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Borough offers loan for gas grid

Funds would be made available to Homer, Kachemak City

Posted: January 21, 2013 - 8:59pm  |  Updated: January 22, 2013 - 9:32am

Kenai Peninsula Borough officials are considering loaning Homer and Kachemak City a combined $13 million to help create a natural gas grid on the heels of last year’s state capital appropriations that will bring a gas line from Anchor Point south.

Although the borough helps connect residents with gas through utility special assessment districts outside of city limits, it usually does not make such large loans and therefore the assembly must consider whether or not to amend their investment policy to allow for the transaction.

A measure to that end — Ordinance 2013-02 — is up for public comment at the borough assembly’s Feb. 5 meeting and represents the first step toward a potential agreement.

Although specific details would need to be written in an agreement that would again need assembly approval, the current ordinance outlines two loans — one to Homer for $12.7 million and one to Kachemak City for $300,000 — each at a 4.5 percent interest rate.

Borough Finance Director Craig Chapman said Homer officials first approached the borough about a loan. He said such a deal could save Homer money depending on other commercial interest rates and could add flexibility to the municipality’s options.

“From my perspective this is a pretty simple transaction,” Chapman said. “It does two things — it expands what the borough’s investment portfolio can invest in, and it gives back to the community.”

While the borough is weighing its options, the city of Homer is also preparing to request proposals from commercial lenders starting next week, said Homer Finance Director Regina Mauras.

However, the borough’s offer is “in all likelihood the way we’ll end up going,” she said.

“The thing is that we have a duty and an obligation to get the best rate we possibly can,” she said. “So in talking to a couple of commercial lenders, we may actually get a better deal via interest rates on the same type of package that the borough is willing to offer us.”

The loans, Mauras said, would fund construction of trunk lines from the main line to the edge of properties. All Homer property owners would pay the principle back through their property taxes via a special assessment district. However, those Homer residents who want to connect their home to the trunk line would pay for that themselves, Mauras said.

“Every citizen who owns property in Homer will be paying for the trunk line,” Mauras said. “... To put the line in from their property line to their home will be their choice.”

Mauras said project — headed by ENSTAR Natural Gas Company — is projected to take two years. Residents will not see a difference on their bill until the whole project is finished, which could be as late as 2015, she said.

“From the time we start drawing down (on the loan) to the time the project is finished, we will pay interest only and once the special assessment districts have been established after the project is done, then ... it will be 10 years we will be paying on that loan,” she said.

Chapman said he has received some questions about how the loan would affect borough finances and if the borough would be appropriating money.

“We are not,” he said. “It has no impact on the fund balance. What has an impact on the fund balance is when you spend money and we are not spending money.”

The other consideration is the interest rate. Chapman said the borough usually charges prime plus two percent — currently about 5.25 or 5.5 percent — on its utility special assessment districts. The borough landed on 4.5 percent after considering the magnitude of the project and the government-taxpayer nature of the loan.

“When we looked at the borough’s investment pool and the rates of return that it has been provided over the last few years, currently we are not getting 4.25 or 4.5,” he said. “But when you go back just a few years, we were making about 5.5 percent return so the extremely low rates we are at right now are not projected to be that low (in the future).

“So the reason why we picked 4.5 percent is because it helps to protect the borough from interest rate risk in the event rates go up substantially.”

Kenai Peninsula Borough Mayor Mike Navarre said he thought the loan was a “win-win for everybody.”

“It helps the Kenai Borough just because we have facilities down there that will benefit from that distribution system,” he said. “It helps the residents down there from an economic standpoint because the fuel cost is going to be good for residents and businesses.”

In addition to helping the community, Navarre said the loan makes sense from a pure investment standpoint.

“We wouldn’t expect the city of Homer would not honor their commitment and not be able to pay their commitment, so it is good, secure funds,” he said. “And for the tax payers in the borough in general, the benefit for them is that we get a better return on the dollars invested in that project than we do on funds that are invested in other things because we have a very conservative investment policy.”

 

Brian Smith can be reached at brian.smith@peninsulaclarion.com.

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Norseman
3215
Points
Norseman 01/22/13 - 04:35 pm
1
2
Truly a win win for all.

Truly a win win for all. Good job!

Judith Eckert
69
Points
Judith Eckert 01/22/13 - 06:36 pm
2
0
Truly a win?

O.K...getting natural gas is a win...check

Legislators get it through while charging Homer folks more than the rest of Enstar customers...check

Enstar stock holders profit...check

Homer folks get to lose money to pay for the Enstar's stock holders...check

Homer Folks don't know they are getting screwed...check

Governor signs it...check

Utilities commission does not advocate for the people...check

Another example of uniformed folks turning into sheep and.... now.... the borough pays for it ....priceless!!!

Enstar is NOT a co-op...It is a stock holder driven company...wake up people something stinks in Alaska!

jimbob
74
Points
jimbob 01/22/13 - 07:40 pm
2
0
Pulling the Wool

How outrageous that the Borough is now becoming a "Bankster" with the taxpayers money! If the borough has so much funding that they can loan out to other government entities maybe a tax cut is in order. The Kenai Borough has nothing other than what has been extracted from the taxpayers. Homer admittedly has the resources to finance the gas project from other sources, therefore it is not the Borough's business. Enstar, I suppose is the beneficiary of the loan as most if not all will end up in the Enstar pocket. Enstar is a big company, whose parent company is huge. Why doesnt Enstar finance the project and pick up the interest on the loan? Or why doesnt the state loan Homer the money since they paid for the trunk line anyway. Navarre is an artful dodger when he states the loan is a win win for everbody which he defines as the borough and the residents of homer, conveniently not including the rest of the borough taxpayers who have put up the money. Stop the foolishness, trim the borough and its ever expanding projects. I wont even go into the issue of forcing people to pay for a public project that they may not choose to use such as this gasline.

Judith Eckert
69
Points
Judith Eckert 01/23/13 - 06:47 am
2
0
Pulling the wool continued...

The scarey part is...the local, borough, and state officials are putting all the financial liability on the citizens they are to serve.
Enstar has the money to invest in the project…hey but If you can get somebody else to take all the risk…why not?
Did someone say corporate welfare??....I think we all need to wake up and follow the money trail!!

Norseman
3215
Points
Norseman 01/23/13 - 08:26 am
1
3
The borough exists to help

The borough exists to help it's citizens. This is a great way to help all of us. The folks down in Homer have been without nat gas for far too long.

The fact that we can lend this money at 4.5% interest for a worthy cause, will be a win win for all of us. The money earned from the interest and will help our borough and it's residents.

It is a no brainer that if we wish to enjoy the benefits of living here and all the amenties that the borough provides, than let's get behind this project and support each other.

Obfuscate
235
Points
Obfuscate 01/23/13 - 09:20 am
2
1
Wrong, wrong, wrong.

According to Mr. Navarre - “And for the tax payers in the borough in general, the benefit for them is that we get a better return on the dollars invested in that project than we do on funds that are invested in other things because we have a very conservative investment policy.”

If the Borough can manage to put away 13 million dollars that it doesn't need in the near future and feels comfortable loaning to someone else, then we are all paying to much in taxes. Jimbob is correct - the KPB should not be acting as a lender.

Norseman - do you live in Homer, or in an area where you stand to benefit from this? Please explain how "this is a great way to help all of us". The folks down in Homer have chosen to live in Homer where there is no natgas. There are people all over this Peninsula that do not have natgas. Are you suggesting that the Borough should fund a project to get natgas to everyone?

The Borough "machine" needs to get smaller, not larger. Stop charging taxes that are not needed. If the Borough is acquiring revenue beyond what is needed for the essential services it provides then we are all paying to much in taxes.

Judith Eckert
69
Points
Judith Eckert 01/23/13 - 05:49 pm
0
1
getting gas is right...getting taken...wrong

It is interesting watching the communication here...the premise is all wrong...Enstar needs to pay for their investment...not the borough...Enstar will profit from this...they also need to be responsible for the financing...what part of private company are you all not getting...don't get so excited about natural gas that you throw out reasoning...this is how government gets to big...people stop thinking for themselves...frightening...love to have gas in Homer...just let Enstar pay their way...they are the one's who will make the profit...KISS factor in order here!!

imagast
18
Points
imagast 01/23/13 - 02:28 pm
1
1
Gasline ownership

If City of Homer is paying for the line, who would own it?

Would they charge for the product flowing throught it?

What surcharge would the city of Homer charge users?

Judith Eckert
69
Points
Judith Eckert 01/23/13 - 03:21 pm
0
1
Gasline ownership...there in " lies" the Question-

Now we are getting somewhere...the truth perhaps?

Answer: ?

Profits will go to Enstar....mmmm...

My husband Rick Eckert did the original bid as interim CEO Homer Electric...he probably has that answer...He out of town...so maybe an answer tomorrow evening...?

Enstar was given the certification but waited until we all scraped up the investment money before they decided to do the gasline....mmm

Facts speak for themselves...problem is the facts have not been fully communicated to the general public...but they will be the ones taking on the financial liability while Enstar profits.

imagast
18
Points
imagast 01/23/13 - 05:23 pm
1
0
Enstar

Does Enstar publish for the public locally what it pays its Canadian owners per year?????????????

Judith Eckert
69
Points
Judith Eckert 01/23/13 - 05:52 pm
0
1
imagast

Another good question...I know Rick was able to go on their website to see cost breakdowns...the ones they did not explain to the people of Homer...maybe you can find their stockholder paychecks...profits should be available through a stock broker...??

Judith Eckert
69
Points
Judith Eckert 01/23/13 - 06:15 pm
0
1
Hope people get it...for their sake...

Enstar has manipulated your city, borough, and state to pay for what they never intended to...got the right to serve Homer...but waited UNTIL someone ( YOU) PICKED UP THE TAB before they acted on it.

If that isn't clear enough...well ignorance is expensive!

Norseman
3215
Points
Norseman 01/24/13 - 02:03 pm
1
0
..."It does two things — it

..."It does two things — it expands what the borough’s investment portfolio can invest in, and it gives back to the community.”...."

That is why I think it is a win win.

Judith Eckert
69
Points
Judith Eckert 01/24/13 - 02:25 pm
0
1
Enstar is not a co-op

What part of stockholder company are we missing here...like I said..ignorance is expensive.

Judith Eckert
69
Points
Judith Eckert 01/24/13 - 02:37 pm
0
1
Let's recap...shall we

1. The route taken will cost twice as much as another route over Diamond Ridge.
2. The pork barrell legislators o.k.'d it.
3. The people of Homer are getting charged twice in their rates for the difference.
4. Enstar only got back in the game because the state paid for it.
5. Now we are all excited about the borough making money off of the people of Homer to pay for gas line with inflated pricing...so Enstar stock holders can profit.....
MMMMMMMMMM

Judith Eckert
69
Points
Judith Eckert 01/24/13 - 02:59 pm
0
1
.by the way...

.I think there might be a shortage of natural gas supply for this line...I wonder what the status of that situation is...??????

Obfuscate
235
Points
Obfuscate 01/24/13 - 03:05 pm
0
0
Norseman - I corrected the

Norseman - I corrected the quote.

"It does two things — it expands what the borough’s investment portfolio can invest in, and it provides a benefit to a for-profit company using local borough tax dollars.”

It may expand the investment portfolio, but that doesn't mean that it is proper for the KPB to be involved as such.

It does not give back "to the community". It would provide an alternative for a select portion of the community. There is a huge difference. The true monetary winner would be Enstar.

imagast
18
Points
imagast 01/24/13 - 03:11 pm
0
1
The comment ..."It does two

The comment ..."It does two things — it expands what the borough’s investment portfolio can invest in, and it gives back to the community.”...."

The borough could expand it's investment policy.
And to give back it could invest in self supporting projects etc to give back to the community.

imagast
18
Points
imagast 01/24/13 - 03:17 pm
0
1
WHY WHY WHY

Wht doesn't enstar ask for the loan???????????????

Judith Eckert
69
Points
Judith Eckert 01/24/13 - 03:25 pm
0
1
Gasline to nowhere??

Sweet! If they run out of gas...we have our own gas line to nowhere...mmmm just something to think about...gas supply...measurement...how many years of a supply...just another item on the long list of questions????

Judith Eckert
69
Points
Judith Eckert 01/24/13 - 03:34 pm
0
1
Why Why Why continued

imagast...the elephant here is... Enstar does not care about Alaska...they just want to take what they can...their stockholders are all out of state

imagast
18
Points
imagast 01/24/13 - 03:48 pm
0
1
This seems

in the order of the private prison scam,,,,,,,,,,,, you build, we run on contract and you give it to us.
We get the property, and all profits from the contract.

imagast
18
Points
imagast 01/24/13 - 04:00 pm
0
1
We live in an

area where people don,t ask questions or are afraid to ask questions, tough questions, why is that.

Is it because they are afraid of ?????????????

Are we not the major users of our nat. gas/// why do we pay so much? Check you gas bill

why all the extra charges? When you buy a store item, do you get a parking fee for your car????????????

certain costs are just inherent to doing business.

It must be great to have strong lobbists.

Judith Eckert
69
Points
Judith Eckert 02/01/13 - 06:23 pm
0
1
strong lobbist

imagast....hope is on the horizon...my husband is now the COO of another coop...therefore...no conflict...he understands what is going on here...knowledge is power!!!

So...we will do are best. ..the rest is up to the people...in this case...you really get ....what you really pay for..so..my hope and prayer is that the truth becomes self evident...the people receive it and understand what they need to do...I hope this is not too much to ask for???

Judith Eckert
69
Points
Judith Eckert 01/24/13 - 05:50 pm
0
1
p.s..I think a call to Fox News is in order.

This is the quite essential...government partnership to subsidize big business...on the backs of the tax payer...I will wait for all the facts...and make the call...I think we should look at how federal funding in Alaska and the Borough indirectlyl subsidizes this behavior.

Norseman
3215
Points
Norseman 01/25/13 - 07:46 am
1
1
LOL

Callling fox news.......

fox news is a cable entertainment program, NOT a viable news source. Might as well contact the Enquirer.

Also, you are getting way too worked up over this to even think this issue has anything worthy to any national news media such as CNN, PBS, BBC, NBC, etc..

I as a taxpaying borough resident think it is a great idea to LEND this money at 4.5% interest to fellow borough residents who WANT natural gas.
They get natural gas, we get the extra income from the loan.
That extra income may get used to lower mill rates or provide more services to the borough.

Judith Eckert
69
Points
Judith Eckert 01/25/13 - 08:35 am
1
0
LOL-this is not a laughing matter

Argument lost when you attack someone personally...too worked up...no...just an American that sees a national issue...government waste...this is just one more example of such waste...I think transparency is important in government local, state or federal...this gas issue is part of a larger issue in Alaska...spending way too much money needlessly...like I said the facts speak for themselves...no emotion here...just a citizen concerned about waste that will affect future generations...we all want gas...we just need to make sure that the rules are followed...when government does not follow the rules they must be made accountable...
Injustice anywhere is a threat to justice everywhere. Martin Luther King Jr., Letter from Birmingham Jail, April 16, 1963 ...
I am a citizen taking responsibility to make my elected officials accountable...Attacking someone personally is a time tested strategy used by the person who has lost the debate.

Obfuscate
235
Points
Obfuscate 01/25/13 - 08:50 am
1
0
Foolish

You are a fool if you think this project has anything to do with helping out the common tax paying resident or if you think you will see any kind of benefit from the potential 'extra income'. That is not the way our government works. If you can't see this, then you have not been paying attention.

Judith Eckert
69
Points
Judith Eckert 01/25/13 - 09:29 am
0
0
How government works.

Again...personal attacks are representative of ingnorance..God bless you whoever you are.

Obfuscate
235
Points
Obfuscate 01/25/13 - 10:18 am
1
0
Misunderstanding

Ms. Eckert, I hope that you did not assume that my prior post was directed at you. It was in response to the final paragraph in Norseman's last post.

It is good to see you are highlighting what is obviously some goverment special interest (likely payback) project.

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