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Counting capital projects.

With $349 million fueling a variety of design and construction efforts across the state, Alaska's 1991-1992 capital projects budget is bound to cause more concrete pouring, earth moving and nail pounding over the next few years than in the last five. The question some in the construction industry are asking, however, is whether that level of activity will be enough to sustain contractors, which have witnessed an overall decline in available work since 1986.

The 17th Alaska Legislature's capital budget was fatter by $87 million than the previous year. Although that point is not missed on contractors and state agencies, the project spending still is a far cry from that during the boom of the mid-1980s.

"Earlier in the year, I think people thought that the construction industry was going to grow another 5 percent or so," says John Boucher, an economist with the Department of Labor's Research and Analysis Division in Juneau. "On the horizon, it doesn't look like there's a whole lot of big projects."

Allen Vezey is secretary/treasurer of North Pole's Lakloey Inc., a firm specializing in heavy industrial work. "It's been a slow year," he says. "I think my total volume this year will be up from last year, but last year was the slowest year I've ever had."

In June, Gov. Walter J. Hickel's veto pen largely favored public works funding for repair of neglected state buildings, roads and harbors over municipal projects containing little or no matching contributions from local communities. He slashed more than $48 million of the legislative appropriations in the public works budget.

A few of the big-ticket items in this year's capital budget are $115 million for statewide roads and other transportation improvements, $52 million for school construction, $25.8 million for water and sewer projects in the Bush, and $25 million for deferred maintenance and equipment for the university system.

The largest chunk of transportation funding comes from the federal government, although Alaska usually kicks in between 8 to 12 percent as its match. By Sept. 30, the end of the federal fiscal year, Alaska had spent approximately $174 million in federal dollars on highway projects, says W. Keith Gerken, deputy commissioner for the state Department of Transportation and Public Facilities. For airports, the state spent about $40 million in federal money on a sizable list of runway upgrades and resurface projects.

"The federal program has been such a large part of what we've done, simply because that's the way it was allowed to be," Gerken says. "We have evolved, by default, almost totally dependent on the federal program."

That may have to change sometime in the near future, he predicts. "We will probably see the need for more general funds for minor construction in airports," Gerken notes. What happens with Alaska's federal allocation next year also depends greatly on what Congress does this year with the Surface Transportation Bill, which is up for renewal.

A Senate version of the bill would parcel out $200 million to Alaska next year, and that sum would keep increasing until the total reaches $300 million in five years. Meanwhile, a House version of the bill would hand over $137 million, about $20 million less than the amount Alaska has been averaging recently.

"One of the things we're doing is developing a statewide policy ... of what the state's transportation plan ought to be geared to do," Gerken says. "There are a lot of new economic development possibilities that can't happen without access greater than what the existing system provides."

Although construction throughout the state has slowed considerably over the last five years, it seems to be improving, says Steve Walsh, president of Associated General Contractors of Alaska. "I'd say it was better than last year; it's slowly coming back," adds Walsh, who also owns H2W Constructors Inc. in Anchorage.

Helping the modest recovery are state contract awards for new school construction in the Kuskokwim Delta area, plus the large funding chunk set aside for deferred maintenance, Walsh says.

That maintenance effort means that instead of lucrative jobs for contractors, such as building a new road, most of the work involves rebuilding. But smaller jobs employ people, too, Walsh says. "I think most contractors are optimistic that there's going to be more work to bid," he notes about next year.

TRANSPORTATION PROJECTS. Several large projects dominate the state's central region in the upcoming 1992 construction year, while other jobs already are under way or were recently completed.

"The Sterling Highway project is a real important one -- this is the start of a whole series of projects on the Kenai Peninsula," says Margaret Holland, a spokeswoman for DOT&PF's central region. "This is the first of several upgrades on the Sterling Highway. We haven't done any work there in years."

Slated for the 1992 construction year is a more-than-11-mile stretch of the Sterling Highway near Soldotna. The work includes lane reconstruction and a new bridge over Moose River. The cost of the work, paid mostly from federal coffers, is estimated at $18.7 million.

The Glenn Highway north of Anchorage will continue to see construction next year with 14 miles worth of work between the Parks Highway and Moose Creek. Truck climbing lanes, auxiliary turn lanes and reconstruction to Moose River Hill is estimated to cost $13.3 million, Holland says.

The central region's airports have seen their share of improvements, too, and more is scheduled for 1992. A new $6.8 million facility for Wasilla, which replaced an existing airport near the city center, features a 3,700-foot gravel runway, taxiways and an apron. The city of Wasilla will eventually own and operate the airport, which later will include buildings and most likely a paved runway, Holland says.

Work next season on expanding or reconstructing airport runways at Dillingham, Scammon Bay and Napaskiak totals $7.2 million. About $3 million is set aside for erosion protection measures for the shoreline near the runway at the Unalaska airport.

The Department of Transportation's northern region is the recipient of a variety of federally funded projects as well, notes Rod Platzke, the region's design chief. Rebuilding eight miles on Farmers Loop Road started this year, and more work on the project is expected through the 1992 season, Platzke says. That job, broken into two separate contracts, totals $22 million.

A $5 million road-widening project for Peger Road in Fairbanks began early this summer and will be completed next fall. Platzke also notes that the region spent $2 million upgrading Davis Road this summer. Work on the $21 million Johansen Expressway project in Fairbanks continued this summer and should be finished with an additional $15 million in upgrades next season.

The only completely state-funded project on Platzke's list is $4.8 million for a 42-mile rehabilitation of the Dalton Highway, which started late this summer. The project calls for rebuilding the road surface at a higher elevation -- a deterrent to snowdrifts -- and a crushed aggregate surface to be placed on top of the road, Platzke says.

It was a quick scramble to put together the design and award the contract in time for work this construction season, because the funding just became available after July 1. Platzke adds, "We'll work as late as we can, until the weather drives us out."

In Southeast, where most communities are not connected by road, but rather by Alaska Marine Highway System ferries, the Department of Transportation's "road proper" work load is understandably smaller. But regional director Jon Scribner insists it's no less important.

A $2.7 million upgrade job on one mile of Riverside Drive in Juneau has been completed, as has a more-than-two-mile straightening, widening and upgrading job on a portion of Glacier Highway, from Tee Harbor to Point Louisa, also in Juneau.

A new airport in Haines, pegged at $5.7 million, is about half completed. Scribner notes the new 4,500-foot runway will be a welcome addition to the community. "The pavement of the whole (old) runway was coming apart. ... It was causing damage to the airplanes," he says.

About $2.8 million in upgrades for bridges about 30 miles outside of Haines on the Haines Highway should be finished by next spring. Also a $5 million airport for Hoonah will replace the last substandard airport in the southeast district.

"We've had a big program this last year. Next year should be another pretty big year for us," Scribner notes.

The 1991 capital budget set aside $24.8 million for upcoming projects, including $5 million worth of road improvements in Petersburg, $2.5 million in improvements on Sitka's Halibut Point Road and $8.9 million on a variety of improvement projects throughout Juneau, including work on Egan Drive, Glacier Highway, Cordova Street and North Douglas Highway.

The state ferry system, which serves southeast, southwest and central regions of Alaska, spent about $12 million this year on renovations and upgrades for the M/V Tustumena, the system's only ocean-going vessel. This fall, the M/V Malaspina went into the shipyard for $5 million worth of improvements on its galley and dining room areas, says Harold Moeser, design and construction engineer for the ferry system.

Most of the money to fund ferry system upgrades comes from the national treasury. The 1991 Alaska Legislature also approved a $5 million deposit into the system's "vessel replacement" fund. About $1.2 million has been earmarked for a new diesel generator for the M/V Bartlett, which should be finished by next month, Moeser says.

SAFE WATER PROGRAM. Besides transportation, several other large projects approved during the last session are already off the ground. Although Hickel vetoed nearly $4 million from the Department of Environmental Conservation's Village Safe Water Program, $25.8 million was allocated for 39 different projects that aim to improve water and sewer systems throughout the Bush.

Work on these remote systems is influenced by several factors, including weather, a limited construction season and restricted barge schedules, says Greg Capito, chief of the program, in Juneau. About a dozen projects approved during the 17th Legislature are already under construction, while the others are either in the engineering feasibility phase or design phase, Capito explains.

Construction on a new water source and waterline for the Southeast village of Angoon began this summer, following several waterline failures in the last year. The new water source is Tillinghast Lake, which replaces the unnamed lake previously used.

The existing waterline is submerged across Kootznahoo Inlet and is subject to severe tidal currents and corrosion. The new galvanized steel waterline that will replace it will be buried in earth above ground, Capito says.

Water and sewer connections to a dozen homes in Gambell for $2.8 million also has begun, and a $1.2 million expansion of the sewer system to a core area of Glennallen got under way this year, he notes.

Thorne Bay on Prince of Wales Island is receiving a $550,000 community sewage treatment plant, and the village of Nikolai received a $500,000 appropriation for a similar system under the program.

MCLAUGHLIN CENTER. In Anchorage, McLaughlin Youth Center received $3.1 million from the general fund to finish up improvements a the facility, a project started nearly five years ago. Dick Illias, youth corrections administrator in Anchorage, explains that the plan was designed for a series of phases, and the work has been desperately needed.

"The spaces being used for detention were not necessarily designed for that back in 1969," he notes. The final phase of the project entails renovating a 25-bed boys' detention unit and remodeling spaces such as the intake area and visitors room, Illias says.

PIONEERS HOMES. Alaska's Pioneers homes also received a good-sized chunk of money for repair and maintenance projects, albeit a much smaller payout at $2 million than the $8 million requested. The money goes quickly when it's spread out among six pioneers homes and 15 different projects, says Frank Spargo, administrative officer for the state Division of Pioneers Homes.

The first priority goes to fire- and life-safety projects such as asbestos removal and fire alarm upgrades. The largest slice of that money, $600,000, is earmarked for kitchen remodeling and asbestos removal at the Fairbanks Pioneers Home. That project is moving through the state's bidding process and is still probably a year away, Spargo says.

The Fairbanks Pioneers Home also is the recipient of about $220,000 worth of work on its fire alarm system. Other work includes $200,000 for fire alarm upgrades for Sitka; $320,000 for water treatment repair, fire alarm upgrades and a new nurse-call system for Palmer; and a number of other smaller projects at the homes in Juneau, Sitka, Fairbanks, Ketchikan, Anchorage and Palmer.

SMALLER PROJECTS. Although many construction companies, forced into cutthroat competition for state contracts, find the situation tighter in the private sector as well, there are several large projects coming up. A new J.C. Penney store is planned to open in the capital city in March, while Fairbanks will be the home of a new Fred Meyer store and Sears outlet.

Other high-priced projects in the private sector include a hotel at the Alyeska Resort in Girdwood for $50 million to $60 million; a Carrs Quality Center Store in Kenai, $9.7 million; a multibusiness project that includes a 105-room hotel, shopping center and dock at Unalaska, $50 million; and new quarters for the Alaska Railroad at Ship Creek in Anchorage, $6 million.

Meanwhile, other large projects are coming to an end. "Construction in Western Alaska on fish processing plants is less than it was last year, and projects like the Bradley Lake hydroelectric project have wound down or ended," notes the Department of Labor's Boucher. "Also, military construction in Fairbanks, which has been a big engine in the construction industry in the past four or five years or so, is off."

The completed construction projects for the Sixth Light Infantry Division at Fort Wainwright in Fairbanks were the state's largest recent sources of construction employment. Other defense projects -- the Navy's radar facility in Amchitka and work at the Adak station, for instance -- also have been wrapped up.

Economist Neal Fried suggests in the October issue of the Department of Labor's monthly publication, Alaska Economic Trends, that a changing role for the state's construction industry is a real possibility. "Maybe it was inevitable that construction's role in Alaska's economy would diminish over time because of the remarkable expansion of the retail trade and services industry," Fried comments.

"In the immediate future, some economic factors will act as a brake to prevent any construction boom. The tax incentives for commercial construction disappeared with the 1988 Tax Reform Act. Bankers are not about to open their vaults to real estate loans as readily as they did in the early 1980s. There is no expectation of a run-up in oil revenues any time soon -- a decline is much more likely."

Fried concludes it would take a project on the scale of a gas pipeline or development of the Arctic National Wildlife Refuge before the construction industry regains its former prominence.

And the industry was prominent in its heyday. Construction employment grew by more than 20 percent from 1980 to 1983, peaking at 20,700, or almost 10 percent, of the state's work force in 1983.

In 1986 -- the last year of the "boom" -- there were approximately 8,300 licensed contractors in the state, according to Judy Weske of the state's Occupational Licensing Division in Juneau. For the fiscal year 1991 that ended in June, the division reported 3,349 licensed contractors in the state.

Vezey of North Pole notes the state's economic situation is affected by many outside factors -- the Persian Gulf war, two years of low state capital spending, the federal budget squeeze and low minerals prices, to name a few. Although it remains to be seen whether Hickel lives up to his promises for a large public works budget next year, Vezey does not predict a sharp jump.

"My observations tell me the market is continuing to shrink," Vezey says. "I think things will get better, but I don't see anything happening to cause that to occur yet."
COPYRIGHT 1991 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Alaska's public works budget and the economic prospects of construction industry
Author:Ripley, Kate
Publication:Alaska Business Monthly
Date:Nov 1, 1991
Words:2694
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