Homer Alaska - Business

Story last updated at 6:51 PM on Wednesday, February 23, 2011

Lawmakers look at Susitna hydro plan

By Tim Bradner
Morris News Service - Alaska

Legislative committees in Juneau are dealing with a number of bills related to business finance and assistance. Two are targeted at small business lending and two others give the Alaska Industrial Development and Export Authority, the state development corporation, more flexibility in financing development projects.

Committee hearings also are under way on a number of high-profile infrastructure projects and changes in state laws needed to make them happen.

Of keen interest to lawmakers is the state's proposal to build a $4 billion, 300-megawatt hydroelectric project on the upper Susitna River north of Anchorage.

A larger Susitna hydro project was extensively studied in the 1980s, but did not move forward. The latest proposal is a scaled-down version.

Gov. Sean Parnell has included $65 million in his proposed Fiscal 2012 capital budget to do environmental and technical work for a hydro license application to the U.S. Federal Energy and Regulatory Commission.

A substantial amount of environmental and engineering work on the Susitna River dam was done earlier, but it needs to be updated.

The appropriation is just part of this, however. The governor also proposed an expansion of the authority of the Alaska Energy Authority, a state agency that now mainly administers energy programs, to build and own power generation projects. That proposal is in Senate Bill 42 and House Bill 103.

The bills were before the Resources committees in both the state House and Senate last week. They also must go to the Finance committees in both bodies.

If passed, the legislation would bring the AEA full circle to what it was in the 1970s and 1980s when the agency, then called the Alaska Power Authority, built a series of hydro projects in Southeast Alaska, Kodiak and Valdez as well as the Bradley Lake hydro facility near Homer.

Although legislators are burrowing into the details of the expansion of the AEA's authority there seems virtually no opposition to the proposal to renew work on the Susitna dam.

A transmission line would connect the dam to the existing Anchorage-Fairbanks electric Intertie, which "railbelt" utilities use to send power back and forth between Southcentral and Interior Alaska.

The AEA recently let a contract to Wxx to begin preliminary technical work on the project.

Another infrastructure project is encountering some stern questions from legislators, however.

Although the proposed Knik Arm Crossing project is proposed to be built and owned by an independent authority with construction financed by private funds, the Knik Arm Bridge and Toll Authority is asking for a $150 million state appropriation for a reserve fund to pay operations for the first two to three years until toll revenues are sufficient to cover costs.

Rep. Les Gara, D-Anchorage, has emerged as a critic of the project, and is questioning the authority's projections on use of the bridge and toll revenues.

"The bridge will not reduce commute time to Palmer and Wasilla. It will require an additional $378 million in costs to build approach bridges, a tunnel, a bridge expansion and highways to approach the bridge from both side," Gara said in a statement.

Gara released a statement from Bob French, a resident of Government Hill near the bridge site, which questioned the authority's estimates.

"You need 20,900 one-way trips a day at $5 apiece just to make the annual bond payments of $38.8 million per year. The current traffic to and from the (Mat-Su) valley is 29,000 trips a day and it is not a shorter trip to use the Knik Arm bridge unless you live west or south of Wasilla," French said in the statement.

To pay off debt incurred for construction, the bridge authority will have to raise the toll to the $15 range or substantially extend the payback period, which is now estimated at 37.5 years, Gara said.

The bridge authority argues that population of the Matanuska-Susitna Borough will continue to rise and traffic to and from Anchorage will rise with it.

Local officials have said that residential areas south of Wasilla, the area Gara said could enjoy a shorter commute with a bridge, have approximately doubled in the past 10 years and will continue to grow.

The bridge authority also says that once the Knik Arm bridge is paid for toll revenues will exceed operating costs and the bridge will become a source of revenue for roads and other transportation projects in the state.

Business financing bills in the Legislature include a proposal from the governor to establish a micro-loan program in the Department of Commerce, which is in Senate Bill 67, and a similar bill by Sen. Bill Wielechowski, D-Anchorage, which is Senate Bill 34.

The Senate Labor and Commerce has voted Wielechowski's bill out of committee, sending it on to the Finance committee, but is still working on the governor's micro-loans bill.

Wielechowski's SB 34 would have small business loans made by the state Dept. of Commerce and has a ceiling of $50,000 per loan or $100,000 per couple. A loan above $35,000 requires that the applicant have been turned down by a bank for some reason, according to the latest version of the bill.

Parnell's Senate Bill 67, and House Bill 121, is essentially a state version of an existing Small Business Administration small loan program that is not done in Alaska because banks in the state do not meet technical criteria set by SBA. The state's terms for the program would allow Alaska banks to participate.

The legislation also sets up special loan programs for mariculture developers and sports fish charter operators. The House version is in the House Fisheries committee. The Senate bill was voted out of Senate Labor and Commerce committee to the Finance committee.

Another business-related bill is House Bill 119, sponsored by the governor, which gives the Alaska Industrial Development and Export Authority more flexibility in making economic development investments.

Legislation passed last year enables AIDEA, the state's development financing corporation, to invest in and own a part of a project, with private partners, rather than having to own 100 percent of project, which was the case previously.

HB 119 makes a number of clarifications, AIDEA executive director Ted Leonard said. Among other things it gives the authority explicit permission to invest in Limited Liability Companies, or LLCs, which is a common way private firms structure a business venture.

AIDEA's governing statute appears to preclude LLC investments and state attorneys have advised a clarification in the law, Leonard said. Being able to invest in LLCs will open up more opportunities for the authority to partner with private companies, he said.

The bill also gives AIDEA the authority to partner with firms or public entitles, like municipalities, in developing projects that will be leased and used by federal agencies. Leasing arrangements are being used more frequently by the federal government, and having this ability gives the state a way to help anchor federal projects in the state.

The bill was voted out of the House Economic Development, Trade and Tourism committee to the House Finance committee on Feb. 11.

Another proposal, in House Bill 120 and Senate Bill 66, gives AIDEA expanded authority to participate in the federal "New Markets Tax Credit" program, a federal program were tax credits are sold by private investors to develop projects in low-income areas.

The House bill is in the Economic Development, Trade and Tourism committee; the Senate version is in the Senate Labor and Commerce Committee.

Tim Bradner is a reporter for the Alaska Journal of Commerce.