Assembly in discussions over new White Pass proposal

By DAN FOX
EDITOR

Skagway’s Borough Assembly is reviewing a draft proposal from the White Pass & Yukon Route Railroad, in which details of the current lease, and a new tidelands lease, are discussed.

The document, which the municipality has made available on its website, outlines three proposed transactions: an amendment to the 1968 lease (which is in effect until 2023), a new lease agreement and an environmental remediation agreement. It is currently considered a draft, with the assembly negotiating team still working with White Pass on the conditions and terms. Covered below are several items discussed in the document; click here for a link to the full proposal. 

Under the amendments to the 1968 lease, the annual rent would be increased to $200,000. The document proposes White Pass and the municipality agree to split construction costs of a floating dock component to the Ore Dock 50/50, with the goal of having said expansion ready by 2019’s tourist season. White Pass is recommending the 3b design option recently proposed by Skagway’s port consultant firm Moffatt & Nichol, which is estimated to cost almost $15 million.

Upon execution of the lease amendment, the seven subleases currently on the property would be turned over to the municipality. Through March 2023, Skagway would give White Pass the current amount of revenue in contained in each of those subleases, while having the ability to negotiate new leases for amounts greater than the current sublease amounts.

The second category, a new lease agreement, focuses on the period after the 1968 lease would expire in March 2023. The initial proposed period for a new lease is 20 years, however assembly members are discussing potentially scaling that number back.

The lease would be for the Ore Dock and Broadway Dock area, with the tideland areas covered in the lease only including the land directly beneath the existing Ore and Broadway docks – as well as any future improvements located above the leased tidelands.
The rent amount is proposed to stay at $200,000 for the duration of the lease. Like the proposed lease period, however, adjusting the rent amount upwards has also been talked about.

The last section of the document covers remediation of contamination in the Ore Terminal Basin, and states remediation would be carried out to the standards of the Alaska Department of Environmental Conservation, and pursuant to the scope of work being prepared by Golder Associates Ltd. – a firm currently hired by White Pass to survey the contaminated area and perform risk assessment for marine and human life.

White Pass would make a $2.5 million contribution to the remediation effort, with the municipality expected to chip in $1.5 million. In the event that more than $4 million is needed, the proposal states Skagway and White Pass would “meet and confer to decide how to proceed.”

White Pass’s proposal comes after a push from the assembly to build facilities in the port to accommodate larger cruise ships for the 2019 tourism season. The municipality, through a letter from Mayor Mark Schaefer, reached out to White Pass President John Finlayson and urged the railroad to come together with the city’s negotiating team for a substantive meeting. Finlayson had replied and said the company was working on a proposal – now before the assembly – that would address issues facing both the community and White Pass.

At a July 6 meeting, the assembly brought suggestions to the table to talk about the proposal in an open forum, so that the negotiating team – which includes assembly members Orion Hanson and Tim Cochran, as well as Borough Attorney Bob Blasco – can continue to work with White Pass.

Assembly Member Monica Carlson said she was “really disappointed” upon first review of the document, and offered several changes. She mentioned the last attempt at a lease with White Pass, which made its way onto a 2015 ballot and was defeated there with 383 votes against, and 167 votes in favor.

According to her, the 2015 lease failed for four main reasons: contamination and cleanup, length of the lease, not enough value from the deal and the municipality’s control of the waterfront.

Carlson pitched two possible paths forward. The first went through the White Pass proposal with some criticisms, such as the prospect of the municipality contributing half the funds for a floating expansion at the Ore Dock, but not receiving any direct revenue from it. Carlson also felt the 20-year term of the lease is too long, and that there should be a clause that would give Skagway access within five years of the lease’s end to make dock and port developments.

Carlson’s second suggested option claimed that the Skagway Municipal Code “gives us the legal right to access our waterfront, to construct a floating dock for the benefit of the citizens of Skagway.”

“If White Pass chooses to obstruct us, the court will decide upon damages to the city,” Carlson said.

Assembly Member Spencer Morgan said after the 2015 lease failed, he went around to get input, and said the municipality’s control over the waterfront was overwhelmingly the most common criticism raised against the 2015 lease – in addition to the proposed 35-year term.

“Almost everybody I think in the city was scared at 35 years,” Morgan said. “I know I was. At 20 years, it worries me. I think 10 years, if you’re really looking at a lease, is more appropriate.”

The potential for White Pass to change hands was also discussed. A recent press release from TWC Enterprises Ltd. – the company that owns White Pass – announced plans to begin a review of its investment in the railroad.

According to the press release, the objective for the review is to evaluate White Pass operations – a process that may include a sale of all or portion of the business.

“If the company should change hands, the agreement should void,” Assembly Member Steve Burnham Jr. said. Morgan agreed with the lease being non-transferable, mentioning that press release as well.
“I think that’s something that needs to be taken very seriously,” Morgan said. “I don’t want to see this lease bought and sold, essentially.”

Prior to the assembly’s discussion, several comments from the public questioned the sudden urgency of the proposal, and the need to accommodate Breakaway-class cruise vessels by 2019.

Pointing to a letter from the Cruise Line International Association – North West & Canada, Steve Burnham said that correspondence suggested the bigger boats are coming.

“They might not come here if we don’t have our act together,” Steve Burnham said. “But they are coming.

“We have to build a dock, there’s not really an option not to.”

Schaefer said that, if the vessels in 2019 – and any that may come in later years – cannot be accommodated, there won’t be smaller ships on standby that could fill the void.

“We just simply lose that ship on a four ship day,” Schaefer said.

Assembly Member Jay Burnham said he agrees that there is a sense of urgency to get a floating component in place, but says he doesn’t see any urgency to signing a lease agreement for the entire port.

Also during public comments, former Harbormaster Ken Russo expressed displeasure at the idea that the proposal may not come before the public in the form of a vote, as the 2015 lease proposal did.

Municipal code requires voter ratification if such an agreement exceeds $5 million dollars over the course of a lease.

“If that is the case, and if that were to happen, my personal feeling is anybody up at that table that supports not putting it to a public vote, I feel the community would be justified in looking into recall procedure immediately,” Russo said.

Hanson said the municipality has all of its eggs in the cruise ship industry, and voiced concerns about a potential recession of the economy should the municipality lose those larger vessels.

At a special session meeting on July 12, the assembly put fears of a no-vote situation to bed with a motion from Steve Burnham: Any new waterfront lease agreed to with the White Pass & Yukon Route Railroad before 2023 must pass the muster of the majority of the qualified voters of Skagway. The motion passed unanimously, 6-0.

Following the motion promising to give the people a vote, the assembly discussed the White Pass proposal line-by-line, until Schaefer called for the meeting to adjourn near the three-hour mark, and be picked up at a later date.

Working off a list of recommendations Hanson had prepared, as well as taking suggestions from public comments earlier that night, the assembly members talked over several negotiating points, including:

• Amending the 1968 annual rent payments to $250,000.

• A new lease starting in 2023 would start at $250,000, and increase annually by 3.5 percent.

• A new lease starting in 2023 would be for a 15 year term.

These points were given to give the negotiating team direction to continue the discussion with White Pass.