Building an industrial park in Nikiski could cost dramatically more than earlier estimates predicted, the Kenai Peninsula Borough Assembly was told Tuesday.
A preliminary draft of an industrial park feasibility study released a couple of weeks ago provided the borough with three possible park locations and three different levels of development, along with their estimated costs.
Accompanying those were estimates for construction of a Cook Inlet dock. The study draft ranged the cost of a park and dock complex between $12 million and $29 million, depending on location, level of park development and the price tag for dock facilities.
But the final version of the study presented Tuesday night by the feasibility study's authors, the Anchorage-based Northern Eco-nomics Inc., recalculated the costs based on revised dock costs and trestle works capable of reaching at least 40 feet of water. The dock, terminal buildings, fuel depots, water and waste water service and temporary staging and storage areas "could significantly increase land-use requirements" of the industrial park, Northern's study said.
The final estimates for a fully functioning park and dock now range from $20.7 million to as high as $41.5 million, Northern said. Those figures do not include the cost of acquiring the land.
The $75,000 feasibility study proposed three sites as possible locations for a park. They included a site on Cook Inlet Region Inc. land just south of the Agrium Plant, another at the old Chevron refinery north of Agrium, and a third location near the old Arness Dock near Nikiski Middle-Senior High School.
Cal Kerr, Northern's project manager for the feasibility study, said original estimates had different trestle lengths at different locations. Following testimony at a public hearing in Nikiski, engineers went back to the drawing boards and developed estimates based on a common water depth of 40 feet. In addition, Kerr said, the per-square-foot cost of the business ends of those trestles -- the actual docks themselves -- were determined to be too low, so estimates of those costs were increased. The combined effect of the revisions, Kerr said, produced the new and higher numbers.
Kerr said he thought the presentation Tuesday night before the assembly went well. So did the assembly, whose members praised the effort.
"I want to commend Northern for a doing a good job and giving us a good planning document for the future," said assembly member Gary Superman, who headed a feasibility study oversight committee. He said it was good for the borough "to be proactive" in looking at enhancing the local economy.
Superman also took time to reiterate his position that before an industrial park project is launched, the borough should have a good idea of the future availability of natural gas, a commodity upon which so much of the local economy depends.
Construction of a park and a deep-water dock isn't going to happen overnight, and likely not for many years, Superman said. The study will prove useful nevertheless, he said, promising that the oversight committee would be coming back to the assembly soon with some recommendations.
Kerr agreed a dock project may not be feasible now, but it would become so as time went on.
"There's no magic wand or pixie dust," Kerr said in an interview Wednesday morning. "But I have no difficulty in seeing that happening by the end of 2020."
Kerr said the assembly asked some good questions, especially about how small businesses would react to the advent of an industrial park and about who would handle operating costs. Kerr said they don't normally get those kinds of follow-up questions.
He told the assembly small business owners might be quite reluctant to move into a park. In fact, they might have to be urged to do so.
"They would need an economic incentive," Kerr said.
Getting a small business up and running often means incurring high start-up costs -- acquiring and clearing land, building structures, installing utilities and the like -- before an owner ever begins selling a service or product, Kerr said.
"Our estimates show that if those costs were picked up by the park and spread out over time, it might be enough of an incentive for them to move there," he said. "But a lot depends on the skill of the business owner. There are high failure rates (for new businesses)."
How a park might one day be developed could depend largely on who owns and operates it. Options include a publicly owned park, owned and operated by the borough, a park owned by private sector interests or an industrial park management authority of some kind.
Decisions on that are a long way off at this point, assembly members said, but Jack Brown, manager of the borough's Community and Economic Development Division and a member of the oversight committee, has suggested the borough consider acquiring land for a future park or find a way to make it attractive for private industry to do so and thus preserve the opportunity for a park at one of the locations.
Kerr noted an industrial park could be operated by a third party. Some successful business parks are run by management firms, such as the Anchorage Business Park, and the Alaska Railroad Corpora-tion, which runs an industrial business park on its land holdings at Ship Creek in Anchorage, he said.
An online survey conducted by Northern as it was preparing the feasibility study asked respondents what kinds of businesses they thought might fit well into an industrial park at Nikiski. Some 64 percent said warehousing and cargo handling were logical park tenants. Also rated high were a dock, equipment maintenance and repair, and light manufacturing.
Heavy manufacturing, offices and retail stores were seen as somewhat less desirable by those who answered the survey. But on a scale of 1 to 5, with 1 equivalent to "very suitable" and 5 to "not suited," no type of business listed by Northern rated poorer than the 2.79 garnered by the retail store category, which fell on the "might be OK" side of a "neutral" rating.
Respondents also listed some types of businesses not on Nor-thern's list they thought would do well, including recreational equipment retail and repair, oil and gas support services, food production, and education and training schools, to name a few.
Northern's study also focused on so-called "threats and barriers" to an industrial park.
Wetlands were seen as a potential threat and barrier to development at all three sites. Northern suggested retaining a wetlands specialist to map the three sites and take samples on the properties. Ice and currents in Cook Inlet also were seen as natural impediments to development.
Zoning issues were seen as another problem and were lumped into a category called "social threats and barriers."
"Residential areas are en-croaching on all of the industrial areas within Nikiski," the study said. "For an industrial park, certain buffers and open spaces can be designed" into a master plan. "However, the Kenai Peninsula Borough or local zoning agency might aid economic growth by anticipating future residential-industrial conflicts and restricting one or the other from specific areas."
Another problem in the social-barrier category was what to do with abandoned buildings near the park, such as those already vacant at the parks construction or vacated by companies moving into the park. Northern suggested the park owners might buy those buildings, incorporate them into the park or tear them down to produce buffer space.
Among the economic threats and barriers noted by Northern was the natural gas supply and cost pressures facing Agrium.
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