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Economic Engine

Backers say road will spur growth; critics question the numbers

Posted: Friday, March 18, 2005

The Road Series

Supporters of a proposed Juneau highway say it's just what the city's economy needs to get from here to there. "Our economy has become stagnant," said Steve Allwine, co-owner of Mendenhall Auto Sales. "I think regionalizing our commerce will help Juneau."

They also think it will bring tourists and shoppers by the tens of thousands each year.

The Alaska Department of Transportation backs supporters' claims, with a report asserting that carving a 68.5-mile link from Juneau's insular roadways to Skagway's continental highway beyond Lynn Canal would deliver the capital city up to $8.6 million a year from new travelers alone.

Accessing outside highways also would pave a new path for refrigerated fish. An economic appendix to the state's draft supplemental environmental impact statement figures the region's seafood producers could be the big winners.

There may be losers.

"We really should be calling it the Haines bypass road," said Nancy Berland, who works with Lynn Canal Conservation, a Haines-based grassroots organization.

Some road opponents say it won't stimulate the region's economy, but will shift business from Haines and Skagway to an already bigger city.

The state's economic study, prepared by the McDowell Group of Juneau, projects 50,000 to 80,000 people visiting Juneau by road annually. New visitors would spend $5.7 million to $8.6 million the first year, generating $290,000 to $430,000 in city sales taxes.

The completed road would attract 110 to 160 jobs to Juneau and increase the population by about 170 to 250, the state says. In general, projected travel is used to predict increased spending, leading to jobs.

Eighty thousand drive-in visitors may seem small in a city that attracted about 895,000 visitors last summer by cruise ship. The Juneau Convention and Visitors Bureau reported that cruise passengers and crews spent more than $160 million in 2004. But experts say independent travelers stay longer.

The Alaska Traveler's Survey found that state ferry passengers spent $80 per day during Alaska visits in 2003. Those coming from outside the region spent $160, assuming a two-day average stay.

The state study says Juneau should expect 900 to 3,400 more recreational vehicles in a road's first year. The city would need more than the 100 RV spaces it currently has, and demand would be expected to grow.

Last summer, 123,900 visitors entered Alaska by private vehicle.

Travel inflation

Emily Ferry, coordinator of the public-interest group Alaska Transportation Priorities Project, questioned the state's RV projections and the reliability of all the figures based on projected travel.

"They inflate the benefits of the road by overestimating the traffic forecast," Ferry said. She doubted a projection that 20,000 visitors from the Yukon's capital would visit Juneau annually.

"I think any (projection) that almost the entire population of Whitehorse would drive to Juneau seems a little high," she said.

As an example of overstatements, she pointed to the Whittier Tunnel project on the Kenai Peninsula. About 100,000 people visited Whittier annually by train before the tunnel opened a road link to the community 2000, she said.

The toll road was projected to bring in 485,000 to 650,000 additional visitors annually. But by 2002 state figures showed visitation only slightly ahead of the pre-tunnel 100,000.

The state hasn't predicted that Juneau consumers would get a windfall. That's largely because the method of getting goods here from Seattle - 1,200 miles by barge - isn't expected to change.

Juneau shelf stocker Northland Services expects to keep receiving goods by barge, said Jim Scholz, regional sales manager. A barge takes four days compared to 2 1/2 by truck, he said, but costs less.

Scholz believes the road would boost the economy, he said, though milk would still come by sea.

"Seattle would still be the major supply point," he said.

That's also what the state concluded.

Shipping lanes

The cost of barging a 20-foot cargo van filled with 20,000 pounds of dry groceries from Seattle is 5 cents per pound, the McDowell Group's report estimated. Trucking companies were asked to estimate the cost of 20,000 pounds of goods for the 1,715 road miles from Seattle to Juneau. They came up with about 15 cents per pound.

"This isn't about connecting you to the Lower 48," said Chuck Hamel, an economics associate for the School of Management at the University of Alaska Fairbanks. Even for "connected" Alaska, barges are the cheapest way to bring in nonperishable goods, he said.

Scholz still thinks a road connection would be good for Juneau economically.

Juneau Chamber of Commerce President David Summers said he believes the road would help business not just in Juneau, but in Haines and Skagway. He cited increased possibilities for the seafood industry.

"Our fishermen have been held back for too long." he said.

Rather than looking at the road to bring goods into Juneau, Mike Erickson wants to take things out. He owns Alaska Glacier Seafood with his son, Jim.

The seafood processing company buys what fishing boats bring in and processes it to sell along the West Coast.

A road to Skagway would increase how much seafood he could sell fresh, he said. Fresh seafood demands a higher price than frozen. "With fish, freshness is a huge issue," Erickson said.

Already the company sends out most of its filleted halibut fresh, shipping it up to Skagway by Alaska state ferry for trucking down to Seattle. Most of the salmon barged to Seattle goes out frozen, Erickson said.

The company ships some fresh seafood by air, he said, but that increases freight costs.

Flying fresh fish to Seattle in just a few hours would cost 33 to 46 cents a pound, according to the McDowell Group study. That compares with up to 15 cents a pound for the 48-hour truck trip.

One problem in trucking fresh fish now is that ferry schedules can keep it from getting out of Juneau for a day or two, Erickson said. Boats often bring in their catches at hours when the ferries aren't taking reservations.

"What the road would do would provide immediate access to the market in a more economic fashion," Erickson said.

Very little of the 5 million pounds of seafood flown or floated from Juneau annually is sold fresh, according the state's economic study. Per-pound wholesale prices for sockeye salmon are typically 30 or 40 cents higher when fresh than when frozen.

While barging the fish would be cheaper, freshness and price suffer.

Prettier pennies

Juneau already has the best airport for moving freight in Southeast Alaska. A road could make it a more natural hub for seafood processing, Erickson said.

The report points to one possible victim in the industry. Haines processors, served by a highway link, sometimes pay fishermen more for their catch than Juneau plants pay. Fishermen could have a new incentive to sell in Juneau with a road.

Allwine, of Mendenhall Auto Sales, said the vehicles he sells will continue to come up by barge. But he still believes Juneau needs a road link.

He said he already sells cars to people in Skagway and Haines, but that some shoppers go to Anchorage.

Often it is a matter of convenience.

"It's not just sales, but service," he said. Safety recalls, for instance, require dealer service. A road would open up accessibility to the dealership after the sale.

Hamel said state officials should weigh the benefits against the costs. Some businesses may stand to lose while others gain - particularly where competition has been low.

The road itself could compete with some businesses. The McDowell Group study projected demand for air taxi service could drop by half.

Mike O'Daniel, vice president of Skagway Air, said the road would "wipe us out" by taking his Skagway-to-Juneau business.

Changing times

Before the Klondike Highway connected Skagway to Whitehorse, the family business O'Daniel's father founded in 1964 would make two trips to Whitehorse in a week. "Now we're lucky to do that in a year," he said.

Specializing in tours would make the business a seasonal operation, he said. "People don't take tours in January and February."

Progress, though, won't bother him individually. At 57, he plans to retire in a couple of years.

He said he worries about the 25 employees in Skagway and Haines.

O'Daniel questioned whether the state's prediction of 30 to 70 new Skagway jobs would provide year-round employment with full benefits.

The manager of Juneau's Costco Discount Warehouse believes a road would make his store competitive over a larger area.

Mike Kryder said Costco already has member shoppers from Haines and Skagway, but many of them order their goods.

Skagway, with a peak-season population of about 800, sits about 100 envisioned road miles from the Juneau area's shopping. Its residents already drive the 108-mile road to shop in Whitehorse, where people can find a Wal-Mart and a competing Canadian discounter.

"We see a lot of Alaska plates, especially when Skagway fills up in the summer," Whitehorse Chamber of Commerce President Rick Karp said.

In Juneau this week, though, shoppers hauling groceries out of Costco said they have what they need in their own city.

"People want to get out," said Barbara Harju, a Juneau resident who grew up in Seattle. But, she said, "I can go to the end of the road, and I'm happy."

"It (a road) won't make any difference to me personally," said Darlene Derbesy, unloading a full cart into her vehicle. "But I think it will bring people in during summer."

• Tony Carroll can be reached at tony.carroll@juneauempire.com.



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