After months of debate and discussion, the assembly unanimously voted to commit $762,000 of Commercial Passenger Vessel excise tax revenues towards the debt payments for the construction of new water well during a meeting on July 21.
The State of Alaska granted the municipality a low-interest loan of $654,000 to construct the well, at a 1.5 percent interest rate over 20 years that will warrant a total repayment of $761,854.
The assembly voted to use a portion of the municipality’s share of CPV tax revenues to make those debt payments amidst recent scrutiny of how Southeast Alaska communities have used those funds.
In April, the Cruise Lines International Association filed a lawsuit against the City and Borough of Juneau over their purported misuse of CPV funds to build a $10 million life-size, bronze whale statue set in an infinity pool along the city’s water front.
The lawsuit triggered an audit of all Southeastern Alaskan cities’ use of the funds, which are supposed to be used specifically for port and harbor infrastructure or to provide services to the cruise ships and their passengers.
The audit found that Skagway inappropriately used CPV funds to purchase $114,450 worth playground equipment for Skagway School.
However, Borough Manager Scott Hahn said the water well project has clear-cut justification for the use of CPV funds.
“I can’t think of anything more directly tied to and measureable to the cruise ships than this water situation,” Hahn said. “When the cruise ships show up and start sucking water up is why the tanks drop. The tanks don’t do that when there is just 1,000 people here the rest of the year. It’s directly tied to it. We wouldn’t need extra water capacity through the pumps of the storage tanks if they weren’t this drawn down.”
As such, Hahn said he has carefully considered the municipality’s use of CPV fund for this project and has even sought outside counsel on this matter.
“I did try to contact the state auditors who did the auditing before, and other officials with the state, but no one wants to pre-clear anything and tell us ‘oh, this would okay’,” Hahn said. “I’ve tried to be very open about it and lacking any guidance from the state at this point, then I just have to rely on what makes a whole lot of sense, and it makes sense that reason that we’re doing this is not for 1,000 people, but for 10,000 people.”
Hahn said Skagway is well overdue to get an additional water well because of the impact the high demand from the cruise ship industry has on the overall water supply in town.
“When [the cruise ships] show up, they take on water and tank levels start dropping precipitously, and the wells start pumping madly, furiously, and yet we still won’t catch up,” Hahn said. “So basically, the amount of water that they’re taking exceeds our level to keep a static level in our tanks.”
And the increased water usage doesn’t just stop with the boats themselves.
“When the cruise ship passengers come off the boats, they come to shore and start using lots of restaurants’ bathroom, and there’s lots of water use to provide for them,” Hahn said. “Our days are effected heavily by cruise ship traffic.”
On a four-ship day, cruise ship demand can cause the water levels in the storage tanks to drop down to less than 40 percent capacity, which is extremely dangerous if a fire were to break out in town.
“We’d have to go into emergency mode and turn everybody off, including the cruise ships and try to get enough pumping capacity to get back into the tanks,” Hahn said.
Ideally, Hahn said the municipality’s water tanks should be at least 75 percent full to fully satiate the cruise ship’s water needs, the touism-related intown water consumption increase and still have enough left in reserves should an emergency rise.
These funds do not include the estimated cost of building a new water tank to coincide with the new pumping station, which comes with a projected price tag of $894,000.
Hahn said the municipality should also use CPV tax revenues for debt payments to fund the construction of the storage tank.
“The water tank is going to be another loan hopefully through the state, and I’ve already told everybody that it’s the very same thing,” Hahn said. “It’s all part of the same project to try and get more capacity.”
The new well will be constructed alongside the other water wells by Skagway School. Hahn and consulting firm Carson Dorn Engineering are currently in the process of looking over bids from various construction firms and are expected to make a decision soon so construction can get underway.