“This just places a tool in our toolbox of revenue bonds to ensure that we have the money necessary to move forward with this summer’s construction,” Assembly Vice Chair Meg Zaletel said. “We expect this will be covered by grant funding but it’s always great to have a contingency plan, especially because this construction season is so important to the rest of the sequencing of the port.”
It’s not clear who, or what, is to blame for the current status. Alaska officials have declined to point fingers, although in a memorandum the Bronson administration suggested MARAD suddenly shifted its earlier expectations for the finalization of the environmental assessment. For its part, the federal agency has not answered questions about what, exactly, the city’s documentation failed to fulfill.
It’s also not clear exactly when the city would face a decision whether to forfeit the federal grant and proceed without MARAD’s environmental review complete.
The mayor’s office did not respond to a question about when the city must begin construction or lose the season.
Port officials have estimated that the total price tag of the modernization project is somewhere between $1.8 billion and $2.2 billion.
For years, city officials in Anchorage had asked state and federal lawmakers to help fund repairs.
The Maritime Administration awarded the grant to Anchorage as part of a much larger federal spending initiative under the 2021 Infrastructure Investment and Jobs Act. Alaska’s federal delegation at the time — Murkowski and Sullivan, and the late Rep. Don Young — lauded the bill’s passage and advocated for the grant.
The current phase of the project will stabilize the terrain in the port’s North Extension directly adjacent to the shipping lane. City officials say it’s a key step in the much larger overhaul of the port’s cargo terminals.
The phase “has got to get done in order for us to move into next summer’s construction on the cargo terminals,” Zaletel said.
The Assembly’s vote follows a visit from MARAD officials to the port last week.
Port Director Steve Ribuffo said the city is working closely with MARAD to complete the assessment as soon as possible, and that it’s likely the city won’t forfeit the grant.
“If we can get the show on the road within the next few weeks, then we’re pretty optimistic that everything will get done this season that needed to get done this season,” Ribuffo said in a May 3 interview.
Sens. Murkowski and Sullivan and Rep. Mary Peltola have not responded to requests for comment on the situation.
Sense of urgency
The port’s infrastructure is failing, threatening a critical piece of the state’s supply chain.
Around 90% of Alaskans rely on goods shipped through the port, which handles about 75% of the state’s inbound cargo, including goods such as food, fuel, construction supplies, vehicles and tools.
“The sense of urgency comes from being able to put in place as fast as possible at least one cargo terminal that we know we’ve designed and will construct to withstand a pretty significant earthquake here,” Ribuffo said.
An earthquake, for example, could liquify the terrain in the North Extension, which would likely flow into the existing dock and cause it to fail.
The landslide work must take place before waterside work on the first cargo terminal can start, Ribuffo said. As scheduled, “2026 is when we start driving pile and working in the water,” he said.
According to an April 23 memorandum from Bronson’s administration, city staff and Jacobs Engineering, its project management firm, had been “under the understanding that the environmental assessment was literally complete” and that it would soon be provided the necessary approval.
But that didn’t happen. Earlier in April, MARAD staff “unexpectedly presented the Municipality with a long list of questions” related to the environmental assessment, the memorandum said.
“If the contractor does not commence work, the Municipality will be liable for payment to the contractor for idle workers and equipment. This liability begins at approximately $100,000 per day and escalates as additional workers and equipment arrives at the site,” the administration said in the memorandum.
“Even more important, is the fact that delaying the start of the project due to the time and effort required to respond to these new, unexpected questions may very well result in the loss of an entire construction season,” the administration said.
Ribuffo said while costs may be racking up, contingency is built into the construction contract for such unforeseen delays.
MARAD staff last week visited Anchorage and met with city and port officials and toured the site.
In a statement May 3, a spokesman for MARAD said it couldn’t say when it expects the review to be complete, but that its staff are working on a process that will allow the port to start construction as soon as the assessment is approved.
“We are working hard to support the Port of Alaska in moving this project along; however it is too early in the process to provide a definitive response for this question. Ultimately, it will depend on how quickly the Port can complete” the environmental assessment, said MARAD spokesman T.V. Johnson.
“Once the Port prepares its updates to the current draft of the EA, they will return it to MARAD. MARAD will work through a review of the updated EA as quickly as possible so that we can properly support the Port’s effort to advance the EA. MARAD is committed to completing this process as soon as possible,” Johnson said.
On Wednesday, Johnson declined to answer further questions about the current status of the assessment and referred the Daily News to the city for questions.
City staff sent amended environmental review documents to MARAD on May 3, Ribuffo said Wednesday. It’s unclear exactly when the city will receive notice from MARAD that the review is finished, he said.
“Now we’re in this situation where no news is good news. If they’re not coming back to us with another raft of questions, then we have gone a long way to satisfy what their concerns were initially. So we’re kind of holding out that that is the case,” he said.
Federal environmental assessments are cumbersome processes that generally span well over a year. The city in its application for the grant scheduled 19 months to complete the review, aiming to finish by last October.
For now, the city has some wiggle room in left in the season, Ribuffo said.
But there are many factors to consider, including other potential causes for delays, such as late delivery of supplies, bad weather, and the frequency of beluga whales feeding in the area, he said.
Complex history
The situation adds another wrinkle to a project that has been dogged with problems, including mismanagement that resulted in a several years-long lawsuit between the city and MARAD.
The federal agency oversaw a failed expansion of the port in the early and mid-2000s that cost hundreds of millions in public money. The need to stabilize the port’s north extension results directly from the failed project.
The municipality sued MARAD and its subcontractors and won. In a 2022 judgment a federal judge awarded the city $367.4 million.
MARAD has since appealed to the U.S. Court of Appeals for the Federal Circuit and in March, a panel of judges heard arguments in the case.
The city is awaiting a ruling and there is no set timeline for a decision, Ribuffo said. The panel could uphold the 2022 judgment and full award to the city, or change the amount of the award, or side with MARAD and nix the previous ruling entirely.
The lawsuit has nothing to do with the grant delay, he said.
City leaders have long pushed for financial help from the state and federal governments. But the project’s reputation of mismanagement, coupled with political resistance toward spending state money on what many have viewed as an Anchorage-specific problem, hindered past requests for port funding.
The tides appeared to have changed in 2022 when the state included $200 million in the capital budget to help rebuild the port, and the city was awarded the federal grant a few months later.
The city aimed to secure federal and state help as a way to defray surcharges that will help pay for the modernization program; fees that ultimately are passed on to consumers of the goods that pass through the port.
The $1.2 trillion infrastructure package is slated to bring billions to Alaska for improvements to ports, the state’s aging highways and bridges, its ferry system and for increased internet access.
The downside, Ribuffo said, is that the workload for MARAD has dramatically increased as communities across the country seek federal dollars and simultaneously undergo similar review processes.
“And the pressure is on. Congressional delegations all around the country are putting pressure on MARAD and the Federal Highway Administration and Federal Rail Administration to get these things done as quickly as possible. So I don’t envy them the position that they’re in either,” Ribuffo said.
“We’re both moving at the speed of government. So patience is necessary,” he added.
Reporter Iris Samuels contributed.