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An analysis of the condition of Alaska's economy, quality of life, educational systems and government at a pivotal point in its history.
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Alaska’s Future in a New World
A StTuDY BY COMMONWEALTH NORTH
Edited by Tom Brennan
JUNE 1997
introduction
Alaska enters this new world with the essential advantages and the leverage to achieve its poals in the development of its economy, the personal growth of its citizens and in governance of its own affairs.
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As the dawn of a new century approaches, Alaska finds itself in an unfamiliar situation. For the first time in its history, the state’s future will be determined largely by its own decisions. Prior to 1940, Alaska was a large territory with a small population and little control over its own destiny. Most decisions affecting the broad community, large and small, were made by a distant government with limited understanding of the land and people it governed. Its attention was focused on massive changes then occurring in the world’s political, economic and social climate.
The development of America’s northern outpost was shaped largely by World War II, followed by the Cold War, then by fighting and continuing tension in the Middle East. These three international events dominated the nation’s agenda and resulted in rapid growth in Alaska’s population and economic infrastructure. In the 1960s, turbulence in oil-rich areas of the Middle East spurred an intensive search for oil reserves on U.S. soil in Alaska that ultimately led to the discovery of a massive reservoir at Prudhoe Bay. That discovery became a fourth major event that has been the primary determiner of Alaska’s course for a generation.
World War I brought construction of the Alaska Highway, the territory’s first land link to the other states, and a large influx of military personnel, government investment and growth of the civilian economic base to support the military buildup. The world war was quickly followed by the Cold War and a long period of international tension in which Alaska’s strategic importance attracted an unprecedented federal government presence with continued military investment and an influx of civil servants to administer its natural resources, govern the civilian populace and serve federal interests here.
In 1958 the growing frustration of people in the Territory of Alaska resulted in the passage of the Alaska Statehood Act, mandating long-sought recognition that Alaska’s still-small population could better govern its affairs than could relatively uninformed decision-makers in distant Washington, would then have taken full charge of its destiny, for good or ill. With the world then descending into the long and most hostile portion of the Cold War, Alaska’s civic and political leaders soon found themselves on what New England Ride.” They were at the helm of Alaska’s ship of state, but the speed and course were set by factors over which they had little control.
Alaska’s government, civic and business leaders proved to be masters at turning world events to Alaska’s advantage. They encouraged the military buildup, convinced oil executives to explore the northern frontier, campaigned long and hard for statehood, and created innovative systems to manage and protect Alaska’s resources and rapidly growing revenues. Their skill, courage and tenacity brought Alaska through the storm in a strong and healthy condition.
As the last great “boom” winds down — the peak production years of the Prudhoe Bay Field — the winds are now calm and Alaska faces what older parts of the nation consider a relatively normal environment. To Alaska, it’s a new world. The international scene still has troubling elements, and some decisions, vitally important to Alaska, remain the purview of Washington politicians representing interests in conflict with those of Alaska. But, in general, the state looks out on relatively calm waters. On the horizon we can perceive no great storms or pending world events that will decide Alaska’s future. Instead, our fate seems most likely to be determined by our own decisions on the economic, social and political issues before us.
Alaska enters this new world with the essential advantages and the leverage to achieve its goals in the development of its economy, the personal growth of its citizens and in governance of its own affairs. Modern transportation, communications and Alaska’s unique global postion, as well as its ownership of many resources, provide unprecedented opportunity.
Improvements in transportation and communications have put us on equal footing with much of the world in some respects. What were formerly considered Alaska’s disadvantages — distance from large national and international markets, and the internal distances separating its people, are becoming advantages. Rapid and relatively inexpensive movement of people and information make possible life and business decisions that once required the sacrifice expected on an untamed frontier. Work that once gravitated to major commerce centers can now be performed virtually anywhere. The decoupling of work from great cities opens the way for Alaska’s advantages — resources, environment, lifestyle and central position in the Northern Hemisphere-— to come into play in personal life and work choices and in investment decision-making.
Using those advantages will require many changes in the state’s approach to marketing itself and the conduct of its business.
Agenda 2000 is an analysis by Commonwealth forth on the condition of Alaska's economy, quality of life educational systems and government at a pivotal point in its history.
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Agenda 2000 is an analysis by Commonwealth North on the condition of Alaska’s economy, quality of life, educational systems and government at a pivotal point in its history.
This report, and the study group reports from which it was derived, offer a range of recommendations for ways to attract investment, create jobs, improve the lives of those who live here, enhance and improve the education of our citizens and restructure government to use available resources more effectively.
This intensive assessment of Alaska’s potential is a sequel to Compass North, a study conducted in 1984-85 to determine how the state should adjust its course to meet the challenges of the following decade. Like Compass North, Agenda 2000 was initiated by the Commonwealth North Board of Directors and carried out by marshaling the thinking abilities of community leaders and experts in a wide array of disciplines. The 125 Alaskans who answered the latest call were organized into four panels, which met over a seven-month period. They were tasked to review Alaska’s existing economic, social and educational infrastructure, its regulatory scheme and its approach to community problemsolving. Their goal was to determine if Alaska is appropriately equipped and prepared to deal with the new world and to suggest changes where needed.
The panels invited speakers with expertise in specific areas, analyzed the information and opinions collected, and worked them into a series of recommendations, an agenda for the years ahead. Their reports to the Commonweath North Board of Directors became the foundation for a series of recommendations to Alaska’s civic, business and government leadership.
With revenues from large oil fields declining, Alaska has in recent years focused on reducing its government to a size more appropriate to available revenue sources, putting its fiscal house in order. That “right-sizing” is essential to avoid economic disaster and to improve the state’s investment climate. We must acknowledge, however, that Alaska cannot prepare to meet the challenges of the new world without spending more money in some areas. Some deferred or deleted expenditures are themselves a tax that will come due, either in forced cash outlays or unacceptable outcomes, early in the next century. Major investments are needed soon in education, transportation infrastructure, technology and economic development. Where possible, Commonwealth North recommends methods by which Alaska can leverage its ownership of natural resources to attract new investment without requiring the state to make large cash outlays.
The focus of the study was in large part a reflection of the economic and political environment in which Alaska now finds itself. It seems unlikely that the oil industry will be able to support Alaska in the manner to which it was previously accustomed, nor will the military or any other agency of the federal government. The oil and government sectors will be an important part of the economy for years to come, but they will be only a part. Instead, Alaska’s future will be determined by decisions at many levels, some statewide, some local. Where once Alaskans could march together against external obstacles, now they must work together to achieve common objectives with tools largely under their own control. More than ever before, Alaska will become the net result of its own decisions, large and small.
Commonwealth North recommends that Alaska adopt and pursue an agenda for this new world, an agenda that will capitalize on Alaska’s strengths and achieve its full potential. That agenda should include investments and new approaches in the following areas:
Economic Development Quality of Life Education
Government
Some of the initiatives proposed here should be the responsibility of state government, some of local or regional government, and some of the private sector.
More than ever before, Alaska will become the net result of its own decisions, large and small.
economic development
Recommendation:
Use Alaska's unique ownership position and geographic location to expand and encourage natural resources development, to add value to that development through in-state processing and to stimulate investment in a broader range of resource activities,
Oil production remains the foundation of the state’s economy and new exploration in frontier areas and investment in existing fields should be encouraged. Huge potential remains under both state and federal acreage; that potential should be fully achieved and a portion of its benefits used to stimulate growth and development of other resource-based industries.
For example, the state has long sought value-added processing within its borders. Traditionally Alaska’s natural resources are minimally processed in-state, then shipped quickly and directly to ports in other states and other countries. Secondary processing, the function which creates the largest number of jobs and adds the most value to the resource, has been conducted elsewhere and the benefits have accrued to those locations. Typically commodities such as crude oil are most economically refined near the markets at which they are consumed, since separating it into individual products complicates transportation requirements. But resources such as fish, minerals and timber can be processed near their source and the higher-value products shippe’ directly to worldwide markets at acceptable and reat opportunities exist in the vast natural gas reassociated with the North Slope oil reservoirs. It is in ka’s best interest that the necessary delivery infrastrucbe constructed as expeditiously as possible and the gas brought to market. Bringing the gas on-line will require contractual relationships, construction of delivery infrastruc-
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ture in Alaska, appropriate vessels for international transportation and infrastructure construction in the receiving markets. Many of the needed elements are beyond Alaska’s control, but several of the most important—establishing a stable and appropriate tax and regulatory framework—are very much within state jurisdiction. These should be pursued and implemented.
Two gas-related issues have had insufficient attention: Alaska’s own need for Alaska North Slope gas and the leverage its royalty ownership position offers for development of other resource prospects along the route of the gas pipeline. Southcentral Alaska has long used Cook Inlet’s gas fields to heat its homes and offices and to generate electrical power. Those reserves are finite and will be unable to meet demand within the next decade. One or more spurs from a trans Alaska gas pipeline could provide energy to many Alaska communities and change the financial equations of a wide variety of resource prospects currently considered uneconomic.
Alaska should:
Recommendation:
Make Alaska an international logistics center. Target air freight as a major source of economic expansion and value-added industry,
Anchorage International Airport (AIA) has the largest cargo freight operation in the United States and significant potential for further growth. As the center of the polar globe, major markets in Asia, North America and Europe lie within eight hours of Anchorage. Fifty three percent of all air cargo moving between Asia and the United States stops here. Anchorage could achieve global prominence as a center for third party logistics operations such as freight forwarding, packaging and assembly for light weight, high value goods, distribution warehousing and final testing and assembly of electronics.
Such operations could include:
The use of AIA as support for product development offers additional significant opportunities. Such activities need not be placed directly on the airport grounds, but are greatly enhanced as a competitive value compared to other cities by having AIA cargo operations less than an hour away.
Developing the full potential for tourism as a year-round industry will provide sustainable prowth with opportunities for both rural and urban areas.
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Such global logisitics-based products include:
Alaska should also:
Recommendation: Build Alaska’s full potential as an international
Alaska receives 1.2 million visitors each year from all over the world, with the peak of activity occurring in the summer months. Developing the full potential for tourism as a year-round industry will provide sustainable growth with opportunities for both rural and urban areas. Developing a winter peak through appropriate infrastructure and destination packaging will make Alaska a worldclass year-round experience for visitors.
Alaska enjoys a stable pattern of growth in summer tourism. Over the past ten years, expenditures by tourists have grown to a record $1.3 billion. Of that, $598 million (42 per cent) was spent on goods and services in Alaska. The remaining $831 million was spent on transportation to and from Alaska (not including in-state transportation services). The growth in spending by tourists continues each year. Additionally, Alaska benefits indirectly from visitor expenditures that take place before they arrive in Alaska. These expenditures affect employee wages, in-state operations costs and capital investments by transportation and tour companies.
While summer visitors are predominantly tourists, business visitors make up half of the fall/winter arrivals. Twentytwo percent of fall/winter visitors come to visit family and friends, and only 15 per cent visit Alaska as vacation or pleasure travelers. The Anchorage Convention and Visitors Bureau (ACVB) reports that convention business remains strong with an annual growth of apincrease tourism during non-summer months have resulted in more travelers to Alaska, yet the summer season still accounts for over 80 percent of visitors.
The greatest opportunity for growth in tourism lies in the fall/winter season. Alaska’s winter beauty and unique outdoor activities make the state a world class destination for the adventurous visitor. Further development of winter attractions such as snowmobiling trails, dog sledding, and northern lights viewing would not only help the tourism sector become a year-round industry, but the increased revenues would allow for further development of the summer tourism infrastructure which is nearing full capacity. Additional facilities such as hotels are needed to build summer traffic, but are only economic if they can be kept operating throughout the year. For that reason building tourism in the fall, winter and spring 1s critical to the growth of tourism throughout the year, including summer.
Alaska should develop a master plan for the expansion and increased value of tourism. The plan should include provisions to:
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Recommendation:
Strengthen fllaska’s sense of community and collective vision for the future, Build the economy to provide jobs and business opportunities, but work to assure that development supports the reasons we live here, including Alaska's unique environment and way of life. Invest in amenities that enhance that way of life.
Improving transportation and communications will shrink distances in this farflung state, opening the way for new interregional commerce, alliances and delivery of services. They could also open the way for new internal rivalry and dysfunction. Alaska’s community and government leadership at all levels should take the initiative to assure the new opportunities are used to further the best interests of all Alaskans. Such initiatives should include:
d safety net to assure that all he obligation to assure that those less ad. Alaska should work for a community offering a diverse economic base, educational opportunities sufficient to prepare its citizens to function in that community and affordable housing, safe and dependable water and sewage, and health care.
build civic responsibility, provide help for those who need it and take full our people. Volunteers are especially needed in agencies and organizations concentrating on the social services and the amenities of living in northern communities.
education
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Recommendation: Make education, including post secondary education, a priority.
The opportunities and challenges ahead are doubly complicated by the current but necessary emphasis on cutting government budgets, including those for Alaska’s educational system, and the changing demographics of our population, especially in urban areas. Budgetary reform is vital, but Alaskans should be aware that some of the cuts being made and new ones under consideration represent deferral of essential investments. They are debts that will come due and eventually be paid, one way or another. Inevitably the time will come when Alaska will decide what services it wants enough to pay for them and how those bills will be paid.
Alaska’s changing demographics are an added complication that has little-understood ramifications. The trend in the 1970s and 1980s was toward in-migration of highly skilled upscale workers to fill oil industry and high-end technical jobs. With those jobs becoming increasingly scarce, combined with parallel growth of lower-paying jobs in the retail ind visitor sectors and increasing in-migration of low-income ss-educated families, the challenge for our educational m is imposing.
fs lack the training and equipment to meet ick ot a failing on the part of the teachers but ‘provide the skills, tools and working environjent to. do their jobs by the standards of the day. With changing -mographies.often come lower test scores, growing requirelucational system and an increasing need for engagement of the public in discussions on how to maintain educational standards and student performance. Alaska is losing the opportunity to develop the brain power of its young people and the opportunities they need to reach their potential.
The education system’s failure is acute at virtually all levels, including and perhaps especially the university level. Alaska’s universities should be leaders in research and development, particularly in the areas where Alaska’s needs and opportunities are unique. They could and should be breaking new ground and incubating the entrepreneurs who will build Alaska’s future. But for the most part the university system is well behind the times. Many young Alaskans seek higher education outside the state, but that option is usually expensive. And for those without the financial resources, education must be offered in-state or they won’t get it.
Therefore, Alaska should:
Recommendation: fldopt higher education as a full partner in Alaska’s development.
Recommendation: Make Alaska technologically competitive by the
2ist century.
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Building the Alaska described in this report will require getting Alaska’s state fiscal house in order and developing priorities for investing in new initiatives and deciding how to pay for those investments without deterring the economic development on which they hinge. Whether a shrinking budget and a growing state are compatible remains to be seen. In some respects they are competing ideals, but since they are ideals, they are viable paths to the future. The state cannot take one path and ignore the other. Alaska must set its own course, pursuing its potential both constrained by its means and inspired by its vision.
Many of the recommendations offered here do not require spending more money. Many do require commitment of resources, thoughtful planning and innovative approaches to economic development and governance. Some entail risk. All require willingness to accept change and new directions.
Recommendation:
ting Alaska manufacturing and Alaska hire. Quraging co-location of offices and shared services for government agencies, both state and federal, with overlapping compatible responsibilities.
Recommendation: Diversify state revenues.
Pursue a balanced strategy incorporating some or all of the following:
Recommendation: Become a recognized model as natural resource owner and trustee.
Recommendation:
Maintain a competitive digital telecommunications infrastructure without state intercession. Allow the marketplace to drive telecommunications development.
New and coming telecommunications technology is bringing all Alaskans into a broader world, with important implications for economic development, delivery of a wide range of health and educational services and improvement in the quality of our lives. It will also enable the development of Alaska as a unified community in ways only beginning to be understood. The physical distances that have long separated us may become largely irrelevant as the ability to communicate and deliver vital services accelerates and expands. New job and investment opportunities will open as Alaska utilizes its global position to create new industries like those described in the economic development section of this report, many of which require advanced telecommunications capability.
Whether Alaska is able to take full advantage of the opportunities presented will depend on the health and growth of its telecommunications infrastructure. Competition will be a critical component to the existence and improvement of such an infrastructure. Alaska is farther along than most other states in development of advanced telecommunications applications. Our remote location, limited surface transportation and vast distances have spurred early and positive movement in that direction. Initially government played an active role in telecommunications development, but successful continuation and extension of those efforts will require a healthy marketplace, which in turn dies, where necessary, should be providied to the user, not the supplier.
Whether Alaska is able to take full advantage of the opportunities presented will depend on the health and growth of its telecommunications infrastructure.
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Where consumer fees cannot support needed services, as perhaps in distance education or using telecommunications to facilitate sophisticated health care in remote communities, the telecommunications providers should be encouraged to partner with medical care providers and other parties at interest. Other partnerships might be viable to provide distance education, with costs shared by education providers and recipients.
The State should not build, own or operate any telecommunications infrastructure that can be provided by the privatesector, nor should it be an investor in such projects. It will always be a large user of telecom services, but should limit its role to procurement of services through a stringent and value-based selection process, determined solely by its own need to deliver services.
Alaska should:
For additional discussion of issues addressed in this publication, see the following four study group reports, available from the Commonwealth North office:
This report is the collective product of a year-long effort by the following:
project manager
Rebecca S. Parker Commonwelth North, Executive Director,
Staff Support
study group chairs
Economic Development
Chugach Electric Association, Inc. Patricia DeMarco, Ph.D.
Anchorage Economic Development Corp.
Quality of Life
Cynthia Parker
Anchorage Neighborhood Housing Dr. Joyce Murphy
Alaska Animal Eye Clinic
Education
Locher Interests, LTD.
University of Alaska Anchorage
Role of State Government Eleanor Andrews
The Andrews Group Inc. Cheryl Frasca
C. Frasca Company
study group members
Mark Armentrout, ARCO Alaska, Inc.
Bob Bailey, Alaska Distributors, Inc.
Mitzi Barker, Alaska Housing Finance Corp.
Richard Barnes, Enstar
Bonnie Bernholz, Bernholz and Graham
Jim Blasingame, Alaska Railroad
Tim Borgstrom, Anchorage Economic Development Corp. Steve Boyd, National Electrical Contractors Assoc. Mike Brady, Brady Construction
James F. Branch, EXXON Co., USA
Tom Brennan, Brennan Communications
Eric Britten, Sea-Land Service Inc.
Bob Bulmer, Alaska Executive Search
Michael J. Burns, Key Bank of Alaska
Milton Byrd, Charter College
Karen Cameron, Alaska Management Consultants Elaine Christian, Anchorage Dept. of Health & Human Services Bob Cox, Petro Marine Services
Dorinda Crist, Anchorage Mutual Housing Association Delisa Culpepper, Anchorage Dept. of Health & Human Services Bill Dann, Prof: Growth Systems Inc.
Brian Davies, BP Alaska, retired
Mark Dawson, Swalling Construction
Robert Dickson, Atkinson, Conway & Gagnon
Don Dietz, Port of Anchorage
Tom Edrington, ATU Telecommunications
Betty Emerick, Charles Schwab
George Erickson, Alaska Railroad
Heather Flynn, University of Alaska Anchorage
Jan Fredericks, University of Alaska Anchorage
Jim Gorski, Hughes, Thorsness, Powell, Huddleston & Bauman Joe Griffith, Chugach Electric Association, Inc. Ernie Hall, Alaska Furniture Manufacturers
John Hendrickson, Hickel Investments
Duane Heyman, Wedbush Morgan Securities
Carol Heyman, Anchorage Chamber of Commerce Max Hodel
David Hudspeth, First National Bank
Mike Huelsman, Anchorage Dept. of Health & Human Services commonwealth north
Barbara Huff-Tuckness, Zeamsters Local 959
Tom Jensen, Port of Anchorage
John Kelsey, Valdez Dock Co.
James Kenworthy, Alaska Science and Technology Foundation Gayle Knepper, Alaskan Federal Credit Union
Michelle Kuiper, Anchorage Economic Development Corp. Lynelle Kukowski, Anchorage Economic Development Corp.
Jeff Leschensky, Alaska Community Foundation
Tina Lindgren, Alaska Visitors Association
Sue Linford, Linford of Alaska, Inc.
Darryl Logan, Human Affairs
Loren Lounsbury, International Management Group
Max Lowe, Regal Alaska Hotel
Sharon Macklin, Sharon Macklin - Gov't Relations
Vicki Malone, Alaska Visitors Association
Bob McManus, ARCO Alaska, Inc.
Dennis McMillian, United Way of Anchorage
Rick Miller, ATU Telecommunications
Sayoko Mimoto, Anchorage School District
Rich Monroe, Bank of America
Dr. Joyce Murphy, Alaska Animal Eye Clinic
Doug North, Alaska Pacific University
Rebecca Parker, Providence Alaska Foundation
Jim Posey, Alaska Public Utilities Commission
Susan Reed, Alaska Public Telecommunications
Cheryl Richardson, Alaska Center for the Environment Malcolm Roberts, Office of the Mayor
Sheila Selkregg, Planning Director, Municipality of Anchorage Jo-Li Sellin, National Bank of Alaska
Gerri Shaefer, Center for Non-Profit Leadership
John Shipe, National Bank of Alaska
Veronica Slajer, Alaska Dept. of Commerce & Economic Development Steve Smirnoff, Municipality of Anchorage
Bonny Sosa, Anchorage Convention and Visitors Bureau Dixie Stanfield, Calista Corporation
Mike Stone, KPMG Peat Marwick
Dee Thomas, Anchorage Economic Development Corp. Ken Thompson, ARCO Alaska, Inc.
Alaska Center for the Environment
Anchorage Economic Development Corp.
Nancy Usera,
Alaska USA Federal Credit Union
Certified Public Accountant
Providence Alaska Foundation
Bill Webb,
Trading Bay Energy Corp.
Kirk Wickersham,
Attorney
Larry Wiget,
Anchorage School District
Hughes, Thorsness, Powell, Huddleston & Bauman Greg Wolf,
Anchorage Economic Development Corp. Phoebe Wood,
ARCO Alaska, Inc.
George Wuerch,
Municipal Assembly
special program presenters
Municipality of Anchorage, Research and Tech. Service Division
ARCO Alaska, Inc.
Anchorage Chamber of Commerce
Alaska Federation of Natives
Douglas North,
Alaska Pacific University
University of Alaska Anchorage Milton Byrd,
Charter College
Anchorage School District
Alaska Department of Education Tom Brigham,
Alaska Department of Transportation and Public Facilities
Alaska Department of Environmental Conservation
Alaska Window
University of Alaska Anchorage
Office of Lt. Governor Fran Ulmer
Alaska Permanent Fund Corporation
Small Business Development Center Deborah Vogt,
Alaska Department of Revenue
Anchorage Neighborhood Health Center
layout, design and printing made possible by contributions from:
Alyeska Pipeline Service Company Bombeck Advertising & Design, Inc.
commonwealth north board of directors - 1996
Bill Allen, VECO International, Inc.
Eleanor Andrews, The Andrews Group Inc. Robert B. Atwood
Richard Barnes, Enstar Natural Gas Co.
James F. Branch, Exxon Co. USA
Fuller Cowell, Anchorage Daily News
Stephen Cowper, Tradelink Alaska
Tom Edrington, ATU Telecommunications Mano Frey, Alaska State AFL-CIO
Lee Gorsuch, University of Alaska Anchorage Joe Griffith, Chugach Electric Association, Inc. Robert S. Hatfield, Alaska Railroad Corp. Walter J. Hickel
Karen L. Hunt, Alaska Superior Court
Marc Langland, Northrim Bank
James Linxwiler, Guess & Rudd
Loren Lounsbury, /nternational Management Group Jeff Lowenfels, Yukon Pacific Corp.
Jim McElroy, Locher Interests, Ltd.
John Morgan, BP Exploration (Alaska), Inc.
Dr. Joyce Murphy, Alaska Animal Eye Clinic Matthew Nicolai, Calista Corp.
Cynthia Parker, Anchorage Neighborhood Housing Mike Porcaro, Porcaro Blankenship Advertising Bill Sheffield
Ken Thompson, ARCO Alaska, Inc.
William J. Tobin, Voice of the Times
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