North Slope Borough tightens its belt as oil property tax base declines

Posted: Monday, September 26, 2005

BARROW - Buses sit idle inside a garage, gathering dust, their only purpose these days to serve as makeshift storage bins for Alaska's largest regional government.

The seven buses once ferried residents around Barrow, the most populated community in the sprawling North Slope Borough with 4,500 people. In their heyday, the buses ran 16 hours a day, seven days a week. They were equipped with monitors that allowed riders to check their TVs at home for the precise locations of the vehicles instead of waiting in the subzero temperatures that grip the nation's northernmost town, where polar bears are known to wander and the sun doesn't rise for two months in winter.

But the borough, once flush with oil wealth, is increasingly pinching revenues. Its industrial property tax base includes the North Slope oil fields and northern segments of the trans-Alaska oil pipeline. But officials say depreciating oil property values have chipped away at borough coffers at a rate of $6 million a year - and those losses must be countered with budget reductions.

"There's this perception that the roads are paved in gold here and that we have plenty of money," said Dennis Packer, the borough's chief of staff. "A lot of people don't believe there's no money and that's unfortunate. But it's pretty straightforward."

The borough's financial problems won't be solved by crude selling at record levels since it reaps no benefit from the oil itself. Instead, the borough only is allowed to tap the aging industry properties - wells, production buildings, a network of pipelines in Prudhoe Bay and other fields - to bring in tax revenue.

Oil and gas properties account for 97 percent of the borough's property tax base, and brought in $161 million last year. The tax base is currently assessed at $10.2 billion, a $1.9 billion decline from it's peak eight years ago, said John Ames, the borough's chief financial officer.

And much of the shrinking revenue is quickly absorbed in running eight communities not linked by roads in the 88,800-square mile jurisdiction, an area almost the size of Oregon.

Borough villages were mired in third-world conditions when oil industry taxes started coming in three decades ago, and much of that bounty was spent on providing basic amenities, such as power and plumbing, according to Packer.

Even after the money began to flow, luxury wasn't the word normally used to describe conditions in Barrow, where a collection of utilitarian commercial buildings and many ramshackle houses line up along trash-strewn streets. Many residents in this Arctic Ocean community hunt and fish for much of their food, including whale, seal and caribou, so it's not unusual to see fresh kills stacked alongside four-wheelers in front of homes.

But subsistence hunting won't solve public sector financial problems, and borough officials were left with tough choices.

In the most dramatic cut this summer to slash costs, officials shut down Barrow's public transit system, stranding many poor and elderly residents in the 18.4-square-mile community, which is separated in two by a large lagoon.

Packer said the borough is working with Barrow officials to find an alternative system, such as a private shuttle service.

Whenever that happens won't be soon enough for Joe and Mary Jane Ahkivgak, who relied on the buses to get them and their four sons around town. The family can't afford a car or cheaper forms of common Alaska village transportation such an all-terrain vehicle or a snowmobile, Joe Ahkivgak said.

"There's been a lot of walking so far," he said.

When bone-chilling winter arrives in coming weeks, the couple may have no choice but to resort to taxicabs, which charge a flat fee of a few dollars.

Borough officials say bus ridership was low and brought in only $30,000 annually, far short of the $700,000 cost of maintenance and operations of the 20-year-old public transit system. It no longer makes sense to supplement such a cash drain, particularly when costs for necessities like municipal insurance and the diesel fueling village power plants are skyrocketing, officials said.

"We had to take a really hard look at transit, something that's not mandated, but optional," Ames said.

Proposed oil developments and the possibility of building a natural gas pipeline could bode well in coming years, borough officials said. But unrealized plans don't pay today's bills.

"We can't change the way we do business now," Ames said.

Downsizing throughout the region began in earnest three years ago, resulting in layoffs, merging departments, unloading residential rental properties, phasing out borough assisted care facilities, and scrapping small buses operating in villages.

One of the few museums in an Alaska Native village also faces uncertain future funding. Annual borough contributions to the Simon Paneak Memorial Museum in the Brooks Range village of Anaktuvuk Pass, about 250 miles southeast of Barrow, have shrunk by a third, from $160,000 in 2002 to the current funding of $105,000.

Closing is not an option for the community of 320 people, the last remaining settlement of inland Inupiat Eskimos with a rich culture and history to share, said curator Grant Spearman, who has managed the small museum since it opened in 1986.

So he's set up an endowment fund to create a museum foundation. The goal is to raise $3 million, an amount that can keep operations running in perpetuity.

"We know we can't be funded by the borough indefinitely," Spearman said.

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