368 



To recover lost utility revenues from the remaining population and business 

 community, electrical rates would have to be raised 68% above current rates 

 and water fees by 94%. Property tax rates would go up 46%, provided the 

 conservative estimates of loss in property values hold true. While these 

 increased costs would be heavy burdens for the average remaining 

 household, they may impose even greater negative impacts on other basic 

 industries. 



The trade industries will be affected by severe losses in sales. A typical 

 business may operate with a 5% to 20% profit margin when times are good. If 

 29% of the sales are lost as projected businesses must still pay their fixed costs 

 and would forego their profits which are necessary to survival. Hardly a 

 business in Sitka could sustain a 29% loss in income. It can be expected that a 

 sigruficant proportion of Sitka's retail businesses would fail within a year, 

 perhaps a third or more of them. The remaining businesses would need to 

 reduce employment, payroll, inventory and any capital investment they may 

 have been contemplating. Prices to local consumers would increase because 

 lower sales mean higher costs per unit of sales. Selection would also be 

 reduced and more local money would be spent outside the economy, further 

 weakening the retail sector which has 526 jobs in 1988 and may lose a third or 

 more of them by the time the economy bottoms out. 



Finance, Insvirance and Real Estate, employers of nearly 70 in Sitka will be 

 devastated. The real estate industry will become a fraction of its current size 

 and one or more baixks will likely close their branches. All banks will be 

 holding bad consumer and business loans and take significant losses. The 

 Alaska recession of 1986-88, though less than half as severe as the Sitka 

 scenario with an APC closure, destabilized the entire Alaska banking system, 

 caused closure of several banks and savings and loan institutions, and 

 stiffened credit requirements. The insurance industry is also hit hard by 

 recession with fire a risk among failing businesses. Insurance sales also drop 

 significaintly in recessions. Households and businesses remairung in Sitka 

 will be saddled with virtually unattainable credit requirements even of they 

 maintain respectable credit ratings. For financial institutions in general, 

 loaning money in Sitka vdll be off limits except in the most risk free cases. 

 Real estate financing vdll be impossible since the real estate market will 

 collapse in the first several months following APC closure. 



Service industries are expected to decline in relation to the loss of income in 

 the corrununity, a 29% loss. As in the trade sector, prices will rise for those 

 who remain and the level and variety of services available will be reduced. In 

 total service industries employ 621 and an estimated 178 of them will lose 

 their jobs. Private medical services will be severely affected with some 

 sp)ecialists no longer able to make an adequate living in Sitka. As mentioned 

 earlier, recession conditions drastically reduces use of medical services and as 



10 



