Kenai is officially debt free.
The announcement that the city was about to make its last payment on a 20-year bond came last month at a city council meeting. That payment, in the amount of $154,000, was the final installment on the city's last bit of outstanding debt remaining from the Inlet Woods subdivision development.
According to Kenai Finance Director Larry Semmens, the Inlet Woods debt originally amounted to more than $2 million. Over the years, Kenai has incurred the Inlet Woods and other debt in a variety of ways, including bonds to pay for capital projects.
In the past decade, however, the city has slowly but surely been getting closer to having all its debt paid off.
"In the last 10 years, we've paid off more than $2 million, not including interest," Semmens said.
During that time, the city has annually paid between $175,000 and $200,000 per year in debt service. Now that those checks won't be getting sent out, Semmens said the city could benefit in a number of ways.
"That's money we won't be paying out in future years," he said.
Not having to make a big debt payment should help an already tight city budget. It also could mean benefits to taxpayers in the form of lower property taxes. Kenai recently dropped its property tax rate by a half mill, in part, because of the fact that debt is no longer an issue, Semmens said.
"It definitely makes it easier (to lower taxes)," he said. "It's $150,000 we don't have to spend."
In addition, if the city wants to take out future loans for capital projects -- like expanding the city's library -- Semmens said creditors shouldn't have trouble lending Kenai the money.
"The bond market would look on us favorably," he said.
Being able to bond for capital projects is a good thing, he said, because that way voters are able to approve large city expenditures rather than having the council dip into the city's general fund.
"You have support of the public whenever you have a capital project that is bonded," he said.
In addition, issuing debt allows the city to spread payment for a project across a longer period of time.
"The question is, do you bond for a project and stretch it out over 20 years?" he said. "If you do it that way, those who use it are the ones paying for it."
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