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Assembly approves $12.7M Homer gas line loan

Posted: March 20, 2013 - 10:11pm

Describing the action as a dual benefit for both municipalities, the Kenai Peninsula Borough Assembly gave the thumbs up Tuesday to a multi-million dollar loan to help build a Homer natural gas grid.

“It makes good sense,” Kenai Peninsula Borough Mike Navarre said. “I can understand why some think maybe we shouldn’t be in this business, but all we are in the business of is investing funds that we have available and getting a reasonable return that can be used to offset expenses for the borough.”

The assembly approved, 5-0, Resolution 2013-024, which approves a $12.7 million loan agreement between the Kenai Peninsula Borough and the city of Homer to finance a natural gas utility special assessment district. Assembly member Charlie Pierce abstained due to a conflict of interest and members Linda Murphy, Ray Tauriainen and Sue McClure were absent.

The potential loan comes on the heels of last year’s state capital appropriations that will bring a gas line from Anchor Point south. The loans would fund construction of trunk lines from the main gas line to the edge of properties. Homer property owners will pay the principle back through their property taxes via a special assessment district, but those Homer residents who want to connect their home to the trunk line would pay for that themselves.

In early February, the assembly approved an ordinance amending borough code dealing with investments to allow for two loans to Homer and Kachemak City to help create the natural gas grid. The assembly’s Tuesday action was only for Homer; a future loan for Kachemak City — up to $600,000, according to code — would have to be approved by the assembly.

Homer assembly member Bill Smith said both municipalities will benefit from the loan. He clarified that the loan money will not come from reserve funds or taxes, but rather funds the borough already has in an investment pool.

“The money is coming from our funds that we have invested for earning interest,” he said. “Those investments earn well under 2 percent … (and) this loan agreement with the city of Homer will bring the borough a 4 percent interest on its investment monies. It is over a 10-year period and the city of Homer has agreed to pay lenders costs as well.”

During public testimony, Soldotna resident Fred Sturman said he was against the loan, adding he felt the borough “had no business being in the banking business.”

“I do feel that if you guys pass this and give the money to Homer if anything happens down the road … I think you guys should be held responsible for not taking good care of the borough money,” he said, adding “Homer should support their own.”

Navarre said the borough has done its due diligence investigating the idea and has found the loan to be well-secured and that it would be a prudent investment.

“The schools down there will save money because of this project ... the hospital is projected to save as much $300,000 on an annual basis in energy costs,” he said. “Is there some conversion costs to it? Absolutely. But the real benefit comes from the energy savings you get with natural gas over fuel oil, propane and other forms.”

Homer City Manager Walt Wrede said the Homer City Council appreciated the borough’s consideration of the loan and reiterated that it would benefit Homer residents through the lower interest rate than the city could get with a commercial lender.

“I think the thing the council likes best about this is (that it is) just good public policy,” Wrede said. “You are taking taxpayer money you are investing anyway and you are reinvesting it right back into the borough for a lower cost of living, a higher quality of life and economic stimulation.”

Brian Smith can be reached at

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jimbob 03/21/13 - 05:56 pm
Sturman is Right

What is lost on the assembly members is the morality of taking taxpayer money and loaning it to other entities. Homer could have easily obtained funding from various other sources including bonding. Another question is why didn't Enstar fund the project if it is such a good deal for the Borough? Enstar is far larger economically than this Borough and it is Enstar that will profit from the servicing of the line. Surely Enstar wouldn't pass on such a lucrative opportunity. The assembly has decided to get into the financing business with money that was extracted from tax payers. If the Borough has $13 million laying around that can be spent and not repaid for 10 years, maybe the money should have been rebated to tax payers in the form of less sales tax or property tax. I am sick of paying tax on cell phone bills, groceries, gas, and every other thing that the borough taxes without any legitimate reason other than simply because they can. I guess though, since they are in the finance business, can we expect to get home improvement loans from the borough any time soon? Just think interest rolling in on the loans and raise the tax assessment.Throw the bums out!

BCKenai 03/21/13 - 07:37 pm
Borough Loan to Homer

Guess I don't care that Homer gets natural gas...does anybody remember all the crap that Homer residents have given the oil suppliers/companies over these last 30yrs or so? I don't. The meetings that the Homerites attended driving there in their gasoline fired cars? The anger towards the rest of us while blocking the presence of oil development in their area? The hypocrisy of the myriads of complaints that development would "pollute" their waters while their own docks I've personally seen with the sheen of an oil slick? Well, I say they need to drill for their own gas if they want it. Take some responsibility and the sweat that it takes to safely drill and produce something not just tap into the sweat equity of others and borrow money they won't pay back....

wings 03/22/13 - 04:59 am
The government of Homer

made the choice, not the people. The people pay the taxes and the government spends the taxes without permission from the people. They don't even listen to the people. Homer is a test city for Agenda 21. The people of Homer don't have a choice because their government doesn't know they exist.

Norseman 03/22/13 - 07:04 am
The way some of you talk

The way some of you talk about Homer is like they are not our neigbors, nor are a part of our borough, or a part of our state, or part of our country.

This is a loan period. It will not default like AIG, GM, or others. The borough will recycle this money back through our own borough. Our neigbors to the south will finally be able to use a natural resource to heat their homes and at a much cheaper cost than electricity.

This is a win win for everyone.

wings 03/22/13 - 07:12 am
What IF

Homer defaults on payments after the money goes down the tubes like Cyprus? (And it will go down the tubes, because it is not our money, and it's being called back through bailouts ... it is our debt). Do we get to take their land and call it Kenai extension?

tranquilitynow 03/23/13 - 01:46 pm
Loan business

The government is not in the business of making loans. There are always those who claim loans should be made available to big business but not to small businesses. When government does this it is not in any way fulfilling it's rightful role.

wings 03/23/13 - 06:22 pm
Conoco Phillips

Do we have any politicians in Alaska who do not work for the oil companies in some way? Mike Navarre works for Conoco Phillips ... does he have an interest in the gas and oil business over the residents of Homer?

Isn't Mr. Navarre a little to close to the taxpayers money to be making loans to Homer for their gas and oil, and doesn't "confict of interest" come to mind here somewhere? How can we let a vested oil and gas company worker make a judgment on how the company is doing?

Mr. Micciche also works for Conoco Phillips:

"Micciche is serving as mayor of Soldotna. He works as the general manager of ConocoPhillips’ Kenai LNG Plant, which has been his employer for 27 years."

How can we trust anything a double agent tells us?

Sam Von Pufendorf
Sam Von Pufendorf 03/23/13 - 10:27 pm

Wings, Mr Navarre doesn't work for Conoco Phillips in any capacity and has no contracts tying him in any way to their operations and never has that I am aware of.
Concerning the loan to the city of Homer, that was voted upon by the Borough Assembly as the borough mayor does not have the authority to arbitrarily make such financial commitments without assembly approval.
As for Mr Micciche; apparently that is who the voters chose. I'm not saying that was the correct choice, however, it was the people's choice.

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