Mayor, Henry, Finlayson tell public about agreement; some still want cost/benefit study


Now that the Memorandum of Understanding between the Municipality of Skagway and White Pass and Yukon Route railway has gone public, both parties are doing everything they can to give residents the information they need to take to an upcoming special election about the future of Skagway’s tidelands.

The election could result in the signing of a new lease that would give White Pass an extension of their lease on the land beneath the Ore and Broadway Docks only until 2049. The rest of the lease, including uplands, would revert back to the borough.

The first of several public meetings on the proposed lease was held Tuesday, Feb. 11 with White Pass President John Finlayson and Skagway Borough Assembly members addressing citizens and taking questions.

Assemblyman Dan Henry, the municipality’s lead negotiator on the MOU, said the intent of the first public meeting was just to bring clarity to the terms and explain where the process will go.

“As voting citizens of the community, you need to be fully informed,” Henry said to a room full of more than 20 residents, including White Pass employees and assembly members.

Henry mentioned the assembly’s passing of an ordinance in 2013 that changed the voter requirement for city leases from $250,000 to $5 million over the life of the lease and exempted state agencies from a public vote. While it exempts a new Alaska Industrial Development and Export Authority ore terminal lease from going to a public vote, it does not exempt large leases to the private sector like White Pass.

If passed by voters, the White Pass lease extension would generate $11.3 million for the municipality over the course of 35 years.

The reason given for the new lease is for the municipality to gain site control from White Pass of the north end of the Ore Dock for its Gateway Project. The Gateway expansion of the industrial side of the port has been on the table for five years, while there have been nearly four years of negotiations and executive sessions on issues relating to White Pass, which has a lease there until 2023.

As of now, the Gateway Project has racked up $10 million from Governor Sean Parnell, a $5 million municipal bond, and a $65 million AIDEA bond Parnell authorized when he visited Skagway in 2011.

In the last 20 years Henry has been interested in Skagway’s government, he said, one of the two biggest challenges of the assembly was coming up with a way to diversify the economy and create year-round jobs.

“If you agree that this is directed to targeting and diversifying economy, then I feel this is something you want to be onboard with,” he said. “

At the public meeting, Henry covered a few major MOU points at length.
The new lease, as proposed, would last 35 years beginning in 2014, and the existing 1968-2023 lease would be terminated upon signing.

Under the new lease, White Pass would give the municipality back all of the developed tidelands including areas currently subleased by AIDEA, Alaska Marine Lines, TEMSCO Helicopters, Cruise Line Agencies of Alaska and Harbor Enterprises/Petro Marine. However, the money generated by those leases, which currently totals about $429,000, would continue to go to White Pass until 2023. After 2023, the money will go straight into the municipality’s pocket. (note, this paragraph is corrected from what appeared in the print edition)

WP&YR president John Finlayson explains the railroad's position as Mayor Mark Schaefer listens.

WP&YR president John Finlayson explains the railroad’s position as Mayor Mark Schaefer listens.

Dan Henry points to the blue dock portions of the tidelands lease that White Pass would retain under the proposed new lease agreement in the MOU. - Jeff Brady

Dan Henry points to the blue dock portions of the tidelands lease that White Pass would retain under the proposed new lease agreement in the MOU.
– Jeff Brady

“We would take over all of the subleases immediately,” Henry said, adding that the municipality would then be free to do whatever they want with that land in the future. The only land White Pass would continue to lease from the municipality until 2048 would be the land directly underneath the Ore Dock and the land directly beneath the Broadway Dock. Though White Pass would be leasing a significantly reduced amount of tidelands, it would be paying about $200,000 more per year than it’s currently paying to lease the entirety of the tidelands. As per the 1968 lease, based on a percentage of appraised value, White Pass currently pays $127,200 annually to rent Skagway’s waterfront and would continue to do so until 2023 if a new lease isn’t signed. Leasing the land underneath the Ore and Broadway docks will generate about $3 million for White Pass each year from the cruise ship industry.

With the new lease, White Pass would continue to be the cruise terminal operator. Finlayson spoke briefly about continuing this tourism partnership.

As written in the MOU, White Pass and the municipality have agreed in negotiations to install and equally share in the costs of a new floating dock extension off the Ore Dock prior to the arrival of the Breakaway class cruise ship expected to visit Skagway as early as 2015. The Breakaway class ship from Norwegian Cruise Lines would bring about 4,000 passengers to Skagway each time it docks.

As per the MOU, White Pass would contribute $2 million to the remediation of the Ore Basin, which is a job that Henry said would cost close to $4 million.

“I was given this number by someone who is in the dredging business,” he said, “To get the material out and move it is going to cost anywhere from $3.5 – $4 million.”

As the owner of the land, Henry said, the municipality is responsible for the clean-up, but lessee White Pass, has offered to contribute greatly to the clean up because the lead-zinc contamination occurred when it operated the ore terminal in the 1970s.

As far as responsibility for the contaminated sediments goes, Alaska Department of Conservation’s Bruce Wanstall said in an August meeting there are several entities who share it: the Municipality of Skagway as its owner, White Pass & Yukon Route as its tenant, and any corporations that used the ore terminal — it does not belong to any one entity.

The municipality wants to cap the contaminants in filled uplands as part of the Gateway Project expansion.

In gaining site control of the northern part of the Ore Dock to create its Gateway Project, the municipality would receive any and all revenue generated from that area.

“Any vessel that is not a cruise ship, the city of Skagway gets the revenue,” Henry said.

If the lease is signed, said Skagway Mayor Mark Schaefer, the assembly will finally be able to come to an agreement with AIDEA on its Skagway Ore Terminal lease, something Schaefer said could not have happenrd without the White Pass lease being finalized.

Those present appreciated the information, but some wanted more.

Jan Wrentmore said she is happy to see the information about the MOU and negotiations, and she appreciates the amount of work that has gone into it.

“But the public is way behind,” she said. “We need a shiny paper analysis of pros and cons from an independent view point.”

Wrentmore said she knows what it’s like to be wedded to a project and, along with others, suggested a cost/benefit analysis might allow some clarity.

Henry said he feels no ownership to the lease, as the signing of it will not benefit nor hurt him personally.

“I was charged with being the spearhead of trying to get a job accomplished,” he said. “As far as a cost analysis goes, it sounds good. But a tremendous amount of speculation would be involved in that, because you have aspects of it that can or cannot come to pass each succeeding year.”

But Henry said it would certainly be good to have a recap and connection with short synopsis of revenue.

In a February 6 Finance Committee meeting, Henry along with Assemblymen Steve Burnham Jr. and Tim Cochran, discussed a cost/benefit analysis but decided it was premature and did not give the direction to order one.

Assemblyman Gary Hanson, who has been against the terms of the MOU from the beginning and was the sole vote against approving its release, said he thinks the public should see a cost/benefit analysis.

“The need for more information and for a cost/benefit analysis is very important whether it’s before or after the lease is (drawn up), but certainly before the vote,” he said. “The most amount of information we can get out there is important.”

Hanson said there will always be some speculation in analysis of future projects, but thinks that seeing the figures is necessary for the public.

The lease is currently in the process of being drafted by the borough attorney for presentation before an ordinance is drafted calling for its ratification by voters in a special election. The earliest the election could occur would be in May. The MOU can be viewed via a link here: MOS-WP MOU (pdf)