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Borough offers loan for gas grid

Funds would be made available to Homer, Kachemak City

Posted: January 21, 2013 - 7:59pm  |  Updated: January 22, 2013 - 8:32am

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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Judith Eckert
69
Points
Judith Eckert 02/01/13 - 04:30 pm
0
0
Misunderstanding...LOL

Thanks obfuscate...very nice!

Judith Eckert
69
Points
Judith Eckert 01/25/13 - 12:20 pm
0
0
From Miss understood...LOL

Misunderstanding...LOL

Thanks obfuscate...very nice! My husband is actually the expert...he will be filing all the necessary info via the Homer clerk tonight...What is so apalling to see how ignorant and possibly greedy all the parties are here...The obvious focus is not that of the consumer...My husband Rick Eckert explained that the rates have NOT been calculated correctly ...as far as he sees...ie: he will be looking into this again tonight ie: changes in the law etc.....He has been working alot in D.C....therefore we are just now getting everything lined up...his findings, thus far, bring into question how this came about...the laws we have...protocol and policy are there for a reason..it looks, in my opinion, that this has not occured in this situation...I believe, it is the responsibility of those entrusted with the correct knowledge to share this with their fellow citizens. My concern is the Utilities Commision...appointed by the governor has sherked their duties in advocating for the people they are to serve...when all the facts are present...I believe, the nation needs to look at this as a case study for incompetent governing at best.

Judith Eckert
69
Points
Judith Eckert 02/01/13 - 04:25 pm
0
0
:)

:)

Seafarer
1147
Points
Seafarer 02/01/13 - 02:37 pm
0
0
I Thought The Sky Was Falling On Our Gas Supply

They've been warning us for years that the Cook Inlet gas is a goner and we have that cutsie little color chart to look at.

Suddenly there is enough for two cities? Who's pulling who's leg? Buncha crooks, if you ask me.

Seafarer
1147
Points
Seafarer 02/01/13 - 02:42 pm
0
0
Too Wrapped Up

Judith Eckert: Does your husband know you flaunt his business all over the web? Does he know how insecure you are by doing this? I quite imagine he does NOT like you spouting his business all over the place. You need to get ahold of yourself and quit bragging about your precious husband. He doesn't mean a thing to me.

Sam Von Pufendorf
1088
Points
Sam Von Pufendorf 02/01/13 - 03:37 pm
0
0
Prospects in the south

As witnessed by recent gas finds on the southern peninsula, gas could flow two ways in a pipeline. Happy Valley is just one area small pockets of gas exist. There are several more pockets that exist in the southern portion of the peninsula and simply need to be drilled and have infrastructure to connect them to the main grid. None of these finds are as extensive as the Kenai Gas Field, but non the less, they were previously discovered and abandoned in favor of the larger fields. What at one time was not commercially viable (50 years ago) is now sizable enough for market if economic conditions allow for it.

Judith Eckert
69
Points
Judith Eckert 02/01/13 - 04:05 pm
1
0
Prospects in the south

Sam Von Pufendorf.

Thank you for your input. Keeping the discussion on an intellectual level is important in sharing information. I think transparency with intellect is what is needed here. (see above personal attacks) I hope your character and standard will enlighten those who lack such attributes. Thank you.

cheapersmokes
1145
Points
cheapersmokes 02/01/13 - 07:52 pm
0
0
Natural gas line!

I do remember back in the early 60's when natural gas was offered to my community and others down the line. The company, Minnegasco, paid for the installation down the alley's and also up to the house and then it was the property owners expense to run the lines into the house and changeover their furnace to work on natural gas. They knew they were going to be making a very nice yearly profit off of the increased volume. Would Enstar be willing to sell the gas at their cost since they will figure out a way to make the users pay for the service line and the product in it?

Judith Eckert
69
Points
Judith Eckert 02/02/13 - 07:39 am
0
0
Last note-relevance here is Enstar's intent and no cost limit

This is the first time I have ever used a blog. It has been interesting to say the least. Just for the record...my husband's expertise is relevant because he did the original bid for certification through Homer Electric. Enstar got the bid and certification but never served. Essentially they waited until they would have no financial risk to bring gas to Homer. Now that this is a reality for the people of Homer. If the utilities commision had gone with the honest bid and intent the people of Homer would have had gas years ago. Instead, government has supersized the whole thing. Rick's original testimony will be self evident to this fact.

Judith Eckert
69
Points
Judith Eckert 02/02/13 - 07:39 am
0
0
Last note-relevance here is Enstar's intent and no cost limit

This is the first time I have ever used a blog. It has been interesting to say the least. Just for the record...my husband's expertise is relevant because he did the original bid for certification through Homer Electric. Enstar got the bid and certification but never served. Essentially they waited until they would have no financial risk to bring gas to Homer. Now that this is a reality for the people of Homer. If the utilities commision had gone with the honest bid and intent the people of Homer would have had gas years ago. Instead, government has supersized the whole thing. Rick's original testimony will be self evident to this fact.

Judith Eckert
69
Points
Judith Eckert 02/02/13 - 07:39 am
0
0
Last note-relevance here is Enstar's intent and no cost limit

This is the first time I have ever used a blog. It has been interesting to say the least. Just for the record...my husband's expertise is relevant because he did the original bid for certification through Homer Electric. Enstar got the bid and certification but never served. Essentially they waited until they would have no financial risk to bring gas to Homer. Now that this is a reality for the people of Homer. If the utilities commision had gone with the honest bid and intent the people of Homer would have had gas years ago. Instead, government has supersized the whole thing. Rick's original testimony will be self evident to this fact.

Judith Eckert
69
Points
Judith Eckert 02/02/13 - 07:39 am
0
0
Last note-relevance here is Enstar's intent and no cost limit

This is the first time I have ever used a blog. It has been interesting to say the least. Just for the record...my husband's expertise is relevant because he did the original bid for certification through Homer Electric. Enstar got the bid and certification but never served. Essentially they waited until they would have no financial risk to bring gas to Homer. Now that this is a reality for the people of Homer. If the utilities commision had gone with the honest bid and intent the people of Homer would have had gas years ago. Instead, government has supersized the whole thing. Rick's original testimony will be self evident to this fact.

Judith Eckert
69
Points
Judith Eckert 02/02/13 - 07:39 am
0
0
Last note-relevance here is Enstar's intent and no cost limit

This is the first time I have ever used a blog. It has been interesting to say the least. Just for the record...my husband's expertise is relevant because he did the original bid for certification through Homer Electric. Enstar got the bid and certification but never served. Essentially they waited until they would have no financial risk to bring gas to Homer. Now that this is a reality for the people of Homer. If the utilities commision had gone with the honest bid and intent the people of Homer would have had gas years ago. Instead, government has supersized the whole thing. Rick's original testimony will be self evident to this fact.

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