Alaska’s Key Industries: A Crystal Ball into 2004
What does the future hold?
Leaders tell what they think based on their expertise.
by Gary L. Martin
Forecasting is a frustrating challenge at best; whether it
is in the sports world or the business world, it takes a very knowledgeable and
brave person to make predictions for an entire industry.
Leaders from 18 key industries in Alaska come forward and
take their best shot at predicting what kind of year their business communities
can expect to have in 2004.
Overall, most forecasts came in on the positive side,
expecting this year to be a good one for business.
Real estate has the highest expectations. Coming off
another good year in 2003, real estate should enjoy another excellent year,
thanks in part to low interest rates and a previously depressed stock market.
The insurance and transportation industries were not so
positive, both predicting a flat year. While insurance companies may look toward
substantial price increases for workers’ compensation coverage, people in
transportation blame, in part, depressed fishing and timber industries.
Transportation does expect limited help from government
spending and the opening of some new mines, and it also hopes for some good news
from the oil and gas industry.
Alaska’s financial industry also is planning another good
year, which was greatly aided by near record-low interest rates. Native
corporations expect to continue their positive affect on Alaska’s economy, as
they continue on their path to becoming the state’s largest importers of money
from investments outside of Alaska.
Perhaps the oil and gas predictions were the most difficult
to make. With all the uncertainties around the gasline, coal bed methane gas
well drilling, ANWR and, of course, the federal energy bill, it could be a while
before anyone hits that nail on the head.
In about 10 months, we can all look back and see who was
right, who was almost right, and who might want to try again for 2005.
Comm-Tech
Liane Pelletier
President and CEO
Alaska Communication Systems
The model for “telecommunications of the future” is rooted
in customer expectations that call for service that is seamless and consistent,
whether home, work or elsewhere. If that is the customer’s expectation, then the
telecommunications company of the future must integrate its approach to
customers. That takes both integration at the experience level as well as
integration at the technology level.
Looking at the service experience fitting for home, work
and elsewhere, we have to look to information processing, in the back office,
that lashes together disparate environments and allow companies to recognize and
treat the customer on an integrated basis. Looking at the technology that
supports home, work and elsewhere activities, we have to look to wireless
expansion, voice packetization, device miniaturization, increased battery life,
sharper displays and operating systems that maintain seamlessness when users
might be crossing networks such as cellular, DSL and WIFI. Such technology and
service advancements will dramatically change the way we live. People want to be
able to connect from wherever they are, and they want to be able to do what they
normally do at home or at the office.
Given Alaska Communications Systems has assembled a broad
asset mix–wireline, wireless, voice and data as well as an entertainment
partner, we intend to be recognized as a future-proof telecommunications service
provider.
Construction
Brigitta Windisch-Cole
Labor Economist
Alaska Department of Labor
In 2003, the construction industry turned in a stellar
season. Performance was up in all divisions of the industry. A healthy mix of
public, commercial and residential construction contributed to the industry’s
best season since 1985.
Activity should continue to be strong in 2004, although
activity could head down to a lower but still sturdy level. Public construction
is expected to remain strong because large projects such as the airport and
multiple military projects will carry over to the 2004 season.
Higher mortgage rates could, however, put a damper on
residential building. Commercial construction may not reach its 2003 performance
because many projects were completed in 2003. But hotel construction and
expansions will continue.
A few other larger commercial projects will start this year
and the beginning of construction of the Pogo Mine remains a possibility.
Although it is a high-dollar project, its impact will be soft at the start-up
phase and gain strength in subsequent construction phases.
Fairbanks will remain a hot spot for construction activity
and it is possible that performance locally will be up over the 2003 season.
Military construction, the museum expansion, other projects and upcoming road
jobs show the strength of public-sector involvement.
Retail, warehousing and hotel expansions are ongoing
projects in the commercial sector. But as elsewhere, activity in residential
construction will be influenced by mortgage rates.
Environmental
Crystal Nygard
CEO PSI, LLC
The environmental and safety industries have more in common
than some would like to comment on, besides the fact that for most of the time,
one person with an organization, is responsible for both the safety and
environmental programs. This is true for both the private and public sectors.
Whereas our government identifies problems, implements
regulations and enforces them, they too realize the importance of compliance.
The local, state and federal governments govern the laws;
either way they can fuel emotions that drive this industry both positively and
negatively.
The regulations enacted will not disappear, but the
education of people from the ground floor up will only increase. This means that
at all levels of an organization, the emphasis of protecting the environment,
and in a safe manner, is of the utmost importance to development; that means
taking the time to plan, communicate and evaluate the process as a development
proceeds.
The public will continue to receive information about the
environmental and safety industries that are opinions, not fact, theory, not
practical interpretations, all based on a fine line of interpretations and how
their issue pertains to the regulations. Fortunately, this new administration,
both at federal and state levels, values the opinions, and facts of progress,
from these industries and is mandating the government to work with industry not
against industry.
This means sitting down and talking about the federal
regulations and how important it is to have the state of Alaska write exceptions
and local interpretation to the federal protocol. For example, the
transportation of hazardous waste must be completed 45 days from the time the
generator signs until the final treatment, storage and disposal facility (TSDF)
receives the material.
In the middle of summer when there are numerous shipments,
it is unusually not a problem. However, in the middle of winter, when shipments
are not as frequent, 45 days can be exceeded, and then the generator must send a
letter to the Environmental Protection Agency as notification. This is one
example of a regulation that needs to be re-examined by allowing industry to
comment and have a dialogue with those who enact the laws.
Financial
By Marc Langland
President
Northrim Bank
Thanks to low interest
rates and a strong economy, Alaska’s financial institutions saw a banner year in
2003. We think that growth will continue into 2004, though possibly at a slower
rate.
Near record-low interest
rates last year enticed thousands of Alaskans to invest in new homes or to
refinance existing loans. And because the economy is strong, Alaskans are
demanding loans that are needed to fund growth in their businesses.
We don’t expect interest rates to increase substantially in 2004, in part
because it is an election year. However, much of the industry’s continued
success relies on how and when our state leaders handle the ongoing budget
deficit, a key factor of current and future economic growth. The uncertainty of
a sustaining budget adds a high degree of uncertainty in the minds of both
individuals and business owners when making financial decisions.
Another key factor for
continued growth lies in the natural gas pipeline. If this project is treated
favorably in the Congressional Energy Bill, Alaska’s financial institutions, as
well as virtually every other industry operating in the state, could see
long-term growth opportunities.
Fishing
Gunnar Knapp
Professor of Economics
University of Alaska Anchorage
Institute of Social and Economic Research
Forecasting is notoriously difficult for the Alaska fishing
industry.
Looking ahead to 2004, as every year, the only thing that
we can be sure about is that there will be surprises. What matters most for the
fishing industry each year are catches and prices.
As of mid-November 2003, the biggest catch change on the
horizon is the possibility of a much larger sockeye salmon harvest in Bristol
Bay. The Alaska Department of Fish and Game has projected a 2004 Bristol Bay
catch of 34.7 million fish–which would be more than double this year’s catch of
14.9 million fish.
In our federally managed groundfish fisheries, including
the huge Bering Sea pollock fishery, the catch quotas for 2004 are about the
same as 2003. Catch quotas and projections for other fisheries haven’t been
released yet: the best guess is that 2004’s catches will be similar to 2003.
What about prices? Fish prices are volatile and difficult
to predict. Markets could change a lot before next summer’s salmon season. A big
Bristol Bay catch–if it happens–could further depress sockeye salmon prices,
throughout Alaska. The big 2003 pink salmon catch could lead to a buildup of
canned pink salmon stocks, which would be a drag on next year’s pink salmon
prices.
On the positive side, in recent months the value of the
Japanese yen relative to the dollar has been strengthening. That could help
those Alaska’s fisheries, which depend heavily on the Japanese market–including
sockeye salmon, herring, sablefish and pollock, because it increases what
Japanese buyers can afford to pay more in dollars.
Stewardship Council certification of Alaska pollock
fisheries as “sustainable” could help industry efforts to market once-frozen
“Genuine Alaska Pollock” in the face of competition from imported twice-frozen
Russian pollock processed in China.
Over the past few years, processors have closed salmon
processing plants in many Alaska communities, in response to difficult economic
circumstances in the salmon industry. Industry rumors suggest that 2004 could
see additional closures of one or more major salmon-processing operations. This
would further reduce market options for salmon fishermen in those areas, causing
a ripple effect on support industries such as transportation.
The industry should see substantial spending for new
federally funded marketing initiatives for Alaska fisheries, through the state’s
salmon industry revitalization efforts and the new Alaska Fisheries Marketing
Board. The board was established by Congress this year to fund grants for
fisheries marketing.
Heated political development is likely to continue this
year, over several major issues facing the fishing industry. This will include
proposals for individual processor quotas in the crab and Gulf of Alaska
groundfish fisheries, changes to the Alaska Seafood Marketing Institute, and
proposals for changing the marketing and management of Alaska salmon.
Gas & Oil
Judy Brady
Executive Director
Alaska Oil & Gas Association
On the Oil & Gas Menu for 2004: Holding oil production
steady in Alaska’s mature fields ... developing new oil and gas fields far from
existing infrastructure on the North Slope ... developing new oil and gas
reserves in the Cook Inlet. Reconfiguring the trans-Alaska oil pipeline ...
developing heavy oil ... focusing on bringing Alaska’s North Slope gas to
market.
No matter what the issues are for the oil and gas industry
in Alaska in 2004–the bottom line will be the bare bones, hard-core competition
for investment dollars.
This is not bad news; it is simply the new fact of life.
Alaska companies are hammering the “cost factor” hard–with
increased investments in technology and by concentrating on being more
efficient.
The state is also taking a hard look on how to control
costs and maintain fiscal stability on the public policy side. Gov. Murkowski is
very clear in his intent to keep Alaska competitive for oil and gas investment
dollars.
Today the industry is staying invested in Alaska.
The outlook for 2004 is one of good news–if both the industry and the state
“stay the course” on keeping Alaska competitive.
1. Oil and gas companies in Alaska are making huge
investments in Alaska right now and are expected to continue to do so in 2004.
Capital budgets for the three largest companies–ConocoPhillips,
ExxonMobil and BP, are over $1 billion in the Prudhoe Bay/Kapuruk fields alone.
Multi-million dollar investments are being made in new ships, satellite fields
and technology. New players on the North Slope, Anadarko, EnCana, TOTAL,
Armstrong, Pioneer and Winstar, have all made new investments over the past
three years and are expected to make additional investments in 2004. The Cook
Inlet companies, UNOCAL, Marathon, XTO, Forest Oil, Evergreen, Aurora Gas and
Andex continue to announce new investments.
2. Because of these investments new gas reserves are being
found and produced in Cook Inlet and oil production on the North Slope has the
potential of holding steady through the end of the decade, providing the time
necessary for new fields to be developed.
3. Alaska has “good rocks”. Reserves mean possibilities.
If Alaska can stay competitive for investment dollars, we have the possibility
for production for the next 60 years.
Great reserves, great possibilities, great challenges.
The goal is for the oil and gas industry to stay invested
in Alaska–for 2004 and for the next 50 years.
Government
By Pamela LaBolle
President
Alaska State Chamber of Commerce
The business of state government is a significant portion
of the economic pie in Alaska, so the direction the legislature and
administration will take in addressing the fiscal gap is a key issue for
business and for Alaska’s economic future.
Stricter budget discipline, some use of the Permanent Fund,
and taxes are the three elements of the fiscal-fix formula that have been under
discussion for the past few sessions and will undoubtedly be so in the coming
session.
However, 2004 is an election year, and the reality is that
difficult and potentially unpopular political decisions are rarely, if ever,
made in the year of an election. Although new revenue sources will have to be
addressed in the next couple of years, it is unlikely that any major tax program
will be enacted next year.
Over the last eight years, there have been budget cuts
amounting to about $500 million, half of which were made by the Legislature
during a five-year period in the late 1990s and the other half by the governor
this year in line-item vetoes to the budget.
Although these cuts caused some reductions in state
services and eliminated a few programs, for the most part reductions in force
have been handled by attrition. Although some fine-tuning of the budget may be
on the agenda this coming session, it is unlikely that major reductions, which
would probably mean job losses, will occur.
Without action on new revenues, it appears that budget
discipline will be the direction for the coming session. The importance of this
is not to be understated. The governor has committed to spending less in FY 05
than in FY 04 (which is less than was spent in FY 03).
The administration is being aggressive in fine-tuning the
budget in order to keep the draw on the Constitutional Budget Reserve at no more
than $400 million. This demonstrated budget discipline has already improved
Alaska’s credit position in bond sales, which translates to savings for Alaskans
in property taxes.
Anything that can be done to reduce the need for taxes is
important to the economy. As has been demonstrated on the national scene,
businesses use dollars saved in taxes to grow production and create jobs. Good
jobs in Alaska will keep our young people in the state. Good jobs also reduce
the demand and cost for social services. Good jobs provide more spending power,
which grows the economy, which expands the tax base, which builds the
infrastructure and supports a desirable level of government.
Health Care Industry
E. Al Parrish
Vice President-Chief Executive,
Alaska Region, Providence Health System
Health care has been a booming industry in Alaska for many
years, and I foresee that this trend will continue. There are, however, some
serious challenges facing this industry that could have a tremendous impact on
not only the state’s health care providers, but also on Alaskans and our
communities as a whole.
We are indeed entering challenging times in health care.
The cost of delivering care continues to skyrocket and the reimbursement
continues to decline.
With budget deficits within both the federal and state
governments, reimbursement and coverage for Medicare and Medicaid services
continues to be at risk. In addition, those who are insured through employer
plans are seeing rising costs.
This is leading to many people simply declining health
benefits due to an inability to pay the premiums and reduced benefits at higher
costs for those who continue to stay in their employer plans.
These issues are quickly leading to a growing number of
uninsured and underinsured people in our state, and, in effect, limiting access
to care for those who need it. Physicians, unable to maintain their businesses
due to poor reimbursement, are being forced to turn away Medicare patients and
those without insurance. Hospital emergency rooms are left to pick up this slack
at a much higher cost to society. I, as well as other health care leaders around
the state, am very concerned about the growing number of Alaskans without
appropriate insurance coverage and therefore access to health care. This is a
problem that affects all of us and one that will take all of us working together
to fix, not to mention increased pressure on our legislators to put a heavy
focus on this growing nationwide problem.
The convergence of these issues is leading us to a “perfect
storm,” which has the potential to change the face of health care in a very
dramatic way. I believe that we will see a major shift in our nation’s health
care industry in the not-too-distant future. When this will happen is anyone’s
guess, but we are well on our way to seeing this occur, and we will not be
immune in Alaska.
While these challenges will continue to affect us in 2004,
I am also happy to report that we continue to see increased services, new
physician specialties, and more advanced technology in our state, allowing
Alaskans to receive state-of-the-art care right here at home. Alaskans can be
very proud of their health care system and the services that are available, and
these services continue to grow in number and sophistication every day. The
focus now must be on ensuring all Alaskans have access to these services when
they need it. We, at Providence, will continue to do what we can to ensure this
issue is properly addressed at all levels in 2004.
Info-Tech
Rob Lapham
Marketing Manager,
DataFlow/Alaska Inc.
In my view, the most significant information technology
industry-related event in Alaska during 2004 (certainly with respect to IT
services) will be the continuous ramp-up to provide IT professional services to
state of Alaska agencies and, ultimately, to a majority of the other government
or quasi-government organizations in the state–from the municipality to school
districts to, say, the Alaska Railroad.
Last Thanksgiving the state published its IT standards
document, a blueprint for state agencies. This provided both a direction and
framework within which implementation of the state’s evolving information
technology infrastructures could proceed–and releasing IT acquisitions that had
been on hold for months. Most of those procurements will flow through the
Information Technology Professional Services contracts that the state has
executed with 29 IT vendors and teams, both in Alaska and Outside.
The projected value of the IT services procurements alone
is best left to state officials to estimate, but will be upward of $5 million
during 2004, and will increase from there.
DataFlow/Alaska Inc., as a member of the Unisys Corp. team,
is already seeing one result of the state’s efforts. The company is hiring more
technical and professional staff, and I believe this trend will continue. During
2004, I expect to see a continuing migration of the IT talent/labor pool in
Alaska to those companies that have received contract awards from the state.
For a list of the state’s various IT requirements, see
http://www.state.ak.us/local/akpages/
ADMIN/info/taskorder/categories.htm and for a list of the
vendors designated by the state to receive contracts under this multiple-award
procurement, see http://www.
state.ak.us/local/akpages/ADMIN/info/taskorder/revisednoiaspreadsheet.xls.
Insurance
Dick Lowell
President
Ribelin Lowell & Company Insurance Brokers Inc.
There likely will be substantial price increases for
workers’ compensation coverage, due to a substantial shortfall in the assigned
risk pool.
The Alaska Insurance Guaranty Association for workers’ comp
is also under-funded by $10 million because of failed carriers creating
additional reasons for price increases in workers’ comp coverage.
The above action will likely force broad legislative action
and reform that will put more control of workers’ comp costs in the hands of the
employer and put more of the burden of proof for claims on the backs of the
claimants. Such reform will mean that carriers will have to be prepared to take
workers as they are. Alaska currently has the second highest deficit in
uncovered claims in the nation.
Pricing for remaining insurance (all types) will likely
remain flat, a benefit for the consumer. This is because insurance companies
have returned to some profitability due to better returns from the market.
In general, capacity will not be a problem. However,
certain classes, such as liquor liability and home builders, are going to have
price increases.
Manufacturing
David Arnsdorf
President
Alaska Manufacturing Association
Manufacturing is a small part of the Alaska economy. On
average in the U.S., manufacturing is 15 percent of the economy. It is 5 percent
of the Alaska economy. There are many reasons for this.
Alaska has several structural issues that make
manufacturing here difficult. The local market is small; Alaska is far from
larger markets, and transportation to these markets is slow and in some cases
expensive. In addition, there is no large-end item (typically called OEM)
manufacturer in Alaska.
OEM manufacturers, such as Ford or Intel, buy huge amounts
of manufactured parts and services from smaller suppliers, many located
physically near to their plants. In Michigan, 50 percent of all manufacturing
firms do at least some business with the auto industry. Alaska lacks any such
large OEM, and thus is missing all the support businesses.
The key question is how can manufacturing be grown in
Alaska? What are the characteristics of successful manufacturing businesses in
Alaska? There are essentially two kinds of manufacturing businesses in Alaska.
The first sells to the local market only. Firms manufacturing and selling
locally have some clear advantages over competitors from far away. They can
respond quicker and can customize their product specifically for the local
market. And in some cases, the buyers want to buy from local producers. When
tourists come to Alaska, they want to buy souvenirs that are made in Alaska, not
China or even North Dakota. This strategy has one big weakness–the local market
is small and thus will only support a limited size, so the growth of these firms
has a clear maximum.
The second kind of firm is expressly competing in a world
market. In some cases, they are selling primarily in Alaska, but they are
selling goods where being local is of little or no advantage. The market size is
of course much larger here, but the competition is much tougher as well.
What kind of Alaskan firms can succeed here? There are
basically two market strategies –commodity and unique. Commodity goods sell
based on price. Unique goods sell based on their unique characteristics compared
to potential alternative goods. It is very hard because of the distance and
small local market to produce products that can compete as commodities.
So most successful manufacturers in Alaska who compete on
the world market compete with unique products. And, what are the characteristics
of successful unique products made in Alaska? Like unique products everywhere
there is something that differentiates them from the competition. Alaska has one
very unique resource–much of the only remaining undamaged wild seafood stocks.
Thus Alaska should be able to create a number of high-value products using
Alaska seafood that no competitors can match.
Mining
Steve Borell
Executive Director
Alaska Miners Association Inc.
International commodity prices
are the main driving force for the metal and coal sectors of the mining
industry. As a result, recent increases in prices of gold, silver, lead, copper,
platinum and some improvement in the price for zinc, are being felt in Alaska.
The mines already in operation, projects nearing development and grassroots
exploration prospects will all benefit.
The Alaska metal and coal mines
already in operation continue to produce and continue to search for and define
additional ore adjacent to their operations and to cut costs wherever possible.
The large mines currently operating are Greens Creek near Juneau, Red Dog north
of Kotzebue, Fort Knox and True North near Fairbanks, and Usibelli Coal Mine at
Healy. Numerous small family placer gold mines also operate on a seasonal basis.
Mines producing sand, gravel and
stone are dependent primarily on local construction. In addition to work in and
around villages and cities, the new resource roads being proposed have the
opportunity to be an area of growth for this sector. These mines are excluded
from business outside Alaska, due to the requirement for Jones Act vessels, but
such vessels do not exist.
The next large metal mine to be
developed in the state will be the Pogo underground gold mine, located about 40
miles northeast of Delta Junction. The Environmental Impact Statement has been
completed, and once the final permits are issued, the mine is expected to go
into construction sometime this winter.
TeckCominco is the project
operator and they estimate construction will require two years and employ about
700. Once the mine goes into operation it will employ 250 full-time workers for
at least 10 years.
The other projects, moving
toward development during 2004, are Rock Creek at Nome and Kensington, 30 miles
north of Juneau. Both projects will be gold mines.
Work in 2004 will include final
feasibility studies and completion of permitting. Both projects could
potentially be in construction by sometime in late 2005 or early 2006. Also, the
Nixon Fork Mine near McGrath is now working to develop new reserves and by late
2004 should be working on a feasibility study.
Exploration continues on several
exciting projects, with the two potentially largest, being Pebble in Southwest
Alaska and the MAN Project along the Richardson Highway north of Paxson.
Elsewhere all around the state grassroots exploration projects are being
revisited as metal prices increase.
Native Corporations
Vicki Otte
Executive Director
Association of ANCSA Regional Corp. Presidents/CEOs
Alexandra J. McClanahan
CIRI Historian
The impact Alaska
Native corporations have on Alaska’s economy continues to grow. And Alaska
Native corporations are becoming Alaska’s largest importers of revenues and
profits back to Alaska from their investments outside the state. Observers
suggest that for 2004, current trends will likely continue, with government
contracts and related partnerships a key focus of initiatives in the coming
year.
CIRI’s chief operating
officer, Mark Kroloff, has said that Alaska Native corporations are the biggest
minority success story in the nation. The most recent economic impact study,
published by the Association of ANCSA Regional Corporation Presidents/CEOs,
shows that for 2001, the 13 regional corporations and 30 village corporations
had combined revenue of $2.9 billion and assets of $2.9 billion.
Much of the focus on
new business endeavors in 2004 will be on government minority and 8(a)
contracts, according to Bob Poe, senior vice president Alaska operations for
ASCG Inc., a subsidiary of Arctic Slope Regional Corp. Poe said that while
margins for such contracts are thin, “having some margin is better than no
margin, and the government is a good credit risk.”
Poe said that the
important trend in government contracting is that Alaska Native corporations are
developing relationships with long-term Alaska businesses that have been
mainstays in the economy in the past.
“It’s not a
displacement of the ‘old guard,’ but it has created an incentive for the old
guard to work with Native corporations,” Poe said. “We will all be much stronger
for it.”
The Native nonprofit
sector’s importance also is expected to continue its upward trend. “Alaska
Economic Trends,” August 2003 issue notes that Alaska’s top 100 largest
companies in 2002 includes 17 employers that are either Native Alaska nonprofit
organizations or subsidiaries of one of Alaska’s Native regional corporations.
There were only 12 on the list as recently as five years ago.
“The list keeps growing
illustrating the increasing influence of Native Alaska institutions on Alaska’s
economy,” according to the publication by the Alaska Department of Labor and
Workforce Development.
Real Estate
Gabe Stephan
Residential Sales Manager
Prudential Jack White Real Estate
Hooray, for real estate. The industry is continuing to
enjoy much success, as it has for quite a few years now. This is due largely to
low interest rates, a depressed stock market and a strong local economy.
Real estate values continue to climb at a very sustainable
rate, and people find that in most cases they can purchase a property and pay
less per month than if they were to rent. This is true in residential as well as
the commercial market. Paying less, plus appreciation, plus tax benefits, plus
pride of ownership, plus freedom and comfort, equals REAL ESTATE. The industry
is strong and why not?
After enduring somewhat of a slowdown, as we settled in for
the winter of ‘03 and the holiday season, January always brings us a tremendous
flood of activity. With interest rates at near-record lows, the prospect for
them to stay fairly low, and our local economy doing well, the demand for real
estate will continue to be great in 2004.
Should this year play out as expected, it should bring
another wonderful strong year for the real estate industry. If not stronger than
‘03, pretty darn close. My concerns for this coming year are typical however,
and yes, I do have a few. The obvious are, rising interest rates, a local
economy slowdown, government layoffs, tourism decline due to unforeseen national
events, and maybe somewhat atypical, the national economy growing at such a rate
that the Lower 48 lures our wonderful new additions to the city and state away
from us to relocate back from whence they came. Here’s looking to a great and
wonderful 2004, and if you are a Cheechako, stick around–it’s sure to get warm
soon.
Retail
Mary Fairbanks
Marketing Director
Dimond Center
The retail industry is alive and well in Anchorage.
Consumer confidence is up and due to tax rebates, low interest rates and
Alaska’s Permanent Fund Dividend, retail sales continue to increase. Job growth
is anticipated to hold steady so this retail sales trend should continue into
2004.
Anchorage is seeing an influx of nationally known retailers
entering this market, and this in turn drives sales up. Many of these chains
have indicated that their Alaska grand openings have surpassed their openings in
the Lower 48 in sales and volume. Having these stores locally also cuts down on
catalog orders and keeps the money in Alaska.
Catalog sales account for about 6 percent of retail sales
nationally, with the Internet picking up about 1.5 percent.
Music stores have been hit hardest by the downloading of
music from the Internet. Fears that Internet sales would wipe out the “bricks
and boards” stores have been unfounded. People still want to taste, touch and
try on their purchases. And when you buy over the Internet or from catalogs,
there are shipping and handling charges to pay.
The Internet has probably helped “in person” sales by
making retailers more efficient with their inventories and more customer-service
oriented.
Sales at the Dimond Center have risen steadily and
consistently over the last five years. And with several new national chains
opening in the Center in 2004, we anticipate another great year in retail in
Alaska.
Timber
Owen Graham
Executive Director
Alaska Forest Association
Southeast Alaska road-building, logging and sawmill activity from the
Tongass should each increase in 2004. This is a result of significant
improvements the Forest Service made in its timber-sale program including:
A much greater focus on timber-sale
economics for the timber-sale program. This includes the normal timber sales,
timber-salvage sales and commercial thinning timber sales.
A number of timber sales have been
partially “preroaded,” decreasing the amount of time necessary for the
construction of access roads.
The Forest Service has sold one
10-year timber sale and plans two more for next year. This should encourage
investments and will lessen the risk of further timber shortages from the
endless environmental lawsuits and appeals.
The
regular state’s timber sale program will be supplemented with some second-growth
timber, from commercial thinning projects; the state is also helping to
reestablish the veneer operations in Ketchikan.
The
harvest from private timberlands is expected to continue at about the current
level. This private harvest activity has provided about two-thirds of the timber
industry employment in recent years.
Southcentral Alaska: The state
timber-sale program is stalled in this region because the program is mostly
focused on salvaging the beetle-killed timber. The timber has deteriorated too
much to sustain a viable timber-sale program. Local operators have asked the
Department of Natural Resources to refocus the future timber sales on green
timber.
The private timberland
harvests continue at about the same level as the last few years. Two of the chip
operations on the Kenai are reportedly closing, but one new operation is also in
the works.
Interior Alaska: The Division of Forestry provided
the following summary for their 2004 plans for the Interior Region:
Fairbanks area plans to offer eight sales totaling 3.74
MMbf (million board feet). They also have about 25 sales of
varying sizes, including some firewood sales, which have been offered in the
past, but did not sell. Those are available “over-the-counter” to interested
buyers.
Delta Area is currently advertising the two Keystone sales, which total 2.94
MMbf. In addition, another 1.5 MMbf (approx.) may be removed from the Pogo Mine
road and powerline right of way. The Delta area also has five other timber
sales, totaling more than 4 MMbf, ready to be sold whenever the market turns
around, or when they get specific requests; however, that volume is not likely
to be offered this fiscal year.
The Tok area is planning to offer the Tok River Wildlife Habitat Timber Sale,
which contains more than 6 MMbf. This will be the Northern Region’s first sale
offered under AS 38.05.123 for “the local manufacture of high value-added wood
products”. The Tok area may also offer another sale of about 500 Mbf (thousand
board feet) near Dot Lake.
Valdez-Copper River Area is planning to offer the Plumb Bob Lake Sale containing
1.5 MMbf and one or two sales on Tolsona Ridge totaling 200 Mbf.
Tourism
Ron Peck
President and COO
Alaska Travel Industry Association
Last year was another challenging year for Alaska tourism.
Estimates for the 2003 summer season were 1.2 million visitors, approximately
the same number as the 2002 summer season. The cruise industry experienced a
slight increase in travelers, growing from 740,000 in 2002 to 760,000 in 2003.
As evidenced by a 2 percent drop in airport traffic and 1
percent reduction in border crossings, the independent traveler market
decreased. We are encouraged by preliminary advanced bookings for the
independent fly and vacation market based upon early initial bookings from
hotels, lodges and tour operators. The outlook for increased road travel does
not appear to be any better in 2004.
ATIA is working with its statewide community partners and
tourism entities in Canada to identify why the long-haul road traffic to Alaska
is decreasing in spite of a boom in RV sales in the domestic market.
The addition of the Alaska Marine Highway System’s first
fast-vehicle ferry, the MV Fairweather, should have a positive influence on how
people will travel throughout Alaska. It begins service this summer and will
provide quicker access between the upper Lynn Canal and Juneau, and between
Sitka and Juneau.
ATIA believes that the international market will rebound
through continued marketing efforts and if international terrorism does not
escalate. In the German market, indications are that charter flights to
Anchorage and Fairbanks will continue to grow.
Within the Pacific Rim, both Japan Airlines and Alaskan
Vacations are considering increasing their nonstop charter flights from Tokyo to
Anchorage by approximately 25 percent over last season. ATIA will continue to
work with the Murkowski administration to obtain an increase in service from
Taiwan to Alaska.
Although tourism in the United States and Alaska had been
challenging the last three years, we believe visitor interest remains high for
Alaska because of what research has told us for 25 years; visitors are inspired
by Alaska’s mountains, glaciers and wildlife.
Transportation
David W. Haugen
Vice President
Lynden Inc.
We
are predicting a flat economy for 2004. Alaska’s economy is geographically a
mixed bag. Southeast Alaska is currently at a low level of activity and expected
to remain flat with no relief in sight, caused by the failure of its timber
industry and a depressed fishing industry.
However, federal funding for construction projects has partially compensated for
the losses of the timber and fishing industry.
The
Alaska Railbelt economy is predicted to be flat in 2004. Federal and state
funding for construction projects will provide a strong positive impact.
However, fiscal problems for the state of Alaska as well as the major
municipalities will result in reduced spending. Consumer spending is expected to
be unchanged from 2003. We expect little if any growth in marine or highway
freight volumes–to, and within, Alaska next year.
Southwest Alaska is depressed due to its dependency on the salmon industry. Bush
Alaska is reasonably strong, led by transfer payments from both the federal and
state governments, and heavy infrastructure spending due to the efforts of the
Alaska delegation.
Alaska’s oil patch will be experiencing divergent trends. The North Slope is
expected to remain slow. Exploration drilling is expected to be limited in
scope. However, prospects for the development of heavy oil are encouraging and
will require significant amounts of drilling and field development activities.
The Cook Inlet area shows signs of increased activities. Several companies are
now prospecting for new sources of natural gas as well as oil. Independent oil
companies are becoming more active throughout the Cook Inlet area and on the
North Slope.
Potentially new, or revised, projects that can impact transportation
requirements for 2004 include the possibility of new mines opening such as Pogo
near Delta Junction, increased spending for the missile defense system and other
federal spending that could translate into other new construction projects.
Activity on the Kensington Mine, in Southeast Alaska, and Donlin Creek, on the
Kuskokwim River, are likewise possible in 2004.
These forecasts are those of
David W. Haugen, of Lynden, not of Lynden as a company.
