BY DAN HENRY
The Gateway Project is a subject that has been discussed by White Pass Railroad (WPYR) and the Municipality of Skagway (MOS) for quite some time now. We, as the MOS, approached WPYR about being granted access to the area known as the Ore Terminal several years ago. The idea was to gain access, to engineer and thereby, improve and expand the Ore terminal facility in conjunction with the current lease, AIDEA, with financial assistance from the Governor’s office in the form of up to $65 million in bonding and $10 million directly from the Governor’s Budget, the latter needing to be spent by the Summer of 2016.
The Assembly contacted WPYR requesting for site control, so as to facilitate some community growth, and more importantly, some diversification economically, adding year-round employment. White Pass had no objection to site control for the MOS, provided that White Pass was given a new lease. A reasonable response, which the Mayor and Assembly immediately began discussions about in executive sessions, so as to reach an acceptable agreement, which, if White Pass found the terms and conditions acceptable, a Memorandum of Understanding (MOU) would be presented to the voters of the Municipality of Skagway, with those same terms and conditions, for their approval.
The MOU, which was released for public consideration eighteen months ago, was a series of bullet point items, discussed and agreed upon, by the Mayor, Borough Manager and THE ASSEMBLY.
The first bullet being “Site Control,” obviously we must have that to engineer the project. Second, defend and indemnification by WPYR—this does not exist under the current lease. This is paramount, for had this provision existed in the previous lease, we would have been completely protected, but the environmental atmosphere of today was not the same in 1968. The third consideration was having White Pass share in the contamination dredging in the Ore Basin. It doesn’t matter who you think was responsible, who you feel you’re certain was responsible, or who you guess was responsible. The only one the EPA and ADEC want to talk to is the land owner, they don’t care who was or wasn’t involved. The only thing they do care about is that they start at the top of the food chain, that’s us: MOS, we own the tidelands, period. Now, we could have discussed who we were going to try and hold responsible, and how after seven or eight years in court and hundreds of thousands, if not millions of dollars in attorney fees, has brought us to the point of sharing in the final disposition of the case, which would likely be shared costs by several parties, including the MOS. KPFF, the engineers on the project, have estimated the cost of the dredging to be $2.8 million, with the addition of $1.5 million for handling and disposal of the contaminated material, which originally had little cost, as it was to be dumped and capped behind a sheet pile wall on site. At the time of negotiating the MOU, cost estimates were placed at $3 to 3.5 million total for dealing with the contamination, we attained a commitment of $2 million from WPYR, more than half. This contribution has nothing to do with White Pass’s defense and indemnification obligations under the lease as to any known or later discovered contamination. Those obligations would remain in full force and effect before, during and after the dredging/remediation operation and White Pass’s $2,000,000 contribution.
Next, we discussed the addition of the floating dock, so as to accommodate the larger vessels that we will host in 2017, keeping Skagway at the top of the cruise destination discussions and decisions of all travelers, by cruise ship. We felt a shared cost was proper, with Skagway using Cruise Passenger Vessel Excise Tax (CPV or “State Head Tax”) money for our half, avoiding the need for any Skagway citizens funding.
Of course the entire community will benefit from the floating dock, with larger vessels, thereby more passengers, more business in the gift shops, jewelry stores, tour sales, bars, restaurants—all businesses in town—including additional revenue in the form of head tax for WPYR at the dock, and for the Municipality of Skagway from additional CPV ($5 per passenger).
The term being set at thirty-five years, as per city code, and the annual payment being $250,000.00 dollars with an additional $25,000.00 increase every 5 years. This was the entire Assembly’s decision, after consideration of the payments currently being $127,200.00 after the latest appraisal by the city appraiser. This value was also placed on the lease after consideration of the fact that the amount of land was being reduced by roughly 90%.
So effectively, the Assembly decided to reduce the leased lands to be only the land submerged directly below the docks, roughly 10% of what White Pass currently controls and has controlled in the past, and more than double their payments. Now understand, this is a lease, of which the city has many. This was not a “We’ll start at 10 and you start at 2, then we go down to 9 and come up to 3 and eventually we’ll meet somewhere in the middle. No, this is a city lease that the Assembly had to determine what would be an acceptable agreement, with all the “moving parts” being given proper weight. This was not horse trading, unless of course we were to understand that from now on all city leases will have to open up their books so the MOS can decide how much of a cut they should be getting. We facilitate business, not gut it like a loan shark. Even assuming there are some who would favor efforts to condition leases on an exorbitant percent of anticipated revenue, it is questionable whether our code allows that form of a municipal lease.
So what we agreed to in the MOU was, a new lease with White Pass for 35 years at $250,000.00 a year, plus an additional $25,000.00 every five years, to top off at $400,000.00 for the last five years. In addition to that revenue stream, the MOS takes back all sub-leases, AML, Petro-Marine, Temsco etc. for an additional $425,000.00 plus per year, based on the current subleases. This total is $23,000,000.00 over the term of the agreement. Additionally the MOS will receive more CPV monies from the floating dock, and monies resulting from any industrial activity at the Ore Dock, imported or exported.
If you feel expanding our choices, maintaining our position at the top of the cruise ship industry’s destinations, increasing our revenue stream in a responsible manner, cleaning up the Ore Basin and being environmentally protected, are positive things, you should support the lease. I feel we have a good agreement, as does your Mayor and Assembly, as demonstrated by their vote every step of the way in the this long process. If you don’t want to expand our economy toward some year-round commerce and jobs, and rather wait until 2023, that is your choice at the ballot box, one by one. No Gateway Project, no diversification economically, so be it. Lastly, let me say, you may have heard some crazy statements being made out there, because you know, it doesn’t cost a thing to say anything that you’re personally motivated to say, for selfish reasons. It’s easy to throw stones from the cheap seats when you’re selfish in your actions or statements, or worse yet confusing or spinning the facts. If you wish accurate information, read the MOU, read the proposed lease, and come to the meeting on August 24th.
In response to a recent letter sent to the Chamber, White Pass’s role down on the docks will be identical to the role that they have had since the restart of the cruise ship business, that of bringing trains down to the docks, as they have always done, just like every other tour operator does, to pick up passengers and go on a tour. They will also remain the largest employer in the community, and contribute the most tax in the community, and do everything else White Pass has done to help participate in our vibrant economy, and I’m confident they will continue to listen to the community and be sensitive to requests like “don’t spray, weed whack”. We diversify and they continue to grow, and we clean up for the future, I feel that’s a good thing! But hey, I don’t throw stones from the cheap seats, I look and hope for positive solutions.
Dan Henry —
Involved Citizen For Over 25 years