Anchorage: Economy

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Major Industries and Commercial Activity

While the U.S. economy has shown declines in recent years, Alaska's economy has shown a relatively stable growth of two percent annually. The United States government and the oil industry have been integral to the Anchorage economy. The federally funded Alaska Railroad gave Anchorage its start; later the military defense system supported an essentially undiversified economic base. This base expanded in the 1970s when the Trans-Alaska Pipeline, one of the largest construction projects in history, brought thousands of workers and increased service industries.

Although Juneau is the state capital, Anchorage is the state's government center. In 2003, Anchorage employed 4,300 state government employees, and 10,000 federal government employees.

Anchorage is the state's primary transportation, communications, trade, service, and finance center. Anchorage makes up 42 percent of the state's population but accounts for 47 percent of the employment. Today, the four major sectors that drive Anchorage's local economy are oil and gas, the military (three military posts are located at the airport), transportation, and the convention and tourism industry.

Alaska's oil production accounts for more than 22 percent of the nation's oil reserves. Anchorage may not be the hub of production, but the city acts as the administrative center for the industry. While the sector only accounts for two percent of the local employment, the importance to Anchorage's economy is greater, accounting for about eight percent of local salaries and wages.

The military in Anchorage is a constant presence. Elmendorf Air Force Base, Fort Richardson Army Post, and Kulis Air National Guard base are all located at the Ted Stevens Anchorage International Airport. The three military posts employ 8,500; military personnel and their family members boost local economy by patronizing businesses. In addition, nearly 10 percent of Anchorage's population is comprised of military personnel and family members.

The transportation industry in Anchorage is the busiest in the state. The Ted Stevens Anchorage International Airport (ANC) accounts for another 10 percent of Anchorage's employed, either directly or indirectly. The ANC flies more than 560 transcontinental cargo flights each week; the airport's economic impact is felt as far away as the North Pole, where jet fuel is refined and loaded onto the more than 100 rail cars that then travel by Alaska Railroad to service ANC daily. The Alaska Railroad transports freight and passengers; in summer months the Railroad transports passengers to popular destinations throughout the state. The Port of Anchorage accounts for delivery of more than 90 percent of the consumer goods arriving in Alaska.

The tourism and convention industry, along with the service businesses that sprout up around the industry, are a major driving force in Anchorage economy. Mainly due to its central location, Anchorage acts as the gateway to the state of Alaska, thereby funneling tourists, conventioneers and other visitors through the area. Alaska's tourism industry accounts for more than 30,000 statewide jobs and an estimated (2003) economic impact of nearly $80 million in Anchorage alone. The market for trade shows and conventions in the city is growing; the 2003 economic impact of meetings sold during that year equaled more than $71 million.

Items and goods produced: fisheries' products, wood and wood products, petroleum products, coal, minerals

Incentive Programs—New and Existing Companies

The most widely used local incentives include customized job training programs, low interest loans, municipal revenue bonds, and property tax abatement. Anchorage Economic Development Corporation, a public-private partnership, assists new and existing businesses with information on taxes and utilities and on available sites and buildings, which are said to be plentiful.

Local programs

The Municipality of Anchorage offers a program that exempts some types of economic development properties from taxation. Inventory that is held for shipment outside of Alaska may also be exempt from local inventory taxes.

State programs

The Governor's Office of International Trade provides assistance and information to firms interested in foreign trade and investment, organizes trade missions and promotions, and sponsors trade shows and seminars. Several areas in the city are located in Anchor-age's Foreign Trade Zone, the two most notable being the Ted Stevens Anchorage International Airport and the Port of Anchorage. The World Trade Center assists businesses seeking to enter or expand their role in international trade. The Alaska Export Assistance Center helps local businesses expand into foreign markets.

Job training programs

The University of Alaska Anchorage offers classes and degree programs to businesses and individuals on logistics and on doing business in Pacific Asia and the former Soviet Union. The university also partners with the Alaska Economic Development Corporation to provide a Mentor Program that connects students with business leaders. Lunchtime forums highlight a different business industry each time.

Development Projects

In April 2005 residents will be asked to approve $46.9 million in bonds for projects involving road improvements, public transportation, and public safety. Residents will be asked to approve more funds to build a new $93 million civic center and to help fund the $100 million planned expansion at the Anchorage Museum of Art and History. Other projects in the works or in planning stages include developing ski terrain at the Winner Creek-Glacier Valley north of the Alyeska Resort in Girdwood. Development of this area is expected to bring thousands more skiers each winter, with another 320,000 visitors expected each summer; this could mean a generation of $74 million annually in gross revenues and the creation of about 900 new jobs. Other projects involve revitalizing neighborhoods, such as the Eagle River Downtown Revitalization and the Mountain View Arts and Cultural District.

In transportation, a $250 million expansion is underway at the Port of Anchorage in 2005. The expanded facility is expected to generate more than 2,300 jobs once completed and will accommodate the area's cruise and military business. Merrill Field has constructed two new taxiways, and an apron expansion in 2005 will add more space and accommodations for ski-equipped aircraft in winter and aircraft with tundra tires in summer. In late 2004, Congress approved funding for several intermodal facilities to be built throughout the city at museums, medical centers, and other destinations. The 2004 summer road construction season completed 41 road and safety projects with a total cost of about $45 million.

Anchorage has a strong commitment to preserving land for recreation. Part of this commitment involves the Foster-A-Flower program; in 2004 downtown businesses bought more than 200 hanging flower baskets, each at $75, to beautify the area. Five new dog parks were created in Anchorage in 2004.

Economic Development Information: Anchorage Economic Development Corporation, 900 West Fifth Avenue, Suite 300, Anchorage, AK 99501; telephone (907)258-3000; toll-free (800)462-7275; fax (907)258-6646; email aedc@aedcweb.com. Municipality of Anchorage, 632 W. Sixth Avenue, Anchorage, AK 99501

Commercial Shipping

Anchorage's sea and air ports combine with its railroad to make the area the primary cargo distributor in the state. The Port of Anchorage, the largest seaport in Alaska, is a year-round shipping point with five terminals served by three major carriers, which bring four to five ships from the Pacific Northwest and Asia each week. More than four million tons of iron and steel products, containerized freight, bulk petroleum, cement, wood products, and various other commodities crossed the Port's docks in 2003. More than 50 air carriers and 9 freight forwarders connect Anchorage to the rest of the country and the world beyond. The airport is said to be one of the busiest cargo airports in North America; in 2002, Anchorage was second to Memphis in having the most cargo landed weight in the country, and third ranked in the world for most cargo landed weight. Municipal Merrill Field airport serves the intrastate needs of business, banking, and commerce. The Alaska Railroad provides rail freight service; in 2003 the railroad moved more than eight million tons of freight across 525 miles of track. More than 30 motor freight carriers link Anchorage with major market areas.

Labor Force and Employment Outlook

Anchorage boasts an abundant and well-educated labor pool with a relatively low median age. Ninety percent of residents are high school graduates, and approximately 65 percent of Anchorage's adult residents have completed at least one year of college. In addition, wage rates in Anchorage tend to be higher than wages in other areas of the country due to an abundance of higher-level positions available. Anchorage employment levels rose 28 percent between 1995 and 2003, due mainly to a 40 percent increase in the private support sector. In that same period, the services industry increased 114 percent, reflecting the area's attractiveness as a tourist destination.

Expansion and diversification have given Anchorage's economy the ability to absorb fluctuations in the business cycle or unexpected economic events. Anchorage now has a steady year-round employment base, with a summer boost from tourism and construction activities. The international cargo business in Anchorage continues to grow; Anchorage is equidistant to both Asia and Europe, and is 9 hours flying time to nearly the entire industrialized world, making it a good location for warehousing and distribution. About 10 percent of the city's employment can be attributed either directly or indirectly to the airport.

According to the Anchorage Economic Development Corporation, job growth in Anchorage is expected to be in the service sector, which would include jobs in health and social services, hospitality, trade, and finance and real estate. Contributing to Anchorage's economy will be the addition of 2,000 Stryker Brigade soldiers to Fort Richardson as part of a nationwide reorganization.

The following is a summary of data regarding the Anchorage metropolitan area labor force, 2003 annual averages.

Size of non-agricultural labor force: 142,600

Number of workers employed in . . . natural resources and mining: 2,200

construction: 8,500

manufacturing: 1,800

trade, transportation and utilities: 33,000

information: 4,600

financial activities: 8,800

professional and business services: 16,000

educational and health services: 17,300

leisure and hospitality: 14,600

other services: 5,700

government: 30,000

Average hourly earnings of production workers employed in manufacturing: $12.01 (statewide average)

Unemployment rate: 5.1% (December 2004)

Cost of Living

The personal tax burden in Alaska is extremely low, while the cost of living is significantly higher than much of the rest of the nation. Residents benefit from distributions from the Permanent Fund, a savings account established in 1976 by voters allowing residents to receive 25 percent of the state's royalty oil revenue. Senior citizens enjoy a $150,000 property tax exemption or a renter's rebate.

The following is a summary of data regarding several key cost of living factors for the Anchorage area.

2004 (3rd Quarter) ACCRA Average House Price: $349,640

2004 (3rd Quarter) ACCRA Cost of Living Index: 122.5 (U.S. average = 100.0)

State income tax rate: None

State sales tax rate: None

Local income tax rate: None

Local sales tax rate: 8% on rental cars, fuel, alcohol, tobacco

Property tax rate: Graduated from 7.91 mills to 18.15 mills levied on full assessed value

Economic Information: Alaska Department of Labor, Research & Analysis Section, 3301 Eagle Street, Suite 202, PO Box 107018, Anchorage, AK 99510-7018; telephone (907)269-4863; fax (907)269-4870