It’s different in Alaska

In a recent New York industry forum dedicated to the Knik Arm Crossing – a proposed $715 million public-private partnership to construct a bridge and associated roads near Anchorage, Alaska – Republican State Senator Linda Menard told the story of her arrival in Anchorage in 1968.

Menard said she’d come to the city as a young wife and immediately loved her new home. But her husband insisted that the young couple buy a homestead outside of Anchorage in nearby Wasilla.

“I agreed to that because he said ‘Don’t worry Linda, there are plans, there’s been some studies done by [consultants] Wilbur Smith…that there is going to be a bridge and it’s only like a mile and a half then from Anchorage. You can still play bridge with your friends over there’.”

“You know how many years ago that is,” Menard said. In fact, it was more than 40 years ago – and only now, after a few twists and turns, does the project seem to be moving forward.

Delayed by whales

Things have not been straightforward. The Knik Arm Bridge and Toll Authority (KABATA), a government agency created in 2003 for the express purpose of constructing the Knik Arm Crossing, launched a tender for the project in 2006. But that process got delayed due to concerns about an endangered species of whale living in the inlet that the bridge would span.

While the process stalled, market conditions changed and KABATA decided to re-launch the project tender earlier this year under an availability payment structure, meaning that the prospective private partner would receive regular government payments in exchange for making the road available in good condition, rather than collecting toll revenues.

Availability payments are more common in Europe and Canada than in the US, where only a handful of deals have been pursued under that structure. Moreover, one of those deals – the Presidio Parkway, a Hochtief- and Meridiam-backed project that includes construction of a new access route to San Francisco’s Golden Gate Bridge – has encountered legal challenges from a public employees’ union which claims the availability payment structure is not permitted under California’s public-private partnership (PPP) statute.

But KABATA officials are confident that Alaska’s first availability-based PPP will not face similar lawsuits. Kevin Hemenway, chief financial officer for KABATA, says Alaska’s law is clear in establishing KABATA’s authority to enter into different PPP structures.

Hemenway also says the political climate in Alaska is different. 

“I don’t think we have the same issues here,” Hemenway says. “Any legal challenge is more likely to be an environmental issue simply because Alaska is likely to be the poster child for environmental causes,” he added.

Labour support

Alaska also has a relatively small population – about 700,000 according to data from the US Census Bureau – and Hemenway says the project is forecast to create 5,000 jobs, a substantial number in relation to the size of the workforce. For that reason, the project is likely to be supported by labour rather than challenged by it, according to Hemenway.

“It’s not like anybody’s job is being taken away,” he adds.

Other than the Knik Arm Crossing and the Presidio Parkway projects, only three other deals in the US have been supported by availability payments: Florida’s $1.68 billion I-595 corridor improvement project; the $903 million Port of Miami Tunnel project; and the Eagle transit rail project in Denver, Colorado.