Permafund bonds would fund projects

More than half of capital-improvements budget would be federally funded

Posted: Monday, December 20, 2004

Federal money would cover more than half of Gov. Frank Murkowski's $1.46 billion plan for capital improvements in 2006 and almost a quarter would come from a $343 million bond package.

Earnings from a portion of the Alaska Permanent Fund based on oil and gas royalty settlements would be used to pay off bonds issued by the Alaska House Finance Corporation. State budget director Cheryl Frasca said using the fund money would not affect annual dividend checks.

Close to half of the bonds would be used on road projects to ease traffic congestion and promote tourism and resource development across the state, according to Murkowski.

Other projects in the governor's budget

• $79.5 million for Alaska Village Safe Water program.

• $20 million to upgrade Department of Administration payroll and accounting equipment.

• $30 million for renovations and maintenance for public schools.

• $2 million for rural bootleg prevention program.

• $36 million for missile defense facility in Kodiak.

• $2 million for renovation and maintenance of senior facilities in 30 communities.

• $530,00 for tourism marketing.

• $750,000 to track tourist statistics.

• $9.9 million for maintenance of state-owned facilities, including the State Office building, Dimond Courthouse, the Court Plaza Building and other state facilities.

• $100,000 for maintenance to the Governor's Mansion.

• $8 million for prison maintenance.

• $2.5 million for prison cameras.

• $25 million for medical equipment and construction of medical facilities.

• $28.5 million for refurbishment of state ferries.

Capital projects in Juneau and Southeast

• $1.4 million for preliminary design and planning for a new Alaska State Archives building.

• $310,000 to purchase wetlands on the Gustavus forelands for conservation.

• $6.4 million to build a barge for mooring ferry system vessels in Ketchikan.

• $1 million for roof replacement for the Juneau Pioneer Home.

• $1.5 million to build an overpass to connect Egan Drive with West Lemon Creek Valley at the Sunny Point intersection.

"Many of these projects offer multiple benefits to the communities in which they are located, as well as to the economic vitality of the state as a whole," Murkowski said in a written statement last week.

A $26 million initiative in midtown Anchorage would build a truck bypass in anticipation of construction of the natural gas pipeline and identify congestion problems and fix them.

The $97 million "Bottleneck busters" package also includes projects in Fairbanks, the Matanuska-Susitna Borough and the Kenai Peninsula.

In addition to roads, the budget funds construction and maintenance projects for schools and other public buildings, information technology upgrades, trail and park construction and maintenance, land purchases and grants to municipalities and organizations.

The budget includes $21.6 million for a new university science building in Anchorage, almost $40 million for the state ferry system and $100,000 to design a 28,000-square-foot aquarium in Ketchikan.

"They view this as an opportunity for another tourist attraction and the governor is very supportive of growing our tourism industry," Frasca said of the aquarium project, following the budget's release last week.

Murkowski's bond plan would use the earnings from a multi-million dollar settlement that 15 oil companies paid the state in the 1990s for undervaluing oil and gas and not paying the full value of Alaska's 12.5 percent royalty share, according to the Office of Management and Budget.

The battle over royalties began in 1977 when oil started flowing through the Trans-Alaska pipeline. In 1989, the state filed claims for $902 million. Oil companies from the so-called Amerada Hess case, named after the first company listed in the suit, paid about $1 billion in settlements through 1995.

The state deposited $194 million of the settlement money into the permanent fund and the account has grown to $424 million as of June of this year.

Earnings from the settlement are not considered when calculating annual dividend checks paid out by the permanent fund, so using it would not affect dividends, according to Frasca. In the past the settlement earnings have been deposited into the fund's principle, adding to the value of the fund.

Murkowski plans to introduce legislation to create a "Capital Legacy Fund," where the state will deposit the earnings from the Amerada Hess settlement to be held for appropriation.

If the market goes down and the account doesn't earn enough to pay the bonds, Frasca said the state might consider directing dividends AHFC pays the state to the bond package. She said the state does not yet have the specifics of the bond proposal.

Senate Minority Leader Johnny Ellis, D-Anchorage, said he is anxious to work with Murkowski to meet the infrastructure and transportation needs of the state but said he is investigating plans to use the Amerada Hess money.

"I want to see if it pencils out," he said.

Ellis applauded Murkowski's proposal to ease traffic congestion in Anchorage but said he was disappointed that no money was included to ease congestion in Anchorage at the intersection of Lake Otis Parkway and Tudor Road.

House Majority Leader John Coghill, R-North Pole, said he is taking a cautious approach toward commenting on the capital budget before studying it more closely.

"It's a cautious approach because none of us have had a chance to look at the Amerada Hess language," he said. "I can tell you that just because it's there doesn't mean it's a given."

• Timothy Inklebarger can be reached at

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