362 



Direct funding from the State of Alaska in the form of Municipal Assistance 

 and Revenue Sharing is affected by the APC loss. Municipal Assistance 

 ($720,000 in FY 1988) is directly proportional to population as is about half of 

 Revenue Sharing money ($790,000). 



Real Estate Values 



The largest economic losses are likely to be in the decreased value of all forms 

 of real estate. When demand for real estate changes, price changed tend to be 

 significant since the supply of real estate is relatively fixed. In the case of 

 grow^th, the supply of land, housing and commercial space cannot grow apace 

 so prices increase sharply until eventually more real estate become available. 

 In a recession the reverse impact on price is more severe than in growth 

 periods because the supply of real estate carmot be reduced. 



The recent Alaska recession taught some valuable and painful lessons about 

 real estate values on the economic downside. The case of nearby Juneau 

 provides some insights into what is likely top occur in Sitka were APC to 

 close. 



Between 1986 and 1988, Juneau lost a bit less than 10% of its total employment 

 and payroll. Less than 10% of the population left the community before the 

 economy began to recover in the second have of 1988 due to additional state 

 government employment and a major mining development. However, the 

 impacts on real estate value of even this change were dramatic. According to 

 the municipal Assessor's office the value of the average single family 

 dwelling dropped from $128,000 to $85,000, a loss of 1/3 of the total value. 

 Every single family homeowner lost an average of $43,000 in the value of 

 their house between 1986 and 1988. Owners of condominiums and mobile 

 homes experienced greater losses. The Assessor's office estimates that overall, 

 residential property now brings less than 70% of its 1986 value. 



Were Sitka to lose 24% of its emplojonent and 29% of its payroll-compared to 

 Juneau's 10% loss-the impact is nearly impossible to estimated. In the case of 

 Juneau, the situation was compounded by existing overexpansion in the 

 housing supply. Without an economic decline some downward price 

 adjustment would likely have occurred but the Assessor's office and other 

 experts feel this would have accounted for a drop of less than 10% in the 

 value of residential real estate property. This leave the impact of Juneau's 

 economic downturn at a value loss of 20% or more. 



Currently, Sitka does not have an oversupply of housing and both sale and 

 rental prices are relatively high for the stock which is available. Considering 

 this fact, a moderate estimate of a 24% loss in the economy would be a 40% 

 loss in the value of all residential real estate. If the average Sitka single family 

 homeowner owns a $120,000 home, it will be worth $72,000 following APC 

 closure, a loss of $48,000 per family. For the economy as a whole, residential 



