By Lex Treinen and Rashah McChesney
Borough officials are on edge waiting for news from the federal government about where the $25 million Lutak Dock replacement project stands after revelations that its contractor ordered millions of dollars worth of steel before getting approval.
“We really don’t know anything until MARAD responds to us,” said borough manager Annette Kreitzer in an interview Jan. 12.
Last year, the U.S. Department of Transportation’s Maritime Administration (MARAD) committed $20 million to the project with the borough funding the rest.
Late in December, emails were publicized from Turnagain Marine Construction, which is building the dock, showing it had started a purchase of $10 million of steel for the project before it had approval from MARAD. That could violate federal rules, which require environmental permits to be in place before project construction can begin. Borough officials said they didn’t give approval for the purchase either.
The agency asked for answers from Turnagain and borough officials about exactly where the purchase stands.
Kreitzer sent a letter to respond to 14 questions from MARAD about the project that included answers from Turnagain.
As of Jan. 16, the borough hadn’t received a response from MARAD. Efforts by the assembly to set up a meeting with MARAD officials have fallen through.
“My last email to them was ‘So this steel thing, is this a speed bump, a hurdle, or a brick wall. What did we hit here? No response,” said borough mayor Tom Morphet, “It’s very frustrating because the fate of the project is in their hands.”
Morphet and Kreitzer said that R&M, the company contracted as the advisor for the borough, assured them in a phone conversation that Turnagain hadn’t done anything against the rules.
Assembly member Natalie Dawson said even if MARAD decides that there were no violations of its rules, the borough could still face lawsuits from environmental groups or tribes if they believe it didn’t follow federal rules.
“They’re not actually the only decider,” said Dawson. “All the time federal agencies are sued by outside entities because they’re not in compliance with the law. If that happens, who bears the responsibility?”
Status of purchase
In emailed responses to MARAD prepared by Turnagain, the Anchorage-based contractor insisted it hadn’t made any payments for the $10 million worth of steel.
In November, the company said in an email to the borough that it had “completed 38.1% of the contract work for a total value earned of $9,741,114.61. The majority of this cost is associated with securing the steel pipe piling.”
In answers to MARAD’s questions sent on Jan. 10, the company wrote that “Steel has not been received and no payments have been made.”
Morphet said he believes the confusion about whether or not the steel had been “purchased” was at the root of MARAD’s investigation. The company hasn’t provided a receipt for the purchase but said they issued a purchase order to the steel supplier, which “locked in pricing and secured space in the 2024 mill rolling schedule” for batter piling material and O-piling material.
“A lot of people might say, ‘If they have bought the steel, why isn’t there a receipt?’ And I think the answer is they haven’t bought the steel in the way that we think people buy things,” said Morphet.
Still, Morphet and Kreitzer said they didn’t have any insight into what MARAD’s concerns are — or what the risks might be to the project.
The borough is facing a Sept. 30 deadline for having a signed grant agreement and permitting. Some assembly members have questioned the need for the $25 million design, which would allow the dock to be used industrially.
The aging dock is more than 50 years old and has been slowly sloughing away from shore, opening potential sinkholes near the mooring sites. Turnagain’s design, selected from a small handful of alternatives, would encapsulate the area with steel pilings to keep it from further deteriorating into Lutak Inlet.
Lynn Canal Conservation, a local conservation group, raised questions about the projected long-term maintenance costs of the design. In a white paper released earlier this year, they wrote that revenue from user fees would likely fall short of maintenance costs, and the burden would ultimately fall on Borough residents, whether through increased freight and fuel prices or higher taxes. MARAD’s grant pays for the construction of the new dock, but not maintenance.
Assembly frustration
At a recent assembly meeting, member Kevin Forster asked for a full cost analysis for maintenance of the current dock design compared with the other alternatives that were proposed.
Meanwhile, some members of the public have accused the assembly of putting at risk the $20 million federal grant even though there hasn’t been any concrete suggestions about changing the design of the current project.
Morphet said the timeframe for changing the project appears to be fast dwindling.
“I’m just speculating that we’re probably past the point of being able to get a different design in,” he said.
Assembly member Natalie Dawson, who has voiced skepticism about the need for the current design said the situation has been awkward for assembly members to navigate.
“It’s a hard one because it just feels like we didn’t do the right process from the start, but now it might be too late to change designs,” she said.
Forster insisted he doesn’t want to jeopardize the current project, but said getting the final economic analysis of the current design will be important.
“It feels totally premature to say I would advocate for one design over the other without having that cost-benefit analysis, which we should have had already,” he said.
Assembly – Manager tension
The controversy around the dock has highlighted tension between assembly members and the borough manager. Especially when it was revealed that Kreitzer had received an email about Turnagain Marine Construction’s steel purchase for more than a month before communicating it to assembly members.
Kreitzer has attributed that lapse to going on vacation and said she regretted not prioritizing the issue.
“I know that we’re in the middle of finding out about MARAD and FEMA and some of the other issues that you want to know about, compounded by when I went on vacation that you hadn’t seen a borough manager report in a little while. I think that some people took that I wasn’t going to communicate with the assembly,” Kreitzer said to assembly members during a Jan. 9 meeting. “It was just time pressure and work pressure and not being able to get those borough manager reports out.”
Assembly members and Kreitzer had a wide-ranging conversation about what is and is not working during that Jan. 9 meeting.
The group talked about communication, and when to bring the assembly in on key communication on projects.
Kreitzer said she has a tendency to wait to provide information until she can also give relevant context.
Morphet criticized that process.
“I think, from what I’ve been able to tell, you’d like to have a response to the bad news before you report it,” he said. “I think the assembly… would probably rather hear ‘this is the bad news, I’m working on it.’”
The group also discussed Kreitzer’s workload.
Forster said from his conversations with staff in the borough, Kreitzer is well-regarded among staff and also overworked. It came up during the meeting that she has nearly 1,000 emails waiting for responses.
“To me, that suggests that we have to change something here because if people aren’t hearing back from the manager there’s an assumption that the manager .. and city hall is not responsive,” Morphet said.
Assembly members also considered the idea of hiring someone to assist the manager, though they didn’t take any action on that idea.
The assembly voted to have its Government Affairs and Services Committee draw up a template for a comprehensive manager’s report that members could see each meeting.