Millions of dollars in road-repair funds the borough needs to complete a slew of small projects could be in jeopardy as the state moves to comply with federal regulations governing earmarks.
Kenai Peninsula Borough Mayor John Williams and a contingent of the Kenai Peninsula Borough Assembly traveled to Juneau last week to pitch the borough's legislative wish list and to discuss concerns on a host of other issues, including retirement system debt, education funding, municipal aid, and transportation projects.
Williams said Tuesday that the way highway funding is directed toward borough projects by way of federal earmarks appears to be changing. New "onerous rules" would wrest control over the spending of those dollars from the borough and give it to the Alaska Department of Transportation, he said.
That could, for instance, take the Keystone Drive project from the auspices of the borough, and could call into serious question the future of the North Road extension.
"It's usurped our power to handle our own road construction," Williams said.
While in Juneau, Williams met with DOT Commissioner Leo von Scheben and other state administration officials, learning that the change is the result of federal regulations meant to guide the use of federal road dollars. Some $5 million in federal earmarks meant to cover the costs of several small road projects may be withheld.
"The state is saying that because of the complexity of the federal rules, small projects are not viable," Williams said. "We may have to choose one or two big projects instead."
Also in jeopardy is money already earmarked for extension of the Kenai Spur Highway, sometimes called the North Road project. Recent estimates suggest building the road could cost $100 million, Williams said, a price tag that makes the project less likely. Earmarked funds, roughly $5 million, might have to be returned, he said.
Assembly President Grace Merkes said she was not sure exactly how the earmark business might ultimately impact the borough. She did say there was talk of a kind of exchange, where the borough would turn over control of federal earmarked funds to the state, and the Legislature would appropriate funds back to the borough from the general fund.
It isn't clear yet if such a mechanism would be a one-to-one, straight across swap or if the borough would end up with less after administrative fees and the like were deducted.
Jeff Ottesen, director of the Division of Program Development within DOT, said the new federal regulations were adopted last Feb. 14. They apply to transportation planning and would govern how plans are developed and funds are appropriated. He called it a tightening of the fiscal constraints.
"In a nut shell, a project can't go into a STIP (Statewide Transportation Improvement Program) list if you can't reasonably foresee the necessary funding into the future," Ottesen said. "In other words, you have to make a credible case for the project."
With regard to the $5 million or so earmarked for several Kenai Peninsula roads, the borough had hoped to spread that money out over a number of small but necessary projects. Ottesen said, however, that the federal rules simply aren't set up to accommodate small projects. They are meant for larger roads.
He quoted von Scheben, who said the federal rulebook was so demanding that using the federal dollars on small repair projects would be like "using a pile driver to drive a nail."
With regard to the North Road extension, Ottesen suggested that the beauty of that project is that it could be done in smaller chunks, which would tend to hold down costs for things like environmental impact statements and the like.
Ottesen confirmed talk about a possible swap of federal funds for state funds, saying the idea has been floating around for the better part of a year. Early on, the idea was to have the $5 million in earmarks go to the state, and the state appropriate somewhat less to the borough on the theory that adhering to state rules would be less expensive for the borough.
Would that change because of the present budget surplus?
"I, personally, would be happy to see it a dollar-for-dollar swap," Ottesen said. All it would take, he added, is legislative intent written into the capital budget.
If it goes that way, the money the borough would get from the general fund would essentially be under the borough's control to use as it sees fit for road projects, he said.
Meanwhile, he said, the borough-earmarked money, whenever Congress officially appropriated it, would still be aimed at the Kenai Peninsula Borough, but be controlled by the state. It could go for larger boroughwide highway projects, he said.
Williams and Merkes also said they discussed state help with meeting municipal obligations to the Public Employees Retirement System and the Teachers Retirement System (PERS/TRS). Municipal governments around the state were hoping for state aid to cover 85 percent of the cost in FY 2008. It may not be that much.
"Under the PERS/TRS amount settled on by the Legislature and agreed to by the Alaska Municipal League, the state will furnish 78 percent and we will furnish 22 percent of total payroll," Williams said. "We agreed not to push for the 85-15. The fear is that if we push too hard that we would lose money from municipal assistance and revenue sharing or the education funding pool."
Merkes said she and the six other members of the assembly who made the trip met with state lawmakers and also with Gov. Sarah Palin.
"We talked about our priorities. I asked about revenue sharing, education and PERS/TRS," Merkes said of her meeting with Palin. "She pretty much supports those things."
Merkes said she also discussed the Alaska Marine Highway System problems with Juneau officials. At issue recently is the ferry system's proposed schedule for the winter of 2008-2009 set to kick in next November that would severely reduce ferry stops at Homer, Seldovia, Port Lions, and Kodiak, while the M/V Tustumena undergoes an overhaul.
"It was not real encouraging," Merkes said. "The system is so old and expensive to run."
She said she also met with Rep. Mike Chenault, co-chair of the House Finance Committee to discuss the budget.
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