A proposition likely to appear on the Sitka ballot this fall asking voters to approve withdrawing $8 million from the municipal permanent fund may already have its first “no” vote.
Sitka Sen. Bert Stedman has come out in opposition to the withdrawal, which would then be used to build a marine haulout.
Stedman has previously held a seat on the committee that oversees Sitka’s local permanent fund. He told KCAW that he thinks tapping the fund would set a bad precedent.
“I’m not personally excited about pulling money out of the Sitka permanent fund for the boat haulout,” said Stedman. “I think there’s other ways of putting that project together. And I’m not sure that the city netted $8 million out of the hospital anyway, because I think there was a significant pension liability that we’re still paying for.* So I don’t think it’s a net $8 million. I don’t know what it is, but the net is a lot smaller. So I think we need to work on that.”
*Note: Sen. Stedman is correct that the city has a substantial pension liability (PERS) to cover for former Sitka Community Hospital employees, but it’s not coming out of the 2021 sale of the hospital building. Rather, the pension liability is being paid from the sale of the hospital “business” in 2019. In that transaction, the Southeast Alaska Regional Health Consortium agreed to pay Sitka over $16 million spread out in installments over 22 years.
Municipal finance director Melissa Haley explained, in an email to KCAW:
“A significant PERS liability does remain for Sitka Community Hospital. Currently we are paying this from remaining SCH assets, tobacco tax, and we are using the payments from SEARHC on the original sale of the hospital business to SEARHC (though these payments are restricted as they must remain in escrow until the Stark liability is fully resolved). Should the PERS liability be resolved before $16,046,000 is paid, then SEARCH will stop making payments on the liability (after paying at least $9,646,000), so I think the nuance that may need to be corrected is that it was the original sale of the business, rather than the sale of the land that is supposed to cover the PERS liability. By Charter, a sale of land must go into the Permanent Fund and any other use must be voted on by the community.”
Stedman is not opposed to a publicly-funded haulout – in fact, he thinks Sitka is ideally situated with good access, flat land, and the necessary infrastructure to support a marine services industry. Although the state doesn’t have a matching grant program for haulouts in the same way it does for harbors, Stedman thinks the money could be found, as it’s been found for other communities.
“To get help from the state, you have to have more of a package,” said Stedman. “Hoonah has a travelift, but they don’t have the physical space, and they don’t have the support services. So it’s not as beneficial as it should be. Wrangell has two big travel lifts. They have the space and they’ve got a fairly well-developed – not finished – but a fairly well-developed yard, that the state has put about $16 million in as I recall, through the capital budget. And it took several years. I think that model is much more workable and deliverable, you know, to get state assistance and some of the other alternatives. You can’t put a dozen folks together, fishermen or processors or whatever, and then go to the state and ask for a grant of $10 million dollars or $5 million and expect to get a check.”
Stedman says that it’s important to move the haulout onto the state’s capital improvement project list, where projects are ranked, and then funded in order. During lean times, not many capital projects are built, but during boom times – like now – projects get checked off relatively quickly. But maybe not quickly enough for Sitka, which has been without a haulout since March. Sitka’s permanent fund is there, and there is an acute need for infrastructure, so why not just grab the cash and build?
“Well, clearly, it’s more expedient to grab the cash if you can by gunpoint or otherwise,” Stedman said. “But, it’s more involved than just putting up or buying a travelift. There’s just a lot more to it. It’s just a vehicle to get the ship on the beach. The government is not quick to respond to virtually anything. We’ve got our cycle, or our legislative cycle. We could go back to $70/barrel oil, and we wouldn’t be building much of anything anywhere. So, you know, it’s also hinging on the oil price. So that’s something that the local people, you know, Sitka voters will decide what they want to do with the permanent fund. But not too dissimilar from the state’s Permanent Fund, I’m not an advocate of overdrawing the permanent funds, because once you open the door, it’s just too easy to take more and more out.”
Stedman says that Sitka could also apply to the Alaska Industrial Development and Export Authority for funding, but AIDEA will want a “business plan, and they want it to function.” That’s been a sticking point in the project from the beginning: Hauling boats doesn’t necessarily pay well – or really break even. The money comes from providing services to boats that are already out of the water. Says Stedman, “one of the challenges of a marine haulout is the business model itself.”
Bert Stedman represents Sitka, Wrangell, Petersburg, Ketchikan and surrounding communities in the Alaska State Senate. Sen. Stedman recently sat down with KCAW News to discuss a number of issues, including the status of the Katlian Bay Road and how this year’s wartime budget surplus will be directed primarily to shoring up the state’s savings.