A $2.588 million bond package that could be headed to Kenai Peninsula Borough voters this fall would make the borough eligible for state reimbursement payments covering 70 percent of the costs of four school repair projects.
An ordinance up for introduction on the borough assembly’s agenda today would place a proposition on the Oct. 3 municipal ballot asking voters to approve issuing general obligation bonds to cover the four projects, totaling $2.588 million. The borough already has funded three of those projects.
A state law adopted in 2005 resulted in the borough being eligible to receive reimbursement for 70 percent of the principal and interest on school capital improvement bonds up to the $2.588 million limit, enough to cover a sizeable chunk of the cost of the four projects.
“The bond program allows the borough to go back three years to recoup costs incurred for school capital projects,” said borough Finance Director Craig Chapman in a memo to the assembly. “This provides an extraordinary opportunity for the borough to be reimbursed for funds previously expended.”
To be reimbursed, however, borough voters must approve issuing the general obligation bonds for those school improvement projects. Those projects and the estimated costs approved for reimbursement by the Alaska Department of Education are as follows:
· Areawide arsenic remediation, $1,029,860;
· Nikolaevsk School roofing, $675,000;
· Soldotna Elementary School windows, $300,000; and
· McNeil Canyon Roofing, $583,140.
According to the borough, the bond debt including interest ($2.588 million plus $655,005) totals $3,243,005.
The estimated amount to be paid by state reimbursement funds would be $2,270,104, leaving the borough owing $972,901.
Chapman explained, however, that the total cost appearing in the proposed ordinance ($2.588 million) is the total cost eligible for reimbursement, not the actual total cost of all four projects. The borough has already funded the arsenic remediation, Nikolaevsk roofing and Soldotna Elementary window projects. The McNeil Canyon roofing project has not yet been funded. Its actual estimated cost, Chapman said, is $750,000, about $166,860 more than the $583,140 eligible for reimbursement.
Chapman said the additional $166,860 needed to complete the McNeil project will require moving funds left over in the accounts of already-completed projects.
Even considering the interest on the bonds, the 70 percent reimbursement program ultimately would save the borough a little over $1 million, Chapman said.
He also said that, based on 2006 assessed valuations on real property, the amount of property taxes needed to pay the borough’s share of the debt service would amount to $2.01 per year on each $100,000 of assessed value, assuming the debt is issued for a 10-year term at a 4.25-percent interest rate.
“The operating and maintenance cost estimate associated with the projects is listed in the ordinance as zero dollars,” Chapman told the assembly. “In reality, completion of these projects will reduce the annual operating and maintenance costs associated with the impacted facilities.”
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