Page 1

HEALTHCARE | BUILDING ALASKA | TOP BUSINESS STORIES OF 2015 | COOK INLET OIL & GAS

December 2015

New Special Section!

Franchise & Business Opportunities

$3.95

TOP of the FOOD

CHAIN

Alaska Franchise Success


Drive customers from online to waiting in line. The Berry Marketing Engine. Everything you need to market your business in the 21st century—simplified.

Content | Websites | Search | Directories | Dedicated Service

Learn how the Berry Marketing Engine can simplify your online marketing at BerryMarketingEngine.com.

888-653-8060


D E C E M B E R 2 0 1 5 | TA B L E O F C O N T E N T S ABOUT THE COVER

Anchorage McDonald’s headquarters sits at the corner of Northern Lights Boulevard and Arctic Road in Midtown Anchorage. The arches of McDonald’s are legendary and iconic symbols of the power of franchise name recognition and business models. Read about other successful franchises in Alaska in our new special section (begins on page 74).

DEPARTMENTS From the Editor������������������������������������������ 7 Right Moves����������������������������������������������86 Inside Alaska Business��������������������������� 88 Agenda ������������������������������������������������������91 Alaska This Month ����������������������������������92 Events Calendar���������������������������������������94 Alaska Trends��������������������������������������������95 Ad Index ����������������������������������������������������98

Cover photo: © Chris Arend Photography Cover design: David Geiger, Art Director

ARTICLES

Business

8 | Top Business Stories of 2015 By Tasha Anderson

Expanded in Digital Edition

Oil & Gas

16 | Renewed Promise of Cook Inlet Oil and Gas Resources are truly consequential By Judy Griffin 22 | Governor Bill Walker’s Trip to Japan Commercializing Alaska’s untapped LNG potential By Kirsten Swann

Financial Services

24 | Mobile Business Banking Applications New and improved from Alaska financial institutions By Tracy Barbour

8 Dalton Highway flooding, May 27, 2015. © Alaska DOT&PF

Financial Services

28 | Early and Consistent Savers Win Retirement Race Younger workers have ‘time on their side’ By Rod Shipley Courtesy of the Office of Governor Bill Walker

Business

30 | A Good Business or a Good Investment Which do you have? Which should you have? By Mel B. Bannon

Insurance

32 | Why Insuring Principal Employees and Owners May Keep Your Business Operating By Tom Anderson

DIGITAL EXCLUSIVES Alaska Native Business

First Annual Alaska Native Business Summit Well-attended event deemed a success

Education

22 Alaska Governor Bill Walker and Tokyo Electric Power Company President Naomi Hirose in September during the governor’s trip to Japan to meet with prospective customers for Alaska’s LNG. 4

STEM Materials Donated to Local School

Philanthropy

Bean’s Café Honors Volunteers

Alaska Business Monthly | December 2015www.akbizmag.com


December 2015 TAB LE

OF

special section

special section

Healthcare

Building Alaska

CONTENTS

38 | The New Age of Healthcare Aging Alaska means more healthcare needs and jobs By Will Swagel 44 | Joint Replacement Best Practices Anchorage doctor recommends ‘tried and true’ By Molly Dischner 46 | Occupational Healthcare for Older Alaskans Niche providers see increase in delivery By Louise Freeman 50 | Behavioral Health Access for Alaskans Big challenges are geography, availability, workforce, and cost By Molly Dischner

62 | Military Construction Marches Forward in Alaska Down $11 million from 2014 By Kirsten Swann

ARTICLES

66 | Safety and Behavioral Economics Making choices and decisions in the workplace By Brian McKay

36 | The Affordable Care Act: What Employers Need to Know for 2016 By Melanie K. Curtice

Expanded in Digital Edition

Environmental Services 54 | Environmental Labs and Testing Services Keeping Alaskans healthy By Tom Anderson

Alaska Native Corporations

57 | Alaska Native Village Corporations with Regional Corporation Levels of Success By Russ Slaten

Courtesy of Brice Incorporated

A Brice Incorporated dozer works on safety improvements at the Kotzebue Airport.

52 | Healthcare Construction Projects in Alaska By Russ Slaten

Legal Speak

6

72

68 | Rebuilding Alaska: Breathing New Life into Kake’s Historic Cannery Reconstruction project to incubate business and stimulate rural Alaska economy By Bethany Goodrich 72 | AGC of Alaska Awards Top Contractors

special section Franchise & Business Opportunities 74 | Risks and Rewards of Franchise Business Opportunities Name recognition and proven business models can reduce risk By Julie Stricker 76 | Alaska Franchises: Top of the Food Chain A handful of success stories By Julie Stricker

82 | Franchise Construction and Remodeling Strict adherence with variations in freedom By Rindi White 85 | Lease Negotiations Ten tips for business tenants By Jeff Grandfield and Dale Willerton

Alaska Business Monthly | December 2015www.akbizmag.com


FROM THE EDITOR

Follow us on and

Volume 31, Number 12 Published by Alaska Business Publishing Co. Anchorage, Alaska Jim Martin, Publisher 1989~2014

EDITORIAL STAFF

Managing Editor Associate Editor Associate Editor Art Director Art Production Photo Consultant Photo Contributor

Susan Harrington Russ Slaten Tasha Anderson David Geiger Linda Shogren Chris Arend Judy Patrick

BUSINESS STAFF

President Billie Martin VP & General Manager Jason Martin VP Sales & Marketing Charles Bell Senior Account Mgr. Anne Tompkins Senior Account Mgr. Bill Morris Account Mgr. Janis J. Plume Accountant Ana Lavagnino 501 W. Northern Lights Boulevard, Suite 100 Anchorage, Alaska 99503-2577 (907) 276-4373 Outside Anchorage: 1-800-770-4373 Fax: (907) 279-2900 www.akbizmag.com Editorial email: editor@akbizmag.com ALASKA BUSINESS PUBLISHING CO., INC. ALASKA BUSINESS MONTHLY (ISSN 8756-4092) is published monthly by Alaska Business Publishing Co., Inc., 501 W. Northern Lights Boulevard, Suite 100, Anchorage, Alaska 99503-2577; Telephone: (907) 276-4373; Fax: (907) 279-2900, ©2015, Alaska Business Publishing Co. All rights reserved. Subscription Rates: $39.95 a year. Single issues of the Power List are $15 each. Single issues of Alaska Business Monthly are $3.95 each; $4.95 for October, and back issues are $5 each. Send subscription orders and address changes to the Circulation Department, Alaska Business Monthly, PO Box 241288, Anchorage, AK 99524. Please supply both old and new addresses and allow six weeks for change, or update online at www.akbizmag.com. Manuscripts: Send query letter to the Editor. Alaska Business Monthly is not responsible for unsolicited materials. Photocopies: Where necessary, permission is granted by the copyright owner for libraries and others registered with Copyright Clearance Center to photocopy any article herein for $1.35 per copy. Send payments to CCC, 27 Congress Street, Salem, MA 01970. Copying done for other than personal or internal reference use without the expressed permission of Alaska Business Publishing Co., Inc. is prohibited. Address requests for specific permission to Managing Editor, Alaska Business Publishing. Online: Alaska Business Monthly is available at www.akbizmag.com/Digital-Archives, www.thefreelibrary.com/Alaska+Business+Monthly-p2643 and from Thomson Gale. Microfilm: Alaska Business Monthly is available on microfilm from University Microfilms International, 300 North Zeeb Rd., Ann Arbor, MI 48106.

www.akbizmag.com

© Patrick Endres / AlaskaStock.com

Get Ready for the Big ‘R’

R

starts a lot of words—good, bad, and indifferent—some words just are. The big “R” word Alaskans are holding their breath for these days is recession. In Anchorage’s first one hundred years there have a been a few, the first one probably occurring after the completion of the railroad when those thousands of railroad workers left and the community heard the first whoosh as all those workforce wages disappeared from the new economy. Looking statewide, though, better known Alaska recessions are more recent—1977, 1985, 2009. The one that began in 1977 happened after the trans-Alaska oil pipeline was complete and thousands of pipeline jobs disappeared. The 1985 recession has been attributed to the price of oil; however, it happened after the state-funded mega projects known as Project 80s were complete and the banks fell when the housing market crashed. The most recent one, the one that began in 2009, was a delayed reaction in Alaska to the 2007 “subprime spillover” national housing market crash that lead to the stock market crash and national recession in 2008-2009 and lasted until the federal government’s stimulus program and bank bailout pumped trillions of dollars into the national economy. This recession, Alaska’s latest recession—some say it began in summer 2014 and some say it is likely to begin soon—will probably be long and hard. There will be no big money bailout, no federal stimulus package, no state spending spree, no oil price recovery to $100 barrel—no cure save time and economic growth. So what can be done? Well, a recession is somewhat akin to anxiety in that eventually it will pass—here are a few “R” words that can help until it does.  Retire: A lot of people are retiring. What better way to avoid the recession altogether? Retire. (Not everyone can do this.)  Reality Check: Many are taking stock of where they are with what they have. Know what’s real when it comes to revenues, finances, holdings, budgets, expenses, incomes, and likely outcomes. (Everyone can do this.)  Reduce Debt: Others are reducing debt, retiring debt, restructuring debt, or in some way or another dealing with debt.  Revise: During a recession many things need revised—start with spending and saving patterns. Now is the time to revise budgets, plans, and the like.  Read: Keep reading to stay informed—know what’s going on. Read Alaska Business Monthly, we’re going to continue to bring stories from the Alaska economy, including many with words of wisdom from statewide leaders in the business community and beyond as we rally during this next recession. You’ll see when reading the December issue that the team has put together another really great magazine. Enjoy! —Susan Harrington, Managing Editor December 2015 | Alaska Business Monthly

7


BUSINESS

Top News Stories of 2015 Compiled by Tasha Anderson 2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

January

48.874 103.819 109.876 111.871 92.557 79.335 39.011 91.159 51.523 62.846 41.125 33.100

February

53.845 106.297 112.757 119.647 96.786 76.741 42.776 94.422 56.998 59.262 43.589 33.660

March

52.279 107.907 108.930 122.678 115.341 79.451

April

58.486 107.362 104.576 120.945 120.860 82.232 46.558 112.370 63.916 67.737 49.749 35.430

May

64.373 108.060 104.423 110.546 113.567 74.231 58.234 125.412 64.755 69.316 46.772 39.066

June

64.401 110.757 104.006 98.063 111.079 75.664 69.797 133.776 69.109 69.500 53.674 36.729

July

56.197 107.634 111.341 103.748 114.469 76.529 64.530 132.871 75.930 73.104 56.671 39.440

August

48.257 101.778 110.568 110.792 106.948 75.783 71.523 115.976 73.830 71.738 62.400 43.124

September

48.830 96.053 110.483 111.937 113.736 75.266 69.200 101.862 79.720 62.330 63.467 42.707

October

48.200 84.905 104.820 107.297 110.836 82.406 74.275 73.650 84.770 54.268 60.369 48.560

47.747 105.063 59.007 60.607 50.632 35.505

November

77.407 101.284 105.235 115.580 83.928 76.524

December

60.902 108.190 107.305 106.546 89.747 75.117 37.699 88.638 58.132 57.169 36.658

53.94

92.982 54.261 56.108 42.151

ANS West Coast Average Spot Prices for the last dozen years have fluctuated a great deal and are not so far off today from $33.10 a barrel in January 2004. State spending grew to new highs over the last few years, now viewed as unsustainable levels of spending.

15 AAC 55.171 (m) specifies how the average spot price for ANS at the US West Coast during a month is to be calculated for purposes of determining prevailing value. For the convenience of taxpayers and the public, the Tax Division calculates the average spot price each month and publishes the result on its web page. However, the Division does not guarantee the accuracy of these calculations, and in the event of a discrepancy between a calculation published here and the true average spot price as provided by the regulation, the provisions of the regulation control.

Mega Projects Put on Hold

Then newly-elected Governor Bill Walker issued Administrative Order No. 271, which halted “to the maximum extent possible” discretionary spending on six projects: the Ambler Road project, the Juneau Access project, the Susitna-Watana Dam project, the Kodiak Launch project, the Knik Arm Crossing project, and the Alaska Stand Alone Pipeline project. While the order was issued in 2014, the effects of the state’s fiscal difficulties, as represented by this order and other state government actions, were felt throughout 2015, making the year uneasy for large and small businesses alike statewide. Source: Alaska Administrative Order No. 271

Oil Prices Drop

In August 2014, oil prices had fluctuated slightly down to about $101 per barrel. By December 2014, prices plummeted to $60 a barrel. In January of this year, the average price for oil was $48.87 a barrel. While oil 8

prices did rise to $64.40 a barrel in June, by the end of the year they had dropped again. The lowest average price for 2015, according to data available at press time, was for October at $48.20 a barrel. Source: Alaska Department of Revenue Tax Division

Alaska State Budget Deficit

In February Governor Walker announced the fiscal year 2016 (July 1, 2015 through June 30, 2016) budget, specifically that that budget had a $3.6 billion deficit, “leading us to draw about $10 million every single day from savings,” the governor said. The budget issue arose from a decline in state revenues due to a massive drop in oil prices in late 2014. More than three hundred state positions were eliminated as just one method of reducing state spending, though the state attempted to limit layoffs by cutting vacant positions and through retirement, resignations, and transfers. Cuts spanned across services provided by the state, including capital funding, state op-

erating costs, education, and transportation.

Source: Office of the Governor

Dalton Highway Flood

Governor Bill Walker declared two state disasters in response to flooding that made the Dalton Highway impassable. Beginning March 13, the Sagavanirktok (Sag) River overflowed the Dalton Highway between MP 390 and MP 405 in multiple locations, with the overflow level as much as thirty inches higher than the road in some areas. At 12 a.m. May 18, the Alaska Department of Transportation and Public Facilities closed the Dalton Highway again at MP 394 to MP 403 due to extreme flooding of the road. Water up to two feet deep was reported over the road. The Dalton Highway reopened to traffic after an eighteen-day closure: Traffic began moving on the road at 8 a.m. June 5. The highway was open to two-way traffic, but drivers encountered a section with flaggers and pilot car at MP 412 to MP 414.

Alaska Business Monthly | December 2015www.akbizmag.com

Source: Alaska Department of Revenue Tax Division

$ Per Barrel


mobile communications wherever you need it AT&T Remote Mobility Zone – critical communications for dark zones and disaster situations When your organization needs cellular and Internet service and none is available, the AT&T Remote Mobility Zone can get you connected, typically in less than 30 minutes. It’s a highly portable cellular communications site that links to the AT&T cellular network, providing service where you need it most. att.com/armz 800.955.9556

Š2015 AT&T Intellectual Property. All rights reserved, AT&T, the AT&T logo and all other AT&T marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners. This document is not an offer, commitment, representation or warranty by AT&T and is subject to change.


It was estimated that emergency repairs would cost $7 million, and $2 million of Emergency Relief funds from the US Department of Transportation’s Federal Highway Administration were made immediately available in May. Hundreds of truckloads of goods, supplies, and fuel destined for North Slope oilfields were backed up in Fairbanks throughout the disasters. Lynden reported that more than three hundred of its trucks were backed up in Fairbanks during the first closure and initially approximately thirty trucks were stuck on the Prudhoe Bay end of the highway. In an attempt to keep fuel and supplies moving northward, Lynden transferred truck cargo to rolligons and Steigers, as well as moving some items in Hercules aircraft. Sources: Alaska Department of Transportation and Public Facilities, Office of Governor Bill Walker, US Department of Transportation, Lynden

DOE Approves Alaska LNG Exports Department of Energy officials announced the license approval in Anchorage at a roundtable on the federal permitting process hosted by US Senator Lisa Murkowski. “Receiving the conditional license to export LNG to non-free trade agreement countries is a major milestone for the Alas-

ka LNG project and great news for Alaska,” Murkowski said. The license, which would allow exports of up to 2.55 billion cubic feet of natural gas a day for thirty years, is conditional on final regulatory approval of the project by the Federal Energy Regulatory Commission. Source: US Senate Committee on Energy & Natural Resources

Alaska Loses Pioneer and Banking Leader On May 12, Daniel Hon Cuddy passed away in Anchorage at the age of ninetyfour. Cuddy assumed the role of president of First National Bank, having purchased stock for years and ultimately attaining a controlling interest, at the age of thirty in 1959. He grew the bank from $25 million in assets to $3 billion. In addition to his life well lived, he was an icon in the Alaska business community. Source: First National Bank Alaska

Providence Alaska Medical Center Designated Level II Trauma Center Providence Alaska Medical Center was designated as a Level II Trauma Center. The hospital received verification from The

American College of Surgeons and certification from the Alaska Department of Health and Social Services. “This designation is a powerful example of our hospital and physician partners working together to provide optimal trauma care for all patients,” said Richard Mandsager, MD, chief executive, Providence Alaska Medical Center. “This is just one step along our journey of always working to deliver the best patient care and outcomes.” Providence works cooperatively with Emergency Medical Services and the state’s other Level II Trauma Center, Alaska Native Medical Center, to ensure trauma patients in Alaska receive the best possible care, as quickly as possible. Source: Providence Health & Services

Healy Unit 2 Power Plant Fires Up Golden Valley Electric Association fired the boiler at the Healy 2 power plant for the first time since 1999. The plant was fired on oil at 5:21 p.m., May 28. Healy 2 will double the amount of coalfired generation in GVEA’s portfolio. Fluctuating oil prices and unpredictable natural gas-fired power from Anchorage have led to price spikes. Coal prices are much more predictable, which should help the

Special Olympics Alaska Training Facility 10

Alaska Business Monthly | December 2015www.akbizmag.com


6602_16399 7 x 10 4c

Helping build businesses across Alaska

No matter what stage your business is in, Wells Fargo may be able to help you with the financing you need. We have lending options, including: • Commercial real estate loans • Construction loans • Equipment financing

• Vehicle financing • Lines of credit • And more

Plus you’ll also have a dedicated business banker to help you along the way. By getting to know you and your business, our experienced business bankers can tailor options to help meet your specific financial needs. Come see a Wells Fargo business banker about financing the growth of your business today. wellsfargo.com

All credit decisions subject to credit approval. © 2015 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. (1596602_16399)


co-op stabilize rates. Usibelli Coal Mine is gearing up to supply the fuel, which will be delivered by truck. Work will continue at the plant for the next two years. Environmental controls and a new warehouse are being built adjacent to Healy 2. The environmental controls are scheduled for completion in summer 2017. Source: Golden Valley Electric Association

ASRC Reaches Historic Milestone For the first time since incorporation, Arctic Slope Regional Corporation (ASRC) distributed more than $1 billion to the other Alaska Native regional corporations as part of its 7(i) obligation. 7(i) distributions are made annually; a recent payout from ASRC was approximately $125 million. “Every region in the state benefits from ASRC’s 7(i) distribution, and the more than a billion dollars in total is a testament to the hard work and dedication of ASRC employees, as well as the importance of responsible natural resource development,” said Rex A. Rock Sr., ASRC president and CEO. “However, in light of this milestone, it’s an important reminder that oil production continues to decline on the North Slope. That decline in production as well

12

as low oil prices will likely affect future 7(i) payouts.” Source: Arctic Slope Regional Corporation

Shell Allowed to Drill in Arctic

The Interior Department gave Shell approval of one Application for Permit to Modify (APM) to conduct exploratory drilling activities into potential oil-bearing zones offshore Alaska at one of the wells at the Burger Prospect, Burger J. The company remained limited to the top section of the Burger V well. Shell submitted an APM on August 6 to modify the Burger J Application for Permit to Drill, which previously restricted Shell from drilling into oil-bearing zones since a capping stack was not on hand and deployable within twenty-four hours, as required by BSEE. The Burger Prospect is located in about 140 feet of water, 70 miles northwest of the village of Wainwright. Source: Bureau of Safety and Environmental Enforcement

President Obama Visits Alaska

In August President Obama traveled to Alaska for three days, making stops in Anchorage, Seward, Dillingham, and Kotzebue. While the president was in Alaska,

he, along with other US and international dignitaries, spoke at the Global Leadership in the Arctic: Cooperation, Innovation, Engagement and Resilience conference, also known as GLACIER, which highlighted international and domestic priorities in the Arctic regarding climate change. A few days before Obama’s trip to Alaska, Secretary of the Interior Sally Jewell on August 28 issued order No. 3337 renaming Mount McKinley to Denali. Sources: White House Newsroom, US Department of State, US Department of the Interior

Shell Ceases Alaska OCS Exploration Shell found indications of oil and gas in the Burger J well, but these were not sufficient to warrant further exploration in the Burger prospect. The well was sealed and abandoned in accordance with US regulations. “Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the US. However, this is a clearly disappointing exploration outcome for this part of the basin,” said Shell Upstream Americas Director Marvin Odum. Shell ceased further exploration activity in offshore Alaska for the foreseeable fu-

Alaska Business Monthly | December 2015www.akbizmag.com


ture. This decision reflects both the Burger J well result, the high costs associated with the project, and the challenging and unpredictable federal regulatory environment in offshore Alaska. Source: Shell Global

ConocoPhillips Alaska Produces New Oil ConocoPhillips Alaska, Inc. announced that Kuparuk Drill Site 2S began producing oil, under budget and ahead of schedule. This is the first new drill site at Kuparuk in more than twelve years. Drill Site 2S is expected to add about eight thousand barrels

of oil per day gross at peak production. “Drill Site 2S is one of the key projects that we announced after passage of tax reform,” said Joe Marushack, president ConocoPhillips Alaska. “The $475 million project created about 250 jobs during construction, with numerous contractor companies and trades involved.” Other Kuparuk owners include BP Exploration (Alaska), ExxonMobil, and Chevron. ConocoPhillips Alaska also started production in October at its CD5 drill site in the Colville Delta Unit of the National Petroleum Reserve-Alaska on surface lands owned by Kuukpik Corporation, the village corpo-

ration for Nuiqsut, and subsurface rights owned by Arctic Slope Regional Corporation. Source: ConocoPhillips Alaska, Inc.

GCI Launches 1 GIG red

GCI announced the launch of the state’s only 1-gigabit-per-second Internet service, called 1 GIG red. GCI President and CEO Ron Duncan said, “With 1 GIG red, we’re quadrupling Internet speeds for our red customers and propelling Alaska to the forefront of technology, all without any increase in our red customers’ bills.” As 1 GIG red began to launch in Anchorage, GCI is also upgrading all other red Internet markets in Alaska—the Mat-Su, Juneau, Fairbanks, Kenai/Soldotna, Sitka and Ketchikan—to speeds up to 500 Mbps from the current red speeds of up to 250 Mbps, previously the fastest Internet service available in Alaska. GCI plans to bring 1 GIG red to more Alaska communities in 2016 and beyond. Source: GCI

Beaufort and Chukchi Sea Lease Sales Cancelled The US Department of the Interior cancelled the two potential Arctic offshore lease sales scheduled under the current five-year offshore oil and gas leasing program for 2012-2017. The decision follows Shell’s announcement of its exploration results at the Burger prospect in the Chukchi Sea and that the company will cease further exploration activity in offshore Alaska for the foreseeable future. The Bureau of Safety and Environmental Enforcement also denied requests from Shell and Statoil for lease suspensions, which would have allowed the companies to retain the leases beyond their primary terms of ten years. The leases will expire in 2017 (Beaufort) and 2020 (Chukchi). Source: Bureau of Safety and Environmental Enforcement

State Buys Out TransCanada AKLNG In the third special session this year, the Alaska Legislature voted to buy out TransCanada’s 12.5 percent ownership of the Alaska LNG project. SB 3001 appropriates approximately $68,455,000 to the Alaska liquefied natural gas project fund for the state to acquire the interests of TransCanada. The bill also appropriates $75,600,000 for the State’s continued participation in the Alaska LNG project, and to fund the state’s share of preliminary front-end engineering and design work for the project. Source: Office of Governor Bill Walker

14

Alaska Business Monthly | December 2015www.akbizmag.com


OIL & GAS

Courtesy of BlueCrest Energy Inc.

Workers installed heating lines in foundation forms for oil storage tanks at the BlueCrest site in Anchor Point.

Renewed Promise of Cook Inlet Oil and Gas Resources are truly consequential By Judy Griffin

C

ook Inlet oil and gas businesses are waiting and wondering. Their costs of exploration and production could rise and affect investment decisions, depending on whether and how the state of Alaska reshapes its capital credits program. Since 2010, those credits have encouraged exploration and production in Cook Inlet. Oil and gas activity in Cook Inlet may be a tiny fraction of that on the North Slope— Cook Inlet oil production amounting to a mere 3 percent of the North Slope volume—but for consumers in Southcentral Alaska, the Cook Inlet basin resources are truly consequential. Oil and natural gas from Cook Inlet are the major sources of heat and electricity for Southcentral Alaskans. Natural gas from Cook Inlet provides heat to homes and businesses in Anchorage, the Kenai Peninsula, and the Matanuska-Susitna Borough. 16

More than 80 percent of the electricity for communities from Homer to Talkeetna is generated from Cook Inlet natural gas, according to the Alaska Oil and Gas Association (AOGA). Facing declines in the production from Cook Inlet oil and gas fields, Southcentral Alaska communities in 2009 were concerned about energy shortages. Options considered included importing liquefied natural gas and energy conservation. Then, in 2010, the Alaska Legislature passed the Cook Inlet Recovery Act, or House Bill 280, which expanded capital credits available to Cook Inlet producers and advanced construction of a natural gas storage facility intended to balance supply and demand. Cook Inlet oil and gas activity has increased substantially since availability of the larger tax credits. New wells have been drilled, platforms have been upgraded, natural gas reserve estimates have risen, and oil and gas production have increased. AOGA reports that since 2010, seventyfive new oil and gas wells have been drilled, new gas fields have been discovered, oil production rose by 80 percent, and the ex-

panded gas storage in the Cook Inlet natural gas storage facility has helped stabilize production. Recently one Southcentral utility was able to contract for natural gas supplies at reduced costs: Homer Electric Association inked a new deal with Furie Operating Alaska LLC of League City, Texas, to receive future gas from a newly discovered offshore gas resource in the Kitchen Lights Unit north of Nikiski. Mike Salzetti, Homer Electric Association’s manager of fuel supply and renewable energy development, explains that the contract, which is awaiting regulatory approval, provides for gas to be supplied from April 1, 2016, through 2018. The agreement is the first in several years for which the price of gas fell. “The cost has been on an upward trend with about a 3 to 4 percent escalation factor each year,” says Salzetti. “We will be paying less for gas in 2016 than HEA was paying for gas in 2014.” Exploration, such as reserve delineation in the Cosmopolitan and Kitchen Lights units by companies taking advantage of state incentives, has resulted in discovery of additional producible reserves of oil and

Alaska Business Monthly | December 2015www.akbizmag.com


gas. In existing production infrastructure, new techniques are being implemented to mitigate problem wells and manage system pressures, also raising estimates of remaining reserves in the Cook Inlet basin. Although large future sources of gas have been discovered, development of those new fields requires large investments to construct production infrastructure. The currently available resources will not meet the long-term demands of Southcentral utilities. Companies poised to develop resources that could supply gas to meet future energy demand are now wary of losing the incentives that helped make decisions to invest in Cook Inlet. C. Benjamin Johnson, president and CEO of BlueCrest Energy, Inc., headquartered in Fort Worth, Texas, says estimates indicate current gas production will meet local demand for four to five years. The development time frames for bringing new gas supplies to market are at least three to five years, he adds.

the Cook Inlet basin had produced 8,308 billion cubic feet of gas and 1.35 billion barrels of oil. The division’s estimate of “proven and probable remaining gas reserves” in existing fields at that time, excluding undeveloped fields such as the Kitchen Lights and Cosmopolitan units, was approximately 1,183 billion cubic feet of gas. According to data provided by the Alaska Oil and Gas Conservation Commission, Cook Inlet gas production declined annually from 2005 through 2013, dropping from 210.4 billion to 95.6 billion cubic feet of gas. In 2014, the commission tally of Cook Inlet gas production rose to 109.6 billion cubic feet. From 2004 through 2009, Alaska Oil and Gas Conservation Commission data for annual Cook Inlet oil production show a decline from 2004 to 2009, recording a fall from 8.2 million to 2.7 million barrels of oil, followed by increases through 2014, when 6.3 million barrels of oil were produced.

The Resource The Cook Inlet area contains thirty-four currently or historically producing oil and gas fields. The Division of Oil and Gas under the Alaska Department of Natural Resources reports that as of year-end 2014,

The economy of the Kenai Peninsula Borough (KPB) benefits from property taxes paid by lease holders and the jobs and income of borough residents created by oil and gas activities in Cook Inlet and operation of Tesoro’s refinery. McDowell Group,

Local Economic Impact

in its report “The Role of the Oil and Gas Industry in Alaska’s Economy,” prepared in May 2014 for AOGA, examines impacts of the Cook Inlet oil and gas industry on the KPB economy. The findings show that, in 2013, six thousand jobs and $430 million in wages can be attributed to positions with primary employers and support services, as well as jobs indirectly created by the Cook Inlet oil and gas industry in the public and private sectors and the presence of North Slope workers residing in the borough. Craig Chapman, KPB Finance Director, says that Cook Inlet oil and gas businesses represent eight of the ten top property tax payers in the KPB. Tax revenues collected from Cook Inlet oil and gas properties compose 20 percent of the borough tax base. State assessments of Cook Inlet oil and gas assets increased more than 60 percent from 2012 to 2015, contributing to higher revenues for the KPB. The KPB would receive a significant economic boost from the proposed Alaska LNG project. Nikiski, on the east side of Cook Inlet, has been identified as the site for the liquefaction plant and marine terminal. Larry Persily, a former presidential appointee to the Federal Office for Alaska Gas Line Projects and currently contracted

Only one company puts it all together. From permitting to production, ASRC Energy Services has the right team for the job.

www.asrcenergy.com Engineering l Fabrication & Construction l Pipeline Construction l Marine Services Operations & Maintenance l Response Operations l Exploration, Drilling Support & Geosciences Regulatory & Technical Services l Quality, Health, Safety, Environmental & Training www.akbizmag.com

December 2015 | Alaska Business Monthly

17


to assist the KPB mayor on oil and gas issues, says, “The additional tax base would have a huge impact on the KPB.” Land has already been bought in anticipation of the proposed infrastructure, and Persily indicates that construction of the infrastructure could start in 2019.

Prominent Recent Players

TOTAL PROJECT SUPPORT

 EQUIPMENT RENTAL/PROJECT SUPPORT COMPANY  SUPPORTING THE NORTH SLOPE & COOK INLET  HEATERS, GENERATORS, VEHICLES, MANLIFTS, LIGHT PLANTS  CAMPS & CAMP SERVICES  FULL PROJECT LOGISTICS SERVICES & STAFFING 18

Prudhoe Team (907) 598-6930 marcusg@magtecalaska.com Kenai Team (907) 335-6305 kenaisales@magtecalaska.com

The commercial landscape has changed since Alaska lured businesses to Cook Inlet with greater incentives; large firms have been replaced by smaller, independent companies for which the credits have helped to fund exploration and production. Hilcorp Alaska LLC, the subsidiary of a Texas-based company, entered the Cook Inlet oil and gas arena in late 2011, acquiring assets from Chevron. Hilcorp began operating ten offshore platforms and two onshore fields acquired from Chevron on January 1, 2012. Later that year, Hilcorp also acquired the Cook Inlet assets of Marathon Oil Corporation and became the dominant producer of oil and gas in Cook Inlet. Hilcorp drilled twenty-two new wells and completed eighty-eight well workovers in 2014. In July 2015, the company executed an agreement to purchase the Middle Ground Shoal assets of XTO Energy, Inc., a subsidiary of ExxonMobil Corporation, in Cook Inlet. Awaiting state and regulatory approval, the latest acquisition is expected to close this fall. Among significant new gas resources recently defined is the Kitchen Lights Unit, where Furie, formerly Escopeta Oil and Gas, used the Spartan 151 rig to drill the first of what is expected to be three production wells. According to Bruce Webb, senior vice president of Furie, the newly installed production platform was expected to begin producing 15 million to 20 million cubic feet per day of gas in November. This production level meets the needs of currently contracted customers and can be expanded. The additional two production wells are expected to be completed in the first half of 2016. Becoming the sixth producer to seek oil and gas resources from the Cosmopolitan Unit north of Anchor Point in Cook Inlet, BlueCrest acquired unit leases in 2012 and 2013. Johnson explains that the company brought a different approach to be able to better assess the oil resource. “We decided we would drill a new well vertically from offshore and penetrate all zones from the top down,” says Johnson. The findings from the 2013 well identified four new oil zones, above the two previously known oil zones, and discovered more than six gas zones above the oil. Johnson says BlueCrest has invested $200

Alaska Business Monthly | December 2015www.akbizmag.com


million to date to develop the oil resource. A $30 million loan from the Alaska Industrial Development and Export Authority has helped finance the $44 million onshore drilling rig and associated facilities that will be used to reach the oil zones three miles from shore. “Our total investment required to get to the point at which we are bringing in enough revenues to be cashflow positive is approximately $500 million,” says Johnson. He adds that BlueCrest is relying on tax credits allowed under existing law to partially offset the costs of oil resource development for the Cosmopolitan Unit. Johnson says, “We anticipate the benefit to the state for paying these credits over the next three years will be roughly a 400 percent return on the cost of the credits.” The return in state royalties was calculated assuming a price of $55 per barrel of oil and tax credits for 2016 through 2018 that would be payable by the state under existing law. The natural gas reservoirs in the Cosmopolitan Unit are separate from the oil and are too shallow to reach from onshore. Development of the gas will require offshore platforms. The only offshore drilling rig in Cook Inlet is the Spartan 151 jack-up rig brought to Alaska by Furie to develop its

www.akbizmag.com

Municipality of Anchorage Seeks to Acquire Cook Inlet Gas Assets By Judy Griffin

T

he Municipality of Anchorage submitted a bid to acquire ConocoPhillips gas properties in Cook Inlet on October 9. The terms of the offer won’t be disclosed until the competitive bidding process is complete. The interests offered by ConocoPhillips consist of a one-third interest in the Beluga River gas field, the North Cook Inlet gas field, and 5,700 acres of leased lands in and around Cook Inlet. The oil and gas producer had stated it prefers sale of the assets “to a single buyer for cash.” The Beluga River gas field is on the upper west side of Cook Inlet. Through its Municipal Light and Power (ML&P) electric utility, the city has owned one third of this field since 1996. Hilcorp Alaska LLC also owns one third. Kitchen Lights Unit. Furie has released the rig, which currently remains in Alaska to drill Cosmopolitan gas for BlueCrest in 2016. “Gas development is on hold pending

ConocoPhillips has been operating the lease. The Municipality calculates that sourcing gas from the Cook Inlet field has saved ratepayers $239 million. Myer Hutchinson, communications director in the Office of Mayor Ethan Berkowitz, explains that figure represents the annual cost of gas for ML&P compared to the costs paid by Chugach Electric Association for Cook Inlet gas during the same time period. According to Hutchinson, ML&P will need additional gas by 2018, and the sale represents an opportunity to lock in supply that likely could meet its needs for twenty years. “Historically speaking, the Beluga River gas field has been a significant provider of gas for Anchorage markets,” says Hutchinson. “The purchase of additional gas properties could be very beneficial for the Municipality, ML&P, and ratepayers at ML&P.” R resolution of the state tax credit issue,” says Johnson. If the rig leaves because BlueCrest doesn’t commence drilling next year, costs to bring an offshore rig to Alaska at a later

December 2015 | Alaska Business Monthly

19


Where Engineering Meets the Environment. With a staff of professional environmental scientists, engineers, geologists, chemists, biologists and technicians, tutka is ready and available to perform projects across the State of Alaska. All services are streamlined to ensure the highest level of regulatory compliance and cost controls.

• General Contractor/ Heavy Civil Construction • Environmental Cleanup and Consulting • Operations and Maintenance of Wastewater Pre-treatment Systems

(907) 357-2238 | www.tutkallc.com SBA Certified HUBZone & EDWOSB/WOSB • State of Alaska Certified DBE

date will be high. Johnson explains that if BlueCrest proceeds in 2016, the company would drill three new gas wells. Construction of the first gas platform would follow in 2017, and gas could be produced by 2018. Johnson says that BlueCrest cannot commit to 2016 offshore drilling without confidence in the ability to complete the entire development. “The credits are a critical part of investment in development of these fields,” he explains. “We don’t want to spend hundreds of millions of dollars and then find out the credits needed to get us to the finish line are not going to be there.” Another Cook Inlet oil and gas company is Miller Energy Resources, based in Knoxville, Tennessee. The business acquired Cook Inlet Energy LLC, owner of several western Cook Inlet properties, in 2009. Miller Energy has been charged with reporting inflated values of Cook Inlet oil and gas properties owned by Cook Inlet Energy. The Securities and Exchange Commission alleges the value of oil and gas properties acquired in 2009 were overvalued by $400 million. Miller Energy is working toward a settlement with the Securities and Exchange Commission. A $6.4 million payment of tax credits from the state of Alaska to Cook Inlet Energy in September toward a 2014 tax-credit certificate is helping the business pay down debts. On October 1, Miller Energy filed for Chapter 11 bankruptcy protection and reorganization.

Threatened Tax Credit Changes

Invested in responsible development for Alaska’s future. For over 20 years Donlin Gold has been carefully preparing to ensure responsible development in Alaska. With our thoughtful planning and industry-leading technology, we are committed to a mining project that will contribute to a thriving Alaska economy. DonlinGold.com

20

Concern about state of Alaska revenue declines and the increasing deficit resulting from the drop in oil revenues that fund state spending has brought scrutiny of oil and gas tax credits. During the budget process, Democratic lawmakers called for scaling back the credits. During a July 1 press conference, Governor Bill Walker announced his veto of $200 million in tax credit payments. Although the action saved money this year, the state remains obligated to pay the credits. Walker said his veto was intended to start a discussion on how the tax credit program may be restructured to reduce state capital spending. In September and October, a tax credit working group convened by Senator Cathy Giessel, an Anchorage Republican chairing the Senate Resources Committee, heard presentations from representatives of the Cook Inlet oil and gas companies, utilities, the investment community, and state natural resource and revenue departments. Companies such as BlueCrest, Furie, and Hilcorp have indicated that the stability of tax structure is integral to providing confidence required for continued investments. Projects are typically long term, and com-

Alaska Business Monthly | December 2015www.akbizmag.com


The monopod drilling platform Julius R. was completed by Furie Operating Alaska this year in the Kitchen Lights unit of Cook Inlet. Courtesy of Furie Operating Alaska, LLC

panies that have already committed to development of known fields based on the existing tax structure seek assurance that the state will honor commitments. Kara Moriarty, president and CEO of AOGA, notes that many speakers at the working group meetings indicated that the incentives for spurring Cook Inlet production have not yet had time to create gas production infrastructure capable of meet-

ing the long-term supply needs of utilities. “The credits are definitely an important tool for the state and industry to continue to increase investment and production,” she says. “The incentives let industry know the state is open for business.” Moriarty explains that the tax credits have increased investment, productivity, and jobs. She adds that predictability is needed for the industry to have confi-

dence that Alaska is a good place for business. “The state has to be very cautious while looking at changing policy by altering credits and consider how that might change investor behavior,” she says. “Even talk has caused unnecessary scrutiny.” R Judy Griffin, a former editor of Alaska Business Monthly, is a freelance writer in Anchorage.

GET NOTICED!

Reaching a statewide business audience in Alaska’s leading business publication gets results!

We Will Help You Safely Navigate the Process Safety Path Ahead Anne Tompkins Senior Advertising Account Manager (907) 257-2910 anne@akbizmag.com I will work with you to plan an ad campaign that offers marketplace visibility and fits your budget.

The road that takes you from where you are to more effective management of regulatory process safety requirements can be a daunting task. aeSolutions is a complete supplier of performancebased process safety engineering and automation solutions to help you navigate down that path of OSHA/EPA/BESSE compliance. We are committed to helping our customers execute, monitor, and sustain the process safety lifecycle in their facilities with proven methods and tools. If you have concerns or questions on the health of your process safety lifecycle call our Alaska office or visit our website.

(907) 276-4373 • Toll Free (800) 770-4373

akbizmag.com

www.akbizmag.com

aesolns.com | 907-865-5992 December 2015 | Alaska Business Monthly

21


OIL & GAS

Governor Bill Walker’s Trip to Japan Commercializing Alaska’s untapped LNG potential By Kirsten Swann

A

s the state of Alaska faces a looming budget crisis driven by low oil prices and declining production, the clamor over a proposed multibilliondollar liquefied natural gas (LNG) pipeline project grows louder. The endeavor—known as Alaska LNG— involves building a gas treatment plant, pipeline, and liquefaction plant to successfully commercialize the trillions of cubic feet of North Slope natural gas. Project partners include the state and its largest oil companies: ConocoPhillips, BP, and ExxonMobil. The proposed forty-two-inch pipeline could carry up to 3.5 billion cubic feet of natural gas per day, according to the Alaska Natural Gas Transportation Projects Office of the Federal Coordinator. Some of that gas would be consumed by Alaskans; some would be sold outside the state. The plant could produce up to 20 million metric tons of LNG every year, processing 2.5 billion cubic feet of gas every day. It would be among the largest natural gas developments in the world. The total price tag could top $60 billion, according to a report by project financial consultant Lazard, but success could bring the state approximately $4 billion in gross revenues annually. Developing a major gas pipeline project is a high-stakes business.

Special Session

In September, Alaska Governor Bill Walker voiced his frustration with the lack of progress on Alaska LNG, calling the Legislature into special session in October and stating the need for a “bold move” to move things forward. “I’m a big believer that if you don’t know your history, you’re destined to repeat it, and that’s the problem we’ve had with the gas line for the last several decades,” said Walker in a September press conference. The governor brought up the topic of a gas reserves tax to prevent individual partners from blocking the project and called for firm state control over state-owned resources. But advancing a major commercial gas project also calls for fiscal and regulatory certainty—just ask the companies who hold stakes in the project. 22

“A competitive, predictable, and durable fiscal and commercial environment is required for this project to compete in global energy markets and to position the Alaska LNG project for a successful investment decision,” wrote ExxonMobil spokesman Aaron Stryk in an emailed statement. “Advancing the Alaska LNG project, with alignment among all resource owners and the state, is the best way to build confidence for financing, investors, and the market.”

Fiscal Certainty Needed

Customers can be hesitant about the long wait between signing a sales contract and receiving their LNG, Stryk writes, and fiscal certainty is necessary to allay fears and assure lenders that the return is worth the risk. ExxonMobil has interests in LNG projects around the globe, from Texas to Asia to Australia and West Africa. Putting together an LNG export facility takes years, requiring concurrent and interconnected projects that can cost billions of dollars, Stryk wrote. Financing, technical expertise, rigorous environmental reviews, and permitting all come into play. A project must have customers who are willing to sign long-term supply contracts, Stryk writes. “So far, the Alaska LNG project team has achieved significant project and regulatory milestones, including substantial progress on pre-FEED activities, receipt of export authorizations for both free trade and nonfree trade agreement countries, and submission of environmental filings to FERC,” the petroleum company spokesman wrote. “The pre-FEED activities are being led by ExxonMobil and will cost more than $400 million.” The pre-FEED phase, which began in 2014 with the signing of a formal commercial agreement between the state of Alaska, ExxonMobil, ConocoPhillips, BP, and pipeline company TransCanada, is just the start of the process. Pre-FEED involves securing government support for the efforts, identifying a viable technical option, beginning to process permits and land use arrangements, and assessing the project’s commercial vi-

ability, according to Lazard. Next comes an estimated two to four years of additional planning—the FEED phase. Alaska LNG partners must execute key commercial agreements, confirm the project’s commercial viability and business structure, complete major engineering and design work, and secure all necessary permits. Then comes construction. At peak activity, the project is projected to bring up to fifteen thousand jobs to the state.

2024 Target Date

If all goes well, the whole system is set to become operational around 2024, according to a report by financial advisor Lazard. Alaska LNG has several advantages, both geographically and politically, Lazard says. The state is ideally positioned to reach high-demand markets along the Pacific Rim. Nikiski—the proposed site of the LNG plant and marine terminal—is approximately 3,800 miles from the major Japanese port of Yokohama, hundreds of miles closer than LNG projects in British Columbia or Russia. While projects in the Gulf of Mexico face chokepoints and higher shipping costs, LNG from Alaska would have a clear path west. Large proven reserves at Prudhoe Bay give Alaska LNG low resource risk, Lazard reports, and existing infrastructure on the North Slope and along the trans-Alaska oil pipeline route makes an Alaska natural gas project more economically and environmentally feasible than competing developments in other parts of the world. Alaska’s government is also much more stable than those in countries like Nigeria or Russia, where large-scale LNG developments could be thrown askew by political upheaval. Still, a significant part of the project’s success depends on things outside Alaska’s control, namely global markets. Alaska LNG stakeholders remain optimistic, but there are some concerns. According to global research and consulting firm Wood Mackenzie, the worldwide LNG market is poised for oversaturation in the coming years. As multiple commercial LNG projects march forward around the globe, the market could see an additional 100 million

Alaska Business Monthly | December 2015www.akbizmag.com


tonnes per annum of LNG sanctioned over the next six to eighteen months, the consulting firm found. That influx could extend the likelihood of an oversupply of LNG in Asia to 2025. “The outlook for longer term incremental LNG demand growth in China is also being negatively affected,” says Noel Tomnay, Wood Mackenzie’s vice president of global gas and LNG research. “With lower industrial output and power generation competition increasingly characterizing other key Asian LNG markets, like South Korea, Asian buyers are not in a hurry to finalize new LNG contracts.” As projects confront these market realities, Tomnay says, a raft of postponements could follow. Exxon, which acknowledges the challenges, remains bullish about future demand. “After 2021, we anticipate that the world will once again need additional LNG supply—presenting an opportunity for Alaska to compete for its share of the global natural gas market,” Stryk wrote. “At the same time, we are currently experiencing a low point in the market cycle, placing the industry at a tipping point of sorts—where the next few years will reveal which LNG projects have the financial strength and discipline to be globally competitive. Our experience in LNG has taught us that strategic decisions must be made with a longterm view and projects must be extremely cost competitive to survive the inevitable up-and-down market cycles.” The interim project report published by Lazard further outlines the market challenges. Alaska LNG would likely export to countries with strong long-term projected demand for LNG—countries like Japan, South Korea, China, and India. “While these markets currently exhibit substantial LNG demand, several factors may limit the magnitude of this demand in the future, including import capacity limitations and development of domestic or regional energy,” Lazard reported in early 2015.

from Kansai Electric Power Company; Mitsui & Company; ConocoPhillips Japan; JERA Co., Inc.; Sumitomo Metal Mining; Japan Bank for International Cooperation; Toho Gas; GS Energy; Mitsubishi Corporation’s natural gas division; Korea Gas Corporation; Marubeni Corporation; Tokyo Gas; Tokyo Electric Power Company; Itochu Corporation; and the Japan Oil, Gas, and Metals National Corporation. He called the trip to Japan productive and successful. Marty Rutherford, deputy commissioner of the Alaska Department of Natural Resources, echoed the governor’s statement.

“Our visit this week put Alaska on the LNG map, and the market knows that we are serious about liquefying our rich natural gas reserves,” Rutherford said. “I look forward to returning to East Asia to sign LNG contracts.” Despite the hurdles, Alaska’s rich natural gas reserves are a promising lure for developers. The state’s potential exports ranked fourth in the world in 2014, according to the IGU World LNG Report. Only Qatar, Malaysia, and Australia ranked higher. R Kirsten Swann is a freelance writer from Anchorage.

Prospects in Japan

In September, Walker traveled to Japan to meet with prospective customers and discuss Alaska’s LNG potential. He spoke with top executives in the LNG trading department at Osaka Gas, the Governor’s Office says, and he toured one of the largest LNG terminals in the country. “We have been shipping LNG to Japan since 1969,” Walker said in a prepared statement at the conclusion of his trip. “I look forward to sending more shipments of Alaska LNG to Japan’s shores.” The governor also met with numerous government officials and energy executives www.akbizmag.com

December 2015 | Alaska Business Monthly

23


FINANCIAL SERVICES

Mobile Business Banking Applications New and improved from Alaska financial institutions By Tracy Barbour

A

s the use of mobile devices steadily increases, Alaska’s financial institutions are releasing new or upgraded mobile apps to make it easier for business customers to manage their accounts remotely. And some banks and credit unions are adding features to their existing online banking system to expand capabilities.

KeyBank Invests in Mobile Banking KeyBank is a prime example. Clients can access the recently enhanced Key Total Treasury solution with a smartphone, tablet, or other mobile device to review their account information, search transactions, perform account transfers, and make administrative updates. They can also approve pending payments for wire and automated clearing house transactions and use Positive Pay to limit payment on suspect checks. Over the next twelve to eighteen months, Key Total Treasury will be offering customers even more cash management functions, such as commercial mobile remote deposit capture (to allow digital check deposits), expanded corporate card administrative functions, and additional foreign exchange capabilities. “Workers are very mobile; their office is anywhere they are,” says Jordan Olack, KeyBank’s Cleveland-based enterprise commercial payments product manager. “Getting access to information from the device that’s right next to them is critical.” KeyBank’s investment in mobile business banking is, in part, being driven by the “consumerization effect,” Olack says. Corporate workers—who are consumers at heart—are increasingly requesting mobile access to their account. Brian Nerland, president of KeyBank’s Alaska District, has a similar perspective. “Business professionals in Alaska who enjoy the convenience and functionality of using mobile devices to manage their per24

sonal finances are coming to expect that same level of service for managing their company finances,” Nerland says. Olack says Key Total Treasury is extremely safe to use because the customer’s confidential information is masked within the app. Plus, the mobile banking app has multiple layers of security and a built-in “kill switch” for emergencies. “If someone feels their phone has been compromised, we can disable the service from functioning on that device,” he explains.

Wells Fargo Optimizes Applications Technology has changed dramatically since Wells Fargo released its Commercial Electronic Office portal fifteen years ago. Last year, the bank launched a global banking portal—Commercial Electronic Office Mobile—that grants access to a myriad of solutions with a single sign-on experience. “Customers don’t want to have multiple sets of user names with Wells Fargo,” explains Secil Watson, Wells Fargo’s San Francisco-based head of Wholesale Internet Solutions. “Our strategy has been to have one application to deliver all the experiences customers have with Wells Fargo in a mobile-optimized way.” Commercial Electronic Office Mobile customers can use the bank’s recently-developed iPhone or Android app to employ a plethora of services. The most commonly-used options are the commercial card expense application and mobile deposit capture. Last year Wells Fargo introduced additional capability with its commercial card application. It also began allowing customers to add photos of receipts to their account statements, which has been a muchwelcomed solution. “We see mobile as a way people can be more in control of their bank account and be more proactive about managing their finances,” Watson says. Wells Fargo is also focusing on updating its applications, so they are more mobilefriendly. The bank had built Mobile as a separate, optimized platform, but some of its applications were not optimized for mobile Smartphones displays of KeyBank’s app called Key Total Treasury. Courtesy of KeyBank

Alaska Business Monthly | December 2015www.akbizmag.com


users. So Wells Fargo has spent the past two years redesigning all of its applications to be mobile-responsive, so they work across multiple devices—regardless of the screen size. Wells Fargo is also striving to use biometric authentication to make it easier for customers to access their Mobile account without cumbersome passwords, PINs, or hard tokens. In July, the bank completed a “bimodal biometrics” pilot program to use face and voice recognition to link a device to a specific person. “Next year, we’ll be looking at the customer’s eye veins,” Watson says.

AVAILABLE NOW! A COFFEE TABLE PHOTO BOOK OF ALASKA’S NORTH SLOPE OIL PATCH

ARE UBJECTSME ORITE S MY FAV WORKING. TOIF THEY PEOPLE N’T MATTER ATORS, IT DOES UIPMENT OPERD MEN, ARE EQ DRIVERS, MU KS, TRUCK RS, ROUGHNECOOKS, DRILLE GISTS, BULL C PANY GEOLO NICS OR COM THE MECHA ENTS — IT’S E MOST PRESID WHO ARE TH PEOPLE TING TO ME. INTERES left Pilebuck

Gary Pickus,

Februar

10

2009 Project, July cable, Liberty left Rigging August, 2010 at West Dock, Rig 25 sealift August 2010 above Doyon to Deadhorse, Rig 25 move next Doyon 94

above Eni Petroleum, Spy Island, March 2011 top right Deballasting after barge offload, West Dock, August 2011

y 2009

bottom right Blaze Anderson, roughneck, Parker Drilling Rig 272, February 2013 next Parker Drilling Rig 272 moving crew, February 2013

135

PICK UP YOUR COPY TODAY! 511 W. 41st Ave, Suite 101, Anchorage, AK 99503 (907) 258-4704 judypatrickphotography.com Also available in bulk quantities! 26

Alaska USA Federal Credit Union Adds Services to Its App Alaska USA Federal Credit Union provides online account management to business members through a mobile app that lets users view balances, transfer funds, check transactions, and find the nearest branch or ATM (with turn-by-turn directions). They can also locate contact information for the credit union’s 24/7 Member Service Center and view the credit union’s current interest rates. Owning a business is demanding and Alaska USA’s app can make the process easier, according to Member Business Development Manager Sheli Dodson. “With the Alaska USA app, along with our other online offerings, business members can streamline many day-to-day processes,” she says. “Business members can save time and money by skipping trips to a branch or reducing the costs of printed materials.” Dodson says Alaska USA is always listening to its members and uses their feedback to offer products and services that provide the best value and convenience. “For instance, remote deposit will soon be available for small business members through the mobile app,” she says. “Members have also asked for text alerts they can use to receive information about their accounts; we will be working on that in 2016.” Protecting members’ information is a top priority at Alaska USA, Dodson says. Therefore, the credit union applies the latest security measures in its mobile app and online account management system. These include authentication, firewalls, secured backend systems, and session management controls. “Additionally, all account information used in the app and online is encrypted so unauthorized parties can’t access it,” Dodson says. “And no information is ever stored on the phone itself to prevent sensitive data from being compromised if it’s lost or stolen.” Credit Union 1 Renovates App

Credit Union 1 offers a mobile app that’s designed for both personal and business

Alaska Business Monthly | December 2015www.akbizmag.com


use. Members can use a smartphone or other mobile device to check their balances, transfer funds, make loan payments, and deposit paper checks remotely. In essence, they can conduct a huge portion of their money management tasks any time while they’re on the go. “With the CU1 Mobile App, our members can access their business finances more easily from anywhere with the Internet,” says Vice President of Communications and Culture Chrissy Bell. “This app allows for a uniquely personal management experience because it’s available at our members’ convenience.” Credit Union 1’s mobile app has been available since 2013, and, this year, the credit union fully renovated it for customers. Having a well-developed mobile app is a must, and Credit Union 1 has worked hard to offer this cutting-edge technology to its members, Bell says. “We make it a priority to stay at the forefront of technology to provide the best tools for our members’ personal and business banking needs,” she says. Credit Union 1 also strives to stay on top of security, which is why its mobile app employs leading Internet security and protocols to protect members’ accounts. “With two-step authentication, a unique login ID, complex password requirements, and predetermined security questions, fraudsters face a multitude of barriers that keep this app and our members’ privacy safe,” Bell explains.

Denali Alaskan FCU Adds Single Sign-on Denali Alaskan Federal Credit Union is also upgrading its mobile banking app to stay current with technology. Starting in December, the app—which originally launched in 2013—will feature a number of enhancements. For example, the mobile banking app will incorporate “single sign-on” to allow customers easier access to multiple products, from automated clearing house to remote deposit to wire transfer. It will also give business owners the ability to view and approve transactions. “Business members with the mobile app can do pretty much anything they can do with their PC,” says Business Financial Services Manager Stephanie Haydn. Additionally, Denali Alaskan’s mobile banking app will look the same regardless of the device to offer a “unified user experience,” according to Vice President of Call Center Operations Judie Miller. This will make it easier for members to understand how to navigate the bank’s platform, whether they’re using a smartphone, tablet, or PC. “The biggest change is it offers the www.akbizmag.com

same online experience across all devices,” Miller says. Denali Alaskan also has multiple layers of security to ensure mobile app users have a safe experience. And depending on the type of transaction, business members will encounter different security protocols, according to Assistant Vice President of EServices Tara Gondek. Keith Fernandez, the credit union’s vice president of corporate communications and development, says Denali Alaskan is committed to providing enhanced online access to business banking services. “You need to give people as many opportunities as possible to securely access their user account. That’s what we’re achieving through the expansion of our online and mobile [solutions],” Fernandez says.

First National Launches ONEpay

First National Bank Alaska recently released ONEpay, an online business banking solution that enhances the bank’s current system. ONEpay is a browser-based system designed to provide the bank’s larger corporate customers access to enhanced account management capabilities. ONEpay offers many of the features that the bank’s larger corporate customers have requested in the areas of automated clearing house, wires, and cash management, according to Chief Information Officer Phil Griffin. It is a much-enhanced solution from what these customers currently have available. “Many of the features being offered will provide our clients with a banking solution that reflects leading-edge technology and services, allowing clients to keep pace with the increased speed and efficiency in the electronic treasury management channel,” he explains. As another benefit, ONEpay also supports a wide array of browsers and employs a variety of authentication measures. Additionally, the bank uses a behavior analytics framework for all online and mobile banking products to help protect customer information. Although First National currently offers a consumer mobile app, the bank is taking a “stair-step” approach toward releasing a business mobile app, Griffin says. This includes exploring the possibility of the ONEpay app for treasury management customers and a separate app that would let business customers review check images and account balances, as well as take advantage of Positive Pay and remote deposit capture. R Freelance writer Tracy Barbour is a former Alaskan.

FOOTWEAR TRACTION FOR PACKED SNOW & ICE

WWW.ICETREKKERS.COM

800.446.7587 ©2015 Implus LLC. ICEtrekkers® is a registered trademark of Implus LLC. 10.15

December 2015 | Alaska Business Monthly

27


FINANCIAL SERVICES

Early and Consistent Savers Win Retirement Race Younger workers have ‘time on their side’ By Rod Shipley

A

s parents, we may tell our children that the fastest way to finish a difficult homework assignment is to sit down at the kitchen table, start with that first problem and move on from there. They may not like this solution very much, but a few minutes later, the assignment is done. We can apply that same approach to saving for retirement. Young employees might view putting aside money for retirement as something that’s too difficult. It’s something they believe can be done later, since the retirement date is so far away. But just the opposite is true. Simply enrolling in a retirement plan at a young age and having those payroll deductions accrue in a pre-tax savings account is a solid strategy for starting down the path of saving for retirement. Results from our latest Wells Fargo Retirement Study show the difference this approach can make. Workers ages fifty-five to fifty-nine who began contributing to a retirement plan at an average age of thirty-one had amassed a median of $150,000 toward their goal of $500,000. That’s three times as much as what workers in their sixties or older had saved, who started saving at an average age of thirty-seven. This data reinforces that younger workers who have “time on their side” should make the most of their retirement savings advantage.

Workforce Plans

Many companies we work with, recognizing the impact of savings over time, have added an automatic enrollment feature to workplace plans. New employees are automatically in the plan at a starting percentage, unless they opt out. It’s one of many strategies that can pay dividends for generations of workers saving for retirement in a 401(k) plan or equivalent. Consistent savers in our study shared they had a healthier outlook: 71 percent believe they will have enough saved for a 28

comfortable retirement and only 28 percent plan to heavily rely on Social Security. People without a workplace savings plan can still be consistent savers. Subject to eligibility requirements, you can set up an automatic savings program and make systematic contributions up to $5,500 annually to either a Roth IRA (with after-tax dollars) or traditional IRA (with pre-tax dollars). Consider this: Annual contributions of $5,500 become $110,000 in twenty years!

Retirement Savings Tips

Take these steps to beef up your retirement savings:  Use the tools available in your plan. If your workplace plan includes an employer match, work hard to contribute enough to take full advantage of it. The match means your employer is investing in your future.  Start deducting a small percentage of each paycheck and see if you’re still able to comfortably pay your monthly bills. Try increasing your contribution by 1 percent each year.  Most plans allow workers over the age of fifty in a 401(k) plan have the ability to

make catch-up contributions up to $6,000 each year, on top of the $18,000 annual deferral savings limit for all workplace plans. That’s a great way to maximize savings as retirement draws closer. Saving for retirement early in your career and being consistent in your savings habits are crucial to mapping out a comfortable retirement. We’re encouraged that there are early and consistent savers out there and hopeful that more will join their ranks once they see the difference it makes. Putting yourself in position for a secure retirement is a marathon not a sprint, something that starts with that first step. R Rod Shipley is Wells Fargo’s Institutional Retirement and Trust Regional Director for Alaska and the Pacific Northwest. Contact him at (907) 265-2841 or shiplerr@wellsfargo.com.

Alaska Business Monthly | December 2015www.akbizmag.com


NOT JUST BIGGER. EVEN BETTER.

THE POWER OF TWO Span Alaska has acquired Pacific Alaska Freightways, and that means more warehouses, more equipment, and more manpower dedicated to shipping to, from, and within Alaska. Span Alaska now ships more freight than any other carrier to Alaska. But it’s not just about size. Expanded services, new hubs, and broader expertise mean we can serve you even better. And that’s always our goal.

Shipping to Alaska? Call Span Alaska.

1.800.257.7726 • www.spanalaska.com


BUSINESS

A Good Business or a Good Investment Which do you have? Which should you have?

W

hen the time comes to think about planning an exit from business, it is important to consider the differences between a “good business” and a “good investment.” The next owner of your company will be looking for a good investment, not just a good business. If you want to attract a qualified buyer and get the highest value, you will need to turn your business into a “good investment.”

Hallmarks of a Good Business

Most privately-held businesses are lifestyle businesses. In other words, the business generates enough revenue and profitability for an owner to live comfortably. Often times owners focus on the personal benefits of business ownership over the potential for the future of the business. For example, business owners will often be satisfied with slow or no growth in the business as a trade-off to not having to work as hard, not having to borrow money, and not dealing with excess complexity. When a business owner has a good business, such as the lifestyle business described above, there will more often than not be a limited set of professional buyers for that business. In fact, the largest pool of potential buyers may be individuals who want to enjoy the same lifestyle as the owner. However, these owners of good businesses have a limited market of potential buyers. Professional buyers are not just looking for good businesses, they are also looking for good investments (which often drives a much higher purchase price).

Hallmarks of a Good Investment

There are many hallmarks of a good business that also translates into a good investment. The list below is by no means a complete accounting of all attributes of a sought after company, but it will provide an overview of areas that professional investors consider important when purchasing a privately-held business.  A business that can run without the owner: Owner dependency is a major issue with professional buyers. If your company is highly dependent upon you in 30

By Mel B. Bannon order to run and grow into the future, then buyers may not consider your company a good investment. If you think about your investments in public securities or mutual funds, those companies run without you. You are merely an investor in that company. In most small businesses the owner is intricately involved with many facets of the business. While some management may be in place, this is often not enough to reduce the high levels of owner dependency. Therefore, in order to make your company a better investment, you may want to reduce the company’s dependency upon you.  A business that has management in place, successfully pursuing a strategy for growth: Another attribute that will help define your business as a good investment is how empowered and successful your management team is in pursuing growth through a defined strategy. If you have managers who take initiative, make good decisions, measure and report their own performance, and can be entrusted to direct themselves towards achieving strategic goals, then your company begins to look more like a good investment.  A business that is in an industry which has attracted capital and has growth potential: If your business is in a slow or no growth industry, but provides for a good income for you and your family, then it may not be perceived as a solid investment for a professional buyer. However, if you are in an area of growth and outside investment is finding its way into your industry, it may be that an outside investor will value your business as one that has a growth story that can be realized.  A business that is out-performing its peers in terms of profitability: It is not enough for a company to be independent of the owner, to have empowered management, and to be in the right industry. For your company to be considered a good investment, it is also important that your company’s performance is stronger than your peer group. A good investment is not just

one that makes money, but one that is considered best in class—a company that outdoes the competition. To the extent that you can, articulate the reasons that your company outshines the competition.

Bottom Line

It is important to present a good investment to a future owner, not just a good business. There are a number of things you can do today to determine the difference between the two. One of the first things you may want to do is determine how dependent your company is on your individual efforts. An Owner Dependence Index Survey is a good place to start with this important initial consideration. This process will assist you in determining where you are starting on the path of taking a good business and turning it into a good investment.  R Mel B. Bannon, CLU, ChFC, RFC, CA Insurance License #0412338, is a registered representative of Lincoln Financial Advisors Corp. Securities offered through Lincoln Financial Advisors, Corp., a broker/ dealer (Member SIPC). Investment advisory services offered through Sagemark Consulting, a division of Lincoln Financial Advisors Corp., a registered investment advisor. Insurance offered through Lincoln Marketing and Insurance Agency, LLC and Lincoln Associates Insurance Agency, Inc. and other fine companies. 31111 Agoura Rd., Ste. 200, Westlake Village, CA 91361 (818) 540-6967 / 1500 W. 33rd Avenue, Ste. 210, Anchorage, AK 99503 (907) 522-1194. This information should not be construed as legal or tax advice. You may want to consult a tax advisor regarding this information as it relates to your personal situation.

Alaska Business Monthly | December 2015www.akbizmag.com


It’s easy. You give your employees an added benefit. I get a college savings plan.

Give your employees a benefit upgrade today. Enroll in the Payroll Deduction Option offered by the University of Alaska College Savings Plan. The Payroll Deduction Option is an easy, no-cost employer benefit program that adds value to your benefits package while contributing to the overall financial well-being and college savings goals of your employees.

UACollegeSavings.com

800-478-0003 80

If you are not an Alaska resident, you should compare this plan with any 529 college savings plan offered by your home state or your beneficiary's home state and consider, before investing, any state tax or other benefits that are only available for investments in the home state’s plan. You can also visit our website or call the phone number to request a Plan Disclosure Document, which includes investment objectives, risks, fees, charges and expenses, and other information. You should read the Plan Disclosure Document carefully before investing.

7/15 2015-US-12646


INSURANCE

Why Insuring Principal

Employees and Owners May

Keep Your Business Operating

E

By Tom Anderson

nvision a scenario that’s all too real in Alaska. You’re a company owner; you have several partners. Your owner group manages the business cohesively and all of you are integral to operations and revenue generation. Corporate vitality is thriving and profit is a reality. Now let’s darken the picture a bit. Consider the Alaska expanse and your business services involving travel to remote, rural work sites with inclement weather. Mix diverse geography, flight limitations, and less than desired meteorology together, and suddenly this hypothetical is not only possible but also probable. Here comes the worst part of the story that isn’t common but remains an unnerving outcome: one of your business partners 32

or a valuable employee has to travel into the harsh environment described and succumbs to an early demise in a plane wreck. Now you have one less business partner or staff member in the company. The loss is devastating. Beyond the absence of revenue-generation and work performance by the deceased co-owner, into your offices walks an entitled spouse, offspring, or distant relative sniffing for assets or ownership and stock value. Without certain kinds of business life insurance like key person coverage or an insured buy-sell agreement on the partner who died, our fictitious business may have serious problems and be forced to liquidate or even close shop.

Keep Your Business Operating Through Good Times and Bad The story of a business losing a partner or crit-

ical employee can be sad, but it doesn’t have to be tragic in terms of business continuity. Losing an employee with special expertise or knowledge can clearly affect a company’s bottom line and operations, says Charles Villarreal, Alaska’s New York Life Insurance Company managing partner. The easiest fix to avoid harm to one’s business upon the loss of personnel is to meet with an insurance agent who specializes in business coverage. Key person coverage is life insurance on a “key” employee, proprietor, or partner integral to ongoing operations of a business, explains Villarreal, who has been with New York Life Insurance for more than ten years. This special insurance is purchased by the company and can cover essential owners, employees, or board members. If the insured person dies, the company is the beneficiary.

Alaska Business Monthly | December 2015www.akbizmag.com


Commercial Insurance Employee Benefits Personal Insurance Risk Management Surety


Villarreal notes that it is not uncommon for family members to inquire as to assets owned by the deceased and the process through which to secure what is owed to the estate. The key person insurance is the alternative to forcing the company to pay out a large sum of capital that is depended upon or critical to the business’s function. Loss of life or injury to critical personnel and management in a company goes well beyond family members expecting a payday. Recruitment to replace, training and learning curves, and new roles for an incoming owner or manager require capital outlays and expenditures which a business may not have available but for an insurance policy like the key person coverage. It makes sense, adds Villarreal. Coverage of this nature, as a preemptive strike against asset depletion, is prudent business planning. “When starting a new business, assessment on how you want your structure to be legally formed, and then meeting with an insurance agent to review options to protect the business, is a responsible foundation to success,” he says. The same goes for a business already in operation and continued review of its policies. As for the amount of life insurance to acquire, that depends on business forms and differences in legal protection require-

ments. A partnership where owners are inextricably linked to services rendered and performance may need more coverage than a C and S-Corporation. Policies can range from $25,000 to more than $25 million. Other considerations tethered to key person insurance include injuries, incapacitation, and taxes. Long-term care insurance may be an appropriate accompaniment to key person insurance as illness or accidents surface. Disability insurance is another consideration in the business insurance umbrella, as a benefit to an employee and incentive to work for the business. As people live longer and companies become more diverse, Villarreal believes a plan for protection of assets and operations should include review of who needs to be covered and how best to achieve an assurance that the business will be least affected. When it comes to the insurance industry, Villarreal is highly confident in New York Life Insurance since it was founded in 1845 and is 170 years old, remaining the largest mutual life insurance company in United States. “When a business client is deciding on what services and coverage is needed, we’ve learned longevity, high ratings, and reputation matter,” says Villarreal. He adds New York Life has eighty insurance agents

throughout the state ranging from the Kenai Peninsula to Fairbanks, including Juneau and with representation in rural Alaska. Anchorage is home to the firm’s headquarters.

Personal Relationships and Knowing the Business Tom Betti is a graduate of Chugiak High School and has worked in Southcentral Alaska with Allstate providing life insurance and retirement consultation for more than seventeen years. “When you think of Allstate, automobile and home insurance may be what comes to mind, but we’re actually quite diverse in services,” says Betti. As a financial specialist with the company, he handles everything from death, disability, and long-term care to retirement. Betti agrees with Villarreal that key employee insurance is essential for a business with multiple partners and management in specialized roles, as well as for a business comprised of owners that have spouses and family who are beneficiaries to the owner’s business assets. Allstate’s statewide coverage is notable, and like New York Life, eponymous in name and reputation with insurance. When it comes to new and active businesses, Betti says a corporate-owned life insurance

We deliver. Advertisers rely on our print and online visibility to reach as many potential clients as possible statewide.

Bill Morris Advertising Account Manager Office (907) 257-2911 b_morris@akbizmag.com

Call me so we can discuss improving your marketing goals.

(907) 276-4373 • Toll Free (800) 770-4373

akbizmag.com

34

Alaska Business Monthly | December 2015www.akbizmag.com


(COLI) policy may be the best bet. COLI is a life insurance policy on an employee or partner purchased by a corporation for its own use. The company is the beneficiary on the policy while an owner, employee, or group of employees are the insured. “There are various ways a business can protect itself through comprehensive insurance planning,” adds Betti. “A splitdollar life insurance policy affords the business a recoup of the premium outlay for an employee or owner as the beneficiary of the policy, and when payout occurs, the insured gets the remainder. The key person and buy-sell agreements protect the business and make sure it can keep operating. In concert they all bring advantage to a business’s value, stability, and longevity.” Betti offers the example of an insured buysell agreement. Consider a business with four owners and one dies. The buy-sell agreement says that upon death a set amount of money will be available to buy the shares of a company-owned stock and distribute to a spouse or dependent. Life insurance funds liquidity—most businesses don’t have $500,000 available in a bank account—the insurance component of the process prevents company collapse. The remaining three owners can keep everything operating as a result. When asked about premium amounts

and what costs and range policies are associated with business life insurance coverage, Betti explains it depends on the age, health, and level of coverage desired. There is a difference between a partner or vital employee who is seventy-years-old compared to a thirty-year-old computer programmer or pilot. If a business has a rainmaker or person who is a primary revenue generator, and she becomes incapacitated or deceased, key employee insurance activates resources that can cover day-to-day operations like payroll and benefits, office space, bills, recruitment, and securing a replacement and even training for a new hire. “Avoiding interruption of revenue flow and output can make a huge difference in a business’s success,” says Betti. The one extra dimension that is unique to Alaska is the mosaic of industries and locations that have used business life insurance options. Betti’s experience working with Alaska Native corporations and subsidiaries has been particularly enlightening. He explains that many of the companies’ managers he’s counseled and guided that ultimately decide to purchase key person and COLI insurance have done so because they care about employees and recognize the possibility that injury and fatalities occur because of flying and environmental conditions. “Alaska Native corporations really

take care of their employees, and that’s an endearing business mentality,” adds Betti.

Prepare and Consider Your Options Business life insurance can literally keep the doors open and lights on for a company, partnership, or sole proprietorship. Insurance benefits can mean the difference between draining savings and available credit to pay ownership equity to the spouse of your employee that has died or not. Whether purchasing a key person policy, COLI, or an insured buy-sell agreement, or all of the above, companies like New York Life Insurance and Allstate offer trained personnel and resources statewide in Alaska to assist in business planning. No one likes hypotheticals, let alone the real thing, when it comes to death and loss of life. There can be light on the horizon after such a dark day however, if business insurance and benefits are researched and acquired to protect business, employee, and estate prosperity. Think about it and do your research before it’s too late. You business’s existence may literally depend on it. R Tom Anderson writes from across Alaska.

Aviation Safety & Audit Solutions Medallion provides third party audits tailored to meet your specific needs, whether you are an airline, maintenance provider or industry user of aviation assets. We follow up with safety consulting services and training solutions for all your safety programs.

1520 Post Road, Anchorage, AK 99501

medallionfoundation.org

907.743.8050

Auditing Services • Safety Program Development • Safety Management Systems • Training

www.akbizmag.com

December 2015 | Alaska Business Monthly

35


Legal Speak

By Melanie K. Curtice

The Affordable Care Act: What Employers Need to Know for 2016

T

he time for employer shared responsibility penalties, or “assessable payments” as the IRS refers to them, is finally here. Note that most of us would refer to penalties as “taxes,” but we don’t because the US Supreme Court taught us in NIFB v. Sibelius that there is a difference between taxes and penalties. Under the Affordable Care Act, also known as the ACA or Obamacare, an employer with at least fifty full-time employees must offer them health coverage that meets certain standards or risk paying assessable payments to the IRS. Starting in 2016 employers must report that coverage to employees and the IRS on Forms 1094 and 1095, which is one way the IRS will determine the assessable payments. And if this wasn’t enough, Congress just passed the Protecting Affordable Coverage for Employees, or “PACE Act,” amending the ACA allowing states to define a large employer as one with more than fifty employees, not one with up to one hundred employees. Without the PACE Act, the ACA’s original requirement that states define small employers as having one hundred or fewer employees would have been effective on January 1, 2016. This change is related to state insurance rating and coverage requirements and is separate and distinct from the requirement to provide coverage or pay a penalty. In other words, the PACE Act really has nothing to do with the assessable payments that may be due; it has to do with the coverage that small employers provide to their employees. Confusing? Yes. Here’s what everyone needs to know.

Assessable Payments under Employer Shared Responsibility Starting January 1, 2015, any employer with at least one hundred full time employees must offer minimum essential coverage, or MEC, to employees in order to avoid assessable payments. For new full-time employees, employers must offer MEC to them by the first day of the month immediately following the conclusion of three full calendar months of employment or pay an assessable payment in 2016. Beginning in 2016, this obligation will extend to employers with at least fifty fulltime employees. Part-time employees and 36

Under the Affordable Care Act, also known as the ACA or Obamacare, an employer with at least fifty full-time employees must offer them health coverage that meets certain standards or risk paying assessable payments to the IRS. Starting in 2016 employers must report that coverage to employees and the IRS on Forms 1094 and 1095, which is one way the IRS will determine the assessable payments. And if this wasn’t enough, Congress just passed the Protecting Affordable Coverage for Employees or “PACE Act,” amending the ACA allowing states to define a large employer as one with more than fifty employees, not one with up to one hundred employees. employees in categories such as volunteers do not have to be provided with coverage. (MEC is basically any type of group health plan that pays for a majority of healthcare expenses and one that meets ACA’s group health plan requirements such as no lifetime limits on essential health benefits. Accountbased plans, or plans or policies that do not meet these requirements, are not MEC.) The penalties apply to an employer that does not provide MEC to “substantially all” of its full-time employees and their dependent children (substantially all is 70 percent in 2015, 95 percent every year thereafter) and one or more of the employer’s full-time employee is certified to receive a premium tax credit or cost-sharing reduction when purchasing health insurance through a state-based or federally facilitated exchange or “Marketplace.” This is called the “no coverage penalty.” The no coverage penalty is equal to $2,000 (indexed) multiplied by the number of fulltime employees minus thirty (eighty for 2015). Even if an employer does provide coverage to substantially all of its full-time employees and their dependents, it can still be subject to a penalty if a full-time employee receives a premium tax credit or cost-sharing reduction when purchasing health coverage in a Marketplace because the employer’s coverage is not “affordable” or does not provide “minimum value.” This is referred to as the “insufficient coverage penalty.”

The insufficient penalty is equal to $3,000 (indexed) for the full-time employee who received the federal subsidy. Both penalties are divided by twelve and assessed for each month in which either no coverage or insufficient coverage is provided to a full-time employee accessing subsidized Marketplace coverage. These penalties or assessable payments will be due on receipt of an IRS notice of and demand for payment. Prior to the demand for payment, an employer may learn when one of its employees is found eligible to receive subsidized Marketplace coverage through notification by a Marketplace. Employers can appeal this Marketplace determination and will reportedly have time to respond to the IRS about an assessable payment before it is due. Based on currently available information, the IRS will send these notifications after employees’ individual federal income tax returns are due, including extensions.

Forms 1094 and 1095 Reporting

Starting in 2016, many employers that make MEC available or have full-time employees will have to furnish statements to their fulltime employees and file this information with the IRS. The statements that will go to fulltime employees are similar to Form W-2s in that each is an individualized, personalized statement applicable only to that employee. The statements that go to the IRS are similar to Form W-3, providing copies through a transmittal form that compiles the data. The

Alaska Business Monthly | December 2015www.akbizmag.com


annual timing of the new statements and reports is similar to Form W-2s as well. Employers that are subject to employer shared responsibility requirements must report information about MEC to employees and the IRS (Form 1095-C and Form 1094-C). Insurers and self-insuring small employers must report similar information (Form 1095-B and Form 1094-B). These forms disclose to employees and the IRS the months that the employees and any of their enrolled dependents had “minimum essential coverage.” Employees will likely have to submit this information as part of their income tax filing obligation in 2016.

Sometimes you need boots on the ground... ...or sneakers, or Xtra tuffs, or crutches...

The PACE Act

For small business employers, the PACE Act has everything to do with what kind of insurance coverage is provided and how much it costs, not whether the business has to report coverage or make assessable payments. Before the ACA, small employers were defined as those with between one and fifty employees for group insurance purposes. This usually meant that these groups were community rated by insurers, but under the ACA small group health insurers have to apply a modified community rating standard; make essential health benefits available, consistent with a state benchmark plan; and meet certain actuarial requirements. The ACA gave states until January 1, 2016, to expand this definition of small employer from fifty to one hundred. Due to concerns over price increases by not allowing midsize employers to remain in the large group market, Congress passed the PACE Act, allowing states to keep the definition of small employer at fifty. As of this writing, we understand that Alaska will keep the definition of small employer of not more than fifty employees on business days during the preceding calendar year.  R

Melanie K. Curtice is a partner with Stoel Rives LLP, a US law firm operating out of twelve offices, including Anchorage. Curtice regularly assists Alaska employers with their employee benefit law needs. Contact her at melanie.curtice@ stoel.com, 907-277-1900, or 206386-7651. This article is provided for educational purposes only. It is not a substitute for legal counsel. www.akbizmag.com

Whatever your business, you can reduce travel costs with FlyAway Rewards. Earn free travel quickly, to anywhere Ravn Alaska flies —from Anchorage to Atqasuk or from Kodiak to Kaktovik.

Whether it’s business as usual, or business unusual, Ravn Alaska can get you there.

www.flyravn.com

December 2015 | Alaska Business Monthly

37


special section

Healthcare

Courtesy of Providence Medical Group Alaska

The New Age of Healthcare

A Baby Boomer receiving care at a Providence healthcare facility.

Aging Alaska means more healthcare needs and jobs By Will Swagel

T

he twelve-foot tall bronze statue of an indomitable sourdough pioneer— “Prospector Bill”—graces the front lawn of the Sitka Pioneer Home. Toting a rifle, pick, and coffee pot, gazing confidently onward, Bill symbolizes those early stalwarts who came to Alaska seeking their fortune. Sometimes fortune smiled and the sourdoughs sailed home heroes. But sometimes fortune didn’t smile and once-hopeful miners found themselves stranded in the Great Land, indigent and ailing. The first Alaska Pioneers Home, housed in a dilapidated former Army barracks in Sitka in 1913, was meant to provide a refuge for such men (only men, at first). In 1933, a stately, two-story, Spanishstyle concrete building a city block long was erected and still dominates downtown Sitka. For decades afterwards, many came to Alaska in their prime and worked their careers in the state, always with the plan to enjoy their fortune or retirement in lower38

cost Lower 48 places like western Washington or Arizona. That post-career migration, say experts, is no longer the rule. Those who study demographics say more and more people are staying in Alaska into their senior years. This is especially true of former cheechakos who came to Alaska during construction of the trans-Alaska oil pipeline or in the years following. In short, aging Baby Boomers are staying in Alaska. The huge Baby Boom generation (born between 1946 and 1964) has skewed population graphs older nationwide. But in Alaska, the trend is even more noticeable. “Between 2012 and 2022, Alaska’s [proportion] of people sixty-five years or older is going to increase by 79 percent,” says Kathy Craft, director of the Alaska Health Workforce Coalition, a group of eleven public and private healthcare entities focused on health and behavioral health workforce planning for the state.

“Around the year 2000, the population of seniors was 7 to 7.5 percent of the population, but it was expected to grow to between 15 and 18 percent,” says Dr. Harold Johnston, CEO of the Providence Medical Group in Alaska. “All the seniors were supposed to retire to Sequim [Washington], but they’re sticking around.” Johnston is a self-identified boomer who says he’s not going anywhere, either.

Aging Patients and Caregivers

The increase in the number of Alaska resident seniors is sure to further stress a health system already stretched by Alaska’s sheer size and high costs. “Alaska suffers from a shortage of healthcare professionals,” says Ann Secrest of AARP Alaska. “Alaska has either entire or partial medically underserved areas and there are health professional shortage areas throughout the state, particularly in dental health,

Alaska Business Monthly | December 2015www.akbizmag.com


KATMAI ONCOLOGY GROUP

Providing Coordinated, Compassionate and Personalized Care

W

hen Katmai Oncology Group in Anchorage started in 1971, it introduced vital oncology services that were unavailable in Alaska. Since then, the patient-focused, community-minded clinic has expanded its vision to add a satellite location in Soldotna. This clinic offers Kenai Peninsula residents high-quality, personalized oncology care and chemotherapy close to home. Earlier this year, Katmai Oncology further expanded by offering integrative services exclusively for patients, including an oncology social worker, survivorship visits, palliative care, a dietician, acupuncture and massage. The integrative approach gives patients another positive option for improving their health and exemplifies Katmai Oncology’s commitment to meeting patients’ complete needs. “We don’t just treat your cancer; we work as a team to provide a seamless continuum of care to make cancer treatment and recovery effective, convenient and accommodating—one patient at a time,” says Dr. Shannon Smiley. Providing Efficient, Quality Care Today, Katmai Oncology is the state’s oldest and largest oncology practice, with a 42-member staff that includes six boardcertified physicians, six oncology-specialized nurse practitioners, chemotherapy certified infusion nurses and supportive clinic nurses to help navigate the cancer journey. Katmai Oncology is also an exclusive Alaskan member of the Seattle

Cancer Care Alliance Network, which provides easy access to national experts and enhances its ability to offer state-ofthe-art care. Last year, Katmai Oncology became the only Quality Oncology Practice Initiative (QOPI®)-certified group in Alaska and one of only 200 such clinics out of thousands nationwide. Katmai Oncology is extremely proud of being certified by the American Society of Clinical Oncology, according to Practice Administrator Terri Tope, ANP. “It’s been a positive certification, and our high quality care reflects it,” Tope says. As another area of distinction, Katmai Oncology always has a medical oncologist on site during chemotherapy, which ensures safety and enhances coordination of care. The clinic also has a mostly exclusive RN staff, which contributes to its high-caliber care. “It shows that the practice respects and recognizes the additional value, support and education behind having an RN staff to help coordinate care, triage concerns and be a part of the health care team at a higher level,” says Clinical Manager Hertha Monroe. Monroe also emphasizes that Katmai Oncology is a privately-owned clinic with the specialized services and expertise on site to ensure optimal care. “The general impression is that patients receive better care in the hospital,” Monroe says. “To the contrary, care in our clinic is cost-effective, efficient, coordinated and very personalized.” –

PA I D

A DV E R T I S E M E N T

Constantly Changing and Moving Forward Katmai Oncology’s longevity lies in its willingness to proactively adjust with the times. This is evidenced by its adoption of electronic medical records in 2004—10 years before such records were government-mandated. A more recent example is the clinic’s QOPI certification, which involved meeting quality benchmarks that will be required by the government in the future. Another testament to Katmai Oncology’s propensity to adapt is its participation in the Oncology Medical Home pilot program, which encompasses taking ownership of patients’ wellbeing to promote cohesive care. “Instead of sending the patient to the emergency room, you have them come into your office to assess the problem,” Tope says. “It’s all about treating the whole patient—not just the diagnosis.”

www.katmaioncology.com 3851 Piper St., Suite U340 Anchorage, Alaska 99508 907-562-0321 247 N. Fireweed St. Soldotna, Alaska 99669 907-262-1310


mental health, and primary care.” nurses, and 26 percent of mental “Seniors wind up with a lot of health practitioners. diseases related to aging,” John“Alaska is the state with the ston says. “So pretty much all fastest growing segment of people kinds of specialists are needed.” sixty-five and older,” she says. He says orthopedic surgeons (bones and joints), cardiologists Primary Need (heart), neurologists (demenRosyland Frazier is a senior retia and strokes), dermatologists searcher at the Institute of Social (skin), and oncologists (cancer) Harold Johnston and Economic Research at the are just a few of the specialties that University of Alaska Anchorage. will become more in demand. Responding to complaints that older AlasBut an even more acute need might be for kans couldn’t find a doctor, Frazier did a primary care providers—especially those survey of physicians statewide in 2008-2009 willing to take new Medicare patients. to gauge the access Medicare patients had to There is also a shortage of nurses and other primary care. members of the care team. The study found access problems in AnPharmacists, too, are needed in Alaska. chorage, Fairbanks, and the Mat-Su ValPharmacists are important for seniors, who ley. Even though Medicare paid doctors in may take numerous medications for condi- Alaska (in 2009) 29 percent more than in tions associated with aging. other locations, the payment was still often Another problem is that many of the less than the doctors would receive from healthcare professionals now practicing in private insurers and was not enough to atAlaska are themselves nearing retirement. tract doctors to see new Medicare patients. Denise Daniello, executive director of the Since that time, Frazier says, several new Alaska Commission on Aging, says data from facilities have been opened specifically to the Alaska Department of Labor Research provide seniors with primary care. and Analysis section show that 31 percent One such facility is Providence Medical of all physicians and surgeons in Alaska are Group Senior Care, located on the Provififty-five or older. That’s also true of 31 per- dence Alaska Medical Center campus in cent of pharmacists, 25 percent of registered Anchorage. There is a nursing home at the

Providence Extended Care Center, and rehabilitation services are available at the Providence Transitional Care Center. Providence also has an assisted living center, a home healthcare program, and a hospice program. “We recently selected a Service Line Director to bridge across all stages of care, to combine them into a seamless set of services to seniors,” Johnston says. Providence’s Family Medical Center accepts patients of all ages, including seniors. Johnston says the Family center has recently adopted a new concept in primary care, called the Patient-Centered Medical Home, which is also being instituted in the Senior Care clinic. The philosophy is to integrate all levels of care to address patient needs from high-tech specialists to home care assistants. Johnston says the program relies on Advanced Practice Professionals, such as nurse practitioners and physician’s assistants. If appropriate, practitioners are willing to make home visits. In fact, Johnston says, mental health workers, case managers, social workers, and even pharmacists may make home visits.

Senior Service

It’s seems that in the twenty-first century, fewer workers—either because of financial imperatives or desire—are planning a complete withdrawal from the workforce at age

Ilisagvik’s Allied Health offers a wide range of academic programs from dental assistant to emergency response trainings. Through community outreach, the program gives the opportunity for adults and youth to explore healthrelated careers and activities across the North-Slope.

For Info Call: 800-478-7337

www.ilisagvik.edu 40

Alaska Business Monthly | December 2015www.akbizmag.com


Anchorage Fracture & Orthopedic Clinic

A

Dr. Kurt Mentzer

Dr. Brad Sparks

Dr. Kenneth Thomas

Alaska’s Leading Orthopedic Practice Continues to Grow by Adding Expertise

nchorage Fracture & Orthopedic Clinic, one of the longest established orthopedic practices in Anchorage, is continuing to grow by adding new doctors. Offering expert orthopedic care since 1969, the doctors at Anchorage Fracture & Orthopedic Clinic specialize in the areas of joint replacement and revision, sports medicine, spine, scoliosis, pediatric orthopedics, trauma, and upper and lower extremities. Although Anchorage Fracture & Orthopedic Clinic has recently retired two reputable doctors, it has added new doctors to the practice with new specialties, continuing its 45-plus years of excellence in orthopedics. Dr. Kurt D. Mentzer, Dr. Brad L. Sparks, and Dr. Kenneth C. Thomas are the newest doctors to join the practice. Dr. Mentzer is a fellowship-trained hand and upper extremity surgeon with more than 15 years of experience. Anchorage Fracture & Orthopedic Clinic was experiencing such a high volume of hand and upper extremity patients that a second hand surgeon was required, which lead to the addition of Dr. Mentzer. Living in Alaska for the past seven years, Dr. Sparks is fellowship-trained in sports medicine and specializes in joint replacements. As an avid hunter

and outdoor enthusiast, Dr. Sparks uses his expertise to provide exceptional care to athletes and outdoorsmen right here in Alaska. Dr. Thomas specializes in pediatric orthopedics and is fellowship-trained in orthopedic trauma. With the addition of Dr. Thomas, Anchorage Fracture & Orthopedic Clinic now offers expert pediatric orthopedic and trauma care, fi lling two needs in the Anchorage area. “We are proud to welcome these new providers to our practice and know that they are committed to excellence,” says Dr. Gregory L. Schumacher. According to Dr. Schumacher, the variety of experience and expertise from the surgeons at Anchorage Fracture & Orthopedic Clinic allows for outstanding treatment for all patients. Along with the other services Anchorage Fracture & Orthopedic Clinic offers, it also provides a walk-in clinic to treat acute orthopedic injuries. The walk-in clinic treats sprains and strains, dislocations, joint injuries, fractures, work-related injuries, and sports injuries. Dr. Schumacher says that this clinic is optimal for serving patients who have had a recent injury. “We have a walk-in clinic for urgent orthopedic injuries Monday through Friday from 11 a.m. to 7 p.m. and on –

PA I D

A DV E R T I S E M E N T

Saturday from 10 a.m. to 2 p.m.,” says Dr. Schumacher. “Anchorage Fracture & Orthopedic Clinic offers this walk-in clinic because orthopedic injuries often happen outside of regular office hours, and patients need to be seen promptly.” Anchorage Fracture & Orthopedic Clinic is passionate about serving the local community. Their surgeons have been team doctors for the University of Alaska Anchorage for more than 30 years and sponsor and care for competitive athletes such as Kikkan Randall and Kieffer Christianson. “It is a pleasure to work with local athletes and the Alaska population in general,” says Dr. Schumacher. “I am thrilled that the practice is growing and that we are able to bring more expertise to the community.”

For more information about Anchorage Fracture & Orthopedic Clinic, visit their website at www.afoc.com or call (907) 563-3145.


sixty-five. The increase in older Alaskans may present challenges to seniors seeking medical care, but it also provides opportunities to those seniors who may wish to stay employed, full or part-time. Older workers already in the healthcare field may be incentivized to stay on board with retention bonuses or offers of a more flexible schedule. Retired seniors who seek re-training might find that the worker shortage makes their age less of an issue in securing jobs. And there is a present and increasing need for direct care workers, such as home health aides, Certified Nursing Assistants, and per-

You are not a diagnosis. You are unique.

sonal care aides—people who we call ‘Empty Nesters,’” Craft come into the home to help with says. “They probably cared for daily activities. people all of their lives. But now “We will have a 22.4 percent their kids were gone and they vacancy rate by 2022,” says Craft. had some extra time and oppor“We need two thousand direct tunity. We did a whole ad camcare workers.” paign trying to get those empty Craft’s work through the nesters into the health field that Alaska Mental Health Trust Auwas somewhat successful. thority has reached out to Alas- Kathy Craft “The ability to care for people kan youth to train to fill those is really trying to connect with positions. They have also reached out to people,” she adds. “That’s what it’s all about.” seniors through advertising about employCraft says the recruiters also targeted ment opportunities. service members leaving the military. “We were trying to find individuals that Whether focusing on service members, youth, or seniors, such “Alaska Grown” recruitment has one advantage for employers. “It’s a better strategy for Alaska than recruiting out of state,” says Craft. “It’s hit or miss whether the [new] people will like Alaska and decide to stay.”

Good Old Workers

Get care that is unique to you.

From ACL to rotator cuff repair, our team is ready to help you get back to doing the things you love. We pride ourselves in keeping surgery your option of last resort. But if the need arises, we’re here with the most advanced technologies and the best surgeons.

Advocates say there are good reasons for employers to retain or recruit older workers—seniors bring many valuable qualities that can boost productivity and provide a diverse workplace that younger workers enjoy, as well. AARP’s Secrest listed some of the pluses: more work experience, greater maturity, a stronger work ethic, the ability to serve as a mentor, greater reliability and loyalty, and lower turnover. Older workers may also have formed strong business relationships with other firms and organizations. Some of the barriers to hiring seniors are shrinking. Technology, for instance, has become so ubiquitous that the image of the tech-averse senior is becoming an anachronism. Secrest says she has seen reports of a weakening correlation between worker age and employer-provided healthcare costs. Seniors have good attendance records. “So there are a lot of reasons why businesses might want to hold on to their older workers,” Daniello says. “And, a lot of times older workers want to stay on the job, too. They find that their work is meaningful—an opportunity for growth and personal development.” About 25 percent of seniors are still working and contribute about $630 million to the state’s economy, Daniello says. She also noted that seniors contributed about $90 million worth of volunteer hours. Add in retirement savings and spending on healthcare, she says, and seniors pack a $3 billion punch to the state’s economy. “Seniors comprise a significant and sizeable resource for the state.” R

And all the TLC you need. 4100 Lake Otis Pkwy. #308 • Anchorage, AK • (907) 563-2663 • rhyneercaylorclinic.com 42

Alaskan author and journalist Will Swagel writes from Sitka.

Alaska Business Monthly | December 2015www.akbizmag.com


©Photo Arts by Janna

PAIRMORE & YOUNG: SYNERGY CHIROPRACTIC

P

Changing the way Alaskans view chiropractic!

airmore & Young: Synergy Chiropractic is changing the way Alaskans view chiropractic! With more than forty-four years of combined experience, Doctors John Pairmore and Dennis Young run a “specialty” chiropractic clinic. It is the only clinic in Alaska offering a unique procedure called the Atlas Orthogonal technique. The AO technique differs from traditional chiropractic in that it employs a painless, hands-off adjustment using a gentle, light force instrument, specifically to the first bone in the neck known as the Atlas.

HIGHLY EFFECTIVE This technique has proven to be a highly effective approach to addressing the needs associated with migraines, car accidents, slips and falls, sports injuries, and many other physical symptoms. Dr. Roy W. Sweat pioneered this revolutionary, advanced, biomechanical procedure more than fifty years ago. Currently, there are less than one hundred certified orthogonists nationwide. Alaska is fortunate to have two doctors who can provide this procedure. The science behind Atlas Orthogonal Chiropractic is the study of the spine

with specific concentration on alignment of the Atlas vertebrae. This bone supports the head and is referred to as the foundation of the spine. The theory is that the Atlas bone needs to be level in order to support the head properly over the lower spine and pelvis, thus allowing the blood and spinal fluid to flow freely to and from the brain. If this foundation becomes unleveled, the spine will move away from the ideal position, which can have profound consequences on a person’s overall health. UNDERSTANDING DOCTORS The doctors understand that not everyone is comfortable with the common chiropractic technique of twisting and cracking, nor is it beneficial for every condition. Consequently, by implementing the Atlas Orthogonal instrument, the tagline for the clinic states that the doctors at Pairmore & Young can provide “real spinal correction with the touch of a feather.” They also administer supplemental therapies for specific treatment situations. Pairmore & Young has been in business since 2012, when Dr. Dennis Young moved up from South Carolina to join Dr. John Pairmore’s existing practice of nine years. Dr. Young comes from three generations of chiropractors and has thirty years of experience in the industry. He is instrumental in bringing the Atlas Orthogonal technique to Alaska. CLINIC FOR ALL ALASKANS Dr. Pairmore grew up in Alaska, attended the Palmer College of Chiropractic, –

PA I D

A DV E R T I S E M E N T

and subsequently opened Pairmore Chiropractic in south Anchorage in 2003. The clinic moved to their current location in midtown Anchorage in January of 2015. Besides the two doctors, the chiropractic team consists of twelve employees, including six certified massage therapists and one certified advanced Rolfer. They plan to eventually expand their specialty clinic to include interior and southeast Alaska locations. The ultimate goal of Pairmore & Young is to be recognized as the Atlas Orthogonal clinic that ALL Alaskans can turn to, treating symptoms from arthritis to whiplash—and everything in between. As Dr. Young so aptly stated, “We have an important need to fulfill; therefore we have assembled an outstanding team and are ready to help our fellow Alaskans experience optimal health!”

3210 Denali St., Suite 1 Anchorage, AK 99503 907-677-6953 www.907Chiro.com


special section

Healthcare

Joint Replacement Best Practices Anchorage doctor recommends ‘tried and true’ By Molly Dischner

A

n estimated nearly 1 million Americans have a joint replaced each year, whether they want a knee that doesn’t hurt so much or a hip with better mobility. It’s a way to improve quality of life when certain body parts are no longer performing at their peak. As Alaska’s population ages, those surgeries are more and more common here, too. But every surgery comes with the possibility of complications, and even those that go smoothly require a purposeful recovery. Anchorage orthopedic surgeon Stephen Tower believes there’s a way to ensure a higher rate of success in joint replacements: keep it simple. Innovation might be what drives much of the world, but when it comes to joint replacements? Tower says the old way is often safer and more reliable. “We know what works in hip replacement; we know there are proven designs out there,” he says. “Avoid new technology and avoid new surgical techniques.” According to Tower, some of the best hip replacement technology is from 1975, and that design is still in use today. Tower put the failure rate for that method at about half a percent per year. In fact, it even predates the first joint replacement surgery he attended, despite his long history with orthopedics in the state. “The first operation I ever saw was a total hip replacement in Fairbanks in 1979,” Tower recalls. And the rule applies to other joints as well, he says.

Getting to Now

Generally speaking, a joint replacement is when one part—most commonly a hip or knee, with shoulders occurring less often— is swapped out for new hardware, usually using plastic or metal components. They’ve become fairly common in the United States, but they are not without risk. With any surgery there is room for complications. But keeping it simple reduces the likelihood of those, Tower says. He saw that first joint replacement in his first year of medical school. Tower, now a professor in the program, was a WWAMI 44

(Washington, Wyoming, Alaska, Montana, Idaho) student in the 1970s. The program had a slightly different structure then, but the basic goal was the same: prepare Alaskans to work as doctors here. To that aim, the program’s first year was held in Fairbanks. He was paired with Dr. George Brown. Tower described that first procedure as “classic orthopedics,” with blood on the ceiling. He’d spent a couple summers building homes and thought the surgery was fascinating. So he turned around to tell a classmate how cool it was—and he was stone cold on the floor. But he didn’t jump straight into the field. Instead he took an indirect path that included time on an internal medicine track. Then he worked for the Indian Health Service, and worked in general medicine at Point Barrow and Bethel, before returning to Anchorage. “I spent three years as a general medical officer, attached to the orthopedic service, so then I got back to doing what I really, re-

ally like,” he says. Next, Tower attended an orthopedic residency at Oregon Health Science University, in Portland, and in 1992 returned to Alaska and joined Anchorage Fracture and Orthopedic Clinic. By then, hip replacements had been done in Alaska for about ten years. His orthopedic practice was at Anchorage Fracture and Orthopedic Clinic until this May, when he started a new clinic.

Re-Doing Leads to Research

Tower says he started out doing difficult replacements, the ones other doctors didn’t want to do: often, the re-dos. In fact, he says his first several years of practicing orthopedics in Alaska were focused largely on redoing hip replacements that had gone awry. So he partnered with Dartmouth College and started researching faulty joints to try to better understand what was going wrong. Eventually, he started to see that newer materials and methods were failing at

Alaska Business Monthly | December 2015www.akbizmag.com


higher rates than the old tried and true hip replacements. “It’s tragic for the patient because a re-do hip surgery is a bigger deal, usually, than replacing a hip the first time,” he says. And that’s where the research came in. Tower and his colleagues studied faulty joints, and patterns emerged. As a new technique or material appeared on the market, he’d often see something not quite right about it. For one, cobalt chrome alloy used in joints was sometimes resulting in cobalt poisoning, with a wide range of health issues present until the joint was removed. He also saw a catastrophic failure of most commonly used plastic hip liners. In the 2000s, one problem was that the plastic was swapped out to make it more wear-resistant. Then the design of the hip changed, under the assumption that stronger plastic could allow for that. But the new plastic turned out to be more brittle. Normally, there’s about a 95 percent chance of a new hip lasting ten years and an 80 to 85 percent chance of it lasting twenty years, he says. The new design with better plastic failed more often, and patients weren’t guaranteed that old rate of success. Tower says that those innovations weren’t unusual—most of the design and materials changes in the last twenty years have been more prone to failure.

‘Tricky Spot’ for Alaskans

From an analytical perspective, he says, it’s easy to see why new technology might be appealing: A patient with a badly arthritic joint is likely going to be pleased with their replacement initially. They tell their friends that their specific procedure is the reason—even if anything would have made them happy for the first month or so. And by the time a problem develops, they’ve already sold others on the procedure. “The proof in the pudding is at least five, if not ten, years down the pike,” Tower says. “That’s how long it takes for the disadvantages to become known.” Alaskans are sometimes in a particularly tricky spot, he says. One method that’s now being abandoned in the Lower 48 because of a high complication rate is just gaining popularity here, even though its heyday has passed. Tower says he tries to talk to all of his patients about that. Some grasp the issue more quickly than others. “I don’t have any trouble convincing an engineer or a mechanic,” he says, noting that he’s also come up with an Alaska analogy that revolves around fishing. Essentially, why leave a good, quiet fishing hole if you don’t have to? But, like most rules, there are exceptions. Tower notes that the old metal-onwww.akbizmag.com

metal replacements are now avoided. Those had high failure rates and are mostly off the market, he says. And a change in plastic in 2000 to be more wear resistant turned out to be for the better. “We’re just not seeing that technology fail as long as the surgeon uses a smaller head,” he says. It’s not all about simplicity.

A Wellness Focus

Alaska Regional Hospital uses a wellnessfocused model when conducting joint replacements that it believes aids in recovery. That’s less about the mechanics of the surgery and the implant itself and more about how the patient approaches their surgery and recovery. The model includes preoperative classes designed to educate patients about the entire surgical experience and emphasizes the patient’s role in their own recovery. It also includes a guide through the process, including postoperative care and group activities while in the hospital, to help patients connect and heal together. Tower has another tip of his own, too, simple in itself. He says it’s wise for Alaskans to have joint replacements done in state, even if the out of state cost initially looks lower, because it’s best to have a doctor around who can help address any issues that develop. “I believe my practice is cost competitive with the Lower 48 for a couple reasons,” he says, noting that surgeons are often reluctant to fix someone else’s work, so it’s easier to have follow-ups with the original doctor than finding someone else to do it or paying to travel out of state. And other doctors note that while it’s good to have a knowledgeable surgeon perform a joint replacement and do so carefully—it can be better to avoid the issue in the first place. Simple things like movement and diet can help keep joints in good condition longer. After all, no surgery means no risk of complications or other issues. But as long as surgeries continue, Tower and others will continue to study them. One of his main interests right now is corrosion and metal-on-metal failures. About 10 percent of the artificial hip joints with the metal-on-metal components were formally recalled; that leaves a large number still in patients—plenty of fodder for future research. He’s also still studying the different types of plastics that appear in replacement joints. R

Freelance writer Molly Dischner writes from Dillingham. December 2015 | Alaska Business Monthly

45


special section

Healthcare

Occupational Healthcare for Older Alaskans Niche providers see increase in delivery By Louise Freeman

I

n the 1970s, when the oldest of the Baby Boomer generation were in their twenties, “natural” everything was popular and they explored the body’s natural ability to heal itself. They discovered new-to-them practices such as acupuncture, which is thousands of years old, and naturopathic medicine, then seventy years old, but it had almost died out in the United States. So it should come as no surprise that today three out of four Baby Boomers turn to alternative medicine to prevent illness and disease, recover from injuries, and get relief from chronic or acute pain. Chiropractic care, acupuncture, massage, and naturopathy, in particular, are well suited for treating the types of health problems common to people over age fiftyfive, including osteoarthritis, low backaches, chronic pain, and the reduced mobility and flexibility that can lead to falls and other accidents. Members of this generation are especially interested in maintaining their health because 85 percent of them plan to work beyond the age of sixtyfive and nearly half plan to work into their seventies and eighties, according to a 2014 study by Cornell University. Reasons for electing to stay in the workforce beyond the typical retirement age range from wanting to prolong a reward-

“Seventy percent of my patients over fifty-five come in with low back pain. If they get to be retirement age but want to work a little longer, chiropractic can give them relief from their pain.”

—Lee Waldroup Chiropractor, Arctic Chiropractic and Massage of Nome

ing career to worries about having insufficient savings to live on in the future. In Alaska in 2012 there were more than sixty thousand workers age fifty-five and older, almost double the number ten years earlier. Of these, workers age fifty-five to sixtyfour made up 17.3 percent of the civilian workforce, while workers age sixty-five and older accounted for 4.5 percent. This makes Alaska the fourth highest state in terms of the highest employment-to-population ratios for workers age fifty-five and older. Mark Hylen, vice president of Beacon Occupational Health and Safety Services, which has clinics and/or testing centers in Anchorage, Kenai, and Prudhoe Bay, says, “Alaska has an aging workforce on the North Slope. They came as younger workers when the pipeline went in in ’76. Forty years into it, a lot of folks have retired in the last five years, but many continue to work.” Fortunately for these older workers,

“Natural medicine is a lot of work because it involves changing your lifestyle and diet. It is not something done lightly. They have to be very motivated. Everyone agrees the less medication, the better off you are. One of the biggest things is too many drugs in people over age fifty-five. They take one drug for one symptom then have to counteract the side effects of the first one and it goes on and on. Some older people are taking ten to fifteen medications. We try to see if there is another way to address the problem.”

—Dr. Amy Williamson Naturopathic doctor, Fairbanks Family Wellness

46

some types of alternative medicine are no longer considered an alternative to traditional medicine, but a complement to it. Now covered by many major health insurance companies, these different approaches have been increasingly integrated into a full-spectrum model of healthcare that includes everything from nutritional counseling and massage on one end to medication and surgery on the other.

Naturopathy

Naturopathic doctors offer a holistic approach that integrates the use of non-conventional treatments such as acupuncture and massage with conventional treatments like drugs and surgery. Dr. Amy Williamson, a naturopathic doctor at Fairbanks Family Wellness, noted that naturopathy is not for everyone. “Natural medicine is a lot of work because it involves changing your lifestyle and diet. It is not something done lightly. They have to be very motivated.” Williamson avoids prescribing drugs when possible. “Everyone agrees the less medication, the better off you are. One of the biggest things is too many drugs in people over age fifty-five,” she says. “They take one drug for one symptom then have to counteract the side effects of the first one and it goes on and on. Some older people are taking ten to fifteen medications. We try to see if there is another way to address the problem.” Taking multiple medications can increase daytime sleepiness and affect mobility, balance, and cognition, affecting older people’s ability to perform safely on and off the job, whether it is operating large machinery at work or driving their car around town.

Alaska Business Monthly | December 2015www.akbizmag.com


“A lot of people over age fifty-five come to me with fatigue and depression that can keep them from working,” says Williamson. These conditions can also affect worker productivity. According to the Centers for Disease Control and Prevention, 20 percent of people aged fifty-five years or older experience some type of mental health issue, with depression being the most common. “For fatigue, I have found that vitamins such as vitamin D and vitamin B can make an enormous difference. I usually start there,” says Williamson. Lee Waldroup, a chiropractor at Arctic Chiropractic and Massage of Nome, treats many older patients. “Seventy percent of my patients over fifty-five come in with low back pain. If they get to be retirement age but want to work a little longer, chiropractic can give them relief from their pain,” he says. Patients who consult chiropractors for back pain are less likely to have spinal surgery, and yet they report high levels of satisfaction with their treatment and level of pain relief. “I’ve been in practice for thirty-seven years, and I’ve kept a lot of folks off the surgery table over the years,” says Waldroup. If they can avoid surgery, workers can return to their jobs more quickly, without suffering a long and painful recovery time. Acupuncture is considered one of safest and least invasive options for treating pain, especially back pain, compared to the risks of surgery and the dangerous effects using opioid painkillers, which have a high potential for addiction, and the long-term use of anti-inflammatory drugs, which can cause severe problems in the digestive tract. The American Journal of Epidemiology endorses acupuncture as a viable treatment option for patients who suffer from chronic low back pain. Research showed that patients experienced significantly better back function and a decrease in pain during treatment and in the following three months. “One reason we see so many Veterans Health Administration patients,” says Michael Wedge, an acupuncturist at Premier Acupuncture & Complementary Medicine in Palmer, “is there is a big push by VA doctors to get them off of pain meds. Acupuncture is quite effective at reducing pain and 90 percent of my patients get long term pain relief, allowing them to reduce or eliminate dependence of pain medication.” A decrease in the range of motion in muscles and joints is another problem that becomes common with age, resulting in more strains (involving ligaments) and sprains (involving tendons). As the cushioning cartilage begins to break down from a lifetime of use, joints become inflamed and arthritic. “I see a lot of arthritis,” says Jaswww.akbizmag.com

mine Krast, a licensed massage therapist at Arctic Chiropractic and Massage of Nome. “Muscles don’t have the same elasticity in older people so they are more likely to pull something. Massage helps calm down the muscles that have been tweaked, and it aids their body in healing itself. It also helps increase the blood flow to the area to help the body to be able to heal itself.”

Prevention

Although speeding up the healing process may help workers return to work sooner, it is better to prevent injuries and illness from occurring in the first place. “At Beacon, we

“The number one reason for medivac life flights is cardiovascular problems.”

—Mark Hylen Vice President Beacon Occupational Health and Safety Services

have a strong focus on wellness and health initiatives, such as nutritional eating in the man camps,” says Hylen. But if a worker has an underlying physical condition, such

December 2015 | Alaska Business Monthly

47


Alaska’s most referred dermatology practice statewide

Experience and expertise. Collaboration and comprehensive care. We treat all ages, from babies to teens to adults in their senior years. D e r m A l a s k a .c om • 907.646.8500

AFFORDABLE • SELF-PACED • ACCREDITED ONLINE DEGREES

1.888.228.8648 www.calcoast.edu

48

as heart disease, a medical emergency can develop very quickly. “The number one reason for medivac life flights is cardiovascular problems,” says Hylen. Heart disease is closely linked to obesity, and today almost 30 percent of Alaskans are considered obese, up from 21 percent in 2000. Alaska’s current rate is still below the national average of 34.9 percent of all adults, but the problem becomes worse as people age. In 2012, 39 percent of women over age fifty-five were obese, rising to 44.2 percent of women between the ages of sixty-five and seventy-four, compared to 26.4 percent of men in that age range. Obesity affects workers’ ability to carry out their job duties, having a significant impact on their mobility and balance. Obesity is just one of the conditions becoming more prevalent in older people. The common perception of Baby Boomers—seen in many ads and commercials— as enjoying a healthy lifestyle is not supported by current research. In contrast to their parents’ generation, this generation’s health does not measure up in many aspects. Although they smoke less and consequently get fewer smoke-related diseases, they have more chronic illnesses, with 75 percent having at least one chronic health condition that requires management, with diabetes, high cholesterol, and hypertension being the most common. Compared to previous generations, they take more medications, are more likely to be psychologically distressed, and are less likely to rate their health as good to excellent. Fortunately, one aspect in which Baby Boomers have bettered their elders is in getting more exercise. This may be especially true in Alaska, which is the fourth highest state in the percentage of people who get regular exercise. In addition to preventing age-related weight gain, exercise has many benefits for older people, including slowing down the loss of muscle mass. It can even shorten the length of time it takes for wounds to heal, a process which tends to take longer as people grow older. However, Waldroup says, “I don’t see my patients as active as I want them to be at that age. They get more and more sedentary. A lot of times their major complaint is ‘I can’t sit down in my recliner without my back hurting.’” Exercise is just one of the ways older people can stay fit for work, both to reduce the number of accidents on the job and to help them recover quickly from illness, injury, or surgery. It is a common misconception that older workers are more prone to workplace injuries. The frequency of occupational injuries actually declines steadily up to age sixty-four and then drops even more sharply for workers over age sixty-five. Protective

Alaska Business Monthly | December 2015www.akbizmag.com


factors may include having more years of experience and greater awareness of workplace hazards. Also, senior workers may be placed in less dangerous positions. However, older workers are at higher risk for slips and falls and for specific types of injuries, including fractures, hernias, and hip injury. When injuries do occur among people over age fifty-five, they tend to be more serious and require a longer recovery time.

Recovery

In Alaska, the median number of days a worker over fifty-five will be away from work after an occupational illness or injury is eleven days, close to double the length of recovery for a worker age twenty-five to thirty-four, which is only six days. “It often takes longer than workers may anticipate as to how soon they will be able to get back to work and meet the ability requirements of their jobs. We don’t want to have the individual go back to their job too soon or they will put themselves or others at risk,” says Hylen. After recovering from his or her injury, illness, or surgery, an employee may be referred to an occupational therapy program like the one offered by Advanced Physical Therapy of Alaska, which is based in Anchorage. Their individualized six-

www.akbizmag.com

In Alaska, the median number of days a worker over fifty-five will be away from work after an occupational illness or injury is eleven days, close to double the length of recovery for a worker age twenty-five to thirty-four, which is only six days. to eight-week re-training process, called Work Hardening, helps the employee gain strength and endurance before returning to work. During each four- to eight-hour day, the employee spends half the time working one-on-one with a physical therapist on activities that simulate job-specific tasks such as lifting, kneeling, climbing, or using their hands with dexterity and the other half of the time doing general strength and endurance exercises. The program is headed by orthopedic manual therapist Chad Ross. “In our patients over age fifty, what we often see are underlying conditions, like mild arthritis,” Ross says. “The approach we take with them is less aggressive, and they may need breaks periodically. We have to respect that joints lose some of their shock absorbency over time and don’t tolerate stress as they

once did.” After completing the Job Hardening program, the employee must take an assessment test to determine if that individual is able to perform the tasks specific to his or her job before being declared ready to return to work. Workers over the age of fifty-five have unique health needs that should be taken into consideration by employers so they may safely perform their jobs and continue to contribute their knowledge, skills, and experience to the workplace. Making use of complementary medicine is one way to extend the productive years of older workers—an increasingly important sector of Alaska’s workforce. R Louise Freeman writes from Anchorage.

December 2015 | Alaska Business Monthly

49


special section

Healthcare

Behavioral Health Access for Alaskans Big challenges are geography, availability, workforce, and cost By Molly Dischner

A

laska’s vast expanses, rugged terrain, and rural communities are often considered one of its highlights. But when it comes to delivering behavioral health services, the state’s geography is one of many challenges. Kate Burkhart, the executive director of the state’s mental health board, says geography, availability, workforce, and cost are among the big challenges to delivering behavioral health services across the state. Demand for services is high, and it’s linked to other high statistics: domestic violence and sexual assault are prevalent; suicide, substance abuse, and other mental health conditions are also more common in Alaska than many other states. Alaskans are also more likely to receive mental health services than residents of other states, according to data provided by the state of Alaska. And the number of men and women served by the state’s Division of Behavioral Health increased each year from 2009 through 2013.

Integration Helps

Step by step, providers across the state are reaching Alaskans. Integration of mental health treatment and substance abuse treatment has helped both fields over the past decade and represents the biggest change. “Recognizing that the majority of clients who experience mental health disorders also experience a substance use disorder [and vice versa], and that the fields share effective health promotion and prevention practices, has allowed the fields to align more closely to serve the whole person,” Burkhart writes in an email. “This work provides the foundation for further integrating behavioral health and primary care—so that we truly provide whole person health.” But challenges remain: availability of treatment chief among them. Burkhart says Alaska’s substance abuse treatment providers—particularly the two in-state methadone 50

programs—usually operate at full capacity with long waiting lists. That’s especially problematic because ideally, treatment needs to be provided when a person is ready for it. “To be confronted with a wait of months, weeks, or even just days can result in a lost opportunity to get treatment to a person in need,” she says.

Far-Flung Locales

Geography is also an issue. Alaska’s treatment and recovery resources are concentrated in the Anchorage area, according to Burkhart, with some services available in Fairbanks, Juneau, and rural hubs. For Alaskans in even more remote locations, community health aides and behavioral health aides can provide day-to-day care, visiting itinerant counselors offer less frequent services, and telehealth augments those offerings. Few communities have residential substance abuse treatment or inpatient mental health treatment, so some individuals only have access to lower levels of care, and community health centers funded by the state must prioritize treatment, so not everyone is always able to access it, Burkhart says. Even communities as large as Fairbanks and Juneau don’t have enough psychiatrists, so care isn’t always easy to schedule. For the services that are mostly only available in Anchorage—like acute psychiatric care and medically-monitored detox—patients must choose between travel or forgoing care. “This means that Alaskans seeking higher levels of treatment must usually travel, whether by road, air, boat/ferry, or a combination of these, to get care,” she says. “Weather delays can exacerbate already emergent situations. People seeking treatment often have to leave home—their jobs, families, and support networks—to get treatment.” Other services, like serious eating disorders, some developmental/sensory disorders, and certain serious behavioral health and mental health disorders can require leaving the state entirely for treatment. Geography and availability of treatment contribute to a problem for Alaskans who want or need to access care. Those aren’t the only challenges, though.

Understaffed Industry

The industry is understaffed, which means providers aren’t always available. And care in Alaska can be expensively, sometimes prohibitively so. Even when a patient has

Medicaid or insurance, they can’t necessarily afford the services they need. Burkhart says Medicaid expansion will help change the access dilemma for some Alaskans. “We anticipate that the demand for all levels of substance abuse treatment services will grow significantly as newly eligible adults enroll in Medicaid,” Burkhart says. “These clients are also expected to have significant primary care and mental healthcare needs, given the high incidence of co-morbidities with chronic alcoholism and addiction.” According to Burkhart, the state expects to see newly enrolled adults with mild to moderate conditions also seeking out counseling and therapy services, but they may still face constraints in doing so, particularly when there aren’t enough providers to care for everyone.

Network of Providers

But for all the challenge’s the state offers, there’s a vast network of providers trying to serve Alaskans; from the newly opened Chris Kyle Patriots Hospital in Anchorage that is part of North Star Behavioral Health to long-standing programs operated by regional providers. The Chris Kyle Patriots Hospital opened in July and serves veterans needing mental health services. Alaska has a large population of veterans, and many of the same issues with Veterans Administration healthcare that have cropped up elsewhere in the country exist in Alaska, leading to a gap between needs and services. For the most part, the Chris Kyle Patriots Hospital is focused on post-traumatic stress disorder and short-term needs. Southcentral Foundation, Cook Inlet Region, Inc.’s biggest nonprofit, provides varying levels of service and support to Alaska Native and American Indian people living in Anchorage, the Matanuska-Susitna Borough, fifty-five rural communities, statewide, and outside of Alaska, according to it’s website. The foundation jointly owns both the Alaska Native Medical Center hospital and Anchorage Native Primary Care Center outpatient clinic with the Alaska Native Tribal Health Consortium, which provide the varying levels of service and support. The foundation has also taken a more integrated approach to care over the past decade. The Nuka System of Care is a relationship-based system that integrates medical, dental, behavioral, traditional, and healthcare support services, according to the organization. In addition to primary

Alaska Business Monthly | December 2015www.akbizmag.com


behavioral healthcare services, Southcentral Foundation uses several approaches to care, including learning circles and residential and nonresidential recovery programs. Denaa Yeets’is a program designed to provide specialized support to Alaska Native and American Indian adults who are at risk for suicide. It tries to help participants develop an increased sense of self-worth, cultural identity, and desire to live. The Family Wellness Warriors Initiative is focused on addressing problems related to domestic violence, abuse, and neglect. According to the organization, its purpose is to equip organizations and individuals to effectively address the spiritual, emotional, mental, and physical effects of domestic violence, abuse, and neglect.

Regional Providers

Outside of Anchorage, many regional providers have a track record of providing care. In the Yukon-Kuskokwim region, the Yukon-Kuskokwim Health Corporation is a main provider. The health corporation provides a range of services in western Alaska, from in-patient psychiatric treatment, residential treatment, and emergency youth services to collaboration on treatment court and home visits focused on strong families. The state Department of Corrections also runs a sex offender treatment program

called the YK Delta Sex Offender program that boasts low rates of recidivism for those who successfully complete the program. Through that program, convicted offenders receive help with their re-entrance into society, including working with village councils to be re-accepted. In the northernmost part of the state, the North Slope Borough is a partner in providing behavioral health services, one of few municipal governments that has taken on that role. The borough’s services include counseling through the Integrated Behavioral Health program and a day program for adults impacted by severe and persistent mental illness. The borough also collaborates on a group home. A couple thousand miles away, the SouthEast Alaska Regional Health Consortium also delivers services through a wide range of methods. A primary behavioral healthcare clinic is located in Sitka, and other providers are based in Juneau, and patients in additional communities are reached via telehealth. Some residential programs are also available in Sitka, such as Raven’s Way, an adolescent substance abuse treatment program. That program combines facets of traditional substance abuse recovery with adventure-therapy and Native cultural activities. Many hubs and rural communities have similar offerings. But added up, providers

and those in the know say there still just isn’t enough.

More Services Needed

No one can move the mountains, and few would want to make Alaska’s far-flung places closer together. Burkhart says more services could help make access easier. Statewide, she says there’s a need for more residential substance abuse treatment, more methadone programs, and medication-assisted treatment for alcohol and narcotic addictions. Aftercare and recovery programs are also needed throughout Alaska. As the state’s population ages, she says there’s also a growing demand for geriatric psychiatry capacity. Certain communities have particular needs—for instance, there’s not enough acute psychiatric care in the Matanuska-Susitna region. There’s also a need for the supports that make accessing care a little more feasible, Burkhart says. “Supportive housing and community transportation services [so that people can get to treatment, work, school, and other services] are critical to people’s recovery.”  R Freelance writer Molly Dischner writes from Dillingham.

Reaching Across Alaska, Helping Children, Supporting Families, & Touching Lives Medical Psychiatric care Psychological Evaluations Medication management

services for all ages 2741 DeBarr Rd Suite C-405 Anchorage, AK 99508 www.goodsamak.com | 907.565.4000 serpentine bold newsgothic www.akbizmag.com

December 2015 | Alaska Business Monthly

51


special section

Healthcare

Healthcare Construction Projects in Alaska

P

By Russ Slaten

rivate healthcare providers were forecasted to add two hundred jobs in 2015, according to the Alaska Department of Labor and Workforce Development in its January 2015 issue of Alaska Economic Trends. The industry has seen employment growth for more than twenty years, and new construction and renovations of healthcare facilities allows the industry to keep up with that growth.

Alaska Native Health Campus

The Alaska Native Health Campus in Anchorage is seeing many changes with renovations and new facilities within the Alaska Native Medical Center (ANMC) and the surrounding area. The Alaska Native Tribal Health Consortium (ANTHC) Patient Housing facility adjacent to the ANMC on Tudor Centre Drive will provide patient and family accommodations for those traveling to ANMC for medical care. Neeser Construction began the more than $40 million project in March, and substantial completion is expected in November 2016, with occupation in late December 2016. The six-floor patient facility is 112,059 square feet with two hundred rooms. Neeser expects seventy-five workers at peak construction, with a 60 percent Alaska Native crew. KBP Architects designed the project, with structural engineering provided by Reid Middleton, Inc., mechanical engineering from Jernstrom Engineering, electrical engineering from EIC Engineers, and civil engineering from EBSC Engineering. The facility will be connected to ANMC by a sky bridge on the second floor which also connects to a new 440-space parking garage. PCL Construction Services completed the $16 million ANTHC Parking Garage connected to the patient housing facility in August. KPB Architects designed the 165,070-squarefoot, five-floor, 400-stall garage, which began construction in January 2014 and saw forty employees at peak construction. The $25 million Nuka Wellness and Learning Center on Tudor Centre Drive is expected to be complete in January. Watterson Construction began the 58,866-square-foot, fiftyfour-room project for Southcentral Foundation in April 2014, with sixty-five workers at peak construction. The center will house Southcentral Foundation’s Nuka System of Care, Family Wellness Warriors Initiative, and Research and Development. Spark Design LLC was the architect for the project, Reid Middleton provided structural engi52

neering, and Coffman Engineers provided civil, mechanical, and electrical engineering.

ANMC Renovations

The Cardiology/Neurosurgery Remodel at ANMC began December 2014 and was completed in July for ANTHC. The 5,571-squarefoot project remodeled the former first floor data center for neurosurgery and cardiology clinical and office space. Cornerstone General Contractors saw fifteen employees at peak construction. Architect for the project was NBBJ, with engineering by PDC, Inc. Engineers. The Step Down Remodel for ANTHC saw the renovation of existing office space to create up to ten flex beds at ANMC for the hospital’s step-down unit. Cornerstone General Contractors began the project in August and expects to complete it in March, with fifteen workers at peak construction. NBBJ was the architect for the 3,458-square-foot project, which was engineered by PDC, Inc. Engineers. The Healthy Communities Building Remodel located at 3900 Ambassador Drive on the health campus will see the renovation of existing office space for the Internal Medicine, Podiatry, Oncology, and Infusion clinics. ANTHC had not yet selected a general contractor at press time for the 43,600-square-foot project with a November expected start date and completion expected in January 2017, with thirty-five projected construction workers at peak. Bettisworth North designed the project, and it was engineered by HZA Engineering. The Critical Care Unit Expansion project will see 4,485 square feet of renovated space and 3,853 square feet of new space over the existing roof of the ANMC to make room for additional Critical Care Unit beds. At press time ANTHC had not yet selected a general contractor. The project is expected to begin in May with completion expected in September 2017, with fifty projected workers at peak. NBBJ designed the project, and it was engineered by PDC, Inc. Engineers. The Orthopedics Renovation began in October and is expected to be complete in January. Roger Hickel Contracting will renovate the first floor of the ANMC for the Orthopedics clinic in the space formally occupied by the Eye, Nose & Throat; Audiology; and Ophthalmology clinics. The 7,300-square-foot project for ANTHC was designed by NBBJ and engineered by PDC, Inc. Engineers, with twenty workers at peak construction. The Nurse Call Replacement project will replace the existing obsolete nurse call system

serving the ANMC. The project was planned to begin in November and is expected to be completed by the end of March, with five workers at peak. At press time ANTHC had not yet selected a general contractor for the project which was engineered by AMC Engineers. Southcentral Foundation’s Complementary Medicine Renovation project located at 4201 Tudor Centre Drive began in January 2014 and was completed last month. Neeser Construction renovated facilities for Southcentral Foundation’s Complementary Medicine Clinic, Health Education, Physical Therapy and Exercise, and a gym, with thirty-five workers at peak construction. The $5 million, thirty-thousand-square-foot renovation was designed by Spark Design LLC.

Around Anchorage

The Providence Alaska Medical Center Cath Lab 2 Equipment Replacement and Remodel project, at Tower H on the Providence campus, was scheduled to be completed in October. MCN Construction installed a new Phillips Allura FD20/20 unit and remodeled the existing 1,023-squarefoot space including the Cath Lab, control room, and equipment room, with twelve workers at peak construction. Architects Alaska designed the project and AMC Engineers provided engineering services. The new Mint Dental Building, owned by Jonathan McNeil of Mint Dental LLC, was slated for completion in mid-November. General contractors John Emmi and Jason DeBaugh began the 24,000-square-foot, four-story building in March, with fifty workers at peak construction. Carol Stockard designed the project and Kumin Associates, Inc. is the architect for all interior tenant improvements. A 10,000-square-foot parking garage is located on the first floor. Level two tenant improvements include the 1,150-square-foot Mint Dental lab and a 2,600-square-foot leased chiropractic clinic, with 3,180 square feet remaining to be leased. The 10,400-square-foot Mint Dental clinic is located on the third floor, and a 2,575-squarefoot private residence with a roof deck terrace is located on the fourth floor. The Alaska Regional Community Clinic owned by Anchorage Community Land Trust began construction this fall. The 1,900-square-foot clinic, located at 3701 Mountain View in Anchorage, has eleven rooms including six exam rooms. The clinic was designed by Architects Alaska and is expected to open in May 2016. The Blood Bank of Alaska’s new $34 million headquarters, laboratory, and collection facility was scheduled to be completed in October.

Alaska Business Monthly | December 2015www.akbizmag.com


Located at 1215 Airport Heights in Anchorage, Neeser Construction began the fifty-six-thousand-square-foot, two-story facility in November 2013. Livinston Slone, Inc. designed the project, AMC Engineers provided mechanical and electrical engineering, and BBFM Engineers, Inc. provided structural engineering.

Across Alaska

Another boost to Alaska’s healthcare industry is the US Department of Health and Social Services awards of $7.8 million in Affordable Care Act funding to health centers in the state to expand primary care services and for facility renovation, expansion, or construction. The awards include $6,796,894 for twenty-seven healthcare facilities across Alaska to increase access to services like medical, oral, behavioral, pharmacy, and vision care; $1 million was awarded to the Bristol Bay Area Health Corporation. The $10 million Kanakanak Hospital Dental Clinic and Administrative Offices project for the Bristol Bay Area Health Corporation in Dillingham will be complete this month. Roger Hickel Contracting began the two-story, 15,800-square-foot project in May. Livingston Slone designed the project, Bristol Engineering Services Corporation provided civil engineering, PND Engineers, Inc. provided structural engineering, and RBA Engineers, Inc. pro-

vided mechanical and electrical engineering. The Yukon-Kuskokwim Health Corporation in Bethel was awarded a $165 million loan from the US Department of Agriculture-Rural Development through its Community Facility Direct Loan program. The Department of Agriculture loan secures one part of the funding for the 110,000-square-foot hospital renovation and 129,600-square-foot new primary care clinic portion of the Dr. Paul John Calricaraq Project. The Yukon-Kuskokwim Health Corporation is working with two other financial partners—the Alaska Municipal Bond Bank Authority and the Alaska Industrial Development and Export Authority—to secure additional funds for the $287 million project. The Myra Roberts Health Clinic Heat Recovery Project in Venetie was completed in September. The nearly $200,000 heat recovery system for the clinic owned by the Venetie Village Council is expected to provide more than 90 percent of the heat needed for the new clinic that opened in January. Construction was performed using local carpenters and laborers under direction of ANTHC Division of Environmental Health and Engineering, and the 2,269-square-foot clinic and its heat recovery system were designed by CRW Engineering and ANTHC. The $2.8 million Koyukuk Health Clinic in Koyukuk was open for occupancy at the

Better care. Less time. When you need emergency treatment, our ER team provides better care in less time. www.akbizmag.com

end of February. Watermark Construction began the 1,580-square-foot clinic for the City of Koyukuk in May 2014, with six construction workers on site. The project was designed by LCG and ANTHC Division of Environmental Health and Engineering. The Akeela Gateway Center for Human Services, KAR House Expansion and Remodel in Ketchikan was completed in March. Marble Construction began the $1 million, seven-thousand-square-foot expansion and remodel in May 2014, with twelve workers at peak construction. KAR House has fifteen beds and provides longterm treatment for clients with addiction and co-occurring conditions. Welsh Whiteley Architects designed the project. The West Valley Vision Center Expansion in Fairbanks was completed in May. NLC General, Inc., the design-build firm for the project, began the 5,200-square-foot expansion project in September 2014, with peak employment at nineteen workers. The West Valley Vision Center expansion includes eleven exam rooms, four offices, a laboratory, a dispensing area, and a private employee area. R Russ Slaten is an Associate Editor at Alaska Business Monthly.

www.alaskaregional.com

December 2015 | Alaska Business Monthly

53


ENVIRONMENTAL SERVICES

Environmental Labs and Testing Services

Keeping Alaskans healthy

t’s easy to take for granted the freshness of the milk we drink at breakfast. Most of us don’t give a second thought when we walk on rich Alaska soil or through verdant ecosystems. Aquifers filled with millions of gallons of unpolluted water buried beneath commercial and residential properties are expected. But does the benefit of fresh dairy, clean soil, and potable water come to fruition by happenstance or design in Alaska?

projects involving diesel, gasoline, heavy metal, and polychlorinated biphenyl spills. Homestead and his lab team have worked on commercial property assessments and Dalton Highway Haul Road spills to and from the North Slope. SGS has been retained to test vast amounts of samples for the US Department of Defense remediation base sites, which he says will generate over $1 billion in lab testing on sites spread across the state from Southeast Alaska to Attu Island of the Aleutian Islands. The enormous amount of remediation projects will ensure healthy, robust lab testing services for many of the companies in the industry while protecting Alaska’s environment and communities, Homestead says.

I

Ensuring Healthy Lab Services and Testing Patryce McKinney isn’t just the chief over a state laboratory; she’s also a biologist. McKinney is in charge of the Environmental Health Laboratory (EHL) under the Alaska Department of Environmental Conservation (ADEC) Division of Environmental Health. The lab supports state and national environmental health programs and also certifies and accredits commercial and municipal laboratories that conduct chemical and microbiological sampling of food, soil, and water. McKinney explains there is a niche market in private lab services and testing in Alaska. Federal regulators scrutinize the process assiduously. ADEC is the state’s overseer and complement to ensure compliance of federal laws like the Clean Water Act, Safe Drinking Water Act, and Solid Waste Disposal Act. The US Environmental Protection Agency, US Food and Drug Administration, and the US Department of Agriculture Food Safety and Inspection Service also work with EHL to keep consumables, vegetation, and soils clean and safe. EHL’s purview covers environmental health, so rather than things that come “out of” humans in a public health sense, the laboratory addresses everything that touches or “goes into” humans. McKinney notes there are twenty-six microbiology labs in the state that test drinking water quality. Alaska has five water chemistry labs that test parameters of chemicals like pH, arsenic, nitrates, alkalinity, and ammonia. There are three contaminated-site labs in the state measuring for petroleum and hydrocarbons in the soil, as well as two dairy producers with lab testing for milk. 54

McKinney enjoys her job and its functionality, thriving on the safety and protection facets of the occupation. She’s worked for the state for five years and in the private lab industry for ten years. The EHL is headquartered in Anchorage with fifteen technical staff including microbiologists, chemists, and technicians.

Private Labs Making Measurable Difference “My focus is to maintain federal dollars and retain employment of trained Alaskans so we can keep labs open and effective in the state,” says Charles Homestead, general manager of SGS North America. Homestead is a chemist overseeing sixtyone environmental science professionals along with three buildings totaling twentyfour thousand square feet of lab and testing facility space in Anchorage. SGS is the largest full-service testing lab in Alaska, opening its doors in 1964. Homestead has been the manager since 1996. Focusing on a wide variety of organic testing for contaminants at cleanup and remediation sites, spill responses, and inorganic testing for elements like metals, sulfates, nitrates, and water quality, SGS remains busy throughout the year statewide. The company recently assisted testing during the demobilization in Barrow of a commercial project utilizing its mobile lab that required a C-130 Hercules aircraft and cat trains to transport the temporary testing facility. Diversity in lab testing is a signature attribute of the company, as it routinely provides drinking water analysis in Anchorage and across the state, including remote sites. SGS performs wastewater analysis, assessing discharge samples for the Municipality of Anchorage and private companies in the city, offshore for petroleum companies’ oilrigs, and at remote construction sites ensuring environmental and aquatic life are undamaged. SGS has offered spill response lab testing and services long before the Exxon Valdez 1989 oil spill in the Prince William Sound. As a result of its experience and longevity, the company was integrally involved in the Valdez spill’s cleanup analytics and has since worked on various soil and water

By Tom Anderson

Specializing In Mobile Lab Testing Delivery TestAmerica Laboratories offers the full array of testing of water and soil in Alaska. The company is actually the largest private environmental testing service in the nation with more than eighty locations in the United States. Troy Engstrom is TestAmerica’s lab director for the state, headquartered in Anchorage. A chemist with over twenty years of environmental services experience—ten with TestAmerica—Engstrom is particularly cognizant of the company’s comprehensive mobile lab services reputation in rural Alaska. TestAmerica, similar to SGS, Analytica, and the majority of large and small private Alaska environmental labs, works directly with engineers and environmental consultants who provide samples to be tested. Construction and engineering companies like Western Construction & Equipment, Environmental Resource Management, Ahtna Engineering Services, and ChemTrack Alaska use Test America’s services and often need immediate results and testing information. Resource development companies like Shell, Chevron, and BP also utilize the company’s lab services. Mobile units are an important part of the analysis and afford expediency, which often matters when dealing with corrosive and harmful elements after a spill or leak. Engstrom says there is a range of services TestAmerica’s environmental labs offer

Alaska Business Monthly | December 2015www.akbizmag.com


in the state. On one project, for instance, an abandoned military base requires soil testing, while another site involves landfill and nearby water sources being evaluated. Fuel spills and even naturally occurring dangers, like high arsenic levels in water or mine tailings, all fall within the range of testing protocols and elements. The process is straightforward. Typically an environmental engineer is hired by a construction or oil company client; water and soil samples are extracted; samples are provided to the lab; thereafter tests are performed and a report is furnished highlighting concentration analytics. Mobile sites offer a lab on-site with a 24-hour turnaround and satellite/Internet assisted communications. This is critical in a state the size of Alaska. Occasionally TestAmerica assesses biomarkers for salmon, clams, shrimp, marine tissue, and plants, but this is not as routine as soil and water testing, adds Engstrom. Mercury may be a problem with halibut and other bottom feeders, data findings the Alaska seafood industry US Fish and Wildlife Service intermittently request. Engstrom notes that many of the company’s clients are Alaska Native corporation subsidiaries. He appreciates the partnerships. “A lot of TestAmerica’s clients are Alaskan Native firms like Brice Environmental Services owned by Calista Corporation, Bethel Services, and Bristol Environmental Remediation Services, all of whom work on many environmental projects in rural Alaska and understand the uniqueness of the industry,” Engstrom says. Alaska Native companies are some of the most cautious and aware of the critical need to be safe and responsible when it comes to the land and water throughout the state, he says.

Small, Efficient Labs Matter

Kelley Lovejoy is a chemist with eighteen years of experience in chemistry, fifteen years specifically in environmental laboratories. Lovejoy is the lab director for Alaska Analytical Laboratory (AAL) and was hired by parent company Mappa, Inc. in July 2007 to set up and operate the lab, located nine miles outside of Fairbanks. AAL is ADEC Certified for Contaminated Sites Analysis (UST-082), providing laboratory analytical testing for soil and water. Lovejoy is proud to be a one-person lab for now, recognizing some testing companies have a collective of staff, because she’s hands-on and scrutinizes the entire process assiduously. AAL is currently analyzing for the Alaska Methods: AK101 - Gasoline Range Organics; AK102 - Diesel Range Organics; AK103 - Residual Range Organics; and 8021B - BTEX (Benzene, Toluene, Ethwww.akbizmag.com

Emergency Response Industrial Services Marine Services Remediation Services Waste Management

Serving all of Alaska • 907-258-1558 • Toll Free 877-375-5040 December 2015 | Alaska Business Monthly

55


ylbenzene, M&P-Xylene, O-Xylene). The company’s clients include local and out-of-state environmental consultants, construction and engineering companies, realtor and property agencies, and homeowners. She adds that the best part about working in Alaska is how supportive the people are of local businesses like her lab. As for regional expertise and proximity, “I primarily receive samples from projects that are located in Fairbanks and North Pole,” says Lovejoy. “I have received samples from all over Alaska. It depends where our clients have jobs lined up or if people see my lab online and request a sample kit for a fuel spill, like the communities of Skagway and Kotzebue for example.” Lovejoy is unaware of other labs headquartered in Interior Alaska who test soil samples other than AAL. She brought AAL’s water analysis service online in 2010. Other environmental labs in Fairbanks she’s aware of are Analytica International, Pollen Environmental, and SGS, which has a sample drop-off location.

Got Healthy Milk?

Northern Lights Dairy is a family-owned business that has been operating its dairy business in Delta Junction since 1980 and was started by third-generation Wisconsin

farmer Don Lintelman and his family, who arrived in Alaska in 1969. No different than testing soils and water, ADEC and federal law require milk be regularly tested to ensure safety for the consumer. Lintelman and his wife and three sons work at the dairy farm, which has 120 cows, 60 of which are milked daily. Upon testing and packaging, the milk is delivered to and sold on Fort Wainwright, Eielson Air Force Base, Fort Greely, and at Carrs-Safeway in Fairbanks. While it varies, the typical cow is milked twice per day and generates approximately seventy pounds of milk. A gallon of milk weighs 8.6 pounds, equating to a little over eight gallons produced per cow per day. Lintelman explains the milk is pasteurized, which is a heating process that kills harmful bacteria. Milk’s lab testing and quality control are mandated by ADEC, the US Food and Drug Administration, and the US Department of Agriculture, with periodic testing performed, including milk samples taken by ADEC monthly and equipment inspection every three months. State and federal regulations require that raw milk for commercial sale be derived from one or more healthy cows. Screening and testing is performed to assess a somatic cell count, the presence of coliform, wheth-

er or not the alkaline phosphatase enzyme is present—which is supposed to be destroyed at pasteurization—and standard plate counts to determine bacteria levels. Havemeister Dairy is the other certified Alaska dairy, located in the Mat-Su Borough in Palmer.

Environmental Labs Protect Alaskans At the end of the day, everyone benefits from the environmental testing of soil, water, and milk. The various microbiology labs in Alaska, in conjunction with ADEC and federal oversight, ultimately ensure the state’s agriculture, water, and land are neither polluted nor damaged by commercial and residential misuse. Whether eating vegetables from a garden, drilling a well into an underground aquifer for fresh water, or drinking a glass of local milk, Alaskans should remember the men and women in the chemistry and biological fields testing in their laboratories every day to make sure everyone stays healthy and the environment remains protected.  R Freelancer Tom Anderson writes from across Alaska.

CONSULTING & TRAINING FOR A CLEANER, SAFER ALASKA EMI is committed to the protection of worker health and safeguarding the environment by providing quality comprehensive environmental consulting and training services to industrial, commercial and governmental clients throughout the State of Alaska.

• Engineering & Permitting Services • Environmental Consulting • Hazardous Materials Consulting • Phase I & II Environmental Site Assessments

• Health & Safety Consulting • NSTC-Approved Training • HAZWOPER Training • Asbestos & Lead Management Training • Stormwater Pollution Prevention Plans 206 East Fireweed Lane, Suite 201 Anchorage, AK 99503 (907) 272-9336 (consulting) or (907) 272-8852 (training) emi-alaska.com

56

Alaska Business Monthly | December 2015www.akbizmag.com


ALASKA NATIVE CORPORATIONS

Alaska Native Village Corporations with Regional Corporation Levels of Success By Russ Slaten

W

hen the state was divided into twelve regional Alaska Native Corporations through the Alaska Native Claims Settlement Act of 1971, village corporations seemed to be created in the shadow of the regional corporations. In today’s business climate, some village corporations have reached a similar level of success as the regional corporations or even eclipsed them.

Chenega Corporation

Anchorage-based Chenega Corporation, the village corporation of Chenega, located more than ninety miles southwest of Valdez in the Prince William Sound, reported gross revenues of $885 million in 2014. It ranked number 5 in Alaska Business Monthly’s Top 49 owned and operated Alaskan companies by gross revenue—the highest ranked Alaska Native village corporation and fourth among all Alaska Native corporations on the list. Chenega Corporation has 5,200 employees worldwide, with 440 employees based in Alaska. Chenega primarily provides government services including security, healthcare, IT, environmental, military intelligence, operations support, and professional services. Its commercial services include electrical, communications, green energy power systems, and Arctic applications services. Although Chenega’s more than $1 billion in reported annual gross revenue from 2010 to 2013 dropped in 2014, it remained the highest ranking village corporation on the Top 49ers.

Tatitlek Corporation

In most Native corporations the president handles the shareholder and overall corporate responsibilities and the CEO is responsible for the corporation’s business interests. The titles are reversed but the duties remain the same at the Tatitlek Corporation, based in the Prince William Sound area, thirty miles south of Valdez. Martin Hanofee, president of the Tatitlek Corporation, reports to CEO Roy Totemoff on Tatitlek’s subsidiary and investment activity. Before becoming president in May, Hanofee was the Tatitlek Corporation senior vice president of operations and has been with the corporation for seven years. In 2014 the Tatitlek Corporation reportwww.akbizmag.com

ed $129.3 million in gross revenues and has about 1,100 employees across the United States. Through its ten subsidiaries, Tatitlek provides IT services, construction services, range operations, and professional services to governmental entities. Tatitlek has real estate holdings in Alaska and the Lower 48 and continues to invest in the satellite imagery business stemming from the acquisition of GeoNorth LLC in 2010. “From a revenue standpoint [GeoNorth] is one of our smallest subsidiaries, but from a future standpoint it represents one of our biggest initiatives. It represents a technology that is virtually endless—a global technology, and we’re not relying solely on the government space, which tends to ebb and flow,” Hanofee says. Hanofee attributes much of Tatitlek’s success to a “steady, savvy, and consistent” board of directors. He says the board, as part of management of the corporation, gives him a clear vision for the operation and direction of financial and corporate assets. Tatitlek saw the landscape of opportunity change with the added challenges in government contracting in 2011 and 2012, so the corporation chose to diversify its business portfolio while continuing its government services. GeoNorth invested in a multi-mission Direct Receiving Station in Fairbanks for optical and radar satellite imagery in September 2013. Through GeoNorth’s partnership with Airbus Defense and Space, GeoNorth has priority tasking and downlink capabilities for all Airbus satellite constellations to be applied in both the commercial and government arenas, Hanofee says. GeoNorth’s initial imagery applications were focused on oil and gas projects; Arctic research; emergency response; maritime domain and awareness monitoring; and environmental, forestry, and transportation projects, among others. “Nearly all of the [Airbus] satellites are polar orbiting, and our Direct Receiving Station is extremely polar, so we get frequent passes from the satellites, which allows us to provide near real-time imagery,” Hanofee says. “And when you’re looking to make business decisions, it is very important to have timely, accurate data—so that’s our niche.” Tatitlek has 357 shareholders, and only 66 of those shareholders and descendants

live in Tatitlek. The village can only be reached by boat or airplane and lacks infrastructure, Hanofee says. “There are many of our younger shareholders that work for the corporation—and many of them have advanced degrees— and we’re really exploring ways to bring technology back to the village,” Hanofee says. “We’re into imagery and IT, and we’re looking at how we can provide a future for folks that might want to stay in or go back to the village.” Tatitlek is starting with the concept of building a facility or two with high-speed Internet connection in the village and is hoping to build on that idea in the next few years, Hanofee says. “Our shareholders—if they so choose— would have an option to go back to the village and have a well-paying job,” he says. Tatitlek’s future goals, along with providing more opportunities to shareholders, will be to expand in the technology field and increase its real estate portfolio, Hanofee says. “Tatitlek has a very robust strategic plan with both short-term tactical elements and mid-term and long-term components that really get down to a granularity of ‘this is what we’re doing and where we’re going,’” Hanofee says. “It helps keep the board in sync with the management team by providing a clear direction for the corporation.”

Afognak Native Corporation

Kodiak-based Afognak Native Corporation, the village corporation serving more than one thousand shareholders descended from Afognak and Port Lions on the Kodiak Archipelago, reported gross revenues of $505.4 million in 2014. Afognak, through its holding company Alutiiq LLC—named after the Alaska Native people it represents, provides a diverse portfolio of government and commercial services around the world. Its twenty-six subsidiaries cover services that include facilities management and maintenance, construction, technical and IT, oil and gas, education, and security services. Afognak has 4,042 employees worldwide, with 192 of those employees based in Alaska.

Sitnasuak Native Corporation

Nome-based Sitnasuak Native Corporation reported total gross revenue of $88.1 million in 2014. Nearly 58 percent of gross revenues came from SNC Technical Services LLC, Sitnasuak’s holding company for its apparel manufacturing operations based in Puerto Rico. Sitnasuak has 833 worldwide employees, with 109 of those employees

December 2015 | Alaska Business Monthly

57


working in Alaska. Sitnasuak has sixteen operating subsidiaries that cover the spectrum of services including apparel manufacturing, financial services, fuel distribution, health solutions, and real estate. Sitnasuak CEO Richard Strutz says the corporation began to see growth again in 2010. In December 2012 Sitnasuak purchased Fidelity Title Agency of Alaska LLC in Anchorage and Mat-Su Title Agency LLC in Wasilla. Sitnasuak renovated and expanded its tank farm under its subsidiary Bonanza Fuel LLC to a capacity of 5.9 million gallons in 2013—providing heating oil, diesel, gasoline, and propane products. In 2014 Bonanza Fuel was Sitnasuak’s most profitable subsidiary and had $24.9 million in revenue. Many Alaska Native corporations acquire businesses as they build their portfolio of companies, and Strutz says it’s important to be credible to the business being purchased, not just look at it in the perspective of the parent company gaining an asset. “It’s always an issue with the company you’re buying. Management has to know that you’re credible and that you’ll treat the business and its employees well,” Strutz says. “People want to be proud of what they’re doing, so they need to know you’re going to do well with the business and grow it.” Strutz says its title agencies—as servicebased businesses—are great examples of the need to execute an acquisition properly. Strutz joined Sitnasuak about six months after it acquired its Fidelity and Mat-Su title agencies and visits the companies frequently to add a face to Sitnasuak. “It’s harder for a person to have loyalty to a corporation than to have loyalty to a person. It’s so much easier to identify with a person,” Strutz says. “So what you try to do with a corporation is give them a real person that represents the corporation. They may think, ‘I don’t know about Sitnasuak, but I know Richard,’ and then you become the person they talk to when they have issues.” Strutz became the president of National Bank of Alaska in 1992 and continued as the Alaska regional president when it merged with Wells Fargo until he retired from the bank in December 2012. In his experience with National Bank of Alaska, he says the bank did a decent job in acquiring other banks and insurance agencies, but when National Bank of Alaska was acquired by Wells Fargo, “they did a great job, and I learned what the difference was.” “I learned how to retain people and convince them they’re valuable. You not only want them to stay, you want them to do well,” Strutz says. “The worst thing in the world isn’t that an employee leaves, it’s that they stay and are unhappy. They become a negative value for the company, influencing 58

others; so when you want people to stay, you also want them to be happy.”

Olgoonik Corporation

Wainwright-based Olgoonik Corporation, located eighty-five miles southwest of Barrow, provides services in government and commercial contracting through its sixteen operating subsidiaries organized under two holding companies. Olgoonik has reported steady revenue growth over the past five years. In 2010 Olgoonik saw revenues of $133 million, with growth of $15 million or more every year, culminating to its most recent gross revenue reported at $231.9 million in 2014. Olgoonik provides construction, environmental, oilfield, logistics, facility operations, and security services across the globe. Olgoonik has 1,025 worldwide employees, with 135 of them based in Alaska.

Old Harbor Native Corporation

Old Harbor Native Corporation serves 374 shareholders with roots to the Village of Old Harbor located forty miles southwest of the City of Kodiak on Kodiak Island. The corporation headquarters are in Anchorage with eleven subsidiaries that operate across the United States and in Germany and the Bahamas. Old Harbor is primarily involved in government contracting through its holding company, Three Saints Bay LLC. Its companies offer IT, telecommunications, systems engineering, administrative, cyber security, logistics support, and engineering services. Old Harbor is also involved in tourism through its ownership of the Grande Denali Lodge and the Denali Bluffs Hotel. “The hotel and lodge were problematic for years because we didn’t manage it out of the office, it was always contracted out, and we never really made a lot of money from it. So we took it in-house and brought in our own team of people. Now that company is doing fantastic,” says Carl Marrs, CEO of Old Harbor. Old Harbor also leases vehicles and equipment to customers in the oil and gas, construction, and transportation industries through its majority owned partnership in Anchorage-based Delta Leasing LLC. “Our partner in Delta Leasing, Rudi Von Imhof, is doing well with the company, and we couldn’t ask for a better arrangement,” Marrs says. Successful Alaska Native corporations are typically involved in multiple industries. Marrs says the key to balancing the subsidiaries and various services provided by the corporation is to find the right people for each operating company and keep a strong connection with the head office. “It really does take a team of people working together to get things done right,”

Marrs says. “When you have a manager that’s in trouble and won’t put an issue on the table and tries to solve it themselves, it gets worse and makes it impossible to solve by the time the parent company learns about it. It’s an old way of doing business, but I’ve done it for years. If you’re in trouble, put it on the table, but if I hear about it after the fact, you’re in trouble.” Marrs credits his teams of people at the holding company Three Saints Bay for creating efficiencies and providing a network of support for its operating subsidiaries to successfully provide services to the customer. The structure allows Marrs and his management team to look at the big picture of the corporation. He says, “Old Harbor’s emphasis is on keeping alive the culture and subsistence lifestyle of our shareholders and doing it in a way that grows the community.”

Goldbelt, Inc.

Juneau-based Goldbelt, Inc. reported gross revenues of $169.1 million in 2014. Goldbelt transitioned from its early beginnings in resource development and the timber industry to a tourism focused company and then to a diversified corporation by adding business lines in government contracting and seafood processing. “As Juneau’s Native corporation, we are uniquely situated to sell goods and services to more than 1 million visitors who travel to Alaska via large cruise ships every summer,” said Richard G. Irwin, Goldbelt president and CEO, in an email. Today Goldbelt principally focuses on government contracting, tourism, land management, and security services through its twenty-two subsidiaries. Goldbelt recently expanded operations in the Pacific Northwest and has launched three new subsidiaries: Goldbelt Seafoods, Goldbelt C6, and Nisga’a Tek. Goldbelt has an employee base of 1,138 worldwide employees, with 269 of them based in Alaska. “We are also expanding our land development plan to identify further natural resource opportunities to support jobs in the local economy and potential high margin business ventures,” Irwin wrote.

Huna Totem Corporation

Juneau-based Huna Totem Corporation represents 1,350 shareholders descended from Glacier Bay and the village of Hoonah located thirty miles west of Juneau. Huna, like many Southeast Alaska Native corporations, got its start in passive investments and the timber industry. It purchased a cannery in 1996 and in 2001 broke ground on its biggest revenue generator Icy Strait Point, with the first cruise ship arriving in

Alaska Business Monthly | December 2015www.akbizmag.com


2004—stopping by the cannery as a historical landmark. “Today Icy Strait Point is Hoonah’s largest tax payer and Hoonah’s largest employer, with about 125 at Icy Strait Point each year; 85 percent of that is local hire. About $4 million goes into the Hoonah economy directly each year from things like payroll, local purchases, and head taxes,” says Lawrence Gaffaney, president and CEO of Huna Totem Corporation. Huna is currently in the middle of a $36 million expansion to Icy Strait Point. The largest component, a four-hundred-foot floating dock being built in partnership with the City of Hoonah, was 80 percent complete in October. The project includes new public access, an expanded transportation center, new welcome center, a new café, and an expanded and renovated restaurant—expected to be fully completed in April 2016. “This project should increase revenue and profitability and is expected to lead to fifty additional seasonal positions upon completion,” Gaffaney says. Although Icy Strait Point is successful and it provides many benefits for shareholders and descendants and the City of Hoonah, the corporation does not want to keep all of its investments in one business

www.akbizmag.com

line and has identified two growth paths. “We’re pursuing the first of those growth paths as we speak,” Gaffaney says. “We’re developing and launching an Alaska lifestyle brand called ‘Dear North.’” “The idea is to be strategic in how we grow and diversify away from having the lion’s share of our business coming from seasonal Alaska tourism,” he says. “We’ve identified growth paths that fit with our vision, increasing our profitability which will allow us to increase our support of educational and cultural activities benefitting our people.”

The Kuskokwim Corporation

The Kuskokwim Corporation (TKC) is the Anchorage-based village corporation that represents nearly 3,600 shareholders in ten villages along the Kuskokwim River in southwest Alaska. Lower Kalskag, Upper Kalskag, Aniak, Chuathbaluk, Napaimute, Crooked Creek, Georgetown, Red Devil, Sleetmute, and Stony River are the ten villages in the middle of the Yukon Kuskokwim region that make up TKC, which manages their collective 950,000 acres. TKC reported gross revenues of $73.1 million on 2014. Revenues increased from $36 million in 2013 to $73.1 this year, but are far from the reported gross revenues of $149 million in 2010. President and CEO Maver

Carey says TKC is on track to regain profitability through potential growth efforts related to TKC’s surface use negotiations completed in June 2014 with Donlin Gold. “Calista owns the subsurface [rights], we own the surface [rights], and we partnered together to create opportunities for Calista and TKC through Donlin, which is the way it should be,” Carey says. Donlin Gold is currently in the permitting phase and anticipates making the decision to move forward with construction by 2017 or 2018. One example of the opportunities the Donlin Gold project presents is that TKC negotiated for the construction and operation of Donlin’s main port facility at Jungjuk Creek, Carey says. The option for this contract and many others in the region—as a result of the development of the Donlin Gold mine—may provide in-region financial and shareholder benefits for TKC. “Our focus is to ramp up new companies in relation to the [Donlin Gold] mine and also put in a training facility to give our shareholders a chance to work at the new companies if the opportunities arrive in the region,” Carey says. “That’s the really exciting part of potential activity in the Kuskokwim region.” TKC is involved in government and com-

December 2015 | Alaska Business Monthly

59


mercial contracting, covering the spectrum of aerospace, construction, real estate, initial outfitting and transition management, IT, environmental, and aircraft repair services through its twelve subsidiaries.

Ukpeaġvik Iñupiat Corporation

Barrow-based Ukpeaġvik Iñupiat Corporation (UIC) ranks as one of the largest village corporations in Alaska with more than forty subsidiaries doing business across the United States and reported gross revenues of $356.8 million in 2014. UIC employs nearly 3,000 workers, with 360 of them based in Alaska. UIC’s diverse business lines were reorganized into six newly refined services lines in 2014 as UIC Design Plan Build, providing construction, architecture, and engineering services; UIC Oil & Gas Support Services, specializing in oil spill prevention, response planning, and operations; UIC Government Services, running the gamut of regulatory consulting, IT, fabrication, logistics, research, and more; UIC Marine Services, provider of marine cargo transportation services; UIC Lands, focused on developing natural resources within UIC’s lands; and UIC Real Estate, specializing in the management of residential and commercial activities in Barrow. UIC has continued to grow since its inception in 1973 and provides benefits to more

60

than 2,500 Iñupiat shareholders and their descendants. UIC has played a major role in the growth of its own village, Barrow, and due to the success has looked to build strategic partnerships with tribal entities in the Lower 48. “Our construction company was mostly focusing on our region, but when we got to the point that most of the infrastructure was already built in Barrow, we decided to go elsewhere—and in 2008 we started to create Native-to-Native partnerships to find work [Outside],” says Anthony Edwardsen, president and CEO of UIC. UIC’s subsidiary, Kautaq Construction Services LLC, completed a fifty-five-home development in 2014 for the Navajo Nation and Gila River Indian Community, funded by the US Department of Housing and Urban Development, Edwardsen says. UIC is now building more than four hundred more homes for the Gila River Indian Community in Laveen, Arizona. “We’ve been very successful in finding work down south. [The Gila River Indian Community] really liked the first twentyfive homes we built, so they gave us the contract to build the rest of the homes,” Edwardsen says. Additionally, Edwardsen says the Navajo Housing Authority may be considering UIC for a project to build 2,500 homes

spread across twenty-seven districts of its reservation. “Those are opportunities in our efforts to diversify our operations not just in oil and gas or in construction but into Nativeto-Native relationships where they have benefitted from their casino operations and they can spend their money on capital projects that are important to their community,” says Delbert Rexford, UIC senior advisor and chief tribal affairs officer. To continue its success and make it possible to thrive in the business community, UIC’s long-term goal involves not only developing the company’s shareholders but also their descendants, Rexford says. “We’ve got 220,000 plus acres of land that we need to protect, preserve, and continue to hold in the corporation in perpetuity, and so it’s crucial that our vision is not short-sighted, but long-term into future generations,” Rexford says. “To achieve that it means education—having the technical expertise and having the right people in the right place today and tomorrow so we remain profitable and maintain a high reputation and high level of credibility.” R Russ Slaten is an Associate Editor at Alaska Business Monthly.

Alaska Business Monthly | December 2015www.akbizmag.com


“Everything I know about fly fishing, I learned at a fishing guide academy supported by BBNC. In college, I’m studying elementary education, learning to be another sort of teacher. But I hope to always return to Bristol Bay, to teach and to learn.” — Tiarna Bartman-Fischler BBNC Shareholder & Bristol Bay River Academy Graduate

Teaching and Learning


special section

Building Alaska

MILITARY CONSTRUCTION MARCHES FORWARD IN ALASKA Down $11 million from 2014 By Kirsten Swann

W

ith several active US Department of Defense (DOD) installations and a clear view of the Arctic and the North Pacific, Alaska has been an important military outpost for more than 150 years. The US Army first raised an American flag on Alaska soil in 1867. The state saw a buildup of forces during the Gold Rush and World War II, and it’s been a key strategic location ever since. Between Fort Wainwright and Fort Greely and Eielson Air Force Base in the Interior and Joint Base ElmendorfRichardson in Anchorage, Alaska’s DOD facilities support tens of thousands of people and billions of dollars in equipment. Building the structures and infrastructure to support it all is big business. While military construction spending in Alaska has trended downward in recent years, installations around the state are still busy with new and ongoing projects. In fiscal year 2015, DOD military construction projects in Alaska—including maintenance and operations, planning, and design—totaled nearly $399 million, according to data from the US Army Corps 62

of Engineers (USACE). In 2014 it was $410 million, and in fiscal year 2013 military construction totaled $408 million. As “the primary design and construction agent” for the Army and Air Force presence in Alaska, USACE builds facilities to improve military quality of life and further mission readiness. It supports the Stryker Brigade and Aviation Task Force at Fort Wainwright and the F-22 fighter jets and various other brigades at Joint Base Elmendorf-Richardson. Over the past construction season, USACE projects ranged from relatively minor renovations to major, multi-year replacements: hangers, battalion headquarters, operations facilities, and mechanical buildings. The companies performing the work are just as diverse, from major national names to local Alaska construction businesses. Alaska Native corporations are a consistent force when it comes to military construction. Approximately half of the DODfunded construction work in Alaska over the past year has been completed by subsidiaries of the state’s profitable Alaska Native corporations—companies like Alutiiq,

ASRC Builders, and Tunista Construction. Between fiscal years 2011 and 2014, USACE awarded nearly $450 million in contracts to Alaska Native corporations.

Fort Wainwright

Many of the projects underway in 2015 have been in the works for years. Chris Morgan, chief of military programs for the USACE’s Alaska District, says project timelines vary. Some of the work taking place this past season was funded in fiscal year 2010; some of it is much more recent. It all depends on the scope of the construction at hand. Fort Wainwright saw the most building this past season, with five multimilliondollar projects that run the gamut in size and purpose. At $25.5 million, the most expensive project is a new warm storage hanger, according to the USACE. The hanger was included in the DOD’s fiscal year 2014 budget, Morgan says, and it’s scheduled to be complete by September 2016. The project was contracted out to the Anchorage-based Unit Company, an Alaskan-

Alaska Business Monthly | December 2015www.akbizmag.com


owned general contractor with experience building everything from commercial and industrial projects to healthcare facilities and housing. The company also has extensive experience working on military installations. Past projects have included a company operations facility at Fort Wainwright and a Battle Command Training Center and aircraft shelter at Joint Base ElmendorfRichardson. In 2013, Unit received a USACE Celebrate Safety award for its work at the Anchorage base. More than fifty-six thousand square feet, Fort Wainwright’s new warm storage hangar is one of the largest military projects in Unit’s portfolio. Plans for facility called for an intrusion-detection system, an energy monitoring and control system, building information systems, and more, according to Unit. The project involved everything from design to construction. Besides the new hangar, construction on two new battalion headquarters is currently taking place at Fort Wainwright, Morgan says. One of the new facilities—a $14 million project scheduled for completion in February 2016—is intended to support the aviation task force bed-down at the installation, according to the USACE. That contract was awarded to Silver Mountain Construction, a Palmer-based CIRI subsidiary with extensive experience in federal and military work. Both of Fort Wainwright’s battalion headquarters projects were part of the fiscal year 2014 budget, according to Morgan. The second facility, which is scheduled for completion in September 2016, is a $12 million project contracted to Alcan Builders, Inc. With more than thirty-three years’ experience in the general contracting business, the Fairbanks-based company has worked on everything from retail construction projects to a satellite operations facility for USACE. The contract for a $16 million duplex company operations facility at Fort Wainwright was awarded to Arctic Contracting and American Mechanical, Inc., Morgan says. It’s a local job—both companies are based in Fairbanks, and Design Alaska was the project’s lead design partner, according to American Mechanical. The company operations facility, scheduled for completion in October 2015, will house everything needed to run the 150-person companies. There are offices for administrative operations and room to store and move supplies, according to American Mechanical. The supporting facilities include mass notification systems and intrusion detection systems, energy monitoring and control systems, fire protection and alarm systems, building information systems, and special foundations. The project is registered with the US Green Building Council, accordwww.akbizmag.com

ing to the general contractor. Sustainable and energy measures were required by design. A second company operations facility at the Fairbanks fort is scheduled for completion in June 2016, Morgan says. The $9.5 million project, funded in fiscal year 2014, is being built by Tunista, a wholly owned subsidiary of the Calista Corporation. The thirteen-thousand-square-foot facility is designed to LEED Silver standards, according to the contractor. It will house an enclosed hardstand facility and administrative and readiness modules, and the construction process covers everything from power and water to steam and sewer systems.

Eielson Air Force Base

Located about twenty-six miles south of Fort Wainwright, Eielson Air Force Base had its own share of military construction projects this year. Despite the small population—there are fewer than seven thousand active duty, guard and reserve, family members, civilians, contractors, and retirees on base—the installation saw more than $80 million worth of construction this past season, according to USACE. The first project is ongoing from fiscal year 2010, Morgan says. It involves replacing two boilers at the central heat and power plant, a vintage facility in dire need of up-

ADVERTISING

COMMUNICATIONS

CONSTRUCTION

ENGINEERING

ENVIRONMENTAL

EQUIPMENT

FEDERAL CONTRACTING

NATURAL RESOURCES

ENERGY EXCAVATION

TRANSPORTATION

Brice Marine - Wainwright Seawall Construction Wainwright, Alaska

Wor k ing to g et her to s t r e n g t h e n A l a s k a’s e co n o my a nd build a brig hter f u tu re for t he nex t g ener ation. Ca l i sta Co rpo ra t i o n

(907) 275-2800

December 2015 | Alaska Business Monthly

63


grades. The project was delayed because of a late start, according to USACE, and the entire thing is set to be complete by early 2017. “One of the challenges is one boiler has to be complete and tested [first],” Morgan says. “So there’s a phasing aspect there.” The general contractor for that work is Haskell Corporation. Unlike the other, Alaskan-owned businesses doing work at Fort Wainwright this year, Haskell is a major Washington-based company with more than a century of industry experience. Eielson’s second major construction project is a 168-person dormitory: a joint venture between Absher and Bethel. The $33 million, nearly sixty-nine-thousand-squarefoot project was funded in fiscal year 2012, Morgan says, and it’s expected to be complete by October 2016. According to Absher, the three-story dormitory building will have reinforced concrete foundation and floor slab, masonry walls, and a roof built for the Air Force base’s Arctic environment. A concept sketch of the facility shows a landscaped entryway and plenty of windows.

Clear Air Force Station

More than seventy-five miles southwest of Fairbanks, at Clear Air Force Station, two Alaska Native corporation subsidiaries are working to upgrade the early warning ra-

dar and build an electrical tie-in and heat plant. Clear is the Air Force Space Command radar station just south of Anderson, deep in the Denali Borough. The $13 million radar upgrades, scheduled for completion in January 2016, were funded in fiscal year 2014, Morgan says. The project contractor is Alutiiq, a subsidiary of Afognak Native Corporation with headquarters in Anchorage and offices around the country. Also at Clear, ASRC Builders is working to construct a $15.5 million electrical tie-in and heat plant, according to USACE. That project is scheduled for completion in early 2016. Like Alutiiq, ASRC Builders is an Alaska company with a presence throughout the United States. It’s a subsidiary of the ACHC Family of Companies, which are wholly owned subsidiaries of Arctic Slope Regional Corporation, according to ASRC Builders. While Clear serves a vastly different purpose and houses far fewer people than Alaska’s other military installations, it still plays a significant role in national defense. The station is home to the 13th Space Warning Squadron, a geographically separated unit of the 21st Space Wing from Peterson Air Force Base, Colorado. From its remote vantage point, the squadron watches for sea-launched and intercontinental ballistic missiles and provides space surveillance

data, according to the US Air Force.

Fort Greely

Further south, just outside Delta Junction, Fort Greely saw work on a $44 million mechanical/electrical building at Missile Field 1, Morgan says. The project is set for completion in March 2016. Anchorage-based Watterson Construction is the general contractor for the building, according to USACE. Besides more than thirty years of industry experience, the company has plenty of experience with military construction on bases around the state. Watterson has worked on a 135,000-square-foot, $67.8 million aircraft maintenance hangar at Fort Wainwright and a $17.2 million Company Operations Facility at Joint Base Elmendorf-Richardson.

Joint Base Elmendorf-Richardson

In Anchorage, the state’s largest military installation saw several types of construction. JBER’s Buckner Physical Fitness Facility underwent a $21.8 million renovation project scheduled for completion near the end of 2015, Morgan says. The work involved building an addition to the existing fitness center, and the project was contracted out to Bristol, according to USACE. Bristol companies cover everything from design-build and construction to general con-

ALASKA’S CHOICE FOR BUILDING MATERIALS AND HOME IMPROVEMENTS. At SBS, we have the quality products you demand and the services you require—assisting you with everything from doors to decking, moulding and windows to insulation and roofing. Visit us at www.sbsalaska.com. VISIT SPENARD BUILDERS SUPPLY TODAY!

64

Alaska Business Monthly | December 2015www.akbizmag.com


tracting and construction. They’re all subsidiaries of Bristol Bay Native Corporation. Another much larger construction project is set to wrap up in January 2016. A $53.8 million brigade combat team barracks project was funded in fiscal year 2012, Morgan says. The project’s general contractor, Kiewit, is an international construction, mining, and engineering giant. The company has a broad reach, but it also has experience building barracks in Alaska: Kiewit previously built a three-story, 276-person barracks at Fort Wainwright.

Decreased Spending

While there’s still construction happening at nearly every active military facility in the state, new spending has decreased in recent years, according to a 2015 report published by the Institute for Social and Economic Research at the University of Alaska Anchorage. Both the military and the state’s construction industry have outsized impacts on Alaska’s economy. In 2015, Alaska’s construction industry maintained around seventeen thousand jobs every month, the state labor department estimated. According to data from the Fairbanks Economic Development Corporation, Eielson Air Force Base alone generates approximately 10 percent of all revenue in the Fairbanks North Star Borough, and nearly 40 percent of all jobs in the city have a military connection. Statewide, the military has stronger job growth than nearly any other sector, the Alaska Department of Labor and Workforce Development reported in 2013. In the years following 9/11, an influx of troops brought an influx of construction money to Alaska. The state’s military installations saw massive upgrades and new facilities. The combined value of that work nearly tripled between 2001 and 2008, climbing from $201 million to $599 million, according to USACE. Between 2003 and 2010, DOD spent about $500 million annually for construction in Alaska. The number has decreased since then. In April, the US House of Representatives passed the 2016 Military Construction and Veterans Affairs Appropriations Act—a funding package containing more than $79 million for projects in Alaska. Those projects included $7.8 million for improvements at the Fort Greely Physical Readiness Training Facility, $37 million for F-35 squadron facilities at Eielson Air Force Base, and another $34.4 million to demolish and replace another boiler at the central heat and power plant, according to the office of Alaska Representative Don Young. As of October 10, the bill had not yet passed the full US Congress. R

@Ken Graham Photography.com

6591 A Street, Suite 300 Anchorage, AK 99518 Phone 907-562-2336 Fax 907-561-3620

www.davisconstructors.com

Kirsten Swann is a freelance writer from Anchorage. www.akbizmag.com

December 2015 | Alaska Business Monthly

65


special section

Building Alaska

Safety and Behavioral Economics Making choices and decisions in the workplace

194 nations on the planet. It’s a big number and certainly worthy of discussion, but it is not today’s topic. The economics that I am thinking of involve choice.

By Brian McKay

There are a few ideas related to behavioral economics relating to safety management. The typical behavioral economic analysis will investigate humans as they make choices related to consumer purchases or their experience in games to investigate what factors influence decisions. The role of behavioral economics in safety is new; however, these techniques are now being utilized at the government level in many countries including the United States and the UK where behavioral economics are being used to influence (i.e., nudge) personal choices related to healthy behavior. Economics, in and of itself, is a social science that attempts to understand human behavior through analysis and study of how we use scarce resources (classical model), and specifically how we engage at a personal level (behavioral economics) with the choices that we are confronted with. Since economics remains a science, models are presented that attempt to explain human behavior, and these models are testable. Models in the classical economic science do a good job describing big ideas (economies, markets, etc.) but lose some explanatory power when confronting personal choices. Behavioral economics picks up at this point and tests people’s reactions when confronted with choice. Again, this is still a social science so these tests are repeated, resulting in a body of knowledge in this developing field. According to Hugh Schwartz’s book, “A Guide To Behavioral Economics,” behavioral economics “endeavors to provide descriptively accurate assumptions about the cognitive abilities and emotional responses of humans in their economic decision making,” which includes factors such as antecedents, consequences, incentives, social norms, emotional states, biases, and a host of other human inspirations (my inclusion). In other words, behavioral economics is the study and science of how people choose and make decisions. I cannot think of a better way to describe what I do, or the profession of safety, as other than the study of, and application of, people’s choices under constraints or scarce resources. Talk about constraints? Safety is often the more expensive option compared to the unsafe choice; it often takes more time; it often involves some additional training or equip-

A

discussion on the economics of safety could go many ways. One could, for example, discuss the enormous financial and societal costs of occupational injuries and illnesses in the United States. According to J. Paul Leigh, in his work on the “Economic Burden of Occupational Injury and Illness in the United States” published in The Milbank Quarterly in 2011, approximately $250 billion is spent on occupational injuries and illnesses in the United States annually. This study is, arguably, one of the most comprehensive available on the subject as it is difficult to get accurate metrics on the counts, occurrences, and money spent by industry on occupational injuries. The thing is, occupational injuries are often times underreported to the Occupational Safety and Health Administration, either maliciously through purposeful omission or through human error. Occupational illnesses are notoriously underreported to both industry and the Occupational Safety and Health Administration because in some cases extensive lag periods between exposure and occurrence of disease makes a link back to occupational exposure difficult. Leigh’s work is one of the most inclusive and takes into consideration at least nine factors, including cost of medical services, Bureau of Labor Statistics, workers’ compensation claims, cost of injuries, cost of fatal injuries, and sensitivity analysis, to name a few. His data reveals that of the $250 billion spent annually, about $191 billion is spent on injuries and about $57 billion is spent on illnesses. For injuries, about $46 billion is spent on direct medical costs and $145 billion is spent on indirect costs for injuries. For illnesses, about $20.83 billion is spent on direct medical costs and $37 billion on indirect costs. Direct medical costs are those associated with the medical care such as ER visits, occupational health, clinic costs, and outpatient care associated with medical care. The indirect costs include lost production, wage loss, replacement costs, insurance premiums, turnover costs, and loss of primary wages for the injured personnel. This $250 billion is higher than the GDP of 151 out of 66

Behavioral Economics

ment; and, let’s face it, it is not always fun. However, while safety remains a choice in a lot of situations, it is the most likely expectation from the point of view of the company, the government, and even society.

Behavioral Economics Examples

“Influence,” “Nudge,” “Predictably Irrational,” “The Power of Habit,” and “The Art of Choosing” are just a few of many popular books examining behavioral economics, or at least some of the techniques. While these books present experiments, they are also full of practical field-tested examples coming from the marketing department with us, and our consumer driven habits, as the lab rats (not necessarily a bad thing). The decoy effect is one example. When presented with two offers, let’s say for mp3 players (see full example in Wikipedia under decoy effect), the A option costs $400 and has thirty gigabytes of memory; option B is $300 for twenty gigabytes of memory. A consumer presented with these options would choose whatever option fit their tastes at the time, either more memory for more money or less memory but at a discount. Behavioral economics has shown that the introduction of a third choice, option C, of twenty-five gigabytes for $450 (the decoy) now boosts sales of option A because of comparison. While option A may have been out of the price range for many consumers initially, when comparing that price to the decoy, they can feel better about their purchase as they spend a little more than they would have without the decoy (it was the original intent of the shop owner to sell more of option A in this example). Anchoring is another example that has been studied in behavioral economics. In a classic experiment, Dan Ariely asked his audience to write down the last two digits of their social security number. They were then asked to bid on items for which they did not know the true value. According to Ariely, those people who had a larger two digit social security value bid approximately 60 percent to 120 percent higher than those with lower values. Those people bidding higher on the same items were “anchored” in their relative pricing model. Variations of this experiment have been tested by others with similar results. Homo economicus, the traditional hero of classical economics, would never be tempted with this ploy, but it seems the rest of us are at least influenced by an anchor. I know; I was upset after reading about this for the first time as well. But, I could imagine myself doing the mental calculations related to the mp3 examples and I had to admit to myself that I would go home

Alaska Business Monthly | December 2015www.akbizmag.com


with option A. However, I also did some calculations and it turned out that option A, at least in the example provided above, is the better option as the price per gigabyte was lower than the other two options (behavioral economists call that the hindsight bias and mine is 20/20).

The Use of Behavioral Economics in Safety Behavioral economics is about humans and choice and, as mentioned previously, humans and choice have a lot of input into workplace safety. I figure, if behavioral economics has enough exploratory and explanatory power in my day-to-day decisions, then there might be some merit in investigating some of the tools on behalf of the safety profession. The basics of behavioral economics starts out with a few definitions needed to explain the three behavioral economics concepts discussed here: Bounded Rationality, The Availability Heuristic, and Optimism Bias. Heuristics and dual system models of thinking are defined below: Heuristics: Mental short cuts or rules of thumb that are used in our everyday lives; they are informal rules of our behavior. Dual System Models of Thinking: System 1—Fast, non-conscious, and automatic thinking used when in a hurry and under some kind of constraint like time pressure (work); System 2—Slow , controlled, and deliberate thinking used when the decision involves important subject matter or when held accountable by others (work or budget planning).

Bounded Rationality

The first of three safety relevant behavior economic concepts I would like to share is that of bounded rationality. While this is not necessarily a marketing trick like the previously offered examples, bounded rationality simply states, according to Herbert Simon, that decisions are not always made under optimal conditions and that the environmental influences affect all that we think and do. Humans cannot possibly process all the information available at any given time, especially when being imposed on by the pressures of work. In order to be able to function, a set of workplace heuristics (mental short cuts) are used in order to get the work done and function normally (System 1). A key concept within bounded rationality is that of limited information and the importance of rapid, if not immediate, feedback. Behaviorists will remind us that in order to influence someone’s behavior, we have to influence either antecedents or consequences—we have a model, the ABC www.akbizmag.com

Model: Antecedents, Behaviors, and Consequences. Antecedents are those activities that include training, bias, and signs (Wear Your Gloves!) and are responsible for about 20 percent of the influence on our behavior. Consequences are responsible for the remaining 80 percent of behavior and include both reward and punishment—positive and negative outcomes. The most influential effect on behavior change are those opportunities to provide positive immediate feedback—the more people do of a thing, the more they get rewarded, and if that reward is immediate, all the better. People start to lose incentive when the behavior gets rewarded only randomly or not at all, and random rewards may lead to extinguishment of the behavior altogether. The second most effective behavior strategy is that of immediate negative feedback. Those who do something wrong, and then get immediately negatively impacted, will most likely voluntarily quit that behavior. However, and similarly to positive reinforcement, if that negative feedback is inconsistently reinforced, than it may persist when nobody is looking; the classic example is what happens when a driver sees a trooper on the highway while speeding.

The Availability Heuristic

The second concept is called the availability heuristic and it relates to safety training and pre job meetings. The availability heuristic-concept relates to mental imagery or memory that is easily accessible because of recent reminders of triggers in the environment. For example, personnel may be influenced by what they remember from recent events, or through vicarious experience of others, which will then influence their safe work behaviors. A related concept from behavioral economics is in the priming effect heuristic where words have been shown to influence future performance on a particular task. For example, priming words that are positively framed produce higher expectations and task efforts than do priming words that are negatively framed. While this may not be revolutionary to any given mature safety program, these pre job meetings do matter and a properly conducted meeting would do well to include some availability and priming words in their development and deployment in the field. This works at the “awareness” level and may keep recent events in mind. For example, recent events on the North Slope include some personnel being exposed to nitrogen with subsequent respiratory problems. Getting to the root cause of this event and sharing the lessons learned are essential elements to the availability heuristic.

Optimism Bias

A third behavioral economic concept is that of the optimism bias and a similar overconfidence effect. People tend to overestimate their ability or probability of a favorable outcome and underestimate the probability of a negative outcome. This is an especially important concept in safety in that nobody wakes up in the morning and goes to work to get hurt. Our optimism bias works in a way that is probably productive for risk takers, but risk takers are not what we want on our construction sites or oil rigs. Optimism bias tends to get people hurt (e.g., I can lift that without help; I can dig just a little deeper without shoring; I can work around that electricity) because we think that accidents only happen to the other guy. Similarly, the overconfidence effect is in play when people’s self-perceived ability is greater than their actual ability, which may get them into trouble on the worksite. This effect is especially prevalent when work planning is involved. According to the dual system model mentioned previously, humans work in either the impulsive System 1 or the calculating System 2. Work plans and HSE planning happens in System 2 thinking while carrying out the work probably takes place in System 1 thinking. Overconfidence in one’s ability during System 2 planning could get a person into trouble in the field.

Lastly, Confirmation Bias

Behavioral economics is not a new branch of economics as the role of behavior and psychology have been present in the journals for some time now. However, there seems to be an increase in both the production and velocity of behavioral economic topics, books, and presentations as of late, or, of course, I could be suffering from what is called confirmation bias in that I am now seeing this stuff everywhere. One of the most elegant and easy introductions to the science of Behavioral Economics is “The Behavioral Economics Guide 2015” (Alain Samson, ed.) found at behavioraleconomics.com. This document is incredibly well crafted, offers a history of the science, and is an excellent reference for further study. The 2015 edition has an introduction by Dan Ariely whose popular books include “Predictably Irrational,” “The Upside of Irrationality,” and “The Honest Truth about Dishonesty,” amongst others.  R Brian McKay has a post graduate degree in Public Health and is a Certified Safety Professional and Certified Industrial Hygienist. McKay is the Director of Quality, Health, Safety, and the Environment for Fairweather, LLC. Contact him at 907-270-6804 or brian.mckay@fairweather.com.

December 2015 | Alaska Business Monthly

67


special section

Building Alaska

© Bethany Goodrich

Greg Harrison and his construction crew at Kake’s Historic Cannery. This hardworking team is inventive, fearless, and includes five Kake locals.

Rebuilding Alaska: Breathing New Life into Kake’s Historic Cannery Reconstruction project to incubate business and stimulate rural Alaska economy

I

By Bethany Goodrich

t was approaching dusk in April when something out-of-the-ordinary, yet strangely familiar, caught Casimero Aceveda’s eye. “It was like something being reborn,” says Aceveda. The lights in the old cannery were on for the first time in almost forty years. Aceveda is the tribal president for the community of Kake. A predominately Tlingit village of approximately 650 residents, Kake is located on Kupreanof Island 68

in Southeast Alaska. Like many of its elder residents, Aceveda grew up in the days when the salmon cannery was thriving. “People were happy they were working. Our sisters and aunties would babysit the younger ones. Our dads fished and our moms worked on the cannery. It was a central part of our life,” remembers Aceveda. At its peak, the Kake cannery was a force to be reckoned with. In 1930 it exported 615,000 full cases of salmon, more than

double what its competitors produced. “Everyone was working, everyone was doing things, and things were going well. The cannery was really the hub of employment and activity at the time,” says Aceveda. As the political, environmental, and economic atmosphere that stimulated the canning industry waned, Kake’s cannery joined others across the region in collapse. “When the cannery closed down around 1980, everybody had started putting away

Alaska Business Monthly | December 2015www.akbizmag.com


their fishing boots and were going into the woods to go logging, so it switched from one entity to the other and the cannery kind of fell to the wayside. The community altogether changed,” says Aceveda. Breathing new life back into Kake’s historic cannery buildings has been a dream for Aceveda and his community for decades. Although tinged with nostalgia for the past, the cannery restoration project has more to do with securing Kake’s future. “This is about all entities working together for the common cause of economic development and education for our kids. They need to step up and help themselves, but they can’t do that unless we can offer a space for them to go and do it,” says Aceveda.

Teetering on Catastrophe

In 1997, the US Department of the Interior and National Park Service recognized the Kake cannery as a National Historic Landmark. After two of the buildings later collapsed, the cannery was added to a less celebrated list: the “Eleven Most Endangered Historic Places” by the National Trust for Historic Preservation. The need for help was urgent. After years of working tirelessly with state and federal agencies, Kake’s call was finally answered on Christmas Eve, 2014. Gary Williams, the executive director of the Organized Village of Kake (which is the tribal government for the Kake area), was contacted by the Bureau of Indian Affairs. Funding had come through—it was a miracle. “When they told us the amount, it truly and literally brought tears to my eyes because it gave us enough, along with other resources we had found, to do the stabilization that needed to be done. That was the Christmas Miracle; it was truly a blessing,” says Williams. Securing funding was only part of the struggle. The magnitude of the job that lay ahead was formidable. There were no blueprints and the remaining structures literally teetered on the verge of catastrophe. This contract would require a fearless, imaginative, and talented crew to complete. Kake’s second miracle came this January. “This is fun, you’ve got to use your imagination, and you’ve got to figure it out. New construction can get boring. This job does not bore me,” says Greg Harrison. Greg Harrison is the owner and operator behind Diversified Diving, a Ketchikanbased construction company. While working with the tribe, the project’s engineer, Harrison, and his crew have risen to the challenge with grace and good humor. “With a job like this, there is a lot of shimmying that happens. When you are doing a new construction you try and get everything plumb and level. These guys will www.akbizmag.com

be working on something here and be like, ‘Well it’s an inch and a half off Greg!’ And it’s like well, after almost a hundred years, I’d call that perfect!” laughs Harrison. The team is innovative. They rely on the tides to help raise heavy wood pilings, salvage wood from the original structure whenever possible, and straighten the building with a series of counterbalances. The magnitude of the construction is impressive. There’s something else notable happening here: local wood and local workers. Adam Davis is the Community & Economic Development Specialist for the Tribe. “The scale is impressive, the scale of the work being done with mostly local hands, local wood, and materials. It’s very impressive to see and, now that the building is getting more work done on the outside, it’s coming to more people’s attention. People are taking note and more of the community is getting excited about what this all means for Kake’s economy,” says Davis.

A Community-Driven Economy

While the dream of rebuilding Kake’s historic cannery has been lingering for decades, it was during a series of community economic meetings that the project was formally established as a priority. Currently, Kake is the only rural community in Southeast Alaska that regularly drafts an economic plan. The Kake Comprehensive Economic Development Strategy was established after the logging era met a similar fate as the canning industry. “We lost half of our community because of lack of work in our community. The younger ones with families took off to the bigger cities to find work to survive,” recalls Aceveda. The magnitude of community out-migration has plateaued in recent years, but the community still faces formidable social and economic challenges. According to a community survey conducted in 2009, more than half of the working population between the ages of eighteen and sixty-four is unemployed with 61 percent of surveyed families reporting at least one household member actively searching for work. “In 2004 was when our economy really took a downturn and that was when the charter members of the Kake Comprehensive Economic Development Strategy came together to put together the first edition of the current economic planning process,” says Williams. Fast forward one decade later to Kake’s 2015 Economic Summit and the process is thriving. Representatives from the tribe, city, school, and village corporation joined business leaders and other residents at the school for dinner and discussion. On giant sheets of paper hung across the cafete-

ria, participants mapped Kake’s strengths, weaknesses, opportunities, and threats. Participants voiced concerns and spoke passionately about building a sustainable and prosperous future for their home village. Input from these meetings is regularly compiled into a formal plan that identifies priorities, fosters collaboration, and drives an informed, community-driven development process. Over fifty projects have resulted from this process since the first plan was published in 2005. “Right now we are working on the fourth edition of this economic plan and throughout it all, the cannery has been recognized as an integral part and priority because so much economic opportunity can and does branch off of it,” says Williams. While Kake’s historic cannery provided community employment while in operation, a series of out-of-state companies ran the show during the first half of the last century. The majority of profit was thus siphoned out of Kake. Today, the historic site is owned in trust by the tribe for the purpose of stimulating the local economy. With more than 70 percent of Kake’s households headed by enrolled tribal members, the future of the cannery will remain a community owned asset. Like many communities on the Inside Passage, Kake identifies tourism as an economic priority. Residents and leaders view the cannery as a unique asset that sets them and the type of tourism they want apart. “Right from the beginning of the planning process, it was identified that in Kake we didn’t want to go too large in scale with tourism. If you go too big it destroys the character of Kake for the community and the visitors,” says Williams. Building an authentic tourism experience for Kake’s visitors, while at the same time ensuring it respects community residents, has been central to the planning process. While a few small tourist boats visit Kake, existing opportunities for locals to capitalize on tourism dollars are limited. Located next to the main dock, the cannery will act as an iconic gateway to Kake with spaces for artisans, vendors, and other service-industry entrepreneurs. The space however, is not slated to be only a tourist attraction. The tribal transportation program will move in and light industrial options are being explored to help diversify the benefits. A section will be dedicated to Kake’s Keex’ Kwaan Dancers, room made for a community meeting space, and a cultural and historical museum will span across the central floor. The idea is for Kake’s cannery to become an incubator of entrepreneurial, social, and cultural ingenuity, a space for the community to gather and collaborate, share ideas, and face the many challenges that come with living in a remote community head on. Proponents of

December 2015 | Alaska Business Monthly

69


the project continually stress the desire for the cannery to be “a part of the community” rather than a playground for tourists. The stabilization stage of the project is wrapping up. The tribe is well positioned to secure funding for the final process of bringing the rooms up to code while preserving the structures of this historic landmark. Some space may be used as soon as next year, and momentum in the community is building.

The Power of Collaboration

Returning the old cannery site to a community asset has taken dedication. This work is a promising example of economic innovation in a state replete with untapped opportunity. Alaska boasts a unique history, cultural identity, and natural assets that, with hard work, can be harnessed to build a more prosperous and sustainable future for our rural communities. The Kake Cannery Restoration Project is made possible with the support of many local, regional, state, and federal partners. This includes the Organized Village of Kake, Kake Tribal Corporation, the City of Kake, Bureau of Indian Affairs, National Park Service, Alaska State Historic Preservation Office, OVK Tribal Historic Preservation Office, National Association of Tribal Historic Preservation Office, Alaska Department of Environmental Conservation, Environmental Protection Agency, US Department of Agriculture Economic Development Agency, University of Oregon, Sustainable Southeast Partnership, and former-Senator Mark Begich’s office. This story is about more than just a restored cannery. It is the story of a community coming together to persevere through economic hardship. The community of Kake has come together to ask: What makes our community unique? How can we develop these assets and opportunities in a way that maximizes benefits both locally and long-term? And, how can we keep our families and quality of life at the forefront of every step in the process? For Kake, achieving a long-term prosperous community vision starts with revisiting its historic roots. These roots run particularly deep for Casimero Aceveda. “My dad worked on the cannery and when I grew up my first paying job was working on that cannery. I was a carpenter. So now, third generation coming down I got my nephew working to remodel the place! So yeah, we have pride in that cannery. The whole community has pride in that cannery, that’s where our families grew up—it’s part of us.” R Bethany Goodrich is a freelance multimedia journalist based in Southeast Alaska. 70

Alaska Business Monthly | December 2015www.akbizmag.com


special section

Building Alaska

AGC of Alaska Awards Top Contractors Davis Constructors and Engineers, Inc. was presented with the first Sustainability in Construction Award by the AGC of Alaska for its eponymous Davis Office Building in Anchorage.

T

he Associated General Contractors of Alaska (AGC), the state’s largest construction organization, named the top construction contractors, projects, and safety awards winners and recognized individuals at the association’s annual conference in Anchorage last month. AGC is a 650 member statewide association for companies in the construction/ contracting business including buildings, highways/utilities, heavy industrial, and specialty areas. Construction employs nearly sixteen thousand workers in Alaska, all of whom pay rent or make house payments and pay local taxes. Construction is Alaska’s third largest industry, paying the second highest wages with an annual payroll of more than $1 billion. It accounts for 20 percent of Alaska’s economy and currently contributes $8.5 billion to the state’s economy. AGC is headquartered in Anchorage and has an office in Fairbanks.

Hard Hat Award Jim Jansen, Chairman of Lynden, Inc., was 72

presented the Hard Hat Award, given annually to an AGC member who has demonstrated exemplary service to the Association, the community, and the industry.

Sustainability in Construction Award AGC of Alaska presented a new award this year for Sustainability in Construction to Davis Constructors & Engineers, Inc. for the Davis Office Building, the firm’s new headquarters in Anchorage. Excellence in Construction

In the Parker, Smith & Feek sponsored Excellence in Construction Awards the following firms were named: Vertical Construction  (Under $5 million) UNIT COMPANY— CH2M ANC Seismic Reinforcement  (Between $5 million and $15 million) Neeser Construction, Inc.—KTUU Channel 2 Northern Lights Media Center

 (Over $15 million) Cornerstone General Contractors, Inc.—Boney Courthouse Renewal Transportation, Marine, Heavy, Earthmoving  (Under $5 million) Bristol Construction Services LLC—Chester Creek at Muldoon Road Creek Alignment and Channel Improvements Project  (Between $5 million and $15 million) Hamilton Construction Alaska Co.—Parks Highway MP 237 Riley Creek Bridge Replacement  (Over $15 million) Brice Incorporated— Kotzebue Airport and Safety Area Improvements Stage III Specialty Contractor  (Vertical Construction) KLEBS Mechanical, Inc.—Coronado Park Senior Village, Solar Heated Domestic Hot Water System

Alaska Business Monthly | December 2015www.akbizmag.com


We manufacture windows for ALL purposes statewide © Ken Graham Photography.com

Photo courtesy of Glenn Aronwitz

 (Transportation, Marine, Heavy, Earthmoving) Davis Block Company, Inc.—KLU#3 Furie Platform, Grout Seal Remedial Work

Excellence in Safety

In the Wells Fargo sponsored Excellence in Safety Awards the following won top honors: General Contractor or Subcontractor  (Large) Davis Constructors & Engineers, Inc.  (Medium) Kiewit Infrastructure West Company  (Small) American Marine Corporation Individual  Steve Rowe, Cornerstone General Contractors, Inc.

Commercial – Residential, Remodel or New Construction Made in Alaska, by Alaskans, for Alaskans Since 1953 – Vinyl windows and glass units made in Anchorage. – Products are Cold Climate Housing Research Center Certified As Alaska Tough. – We make the best windows for ALL of Alaska and have the certifications to back it up!

Other Awards

AGC also honored Alaska Digital Printing, Inc. as Associate of the Year and Jenith Flynn of Davis Constructors and Engineers as Volunteer of the Year.  R www.akbizmag.com

907-272-4433 • www.capitolglassak.com December 2015 | Alaska Business Monthly

73


special section

Franchise & Business Opportunities

Risks and Rewards

of Franchise Business Opportunities Name recognition and proven business models can reduce risk By Julie Stricker

A

laska has undergone a retail explosion over the past few years, and many of the new businesses are immediately familiar to those who travel Outside. But while the businesses may evoke the Lower 48, their owners are usually Alaskans via franchising agreements. “The advantage of a franchise is that it is generally a proven business model,” says Bill Popp, president and CEO of the Anchorage Economic Development Corporation. “It reduces your risk, if you choose wisely and find a business that fits the market needs and fills a consumer demand that isn’t currently being met.” In Anchorage, new, expanded, and refurbished shopping centers such as Tikahtnu Commons, the Dimond Center, Northway, and Fifth Avenue malls have opened opportunities for new stores and restaurants to establish a hold. “Restaurant franchises have been insanely successful,” Popp says, noting the extremely long lines that greeted the opening of the corporate-owned Olive Garden restaurants—lines that persisted for months. He starts ticking off other recent openings, such as BurgerFi, Buffalo Wild Wings, Hard Rock Café, Texas Roadhouse, and Pita Pit. Billy St. Pierre, who has opened three Pita Pit restaurants in the past three years in Anchorage, says he has seen studies that show Anchorage residents eat out more per capita than anywhere in the United States. His three stores are always busy, and St. Pierre notes they rank first, second, and fourth among all Pita Pits nationally in revenue. “We do about three times more revenue than the average Pita Pit does,” he says. It’s not just new restaurants: the Tastee 74

Freez in Jewel Lake has been a local favorite for decades and is one of the top revenue producers for the chain, says owner Rich Owens. The franchise itself dates back to 1956, and Owens has owned it for the past twenty-one years. That history is a definite advantage in a crowded marketplace, he says. “The benefits of having the [Tastee Freez] franchise is obviously the name recognition because it’s one of the original franchises,” he says. “It’s one of the oldest in the country.” Ray Kroc is generally credited with starting the franchise boom in the 1950s after walking into a small hamburger restaurant in San Bernardino, California, run by Dick and Mac McDonald. He was inspired by the restaurant’s success and emphasis on efficiency and quality. By 1958, McDonald’s had sold its 100 millionth hamburger, according to the corporate website, and the rest is franchising history.

Recent Surge

Popp says there are many reasons for the recent surge in retail opportunities in Alaska, but it boils down to the economy and historic success of businesses. “The last couple of years, it’s just been the strength of the Anchorage economy and the continued demonstration of setting sales records on opening day as well as first-year sales,” he says. “We’re consumers up here. We have better-than-average personal and business income. The Permanent Fund, which injects $1.3 billion into the economy every year, doesn’t hurt.” The franchises that come to Alaska have generally already done well in the Lower 48, Owens says. Alaska is a place for franchises to expand; it’s not an experimental market. The state’s mobile population helps, as well.

“There are a lot of people that rotate through either with the oilfield companies or with the military up here,” he says. They like seeing a franchise they’re familiar with and will visit it and talk about it to their friends. Chain restaurants such as McDonald’s, Wendy’s, and Carl’s Jr. are usually what people think of as franchise opportunities. More than 80 percent of McDonald’s restaurants around the world are franchises, and strict rules from the parent company are the reason a Big Mac tastes the same in Florida as it does in Fairbanks. “They [corporate] will have certain procedures and standards they want you to meet,” Owens says. “If you look at the success rate of people who open businesses, it’s considerably higher on the success side if it is a franchise than going out and doing something on your own. “The disadvantage is sometimes you want to do something and you can’t do it,” he says. The secret to success, Owens says, is having good management and staff. “Whether it’s food or it’s a clothing store or a gas station, they’re looking for good management and staff that are friendly and helpful,” he says. “They’re looking for a consistent product.”

Opportunity Abounds

It’s not just restaurants. Franchise opportunities are available in a huge range of fields. Entrepreneur Magazine annually highlights the top franchise opportunities, a list that shows the diversity of opportunities available. The 2015 list includes hotels, fitness centers, fast food, beauty salons, cleaning services, and convenience stores. Finding the right one can be as simple as walking in the door of a business in

Alaska Business Monthly | December 2015www.akbizmag.com


the Lower 48, which is how St. Pierre discovered Pita Pit and Ann Marie Valdez found clothing boutique Apricot Lane. Destiny Sergeant was a client at the Curves in Juneau and bought the franchise for the women’s fitness center to make sure it stayed open. Or there’s always the Internet. That’s where Larry and Mary Banning researched franchises before settling on Batteries Plus Bulbs. Websites such as franchise.com and franchisesolutions.com serve as an online clearinghouse for people shopping for business opportunities, says Sharon Dietrich, director of sales for those sites. “We attract people who are looking to buy a franchise or business opportunity,” she says. “I would equate what we do to be similar to a Yellow Pages for franchising.” Investing in a franchise can be rewarding for those with little business background because the company often provides a great deal of training and support, Dietrich says. Once a potential franchisee chooses the business they want to open, they will pay a franchise fee, which can range from a few thousand dollars to tens of thousands of dollars, depending on the business and terms. Then they get access to the franchise’s system, the right to use the franchisor’s name and logo, and training in how to run the business. The franchise fee goes toward startup costs, such as buying the equipment and inventory. Most franchisors also make sure potential buyers have enough cash on hand to cover the first year of operation because it may take a while for the business to become established, Dietrich says. After the contract is signed, a franchisee will have a discovery period, during which they go through initial training. Franchisees will also get a document that shows all the points of failure for that company’s franchises and how they’ve corrected them. “It’s a good model, it really is,” Dietrich says. “For a lot of women, franchising is really good because they may not have a lot of business experience and they get a lot of backing. You have somebody to call when your pizza burns.”

Franchise Rules

Larry Banning, who owns three Battery Plus Bulbs franchises in Alaska, says he gets frustrated when someone buys into a franchise but doesn’t follow the rules. “The franchises are very structured and everything is being done for a reason,” he says. “It’s tried and tested. It’s documented. The advice I would have for someone who wants to buy a franchise: go by the rules. It’s a proven thing. If you go by what the franchiser has set up and you play by those www.akbizmag.com

guidelines, it’s going to be successful. “The other thing is to be ready for eightyhour weeks for a while.” Franchisors have a big stake in the game, too. It costs a lot of money to franchise a business, and there has to be a fabulous business plan, Dietrich says. Franchisees pay a royalty based on a percentage of gross revenues and may also pay advertising fees. The idea of franchising is to keep the brand name synonymous with the quality that brand invokes. Businesses pay close attention to how franchisees adhere to their standards. “They’re protecting everybody else in the franchise,” Dietrich says. “They want you to be successful. They make money off of you. If you’re not successful, that goes into their record. They’re going to be picky who they let into the system, and they’re going to be supportive.” Potential franchisees get a paper called the franchise disclosure document that lists, among other things, what each unit makes on average and any potential litigation. It also lists all current and failed franchises. “You should go through and call every single person on that list,” she says. Typically, most people want to buy an established franchise, but there are some who like to be among the first. There are advantages to that, too, Dietrich says. “If you get in when the franchise is young, you’ll have a lot of say-so,” she says. “They’re going to want your opinion on everything. You’re part of the lab test. As the franchise grows, you’re going to have a lot of input. When you get over one hundred, you know you’re going to have a winner.” Success also gets the attention of franchisors, as St. Pierre has found with Pita Pit. He says their unprecedented sales in Anchorage meant they had to start doing things a little bit different from the corporate model. “There was a lot of learning and utilizing the foundation they set forth and making adjustments due to the increase in volume we experienced in Alaska,” he says. “Some of the things we’ve incorporated in Alaska corporate has picked up, like setting up a third sandwich station because of sheer demand.” Anchorage is a great place to do business, but like anything else, there are no guarantees, St. Pierre says, adding, “It does take work day in and day out, like any other business, to be successful.”  R

Want to Sell Your Company?

25+ Years Experience

• Value Assessment • Consultation • Marketing • Results

Matthew Fink 907-261-7620 direct 907-244-4194 cell 907-865-4750 fax fink@akmergersandacquisitions.com 3350 Midtown Place, Anchorage, Alaska 99503 Alaska Mergers & Acquisitions is affiliated with Remax Dynamic Properties, Inc.

Julie Stricker is a journalist living near Fairbanks. December 2015 | Alaska Business Monthly

75


special section

Franchise & Business Opportunities

Rich Owens—left, with tray of tasty food, and above, with a happy customer—is the owner of the Jewel Lake Tastee Freez, one of the highest revenue-producing franchises for the company. He was named top Tastee Freez franchisee twice. Courtesy of Rich Owens

Alaska Franchises:

Top of the Food Chain A handful of success stories By Julie Stricker Tastee Freez—Rich Owens

Rich Owens figures that owning a Tastee Freez was always in the cards for him. He grew up in a small Montana town that had an A&W stand on one end and a Tastee Freez on the other. It just so happens that the Tastee Freez was on the way to the drivein and was owned by a family friend, so Owens and his brothers stopped by often. Forty years later, Owens discovered the owner of the Tastee Freez on Jewel Lake Road in Anchorage was a friend. They got to talking in the restaurant one Saturday morning and agreed to the sale terms the following Monday. The deal was closed two weeks later. “Everything fell into place at the right 76

time,” he says. “I had done some work up on the North Slope, just getting done with that contract and really didn’t have anything else going. It was that little window that just happened to work.” That was twenty-one years ago. Since then, Owens has built the Jewel Lake Tastee Freez into one of the highest revenue-producing franchises in the company. Owens has been named Operator of the Year twice, most recently for 2014. “We’re like number one in the country for May, June, July, and August,” Owens says. A Tastee Freez in South Carolina, that just happens to be located next to a 1,600-student high school, is number one the other months. Owens says one of the reasons he is successful is because his Tastee Freez has a greatly expanded menu that includes salmon burgers, veggie burgers, and salads, as well as the core ice cream treats. When he took over the franchise, those regional variations were encouraged, but times have changed. Tastee

Freez is now part of the Galardi Group, which owns Wienerschnitzel. “In the process of purchasing Tastee Freez, they ended up with about sixty-five of us that are grandfathered,” Owens says. “My franchise goes back to 1958. What happens is those of us that are grandfathered don’t really fit the corporate model.” Executives from the Galardi Group traveled to Anchorage to talk to Owens about becoming a more traditional Tastee Freez but left impressed, and without changing his business model, when they saw the lines outside the door. “We have one of the largest menus in the country, but that’s what we need to survive, and the home office has been good about not bugging me about having things that aren’t on the core menu,” Owens says. The Tastee Freez is in a residential area, which doesn’t get the vehicle traffic it would get on a major road (there is no drive-thru, he notes) but gets steady traffic from the neighborhood and those traveling to and from Kincaid Park. Until it was folded into Joint Base Elmendorf-Richardson in 2011, Kulis Air National Guard Base was also right next door. Over the years, Owens has been heavily involved with the 176th Wing and in 2005 he launched

Alaska Business Monthly | December 2015www.akbizmag.com


“My brothers and I, we all ended up with the same idea of community service and philanthropy. We never talked about it; we just watched mom and dad and we saw how important it was to the community and the employees. Any business has the responsibility to return a portion of the profit to the community they serve. On the one hand, they serve that community. On the other hand, they benefit from that same community.”

—Rich Owens Owner, Tastee Freez

the Ice Cream Support Squadron. Owens is known informally as the commander of the squadron—which has its own patch—and is a member of the National Guard’s Operation Santa Claus Committee. Community service is just part of his business model. Owens’ dad was a pharmacist in the family’s mom and pop drugstore. The kids all worked at the store and watched their parents, who were active with the local library, chamber of commerce, Rotary club, and hospital guild, among other organizations. “My brothers and I, we all ended up with the same idea of community service and philanthropy,” he says. “We never talked about it; we just watched mom and dad and

we saw how important it was to the community and the employees. “Any business has the responsibility to return a portion of the profit to the community they serve. On the one hand, they serve that community. On the other hand, they benefit from that same community.” Owens keeps a donation jar on the counter that annually raises $5,000, sometimes even $10,000. He distributes the money to local schools and nonprofits. When an apartment complex across the road burned a few years ago, he put out a similar jar and within three days had raised $16,000 in cash and two semi-trucks worth of furniture. “It’s worked out very well,” he says. “The customers are very generous.”

One advantage to owning a neighborhood restaurant is Owens has gotten to know many of the locals. His manager started as a teenager and now, thirteen years later, is married with two kids. “This is still a neighborhood and we’re one of the few places that still hire fourteen- and fifteen-year-olds,” he says. “They can either walk to work or pedal to work. It’s one of the small businesses that really makes a neighborhood a neighborhood. That’s important.” On August 1, the twenty-first anniversary of Owen’s purchase of the Tastee Freez, he got a call from his accountant. “He said, ‘In the twenty-one years since you bought it, you’ve had 647 employees go through there, almost all of them high school students,’” Owens says. “That’s a lot of hormones.”

Batteries Plus Bulbs— Larry and Mary Banning Zero is a magic number for Larry and Mary Banning. The Bannings, who own three Batteries Plus Bulbs outlets in Alaska, really like cold weather. “The colder it is, that’s when car batteries start going bad, so we see a huge increase when we get down around zero,” he says. “That’s when people whose car batteries are

HELPING OTHERS IS AN ALASKA TRADITION Helping businesses is ours. Alaska USA Insurance Brokers goes beyond selling you a policy. With customized coverage and enhanced services, trusted specialists find what’s best for your business and your bottom line. Grow with confidence that you have support from industry professionals with more than 25 years of experience.

alaskausa.org/insurance | (800) 525-9094 www.akbizmag.com

December 2015 | Alaska Business Monthly

77


marginal start failing. So zero is a magic number for us.” The Bannings opened their first Batteries Plus Bulbs in Anchorage in 2001. It’s a store that stocks exactly what it says, batteries and light bulbs. It was a deliberate career change for Larry Banning, who spent nearly twenty years working on Alaska’s North Slope. He started looking online for franchise opportunities in 1999. “I was just cruising the Internet,” he says. “I wanted to do a franchise and I wanted to do something that was unique to Alaska.” He liked the idea of a stand-alone store specializing in batteries because there was nothing else like it. At the time, he says, the chain had only 130 stores. Now there are 630. “This is the only brick and mortar all batteries, all bulbs franchise going,” he says. He opened the Anchorage store in 2001, followed by one in Wasilla. They were moderately successful, but he struck gold in July 2013 when he opened a third outlet in Fairbanks. “This store hit the road running,” he said in the cluttered office at the back of the brightly lit store. Its prime location along one of Fairbanks’ busiest streets is a big reason for its success, he says. Banning says he measures success by how many customers are helped in the store each day. For the first six months or

78

Larry and Mary Banning, far right, opened their first of three Batteries Plus Bulbs in Anchorage in 2001. Courtesy of the Bannings

so, the Anchorage store averaged about ten tickets per day. Wasilla was even slower. “This one right here, on the very first day we were opened, we did forty-six tickets and we’ve never looked back,” he says. “That’s our lowest ticket count to date, the day we opened.” The Bannings’ two daughters and a sonin-law work in the stores, which have a total of twenty-one employees. “I like hiring family,” says Banning, who was born and raised in Alaska. “I don’t know, I just like being around them. I like the family aspect of it.” The chain has recently starting repairing mobile devices, a niche that has taken off in Fairbanks. Banning says his reports show the Fairbanks store is leading the

chain in mobile device repairs. It’s not that Fairbanksans are more clumsy than people elsewhere, but it has a young mobile population and few other options for those repairs. The biggest challenge is logistics. “I’ve lived in Alaska my entire life,” he says. “I did logistics in Prudhoe Bay but still, it doesn’t matter how much you know about logistics, but it changes so fast. That would be our biggest thing; I wouldn’t say we struggle with it, but we’re constantly on top of it.” Asked if he wanted to expand further, Banning laughs. “If you ask my wife, the answer’s no,” he says, “but I would like to open one more in Anchorage.”

Alaska Business Monthly | December 2015www.akbizmag.com


“It really changed my life. I can’t say enough about Curves. Curves really helped me. I lost a lot of weight. I got fit and healthy. I loved it so much that when I heard [previous owner] Genevieve was going to sell it, I decided to buy it to make sure I could keep coming here.”

Curves in Juneau— Destiny Sargeant Destiny Sargeant started visiting Curves, a fitness center for women, about two years ago because she wanted to feel better physically and to feel better about herself. “It really changed my life,” she says. “I can’t say enough about Curves. Curves really helped me. I lost a lot of weight. I got fit and healthy. I loved it so much that when I heard [previous owner] Genevieve was going to sell it, I decided to buy it to make sure I could keep coming here.” Sargeant, who has a PhD in psychology, had little business experience. “There’s quite a learning curve to owning this kind of business,” she says. “I had to hit the ground running, but the franchise itself does a lot of training, so they offer new franchises a lot

of support. I was very grateful for that.” Curves is built on research about the best way for women to lose weight through diet and exercise. At the core is a thirty-minute workout using specialized machines. Sargeant had to learn to teach others to use the equipment, as well as maintain it, as well as become versed in nutrition and other health issues. One thing she likes is that a woman who joins her Curves in Juneau can have the same experience at a different Curves in the Lower 48. “They do a lot of training,” she says. “It’s a lot more standardized. They’d like it so that a Curves is a Curves is a Curves just like a McDonald’s is a McDonald’s is a McDonald’s. “We pretty much attempt to do what they say research has proven on so many,

Courtesy of Destiny Sargeant

—Destiny Sargeant Owner, Curves

Destiny Sargeant at her Curves fitness center in Juneau.

many women.” Sargeant has been in southeast Alaska for about twenty-five years and said buying Curves has encouraged her to sink her roots even deeper. “I dearly love Curves,” she says. “It changed my life and I bought it for that.”

IN YOUR CORNER Alaska USA is the perfect partner to support local business. As the largest credit union in Alaska, we offer a full range of services for business members, including equipment financing, commercial real estate lending, and more. See us for low rates, flexible terms, and quick decisions. Federally insured by NCUA

SERVICES | LOANS | INSURANCE alaskausa.org/biz | (800) 525-9094 www.akbizmag.com

December 2015 | Alaska Business Monthly

79


Pita Pit—Billy St. Pierre

Billy St. Pierre’s three Anchorage Pita Pits are among the top four revenue producers for the entire chain. Courtesy of Billy St. Pierre

80

Billy St. Pierre first stumbled onto a Pita Pit when he was doing a sports management internship in Oregon. There was a Pita Pit right down the street and St. Pierre’s coworkers ate there frequently. The first time he ate at Pita Pit, St. Pierre says he called his dad, a successful Fairbanks restaurateur and businessman, and told him he needed to bring the concept to Alaska. But St. Pierre went on to other things, including getting his MBA, and it wasn’t until he saw another Pita Pit in Bozeman, Montana, that the idea really clicked. “I ate there three times in three days,” he says. “I wasn’t particularly keen on sitting on a job from nine to five. I went to the website and submitted a letter of interest.” At the time, few of St. Pierre’s friends had even heard of Pita Pit, which specializes in pita sandwiches, so the brand itself wasn’t a huge selling point. “I love the product,” he says. “That was the number one thing. I knew it was unique to Alaska. I think it is a great brand and a fun-loving brand.” St. Pierre drew up a “massive” business plan. “I knew the importance of being prepared,” he says. He spent the six months before the first Pita Pit opened talking it up on social media. He documented the whole construction process on Facebook, gave away Pita Pit workout shirts to his friends and tagged them in photos. “When we first opened for business, it was busy, very, very busy,” he says. “The initial community response was better than I ever imagined it could be.” The next year, St. Pierre opened a second store and followed that with a store in Tikahtnu Commons last summer. The three stores are among the top four revenue-producers in the entire chain. He’s continuing to scout locations elsewhere in Anchorage, as well as Wasilla and possibly Fairbanks. “What I’d really like to do is find someone to partner with me and live in Fairbanks,” he says. “In my opinion, we do a great job running our stores. We’re involved on a daily basis; we’re in the stores on a daily basis. In the restaurant business, I think owner participation is essential to the business. “I’m trying to balance the next best location and affordable real estate and what I want my personal life to be,” he says. The restaurants employ about eighty people, mostly part-time, but St. Pierre says turnover has been very low. “Most of them are students or younger folks just figuring out life,” he says. “Some of these kids started off with us at sixteen. We’ve been able to watch our staff grow up and play a positive role in their lives.” St. Pierre says his biggest challenge is logistics. “In Alaska, compared to the Lower

Alaska Business Monthly | December 2015www.akbizmag.com


48, we have to order our stuff nine days in advance, while a lot of other Lower 48 stores can have next-day delivery,” he says. St. Pierre came up with a form that tracks the store’s sales, inventory, and projections for the next ten days so that he can make sure he has needed supplies on hand. His next step? “Traveling is my ambition. It’s my passion,” he says. “Financially we’re doing as well as we ever wanted to do. We’re entering our slowest four months, so we have quite a bit of travel in the next few months.”

Apricot Lane—Ann Marie Valdez When Ann Marie Valdez walked into an Apricot Lane clothing boutique at Downtown Disney in Anaheim, California, she was immediately smitten. Apricot Lane is a women’s wear chain that features trendy designer clothing and celebrity-inspired fashion. Valdez noticed a few placards around the store that mentioned franchise opportunities. It was just what she and her husband, Arne, a salesman, had been looking for. “I still have the original piece of paper,” she says of the moment more than three years ago. “I was immediately super-excited. My husband and I had been investigating franchise opportunities for years.” The couple, who have two teenagers, wanted a business that would work in Anchorage, where the couple has lived for twenty years. “We were looking for something I could run and could kind of be my thing,” Valdez says, noting she had been a stay-at-home mom for years. Her teenaged daughter is a big supporter. “I don’t have a lot of experience in the fashion industry,” she says, although when she was younger she did some modeling in the Seattle area and worked at a Limited clothing store. The Valdezes settled on a location in the Fifth Avenue Mall in Downtown Anchorage. “The demographics and anchor stores here in Fifth Avenue were more along the lines of my customers,” she says. “I’m a ‘mom and daughter’ shopping together store.” The store also hosts fashion shows and trunk parties. Apricot Lane sells mostly brand-name items, but it’s not a high-end boutique as far as prices are concerned, Valdez says. “Our price points are really good. We try to cater to the mothers and the daughters, but our demographics are pretty wide-ranging—eighteen to fifties and sixties.”  R

We help good organizations, look great!

Design

907-562-4248 800-478-4248 in AK info@stellar-designs.com

stellar-designs.com

Julie Stricker is a journalist living near Fairbanks. www.akbizmag.com

December 2015 | Alaska Business Monthly

81


special section

Franchise & Business Opportunities

Franchise Construction and Remodeling

Mark Pfeffer Members of the Creekside project team, owners, and tenants of the building officially break ground for the new Body Renew, BurgerFi, and Krispy Kreme at Creekside on Wednesday, October 7 in East Anchorage. The twenty-one-thousand-square-foot Class A retail building will be owned by Alaskans Jerry Neeser and Mark Pfeffer, along with Chignik Lagoon Native Corporation. The project team includes Pfeffer Development, Neeser Construction, and KPB Architects. Northrim Bank and Alaska Industrial Development and Export Authority are financing the project.

Strict adherence with variations in freedom By Rindi White

S

ometimes it takes the addition of a franchise to a city to make residents feel they’re living in a “real” town. Anyone who’s ever lived in a town without a Subway or McDonald’s surely knows people who eagerly anticipate traveling to other towns that offer the American experience of shopping at a franchise store. But how do franchise companies ensure the shopping experience at a store in Alaska is the same as the experience shopping at the same store in Los Angeles or Miami? By requiring strict adherence to building plans, operational plans, and product sourcing, of course. So strict, in fact, that some companies are prepared to drop a franchisee over sign placement or the type of wood used in the interior of their store, says Jack Lewis, who’s behind the BurgerFi restaurant at the Sears Mall, as well as the new BurgerFi and Krispy Kreme restaurants anticipated to open next summer as part of the Creekside development under construction near the corner of DeBarr and Muldoon roads. 82

“I did almost run into an impasse with Krispy Kreme because of the ‘Hot Donuts Now’ sign,” Lewis says. “We have a very strict signage law in Anchorage and [not having the sign] was actually a deal-killer. That’s how strongly they felt about their branding.” In the end, Lewis says he was able to meet the Municipality of Anchorage sign law requirements with no problem. But he said it was surprising to learn that his chance to bring Krispy Kreme to Alaska could have been sidelined by a sign law. “They were quick to say if we don’t meet these certain minimal requirements, [Krispy Kreme] will not issue the franchise, even if it’s a wonderful market, even it if means little [in terms of lost revenue],” Lewis says.

Varying Freedom

Franchises, from restaurants to tire shops and gyms, vary in how much freedom they allow franchisees to have. The construction process is frequently very strict to ensure homogeneity. But most allow franchisees to hire their own contractors to build or remodel the stores. Maintenance is frequently left up to the franchisee as well, although some companies stipulate that the work fit into a preset financial model. Lewis is behind several restaurants in Anchorage, including Peanut Farm Bar and Grill, Sourdough Mining Company, McGinley’s Irish Pub, and two Firetap Alehouses,

one near O’Malley Road and one at Tikahtnu Commons in northeast Anchorage. Bringing franchise restaurants to Alaska is an exciting challenge, he says, and definitely a different experience than building the new Firetap Alehouse, for example. “Firetap is our own homegrown concept. That was more, you get a vision, sit down, look at the marketplace, look at the demographics and spend hours and hours sitting there with an architect,” he says. Lewis tapped the knowledge of Gordon and Diane Thompson, who founded Humpy’s Great Alaskan Alehouse. “We’d draw and look at pictures, sleep on it. We had a professional restaurant design company out of Bellevue, Washington, that I used for interiors, and there were additional designers I brought in from my days at Sourdough,” he says. The design, the building plans, the marketing—it was all up to Lewis and his partners. Contrast that with BurgerFi and Krispy Kreme, where the planning is already done. The only real design work was in adapting the Lower 48 chains’ stores to an Alaska climate, he says.

Alaska Adaptations

“BurgerFi was an interesting development. We’re in a very cold part of the nation, and more than 70 percent of their stores are in the Southeast. Earthquakes and freezing are not a big deal for them,” he says.

Alaska Business Monthly | December 2015www.akbizmag.com

Photos by Ash Adams for Pfeffer Development

Jack Lewis


The chain got its start in West Palm Beach, Florida. It’s what Lewis describes as “all-natural, fast casual dining.” The burgers are grass-fed beef and the fries and onion rings are hand cut every day. While fast food chains often use heat lamps to keep premade burgers warm, BurgerFi food is made to order and generally ready in less than ten minutes from the time the order is placed. Lewis says the chain caught his eye a few years ago on a business scouting trip. But with a glass-and-metal exterior and an interior full of wood from the southern United States, Lewis says it would have been economically challenging to build. Rather than shipping the wood for the restaurant’s interior across the nation, he says he sent samples of different locally available wood and the company selected a fir from Southeast Alaska for use in the store. There were a few other changes, such as to the exterior patio furniture, which is only used during the brief summer window here, and the large circulating fans used in the BurgerFi restaurants in the southern states. “Being too hot was not an issue,” Lewis says. Dale Martens, the president of Denali Foods, which operates fifteen Taco Bell stores in Alaska—all the stores in the state except one in Kodiak, which is owned by someone else— says Taco Bell stores were designed for Califor-

www.akbizmag.com

nia, where the company is based, not Alaska. “Structurally, it has to be modified for a different seismic zone, and it needs more insulation, bigger HVAC units on the roof— and that requires a stouter roof, that is also modified for the climate,” Martens says. Basically, he says, the stores must be built using two-by-six construction instead of the two-by-four construction laid out in the company’s prototype building plans. “That affects everything, so the building has to be largely redesigned,” he says. “These are just a few of the many items that must be adapted to the local climate so that the result is a highly functional building designed specifically for us that looks identical to the current national prototype.” That means hiring an architect to redraw the plans—Martens uses Architects Alaska—and getting approval from the company. Like Dairy Queen, BurgerFi, and Krispy Kreme, Taco Bell allows franchisees to hire their own contractors. Once inside, however, some franchises operate differently. While BurgerFi allows franchisees to do their own interior construction, Lewis says Krispy Kreme sends all the interior furnishings up to be assembled on-site. “With BurgerFi, the fabrication was done locally. Krispy Kreme was done out of state and you put it together here,” he says.

Keeping Brand Pride at the Forefront Although some franchises require their own contractors be used for construction or remodeling, Martens says he was able to hire his own work done independently, as long as the plans were rigidly adhered to. “BurgerFi made two inspections before the opening. I imagine I’m going to see the same of Krispy Kreme. They have the authority to shut it down if they don’t like what they see. They take their branding extremely seriously,” he says. Greg Todd, owner of five Dairy Queen Grill and Chill restaurants in Anchorage and Mat-Su, says one way Dairy Queen ensures ongoing high standards is by surprise visits. “DQ has annual surprise facility pride and cleanliness checks to make sure the brand is protected and presented in a professional way,” he says. Todd says Dairy Queen requires remodels every ten years, but the stores are updated much more frequently. “We are constantly updating our kitchens as new products are introduced and old ones are retired. Our latest was the addition of bake ovens to support our ‘DQ Bakes’ line of treats and artisan-style sandwiches,” he says. As with maintenance, local contractors generally do the installation work. Todd

December 2015 | Alaska Business Monthly

83


says the contractors are selected based on reliability and knowledge of the type of equipment the restaurant uses. Polar Refrigeration, he says, works on the soft-serve ice cream machines in Todd’s stores. Martens says Taco Bell also requires renovations every ten years, but equipment is updated much more frequently. Martens is part of a national cooperative through which he buys the equipment for the restaurant. Sometimes the purchase includes installation, but often it does not. “A lot of the minor things we do ourselves,” he says. “If it’s signage, we call a local sign company. If it’s a hot water heater, we are capable of doing that ourselves.”

Building for Future Franchisees

The Creekside development that will house the second BurgerFi in Anchorage and the state’s first Krispy Kreme, as well as a Body Renew weight loss and fitness studio, is being built as a partnership between Jerry Neeser, president of Neeser Construction; Mark Pfeffer, president of Pfeffer Development; and Chignik Lagoon Native Corporation. According to Pfeffer Development, the twenty-one-thousand-square-foot retail building is part of the continued redevelopment of what was previously a sixty-eightacre mobile home park. Begich Middle

School, Grass Creek Village Apartments, Clearwater Village, and Creekview Plaza 49 are also part of the redevelopment project. The project is one of many around the city designed to appeal to small businesses and franchises. In East Anchorage, Tikahtnu Commons is the largest single-owner shopping center in the state and hosts numerous franchises and small businesses, including Lewis’s newest Firetap Alehouse. Tikahtnu is owned by Cook Inlet Region, Inc. and managed by Browman Development Company, Inc., a primarily California-based company that manages shopping centers across California, Washington state, Idaho, and Alaska. Browman also owns and manages the Cottonwood Creek Place development in Wasilla that is home to Target and Walgreens, among other stores. Jim Stephens, Browman’s director of development and leasing, says the process of building shopping centers happens in many ways—sometimes a landowner approaches the company with an idea for a shopping center. Sometimes retailers identify a location where they want to be. Sometimes his company identifies a good piece of real estate and moves toward development. The real trick is how to develop a property in such a way that it maintains its appeal as time passes and shopping habits change. “We don’t

build large buildings without a tenant committed to the space,” Stephens says. “We don’t control the future, whether the next group is going to want that space, but what we can influence is that the spaces we construct aren’t too narrow.” A too-narrow space can be a deal-killer, he says. For smaller tenants, in the ten-thousand-square-foot to eighty-thousand-squarefoot range, building a structure that can adapt over time is key. “You can move the dividing walls. As long as you don’t make the building too deep, you can adjust the frontage and get them the size that they want,” Stephens says. Browman’s projects are all competitively bid, he says, although the company does frequently do repeat business with contractors and subcontractors that perform well. Often, as is the case with Tikahtnu Commons, several contractors work on the same property. And that’s just the main buildings, he says. The business owner or franchisee builds leased sites, like Firetap Alehouse and Olive Garden at Tikahtnu, although there are some requirements that the theme of the shopping center be maintained, Stephens says, adding “We try and make everybody comfortable and happy.”  R Rindi White is a freelance journalist living in Palmer.

Subscribers give us an email address for your

DIGITAL EDITION

• Get expanded article content each month including video! • Read past issues at your leisure on desktop, laptop, tablet or mobile device. email us at subscribe@akbizmag.com

Or update online http://www.akbizmag.com/Alaska-Business-Monthly/Manage-Subscriptions/

akbizmag.com 84

Alaska Business Monthly | December 2015www.akbizmag.com


special section

Franchise & Business Opportunities

Lease Negotiations Ten tips for business tenants By Jeff Grandfield and Dale Willerton

F

or many entrepreneurs, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While a business owner focuses on marketing and managing their business, savvy real estate agents and brokers are specialized sales people. Their job is to sell commercial tenants on leasing their location at the highest possible rental rate. Commercial tenants may go through the leasing process two or three times in their entire lifetime—yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for an entrepreneur as the amount of rent paid will directly affect the financial bottom line. Whether negotiating a lease renewal or leasing a new location for the first time, here are ten tips for business tenants:  Negotiate to Win: All too frequently, tenants enter into lease negotiations unprepared and don`t even try winning the negotiations. If you are not even negotiating to win, you won’t. With big commissions at stake, you can be sure the landlord’s agent, on the other hand, is negotiating fiercely to win. Tenants should remember that it is okay to negotiate assertively.  Be Prepared to Walk Away: Try to set aside your emotions and make objective decisions. Whoever most needs to make a lease deal will give up the most concessions. A good business in a poor location will become a poor business.  Ask the Right Questions: Gathering information about what other tenants are paying for rent or what incentives they received will position you to get a better deal. Consider that your landlord and his agent know what every other tenant in the property is paying in rent, so you must do your homework, too.  Brokers … Friend or Foe? Real estate agents and brokers typically work for the landlord who is paying their commission. It is not normally the agent’s role to get www.akbizmag.com

the tenant the best deal—it is their job to get the landlord the highest rent, the biggest deposit, etc. The higher the rent you pay, the more commission the agent earns. If you are researching multiple properties, try to deal directly with the listing agent for each property, rather than letting one agent show you around or show you another agent’s listing. Your tenancy is more desirable to the listing agent if he/she can avoid commissionsplitting with other agents.  Never Accept the First Offer: Even if the first offer seems reasonable, or you have no idea of what to negotiate for, never accept the leasing agent’s first offer. In the real estate industry, most things are negotiable and the landlord fully expects you to counter-offer.  Ask for More Than You Want: If you want three months free rent, ask for five months. No one ever gets more than they ask for. Be prepared for the landlord to counter-offer and negotiate with you as well. Don’t be afraid of hearing “no” from the landlord—counter-offers are all part of the game.  Negotiate the Deposit: Large deposits are not legally required in a real estate lease agreement for a tenant. Deposits are negotiable and, more so than anything else, often serve to compensate the landlord for the real estate commissions he will be paying out to the agents. If you are negotiating a lease renewal and your landlord is already holding a deposit of yours, negotiate to get that deposit back.  Measure Your Space: Tenants frequently pay for phantom space. Most tenants are paying their rent per square foot, but often they are not receiving as much space as the lease agreement says.  Negotiate, Negotiate: The leasing process is just that—a process, not an event. The more time you have to put the deal together and make counter-offers, the better the chance you have of getting

what you really want. Too often, tenants mistakenly try to hammer out the deal in a two- or three-hour marathon session. It is more productive to negotiate in stages over time.  Educate Yourself and Get Help: Unless you have money to throw away, it pays to educate yourself. Taking the time to read about the subject or listen in on a leasing webinar will make a difference. And, don`t forget to have your lease documents professionally reviewed before you sign them. With hundreds of thousands of dollars in rent at stake, personal guarantees, and other risks, you can’t afford to gamble. In leasing, tenants don’t get what they deserve, they get what they negotiate. We still remember a client of ours a few years back who was opening up a new business in Anchorage. She was anxious to get the deal done and was happy with and ready to sign the deal presented. We had advised that we push the deal as we felt there was nothing to lose. With one extra phone call (employing some of the abovementioned strategies) and a few hours of additional work, we achieved over $7,500 in savings through a reduced rental rate and increased lease incentives—time well spent! R

Dale Willerton and Jeff Grandfield of The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Willerton and Grandfield are professional speakers and co-authors of Negotiating Commercial Leases & Renewals For Dummies (Wiley, 2013). Contact them by phone 800738-9202, e-mail DaleWillerton@ TheLeaseCoach.com, or online TheLeaseCoach.com.

December 2015 | Alaska Business Monthly

85


RIGHT MOVES MTA

Michael C. Burke was appointed as Matanuska Telephone Association’s new CEO. He was the interim CEO since July. Burke brings more than thirty-one years of professional consulting and senior management experience with telecommunica- Burke tions and other utility companies. He is an Alaska CPA and earned a Bachelor of Business Administration specializing in Accounting from Seattle University.

Alaska USA Mortgage Company

Linda Winters was promoted to Assistant Vice President of the Alaska USA Mortgage Company’s Eagle River office. Winters has more than twenty years of experience in the financial services industry in Alaska, including seven Winters years as a senior mortgage loan originator at Alaska USA Mortgage Company in Anchorage. Winters holds a degree in business administration from the University of Puget Sound.

Fairweather LLC

Linda Leary was appointed as the new President of Fairweather LLC and the Deadhorse Aviation Center LLC. Leary brings more than thirty years of logistics and sales experience, formerly serving as the president of Carlile Transportation Leary Systems and senior vice president of Alaska Communications. Leary holds a bachelor’s from the University of Maine and a master’s in global supply chain management from the University of Alaska Anchorage.

MacKinnon Marine Technologies

Kevin Kastner joins MacKinnon Marine Technologies, manufacturer of the AlumaSki sport utility and rescue boat, as General Manager. He is a previous entrepreneur, avid power sports enthusiast, and director of major Alaska motorsport and recreation events. Slavik Lund, who joined the company at the launch, will lead the product management and daily operations activities.

Compiled by Russ Slaten UBS Financial Services

Debra Austin joins the Legacy Group of UBS Financial Services as Senior Registered Client Associate in Anchorage. She has more than twenty-nine years of financial industry experience. Austin has a degree in Business Administration Austin Management from Alaska Pacific University and has worked in the financial services area in Anchorage since 1993.

First National Bank Alaska

First National Bank Alaska promoted two banking experts and appointed two others to new positions. John Schaff was promoted to Mortgage Lending Director. Schaff started his banking career thirteen years ago as a mortgage loan originator and transitioned into management in 2007. Schaff earned a degree in agricultural and resource economics from the University of California-Davis. Jeff Livingston is First National’s newest Loan Officer. He joined the bank in July 2014 and previously worked in all aspects of branch management. Jennifer Matthews was appointed Business Development Officer. A First National banker since 2006, she works closely with customers to formulate the best solutions to meet their business banking needs. Aili Peyton was also appointed Business Development Officer. Peyton is an experienced banker with a family deeply rooted in the banking business.

Schaff

Livingston

construction experience with the department. Coffey holds a BS in Environmental Resources Engineering from Humbolt State University.

University of Alaska

Dr. Deena Paramo of Wasilla has been selected by Governor Bill Walker to join the University of Alaska Board of Regents. She has extensive experience in Alaska’s education system and is currently the Superintendent of Paramo Schools for the Mat-Su Borough School District. Paramo holds a BS from Texas State University, a master’s in education from the University of Alaska Anchorage, and an education doctorate from the University of Oregon.

Alaska Center for Ear, Nose and Throat

Dr. Mark Brandt Lorenz joins Alaska Center for Ear, Nose and Throat as the newest member of the practice. He is an ear, nose, and throat physician with a sub- Lorenz specialty in neurotology. Lorenz is the only fellowship-trained neurotologist in Alaska, and he is also the only doctor in the state qualified to perform cochlear implant surgery. Lorenz attended medical school at Ohio State University and completed his residency in Michigan.

Pacific Environment

Matthews

Peyton

Alaska DOT&PF

Mike Coffey was named Southcoast Region Director of the Alaska Department of Transportation and Public Facilities. He has more than thirty years of maintenance, operations, design, and

Elizaveta Barrett Ristroph has joined Pacific Environment as Pacific Policy Director. She has worked around the world, from the Northern Mariana Islands and the Philippines to Arctic Ristroph Alaska and Russia. Ristroph holds a JD from Tulane Law School, a master’s in Regional and City Planning from the University of Oklahoma, and a BS in Environmental Science from the University of Oklahoma.

Alyeska Title Guaranty Agency

Laurie Downing was named Title Manager of Alyeska Title Guaranty Agency. She has more than thirty

:Delivered 86

Alaska Business Monthly | December 2015 2015www.akbizmag.com

Client/Project:#: NAC_15_0529_Delivered_atv


RIGHT MOVES

Compiled by Russ Slaten

years of residential and commercial title and escrow experience. Downing has worked in Anchorage and the Mat-Su Valley and has been approved as an instructor by the Alaska Real Estate Commission.

his career. McDowell also provides analysis and counsel to investment firms across the globe and is currently a senior advisor to Berenson & Co.

Alaska Gasline Development Corporation

Richard Strutz was appointed CEO of Sitnasuak Native Corporation. Strutz joined Sitnasuak as the CEO of the corporation’s Sitnasuak Financial Services LLC subsidiary in 2013 and assumed the interim CEO role of Sitnasuak in April. Strutz Strutz was president of Wells Fargo Bank Alaska, N.A. and at its predecessor, National Bank of Alaska. Rebecca Neagle was promoted to Shareholder Relations Manager. Her role within the corporation will include the facilitation of communication among shareholders, the Shareholder Relations Department, and various agencies, Neagle providing assistance in person, by phone, and through written correspondence.

Governor Bill Walker appointed A.J. “Joey” Merrick II of Eagle River as a new member to the Alaska Gasline Development Corporation’s board of directors. Merrick has a long history with Laborers’ Local 341, beginning as a laborer apprentice Merrick in 1989 and then serving as general foreman, business agent, president, and currently as secretary-treasurer. Walker also re-appointed Dave Cruz of Palmer to the board. Cruz is the President of Cruz Companies. He has served on a number of boards and commissions, including the Matanuska-Susitna Borough Port Commission, the Cruz Resource Development Council for Alaska, and Associated General Contractors of Alaska.

Anchorage Chamber of Commerce

Brix Hahn joins the Anchorage Chamber of Commerce as the Event Coordinator. Hahn was the social media coordinator at Alaska Dispatch News. She studied journalism, justice, and German at the University of Oregon and Hahn University of Alaska Fairbanks and has worked for several other news outlets around the state, including the Nome Nugget Newspaper and KSUA TV Productions.

Arctic Economic Council

Robert McDowell joins the Arctic Economic Council as the Chair of its telecommunications working group. He was the commissioner and senior member of the Federal Communications Commission and has been an industry and government leader on a multitude of complex issues in the communications field throughout

Sitnasuak Native Corporation

Stantec

Giovanna Gambardella joins Stantec as a Senior Architect in its Anchorage office. She has more than fourteen years of in-state industry experience and has worked on projects in Maine, Guam, Italy, and the Gambardella Netherlands. Gambardella is an award winning designer, graduated magna cum laude at the University of Architecture in Genova, Italy, and attended the Escola Tecnica Superior de Arquitectura in Barcelona, Spain.

Wells Fargo

Elaine Kroll was named Senior Treasury Specialist at Wells Fargo’s Alaska Commercial Banking Group. Kroll is a twenty-year Wells Fargo veteran, most recently serving as Anchorage community banking district manager. She is Kroll a recent graduate of the Pacific Coast Banking School. Kroll holds a bachelor’s

in business administration from State University of New York Fredonia College. Nate Stogsdill was named Senior Commercial Real Estate Industry Specialist. Stogsdill has fourteen years of financial services experience, including seven years with Wells Fargo in Alaska. He was a business banking spe- Stogsdill cialist and relationship manager for six years in Anchorage.

Matanuska-Susitna Borough

Kirsten Vesel is the MatanuskaSusitna Borough’s new Animal Care Manager. Vesel was a state commissioner for Serve Alaska, the State Service Commission, for eight years. She developed and ran her own company, the Vesel Vesel Group LLC, in Anchorage and Seward providing administrative support for municipalities and nonprofits.

PDC Inc. Engineers

Matt Stone, PE, was promoted as a Principal of PDC, Inc. Engineers. Stone joined PDC in 2002 and has seventeen years of civil engineering and management experience. He has managed the civil department since 2012 and took Stone responsibility for PDC’s business development endeavors this year. Stone is on the Advisory Board of the University of Alaska Fairbanks Civil and Environmental Engineering Department. Craig Knight, PLS, was selected as an Associate to PDC’s leadership team. Knight has more than twenty-three years of experience in surveying, engineering, and GIS and possesses a high degree of technical competence with Knight AutoCad, ArcGIS, and RTK GPS. Knight previously owned and operated a thirtyperson multi-office firm that provided GIS, CAD, and professional surveying services. R

We go the distance, so you can too. CONNECT WITH US / 800.727.2141 / www.nac.aero /

www.akbizmag.com Client/Project:#: NAC_15_0529_Delivered_atv

December 2015 | Alaska Business Monthly

87


INSIDE ALASKA BUSINESS

Compiled by Russ Slaten

communities today. She also provides an important template for policy makers, rural communities, and developing countries struggling to develop their own twentyfirst century infrastructure. Connecting Alaskans is available on Amazon.

N

Connecting Alaskans

A

laska is now open to civilization.” With those six words in 1900, the northernmost territory finally had a connection with the rest of the country. The telegraph system put in place by the US Army Signal Corps heralded the start of Alaska’s communication network. Yet, as hopeful as that message was, Alaska faced decades of infrastructure challenges as remote locations, extreme weather, and massive distances all contributed to less-thanideal conditions for establishing reliable telecommunications. In Connecting Alaskans: Telecommunications in Alaska from Telegraph to Broadband, Heather E. Hudson tells the unique history of providing radio, television, phone, and Internet services to more than six hundred thousand square miles. Hudson covers more than a century of successes while clearly explaining the connection problems still faced by remote

USDA

early $1.5 million of the US Department of Agriculture High Energy Cost Grant program went to three Alaska recipients to help reduce energy costs for residents in ten remote rural communities where the cost of producing electricity is extremely high. Alaska Native Tribal Health Consortium received $426,916 to retrofit sanitation systems and train operators in the eight communities of Napaskiak, Nunapitchuk, Chefornak, Nightmute, Tuntutuliak, Newtok, Teller, and Tununak. Puvurnaq Power Company received $857,920 to integrate a two hundred kilowatt lithium ion-based battery energy storage system into the wind-diesel power system in Kongiganak. Ipnatchiaq Electric Utility received $175,071 to bring electricians to Deering for five weeks; replace three deteriorated poles; replace insulator caps; repair the distribution system; and train staff at the utility to operate and maintain the system.

S

Span Alaska Transportation

pan Alaska Transportation, a leading provider of freight and logistics management services for the Alaska market, has acquired Pacific Alaska Freightways. The two companies have nearly one hundred years of combined experience in the logistics industry and Span Alaska will now be the largest less than truckload freight forwarder serving Alaska. Customers of both

companies will have access to expanded service offerings, as well as faster and more direct service to more locations. After the acquisition Span Alaska will ship more than 400 million pounds of freight annually to Alaska, Hawaii, and Puerto Rico, and will employ more than 220 people.

Everts Air Cargo

F

or ten years Zero Gravity Corporation has been operating commercial weightless flights in a specially modified Boeing-727 aircraft, known as G-FORCE ONE. Everts Air Cargo will manage aircraft operations and assist ZERO-G as they continue to “go weightless” across the United States.

P

PDC Inc. Engineers

DC Inc. Engineers, an Anchoragebased multi-discipline engineering, planning, and survey consulting firm, opened a new office in Soldotna at the corner of East Corral Street and the Kenai Spur Highway. The locally staffed branch office at 170 E Corral Street brings the backing of an eighty-five person engineering firm to the Kenai Peninsula.

Millrock Resources, Inc.

M

illrock Resources, Inc. entered into an agreement under which it has been granted the option to purchase the former-producing Apex El Nido gold mine, located about seventy miles southwest of Jueanu on Chichagoff Island near the village of Pelican, from property owner, Apex El Nido Gold Mines, Inc. The option is exercisable until August 1, 2018, and can be maintained by making annual payments of $1,000 per year and by paying the annual federal claim rentals on behalf of the owner, totaling $4,500 per year. Millrock intends to review existing data and the drilling plan developed previously by Echo Bay

Your Project, Our Responsibility. 24/7 Service Pacific Pile & Marine has a robust fleet of marine equipment including our recent addition of a 600-Ton 4600 Ringer.

www.pacificpile.com I (907) 276-3878 276-3873 88

From critical lifts to platform support, PPM is sufficiently resourced to deliver a wide range of construction services. 620B East Whitney Road I Anchorage, AK 99501

Alaska Business Monthly | December 2015www.akbizmag.com


INSIDE ALASKA BUSINESS Mines, formulate its own exploration plan, seek joint venture partners to drill and delineate the deposit, and further develop the mine if warranted.

G

GCI

CI has selected the Tektronix Medius Video Quality Monitor along with Sentry Edge monitors to help ensure the best viewing experience possible for its customers. When network problems such as video or audio interruptions occur, Medius gives call center operators a single interface for consolidated status alerts across GCI’s network. Based on the success with the Medius deployment in Anchorage, GCI now has plans to deploy Medius and Sentry systems in Juneau and Fairbanks.

A

Adventure Flow

dventure Flow, a tour group based in Juneau, has adapted its adventure sailing and walking tours to offer tours throughout the entire winter season. Adventure sailing tours range from three to nine days with a completely customizable adventure level, including skiing if desired. For a more low-key adventure, guests can sail aboard the Adventure Flow sailboats to embark on walking tours of Southeast Alaska communities, visiting natural hot springs, fishing, and enjoying gourmet cooking on the boat.

A

Alaskan Brewing Company

laskan Brewing Company teamed up with Juneau-based Heritage Coffee Roasting Co. to craft a new beer, Alaskan Heritage Coffee Brown Ale, which accentuates the richness of coffee and the smoothness of premium malts. Heritage Roasters worked with Alaskan Brewers, using Heri-

Compiled by Russ Slaten

tage’s signature Brazilian blend “Paixao” to find a blend that would bring out chocolate, caramel, and honey in the final beer, which was cold-brewed to reduce acidity. This cold-brewed coffee was added at multiple stages throughout the brewing process of the beer in order to infuse it with a deep and rich coffee flavor and aroma.

Northwest Strategies

T

iffany Tutiakoff recently purchased Northwest Strategies, a full-service advertising and public relations firm operating in Alaska since 1987. Tutiakoff joined Northwest Strategies in 2005 and was president for three years before purchasing the firm. The firm boasts a team of twenty-five employees and an agency profile that comprises some of the state’s largest businesses and organizations, including Alaska Regional Hospital, Spenard Builders Supply, the Hotel Captain Cook, and the Alaska Mental Health Trust Authority, along with national brands such as Verizon.

A

Odom Corporation

laskan Brewing Company switched distributor partners in the Seattle area to The Odom Corporation. Odom and Alaskan Brewing have the additional connection of both being family-founded businesses with a long history in the Pacific Northwest. Beer from Alaskan Brewing will receive wider distribution and be available at more tap handles in the Pacific Northwest.

F

First National Bank Alaska

irst National Bank Alaska opened its new Juneau Regional Branch located at 840 West 10th Street. The two-story, 7,854-square-foot branch features access to

services not previously available to downtown Juneau customers, including a 24/7 drive-up ATM and night drop, drive-up lane, free parking adjacent to the branch, and a full function kiosk in the lobby for fast, secure online banking. The new branch also offers a private area for safe deposit boxes and offices where customers may meet with bank officers.

T

Aleut Corporation

he Aleut Corporation has launched a new website, portofadak.com, showcasing the importance of the Port of Adak’s strategic location and unique capabilities. The deepwater, ice-free port is in close proximity to the Arctic, making it a vital tool for a diverse group of Alaska industries, which include transshipping, oilfield services, offshore companies, and fisheries. The Port of Adak website is the source of information for industry leaders. The new website is a testament to the bright future the Aleut Corporation envisions for the Port of Adak.

Alaska Communications

A

laska Communications is now offering SIP (Session Initiated Protocol) Trunking Service for IP connectivity to businesses in Fairbanks, Juneau, and select areas of Kenai. Alaska Communications launched SIP Trunking Service in Anchorage this March and has since installed several hundred lines for Alaska Native corporations, healthcare providers, travel and logistics companies, oil and gas producers, and one of the state’s leading financial institutions. Customers get advanced calling features such as simultaneous ringing, call forwarding, a Web interface, and more. Additionally, Alaska Communications further advances its IT security offerings and has achieved Gold Partner status with WatchGuard Technologies. As Watch-

Your Project, Our Responsibility. 24/7 Service

Pacific Pile & Marine has a robust fleet of marine equipment including our recent addition of a 600-Ton 4600 Ringer.

www.pacificpile.com I (907) 276-3878 276-3873 www.akbizmag.com

From critical lifts to platform support, PPM is sufficiently resourced to deliver a wide range of construction services. 620B East Whitney Road I Anchorage, AK 99501 December 2015 | Alaska Business Monthly

89


INSIDE ALASKA BUSINESS Guard’s only Gold Partner in the state, Alaska Communications provides Unified Threat Management, which covers network firewalling, intrusion detection, anti-virus, anti-spam, virtual private networking, content filtering, and more. The technology provides an all-inclusive security product able to perform multiple functions within a single system.

T

Alutiiq Museum and Kodiak Brown Bear Center

he Alutiiq Museum and the Kodiak Brown Bear Center, both located on Kodiak Island, have formed a partnership to offer more in-depth experience with Alutiiq culture. Benefits will include a oneyear membership to Alutiiq Museum for all guests of the Kodiak Brown Bear Center; a special advisor from the museum to help the center incorporate Alutiiq culture into capital projects; Alutiiq artwork displayed in the center’s guest cabins; 20 percent discount to the Kodiak Brown Bear Center for museum donors; “Alutiiq Week” at the center that will include museum staff, artists, archeologists, and more; a special package at the Kodiak Brown Bear Center designed for visitors interested in learning more about the Alutiiq people; and discounts to the center for museum staff.

T

RCA

he Railbelt utilities jointly submitted a letter to the Regulatory Commission of Alaska summarizing progress on their voluntary efforts to evaluate a business model whereby the operation, maintenance, and upgrades of the Railbelt transmission network are accomplished by a transmission company to enhance the reliable delivery of electric power to Railbelt customers. Join-

Compiled by Russ Slaten

ing the Railbelt utilities is American Transmission Company, a Wisconsin-based transmission-only utility formed through a similar effort in 2001 in the Midwest. The utilities will provide an additional update to the Regulatory Commission of Alaska by year-end.

C

ConocoPhillips Alaska, Inc.

onocoPhillips Alaska, Inc. began producing oil at Kuparuk Drill Site 2S in October, under budget and ahead of schedule. The Drill Site 2S project includes fourteen new development wells, a new gravel road, and new drilling pad capable of handling twenty-four wells, power lines, pipelines, and other new surface facilities. The $475 million project created about 250 jobs during construction and is expected to add about eight thousand barrels of oil per day at peak production. The project was approved for funding in October 2014, and production was originally expected in December. Drilling is ongoing on the fourth 2S well.

N

Ulta Beauty

ational retailer Ulta Beauty opened a new store in Anchorage at Dimond Center. The store features twenty thousand beauty products across 550 brands, as well as a full-service salon. Ulta Beauty offers cosmetics, skin care, bath/body, hair care, and men’s products.

E

Elfin Cove Resort

lfin Cove Resort, a haven for anyone looking for an escape to a secluded spot surrounded by the pristine waters of Southeast Alaska, recently expanded to include a main lodge with five guest rooms, a more private two-bedroom chalet, a

three-bedroom beach house, and the sixbedroom Fishmaster’s Inn that includes its own kitchen, a dining area, and a wraparound deck.

A

AT&T

T&T launched HD Voice in Anchorage, allowing customers to experience crystal clear conversations while simultaneously surfing the Web at 4G LTE speeds. Voice Over LTE is the all-Internet Protocol network technology that enables HD Voice from AT&T, which also enables the ability to talk while surfing the web.

D

Doyon, Limited

oyon, Limited has acquired designDATA, a leading IT Managed Services provider with offices in Maryland, Washington, D.C., and North Carolina. designDATA’s vHOST data center operations provides clients with a secure, scalable, and highly available platform for hosting critical applications and data services. designDATA will operate as a wholly-owned subsidiary of Doyon Government Group, and it will continue to be led by founder Dennis Ruck, CEO; Matt Ruck, Vice President; and TJ Rainsford, Vice President and Chief Information Officer.

Alaska Structures, Inc.

A

laska Structures, Inc. completed a contract for 365 new and improved US Air Force Medium Shelter Systems. The contract, valued at more than $15 million, was finished on time and on budget. Alaska Structures has provided American-made military shelters and environmental control units to the United States and Coalition Forces for operations around the world since 1999. R

• General Contracting • Marine Infrastructure • Design Build

Dutch Harbor - Unalaska, Alaska

www.pacificpile.com I (907) 276-3873 90

620B East Whitney Road I Anchorage, AK 99501

Alaska Business Monthly | December 2015www.akbizmag.com


AGENDA

Compiled By Tasha Anderson

December BIA25: Tribal Providers Conference

n

December 1-4—Dena’ina Center, Anchorage: The conference provides attendees with the opportunity to be informed and prepare for upcoming challenges in Alaska, as well as the opportunity for tribal leaders, native corporations, and rural representatives to connect with federal agencies. biaprovidersconference.com

Alaska Peony Growers Association Winter Conference

n

ALASBO Annual Conference

n

December 6-9—Hotel Captain Cook, Anchorage: Annual conference of the Alaska Association of School Business Officials. alasbo.org

Alaska Statewide Special Education Conference

n

ASCE Regions 8 & 9 Leadership Conference

n

January 22-23—Hilton Anchorage: The conference includes the Workshop for Section and Branch Leaders, the Western Region Younger Member Council, and the Workshop for Student Chapter Leaders. asce.org/Conferences January 23-24—Dena’ina Center, Anchorage: The theme this year is Integrating Behavior and Academics Into A Seamless Multi-Tiered System of Supports. Invited presenters included Dr. Louisa Moats, Nicole Frazier (Engaged Classrooms), Tom Hierck (Visible Learning for School Leaders) Karen Karp, Tricia Skyles, Anita Archer and many others. asdn.org/2015-alaska-rti-conference

n

January 25-29—Hotel Captain Cook, Anchorage: Scientists, researchers, and students from Alaska, the Pacific Northwest, and beyond come to communicate research activities in the marine regions off Alaska. amss.nprb.org

Anchorage AEYC Early Childhood Conference

n

January 27-30—Hilton Anchorage: “Our Children, Our Families, Our Community: Building Resiliency.” Join other early childhood community members to learn new strategies, hear about the latest research, try out a few practical techniques, and discover new tools and resources to help face any challenge. anchorageaeyc.org January 28—Dena’ina Center, Anchorage: Three new Alaskans will be inducted as Business Hall of Fame Laureates and recognized with this prestigious award. Attended by over four hundred business representations, the program consists of a networking

www.akbizmag.com

February 19-20—Sheraton Hotel, Anchorage: The annual meeting of the Alaska Dental Society, which is “Committed to enhancing the dental profession and the health of all Alaskans.” akdental.org February 20-23—Hotel Captain Cook, Anchorage: This is the educational technology conference of the Alaska Society for Technology in Education. This years’ them is “What if: It is Possible.” aste.org

Sustainable Agriculture Conference

n

February 23-25—The Lakefront Anchorage: This conference is held every year and brings together farmers, ranchers, researchers, Extension agents, and members of the agriculture support industry to learn from one another and to find ways to improve the agriculture industry in Alaska. uaf.edu/ces/ah/sare/conference

March 2016 Alaska Anthropological Association Annual Meeting

n

March 2-6—Sitka Fine Arts Camp, Sitka: The annual meeting includes workshops,

March 12-18—University of Alaska Fairbanks: Arctic Science Summit Week is the annual gathering of international organizations involved in Arctic research. assw2016.org/about

AFCCA Annual Child Care Conference

n

March 26—BP Energy Center, Anchorage: The conference includes seven hours of training, and lunch is provided. alaskafcca.org

April 2016 ASRT Annual Meeting and Educational Conference

n

April 8-9—Westmark Fairbanks: This annual event offers a single location for companies as well as Imaging Specialists from all modalities to network with the largest captive audience in Alaska. aksrt.com

Alaska Native Studies Conference

n

April 15-16—University of Alaska Anchorage: This year’s theme is “Wellness & Healing: Indigenous Innovations & Alaska Native Research.” alaskanativestudies.org

AWWMA Annual Statewide Conference

n

ASTE Annual Conference

n

Junior Achievement of Alaska Awards Banquet

n

February 8-12—Dena’ina Center, Anchorage: The Alaska Forum on the Environment is Alaska’s largest statewide gathering of environmental professionals from government agencies, non-profit and for-profit businesses, community leaders, Alaskan youth, conservationists, biologists, and community elders. akforum.com

March 10-13—Westmark Hotel, Fairbanks: AkLA is a nonprofit professional organization for the employees, volunteers, and advocates at academic, public, school, and special libraries of all sizes in Alaska, as well as library products and services vendors. akla.org/fairbanks2016

Arctic Science Summit Week

n

ADS Annual Meeting

n

Alaska Marine Science Symposium

n

February 6-12—Hilton Anchorage: The Alaska Statewide Special Education Conference (ASSEC) is committed to providing high quality professional development relevant to the cultural, rural, and remote characteristics of our great state. assec.org

Alaska Forum on the Environment

Alaska RTI Conference

n

February 2-4—Hotel Captain Cook, Anchorage: The 2016 summit tracks will be policy and advocacy, social and economic determinants of health, interdisciplinary and partnerships, research and evaluation, and health promotion/communication/ education. alaskapublichealth.org

an evening reception for information and registration, paper presentations, and an awards banquet, business meeting, and the Belzoni meeting. alaskaanthropology.org

Alaska Library Association Annual Conference

n

Health Summit

n

Meet Alaska Conference

January 8—Dena’ina Center, Anchorage: Hosted by the Alliance, this is the largest one-day energy conference in Alaska and includes educational forums and a tradeshow. alaskaalliance.com

January 29-30—The Alaska Peony Growers Association is a membership organization comprised of commercial peony growers as well as those interested in the emerging peony industry in Alaska. alaskapeonies.org

February 2016

January 2016

n

reception, dinner, and awards ceremony. juniorachievement.org

April 18-21—Anchorage: This is a venue for to bring information, technology, expertise, curiosity, hunger, and thirst (for refreshment and knowledge) to the Water and Wastewater Industry Professionals in Alaska. awwma.org

NEA Alaska Spring Conference

n

April 22-24—NEA Alaska, an affiliate of the National Education Association, is an organization with over twelve thousand members who work in Alaska’s public schools. neaalaska.org

Rural Energy Conference

n

April 26-28—Westmark Fairbanks: The Alaska Rural Energy Conference is a three day event offering a large variety of technical sessions covering new and ongoing energy projects in Alaska, as well as new technologies and needs for Alaska’s remote communities. alaskarenewableenergy.org

December 2015 | Alaska Business Monthly

91


ALASKA THIS MONTH By Tasha Anderson

DINING

Photo courtesy The Salvation Army Alaska Division

The Salvation Army Older Alaskans Program

Modern Boutique.

CLASSIC CHARM.

Exquisitely restored in the heart of downtown, the Historic Anchorage Hotel offers superior service and luxury accommodations in a boutique setting – at a price you can afford. Its remodeled banquet spaces can accommodate 150.

An Older Alaskans Program driver loads his truck with meal deliveries. 330 E Street, Anchorage, Alaska 99501 | 907-272-4553 • 800-544-0988

www.HistoricAnchorageHotel.com

HIS012 ABM Print Ad_V7.indd 1

8/30/12

AvisAlaska.com

RENT. LEASE. BUY. 92

S

ince 1965 The Salvation Army Older Alaskans Program has offered a wide variety of services that help support frail seniors and those with disabilities over the age of sixty in maintaining an independent lifestyle as they age in their own 1:38 PM homes,” says Older Alaskans Program Director Debbie Comiskey. In addition to providing transportation and homemaker services, one of the major components of this program is to deliver meals to homebound people. “Without this program many older Alaskan seniors would go hungry in our community,” Comiskey says. “For some of our clients this is the only meal of the day they will eat; they depend on us daily.” To get a sense of the scope of the program, between July 2014 and June of this year the program delivered 110,000 meals. In a month, the program on average will distribute 9,000 meals to a range of 350 to 550 clients. The meals are delivered either chilled or frozen: chilled for weekday meals and frozen if the client qualifies for weekend meals, Comiskey says. Both chilled and frozen meals can be reheated in a microwave or oven. “Each meal also gets a daily newspaper, a carton of milk, and the side dishes that may accompany the entrée,” she says. For those who would like to contribute, since these meals are prepared in large batches, bulk items such as flour, sugar, corn starch, brown and white rice, and whole wheat pasta work well for donation. In addition, with the Christmas season approaching, ham, turkey, or assorted pies would be appreciated. Also, caring volunteers are always welcome to participate in the program, as are monetary donations. “The heart of the Older Alaskans Program is a desire to respond to the practical needs of Alaska’s growing senior population,” Comiskey says, and she points out this is outlined in the program’s mission statement: Improving the physical, emotional, and spiritual health and quality of life for older Alaskans. salvationarmyalaska.org/alaska/older_alaskans_programsR

Alaska Business Monthly | December 2015www.akbizmag.com


ALASKA THIS MONTH By Tasha Anderson

ENTERTAINMENT

Anchorage International Film Festival The festival’s 2015 poster, a sweater with mountain imagery and the Anchorage skyline, is a nod to its tagline “Films Worth Freezing For.” Image courtesy the Anchorage International Film Festival

T

his year the Anchorage International Film Festival is December 4 through 13. For 2015, the Anchorage International Film Festival is maintaining its mission to “develop, promote, and sustain a film festival that supports new media and independent film making in Alaska and around the world while enriching cultural and entertainment opportunities for Alaskans.” Festival Director Rebecca Pottebaum says the festival has a new executive team this year and is adding a fourth venue, the Snow Goose Performing Arts Theatre. The other three venues are the Beartooth Theatre Pub, the Anchorage Museum, and the Alaska Experience Theater. The tagline is “Films Worth Freezing For.” The films cover a variety of subjects and genres and fall into several categories: features, documentaries, shorts, animation, and Made in Alaska. “The Made in Alaska category showcases films shot primarily in Alaska or with a crew of mostly Alaskans,” Pottebaum says. Pottebaum says that at the Anchorage International Film Festival, the drive is to provide the best experience possible for the audience. “We are not an industry-driven festival—we don’t have distributors trying to buy films here, just film-lovers—we are audience-based. So, to give our audiences the best experience, we invite the best films, and whenever possible, will help filmmakers make the trip to Alaska,” she says. Pottebaum is particularly excited about Eadweard, the festival’s opening night film, which is described as, “The true story of worldfamous, turn-of-the-century photographer Eadweard Muybridge who discovered how to capture the theory of motion on film with his famous Stanford Horse Gaits photographs.” In addition, she says, “I’m also really looking forward to a very unique film we’ll have on opening weekend Sunday, which is a very early example of a Sci-Fi film from 1929.” anchoragefilmfestival.org R www.akbizmag.com

Alaskans serving Alaskans. Oxford is proud to be the only gold refiner and bullion dealer to maintain two locations in Alaska for more than 35 years. BUY : SELL : TRADE • ANCHORAGE • FAIRBANKS • NOME • NEW YORK

1.800.693.6740 www.oxfordmetals.com

EAT 

SHOP  PLAY 

STAY 

Coming in January 2016! Eat, Shop, Play, Stay is Alaska Business Monthly’s exciting new section replacing Alaska This Month. Contact our advertising team for details 907-276-4373 December 2015 | Alaska Business Monthly

93


EVENTS CALENDAR ANCHORAGE

Compiled by Tasha Anderson HAINES

18-27 A Christmas Carol This holiday season, witness Ebenezer Scrooge’s miraculous Christmas Eve transformation in a new adaptation by Arlitia Jones and Michael Haney. Ebenezer Scrooge is a greedy businessman, with no place in his life for kindness, compassion, or charity. When Scrooge is visited by four ghosts, he is warned to change his ways or face a miserable afterlife. Discovery Theatre, 3 p.m. or 7:30 p.m. ptalaska.org

11-12 Community Christmas Celebration This celebration has activities for all ages: enter a treat in the candy/ cookie contest, write a letter to Santa and get a picture with the man in the red suit, visit Mrs. Claus at the Public Library for stories and songs, stop by the Museum to see the trains, and get an early start on holiday shopping. haineschamber.org

19 Christmas Village Christmas Village is one the newest holiday shows in Alaska, the perfect time to buy all of those wanted last-minute gifts. Christmas Village allows both Alaskan-made and imported items to be sold at the show. Dena’ina Center, 10 a.m. to 6 p.m. anchoragemarkets.com

4 Christmas Tree Lighting Join the Homer Chamber of Commerce & Visitor Center for hot cocoa and cider, caroling and cookies, and of course the lighting of the Christmas Tree, as well as a visit from Santa Clause. Homer Chamber of Commerce & Visitor Center, 5 p.m. to 7 p.m. homeralaska.org

31 New Year’s Eve Celebration Anchorage’s New Year’s Eve celebration is a fun, family friendly, free event. The night will feature musicians, street performers, food vendors, and 3D light projections. Town Square, 5 p.m. to 8 p.m. anchoragedowntown.org

CHATANIKA

18-19 Christmas Party for Children This is a festive holiday party for children. The party on December 18 is specifically geared toward children with disabilities. A free buffet and gift will be available for every child, and Santa will arrive on both nights. Chatanika Lodge, 6:30 p.m. Call 907-389-2164 for information.

FAIRBANKS

4 Nutcracker Ballet This is the annual presentation of the classic Nutcracker Ballet by North Star Ballet. Lathrop High School Hering Auditorium. thenorthstarballet.org 4-20 A Christmas Carol Fairbanks Drama presents this classic story as adapted by Romulus Linney and directed by Steve Mitchell. Hap Ryder Riverfront Theatre: Friday and Saturday Nights 7:30 p.m., Sundays 2 p.m. fairbanksdrama.org 6 Design Alaska Holiday Concert The Design Alaska Holiday Concert features Eduard Zilberkant conducting the Fairbanks Symphony Orchestra, the Fairbanks Symphony Chorus, and the Fairbanks Symphony Children’s Chorus, and will treat guests with traditional holiday favorites. UAF Davis Concert Hall, 4 p.m. fairbankssymphony.org 12 Mushing Madness Sponsored by the Junior Dog Mushers of Interior Alaska, this is less formal opportunity for young mushers ages two through eighteen to enjoy dog mushing without the pressure of racing. Mushing Madness will also include a potluck lunch and a speaker. Jeff Studdert Racegrounds. juniordogmushers.com 19 Celebration of Lights Downtown Fairbanks comes alive around solstice to herald the return of the light, featuring brilliant fireworks that can’t be seen in the summer time. Watch for musical and artistic events downtown and shop for made-in-Alaska items. Visit Golden Heart Plaza to see holiday decorations and light posts enamored with charming, lit-up snowflakes. Downtown Fairbanks. downtownfairbanks.com 94

HOMER

JUNEAU

11-20 Amahl and the Night Visitors Amahl and the Night Visitors tells the story of how a crippled, young shepherd boy’s life changes forever when he sees an amazing star “as big as a window.” When three foreign kings following the star in their search for a wondrous child encounter Amahl and his mother, the result is a timeless and inspiring message of how faith, charity, unselfish love, and good deeds can work miracles. McPhetres Hall Theatre. juneauopera.org

NORTH POLE

5 North Pole Winter Festival Activities at the festival include fireworks, a holiday bazaar, tree- and candle-lighting ceremonies, caroling, and crowning the North Pole King and Queen. northpolechamber.us

PALMER

11-13 Colony Christmas Colony Christmas is an old-fashioned country Christmas celebration with craft fairs, horse-drawn and reindeer sleigh rides, pictures with Santa, fireworks, and a parade on December 12. Downtown Palmer. palmerchamber.org

SITKA

11-13 Sitka Artisans Market & Holiday Craft Party This seasonal celebration combines two long standing events, the artisans market (a juried market of approximately thirty-five vendors) and the craft party where all ages can make fish prints, holiday cards and ornaments, gingerbread houses, and more. Allen Hall, Fine Arts Campus: Friday 4 p.m. to 7:30 p.m., Saturday 10 a.m. to 5 p.m., and Sunday 11 a.m. to 3 p.m. thinkartthinksitka.com

SKAGWAY

4-5, 12 Yuletide Major events of Yuletide include the tree lighting, robotics club demo, concert, wine tasting fundraiser, Santa train, and the Yuletide Ball. skagway.com

WASILLA

11-12 Waltz of the Fireweed This holiday classic, brought to you by Sonja’s Studio of Dance, will take on a truly Alaskan twist. Come celebrate the season with the sights and sounds of the magical Alaskan Nutcracker. Glenn Massay Theater: Friday at 7 p.m. and Saturday at 2 p.m. and 7 p.m. glennmassaytheater.com

Alaska Business Monthly | December 2015www.akbizmag.com


ALASKA TRENDS

A

By Iuliia Chepurko

The Ballooning Cost of Healthcare in Alaska

challenging dichotomy exists in Healthcare Expenses Per Capita, 2013 Alaska: the healthcare industry is one of the state’s largest employers, Belgium 4,256 but at the same time, healthcare is one of the largest expenses for many people. Canada 4,351 In 2009, residents of the Last Frontier Austria 4,553 spent 19.1 percent of their income on medDenmark 4,553 ical bills, more than the residents of forty other states. The highest share of income Germany 4,819 spent on healthcare was West Virginia at Sweden 4,904 24.4 percent, followed by Maine with 23.3 5,131 percent and Mississippi with 21.8 percent Netherlands (see Figure 1). Norway 5,862 Since 2009, the most recent year for Switzerland 6,325 which state-by-state data is available, the situation has likely worsened after taking United States 8,713 into account the inflation rate in health0 2,000 4,000 6,000 8,000 10,000 care spending. Prices for healthcare services on average grow 2.4 times faster The Organisation for Economic Co-op- largest healthcare expense in the world, equal than prices of consumer goods. From eration and Development tracks informa- to $7,691 per capita. The same year Alaska 2002 to 2009, healthcare inflation was 6.8 tion on healthcare expenses in different had annual healthcare expenses per capita percent per year, while general inflation countries on an annual basis. Based on equal to $9,128. This means Alaska is one of was 2.8 percent. the last release in 2013, the United States the most expensive states for healthcare withThese numbers are lower at the national was ranked the first in the world for ex- in one of the most expensive countries. R level, but there is a tendency for health- penses, followed by Switzerland, Norway, care costs to increase faster than general Netherlands, and Sweden. Alaska Trends, an outline of significant prices. Following the declining inflation State level information is only current statewide statistics, is provided by the rate in Alaska the past five years, there through 2009, so it is useful to compare naUniversity of Alaska Center for Economic may be a decrease in inflation for health- tional, state, and international levels from Development. care as well. that year. In 2009 the United States had the

ALASKA TRENDS HAS BEEN BROUGHT TO YOU THIS MONTH COURTESY OF AMERICAN MARINE/PENCO AMERICAN MARINE • Marine Construction/Dredging • Subsea Cable Installation & Maintenance • Commercial Diving • Platform & Pipeline Construction, Installation, Repair & Decommissioning • Underwater Certified Welding • Marine Salvage • NDT Services • ROV Services • Vessel Support Services PENCO • Environmental Response/Containment • Site Support Technicians/Maintenance • Waste Management/Environmental Monitoring • Tank Cleaning/Inspection • Petroleum Facility Maintenance & Repair • Logistics Support • 24-Hour Response

ANCHORAGE OFFICE 6000 A Street, Anchorage, Alaska 99518

(907) 562-5420

www.akbizmag.com

www.amarinecorp.com www.penco.org

Alaska I California I Hawaii DEADHORSE OFFICE Pouch 340079, Prudhoe Bay, AK 99734 (907) 659-9010 December 2015 | Alaska Business Monthly

95


ALASKA TRENDS

Indicator

By Iuliia Chepurko

Units

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

GENERAL Personal Income—Alaska US thousand $ 2stQ15 41,337 39,836 39,731 4.04% Personal Income—United States US thousand $ 2stQ15 15,200,429 15,100,011 14,603,925 4.08% Consumer Prices—Anchorage 1982-1984 = 100 1stH15 217.11 217.11 214.78 1.09% Consumer Prices—United States 1982-1984 = 100 1stH15 236.27 236.27 236.38 -0.05% Bankruptcies Alaska Total Number Filed August 35 39 35 0.00% Anchorage Total Number Filed August 26 30 26 0.00% Fairbanks Total Number Filed August 2 7 7 -71.43% EMPLOYMENT Alaska Thousands August 348.40 352.42 349.51 Anchorage & Mat-Su Thousands August 189.90 193.15 186.81 Fairbanks Thousands August 45.01 44.17 42.96 Southeast Thousands August 39.04 39.37 41.69 Gulf Coast Thousands August 39.77 40.07 40.88 Sectorial Distribution—Alaska Total Nonfarm Thousands August 358.30 363.30 359.90 Goods-Producing Thousands August 61.10 64.50 60.80 Mining and Logging Thousands August 18.30 18.30 18.80 Mining Thousands August 17.90 17.90 18.50 Oil & Gas Thousands August 15.20 15.20 15.30 Construction Thousands August 22.00 21.50 20.80 Manufacturing Thousands August 20.80 24.70 21.20 Seafood Processing Thousands August 16.60 20.10 17.00 Service-Providing Thousands August 297.20 298.80 299.10 Trade, Transportation, Utilities Thousands August 72.20 72.30 70.00 Wholesale Trade Thousands August 6.70 6.60 6.60 Retail Trade Thousands August 40.10 40.40 38.80 Food & Beverage Stores Thousands August 6.50 6.70 6.70 General Merchandise Stores Thousands August 10.30 10.20 10.30 Trans/Warehouse/Utilities Thousands August 25.40 25.30 24.60 Air Transportation Thousands August 6.80 6.80 6.40 Information Thousands August 6.20 6.30 6.30 Telecommunications Thousands August 4.40 4.40 4.20 Financial Activities Thousands August 12.10 12.30 12.60 Professional & Business Svcs Thousands August 29.40 30.10 31.50 Educational & Health Services Thousands August 47.20 47.40 46.80 Healthcare Thousands August 34.40 34.80 33.80 Leisure & Hospitality Thousands August 40.70 41.20 41.40 Accommodation Thousands August 12.00 12.20 11.90 Food Svcs & Drinking Places Thousands August 22.40 22.70 23.30 Other Services Thousands August 11.80 12.30 12.00 Government Thousands August 77.60 76.90 78.50 Federal Government Thousands August 15.50 15.70 15.30 State Government Thousands August 24.60 24.20 25.80 State Education Thousands August 6.40 5.70 6.60 Local Government Thousands August 37.50 37.00 37.40 Local Education Thousands August 18.20 17.10 18.20 Tribal Government Thousands August 4.10 4.10 4.10 Labor Force Alaska Thousands August 368.52 374.50 373.39 Anchorage & Mat-Su Thousands August 199.71 203.99 202.51 Fairbanks Thousands August 47.04 46.58 47.64 Southeast Thousands August 41.10 41.59 42.06 Gulf Coast Thousands August 42.14 42.57 41.90 Unemployment Rate Alaska Percent August 5.1 5.3 6.1 Anchorage & Mat-Su Percent August 4.9 5.3 5.4 Fairbanks Percent August 4.5 4.9 5.1 96

-0.32% 1.65% 4.77% -6.36% -2.72% -0.44% 0.49% -2.66% -3.24% -0.65% 5.77% -1.89% -2.35% -0.64% 3.14% 1.52% 3.35% -2.99% 0.00% 3.25% 6.25% -1.59% 4.76% -3.97% -6.67% 0.85% 1.78% -1.69% 0.84% -3.86% -1.67% -1.15% 1.31% -4.65% -3.03% 0.27% 0.00% 0.00% -1.31% -1.38% -1.26% -2.29% 0.56% -16.39% -9.26% -11.76%

Alaska Business Monthly | December 2015www.akbizmag.com


ALASKA TRENDS

Indicator

Southeast Gulf Coast United States

By Iuliia Chepurko

Units

Period

Latest Report Period

Percent Percent Percent

August August August

4.8 5.6 5.1

Previous Report Period (revised)

5.2 6.1 5.3

Year Ago Period

5.4 6.3 6.1

Year Over Year Change

-11.11% -11.11% -16.39%

PETROLEUM/MINING Crude Oil Production—Alaska Millions of Barrels August 12.6 13.9 12.3 2.44% Natural Gas Field Production—Alaska Billions of Cubic Ft. August 8.3 8.3 9.20 -10.08% ANS West Coast Average Spot Price $ per Barrel August 48.26 56.20 101.778 -52.59% Hughes Rig Count Alaska Active Rigs August 12 10 7 71.43% United States Active Rigs August 883 866 1904 -53.62% Gold Prices $ Per Troy Oz. August 1117.50 1130.81 1296.50 -13.81% Silver Prices $ Per Troy Oz. August 14.94 15.07 19.8 -24.55% Zinc Prices $ Per tonn August 1809.30 2001.30 2330 -22.35% REAL ESTATE Anchorage Building Permit Valuations Total Millions of $ August 53.2 31.7 59.7 Residential Millions of $ August 15.7 15.3 20.5 Commercial Millions of $ August 36.6 14.0 38.1 Government Millions of $ August .09 2.4 1.1 Deeds of Trust Recorded Anchorage—Recording District Total Deeds Data not available at press time. Fairbanks—Recording District Total Deeds Data not available at press time.

-10.90% -23.61% -3.86%

VISITOR INDUSTRY Total Air Passenger Traffic—Anchorage Thousands August 674.77 710.17 632.86 6.62% Total Air Passenger Traffic—Fairbanks Thousands August 124.10 127.40 127.45 -2.63% ALASKA PERMANENT FUND Equity Millions of $ August 51,128 52,887 51838.70 Assets Millions of $ August 52303.80 54016.30 52442.30 Net Income Millions of $ August 161.40 146.00 224.20 Net Income—Year to Date Millions of $ August -1791.10 43.40 769.10 Marketable Debt Securities Millions of $ August -70.10 29.50 11.23 Real Estate Investments Millions of $ August -46.50 13.10 5.92 Preferred and Common Stock Millions of $ August -1487.40 -4.70 20.72 BANKING (excludes interstate branches) Total Bank Assets—Alaska Cash & Balances Due Securities Net Loans and Leases Other Real Estate Owned Total Liabilities Total Bank Deposits—Alaska Noninterest-bearing deposits Interest- bearing deposits

Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $

2ndQ15 2ndQ15 2ndQ15 2ndQ15 2ndQ15 2ndQ15 2ndQ15 2ndQ15 2ndQ15

5,913.90 222.57 151.28 2,866.23 19.95 5,109.57 4,334.37 1,779.18 2,555.19

3,994.74 207.48 154.35 2,313.63 10.57 3,506.48 3,340.30 1,000.84 2,327.83

5,589.78 309.79 145.27 2,703.46 18.73 4,814.61 4,188.54 1,702.65 2,485.89

FOREIGN TRADE Value of the Dollar In Japanese Yen Yen August 123.26 123.27 102.92 In Canadian Dollars Canadian $ August 1.31 1.28 1.09 In British Pounds Pounds August 0.64 0.64 0.60 In European Monetary Unit Euro August 0.90 0.91 0.75 In Chinese Yuan Yuan August 6.33 6.11 6.16

-1.37% -0.26% -28.01% -332.88% -724.22% -885.47% -7278.57% 5.80% -28.15% 4.14% 6.02% 6.51% 6.13% 3.48% 4.49% 2.79%

19.76% 20.26% 7.19% 19.82% 2.74%

Note: Banking data has been updated to include Alaska State Banks and Alaska’s sole federally chartered, Alaska-based bank, First National Bank Alaska

www.akbizmag.com

December 2015 | Alaska Business Monthly

97


ADVERTISERS INDEX Advanced Physical Therapy of Alaska...............................................45

Bristol Bay Native Corp....................61

Fairweather LLC.................................47

Parker Smith & Feek..........................33

AE Solutions Alaska LLC...................21

C & R Pipe and Steel, Inc................. 34

GCI..............................................18, 100

PenAir....................................................19

California Coast University............48

Great Originals Inc.............................81

Personnel Plus.....................................93

Calista Corp.........................................63

Historic Anchorage Hotel............... 92

Plans Room.........................................70

Capitol Glass/ Northerm Windows.....................73

Ilisagvik College................................ 40

Ravn Alaska..........................................37

Carlile Transportation Systems.....5, 83

Implus Footware LLC........................27

Rhyneer Caylor Clinic......................42

Judy Patrick Photography............... 26

RSA Engineering Inc..........................65

Katmai Onocology Group................39

Span Alaska Transportation Inc..... 29

Little Caesar Enterprises Inc...........81

Spenard Builders Supply A Probuild Company...................64

Alaska Center For Dermatology...48 Anchorage Fracture & Orthopedic Clinic..........................41 Alaska Mergers & Acquisitions LLC............................75 Alaska Regional Hospital..................53 Alaska USA Federal Credit Union.. 77 Alaska USA Insurance Brokers.......79 American Marine / Penco................95 Arctic Office Products..................... 78 Argon Environmental Consulting...56

Ch2m Hill.............................................. 13 Chris Arend Photography...............98 Construction Machinery Industrial...........................................2 Cornerstone Advisors.......................25 Davis Block & Concrete...................70

Army/Navy Store............................. 80

Davis Constructors & Engineers Inc..................................65

ASRC Energy....................................... 17

Diamond Airport Parking................ 26

AT&T........................................................9

Donlin Gold.........................................20

Avis Rent-A-Car................................. 92

EDC Inc.................................................73

Blood Bank of Alaska....................... 99

Environmental Management Inc....56

Bowhead Transport Company LLC.................................59

Fairbanks Memorial Hospital......... 49

98

Lynden Inc............................................ 15 Magtec Energy....................................18 N C Machinery....................................71 North Star Behavioral Health......... 51 Northern Air Cargo....................86, 87 NRC Alaska..........................................55 Olgoonik Corp................................... 60 Oxford Assaying & Refining Inc.....93

Stellar Designs Inc..............................81 T. Rowe Price.......................................31 The Berry Company............................3 The Medallion Foundation Inc........35 Tutka LLC.............................................20 United Way of Alaska.......................14 Washington Crane & Hoist..............12

Pacific Pile & Marine.........88, 89, 90

Waste Management..........................23

Pairmore & Young Synergy Chiropractic...................43

Wells Fargo Bank Alaska.................. 11

Watterson Construction.................10

Alaska Business Monthly | December 2015www.akbizmag.com


KEEPING ALASKA PATIENTS SAFE SINCE 1962

Help Build a Better Future for Alaska Visit www.bloodbankofalaska.org and donate to the new building fund today

Ensure that the blood supply is available in times of disaster Keep patients closer to home during treatment Expand available services for Alaska patients

BLOOD BANK OF ALASKA IS A 501 (C)3 NON PROFIT CHARITY // MAIL TO: 4000 LAUREL ST. ANCHORAGE, AK 99508


Alaska Business Monthly December 2015  

Anchorage McDonald’s headquarters sits at the corner of Northern Lights Boulevard and Arctic Road in Midtown Anchorage. The arches of McDona...

Alaska Business Monthly December 2015  

Anchorage McDonald’s headquarters sits at the corner of Northern Lights Boulevard and Arctic Road in Midtown Anchorage. The arches of McDona...