Economy

Sealaska has lost some its California casino land to foreclosure. But the regional Native corporation says it won’t hinder the project.

Sealaska has been working for several years to build a hundred-million-dollar-plus hotel and casino project about 85 miles north of San Francisco. Its partner is the Cloverdale Rancheria, a Pomo Indian group.

It lost two acres to foreclosure this week. The corporation’s Rick Harris says it’s a small part of a 65-acre project. A recent study showed it was not needed.

“What we chose to do is try to negotiate a better price because the property wasn’t going to be used for casino property. The individual who owned it was not interested in any further discussion, so we felt that it was not necessary for the project. So we chose to let it go and it just goes through the normal structured foreclosure process,” Harris says.

Sealaska bought the two acres for $1.3 million, according to the Santa Rosa Press Democrat. The newspaper reports the corporation owed just under $1 million when it defaulted on the land and it reverted to the previous owner.

The Press Democrat, about 30 miles south of Cloverdale, has covered the casino extensively. Some residents strongly oppose the project, saying it would create too much traffic and change the town’s character.

Harris says any money lost in the foreclosure will ultimately be recovered.

” We did invest some initial purchase price on the property. But it’s included as part of the overall gaming project. And as Sealaska is repaid, we’ll cover our investment,” he says.

Sealaska’s 2010 financial report, issued earlier this year, shows gaming operations losing more than $7 million during the previous two years.

The same report also said the corporation moved to end some agreements with its tribal partners in Cloverdale. But Harris says the project continues.

“We have agreements with the tribe to go forward with how to secure the financing for the project. And based upon that financing, that will help chart the course for the future,” he says.

The corporation earlier invested about $15 million in a San Diego-area casino run by the San Pasqual Indian Band. It made a sizable profit from that investment.

Sealaska Regional Native Corporation owns about 25-thousand acres of subsurface mining rights in an area being contested by the City and Borough of Juneau and Petersburg.

The area includes Hobart Bay, where Juneau’s Native Corporation Goldbelt owns 30-thousand surface acres.

Sealaska Vice President Rick Harris says the company will follow Goldbelt’s lead in commenting on the dispute.

“We’ll support them in whatever way is necessary to achieve a result that’s best for Goldbelt’s shareholders and also our shareholders,” says Harris.

Juneau plans to file a competing petition to Petersburg’s proposed borough boundaries, which includes land previously slated for annexation to the CBJ.

So far, Goldbelt hasn’t expressed a preference for which borough, if any, the corporation’s land should be in. Earlier this month, Goldbelt Vice President Derek Duncan sent a letter to the state’s Local Boundary Commission saying it would make a statement in the near future.

Harris says sand rock and gravel are quite prevalent in Hobart Bay, and that some precious metals are nearby.

“We don’t believe that it’s on our property,” Harris says. “We think that if there’s any precious metals, they’re actually to the north of our property.”

October 26th is the deadline to submit competing petitions and opposing briefs to the state’s Local Boundary Commission on Petersburg’s proposed borough.

The CBJ Assembly plans to introduce an ordinance Monday to make its petition official.

About 5,500 Permanent Fund Dividends are being recalled.

The PFDs were sent out in error. Approximately 3,600 were deposited directly into bank accounts and 1,900 were sent out as paper checks.

PFD Division Director Deborah Bitney says employees didn’t match correct records in a new software program and dividends were paid to applicants instead of creditors.

The software is called “eGarns” and it’s being used for the first time this year.

“This affects only debts that are basically court ordered, like restitution, judgments for debts that are unpaid, things like that,” Bitney says.

It does not affect garnishments for child support, she says.

The division has requested that direct deposits be reversed and also has issued stop payment orders on the checks. Bitney says the error was discovered late Monday afternoon. While the total amount of the error isn’t available, it’s expected to be nearly $7 million.

Bitney says it’s important to get the word out about the error.

“You know, 99 percent of the dividends that went out are just fine,” she says. “This affects a very small subset of the population. We really are trying to help those people and we would like them to contact us as quickly as possible once they find out they are involved in this.”

Bitney says safeguards have been programmed into “eGarns” to prevent similar errors.

Nearly every Alaskan received $1,174 in this year’s PFD.

The Alaska Marine Highway System says the engines being used in their two fast ferries are defective and builders of the ships knew it when they delivered the ships only six years ago. But the ferries’ builders say it’s not their fault, and they shouldn’t be obligated to replace the engines when the warranty doesn’t cover it.

Judge Philip Pallenberg enters the courtroom lugging a stack of files and documents easily a foot high. He’s about to get handed a few more accordian folders that will extend that by several more inches.

“I think the state fired the opening salvo in this naval battle,” said Pallenberg. “So, I think the state should go first.”

October 7th’s skirmish in Juneau Superior Court was over the engines installed in the state’s fast ferries Fairweather and Chenega, relatively new ships with diesel-powered jet drives that push the catamarans at a nice 32-knot clip. That’s about twice the speed of the ferry system’s standard mono hulls.

State attorney Dana Burke is leading the attack for the ferry system. But he runs out of time during oral arguments to carefully cite excerpts of contract documents and internal memos. Burke says manufacturers of the fast ferries knew the engines were defective, almost as soon as they were installed. He said they breached warranties that called for repairs and – if necessary – replacement of the engines. For both ships, all eight engines have been valued at $20 million.

“And we cannot wait,” said Burke. He said both the Fairweather and Chenega are in danger of being decertified from passenger service in the very near future.

Burke wants the ship and engine builders’ liability extended to the engines’ defects, especially when they admitted to using the wrong kind of coolant (that accelerated corrosion in the engines).

Burke said that MTU instructed the state to stop using Power Cool 3000 because it might degrade a layer of molybdenum in the crank case cylinder bores.

David McMahon representing Robert Derecktor Incorporated said the state was not entitled to any more rights after expiration of a standard year-and-a-half warranty.

“These two vessels have been operated on an uninterrupted basis since they went into operation,” said Burke.

But Derecktor Shipyard is only one of the parties in the state’s lawsuit. The state’s real target is MTU Friedrichshafen and MTU Detroit Diesel, the German company that built the engines and the American company that did the subsequent repairs.

Jon Dawson, who has already been prepared for a response, said they already have a potential repair of an interstitial ring that they’ve been trying to install.

“Scare mongering and hyperbole aside, the principle issue in this case involves only one component of these engines: the engine block,” said Dawson.

Dawson said there are clear factual issues at what caused the faster-than-expected deteroriation; instead of the coolant – perhaps the Alaska environment, improper maintanence by ferry crews, even excessive vibration caused by a misaligned installation by the shipyard.

“You can’t wave a wand and resolve this wear issue when you don’t know what’s causing it,” said Dawson.

Dawson also says the engine warranty was assigned to Derecktor – the general contractor, not the final buyer of the vessels, or in this case, the state ferry system. And it did not include replacement of the entire engine, beyond the engine block.

But the plantiffs always have the last word in any courtroom argument.

“Something’s wrong with these engines. They’re lemons,” said Burke. “These were defective beyond delivery and someone is responsible.”

October 7th’s hour-and-twenty minute oral arguments focused not on any factual disputes, but primarily arcane and esoteric interpretations of liability and warranty law. It will be sometime before Judge Philip Pallenberg issues an opinion.

The Juneau Airport’s two-and-a-half-year terminal renovation project is coming to a close – a year later than expected and more than a million dollars over the original price tag.

Airport Architect Catherine Fritz says all that’s left to do is to go through the final punch list and pay McGraw Custom Construction the final 90-thousand dollars of its contract.

The work ended up costing just under 11.2-million dollars, up from the original estimate of 10.1-million. Fritz says unforeseen conditions exposed during construction and design errors contributed to the increase. But the airport also requested additional work not included in the original plans. For example, renovation of the departure lounge.

“Because of the timeliness and the integral nature of other work in the departure lounge that was in the contract, we were able to use existing contractor and subcontractors to accomplish work that wasn’t originally in the scope,” says Fritz.

She says McGraw was able to utilize surplus materials, saving money on the departure lounge work.

Renovations began in May 2009 and included adding about 10-thousand square feet to the terminal building, modernizing the baggage claim area, and a new down escalator for passengers arriving at the airport. Fritz says a geothermal heat pump system installed during construction has already reduced operating costs.

“The energy efficiency improvements were significant, but we also modernized a lot of our facility for the convenience and expectation of travelers,” she says.

The City and Borough of Juneau owns the airport, so about half of the project was paid for with local sales tax revenue. The rest came from state and federal grants.

Over the next two weeks, City and Borough of Juneau Engineering Director Rorie Watt will hold a series of informational meetings on the AJ Mine.

Starting tomorrow (Thursday), four sessions will be held to talk about the history of the old mine and the city’s current consideration of reopening it. Then, a week from tomorrow (October 20th), Watt will host the first of two sessions described as an open discussion about the city’s water system study. The AJ ore body is located in Last Chance Basin, Juneau’s main source of drinking water.

On Monday, Watt told the CBJ Assembly Committee of the Whole that the meetings are designed to bring the public up to speed before the drinking water study gets underway.

“The intention is, if they’re new they can come to an introductory session and then come to a water session, or if they’ve been following it all along, come to a water session,” says Watt. “But just trying to open the doors and get as much input as possible.”

The city and borough owns two-thirds of the old AJ Mine and Alaska Electric Light and Power owns the rest.

Earlier this year, a committee appointed by Mayor Bruce Botelho produced a report that attempted to define under what circumstances, if any, the city should promote development of the mine. In August, the assembly created a 250-thousand dollar AJ Mine Capital Project Fund to pay for the water study and other work surrounding the effort.

All of the upcoming meetings will be held in the CBJ Engineering Conference Room on the 3rd floor of the Marine View Building. See the full schedule below:

Introduction to the AJ Mine:
October 13th – 12:00 noon
October 13th – 5:00 p.m.
October 19th – 12:00 noon
October 19th – 5:00 p.m.

AJ Mine Related Water Study:
October 20th – 5:00 p.m.
October 26th – 12:00 noon