Closure spurs Sitka changes.

• Author: Swagel, Will
• Position: Sitka, Alaska - Includes related article

Losing its major employer in September 1993 forced this Southeast town to find new lifelines for economic survival.

When the Alaska Pulp Corp. (APC) closed its doors Sept. 30, 1993, the hammer dropped on the Sitka economy. More than 350 people lost their jobs. The direct and indirect payroll loss was gauged at $30 million, a quarter of the town's total. Property values were expected to plummet immediately, with scores of mortgages foreclosed and homes boarded up. The exodus from the island community of 8,500 was predicted to be as high as 2,000 people.

But when the closure actually came, prior planning by mill officials, coupled with quick action by business and civic leaders, blunted the worst of the immediate effects.

Now, the town must prepare for the worst, but there is an optimism among most business and civic leaders that through diversification, Sitka can continue to develop.

Despite hundreds of people out of work, Sitka merchants reported a good 1993 Christmas season. Real estate sales and commitments for housing starts remained steady into the building season. People still bought cars. APC workers had received generous severance pay that, coupled with vacation and pension payoffs, amounted to big bucks in some workers' pockets. Even if they had no jobs.

But the severance pay has now run out on nearly all the former APC workers. Students of economic debacles like mill closures report that the effects often are not felt for six months or more and can go for years. If they are right, this spring is when Sitka's transition will truly begin.

Predicting the Big Chill

For years, Sitka government and business planners predicted decisions based on APC's health. Besides providing the largest single payroll in town, the mill kept Sitka utility costs low by purchasing electricity in bulk and also by paying 18 percent of the town's property tax base.

Conventional wisdom said that the mill would operate until the end of its 50-year timber contracts in 2011 and then close. But increased competition in the dissolving pulp market, especially from South Africa, dropped pulp prices from $880 a ton in 1989 to $700 a ton in 1993. Meanwhile, the successful efforts of environmental groups and agencies to limit logging and require more stringent discharge controls on the plant made a closure more likely.

But what mill officials complained about the loudest was the shrinking supply of commercially-viable timber from the Tongass National Forest since the passage of the Tongass Timber Reform Act of 1990. The act sought to balance use of the forest from all parties concerned -- i.e., fishermen, tourists, environmentalists -- but at the expense of the timber industry's previous access to forest resources.

"The contract (change) was the straw that broke the camel's back," says APC spokesman Rollo Pool.

The company believes the U.S. Forest Service is administering the contract more strictly than Congress intended and has sued the agency over the matter. The Forest Service maintains that the company violated the contract when it closed the pulp mill.

Nearly everyone was surprised when mill of officials announced on June 30 that they would close the facility in three months, despite the fact that they had been talking about the fate of the mill since the beginning of the year.

"Going back to the original planning in the first part of 1993, it was the concern of the company that we treat the employees aboveboard, and we do whatever we can to protect their interests make sure they can get on with their lives," says APC's administrative and personnel manager Don Best.

That meant engaging the services of Right and Associates, a national "out-placement" firm that had done work for BP and Arco in Anchorage.

Besides offering the laid-off...