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Consequential Kodiak.

Consequential Kodiak

Service, depth and reliability pave the way for Mammoth of Alaska Inc.'s success. According to Rich Whitbeck, vice president and general manager of the trucking firm, those ideals were the cornerstone on which this Anchorage-based company was founded nearly 16 years ago. Today they continue to drive Mammoth - one of the largest and busiest trucking firms in the state.

"Mammoth is a professional company," Whitbeck says. "Every one of our drivers is an experienced professional committed to serving our customers."

One of few carriers serving the Port of Anchorage, Mammoth's commitment to customers ensures rapid and efficient response to their hauling needs. "When a customer calls and has a trailer to move, it means money to that customer if the trailer is moved promptly. And we move it promptly," Whitbeck explains.

Particularly in seafood and oil field freight transportation, Mammoth is recognized as a leader. Operating one of the most modern fleets in the state, Mammoth last year invested more than $1 million in improvements to its vehicles and in a state-of-the-art computer program that tracks vehicles and aids the company in quickly dispatching trucks to customers.

"In an industry with a standard four-hour response time to a customer call, Mammoth shines," says Whitbeck. "Our response time is half that - we'll be at a customer's door within two hours after we receive that call." The company's service is a tribute both to its computer dispatching system and the dedication of its drivers, he adds.

Mammoth researched and developed the computer software that gives the company an edge on competitors. An advanced LORAN communications network links most vehicles to the Anchorage dispatch center, enabling dispatchers to track the precise locations of vehicles.

"Because we have instantaneous access to our vehicles and drivers, we can boost efficiency and profit for our customers. And that's one of the primary reasons Mammoth leads its competitors in freight hauling," says Whitbeck.

Operating a fleet of 60 vehicles today, Mammoth has chalked up an enviable safety record. "In the past 10 years, we've hauled more than $1.7 billion worth of valued cargo in seafood alone, with a claims-loss history of less than $7,000. That's a record that translates into profit for our customers. If cargo is lost, insurance may cover it, but insurance can't cut the loss on that cargo's potential profit," explains Whitbeck.

Mammoth's employees are recognized in the industry for their driving safety records. Several of the company's drivers have logged more than a million miles on the road without a chargeable accident.

Adds Whitbeck, "Most of our drivers have also been with Mammoth for more than 10 years. There's very little turnover here. These people are veterans and know the business."

Drivers operate top-quality modern tractors. Most of the fleet are 1989 vehicles. "When we ordered them, we specified the items that would allow our vehicles maximum compatibility and minimum wear on customers' equipment. That, too, translates into speed and profit for our customers," says Whitbeck.

Maintaining Mammoth's rolling stock is a complement of certified heavy-equipment mechanics who work in a fully equipped facility with a complete parts inventory at the company's Anchorage headquarters. In addition to minimizing down-time, the availability of qualified mechanics and a self-sufficient repair facility helps to ensure that every vehicle is in top mechanical condition. Mammoth's ready-to-roll strategy complements the company's ability to serve its customers quickly and safely.

Because of the firm's pervasive commitment to service, customers trust Mammoth and stay with the company. Several customers have been with Mammoth for 15 years.

"It makes sense to call Mammoth," Whitbeck says. "We're fast, efficient and reliable. We're professionals."

ITS BOUNDARY AND ITS BREAD-basket, the sea defines life on Kodiak and surrounding small islands. It isolates, but also insulates; seizes life and property, but surrenders rich maritime resources whose harvest drives the region's economy.

Victims of nature's fury and beneficiaries of her bounty, the people of the Kodiak Island Borough are a different breed than many Alaskans in other centers of commerce. Resigned to suffer the fates of unpredictable weather and limited access, the islanders often cope with inconveniences that would thwart many Alaskans grown comfortable with predictable urban lifestyles.

Says one longtime Kodiak resident, "Living on an island, we have to be flexible."

Although they meekly accept challenges as a way of life, the borough's inhabitants recognize that opportunities of their lifestyle must be defended. Depletion of fisheries would strike a devastating blow to the area's economy and to its people, particularly to those who venture to the sea to earn their incomes.

Jim Ramaglia, vice president and manager of Kodiak Oil Sales in Kodiak, says he enjoys doing business with fishermen. He notes that although they could make good livings in other, less risky lines of work, they become driven by more than profit. "If they do it (fishing) right, they can make a lot of money, and that attracts people. But it also gets in their blood. Dad used to say, `I'll never hire another fisherman.' They get the itch and want to get back to sea."

Fishing also is the life force of the borough's economy, which centers in and around the City of Kodiak on the northeast coast of Kodiak Island. About 6,800 of the more than 3-million-acre borough's 15,000 residents live in the city, a 45-minute flight south from Anchorage across Cook Inlet and the Kenai Peninsula.

Due largely to its dependence on fishing revenues, Kodiak in the last decade has proven more vulnerable to changes in the world economy and marketplace - which determine demand for and value of fish products - than to the state's fortunes. In 1982, when the ex-vessel (delivered to the dock) value of Kodiak's harvest fell from $132.9 million the previous year to $90.1 million and caused severe contraction in the local economy, much of the state enjoyed a year of rapid growth due to oil industry-generated business.

Says Jeff Stephan, manager of the United Fishermen's Marketing Association (UFMA) in Kodiak, "From 1982 to 1986, the rest of Alaska was booming, state spending was high and real estate values were rising. But the fishing industry had hard times each of those years. The state economy has been down since 1986, and Kodiak's has been somewhat stable. It's clear much of our economic success is based on independence of factors affecting other areas of the state."

Although the ex-vessel dollar value of Kodiak harvests was lower during the mid-1980s, the community's population has continued to grow, averaging a 2-3 percent increase annually for the last eight years, according to Wayne Stevens, executive director of the Kodiak Chamber of Commerce. "We've had an extremely tight real estate market over the years," he notes.

Stevens explains that although real estate took a little longer to sell in the couple of years following the 1982 fishing revenue dive and agents in the industry complained business was going to hell in a handbasket, the market actually was behaving closer to normal in most communities. "There's been a healthy evolution, and that scores the whole transition of this community," he says.

Kodiak received less per-capita state spending than other areas of the state during oil-boom years, points out Jerome Selby, mayor of the Kodiak Island Borough. "The capital money that did come to Kodiak in the '80s was spent carefully and somewhat more frugally than in other areas of the state," he says.

Adds Stevens, "Kodiak has not depended on oil revenues. In the '70s and '80s, there was some local grousing about capital expansion financing missed out on, but we don't have white elephants." He notes that as real estate "was going down the chute" in the rest of the state during the mid-'80s, Kodiak was growing due to expansion in processing plants, several of which added equipment to process bottomfish species. "We were fortunate," he says.

FISHING. According to Harbormaster Corky McCorkle, 2,200 vessels used the state's largest and most diversified fishing port in 1989. Harbor and dock expansion in Kodiak is an ongoing priority, and last year a 400-foot dock funded by $4.5 million in revenue bonds was completed.

Utilizing Gulf of Alaska harvests, 12 fish processing plants operate in the city, 4 more elsewhere on the island. Prices they pay to fishermen for their catches are determined by existing inventory of the same and competing seafood, projections for harvest and demand, and - because Japan is the major consumer of Alaska's seafood products - the value of the yen.

In January, Kodiak fishermen stalled the start of Tanner crab harvests one week past the opening in a dispute with processors over the floor price. Particularly with the lower value bottomfish species, a drop in price can make margins too thin for operators of some vessels to participate in a fishery.

Many of the Kodiak vessels that harvested crab in the gulf changed gear in February, outfitting as trawlers or longliners to catch various bottomfish species. Come April, still more gear changes will enable vessels to longline for different varieties of bottomfish and for halibut. The versatility of the Kodiak fishing fleet and the processors' abilities to change product have helped to stretch the fishing season and to employ more people year-round.

Says UFMA's Stephan, "The Kodiak fishing community is successful because of its ability and willingness to diversify. The economic strength of processing companies in Kodiak depends on their ability to process a diversity of products and to keep people employed throughout the year. For that reason, we're opposed to limited entry. Fishermen have to be able to move from Tanner crab to cod fish to salmon tendering."

Also threatening Kodiak's multi-species industry is the growing factory trawler fleet. Processors that typically concentrate on pollock handling were idled in the last quarter of the year because the quota set for Gulf of Alaska pollock in 1989 was met by March 23.

The increasing number of factory trawlers is heating up a debate over whether quotas should be allocated separately for inshore and offshore processing. As a temporary measure, an emergency regulation adopted by the North Pacific Fishery Management Council now allocates pollock quotas on a quarterly basis.

By-catch, or harvesting of unintended species, also affected fishermen and processors last year. According to Chris Blackburn, owner of two fishery-related businesses and a Kodiak fisheries consultant, the trawl fleet was forced to halt bottom trawling on Sept. 3, after the 2,000-ton mortality cap for halibut by-catch was reached in the Gulf of Alaska.

Worsening the impact of the absence of pollock after the first quarter was the grounding of the Exxon Valdez the day after that fishery had been closed for the season. The oil spill devastated the borough's salmon harvest. According to Stephan, salmon accounted for about $105 million of Kodiak's $166.3 million of fish harvests for 1988.

In 1989, Kodiak Island's numerous salmon runs were closed to commercial harvests, except for two limited openings. "We've foregone a significant salmon fishery that, no matter how you cut it, will never be made up in the claims process," says Stephan.

Although payments from Exxon "put fishermen as close as they would have been had there been a salmon season," a lot of support businesses, cannery workers and others who would have enjoyed trickle-down effects of the harvests were deprived, he explains.

Based on preseason harvest projections, Exxon agreed to pay $42.1 million for salmon claims in the Kodiak area. According to Stephan, UFMA has proposed Exxon increase payments to $58 million to provide for "run strength" adjustment to compensate for actual salmon returns that were stronger than anticipated.

 Ex-vessel value, Volume landed
 millions U.S. port millions U.S. port
Year of dollars ranking of pounds ranking
1980 84.6 4 207.5 7
1981 132.9 1 193.2 6
1982 90.1 2 105.3 9
1983 60.4 3 89.0 9
1984 69.9 3 113.6 8
1985 65.8 2 96.1 9
1986 89.8 2 141.2 7
1987 132.1 2 204.1 6
1988 166.3 1 304.6 3

Notes: The ex-vessel dollar value of fish landed at the Port of Kodiak set records in the United States in both 1981 and 1988.

Source: Data compiled by National Marine Fisheries Service

SPILL IMPACT. Events of 1989 disrupt Kodiak's success streak: The city's port has ranked in the top four of U.S. ports over the last decade on dollar value of product landed. The combined pollock and salmon harvest declines are expected to knock the port out of the top 10 for 1989.

The year will be remembered not only for lost profits and opportunities but also for tensions that strained the community. "Everything was screwed up. Nothing was normal," says Kodiak Oil Sales' Ramaglia.

"In the summer between openings, we'll typically service 40-50 boats a day. Last summer it was only three and four. It was OK business-wise for us but would have been a lot better and a lot more fun if we'd had a normal salmon season. One of the good parts of this business is seeing friends every year," he adds.

The borough's Selby agrees: "This summer was disruptive; everything was off-key. People who have been friends for years were yelling at each other. The closures went on week to week for way too long."

Because fishermen waited for weekly announcements about salmon openings, they were disappointed repeatedly. Due to stress in the community, demand for services at the mental health center increased by 700 percent, according to Selby.

As it turned out, those who chartered their vessels for oil cleanup activities made out well. But those who sat out hoping to pursue their chosen professions later came to realize they'd passed up sizable incomes.

Ramaglia points out a lot of people will be fishing with brand new gear in 1990 because they chartered their boats for cleanup duties at $44 per foot per day; that's $4,400 per day for a 100-foot vessel. "It created an unequal environment. Some people became rich and bought new boats and can compete against someone who didn't get to fish," he says.

Spending of cleanup salaries was a boon to many of Kodiak's retail and service businesses. Pam Foreman, general manager of the Westmark Kodiak, a 90-room hotel on the harbor, says although Exxon's accomodations helped to boost October occupancy, the hotel would have been full during the summer anyway, serving tourists. "Where we did see an advantage was in the food and beverage dollars from the Exxon people and from local employees who made more (than they were accustomed to)," Foreman adds.

TRANSPORTATION. Jan Schommer, general manager of Sea-Land Services in Kodiak, says that although supplies shipped in for cleanup work increased northbound cargoes, those revenues did not offset the loss of southbound fish freight - both salmon and pollock - for the transportation firm. "Our business was hurt extensively," she adds.

Kodiak is a passenger and cargo transportation hub for villages in the region and plays an important role in Sea-Land's distribution system as a relay market for freight moving by barge to and from Cordova and Dutch Harbor. Schommer points out her firm's growth in Kodiak could be fueled by the carrier's long-term expansion plans for Dutch Harbor.

Sea-Land container ships currently stop in Kodiak after docking in Anchorage and continue to Tacoma with fish cargoes bound for Japan and other Asian nations. But the carrier is examining the possibility of sending Pacific Rim-bound freight across the Pacific from Dutch Harbor. American President Lines already routes its vessels that way.

Transportation is a vital link to an island economy such as Kodiak. The community also is served by several air carriers, barge lines and the state ferry system. Says the chamber's Stevens, "Operating on an island has a cost." Dependence on water transportation for heavy cargoes, in lieu of truck or rail transport, also adds time.

Nonetheless, economic activity in the borough is attracting major retailers. Safeway Stores opened an outlet in Kodiak in 1987, and Stevens says Lamonts department store recently inquired about retail space on the island.

Because of Kodiak's role as a regional transportation hub, merchants serve not only local residents but also shoppers from outlying areas. Service and retail firms see opportunities in capturing a portion of spending now going to cities outside the region. The Westmark, for example, began marketing Christmas shopping trips to Kodiak last year to attract business from villagers.

REAL ESTATE. In a commercial building boom that sets Kodiak apart from the majority of the state, three new shopping centers are planned in Kodiak. All are on Mill Bay Road in the northern bounds of the city. Toby Cook, a broker with Associated Island Brokers in Kodiak, points out land for commercial development is scarce, while demand for services is strong. Located between mountains and water, the downtown area offers no room to expand.

One of those commercial centers is continued development of Mill Bay Plaza where National Bank of Alaska completed a second branch last summer. The project includes an enclosed mall attached to the Safeway store and a three-screen theater.

The other two development sites, both strip malls, are on opposite sides of the street. The nearly completed Highliner Square Plaza is expected to cater to fisheries-related businesses. The property's owner, Dave Harville, says he will move three of his own businesses - a sportfishing charter partnership, KWT Wire Inc. and Kodiak and Western Trawler Group - into the 14,000-square-foot shopping center.

Kodiak's housing market is robust as well. Personnel from Exxon and its cleanup contractor, Veco, swelled the traditionally high volume of summer renters. Further, many residents sought to invest summer cleanup incomes in real estate.

Cook says housing prices increased due to the soaring demand. He adds, "Housing is in short supply here, and the lack of available land creates higher prices. So there should continue to be upward pressure on prices."

Bill Roberts, owner of Kodiak Appraisal, concurs: "The end of the summer and fall this past year, real estate took off like a rocket. That's usual in the fall after the salmon season, but this year was the Veco season. Conservatively I'd say we're seeing 6 percent appreciation a year. Increases are in the 6-10 percent range for single-family residences."

According to Roberts, although vacancy in the fall and summer was "as near zero as it could get," there are no plans to build multi-family housing. He explains that banks are unwilling to finance such developments because of the overall grim Alaska real estate market.

MILITARY. Among the consumers of housing on Kodiak Island are U.S. Coast Guard personnel and civilian employees, totaling about 3,000. Base housing at the Support Center south of the city accommodates only 640 families.

The Coast Guard has about 1,000 active-duty personnel stationed on the island with 1,500 dependents. Its military payroll is $60 million. Ongoing renovation and replacement of base housing and other improvements, such as the medical center completed in 1988, have created construction jobs and generated revenue for local suppliers.

Kodiak and Seward are the two sites being reviewed for a U.S. Navy homeport in Alaska. With defense spending reduction considered a growing priority, that selection isn't likely to be made in the next few years, if at all. But the borough is continuing to pursue the plum.

Selby says the borough can pare projected costs for the facility. He notes that one of the regional government's strengths is construction management experience gained in completing a variety of infrastructure projects to meet the needs of the area's growing population. "We've been in the water and sewer construction business full time for the last eight years," he says.

The borough's mayor sees the homeport as one of several ways the area's economy could become increasingly diversified. "We have a base building other than fishing that takes the peaks and valleys out of national fishing cycles," he explains. Among other sources of revenue being developed in the borough are logging, on Afognak Island, and tourism.

TOURISM. The Westmark's Foreman, who also serves on the board of the Kodiak Island Convention and Visitors Bureau, says she's found Kodiak's residents have mixed feelings about tourism. Despite the lure of increased revenues, many are wary of changing the character of the fishing community.

Bob Shuttlesworth, president of the Kodiak Chamber of Commerce and owner of Shuttlesworth and Son General Contractors in Kodiak, says, "Kodiak is still fighting the no-growth, old-time syndrome to a degree."

Several successful conventions in Kodiak have helped to persuade people of the advantages of expanding the visitor industry, however. The area's largest convention is the annual ComFish Alaska show. The 1990 commercial fishing trade show, to be held March 16-18 at the Coast Guard base, has grown to 153 booths from just 23 in 1985. "It's a significant jolt to the economy," says Stevens.

Foreman says another "real good eye-opener" for the community was the Alaska Academy of Family Physicians convention last summer. The meeting, which has rebooked for this summer, attracted about 220 visitors - physicians and their families - to Kodiak.

"It was an ideal convention," says Tom Watson, director of the Kodiak Island Convention and Visitors Bureau. The visitors spent money in local eateries, sporting goods shops and gift stores, as well as using local services for sportfishing, transportation and lodging. Further, organizers promoted the convention in mailings to addresses Outside and in Alaska. "The influx to the economy was equal to the convention and visitors bureau's annual budget, approximately $100,000," adds Watson.

In luring conventioneers, Kodiak faces a problem that's common throughout Alaska - the need to expand to provide suitable visitor accommodations for a largely seasonal industry. "At peak times, we're 100 rooms short," says Stevens. "But annual occupancy rates don't justify 50 more rooms."

The Westmark is remodeling this year to improve facilities for hosting small conventions or retreats. A hall suitable for an 85-100 person banquet or for serving two or three smaller groups will replace eight sleeping rooms.

Although a growing consensus of community support favors building a convention facility to host large meetings such as ComFish, Watson warns the facility must be suitable for multiple uses. "Our biggest concern is maintaining a facility year-round and the need for other infrastructure that goes hand in hand," he says.

NEAR ISLAND. One possible site for a convention facility is Near Island, joined to Kodiak Island in 1986 by a bridge nicknamed the "Road to Nowhere." According to the borough's Selby, "That bridge represents the development future for Kodiak for the next 20-25 years."

Already on Near Island are harbor facilities and the Fishery Industrial Technology Center of the University of Alaska Fairbanks, School of Fisheries and Ocean Science, which has operated in Kodiak since 1981. The Kodiak Area Native Association (KANA) is planning to build a tourist attraction on Near Island as well.

According to Gordon Pullar, former president of KANA and now director of its museum and cultural center project, the Native association has signed a dollar-a-year, 50-year lease for property owned by the City of Kodiak. Although funding is not yet secured, KANA hopes next year to begin building a 17,000-square-foot facility to house two major archeological collections, displays of arts and crafts and traditional dancing exhibits.

Still under construction, the new $8 million Fishery Industrial Technology Center is expected to increase employment from 15 to 90 people when completed late this year. The 20,200-foot facility will have four laboratories for seafood analysis, a processing plant, a large freezer complex and a test kitchen.

The Fishery Industrial Technology Center specializes in food and harvest technologies to increase use and revenue from seafood. Says Jong Lee, director

of the center, "The fishery resource is finite, and the only way to really expand the industry is by adding more value."

Selby thinks Kodiak is ideally positioned to use developing technology to diversify and increase its fishing industry. "Now Kodiak is by and large a heading-and-gutting operation. Most all of the value-added effort in Alaska's entire fishing industry still goes to Washington," he notes.

The borough's mayor admits that many things will have to mesh for Kodiak to realize its dream of becoming a value-added center for the fishing industry, among them the development of technology and justification of transportation costs. But he says the availability of land is a key to realizing future opportunities.

There's concern in Kodiak about the near-term prospects for the region's fishing industry, most immediately whether oil spill residue will interfere with another year's harvests. Other issues confronting the fishing industry also could cause a downturn.

Despite other growing sources of revenue, harvests from the sea remain the weathervane of Kodiak's economic fortunes.

As do most business people in the community, Kodiak Oil Sales' Ramaglia pins his hopes for this year on a successful 1990 fishing season. "The fishing industry really drives our business," he says.

PHOTO : Fishermen in Kodiak drill holes in frozen cod, insert wires and stack the fish to use in baiting crab pots.

PHOTO : The bridge joining Near and Kodiak islands has opened up land for industrial development considered critical to Kodiak's growth.

PHOTO : Jeff Stephan, manager of the United Fishermen's Marketing Association, discusses crab harvest data used in negotiations between fishermen and processors.
COPYRIGHT 1990 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Kodiak Island's economic development plans
Author:Griffin, Judith Fuerst
Publication:Alaska Business Monthly
Date:Mar 1, 1990
Previous Article:Safety tips the scales.
Next Article:Silver Lining expands.

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