Wrangell’s own permanent fund has grown to almost $13 million

(City and Borough of Wrangell photo)

By Larry Persily

Wrangell Sentinel

Much like Alaska’s Permanent Fund, which voters approved in 1976 to ensure that some of the state’s oil revenues would be saved for future needs, Wrangell has its own permanent fund that holds a piece of one-time federal money from almost 30 years ago.

That initial deposit of $5 million in 1997 has been invested in a mix of stocks and bonds, growing to $12.95 million as of the most recent statement on Sept. 30. The money is available to help with the community’s future needs, subject to limits on withdrawals — the same as the $84 billion Alaska Permanent Fund.

Though in past years — particularly the 2010s — the Wrangell borough assembly withdrew $250,000 a year from the fund’s earnings to help with the budget for public services, nothing was taken from the fund between fiscal years 2021 and 2025, allowing it to grow even larger.

The assembly decided to withdraw $424,000 for the current fiscal year to help pay for improvements to parks and recreation facilities, including a possible reroof of the community pool building and repairs to the rot-damaged Public Safety Building. 

“We’re going to look at a bunch of different projects,” Borough Manager Mason Villarma said in an interview earlier this month. 

Though the assembly voted on Sept. 23 to make the withdrawal, it did not appropriate any funds to specific items. Villarma said he expects staff will present the assembly with a list of possible work projects sometime after Jan. 1.

“The (stock) markets are at an all-time high, our permanent fund has been zinging along,” he said. 

The fund gained more than $3 million in value in just the past three years, Villarma said.

“Timing suggests it was a prudent time to take a draw,” using some of the earnings for needed improvements around town.

Municipal code limits the amount the assembly can withdraw from the fund’s earnings in any one year, capping it to protect the principal from losing value to inflation. That’s similar to the annual cap on withdrawals from the Alaska Permanent Fund.

The Wrangell fund was established by a vote of the public in 1997, setting aside a portion of the $37 million the community received in 1996-1999 from Congress, designated as Southeast Economic Timber Relief Funds.

“The principal of this fund will be maintained and grow through wise investment and inflation proofing,” according to the municipal charter amendment adopted in 1997.

Another vote of the public would be required to touch the account principal. Only the earnings, within the limit in code, is available for spending.

The federal program sent most of the $110 million in relief aid to Wrangell, Ketchikan and Sitka, the three towns with the biggest economic hurt from the closure of pulp and timber mills and the collapse of the industry. Other communities received small shares of the funding.

Alaska Sen. Ted Stevens, then head of the powerful Senate Appropriations Committee, pressed his colleagues for the $110 million appropriation to help offset the economic loss of timber jobs in Southeast, particularly to help put people back to work at community projects.

“I remember when the mill closed” and the senator pushed through the federal aid, said Mayor Patty Gilbert. Some people in town wanted to divvy up Wrangell’s share and hand out checks to everyone, she said.

Before the public voted to set aside some of the money, the federal dollars created controversy.

A petition signed by several hundred people in November 1996 asked the city council to give every resident $10,000, spending about $25 million of the federal aid. The council voted 6-0 against handing out the money, based on an attorney’s opinion that it might not be legal under state and municipal law, and because council members thought it was a bad idea.

“It’s supposed to be used for economic development for this town,” City Council Member Jeff Angerman said at the Nov. 26, 1996, meeting. “I’d hate to see what (Sen.) Ted Stevens had to say. … There’s no way I could ever vote for this thing, not now, not ever.”

Council Member Bernie Massin was just as solidly against it. “To disburse that $10,000 would be just like throwing it out the window. There’s a lot better ways we could spend this money. That way would just be pretty foolish,” he said at the meeting.

Since it was created, the Wrangell fund has earned just over 7% per year, on average. The money is invested by a private financial management firm, which the borough pays a 0.04% fee on the first $5 million and then an even smaller 0.025% fee on the balance over $5 million, Villarma said.

He sees the permanent fund as spinning off earnings for capital investment in the community, not as a budget filler.

“I kind of think people have forgotten that we have that permanent fund set aside,” Gilbert said.

The account is separate from the reserve funds held for the port and harbors, electric utility, water and wastewater services, all of which are intended to be self-sufficient and maintain their own reserves.

Though Wrangell still faces economic challenges — a shrinking workforce, a shortage of housing, uncertain commercial fishing harvests and a long list of aging building and facilities in need of repair — it’s been worse.

“When I first went to work here, the city had a couple hundred thousand dollars in the bank,” said Jeff Jabusch, who started work as the city accountant in 1977, later advancing to finance director and then manager. He retired in 2017.

State oil dollars started to flow with the opening of the trans-Alaska oil pipeline in 1977, sending millions of dollars to communities across the state for projects and programs. The city council cut the property tax rate and the finances looked good, Jabusch said — until the town’s two sawmills closed and the timber industry shrank.

He remembers discussions at city council meetings of how to use the $37 million in federal aid. His recommendation was to save and invest a large portion. “Let’s put a bunch of this somewhere and keep the golden goose alive.”

That has worked well and the account has grown. “I was surprised we had that amount of money,” Villarma said of the permanent fund when he started as finance director in 2021.

In addition to setting aside the $5 million to start the fund, the city council in 1996-1998 used most of the federal aid for construction and improvement projects, economic and community development efforts intended to create jobs, if even only temporary work.

The list included $2 million for Reid Street construction; $2 million toward building the Nolan Center and museum; $2.7 million to purchase the downtown mill property, which was developed into the Marine Service Center, and $1.2 million to rebuild the mill dock; $824,000 for fill to create Outer Drive on the downtown waterfront; $1 million to clean up the Shoemaker Bay site of the former Bureau of Indian Affairs Wrangell Institute Native boarding school, which the federal government had given to the city in 1996; and $610,000 toward building the golf course.

The city council (Wrangell became a borough in 2008) also appropriated more than $8 million of the federal aid for water, sewer, electrical and harbor projects; $500,000 for schools; $300,000 for hospital equipment; and several smaller but well-used improvements such as $50,000 for restrooms at Shoemaker Harbor and $55,000 for a new hoist at the downtown harbor.

• This article originally appeared in the Wrangell Sentinel.