Getting to “yes” on the Anchorage navigation center

At our last regular meeting on June 6, the Anchorage Assembly came back to AO 2023-182, a $7 million proposal for funding to reactivate construction on the proposed navigation center at Tudor and Elmore roads. I brought a substitute proposal forward that increased the request to $11.1 million. Here’s why.

As one of 12 Assembly Members tasked with evaluating this proposal, I see our role like a governing board: We are charged with making prudent, informed investment decisions on behalf of our investors — you, the public. That’s why I submitted a substitute proposal and accompanying memo to the Assembly, summarizing what we know so far from prior work on this project. To get to “yes,” it’s our responsibility to talk about the navigation center as a capital project, in project management and financial terms.

On Tuesday, the Assembly will consider the proposal. We’ll continue asking key questions about feasibility. So, let’s set aside the political baggage, and look at the questions we, the Assembly and the public, need to ask to evaluate this project:

1. How much will this project cost to build? We have to recognize the magnitude of the cost of this project. In 2021, the original estimated cost of the project was $15.2 million. The 2021 estimate only included the cost of building the site, without finishes like furniture, fixtures, and equipment, which could cost as much as $2.5 million. Depending on how much work has already been completed, and paid for, the total remaining cost is as much as $15.7 million.

[Anchorage Assembly agrees to $2.5M settlement over unapproved construction work]

But conditions have changed since the original estimate in 2021. Construction costs, both materials and labor, increased by double digits over the last three years, reflecting big disruptions in the overall economy and the supply chain. Assuming even a lowball annual cost increase of 5%, the total capital cost for the project could be closer to $17.3 million in 2023 dollars.

It sounds like a lot, but it’s still within a typical range for a construction project, where the actual cost is between 75% to 175% of the estimate. At the highest end of that range, construction could cost as much as $20.8 million.

2. How much will it cost to operate? Both the original and substitute versions of this proposal only focus on capital funds to build the project, but a prudent board won’t talk about building a facility without also seeing a plan to operate it. I looked back to the most recent operating cost estimates put forward by the administration in October 2022, from the Anchorage Health Department and the Municipal Manager. Both estimates placed annual operating costs around $5.9 million, or about $495,000 per month, for operating and staffing a 150-bed shelter and navigation center.

For context, the Sullivan Arena — a large facility with high utility costs that provided shelter for hundreds, and without separate navigation services — cost the Municipality approximately $6 million per year. This was high for running one shelter, but also not enough to adequately deal with security needs and other impacts of that facility in a sustainable way.

Of course, these prior estimates need to be updated and verified throughout the process of getting to “yes.” Even still, the reality is that this project will cost millions to build (capital funds) and millions to run (operating funds), year after year.

3. How will we pay to build it, or to operate it? For the last few years, the Assembly has made substantial investments into housing and solving the homelessness crisis using one-time federal relief dollars and alcohol tax funds. The Municipality has also worked to get almost all of our COVID-related mass care expenses, including the Sullivan arena and non-congregate shelter costs at hotels, reimbursed by FEMA. Those funds are finite.

Beyond one-time funds and FEMA-reimbursed expenses, the Municipality has seen years of operating budget cuts, responding to rising costs and all but total reduction of state revenue sharing to local governments. The reality is that funding this project with Municipal dollars might require millions in cuts to key public services.

Realistically, that means we need a finance plan that identifies a funding source.

4. When will the new facility’s doors open and start serving clients? We have heard from many frustrated members of the public, “Please do something about homelessness!” And many people believe that, because we have begun this project, the proposal as presented is enough to get it…