Alaska Railroad Corporation Land Swap

History of the Master Lease

Imagine, or remember, a time before you were able to simply drive through the Anton Anderson Memorial Tunnel to get to Whittier. Back then, our city struggled with a modest tax base. There were no cruise ships gracing our shores, local business was scarce, and much of the land worth developing was locked up under Railroad control. With the completion of the Tunnel would come a tidal wave of traffic, which meant we needed more than just sturdy roads – we needed places to park, bustling businesses, and essential services like police and emergency responders. How could a city with such limited resources even begin to tackle these challenges? At that pivotal moment, our Council and Administration saw a solution: gaining control of the Railroad’s unused lands to manage development, boost property taxes, and secure lease revenue.

Headed to Capitol Hill

As the planning stages of the Anton Anderson Memorial Tunnel retrofit project came to a close, anticipation buzzed through Whittier. The year was 1998, and all eyes turned to the Alaska Legislature as they deliberated on House Bill 412. This pivotal legislation demanded action from the Railroad, compelling them to relinquish “non-essential” lands to the City of Whittier.

Behind the legislative chambers, echoes of testimonies resonated. Community leaders and concerned citizens spoke passionately of Whittier’s plight under the Railroad’s grip. They painted a vivid picture of a city stifled by vast land holdings and bureaucratic red tape. City officials found themselves hamstrung, unable to effectively govern and develop their community under the weight of the Alaska Railroad Corporation’s (ARRC) restrictive policies.

House Bill 412 wasn’t just about land transfer; it symbolized Whittier’s quest for autonomy and self-determination. It was a rallying cry for fairness and balance, aiming to tip the scales back in favor of local governance. The legislative debates crackled with urgency as lawmakers weighed the implications of granting Whittier control over its own destiny. However, despite the collaborative efforts and intentions behind House Bill 412, it was ultimately referred to the Finance Committee and never progressed beyond that point.

Wading into the Heart of the Issue

In the midst of growing tensions and competing interests, the Alaska Railroad Corporation (ARRC) and the City of Whittier embarked on a series of challenging negotiations to forge a path forward. Recognizing the necessity for cooperation, both parties approached the table with cautious optimism. The ARRC, understanding the city’s aspirations for growth and self-governance, offered a significant concession: the Master Lease. This agreement allowed Whittier to sublease approximately 250 acres of ARRC land, thereby empowering the city to manage development activities and bolster its tax base. In return, the ARRC retained a share of the lease revenue and maintained essential rights to ensure their operations remained unhindered. Despite the adversarial nature of their relationship, the negotiations were marked by a mutual recognition of the need to coexist and collaborate. The Railroad demonstrated a willingness to support Whittier’s future while safeguarding its own vital interests, laying the groundwork for a partnership that, while fraught with challenges, aimed at fostering community development amidst competing priorities.

Persistent Contentions

Despite all good intentions, the Master Lease has continued to be a source of contention, impacting critical infrastructure, the city’s tax base, and investment safety.

Critical Infrastructure at Risk: The Master Lease places critical infrastructure such as water wells, water mains, sewer systems, and most roads under uncertainty. These parcels could be deemed “essential” for railroad purposes by the ARRC, potentially jeopardizing Whittier’s ability to maintain and develop essential services.

Tax Base Challenges: The ARRC, as a state-owned entity, is tax exempt, which extends to its lessees and patrons. This exemption limits the City’s ability to raise revenue from commercial and industrial entities that rely on City services. Instead, Whittier must rely heavily on its 310 individual and business taxpayers to generate sufficient revenue to sustain public services.

Impact on Investment Safety: Investor confidence in Whittier is undermined by the ARRC’s authority to terminate leases if the land is deemed “essential” for railroad operations. This uncertainty significantly diminishes property values, particularly for properties with limited remaining lease terms. As a result, lenders are hesitant to finance interests held under subleases with short remaining durations, further stifling potential economic growth and development.

Alaska Railroad Corporation

The Alaska Railroad Corporation spans nearly 500 miles across Alaska, linking Seward to Fairbanks and serving as a critical lifeline for both passengers and freight. Established in 1923 and originally constructed by the U.S. government to access mineral resources, ARRC was pivotal during World War II for transporting military supplies. Today, it remains essential, transporting goods and passengers while managing extensive real estate holdings crucial for economic development.

Whittier and the Railroad: A Symbiotic Relationship

Whittier’s history is deeply intertwined with the Railroad, which recognized the town as a strategic deep-water port during WWII. The railroad infrastructure facilitated Whittier’s growth as a secondary port, supporting essential barge and train-ship services.

A Century of Service and Development

Celebrating its centennial in 2023, ARRC remains Alaska’s last full-service railroad, embodying a blend of historic legacy and modern infrastructure. Its extensive network of tracks, rail yards, and real estate holdings not only supports transportation needs but also fosters economic growth statewide. With a focus on innovation and community partnership, ARRC continues to evolve, ensuring Alaska’s connectivity and economic vitality for generations to come.

Importance of the Land Swap

The ongoing negotiations between the City of Whittier and the Alaska Railroad Corporation (ARRC) hold significant importance for several compelling reasons:

• Optimizing Resource Allocation: Whittier’s acquisition of the Tank Farm and its willingness to negotiate signify a strategic move to optimize the city’s land resources. By engaging in this negotiation now, Whittier aims to strategically utilize its assets for long-term community benefit.
• Stimulating Local Economy: The negotiation presents a crucial opportunity for Whittier to enhance its economic landscape. Through a potential land swap, the city could gain access to parcels that are strategically located for commercial and industrial development, thereby attracting new businesses, creating jobs, and expanding the tax base.
• Improving Public Infrastructure: Ownership of additional land could facilitate significant improvements in public infrastructure such as roads, utilities, and public facilities. This, in turn, enhances the overall quality of life for residents and supports the growing needs of the community.
• Enhancing Local Control: The negotiation is pivotal in granting Whittier greater local control over its development trajectory. By securing ownership of key parcels, the city can assert more influence over urban planning decisions and community development initiatives.
• Addressing Contentious Lease Arrangements: The negotiation provides an opportunity to address longstanding issues associated with the Master Lease between Whittier and ARRC. Resolving these issues can mitigate uncertainties related to land use and lease termination clauses, fostering stability and predictability for both parties.
• Fostering Collaborative Governance: The presence of committed leadership in Whittier and at ARRC underscores a proactive approach to governance. Their willingness to engage in open and honest negotiations with ARRC sets a precedent for collaborative decision-making and mutual respect.

To summarize: the current negotiations between Whittier and the Alaska Railroad Corporation are important for unlocking our economic potential, improving our local infrastructure, enhancing our community’s autonomy, and fostering collaborative relationships. By seizing this opportunity, Whittier aims to position itself for sustainable growth and prosperity while addressing longstanding challenges related to land ownership and development.