Turnagain Times Flag Header
 Vol. 17, No. 6
Serving Indian, Bird, Girdwood, Portage, Whittier, Hope, Cooper Landing & Moose Pass  
March 20, 2014

Whittier and Alaska Railroad seek major land and asset swap

Whittier and Alaska Railroad seek major land and asset swap

Jen Kinney/Turnagain Times

Negotiations are underway for a major land and asset swap between the city of Whittier and the Alaska Railroad Corporation. One of the properties the railroad is seeking to obtain surrounds Smitty’s Cove, one of the few access points for recreational users of the marine park, but the railroad promises to maintain public access at the cove.

 

The city of Whittier and the Alaska Railroad Corporation (ARRC) are in the initial stages of negotiating a swap of land and assets that could have wide-ranging impacts for both the city and the railroad.

The city, which owns very little land in its core area, is seeking to acquire tracts that would allow for increased community development. The ARRC, Whittier’s majority landowner, hopes to acquire land and assets owned by the city that it views as critical to current and future operations. However, what land will ultimately be traded is yet to be determined.

At a Feb. 27 Town Hall meeting, former Whittier City Manager Thomas Bolen and Mayor Dan Blair made a presentation outlining the proposed trade benefits and detriments to Whittier residents and non-residents. The city, they said, would like to acquire the plot west of Glacier Avenue to Whittier Creek (Parcel 2), the harbor uplands, including the waterfront and the harbor parking lot (Parcel 3), and the southern and northern shoreline parcels at the head of Passage Canal (Parcels 4 and 5).

The ARRC would like to acquire the Delong Dock, its associated tidelands, an adjacent parcel called Tract A, and a piece of the Tank Farm property at the head of Passage Canal that is currently owned by the Department of Defense, which will be conveyed to the city in the coming year.

Blair expressed enthusiasm for the trade and said it would allow Whittier to engage in long-term urban planning, create a stabilized business environment and has the potential to attract new businesses and more year-round jobs.

Tim Sullivan, manager of external affairs at the ARRC, said he hopes the land swap will make growth for the railroad and city easier.

The swap, he said, is part of a conversation between the two entities about how lands should be owned and shared that dates back to 1985 when the state purchased the railroad from the federal government. Now, he said, the timing is right.

“The city wanted to have a conversation,” he said, “and we wanted to have a conversation about where we’ll be in the future. It’s better to have that now than in 20 years.”

At present, the city leases much of its land from the ARRC under a Master Lease, an agreement that grants the city management rights to certain parcels, including the critical harbor uplands. Under the agreement, the city is required to develop unused lands by certain deadlines or risk losing management rights to undeveloped tracts.

The city lost its rights to manage portions of Parcel 2 in 2008 and Parcels 4 and 5 in November 2012. Parcel 3 has been fully developed.

Businesses on these parcels face the challenge of building permanent infrastructure and receiving loans, since acquiring financing is more difficult on leased property than on property owned outright. The Master Lease also directs that all lease revenues collected from lands under it be split 60/40 between the city and the railroad.

“The Master Lease was good for Whittier only in comparison to what the city had before, which was nothing,” said Blair.

The city maintains that to acquire all or substantial portions of Parcels 2, 3, 4, and 5 under the land swap, the Master Lease would become unnecessary and be terminated.

As was mentioned in the Town Hall presentation, potential benefits of the swap to the city include: retaining the 40 percent of Master Lease revenues that is currently paid to the ARRC (approximately $40,000 per year), the ability to sell or lease newly acquired land to the private sector; property tax on new developments, and revenue generated by new services made possible by land acquisition, such as a new small boat harbor, launch ramp or parking lot.

The city would, however, forfeit potential revenue that could have been generated by the Delong Dock and its associated tidelands and uplands.

In 1999, legislators composed a complicated plan intended to give the city and ARRC joint ownership of the dock. The dock would belong to the ARRC, the uplands and tidelands would belong to the city, and the ARRC would lease half of the dock to the city and the city would lease half of the uplands and tidelands to the railroad. The parties never agreed on the terms of the mandatory management agreement that would govern this arrangement, so the issue was never settled. The federal government currently retains ownership of the dock, uplands and tidelands.

The ARRC, however, has repeatedly applied for and received a permit from the Army Corp of Engineers to operate the dock, charging commercial fishermen who unload their catches there. Therefore, the dock, which would have profited both parties under the co-management plan, has been profitable only for the railroad.

Under the proposed land swap, the city would waive its promised co-ownership of the Delong Dock, giving up the potential for future revenue, which the Town Hall presentation estimated at $50,000-$100,000 per year. The ARRC does lease Tract A for use in its operations, generating approximately $7,500 per year in lease revenue for the city.

At the Town Hall meeting, residents and non-residents raised concerns about the future of the Whittier Manor and Smitty’s Cove, Whittier’s access to coastline, about contaminants in the parcels being traded, and about the ARRC’s seemingly sudden desire to end the Master Lease.

The Whittier Manor, a condominium complex on railroad land adjacent to the rail yard, is not part of the proposed land swap. The Legislature has mandated that the ARRC divest itself of inessential property, said Bolen, but the Manor’s proximity to rail operations makes its land essential and vulnerable to the needs of railroad expansion.

The ARRC hopes to grow, said Sullivan, through more rail shipments, more barge service, or more rail lines. “We want to work with the folks [in the Whittier Manor] to keep them there as long as we can,” he said, but acknowledged that the possibility of relocation is real.

The Manor, the Sportsman’s Inn (adjacent to the Manor) and WorldCom Communications are not under the Master Lease but are leased directly from the ARRC. The Manor’s and Sportsman’s leases end in 2019, when they are scheduled to revert to city management under the Master Lease.

Mike Blonski, a member of the Whittier Manor Condominium Association Board, said the board would prefer to continue leasing directly from the ARRC, which has been a steady landlord, rather than leasing from the city, which may result in higher fees, a shorter lease, or other outcomes not desirable to Manor residents. The Manor’s situation will be a part of land swap negotiations as the city may mandate or advocate for a new long-term agreement between the Manor and the ARRC.

Personally, Blonski said, he is not in favor of the swap. “I want the city to sit still and become healthy rather than take on more responsibilities and more cost,” he said, fearing that with so many intensive projects already on its plate that the city will struggle to complete them.

Maritime business owners and divers also expressed concerns that if the ARRC owns all of the property surrounding Smitty’s Cove, access to the marine park could be threatened. Divers said that Smitty’s Cove is extremely unique in its ease of access and wildlife diversity.

Kelly Bender, owner of Lazy Otter Charters and president of Whittier’s Chamber of Commerce, said Whittier has been squeezed out of access to its own shoreline, which is essential to maritime business. Though generally in favor of the swap, Bender believes the loss of Smitty’s Cove would be a deal breaker.

Bolen said, and Sullivan confirmed, that the ARRC has promised to maintain access to Smitty’s Cove by improving Kittiwake Court, a platted city right of way that now drops off into a rocky cliff.

Until that road is built, said Blair, the city would ensure that the current access road remains open. Bolen has since suggested making Smitty’s Cove a public area on city land, thereby lessening the fear that the ARRC might change its position on the matter.

Business owners situated on harbor property under negotiation, like Peter Denmark, owner of Alaska Sea Kayakers and a member of the city council, expect there will be no direct impact on those businesses. “I don’t think this land swap will increase rent, or have any immediate impact on the cost of doing business in Whittier.”

The potential uses of the head of Passage Canal were also discussed. Were the city to acquire shoreline property there in exchange for a portion of the former Dept. of Defense property, a new small boat harbor and deep-water port could be constructed. The ARRC has expressed a desire to build a new WYE track on the Dept. of Defense land, which once housed an oil tank farm.

A 2012 report found the land to still be contaminated after substantial cleanup efforts, and likely suitable only for industrial purposes. Parcels 2 and 3 also have histories of contamination, from a former creosote plant and tank farm, respectively.

“If we weren’t going to buy land with contamination, there would be no land trade,” said Blair, noting that the city will be mindful that there is no liability to the city for past contamination on land it acquires. “We’re not going to get everything we want,” he said, acknowledging that while the swap could represent an unprecedented change in Whittier, it will not come without losses and pitfalls.

And it won’t happen quickly. Sullivan said that the pace of the negotiations is dependent on the city, but ultimately the trade has to be approved by the ARRC board and the Legislature, which will not happen this legislative session.

Nonetheless, Blair told the assembled crowd at the Town Hall meeting, “If I didn’t think this was a positive thing, I wouldn’t bring it before you today. That’s why we’re doing this, getting community input. We have to do this with our eyes wide open.”

 



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