A group of Skagway revelers parties at Moe’s Frontier Bar in the early 1960s. Owner Malcolm Moe, who started it all, is second from right. The historic bar closes on Sept. 27. See story, more photos and a special tribute in features below. Photo courtesy of Mike Moe

Oct. 2 Election Preview - the two propositions

Bond issue support sought to fund new clinic
Funding agencies question high square footage cost from architect

The Skagway Borough is poised to start work on the new Dahl Health Center if voters pass a bond issue on Oct. 2 that would raise up to $5 million for the project with a payoff of up to 30 years.
The total cost of the clinic is now estimated at $7.84 million, based on the latest figures from project architects Livingston Sloan. That includes contingencies and expected construction cost increases of $600,000 between now and next spring.
“I feel it’s very important to the community to move this on,” said Mayor Tom Cochran. “If we get a positive yes on this bond issue, it shows the other grant agencies that we are behind the project, and it puts less burden on the community and the tax payer.”
Cochran added that the bonding option is “prudent fiscal responsibility” at a time when interest rates are still low, but with construction costs steadily rising. The borough has $1 million already reserved for the project, but if it continued to save for the project, it would cost a mill or two more in property taxes, just from the increasing construction costs, before it could be built, he said.
The borough hopes a positive vote on Prop. 2 and showing of strong community support will leverage additional money from grant agencies like the Rasmuson Foundation and Denali Commission, whose representatives were here for Southeast Conference this week and took a tour of the new clinic site.
Before the tour on Tuesday, they were given a presentation by Borough Manager Alan Sorum. He explained about the problems with the current building being too small and not up to code, the need of a bigger and better clinic for residents and visitors, and how the new federal health center grant with construction of a new clinic “will insure sustainable delivery of health care services for the community.”
Representatives from the funding agencies said they have been impressed with the community support for the project, but questioned the latest cost estimates. Diane Kaplan of the Rasmuson Foundation called it “sticker shock.”
Tessa Rinner of the Denali Commission, whose agency has already contributed $600,00 to Skagway for planning and design, said the $600 per square foot cost is high and needs “strong documentation.” She said it was comparable to a clinic in Savoonga in a remote region of the state, and noted that its most recent clinic in Fort Yukon was in the $475-$500 range.
Closer to home, a new SEARHC clinic in Juneau and one in Klawock came in at a little more than $200 per square foot, but local contractor Charles Dolan said that is what most houses are costing now. He said the recent public bathroom cost $500,000. Sorum noted that the borough had already shaved $1 million off the project cost by not having the new clinic straddle Pullen Creek.
Kaplan asked about the possibility of more involvement from the cruise ship industry, and Sorum said the borough would try to draw a line from the expected $600,000 in state cruise ship head tax funds to the clinic. Borough lobbyist John Walsh said Skagway does not have its own head tax like Juneau and Ketchikan, but said it will be up to the Dept. of Revenue and the legislature to see what Skagway will receive and how it can be used.
“We are hopeful that we can (apply it to the clinic),” he said.
Kaplan suggested other ways to get the community more involved in its clinic, such as having a plaque acknowledging memorial gifts, room dedications, and a “buy a brick” campaign. It also was suggested that the cruise ships could be approached for equipping exam rooms.
She said that the Rasmuson family originally owned the six lots on 14th Ave. that were donated to Skagway by Wells Fargo for the clinic, and that Ed Rasmuson had told her that the lots had always been reserved for the community. The transfer was made in April 2005 about a year after the Rasmuson-owned National Bank of Alaska was purchased by Wells Fargo.
In the meantime, the borough’s Finance Committee has been in discussions with funds manager Skip Elliott about the best approach for bonding, should voters approve the measure on Oct. 2.
In a Sept. 13 letter to the borough, Elliott said he had provided due diligence on all options and concluded that applying to the Alaska Municipal Bond Bank for general obligation bonds was the best route. The only other viable option was to do it in-house.
There is a cost of about $25,000 for AMBB to issue the bonds, more than half of what it costs the in-house bonds issued by the City and Borough of Juneau. Doing it in-house would cost the borough an estimated $75,000 and take an additional 90 days, he added. He said a AA rating is obtainable given the borough’s good credit.
AMBB does receive a “huge mark-up” when it sells bonds, Elliott explained, and it could be as high as $200,000 in the long run. But he told committee members that part of that amount could be saved by moving fast before interest rates go up. AMBB’s most recent bonds were selling between 4.25 and 5.5 percent, with an effective yield of between 3.78 and 4.66 percent.
“Based on discussions with knowledgeable parties and detailed review of numerous documents, it is my opinion that the most prudent and expedient (and quite likely the cheapest) option for Skagway is to apply to the AMMB to sell the required bonds,” Elliott concluded.
With a positive vote, Finance Chair Dan Henry said the borough would be “poised and ready to pull the trigger as quickly as possible.”

Splitting the tax hand
Sales tax vote a question of what’s ‘due’

In black jack, if the dealer gives you two cards of the same number, and the numbers are good, say a couple of nines, then you gamble on splitting the hand to come up with two winning hands instead of one.
Skagway voters will be voting on something similar Oct. 2 when they choose whether to split the current 4 percent sale tax – a decent hand – by reducing the rate to 3 percent in winter, and increasing it to 5 percent in summer, all with an exemption on the purchase of foods.
Borough Finance Chair Dan Henry said the big difference between this year’s proposition and last year’s straight proposed increase to 5 percent (which failed) is that there’s no year-round tax increase.
The idea behind the seasonal split, he said, is “to generate needed revenue in the summer from those who are creating the need, and I felt (splitting the tax rate) would offset the additional property tax increases that the year-round resident has experienced over the last 10-15 years.”
To those who claim taxes are high enough, he says, “We’re not raising taxes. We are anticipating with the passage of the proposition to pay 5 percent half the year and 3 percent the other half, a net of 4 percent year-round, which is what we are paying today.”
But it will bring in more money.
Based on current sales figures, the new tax would net – subtracting out exempt food items – an additional $850,000 to the borough, Henry said, while looking at a recent treasury report.
There is a definite need for extra revenue, he said. The other half of the ballot is spearheading the need – money must be raised to help pay off the $5 million in bonds for building the new Dahl clinic.
He says the clinic is then followed by a “myriad of needs” ranging from addressing cuts in the school that need to be re-funded, financing EMS services which are driven by the tourist industry, and additional infrastructure needs such as repeated requests for rest rooms out at the cemetery, bike paths around and exiting town, a water pump station at north end of town, a new rifle range, better access to West Creek, continuing improvements at the Rec. Center, as well as the increases in city wages, and the desires of various groups such as seniors.
“The wants, needs and desires are many and our community deserves as many as we can fund, provided Skagway is receiving their just due,” he said.
Some think that due is fine, as is.
Bud Rauscher, a year-round resident who owns a local gallery, said he is against the proposition because it targets a special user group, tourists.
“I just firmly believe it’s wrong to target certain groups for more money and I think that’s what we’re doing,” he said. “I think 4 percent (year-round) is pretty reasonable.”
He added that he is opposed to the borough “taking in more money from taxes, because we just spend it.”
Henry said the alternative is to raise property taxes, which have already escalated in recent years due to increased appraisals. Over the past 10-15 years, the city was able to buy down the mill rate from sales tax but people have still been paying more.
He said a 5 percent sales tax in the summer would not create “sticker shock” for tourists who are used to paying 6 percent in Ketchikan and 5 percent in Juneau.
When the ordinance placing the split tax on the ballot passed the Borough Assembly (on a split vote), some at the table said it would be better to wait and see what the new state cruise ship head tax will bring in.
Henry said there is no guarantee that the state will allow Skagway to tie the estimated $600,000 from the cruise tax to the clinic, saying it will probably have to go to port development.
“I don’t know that we can push around any of that to get to the clinic,” he said.
Henry added that if the borough does experience a windfall from the state, then the assembly always has the ability to repeal the sales tax changes.
He noted that with 90 percent of all borough revenue being generated in the summer, and 90 percent of that leaving town (a figure from a recent McDowell Report), that he found it “disingenuous” that most of the objections voiced at the meeting came from business people who are not year-round residents and who “don’t have to deal with the budgetary headaches and limited infrastructure of the people who live here on a year-round basis.”
“I would have thought they would have been supportive of the people that are the backbone of this community,” he concluded.
So, if it passes, will the split work and pay off big?
There is a precedent for this in Sitka. In 2004 voters approved a sales tax proposition with a bond issue that increased the rate from five to six percent during the second and third quarters.
The increase boosted sales tax coffers by about $1.044 million during the most recent fiscal year, said Marjorie Parmalee, sales tax clerk for the City and Borough of Sitka.
“I would have to say the new rates have been well accepted for the most part,” she said.
But there have been some glitches. It is a “real hassle” for the merchants to remember and change their machines, she said. And problems developed when the code did not address the issue of when a service crosses over, such as a job that started in March and finished in April. “It would be good to address that in your code,” she said.
Another problem is the logistics of dealing with forms and getting them to and from companies outside Sitka like the franchises who do their bookkeeping in another state.
“Also we made long term rentals stay at 5 percent all year, for boat stalls, land, etc.,” she said. “Otherwise it would be a total nightmare.”
Rauscher used to have a business in Sitka and said he’s heard from merchants that the split sales tax “is not that big a deal,” but added that many businesses are having a tough time regardless of the tax issue.
Henry said Skagway experiences the same amount of visitors as the much bigger cities of Ketchikan and Juneau, yet must provide a similar level of services from a much lower year-round population and tax base. Rather than raising property taxes to handle the need, passage of the proposition would place the burden more on the users of the services at a rate that is on par or even lower than other Southeast communities.
“My hopes are that we can pass this for the benefit of the year-round Skagway residents and their community,” he said.

• Borough Assembly candidate statements

WIFI NETWORKING – The laptops were out at the Skagway Rec. Center for the conference. During breaks, many of the 200 delegates checked e-mails.

Southeast transportation: desires versus money

The Southeast Conference was founded 50 years ago to unite the region behind the development of the Alaska Marine Highway System. Half a century later, the region’s primary transportation infrastructure is in dire need of a fix, but there’s not much money for parts.
“To me, we have to make the marine highway system shine again,” said Skagway’s Mike Korsmo, a member of the SEC Transportation Committee, before introducing speakers who addressed the funding, the mechanics, and the desires of the region’s transportation system.
Jeff Ottesen, with the Department of Transportation, said the state first has to deal with some “bad news” – it can’t implement any projects on its Statewide Transportation Improvement Plan (STIP) until it finishes a federally mandated long-range plan. It is due to be finished by the end of the year.
The plan looks at all modes – ferry, roads, airports, and transit systems – and how to fund the needs. Alaskans are using the modes at three times the rate of population growth, construction costs have increased 60 percent since 2003, double the rate of inflation in the Lower 48.
“This is what’s causing the STIP to be delivering less that what’s promised,” he said, adding that the future prognosis is “not good” with oil revenues due to run out in 2015 if there’s no gas line.
The state’s transportation system has needs of $1.4 billion, but an ability to bring in just $600 million in revenue. In their planning, they have looked at various scenarios, from just a straight “maintain what we have” to a balance of new construction and annual maintenance. Depending on the balance, projects could take 30 years to complete, or 60 years. He said it comes down to a choice of fixing five miles of road versus 20 miles, and possible reductions in service. He said residents can comment on the scenarios at the DOT website.
Addressing the mechanics of the ferry system itself, Capt. John Falvey, AMHS director, ran down the list of where ships are in service and what they need. He spent the most time talking about the Columbia, which blew an 800-pound piston rod last month, and will be out of service until May getting all rods changed out. They found 24 rods in Asia from a vessel that was being scrapped, he said. But he remains worried about the vessel’s engines, which need a $25 million fix. “It’s a real tricky situation with that boat,” he said, but fixing it would be cheaper than buying a new one for $200 million.
He said they have found and are fixing the faulty reduction gears on the fast ferries Fairweather and Chenega. The Fairweather had 50 percent of its work done last winter, and the rest will occur this winter. The Chenega will take its place and then go in for its own work.
“We feel very confident these boats will be fixed once and for all,” Falvey said. “The boats are performing very well and the numbers look good for both boats this summer.”
Under development are two new shuttle ferries for the northern and southern panhandle. Design work for the Lynn Canal shuttle should be completed next summer. If funded, it would serve Haines and Skagway from Juneau, and then move to a Haines-Skagway shuttle from Katzehin if the road is ever build from Juneau up the east side of the canal.
Falvey said total system ridership numbers are up through mid-September. In Southeast, the system has hauled 194,000 passengers and 59,000 vehicles, compared with 189,000 passengers and 54,000 vehicles in 2004. The increases are higher in Southwest, and overall system revenue is up to $41 million, compared with $36 million in 2004.
“We were about $1.3 million ahead of last year before the Columbia went down,” he said. “It’s just unfortunate the boat went down when it did.”
After hearing more good ridership numbers from Bruce Jones of the community based Inter-island Ferry Authority in southern Southeast, Korsmo introduced Cathie Roemmich of Juneau, the new president of the state Marine Transportation Advisory Board.
Input from MTAB helped Skagway and Haines get back a fourth ferry a week this winter. Korsmo said she would have a message of “hope for the future.”
After thanking the new governor for appointing her, Roemmich said she didn’t realize she had a “message of hope” until talking with people in communities and reading about the MTAB appointments in the media.
She said she didn’t intend to “spread false hope,” but after five months of research and discussions with various groups, she had found some problems, and they weren’t just about money.
She started off by saying, “The sad thing is that the better the plan, the further it gets pushed aside,” and said one has to ask, “if government is best for this?”
“How do you get to 64 percent labor costs overnight?’ she asked.
“How can we afford to have ships break down before we have replacement parts?” she asked, noting that holes were seen in the steel before it broke, and the state should have been shopping for parts in China sooner.
Finally, she said she is tired of people in state government “pitting community against community.”
“Why do we hear ‘If Ketchikan gets its bridge, Juneau doesn’t get their road?’” she asked. “It seems to go on and on ... and nothing gets done. It’s tragic.”
During her talk, a slide show of historic ferry photos from retired Captain William Hopkins’ collection, played to the audience. One showed an AMHS banner with the slogan: “The proud tradition, a bright future.”
She wondered where that tradition had gone for the people in 99901 who don’t feel like they’re in “nowhere” and those in 99801 without road access.
Her straight talk drew some of the loudest applause heard at the conference. The conference wrapped up Thursday with the election of new officers and passage of resolutions.


BLASTING OFF – Runners take off with a blast from Steam Engine 73 in the 25th annual Klondike Trail of '98 International Road Relay. See story in features below. Jeff Brady

HISTORIC FEATURE: Memories of Moe's before last call

• KLONDIKE ROAD RELAY: Bears join runners for 25th Relay

• SPORTS & REC: Skagway girls win local X-C meet; Box of Rocks results

• FISH THIS!: Falling into place - column by Andrew Cremata

HEARD ON THE WIND: Wind-driven, tongue twisting, shopping stumping and more...

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