MAYOR'S CORNER
Kotzebue School Construction Funding
Week of December 7, 2003

The search for funding for a $24 million dollar expansion to the Kotzebue High School began over four years ago, prior to my election as Mayor in October of 2000. It was successfully concluded on Monday, December 1, 2003.

Schools in Alaska are funded by the issuance of bonds, with the state paying between 60 and 70 percent of the total debt service and the home municipality paying the balance. The Borough's revenue from Payment in Lieu of Taxes on the Red Dog Mine operation over the last two decades has allowed our municipality to build new schools in many of our villages, including, most recently, Buckland, Kiana, Noorvik and Ambler. However, when the Borough's share of the debt from these projects reached $46 million, our bonding capacity reached its limit. Therefore, since 1999, we have been looking for a different solution for funding the Kotzebue school project.

Our target for obtaining additional funds for bonding was the Alaska Industrial Development and Export Authority (AIDEA). AIDEA was the financing agency for construction of the Delong Mountain Transportation System, also known as the Red Dog Haul Road. Under its original financing agreement with Cominco (now TeckCominco), AIDEA receives payments based on the tonnage of ore concentrate that is hauled. In recent years those payments to AIDEA have amounted to about $17 million per year. $10 million of that amount has been applied to TeckCominco's debt and the hefty $7 million surplus has been split between AIDEA and the state. It should be pointed out that our Borough received less than $6 million in revenue from TeckCominco last year.

Cominco and then TeckCominco management has always been supportive of having the Borough utilize some of that excess payment to AIDEA to increase our bonding capacity. Eventually, we were even able to obtain agreement from the Knowles administration on this plan of action.

However, when the Murkowski administration took over, AIDEA reversed its position and discontinued communication on the subject. In reaction, our Assembly passed a resolution stating that until this issue between AIDEA and the Borough was resolved, the Borough would withhold approval of any further AIDEA-financed development affecting the Borough.

Fortunately, Murkowski Chief of Staff Jim Clark responded to this action and worked with AIDEA to negotiate a solution. Ultimately, the AIDEA board agreed to TeckCominco's plan to release $550,000 per year to pay the Borough's share of the debt payment for the Kotzebue School project.

As it turned out, there was still another battle to fight. The Alaska Municipal Bond Bank initially tabled our application for the bonding of the project. The sticking point was that the bank wanted authority to approve (or disapprove) any future bond issuances by the Borough. Again, the Borough Assembly responded by resolution that such a condition was unacceptable. Finally, in a December 1st teleconference, we earned approval of a general obligation bond issuance in the amount of $24 million with a negotiated bond sale by our underwriter John Urbina of George K. Baum and Company.

I thought I would share all this information with you because it's important for you to know about all of the effort that was expended in order to make this major project a reality. It is also important that you know and recognize all the people who worked relentlessly as a team during this process. Red Dog superintendent Bob Jacko and attorney John Norman, Assembly Chairmen Larry Westlake, Walter Sampson and Willie Thomas and the rest of our Assembly members, Representative Reggie Joule and Senator Donny Olson, Borough Finance Director Judy Hassinger, consultant Al Adams, our Attorney David Case, and John Urbina were all of great assistance in this process. I would also like to thank the Governor, Jim Clark, and AIDEA for ultimately making the right decision, even if it took longer than it might have. Finally, a special thanks goes out to Community and Economic Development Commissioner Edgar Blatchford, who was a strong and effective advocate on our behalf.

Our Borough voters have approved bonding of up to $100 million for our region's schools, and this latest project will bring our total indebtedness up to about $71 million. We will now begin looking at creative ways to find revenue necessary to enable bonding for a new school in Noatak as well as other school projects around the region.

Merry Christmas, Kotzebue. You are going to have a wonderful new school.