Sitka has come a long way since a major employer left 12 years ago

Posted: Monday, October 17, 2005

SITKA - Sitka survived an attack in 1802 by the hammer-wielding Tlingit war chief Katlian. It weathered the ensuing vengeance of the Russians who poured cannon fire down on the Tlingits huddled in a wooden fort.

A century later the city once called Paris of the Pacific lost its status as U.S. Territorial Capital of Alaska. The honor and money moved 95 miles northeast to the muddy upstart mining boomtown of Juneau.

It was in 1993, however, that people said Sitka was really in trouble.

That was the year the Japanese-owned Sitka timber pulp mill shut its doors after 34 years. The mill had provided hundreds of stable well-paid jobs. With paychecks and purchasing, it generated more than 20 percent of the town's economy.

The Sitka mayor at the time, Dan Keck, said the shutdown would be devastating. Seasonal pulses of fishing and tourism would not make up for the year-round mill jobs, he predicted.

But Sitka is bouncing back again. Even the pulp-mill site out on Silver Bay is showing signs of life, with a chocolate factory, fish processing and hopes for other businesses. Jobs are up. Housing is tight. Population is holding.

Sitka newspaper editor Thad Poulson said the town has done better than it had a right to expect. In part, he said, that's because it is an attractive place to live.

"What Sitka had going for it after the mill closed was the determination of so many people to stay here no matter what," Poulson said.

Sitka is being touted nationally as an example of how a town can survive after losing its major resource industry.

Ed McMahon, a national council member of The Conservation Fund, co-authored a book about balancing nature and commerce that highlighted Sitka's comeback.

"In fact, the closure of the mill may have actually helped Sitka by improving local air and water quality and forcing the community to diversify its economy," the authors wrote in "Balancing Nature and Commerce in Gateway Communities."

State economists wouldn't go that far, but they are impressed with how the town has recovered.

"Actually, it's kind of the bright spot here in Southeast," said Neal Gilbertsen, regional economist for the state Department of Labor. "This year it actually registered some growth. Most of the rest of the area is either showing losses or flat."

Such examples are particularly welcome in boom-and-bust Alaska, where many towns are as vulnerable as Sitka was, as dependent on mining or drilling or fishing as Sitka was on logging.

The Kenai Peninsula faces a comparable blow if the Agrium fertilizer plant closes, as is feared. Ketchikan and Wrangell are suffering the decline of timber industries.

Sitka may show what is possible after the chain saws stop, but the story is more complex. Redevelopment of the pulp mill site has gone slowly, for instance. Yes, there are jobs, but wages aren't what they used to be.


Sitkans braced for years for the bottom to drop out of the local economy, saying the full effects of the mill closure might yet be felt. A dozen years after the shutdown, though, many express a cautious optimism that the worst is behind them.

It helped that the pulp corporation paid severances to workers and financial obligations on the way out of town, said Poulson, the newspaper editor. Millions of dollars in federal economic disaster-relief dollars, called "Stevens Money," after the state's senior U.S. senator, helped greatly, he said. So did an upsurge in charter fishing and related businesses, Poulson said, aided by local waters getting clearer in the years after the mill shut down.

The Sitka pulp mill shut down in 1993 amid sagging pulp markets and arguments over pollution and environmental rules. The population was at a peak of 9,083 when the mill closed.

Although there are about 200 fewer people, as of 2003, the most recent data compiled, Sitka had almost 300 more jobs than when the pulp mill was open, according to the state Department of Labor. The town has seen additional job growth since then, the state said.

But the total inflation-adjusted payroll declined from $140 million to $135 million in the decade after the closure. That fits with the loss of high-paying mill jobs and a reliance on lower-paying service jobs such as tourism and social services.

The town's strength, economist Gilbertsen said, is its wide range of employers. Many of the elements were in place when the mill closed and made it easier for Sitka to recover: There are two small universities - Sheldon Jackson College and the University of Alaska Southeast Sitka - tourism and a fishing fleet. It's also home to two major seafood processing plants.

Health care has replaced the mill as the town's biggest employer. The Sitka-based Southeast Alaska Regional Health Consortium, a Native health services organization, has expanded with the help of federal grants and employs more than 500 people.

Another bright spot is Allen Marine. The family-owned company is unique in that it builds and operates its own vessels. It employs about 80 people, has expanded its boat tours in Southeast and even built passenger ferries for New York. The state chamber of commerce named it small business of the year in 1999.


Sitka, the former capital of Russian America, has the benefit of rich history and gorgeous scenery. It is surrounded by mist-shrouded mountains and thick, dark rainforest. Slate-dark Sitka Sound is dotted with small emerald islands. Locals say it's a great place to head out in a boat and catch fish on the weekend.

Visitors think so, too. The charter boat industry reported less than $2 million in gross annual sales the year the mill closed. Now it is more than $16 million.

Cruise-ship traffic is more than 40 percent higher than in the mill days. Sitka gets about 240,000 cruise visitors a year. But after years of steady growth it dropped by 9 percent in 2004. Sitka is on the outside of Baranof Island, facing the open ocean, a bit off the popular Inside Passage cruise route.

Some argue it's also at a disadvantage by not having a deepwater dock. Cruise ships moor offshore and the passengers are lightered into town on small boats.

The town's main drag, Lincoln Street, was bustling on a sunny afternoon this summer. Cruise-ship tourists wandered the streets, stopping at T-shirt emporiums and gift shops or enjoying the new outdoor beer garden.

Old Harbor Books, at one end of the street, was full with browsing tourists and locals.

The owner, Don Muller, sat in a narrow office with Greenpeace stickers on a file cabinet and a newspaper clipping on the wall announcing the demolition of mill buildings.

The onetime pulp-mill chemist had long fought for environmental reforms at the mill. He said he didn't know the statistics but the town seemed to be doing well.

"I wouldn't trade it for the old days for anything," he said.

Sitka's mayor and downtown mailman, Marko Dapcevich, was out on his postal rounds nearby. He took a break to reflect.

"We're probably holding our own. We've weathered it pretty well," he said.

But Dapcevich said he sees possible rough times ahead with the prospect of reductions in state and federal dollars. The Coast Guard and U.S. Forest Service are major employers, with government-dependent education and health care.

Poulson said there are problems. He said there is a housing crunch, which he believes is worsened by a trend of short-term rentals catering to visitors. There's also the shift to a more service-oriented economy and the fact wages never fully recovered from the closure of the pulp mill.

Former mill worker Melody Owens agreed.

She said her family was barely able to keep its house after the shutdown and a lot of mill workers lost theirs. Owens said she has had to work long hours at multiple jobs.

"You see where guys have fared all right. But a lot of them never did get on their feet," she said. "When you are used to making $18, $20 an hour, well you couldn't go out and get a job like that."


Six miles from downtown Sitka, a quiet collection of squat old industrial fixtures fronts a magnificent bay. It's the site of the old pulp mill, handed over to the city in 1999.

Sitka leaders hope the future lies here.

Open the door to one of the buildings and there's the sound of rock music and the smell of chocolate. It's the kitchen of Theobroma Chocolates, which employs seven people and ships gourmet chocolates to Alaska stores and nationwide. The Sitka chocolate bars are even gobbled up in the cafeteria of the Smithsonian's National Museum of the American Indian in Washington, D.C.

Company owner Ed Iwamoto said redevelopment of the old pulp mill has lagged, with businesses coming and going. But he's enthusiastic about a proposal to build a cruise-ship dock at the mill site.

The city and borough of Sitka has put about $11 million into the pulp mill site, largely through federal grants. Hugh Bevan of the Sitka Economic Development Association said it costs the city $436,000 a year to operate the site.

It's a money loser but that could soon change, he said. "I would say there is an excellent chance in the next 12 months that the site will develop very rapidly and become a net generator of revenue," Bevan said. "All in all there is a lot going on."

A fish processor at the mill site, Baranof Frozen Foods, is planning to double its number of employees to 35, Bevan said. There is funding for a fish hatchery there and a company hoping to use the mill as a base to export clear, pristine water to foreign countries.

There is already a water-bottling plant at the mill. Called True Alaska Bottling, it is the mill site's major employer, providing about 20 jobs. The company is perhaps best known outside of town as Alaska Airlines' bottled-water supplier.

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