An Anchorage developer is taking advantage of an American Recovery and Reinvestment Act program that allows private entities to borrow money at free municipal tax rates to build a site adjacent to Kenai's new Walmart.
Pfeffer Development, LLC, has requested $2 million of the Kenai Peninsula Borough's allocated $7 million in recovery zone facility bonds to purchase a couple of Walmart's out lots for construction of retail space.
Mark Pfeffer, the managing partner of Pfeffer Development, said the first phase of the project is to put in a store for the wireless phone company, Alaska Communications Systems, or ACS.
"Right now we're only building out what's needed for ACS, but we're under contract with Walmart to purchase the whole two-acre site," he said.
ACS hired Pfeffer Development to build three stores throughout the state, two in Anchorage, and one in Kenai. He said that these new ACS stores will look vastly different than their counterparts, like the one in Soldotna.
"The stores are really on the cutting edge design-wise for Alaska," he said.
Despite rumors that the other spaces may house a chain restaurant like Chili's or Applebee's or a steakhouse, the other retail space has not been leased yet.
"We have absolutely no other takers," Pfeffer said. "We haven't advertised and we haven't marketed the space."
Pfeffer said the company is scheduled to close on the site at the end of the month, getting ready to submit permits and could be breaking ground as early as July.
Terry Eubank, Kenai finance director, explained that because the Kenai Peninsula Borough is a designated recovery zone under the stimulus act, the borough was given the right to issue bonds with tax-exempt borrowing rates.
He said that the bond program allows the city to act as a vehicle for the borrower to obtain financing at a reduced cost with no debt or cost to the city. The tax-exempt rates are expected to reduce the cost of capital by 1.5 percent to the private entity, which means Pfeffer Development will save $30,000 on their $2 million in bonds in the first year.
"We happened to have a project teed up and the timing was good," Pfeffer said about taking advantage of the program.
Eubank said that no other private companies have applied for the remaining $5 million in tax-exempt bonds allocated to the borough. June 30 is the deadline for private entities to take advantage of this program through their communities, he said. The entire state of Alaska was allocated $135 million in recovery zone facility bonds through the stimulus.
"It makes projects more viable than they normally would be because cost is less," Eubank said.
"It saves a lot of money and stimulates some development," said Rick Koch, Kenai city manger.
The city of Kenai had already taken advantage of the stimulus act with the bond program for the Kenai Community Library's expansion.
Brielle Schaeffer can be reached at firstname.lastname@example.org.
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