Tom Boutin Statement Letter

    The decision to build a new office building for CBJ officials and employees is distinct from the
    decision to increase CBJ debt. No matter the decision on constructing a new downtown city
    building I urge all voters to vote NO on additional indebtedness.

    Nothing is forthright about this debt except that if it’s approved by voters the debt service must
    be paid in full by taxpayers. Debt approved by voters is a lien on all private real estate. Under
    the current plan the total debt service will be as much as $85 million. The debt would not be
    sold by CBJ to the public but instead sold to investment bankers who then resell the debt at a
    generous mark-up. Devices that waiver between bond discounts and bond premiums can add to
    the debt service without voter approval! Similarly, CBJ also plans to do a shuffle with the
    liability, not counting the debt with other city expenses when calculating the property tax mil
    rate. Please note that the Assembly could have instead chosen to pledge the new building as
    security for the debt rather than private property, something the State of Alaska has done for
    many buildings, and that would not require voter approval.

    What I would say to Juneau commercial property owners is that seeking the full faith and credit
    approval from voters is a way to leverage your property; going to voters for authorization rather
    than to the property owner! Full faith and credit debt sold now would put a lien against your
    property using the new higher assessed value as the assigned security. Current Assembly
    members would be long gone but your property would remain the security as the last debt service
    payment is made.

    A child in kindergarten today will also be paying this debt service should he/she remain in
    Juneau and own property. But during the life of that debt Juneau will lose 10.8 percent of its
    population according to the Research & Analysis economists at the Alaska Dept. of Labor.

    The debt service will also continue past the autochthonous nameplate life of each of the two
    mines operating today in Juneau. A mine shutting down would reduce the population even more
    than the 10.8 percent reduction anticipated by state economists. If the full faith and credit is
    approved the Assembly could later add personal property like boats and aircraft as part of the
    bond security without seeking that specific authority from the voters.

    The pandemic taught us that the cruise ship tourism industry is susceptible to interruption and
    curtailment. It’s a credit to the industry that they have bounced back so well but the next shut-
    down could come from the Russian war spilling into the N. Pacific to pull in China or N. Korea.
    Even under such a hopefully unlikely event the private property owners of Juneau would still
    need to pay principal and interest on these bonds!

    No one I know believes the Trans-Alaska Pipeline will remain in operation for the life of this
    proposed CBJ debt. TAPS once produced 2 million barrels a day, but now, despite prices of
    about $100, production hovers between 450 thousand and 500 thousand barrels a day. The
    marginal cost of producing a barrel on state land in a new field is between $57 and $75 today,
    very likely the highest cost in the world for a producing oil regime. Even if the end of TAPS
    was concurrent with years of low Permanent Fund earnings the full faith and credit pledged for a
    new CBJ office building would still require Juneau taxpayers pay all bond principal and interest.

    Voter-approved CBJ debt as a lien on private property is not merely hypothetical if the bonds are
    sold. Among the many costs of bond creation and sale, all of which CBJ intends to pay with
    bond sale proceeds (adding to the debt beyond construction costs) is hiring a trustee to represent
    bondholders for the life of the debt. Even a technical default, let alone an actual failure to make
    a payment on the bonds, could trigger an acceleration of debt, with the trustee showing up at
    private property sale closings. A capital move vote, dismantling TAPS, or depletion of a Juneau
    mineral deposit could very likely trigger a technical default on these bonds! A capital move
    could come from a constitutional convention, something Alaska voters will decide yet this year.So by way of recap, Juneau has a great economy today with two very strong, well-managed and
    environmentally sound mines. As mentioned, oil is at about $100. Cruise ship tourism has
    come back. The PFD is at a record level, and sales taxes reflect that. However the economic
    outlook is risky and less rosy. Therefore under any common sense arithmetic this is the worst
    possible time to finance governmental projects with debt, especially when that debt is to be
    secured by your private property. This ballot measure is nothing more than our government
    asking to spend money it doesn’t have to build a new downtown office building so that the
    Assembly can spend unusually high current revenue on other wants. This is also the Assembly
    attempting to cash in on and leverage record high private property assessments. Please vote NO.
    Please do not pledge all private property to building a new downtown office building.

    Current Conditions

    Crude Oil Price