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Analysis of Impacts and Potential Reparations 



Due to 

 Alaska Pulp Corporation Closure 



The purpose of this analysis is to provide estimates of the socioeconomic 

 impacts of the possible closure of the Alaska Pulp Corporation and to estimate 

 in turn the reparations necessary to compensate for these losses. 

 Reconsideration of the management policies of the Tongass National Forest 

 could affect the timber supply for the Alaska Pulp Corporation to the point 

 where permanent closure is the only economic alternative. 



This analysis v^as to include scenarios for reductions of 1/3 and 1/2 in the 

 scale of APC operations. However, interviews with corporation officials and 

 the consultant's knowledge of the econonnics of major manufacturing 

 operations both conclude that reductions of this magnitude may not be 

 economically feasible. Major plants have economies of scale operating at full 

 capacity which they do not have at 1/2 or even 2/3 of capacity. A reduction of 

 1/2 in log supply is more likely to result in full closure than in reduced 

 operations. 



For readers interested in the impacts and reparations of partial operations 

 scenarios, simply take 1/3 or 1/2 of the losses shown for the closure scenario 

 except for losses in real estate values, property tax and utility revenues. Losses 

 of all other items on the enclosed table will be proportional when they are 

 played out over time. The reaction of the real estate market in the partial 

 closure scenarios are likely to be more than 1/3 to 1/2 of the full closure losses 

 because real estate overreacts to economic change. 



The actual timing of these impacts will vary depending on the financial 

 condition of affected families and the schedule for shutting down. Studies of 

 significant economic change in other Alaska communities show almost all 

 impacts are fully experienced within two years with the heaviest impacts 

 being within the first six months. The initial period of outmigration and 

 economic recession is followed by a prolonged period of personal and 

 business bankruptcies, collapse of the real estate market, business closures, 

 reductions in government services and additional job loss and outmigration 

 as the effects are played out throughout the support sector of the remaining 

 economy. 



Population 



The population loss of 2,050 residents, 24% of the Sitka total, is based on 

 employment loss. While population loss does lag employment loss for some 



