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Acting as the Kenai Peninsula Borough's economic analyst for the last 10 years, Jeanne Camp has seen an increase in taxable sales every quarter of every year, however, that trend could be coming to an end.

Fourth quarter results for 2008 are still an unknown, but for the first time in a decade, taxable sales for the borough are expected to decrease.

"Taxable sales have always increased," Camp said. "I don't know what the fourth quarter will hold."

Though taxable sales are predicted to drop, Camp said she couldn't say there will be a decrease for sure until the official report is available, which should be out by the end of February.

Gross sales, too, are a mystery.

In the wake of Agrium closing, Camp said other businesses have increased production.

"It's a puzzle, it's a mystery," she said.

Construction permit values rose to $92 million in 2008, up from $72 million in 2007, Camp said. The addition of Lowe's and WalMart in Kenai added to this increase, though Camp said the borough would have had a reasonable year without those properties.

Borough construction activity was strong in the third quarter of 2008 as total value of projects reached $39.3 million, the second highest value on record behind $45.4 million in 2006.

Third quarter volume totaled 87 permits for 2008, the fewest issued since 1997 when 85 were issued. On a year-to-date basis, 256 permits were issued in 2008, the lowest volume since 252 were issued in 1999.

Unemployment has also risen from 2007.

Unemployment reached 9.5 percent in 2008, up from 7.8 percent in 2007, Camp said. She said the labor force has increased more than borough employment has, resulting in increased unemployment.

"Our unemployment was higher throughout the year," Camp said.

Camp said unemployment data comes from the Alaska Department of Labor. They use a federal standard for determining unemployment by interviewing two percent of the population in a given area and entering the data received into a model used for the entire country.

"It's not as accurate as it could be," she said.

The larger the area, the more accurate the numbers are, Camp said. Because the Kenai Peninsula Borough is a smaller area, the standardized model used results in less accurate unemployment rates.

On the business front, major projects are under way that would impact the borough's economy.

Canadian company Northern Dynasty partnered with Anglo American to determine the feasibility of Pebble Mine, located west of Cook Inlet.

John Shively, chief executive officer of Pebble Partnership, estimated at least three years will be needed to obtain the hundreds of necessary permits, with another three to four years needed for construction of the copper mine.

The project will need about $400 million to $500 million to pass through the pre-feasibility stages and another $300 million for feasibility.

The project has a capital investment estimate of $3 billion to $5 billion thus far, but that is subject to change.

"It's a significant investment," Shively said to the Kenai Chamber of Commerce in December. "It's a very challenging project economically."

The project is estimated to bring 3,000 jobs to the state and has a lifespan between 50 and 80 years, depending on its size.

So far, no roads have been built at the Pebble site. All work is being done by helicopter.

Shively discussed two methods for extracting ore from Pebble. For the west side of the mine, he said it would most likely be an open pit mine. For the east side, however, because the ore is buried much deeper, block caving might be used.

In this technique, the floor of the mine is collapsed from underneath it.

"You're actually using gravity to do your mining as opposed to blasting," Shively said.

"Ninety-nine percent of everything we dig out of the ground is going to stay here," Shively said. "This is a big prospect but it's not a particularly rich prospect."

Along with copper, the mine also contains substantial deposits of gold and molybdenum.

Because of Pebble's size, Shively said the project wouldn't be developed all at one time.

Closer to home, exploration of another mine has been ongoing since the late 1980s.

Called the Chuitna Coal Project, PacRim Coal LLP is exploring a future strip mine coal operation in the Beluga Coal Fields on the west side of upper Cook Inlet. The company has a state lease on 20,571 acres of land northwest of Tyonek estimated to contain one billion tons of ultra-low sulfur, sub-bituminous coal.

PacRim hopes to mine that deposit over the course of several decades, beginning with a 5,000-acre section that could produce 12 million metric tons a year for 25 years.

Most of the coal would likely be shipped overseas from a dock facility to be built at Ladd Landing.

The borough first entered a lease-option contract in 1987 with Tidewater Services Corp., which merged with Midgard Energy Co. in 1994. The option has since been assigned to PacRim Coal.

Over the years, the option on the lease has been extended and amended five times. At the Feb. 3 Borough Assembly meeting, the assembly voted to postpone action on Ordinance 2009-02, authorizing a five-year extension of the option to lease Ladd Landing between the borough and PacRim.

Should the ordinance pass, it would be the sixth addendum made to the lease.

The Alaska Natural Gas Development Authority continues discussion of the Alaska Gas Spur Line project.

The proposed gas line would connect the Cook Inlet natural gas infrastructure with a supply coming off the North Slope via the much larger proposed TransCanada pipeline.

The route would parallel the Richardson Highway south from Delta Junction, before heading west in Glennallen to reach the inlet.

ANGDA Chief Executive Officer Harold Heinze spoke optimistically of the pipeline's development during a board conference in Kenai in October, saying they completed the wetlands determination process in the summer of 2008, and ANGDA is now initiating an environmental impact study.

Heinze said it was crucial to remain one step ahead of the larger pipeline, which will begin conducting field work and permitting as early as the summer of 2009. Heinze said that he would like to see the spur pipeline completed before work begins on a bigger pipeline.

"Once the mega project starts, costs escalations will get huge," he said.

Heinze estimated that work could begin on the spur line in two years and that the TransCanada line was still 10 to 12 years out.

The main focus of the project is to complete the spur line, however, in doing so, ANGDA would open opportunities to provide gas to new areas of the state. Gov. Sarah Palin challenged ANGDA to find a way to supply the city of Fairbanks with Cook Inlet natural gas via a temporary high-density plastic pipeline that would run from Delta Junction into the city as early as this coming summer. Heinze said energy costs in Fairbanks are four to five times as high as those in Anchorage. Plans for this extension are not final.

Several calls made to Borough Mayor Dave Carey were not returned for comment on the borough's position on these projects.

As of Jan. 1, 2009, suspension the Kenai Peninsula Borough's 3 percent sales tax on all non-prepared food items from Sept. 1 through May 31 took effect.

All items eligible for purchase with food stamps at food stamp eligible retailers are exempt from borough sales tax during the nine-month period.

For those that do not participate in the food stamp program, the seller of food must first decide whether they're considered a "restaurant" or a "non-restaurant" by the borough's standards.

A "restaurant" is any food-selling establishment that earns 75 percent or more of its total food sales from prepared foods. If this is the case, than all food items, prepared and non-prepared alike, are taxed.

According to Borough Sales Tax Auditor DeRay Jones, prepared food is "food sold in a heated state or heated by the seller, or two or more ingredients mixed or combined by the seller for sale of a single item." Prepared food does not include food that is only sliced, cut, repackaged or pasteurized by the seller. Raw eggs, fish, meat, poultry and foods containing these raw animal products that require cooking by the consumer also are not considered prepared foods.

A "non-restaurant" is any food-selling establishment where prepared foods account for less than 75 percent of its total food sales.

"Non-restaurants" have to break down what is and what is not taxable based on the borough's definition of prepared and non-prepared foods.

Many food sellers offer both prepared and non-prepared food items. Jones said the "75 percent rule" was a way to keep the initiative fair.

Another change that Prop 1 brought was a new sales tax return form. Each jurisdiction -- Kenai, Soldotna, the borough -- has its own, separate column.

"The form is totally different," Chapman said.

A scanner now reads tax returns. Do not attempt to change any pre-printed items, as this will create problems for the machine attempting to read the document, Jones said.

Borough Finance Director Craig Chapman said there was some confusion during the first few days of the switch, but the changeover has been running smoothly since.

The borough has sent out notices and conducted presentations throughout the borough to explain the changes Prop 1 brought.

The next round of informational sessions will be held in Seward, Feb. 19, from 10 a.m. until noon at the Seward Community Library; in Soldotna, Feb. 24, from 2 to 4 p.m. and Feb. 25, from 7 to 9 p.m. in the assembly chambers; in Homer, Feb. 26, from 2 to 4 p.m. and 7 to 9 p.m. in the Homer council chambers.

Hal Spence and Dante Petri contributed to this report.

Mike Nesper can be reached at mike.nesper@peninsulaclarion.com.