Kasidaya Creek’s diversion dam, more than 500 feet above Taiya Inlet, sends water 4,000 feet down a penstock, generating up to 3 megawatts of electricity. See story and more photos in our Energy Feature below.

Photo by Andrew Cremata

Borough land fund value falls 14 percent

Conservative approach toward stocks kept losses from being any worse


The country’s economic downturn is adversely affecting the value of the borough’s J.M. Frey Land Fund, but things could be worse.
Since the beginning of the borough’s fiscal year on July 1, the fund’s value has dropped 14 percent. This has wiped out gains made a year ago, when the fund was up 11 percent. But a diverse portfolio, with fewer and fewer investments in the stock market, has kept the slide from being any worse. The fund is still about $390,000 ahead of when it started being invested in 2002.
In recent reports to the Finance Committee and answers to follow-up questions to the News, fund manager Skip Elliott outlined the recent wild ride, and steps he has taken to cut losses and preserve much of the fund’s value.
The picture was good a year ago, even though there were signs that markets were beginning to turn with falling real estate prices and credit tightening. For the first half of the calendar year, the fund kept posting smaller and smaller increases.
By the end of the fiscal year on June 30, its value was at $3,266,666. There was little change in July and August, but the major collapse of the housing market, investment houses and mortgage insurers in early September changed everything. The stock market fell, and by Sept. 30 the land fund’s balance had fallen 5.8 percent to $3,097,859. It further slid to $2,827,621 at the end of October for an overall drop of 14 percent in four months, Elliott said.
The borough can thank the man behind the fund’s name for charting a course that protected the fund. The land fund was sitting in a bank account prior to 2002, drawing minimal interest, and then the city contracted with Elliott Financial Management to invest most of the fund. The late J.M. Frey was chair of the Finance Committee then and urged a conservative approach, making sure that not too much was invested in stock equities.
Elliott said he has never gone as high as the current 60 percent limitation on stocks, and in fact has whittled it down in recent months. Most of the fund is now invested in fixed income bonds. When the stock market falls, bonds tend to go up in value.
“From April 2007 to July 2007 stocks reached a high of 53 percent of the portfolio, after which I began trimming equities (note that the stock markets peaked in October 2007),” Elliott wrote. “Equities remained at 34 percent from March 2008 through June 2008, at which point I began to trim further. They are currently only 14 percent of the portfolio, in line with research indicating that this is historically the most conservative allocation for portfolios with a time-frame of five years or more.”
With the borough angling to spend a big chunk of the land fund on the purchase of the Garden City RV Park (old Pius X Mission) property, Elliott was asked what the impact would be, and if he has advised the parties involved. Before he was a full-time fund manager, he was city manager and later mayor of Skagway, and then business manager of the Catholic Diocese in Juneau, which owns the land.
Elliott said that if the assembly were to withdraw $1.85 million for the land purchase, then “the equities allocation would jump to 40 percent of the remaining land fund balance, still well below the legal limit of 60 percent. If the purchase is not immediate, the land fund is nevertheless conservatively invested.”
He said he offered his help to all parties involved in the property sale, and advised both during the appraisal process.
“The mayor informed me several months ago about the possibility of this purchase, so that I might have as much lead time as possible for my investment allocation decisions,” he wrote. “Plus, (current Finance chair) Dan Henry has phoned me weekly since late September regarding market conditions and investments. However, I have attempted to refrain from getting involved in policy matters.”
Elliott did offer some background on how the fund was originally set up using budget surpluses in the early 1980s. It was his initial idea as city manager, and was funded when he was mayor.
He said the fund’s goal was for it to be invested aggressively over 20-30 years and “provide a means of someday permanently stabilizing real estate taxes.” But he said it never grew as it should have in that early period, because city councils (after he left) were reluctant to hire an investment manager. The fund’s balance remained at about $1.5 million from 1987 to 2002, when former mayor Stan Selmer got it “back on track” by seeking Elliott’s services. A small portion still is held in the bank by Wells Fargo.
Elliott then explained how it might be prudent for Skagway to take steps to secure the fund’s direction.
“Legislative intent is often helpful, but it is not binding,” he noted. “Although the city councils of the late 1980s had a certain vision for the land fund, those actions could not legally bind future councils/assemblies. Personally, I would encourage Skagway to become a home-rule municipality with a charter that establishes the land fund permanently with carefully defined uses. This would bind future assemblies unless changed by a vote of the citizens. But until then, the assembly may, by ordinance, spend the land fund as it sees fit. Likewise, it is up to them to decide upon future contributions to the land fund. Past councils/assemblies have supported putting proceeds from municipal land sales into this fund, for instance, but I don’t believe there is a requirement that they do so.”
The assembly sought public input on the RV park purchase at a recent town meeting, and there was overwhelming support for the action. But some questions were raised about the impact on the land fund. The assembly will be taking up the issue at its next meeting on Dec. 4.

Hovering again

Tour proposes new hovercraft landing area at mouth of river


Luke Rauscher is seeking a new passenger boarding area at the mouth of the Skagway River for his proposed hovercraft tour operation. The passenger loading/unloading area will be 15 yards south of the Skagway Airport Terminal, according to Rauscher’s application with the state.
The application also states that Rauscher’s proposed business, HoverNorth, will drop off clientele at the Skagway Airport Terminal and plans on “parking an SUV near the Skagway Airport.”
Last May, Rauscher was denied a conditional use permit in the borough-owned Seven Pastures area after the assembly, on an appeal, narrowly rescinded an earlier decision by the Planning and Zoning Commission to grant the permit.
This time around, however, the state will handle the permitting process. A 30-day review period began on Nov. 19. Written public comments will be accepted until Dec. 5, and a final determination will be made by Dec. 18.
Alaska Department of Fish & Game Habitat Biologist Sheila Cameron said via email that the public “should know that the review is for consistency with the Alaska Coastal Management Program.” She said comments should be related to the ACMP.
Rauscher said via phone that comments could also deal with impact to fish habitat.
He said he felt confident the application would be approved, as his operation would fall within the designations for use of the Skagway River by the state.
In his application, Rauscher describes the tour as traveling north up the Skagway River from the put-in at the airport for 5.5 miles. It will then turn around and travel back to the put-in. There will not be a stop on an island upriver, as was noted in his first proposal to the state.
Time on the river is estimated at 40 to 60 minutes with a total tour time of one hour. The hovercraft will remain parked on the beach for approximately 30 minutes between tours and then driven to the Skagway Harbor at the end of the day.
The application states that tours will be run from 7 a.m. to 7 p.m. It also stated there will be little impact from the use of the hovercraft on the river as the footprint pressure of .33 lb per square inch is “less than that of seagull standing on one leg.”
Rauscher said if the permit with the state goes through, the only hurdle left will be purchasing the hovercraft. He hopes to start tours on the river next May.
Written comments may be sent to ADFG Division of Habitat, 802 W. 3rd St., PO Box 110024, Juneau, AK 99811-0024, or e-mail: They must be submitted by 5 p.m. on Dec. 5.

ENGINE OFFLOAD - No. 90 is off-loaded from a barge for work by Coast Engine and Equipment Co. in Tacoma, Wash.
TOP OFF – Shiny new red Cummins engines have been installed in the two 90-class locomotives. Photos by WP&YR

WP&YR embarks on modernization program

Rebuilt 90-class engines will produce more horsepower, fewer emissions

The White Pass and Yukon Route announced Nov. 19 its commitment to re-power its fleet of 11 GE 90-class locomotives. The first two WP&YR locomotives, numbers 90 and 98, were sent to Coast Engine and Equipment Co. (CEECO) in Tacoma, Wash. at the end of this year’s operating season and are expected to be back in Skagway by May of 2009.
Gary C. Danielson, president of WP&YR said in a press release, “The GE’s are the oldest of our diesel locomotives, built between 1954 and 1966, and are our ‘signature’ engines. This multi-million dollar initiative will be one of the largest expenditures in the history of the company and in this time of economic uncertainty, it shows our commitment to the long term sustainability and growth of the company.”
Danielson said all 11 locomotives should be completed by the 2012 operating season.
The new locomotives will be re-classed as CERES 140’s, which stands for Controlled Emissions Repower Systems. When completed, the WP&YR will have one of the most modern, safe and environmentally friendly locomotive fleets in the world, according to the release.
Danielson added, “The Company chose CEECO for the project as they have worked closely with us over the past several years, most recently with the rebuild of engine #114. They understand our needs and have the suppliers and expertise to ensure the success of this project.
For 2.5 years, the White Pass has been working with CEECO on an engine design specific to our operating needs and together decided on Cummins Engine in the United Kingdom as the supplier of the engines, the release stated.
Among the benefits:
• The engines will supply 60 percent more horsepower and will still increase fuel efficiency by more than 30 percent.
• The new engines will reduce 80 percent of stack emissions and eliminate all visual emissions.
• They will eliminate all hazardous waste oil and reduce other hazardous waste products such as filters by 90 percent.
• They will meet or exceed all EPA regulations now and into the foreseeable future.
• The new engines are of a modular design, which will simplify maintenance and reduce repair time.
Control functions will be CEE-Trac Microprocessors, which will provide up to 30 percent more tractive effort for a higher horsepower to weight ratio. These controls will reduce wear and overheating of electrical components and increase life of rail and track structure and eliminate unnecessary idling time. The electronic control systems will also increase the safety and handling functions of the locomotive.
“What this all means is that we will increase the efficiency, effectiveness, capacity and reliability of our locomotive fleet”, Danielson concluded.

UTU satisfied with TSB report’s conclusions on causes of derailment

The local chapter president of the United Transportation Union of engineers, conductors and brakemen in Skagway says they are happy with the recent release of the Transportation Safety Board of Canada report.
The report on the Sept. 6, 2006 work train accident concluded that a combination of factors – overloaded train, steepness of the grade, ineffective brakes, absence of comprehensive training instructions on loads and safe descents, and the speed of the train – led to a runaway which derailed, killing one worker and injuring three others.
Wade Brown, the local’s current president, said via phone from his winter home in Utah that, going into the investigation, no one really knew what happened.
“TSB is an independent agency,” he said. “We basically believe what they put in the report. Their whole job was to get at the truth and find out exactly what happened.”
When asked about specifics that led to the crew’s decision to take eight ballast cars with one engine, versus the usual four, Brown referred to the report.
“I think the report is pretty clear for what they thought was the reason for the accident,” Brown said.
The report states that the train left overloaded from Log Cabin, in part because the cars were routinely loaded too full and were not marked for proper weight limits. Work train crews had taken six loaded cars in the past, but with additional locomotives and empty cars that helped with braking. Tests by TSB showed the cars were overloaded by 10-70 tons each. Retainer brakes were working on just three of the eight cars, and were set to an incorrect position. Plus heat fade and no working dynamic braking on the locomotive further diminished its braking capacity. The train was allowed to speed up before automatic and emergency braking were applied, but the braking force was insufficient for the heavy load. It continued to gain speed and derailed on the sharp curve at Mile 36.5.
The report says the crew was inexperienced on work trains, and that proper training was not done. Brown commented on the training aspects, saying, “Prior to the accident, I wasn’t aware of any training program except information being passed from one engineer to the next. It’s definitely an issue that will be covered in the future.”
The report notes three pages of safety actions that TSB and WP&YR have implemented since the accident. Brown said the railroad brought in a consultant and employees did go through more training last summer.
He would not comment on the status of engineer Jeff Ruff and conductor Lee Hartson, because the union was preparing for a hearing with the company. - JB

BOROUGH – Few public voices heard as Skagway Comprehensive Plan rewrite nears its completion

Skagway’s Comprehensive Plan rewrite is nearing completion after the addition of public testimony heard at the Nov. 13 Planning and Zoning meeting. The addition of the comments, and some final editing in the coming week, will complete the final plan to be presented to the Skagway Borough Assembly, and set clear guidelines for Skagway’s future.
Barb Sheinberg, of Sheinberg and Associates informed P&Z commissioners that a hard edit of the plan was necessary. She said the edit would correct only technical errors and not result in any changes to the specific policies included in the plan.
Tim Bourcy testified that he would like to see the identification of historic trails included in the final product, such as the White Pass Trail and Chilkoot Trail.
He said the plan should also include documents relevant to assisting those in need of filing permit applications for certain areas. He suggested the reference tool could include information on land ownership, Memorandums of Understanding with the National Park Service, agreements with the state, and areas such as Dyea with their own management plans.
Bourcy said such a reference tool would make P&Z’s application process easier.
Municipal Clerk Marj Harris said a reference checklist would be better suited for the planning office and could address the various types of plans to be considered when applying for a permit. She added that borough permitting official Emily Rauscher was currently working on such a checklist and would be available to applicants in the future.
Harris read a memo from Mayor Tom Cochran addressing P&Z which said the plan was not a tool to set policies in stone, but should act as more as a guide.
He also asked that new policies be added to the land use section of the comprehensive plan which would require advance notice on land acquisition and management issues within the municipality by, and between, any agencies of the federal government or the state.
Assemblyman Dave Hunz agreed with Cochran’s suggestions. He said in the past, when MOU extensions between the Park Service and the state were signed for Dyea and the Chilkoot, assembly members were not always notified or given a chance to provide input.
Hunz said when the last agreement was signed – with an extension up to 15-years – the municipality was left out of the loop. He said he felt the citizens of Skagway should have a say on how that land is managed, as it is state land.
The Comprehensive Plan rewrite, with the addition of public testimony, passed unanimously. The final, edited plan will come before the assembly at its next meeting on Dec. 4, and there will be a final public hearing on Dec. 18. – AC

SCHOOL – Marshall Islands trip approved, senior trip tabled till January

The Skagway School Board found itself in the middle of another debate about student and teacher travel at its Nov. 18 meeting.
First up was a proposed two-week trip to the Marshall Islands by the Drama, Debate and Forensics team which would take the kids out of school for four days in addition to spring break.
Two members of the team last traveled there in fall 2006, and the entire team was invited back after tco-hosting a Nuclear Awareness Conference with UAS in Juneau earlier this year.
English teacher and DDF coach Kent Fielding said the focus of the trip this time would be on climate change. The students would interview experts in the field and people whose islands may disappear in 25 years. They also would perform pieces on climate change.
“I really believe in student travel in connection with projects,” he said, noting that the trip is not a vacation.
Senior DDF student Shelby Surdyk said her previous experience there and working on related projects had given her the confidence to apply to top universities.
Board President Darren Belisle said he was opposed to the trip because of finances and taking the kids out of the country.
But Chris Maggio said money was his only concern. “We need to be flexible,” he said.
Fielding said they have a series of fund-raisers lined up to raise $10,000 for five DDF students to travel to the Marshall Islands “If we don’t make it, parents will make up the difference,” he said.
The amount is $2,000 less than the previous trip, which spanned nearly three weeks. Students would stay in a school for one week and a hostel the next week, and there would be some meal costs.
Chris Ellis said there are a lot of school “politics” now dealing with travel, but she agreed with Surdyk on what the kids get out of educational trips.
Joanne Korsmo said she was concerned about the school’s liability overseas, but Superintendent Michael Dickens said that as a school-sponsored trip it should be covered in their liability policy.
“The opportunity is incredible,” Korsmo said. “I don’t want to stand in their way.”
The trip was approved on a 3-1 vote. Belisle voted against the motion. Robert Murphy was absent.
The next request before the board was for a senior trip, but Colette Hisman, one of the parents of the three seniors, said passage of the Marshall Island trip negated a possible senior trip to Chicago over spring break. Surdyk is one of the seniors.
Hisman said the spring break time period was proposed because the kids would not miss any school. The trip would still have to be approved since funds were raised by the school class.
The board has frowned on senior trips over the past three years, and again Belisle said he was against it until he heard more details. Reasons given were that senior trips were not educational. Hisman said they would be visiting several museums.
Members and some audience members discussed having trips with an educational focus, rather than a senior trip, and opening it up to other classes. Such a trip was approved last year to the Smithsonian in Washington, D.C. But seniors Surdyk and Tylor Forester said a senior trip should also be a final bonding experience for the class. Korsmo suggested they look at a time closer to graduation.
The debate then shifted to teacher travel.
Local resident Blaine Mero, who has worked with students, said the board “can’t pick and choose.” He questioned why they just approved a DDF trip that took a teacher out of a core class, saying Fielding already had traveled a lot this year – he recently returned from a three-week fellowship to Japan. Mero said some kids and parents are afraid to speak out about teachers being away from class for fear of retribution.
Ellis said there are two sides to the story about teacher travel. She said a parent who had been complaining finally talked to a teacher who had gone to a conference. She learned that the teacher, by interacting with other teachers outside of Skagway, brought back tools that helped students here, she said.
“They need training and they need to go out and keep fresh,” Ellis added.
She proposed having both student travel and teacher travel as discussion topics at the annual community forum in early January.
Another big discussion topic will be the “Skagway culture” – coping with seasonal shifts that affect enrollment and funding.
Also planned are presentations on curriculum and how they progress through grades, and on the new DARE program to be taught in the new year by police officer Rick Ackerman.
The forum will be held on Tuesday Jan. 13 at 7 p.m. in the Elma McMillen Room.
The board will not meet in December, but has planned a work session on the day following the community forum. The senior trip request can come before the board again for a vote at its next regular meeting on Jan. 27.
“I’m happy to talk about it, but there’s not enough information right now to make a decision,” said Belisle. – JB


BIG LIFT – Mickey Wilson attempts a lift on Ketchikan’s Cesar Ramirez during their 160-pound match at the Petersburg Invitational on Nov. 8. Wilson lost to the state second ranked Ramirez 4-1. See more photos and story in SHS Acitivities under features. Photo by Klas Stolpe

• ENERGY FEATURE: Kasidaya hydro project now online

• SHS ACTIVITIES: Skagway matmen prepare for regionals; Lego League teams win in Juneau


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