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Fair weather predicted for Fairbanks.

The military buildup on Fort Wainwright that has been credited with cushioning Fairbanks from the worst effects of Alaska's recession - and, according to some, letting this town get back on its feet - is winding down. The deployment of the Sixth Light Infantry Division, relocating here from Anchorage, is almost complete.

Numerous indicators point to a stabilized Fairbanks economy and provide optimism that 1991 will prove overall to be an even better year than 1990. According to figures compiled by the Alaska Department of Labor, the Fairbanks economy grew nearly 4 percent in 1989, based on statistics tracking non-agricultural jobs. That trend continued this year, although to a lesser degree: Numbers so far confirm the 3 percent growth predicted earlier.

In 1991, Fairbanks is expected to experience continuing but seemingly stunted growth; the increase is pegged at a mere 1. 1 percent. Only the construction industry is forecast to lose ground, according to a review of Fairbanks' prospects by labor department economist Holly Stinson in a recent issue of Alaska Economic Trends. But that decline will be significant enough to offset progress in most other categories.

One reason for the shrinking construction picture is that building on Fort Wainwright, in conjunction with the buildup of the Sixth Light Infantry Division over the past three years, is slowing down after several exceptionally busy seasons. That activity peaked in 1988 and 1989; projects exceeded $100 million both years.

This year, post officials listed close to $90 million in projects. For 1991, that figure is expected to plunge to $35 million. The good news is that although construction will fall off, the injection of money from Fort Wainwright, through payroll and contractual services, should total close to $82 million in 1991.

While significantly less than the $103 million tallied in 1989, and down from the $99 million estimate for this year, the 1991 contribution will still account for about 9 percent of the money flowing into the local economy. Beginning in 1992, totals are expected to level off between $70 million and $75 million.

Military spending at Eielson Air Force Base also makes a sizable contribution to the local economy. The Air Force pumped almost $55.7 million into the community in 1989, with similar totals expected for 1990 and next year.

In addition, the base hopes to begin work on a new vehicle maintenance facility and a new supply complex within the next year, as well as to upgrade its sewage treatment plant. Projected costs aren't available yet.

Some predict Eielson's personnel roster could grow in the next year or two, particularly if politics dictate redeployment of forces from overseas areas. According to the former commander of the 343rd Tactical Fighter Wing, Col. David Dingee, it is one of several bases that has facilities to support more aircraft and air-crew training opportunities.

Air Force officials say there are no immediate plans for expansion at the base, although ranks could swell for the 168th Air Refueling Squadron, Eielson's tenant Alaska Air National Guard unit. According to spokesman Maj. Jim Alonzo, the Department of Defense recently upped the squadron's authorization to 704 personnel slots, only half of which are filled to date.

The majority of the remaining openings are for part-time guardsmen ("weekend warriors"), but filling them all could boost the squadron's annual $12 million payroll by another $3 million to $5 million. According to Alonzo, who hopes to see a full complement of guardsmen in place as soon as possible, recruiters are working overtime to make that happen.

The military's economic impact in the Fairbanks area, all branches considered, is truly significant. To wit, close to 11 percent of the borough's population is active-duty military, compared to the national average of less than 1 percent. Counting military dependents, retirees and guardsmen, the percentage verges on a phenomenal 30 percent.

Mining Momentum. While economic repercussions from the Army's buildup on Fort Wainwright are fading and growth on Eielson is indefinite, other industries continue to gain momentum. Mining is one of those.

Statewide, a 14 percent gain in mining employment is anticipated. That won't mean a boom in terms of the number of new jobs available next year, but it does signal an optimistic trend, according to Roger Burggraff, vice chairman of the Fairbanks chapter of the Alaska Miners Association.

How aggressive the mining industry will be next year will depend on whether the state government will advocate for miners where environmental regulations are concerned, he says. (Mining) has tremendous potential for putting people to work,' Burggraff adds. A lot will depend on the political climate of the state whether the state is going to start asserting itself"

One mining venture with long-term promise for the area is Fairbanks Gold Ltd.'s Fort Knox project, just 12 miles northeast of town. This year, using conventional open-pit mining techniques, the company is extracting bulk samples from a 5,000- foot by 1,700-foot area on Gilmore Dome.

In October, the company announced it had acquired 280 additional acres in mining claims adjacent to Fort Knox, increasing its territory in the Fairbanks gold district by 50 percent. Fairbanks Gold has yet to develop a mining plan for Fort Knox, but state mining officials believe the project will prove economically viable. A feasibility study, slated for 1991 completion, will tell.

In the meantime, the company is in the midst of a $9.3 million development program that runs through March 1991. Eventually, Fairbanks Gold hopes to establish a $100 million mine that would take about 300 people and 18 months to build.

Employing as many as 200 people on a year-round basis as early as 1993, up to 30,000 tons of ore would be ground and leached daily, according to Eric Friedland, company chairman and chief executive officer. Producing as much as 500,000 ounces of gold per year -based on samples obtained to date - it would rank as one of the top 10 mines in the nation in terms of gold production.

For perspective: Gold outputs predicted for the Alaska-Juneau and Kensington mines in Southeast, should the mines begin production, are 370,000 and 200,000 ounces per year, respectively.

Tourist Traffic. Tourism also may turn out to be a wild card for Fairbanks in the coming year. The number of visitors to Fairbanks, as to other parts of Alaska, has been steadily increasing for the past three summers. According to Janet Halvarson, executive director of the Fairbanks Convention and Visitors Bureau, winter tourism, especially, is picking up.

She says 10,000 Pacific Rim visitors are expected this winter, nearly a 20 percent increase over last winter. That estimate is based on bookings to date by local hotels, motels and tour companies. Halvarson explains the biggest increase will be in the number of Japanese, a people who have shown a fascination with the northern lights and a distinct interest in the university's research facilities.

Altogether, Fairbanks is likely to have hosted close to 620,000 visitors in calendar year 1990. The sum of $1.13 million in hotel/motel bed taxes collected by the city through August suggests it's been at least 8 percent busier this year than last. Contributing to the increase has been a jump in the number of conventioneers to Fairbanks -the bureau had counted 61,052 more "delegate days" through September of this year, up more than 25 percent over a year earlier.

Both Halvarson and Leslye Korvola, director of the borough's Community Research Center, acknowledge that spiraling oil prices could easily have a detrimental effect on tourism in Alaska in general and in Fairbanks in particular. Then again, they may not.

There are two factors looming," Korvola notes. 'Oil prices are high, and that has a negative impact; air fares are up and (the price on gasoline is up. On the other hand, Alaska has not been as badly hit (as elsewhere). It's not as expensive as Europe.' Travelers, stymied by those costs, could decide to come to Alaska instead.

One company banking on a continuing increase in visitors is Princess Tours, which has laid plans for a new 200-room hotel. Site work, on Alaska Railroad property alongside the Chena River, could begin as early as next spring, pending final approval of the project from the railroad's board of directors. The tour company hopes to open hotel doors sometime in 1992.

Building Prospects. Construction of a new hotel is just one of several projects that will benefit Fairbanks next year. Optimism regarding Fairbanks' economic future hasn't been lost on retailers, several of which have indicated an $ interest in expanding their local operations. Among them is Portland-based Fred Meyer Inc., which began work this summer on a 180,000-square-foot multidepartment store, expected to be completed before Christmas 1991. The store, Fred Meyer's second here, could employ close to 400 people, company officials say.

Likewise, Carrs Foodland announced it plans to build a second grocery store in Fairbanks within two years, although a site has yet to be selected. And the word is out that Sears Roebuck and Co., which currently runs a small retail store and catalog counter in town, would like to expand as well.

Along with commercial building ventures, home building in Fairbanks seems to be enjoying a revival. Although most of the work initiated this year has been on custom owner-builder projects, contractors have also been dabbling, once again, in 'spec building.'

It's a daring move, admits local contractor Randy Wakefield, but he believes Fairbanks is ready for it. Wakefield, also president of the Alaska State Homebuilders Association, built one such home this year. The $110,000, three-bedroom, two-story home, about 11 miles out of town, was sold by the time Wakefield had it framed in.

Bill Simon, president of Mount McKinley Mutual Savings Bank in Fairbanks, is among those who see great things on the home-building horizon. He predicts home construction will increase next year and expects his bank, which made close to $2 million in new construction loans this year, to as much as double those loans next year.

We can really see the indicators out there. The housing market in this area is going to turn around," says Simon. "We're going to be in that same cycle that we were back in the 80s, when interest rates were sky high and there was a recession Outside.'

Records kept by the Greater Fairbanks Board of Realtors, meanwhile, show that sales of new and existing homes are up, although average selling prices are down slightly. Through mid-September this year, for example, the 170 three-bedroom homes sold in the Fairbanks area went for an average of $78,000. Seventy four-bedroom homes also had been sold, for an average of $92,900.

By comparison, year-to-date averages through September 1989 showed 134 three-bedroom homes selling for an average of $78,537, and 66 four-bedroom homes for an average of $93,992.

The Alaska Department of Transportation and Public Facilities is also a major player in the construction picture. It awarded $17.8 million in contracts in the local area through August of this year, with many of those projects slated to carry into 1991. That compares to $13.7 million for the same period last year.

Another kind of construction project that is expected to benefit Fairbanks considerably in 1991 is ongoing repair work on the trans-Alaska pipeline. According to spokeswoman Marnie Isaacs, Alyeska Pipeline Service Co. expects to spend between $270 million and $300 million on corrosion repair work next year.

Of that, $115 million has been specifically earmarked to pay for replacement of a nine-mile section of pipe in the Atigun flood plain next summer. Although the number of jobs resulting will depend on contract terms, many likely will go to Fairbanks union workers.

Learning Curves. While city and borough government officials project no significant increase in employment for 1991, the Fairbanks North Star Borough School District is another story. Ten days into the 1990-91 school year, with new students still arriving, officials counted 14,912 youths enrolled, 462 more than projected for the year and 660 more than the 14,252 attending the year before. Teaching and support positions have been added to handle the student increase.

School administrators and borough analysts alike theorize that while some of this year's influx, like last year's, can be attributed to the building military presence on Fort Wainwright, a portion of the added enrollment is the result of a secondary wave of arrivals. Those are families who moved into town on the heels of the Army in pursuit of jobs that opened up to accommodate the military in the way of construction, goods and services.

While not on the books for startup in 1991, at least two other projects being considered could have significant impact on Fairbanks in the long run. Menasha Corp. of Wisconsin, after spending a year of looking around' the Interior at both hardwood and conifer timber resources, has launched a full-scale feasibility study to determine whether to build a mill in the Interior.

The company announced it would open a Fairbanks office in October and make a decision within a year. If Menasha does decide to build, it would likely begin with a chopping operation, employing as many as 60 people to start.

Also, Mapco Alaska Petroleum is considering construction of a 12-inch, 270-mile, $100 million gasoline pipeline between its North Pole refinery and Anchorage.

The line's installation could mean a year of construction work for 2OO people, eventually creating 2O permanent jobs. But obtaining necessary permits might take up to two years.

The long-term outlook also seems to be brightening for those in small business and for those contemplating a new enterprise. That's partly because the local community is strong enough, once again, to sustain them.

But according to Cindy Marquette, director of the borough's Economic Development Center, credit also must go to renewed dedication to the work ethic and competitive spirit among entrepreneurs. They're putting more energy into planning and time into developing strong business plans that we haven't seen in the past,' she says.

Charlie Dexter, director of the University of Alaska Fairbanks' Small Business Development Center, echoes Marquette's sentiments. A record number of prospective entrepreneurs have come to the center for assistance this year, he says. More often than not, they have done their homework.

Building an economy based on small business and the entrepreneurial spirit - rather than on big business and state spending - will help insulate Fairbanks against a recession, Marquette believes. We need to lower our vulnerability to the boom and bust' cycle,' she notes.

Probably the most uncertain variable in the economic formula for Fairbanks, and for the rest of Alaska, is the extent to which higher oil prices - if they endure - will affect state revenues.

If fat coffers entice the state into lavish spending, as they did during the pipeline boom days, it could spell disaster, the borough's Korvola reminds. That's because once the Mideast crisis is resolved, there likely will be a glut of oil on the market, and when North Slope crude sells cheap, revenues dry up.

Historically, the state has not shown a great deal of commitment to saving for a rainy day,' she says. Who knows? Maybe this time."
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Title Annotation:Economic Review & Forecast; Fairbanks, Alaska
Author:Martin, Ingrid
Publication:Alaska Business Monthly
Date:Dec 1, 1990
Previous Article:Anchorage's recession recovery is slow ... but real.
Next Article:Southeast's economy rallies.

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