Insurance company denies $2.3 million claim for Mat-Su port repairs

Jan. 30--WASILLA -- The Matanuska-Susitna Borough could be on the hook for millions of dollars spent to repair a failing barge dock at the borough's little-used port -- a repair that failed again months later.

The borough last week learned its $2.36 million insurance claim on the original damage has been denied, even as officials gear up for a permanent fix expected to cost roughly $1.5 million.

The borough got the bad news in a letter from Chubb Limited that arrived early last week, according to port director Marc Van Dongen. The letter couldn't immediately be obtained by Alaska Dispatch News.

Chubb and another insurance company covering the port denied the claim because the damage apparently started when the dock was built 16 years ago, Van Dongen said.

"I understand an insurance policy doesn't cover that," he said during an interview Wednesday, adding that the borough is contesting the decision but he wasn't optimistic.

If final, the denial could mark the latest financial hit at Port MacKenzie, which brings in little revenue but has cost millions in a cash-strapped borough that already faces other potential expenses linked to the never-used ferry Susitna, sold last year to the Philippine Red Cross.

The Mat-Su dock is the same unusual design -- Open Cell Sheet Pile construction -- that was used in a botched Port of Anchorage expansion project. But the problems at Port MacKenzie are different from those plaguing the Anchorage project, Mat-Su officials say.

The Mat-Su port, still waiting on a stalled rail extension managers tout as a future economic driver, is considerably quieter than Anchorage's.

The beleaguered barge dock handled 32 vessels in the summer of 2015 -- the most since it was built in 1999 -- but only nine were barges. Just one barge called last summer, as the port contended not only with dock repairs but problems with an anti-corrosion system.

Van Dongen said the port is expecting more traffic this summer from an Oregon wood chip operation and scrap-metal shipments. A final decision is also expected by year's end about an LNG facility proposed for the port.

The damage at the center of the insurance claim likely stems from a Y-shaped steel piling that hit an obstruction -- like a rock -- when it was driven into the mud of Knik Arm 16 years ago, Van Dongen said.

Over the years, the crack expanded, but the extent of the problem didn't surface until a rapidly expanding sinkhole emerged.

To repair the problem, the Mat-Su Assembly in December 2015 approved taking $2.5 million for emergency repairs from the Land Management Permanent Fund that's become a de facto reserve account in the past few lean budget years. The fund at the time held $6.5 million generated by a portion of borough land revenues.

The repairs were finished by the end of May 2016, Van Dongen said in an interview earlier this month.

"And then five months later, in October, we had a failure of the repair," he said.

The first sheet pile connected to a tail wall tore right up the center, from its base nearly to the top, he said.

Crews stabilized the dock and winter ice is holding it fast, Van Dongen said. He doesn't know what caused the sheet pile to tear, though there was a relatively small earthquake that day.

The borough is expected to put long-term repairs out for bid next month.

If the insurance claim is ultimately denied, the borough still has more than $750,000 to put toward long-term repairs, estimated at $1.5 million. That amount includes more than $300,000 left over from the emergency appropriation, as well as more than $430,000 from port maintenance and other funds, according to Van Dongen.

The Assembly would have to approve any additional funds.

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