Remote Alaska Community Struggles as Oil Funding Sags

Buses sit idle inside a garage here, gathering dust, their only purpose these days to serve as makeshift storage bins for Alaska’s largest regional government.

The seven buses once ferried residents around Barrow, with 4,500 people, the most populous community in the sprawling North Slope Borough. In their heyday, the buses ran 16 hours a day, seven days a week. They were equipped with monitors that allowed people to check their TVs at home for the buses’ precise locations, thus avoiding a wait outside in subzero temperatures.

But the borough, once flush with oil wealth, is feeling broke. Its industrial property tax base includes the North Slope oil fields and northern segments of the trans-Alaska oil pipeline.

But depreciating oil property values have chipped away at borough coffers at a rate of $6 million a year -- and those losses, officials say, must be countered with budget reductions.

“There’s this perception that the roads are paved in gold here and that we have plenty of money,” said Dennis Packer, the borough’s chief of staff. “A lot of people don’t believe there’s no money and that’s unfortunate. But it’s pretty straightforward.”

The borough’s financial problems won’t be solved by crude selling at record levels since its revenues don’t come from the oil itself.

Instead, the borough only is allowed to tax the aging industry properties -- wells, production buildings, a network of pipelines in Prudhoe Bay and other fields.

Oil and gas properties account for 97% of the borough’s property tax base, and brought in $161 million last year.

The tax base is currently assessed at $10.2 billion, a $1.9 billion decline from its peak eight years ago, said John Ames, the borough’s chief financial officer.

Much of the revenue is quickly absorbed in running eight communities not linked by roads in an 88,800-square-mile jurisdiction, an area almost the size of Oregon.

Three decades ago, when oil industry revenues started coming in, borough villages were mired in Third World conditions. Much of the bounty was spent on basic infrastructure, such as power and plumbing, Packer said.

Even when the money flowed freely, luxury wasn’t a word used to describe conditions in Barrow, where utilitarian commercial buildings and ramshackle houses line trash-strewn streets. Many residents of this Arctic Ocean community hunt and fish for much of their food, including whale, seal and caribou, and it’s not unusual to see fresh kills stacked alongside four-wheelers in front of homes.

But subsistence hunting won’t solve the financial problems, and the erosion of revenue has left borough officials with tough choices.

In the most dramatic cut, this summer officials shut down Barrow’s public transit system, stranding many poor and elderly residents in the 18.4-square-mile community, which is divided by a large lagoon.

Packer said the borough was working with Barrow officials to find an alternative system, such as a private shuttle service.

In the meantime, residents such as Joe and Mary Jane Ahkivgak, who relied on the buses to get them and their four sons around town are making do without. The family can’t afford common Alaska transportation such an all-terrain vehicle or a snowmobile, let alone a car, Joe Ahkivgak said.

“There’s been a lot of walking so far,” he said.

When winter arrives, the couple may have no choice but to use taxicabs.

Borough officials say bus ridership was low and brought in only $30,000 annually, far short of the $700,000 cost to maintain and operate the 20-year-old public transit system.

It no longer makes sense to continue such a cash drain, particularly when the cost of necessities such as municipal insurance and the diesel fueling village power plants are skyrocketing, officials said.

“We had to take a really hard look at transit -- something that’s not mandated, but optional,” Ames, the financial officer, said.

Proposed oil developments and the possibility of a natural gas pipeline could help in future years, borough officials said. But for now there is no choice but to trim the budget.

Downsizing throughout the region began in earnest three years ago, including laying off municipal employees, merging departments, unloading residential rental properties, phasing out borough assisted care facilities, and scrapping small buses in villages.

One of the few museums in an Alaska Native village also faces uncertain future funding. Annual borough contributions to the Simon Paneak Memorial Museum in the Brooks Range village of Anaktuvuk Pass, about 250 miles southeast of Barrow, have shrunk by a third, from $160,000 in 2002 to $105,000.

Closing the museum is not an option for the community of 320 people, the last remaining settlement of inland Inupiat Eskimos with a rich culture and history to share, said curator Grant Spearman, who has managed the small museum since it opened in 1986.

He’s trying to set up an endowment fund that would fund the museum in perpetuity.

“We know we can’t be funded by the borough indefinitely,” Spearman said.