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Weekly UpdatesAs we get ready to close the door on the first decade of this millennium and begin looking ahead in the new year, it might be fun to gaze into the corporate crystal ball with many of Alaska's key business and industry leaders to see what the future might hold. Brace yourself.
According to our "prognosticators," the consensus is that 2007 will be a good year for the Last Frontier.
Perhaps the single-most burning question remains: what about the gas pipeline? The clouded, lingering answer appears to be not if or where or how--but when?
In the commercial and residential real estate markets, the news is one of guarded optimism, as loan rates slowly inch upward. But that shouldn't prevent the industry from turning in another glowing report at year's end.
Alaska's construction picture will see a steady growth with both civilian and military sectors reaping the benefits of several huge planned capital projects.
The commercial fishing industry in Alaska may encounter some rough waters, but should be strong enough to recover in 2007, which suffered a small dip last year. Some experts credit the projected turn-around, in part, to a more assertive approach in its strategy.
Retailers in the 49th state should see a healthy economy in 2007. Many businesses will either be expanding and/or adding multiple locations.
Tourism in the Great Land is looking to continue its upward trend from last year, as bookings on cruise ships and airlines are predicted to rise, although vehicle traffic coming up the Alaska Highway saw a slight decline from the previous year.
The corporate road ahead in the following 12 months may have its speed bumps and detours, but the overall picture along the economic highway for Alaska is for a bright, scenic view of prosperity. Come along for a test drive.
COMMUNICATIONS & TECHNOLOGY
While the rest of the U.S. goes through a high-paced cycle of spending in communications and Internet Technology solutions, then cutting IT for immediate cost savings, Alaska's technology focus is steadily growing. Even in the "dotcom" boom-and-bust years, Alaska continued to expand its telecommunication and IT spending. Alaska's economy does not necessarily mirror the Lower 48, which gives Alaskans the benefit of evaluating technology at a more controlled rate.
Some influencing factors for growth in 2007 are both Alaska-specific and national:
* Microsoft will roll out new MS Office products and new operating systems. This will make plenty of work for those consumers who wish to stay current.
* The need to update legacy applications such as Enterprise Resource Planning (ERP) and financial reporting.
* The desire to provide more services to the public via the Internet.
* Providing the infrastructure to support continued economic growth, from the development of the gas pipeline to supporting the return of Alaska veterans from their military campaigns.
It is believed a lot of time will be spent expanding technologies to support Web applications. Many large projects implementing Microsoft's Net and Java development are also going to be a priority for companies that have not migrated off older equipment.
CONSTRUCTION (CIVILIAN)
For large civil construction projects in Alaska, AIC sees a lot of opportunity in three major areas. In the oil and gas sector, the continuing high price of oil will create opportunities within the oil/gas market. Current expectations are that the price of oil will remain about $50 a barrel. This will allow the industry to spend more money on oil/gas exploration. The largest future potential opportunity in the oil/gas industry is the proposed Alaska gas pipeline. Although little or no construction-related activities would occur during FY07, the aging Prudhoe Bay oil field has proven in FY06 that the major operators must reinvest substantial capital dollars to maintain aging facilities.
BP Exploration (Alaska) Inc. will spend $150 million on pipe replacement this winter as well as $500 million in overall North Slope infrastructure renewal over the next two years. There are other opportunities in onshore exploration with smaller (independents) oil companies. Exploration is expected to continue in the NPR-A. Shell has very aggressively reinserted itself within the Alaska market. Other newcomers-such as ENI Petroleum, Brooks Range Petroleum and Kerr McGee/ Anadarko--are emerging as players on the North Slope.
The opportunities within the public-works sector are practically without limits. The Department of Transportation is getting more and more projects that are bid on by either one, or in some cases, zero contractors. Along with increasing material prices, this tends to increase project costs substantially. In the FY07 capitol budget, some of the biggest capitol projects went to deferred maintenance of roads, improving transportation, university construction and the Alaska Railroad. The Alaska Railroad was given $165 million in bonding authority to improve the corridor between Anchorage and Fairbanks and a budget of $5 million for the rails extension. About $40 million of the budget will go to road improvements and extensions in the Mat-Su Borough. In addition to projects on the Glenn Highway, Hatcher Pass and South Big Lake Road, there is the immediate need to rehabilitate and repair the destruction caused by flooding late last year. Flood damage costs will be discussed in the supplemental budget as the Legislature is back at work in Juneau.
Anchorage development will continue to leap forward in the coming year. Twenty million dollars was given toward the $100 million project to extend Dowling Road to Minnesota Drive and $25 million for the Boniface Parkway/48th Street extension. Another measure in the capital budget is the $80+ million Juneau access road that would shorten the ferry ride to the capital. As requested, the governor was given the money for "roads to resources," such as building roads to gain access to mine sites, potential mining areas, or for oil companies to get access to drill for oil and gas.
The state will continue to pay 70 percent of construction of urban schools and has set aside $73 million for the construction of three new rural schools in 2007 and $90 million for five more rural schools in 2008. With $1.52 billion for transportation, $45 million for deferred maintenance, $165 million for Municipal grants, and $103 million for Village Safe Water projects, 2007 looks to be full of opportunity.
Other port and harbor projects that will surface in FY07 include an intermodel facility for Sitka. The multimillion dollar project will be the first part of what will eventually become a deep-water dock for the industrial site. Work is also under way to replace and rebuild Thompsen Harbor in Sitka, a $6.2 million project.
CONSTRUCTION (MILITARY)
The U.S. Army Corps of Engineers, Alaska District, continues to execute a robust construction program, particularly in military construction. The estimated program of military, Army Transformation, civil works and environmental work will range between $700 million to $800 million per year, until at least Fiscal Year 2009.
In FY06, the District workload was $738.6 million. In FY07, the District expects the workload to total $726.6 million, including $550 million in military construction, $50 million in Army transformation, $86.6 million in civil works, and $40 million in environmental work. Workload is defined as all expenditures for executing the fiscal year's mission. These expenditures include such things as studies, designs, labor, and payment on contracts for architecture-engineering, service and construction work.
Three large Army housing contracts are targeted for award in the second quarter of FY07, between January and March 2007. The cost range for each of these projects is $36 million to $44 million. Other military construction projects include adding and altering the physical fitness center at Eielson Air Force Base, replacing the chapel center at Eielson, a 120-room dormitory on Elmendorf, and several utility projects. For a complete list, see the Alaska District's Web site at http://www.poa.usace.army.mil/contracting/forecast.htm.
Military Transformation changes the Alaska District's role somewhat in the project-delivery process. The idea is to emulate private-sector practices with standardized facilities and processes. The goal is to tighten the timeline and stretch the dollars while providing quality facilities.
In March 2006, the Corps of Engineers created Centers of Standardization (COS). The Corps' Huntsville (Ala.) Center and seven districts around the nation have been assigned responsibility for specific types of facilities. For example, Huntsville is the center for physical fitness facilities, and Honolulu District is a center for unaccompanied officers' and transient officers' quarters. The District works closely with these centers.
Two of the first Military Transformation projects in Alaska are a troop medical clinic, and a barracks facility, both on Fort Richardson. Projected award dates for these projects are second-quarter FY07.
The District's Civil Works program has targeted several harbor contract awards in FY07, depending on congressional funding. St. Paul Harbor improvements, Phase III, at an estimated cost of $1 million to $5 million, is targeted for award in the second quarter. Unalaska Harbor, estimated at $5 million to $10 million, is targeted for a third-quarter award. Chignik Harbor, Phase II, estimated at $1 million to $5 million, and Dillingham Emerggency Bank Stabilization, estimated at $1million to $5 million, are targeted for a fourth-quarter award.
Also, depending on congressional appropriations, the District could award $1 million to $5 million each for coastal erosion, Bethel Bank Stabilization and Seward Harbor construction. Continued funding for ongoing harbor projects at False Pass, Nome and St. Paul could total $17.5 million.
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