The private company that controls more than half of Skagway’s port wants a 20-year lease extension in order to make way for pressing waterfront improvements.
White Pass and Yukon Route Railroad is a major tourist attraction in Skagway. Since 1968, it has controlled a significant portion of Skagway’s tidelands and uplands through a lease with the city.
This June, White Pass gave the municipality a new lease extension proposal.
The offer is preliminary. White Pass and municipal officials are at the beginning of negotiations.
White Pass President John Finlayson says the potential contract would continue a “great partnership.”
“If you look at the last 25 years, the town’s economy has experienced unprecedented growth,” Finlayson said. “I think a lot of that has to do with White Pass’ investment.”
Finlayson shared the entirety of the new proposal with KHNS Monday. He agreed to release the document following a borough assembly meeting in which some key details were revealed publicly.
White Pass’s offer is broken into three parts: an amendment to the current tidelands lease, a new lease picking up after the original expires, and an environmental remediation agreement.
These new contracts are on the table about two years after voters rejected a 35-year lease extension.
The situation has become more critical since then. In less than two years, larger cruise ships will sail to Alaska. If Skagway doesn’t renovate its port to accommodate the vessels, it could miss out on a significant share of the market.
Mark Schaefer is the mayor of Skagway. He supported the 2015 lease that was thrown out by voters.
“It’ll be a miracle if we don’t lose this boat, it really will be,” Schaefer said. “And when we do lose it, its not gonna be such a fun time I don’t think.”
There are a few key differences between the 2015 proposal and the new one.
One is the length of the lease. White Pass is asking for a new, 20-year lease following the expiration of the current contract in 2023.
At a recent meeting, Assemblyman Orion Hanson suggested the municipality try to negotiate the term down to 15 years, so that the agreement would end in 2038.
Another new detail: the lease amendment would clear the way for an estimated $15 million floating addition to the ore dock. This is perhaps the most urgent piece of infrastructure. Skagway’s ability to welcome larger cruise ships hinges on it.
White Pass proposes it take the lead on building the floating dock, while splitting the cost 50/50 with the municipality. Finlayson says the railroad building the infrastructure is simply more expedient than the government taking it on.
Finlayson says the railroad needs a lease extension in order to move forward with the ore dock modification.
Another difference from the last proposal: the annual rent payments. Right now, White Pass pays the city about $130,000 per year. The company suggests raising that to $200,000 annually.
That offer is lower than the 2015 proposal. Those proposed payments started at $250,000 and increased to $400,000 over the 35-year period.
Assemblyman Hanson has suggested negotiating those numbers up to $250,000 at the start of the lease, increasing by $50,000 every five years.
The rent payments are key in terms of whether this lease will need to go to a public vote. Skagway code stipulates that any lease worth $5 million or more must go to the voters for approval. White Pass’ proposal doesn’t reach the $5 million mark this time.
Hanson advocated for a public vote once the city and White Pass are done negotiating.
“I didn’t feel totally comfortable that we could execute this without a vote,” Hanson said. “And I think voting is one of the most important things we have as Americans.”
But both Mayor Schaefer and Finlayson say they worry about how a referendum would affect the tight timeline.
Port consultant Moffatt & Nichol has said that if the city wants to have a floating dock in place by the time bigger ships arrive in 2019, they’ll need to start design and permitting work by late summer or early fall.
Unlike the 2015 lease proposal, White Pass is looking to separate environmental remediation from the rest of the contract. Skagway’s ore basin is polluted with decades-old contamination. The railroad proposes paying $2.5 million and the municipality chipping in $1.5 million toward an estimated $4 million clean-up. If it costs more, the two parties would meet and decide how to split the cost.
Finlayson says White Pass’ contribution to remediation is contingent on the lease extension.
There are some things that have not changed between the 2015 and 2017 proposals.
White Pass would give up a significant portion of the lands it leases, only retaining control over the areas directly beneath the ore dock and Broadway dock. Cruise ships berth at both facilities.
The municipality and White Pass would share the ore dock, with the railroad getting cruise revenue and the city getting revenue from industrial and other uses.
The assembly is set to discuss the lease proposal at its meeting this Thursday. From there, negotiations are likely to continue.