Gov. Dunleavy wants to link $175 million in funding for Anchorage and Mat-Su ports. It may be a tough sell.

Gov. Mike Dunleavy is proposing a funding injection to shore up Anchorage’s bustling Port of Alaska but linked with the nearly idle port 5 miles across Knik Arm in the governor’s home base of Mat-Su.

The Dunleavy administration is suggesting the Municipality of Anchorage and Matanuska-Susitna Borough look at forming a new regional port authority to decide how to spend $175 million in general obligation bond funds on repairs needed at both.

The so-called Knik Arm Port Infrastructure project currently makes up nearly two-thirds of a larger statewide $325.1 million GO bond package Dunleavy included in a state budget proposal unveiled in December. Any package faces revision and approval by the Legislature before going before voters in November.

The early stage port funding proposal is already hitting challenges: no port authority exists, there are no immediate plans for Anchorage and Mat-Su assemblies to discuss it, and the general idea is already raising questions among key legislators.

The Dunleavy administration simply met with officials from the Mat-Su Borough and the Municipality of Anchorage to encourage them to explore the viability of a port authority, Jeff Turner, the governor’s spokesman, said in an email, adding that the ultimate decision is up to the borough and municipality.

But it’s not entirely clear how the Port of Alaska would benefit from the relationship, numerous people interviewed for this story said.

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Mayor Dave Bronson has no immediate plans to bring the port authority idea before the assembly, though he may in the future, Bronson’s spokesman Corey Allen Young said Friday.

The mayor is waiting on more information from the governor’s office, Young said.

“Obviously he wants to do due diligence and have a study done,” he said. “He wants to look at all the options before diving into that with the assembly. We don’t know what it even means yet.”

Anchorage assembly leaders say a reporter’s call Friday was the first they heard about the proposal. The assembly had not been briefed on the concept as of Friday, according to chair Suzanne LaFrance.

The overall bond package is part of early budget discussions in Juneau. Legislators last week raised questions about passing a large bond package — and taking on significant debt — when federal infrastructure funds are expected to start flowing to Alaska.

More specifically, the idea of a Knik Arm Port centered around a regional authority that doesn’t yet exist is raising red flags even among members of the Mat-Su caucus.

State Sen. Mike Shower, a Wasilla Republican and vice-chair of the Senate Transportation Committee, balked at the governor’s port funding mechanism at a committee hearing Thursday.

A port authority that doesn’t exist can’t spend money, Shower said, adding the governor’s funding idea also runs the risk of increasing existing tension over funding between the two ports.

“This isn’t a good idea, guys,” he said. “We need something different than this.”

Both ports need help. Anchorage’s handles nearly all the cargo shipped to Alaska but is in dire need of repair. In Mat-Su, the port sees no large vessel traffic and in the past two years ran $400,000 in the red.

According to budget documents, work funded by the port package could include Port of Alaska repair and reconstruction; facilities to enhance passenger service, including cruise ship berthing and to provide shore-based services to visitors; Port MacKenzie development and upgrades; and work on a rail extension from the Alaska Railroad mainline to Port MacKenzie.

The proposal does not include a specific distribution between the ports but rather encourages both to coordinate infrastructure needs instead of addressing them separately, according to legislative testimony from Neil Steininger, director of the state Office of Management and Budget.

Mat-Su borough officials say they met with the governor’s office and discussed the regional port idea with the borough assembly during a special meeting earlier this month.

The assembly expressed interest in exploring the concept, which borough manager Mike Brown characterized as a way to better leverage future federal infrastructure dollars by presenting a unified front instead of two competing entities.

“For the borough, Port MacKenzie has been underperforming for years. That’s not a secret. We want to see some opportunities there,” Brown said.

The Mat-Su port doesn’t have revenue or activity “anywhere near” Anchorage’s but does have some potentially valuable assets like real estate, he said. “I think a larger conversation around that could be useful. I think this idea we’re trying to get away from is that it’s competition, or that it’s one taking away from the other.”

The future of the long-struggling Mat-Su port has been a source of scrutiny for years. A rail-line extension meant to drive up business stalled more than five years ago and now remains nearly $200 million short of completion. A ferry meant to transit between the port and Anchorage was finally sold in 2016 after never making a single trip — and costing more than $12 million.

The Port of Alaska, the state’s main conduit for essential supplies distributed across the state, has been badly in need of repairs and design upgrades for decades, partly due to extreme Cook Inlet tidal conditions that pummel pilings, leading to corrosion on crucial metal supports.

The municipality is already requesting $600 million from the Legislature and approved a $165 million revenue bond earlier this month, according to Young.

Port MacKenzie was constructed in 1999 to specialize in resource exports that failed to materialize. Just 14 large vessels have called since 2002. About 250 barges have docked in that time, bringing everything from vehicles and heavy equipment to lumber and steel and providing most of the port’s current revenue, according to port director Therese Dolan said.

Like Anchorage’s, the Mat-Su port faces constant maintenance needs from harsh tidal conditions. An earthquake-damaged conveyor built for a long-gone wood chip venture is now the borough’s responsibility.

The Dunleavy administration is interested in forming a Knik Arm port authority because it could establish “coordination in planning and operations that improve the efficiency of both ports,” Turner said in an email Friday.

“If the Port of Alaska and Port MacKenzie had a joint management plan in place it could result in a more reliable flow of goods into Alaska, including greater food security, especially if a natural disaster were to happen,” he also wrote.

Pressed about concerns over the lack of an established port authority, he said the governor is simply encouraging the two sides to consider the viability of that structure.

If the Legislature approves the bond and it is approved by voters, the money could still be appropriated with or without a port authority, Turner said.

The port proposal, as well as the larger bond package, is just starting to move through the legislative process in Juneau.

Tally Teal, chief of staff for House Finance Commitee co-chair Rep. Kelly Merrick, R-Eagle River, said the port proposal has raised some early concerns. The committee will be working with the Office of Management and Budget to “figure out the details,” Teal said, as part of the larger budget review.