Volume XVIII No. 26:

The late-Sen. William Proxmire (D-WI) – who entrusted the “Golden Fleece” to us after his retirement – gave out hundreds such “awards” over the years to the most egregious examples of government waste. He highlighted some truly ridiculous uses of federal dollars. So we are confident he’d agree with our most recent award. As fleeces go, it’s a doozy. For nearly a decade, the Knik Arm Bridge and Toll Authority (KABATA) in Anchorage, Alaska has spent millions of federal dollars serving as a taxpayer-funded cheerleader for the Knik Arm Bridge with little more than receipts to show for the money.

The project is a proposed $1.6 billion toll-supported bridge across the Knik Arm (a body of water) that would connect Anchorage to a relatively undeveloped piece of land in an adjacent borough (county). It is a sibling of the most infamous bridge of all, the “Bridge to Nowhere” in Ketchikan, Alaska (itself a Golden Fleece recipient). Both received hundreds of millions of dollars in earmarks in the 2005 transportation bill, and both were kept alive by Alaska even after Congress soured on the bridges. Later that same year, lawmakers removed the requirement that the money be spent on the bridges, but let Alaska keep the cash.

With a portion of that money, Alaska provided more than $100 million for the Knik Arm Bridge. Since then, KABATA has spent more than $75 million on executive salaries, project rights-of-way, and the like. But a March 2013 project audit prepared by the Alaska Legislative Budget and Audit Committee indicates the project is headed in the wrong direction. On the cost side, the audit was the first to unveil a December 2012 Financial Plan, prepared by KABATA, showing the total project cost has ballooned to $1.6 billion. The audit also raises questions about the projects benefits, concluding that KABATA is relying on “overly optimistic” toll and revenue projections to justify the project. In other words fewer drivers will cross the bridge than KABATA estimates. This means toll revenues to pay for the bridge will likely fall short, and fewer drivers will benefit from using the bridge.

With rising costs and declining benefits, this project has the markings of a loser for taxpayers.

We aren’t the only ones who think so, either. KABATA has been rejected five times by the federal TIFIA program, which provides low cost federal loans. The TIFIA analysis depends a great deal on benefit-cost analysis and the ability of the project to repay the loan, which are both on shaky ground. Conveniently ignoring reality, however, KABATA still includes a $357 million TIFIA loan as part of the project’s overall financing package. It is like budgeting for raise after hearing “no” from your boss five times. Could the project proceed without a TIFIA loan? Technically, yes. But it would further drive up the projects costs if the loan had to be secured at market rates, instead of federally subsidized rates, thereby further reducing the value for taxpayers.

The Anchorage Daily News concluded that “KABATA’s Time is Up” in an editorial soon after the audit was released. They pointed to the audit committee’s “extreme skepticism” of KABATA’s numbers and their own skepticism regarding the current cost estimate to conclude, in stark terms, “It's well beyond time for a bridge project based on something more than booster spin.”

The direct federal investment in this project is admittedly limited (though the prospect of a federal loan would drive up the federal investment considerably). But Sen. Proxmire never believed the amount of waste was as important as the violation of the general principles of responsible government spending. There should be no more bedrock principle of government spending than the simple idea that we understand all of the costs and all of the benefits before we throw a single dollar at a project. Equally important is if the numbers don’t work out, we walk away and not look back. KABATA has had ten years and squandered tens of millions of taxpayer dollars, yet failed to create a compelling case the Knik Arm Bridge is worthy of any federal investment, particularly in the current budgetary environment. It is time to take back what we can of our investment, make it clear that no additional federal support is forthcoming, and leave it to the State of Alaska and its citizens to decide if they are willing to put up their own dollars to build the bridge.

To read the Golden Fleece award discussed here, visit: http://www.taxpayer.net/library/article/golden-fleece-kabata.