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Natural gas line project cost a concern

Posted: Friday, October 10, 2008

A proposed natural gas line to a subdivision off Funny River Road has some residents protesting that they weren't fully informed of the actual costs when petitioned to form a utility special assessment district.

The Kenai Peninsula Borough Assembly is scheduled to consider a measure at its Oct. 14 meeting, Resolution 2000-080, that would authorize the borough to proceed with construction of the Moose Range Meadows South assessment district, or USAD, a project estimated to cost $367,695.

The bulk of that, about $353,500, is the price Enstar has set to build the line. Another $14,200 represents borough costs.

The borough would finance the project. Each of the 117 benefiting properties would be assessed $3,142, payable over 10 years at 2 points above the prime interest rate, which is currently about 5 percent. Property owners could opt to pay the assessment immediately or over less time with no penalty for early payment.

Those actually tying into the line would also have to pay Enstar to install connecting service lines to their properties, plus meter fees. That could add about $1,000 to a property owner's total costs.

Rod Nelson owns a property in the subdivision assessed at $155,300. He said Wednesday that he and several of his neighbors were unaware of the interest they'd have to pay, and were not informed that Enstar would tack on its own fees to the project.

He said he actually wants gas, but is not pleased with how the process unfolded.

"The way it was presented to us, there was no mention of any interest," he said. "The whole thing is just not right."

Whether at this point anything can be done to stop the process that is well along is not known. Borough code requires that the owners of more than 70 percent of the parcels in a proposed utility district sign a petition in order to start the USAD process. Earlier this year, the borough got 83 valid signatures, or 70.9 percent.

The borough prepared a Resolution of Necessity, which was adopted by the assembly on Aug. 19. That launched a 30-day period during which the project could have been halted if the borough had received written objections from 50 percent or more of the property owners.

Clyde Johnson, special assessment coordinator for the borough, said the borough had received only one written objection -- that from the owner of two undeveloped lots. Johnson acknowledged that Nelson had offered a verbal opposition at a meeting, but did not submit a written objection.

Absent sufficient objection, the resolution authorizing construction of the project was prepared for the assembly's review and will be addressed Tuesday. Nelson said he would attend along with others to protest the project. He said he had a petition signed by 11 people who feel, as he does, that although many had signed the original utility district petition, they were unaware of the extra costs.

Johnson said the borough did not offer information detailing Enstar's fees. Property owners were sent mailings explaining their right to object and the timeframe in which to do it.

As for the interest rate, Johnson said he believed property owners were given that information, but could not find any written correspondence with property owners spelling that out specifically. He said he discussed the interest rate issue with some property owners, though he couldn't say if that included Nelson. Reference to the interest rate does appear in a July 23 memo from Finance Director Craig Chapman to the assembly.

Could some property owners been left unaware of the interest rate factor?

"It might be possible, but I would not think it likely," Johnson said, adding that he'd never heard of an example where money was loaned long term without some interest rate attached.

Nelson had other concerns about the proposed gas line. He said he thought subdivision residents were being asked to pay more than a fair share, even if the assessments were the only costs. He believes they would be subsidizing the lengthy extension of a gas line along the back side of the airport that is needed to reach the subdivision, and for a connection to an existing line near the river that would complete a gas line loop, something he said would help Enstar by equalizing pressure.

He said there didn't appear to be any compensation contemplated for subdivision property owners for the benefits realized by Enstar. Nor were reimbursements anticipated from future consumers who might tie into the line outside the USAD's borders.

Johnson explained that in some cases there is a reimbursement mechanism. That would apply, say, to someone having 10 acres inside the USAD for which they paid one assessment who later decides to subdivide the property. In that case, within the first three construction seasons, a subdivided lot owner hooking up to the line would be charged the original USAD assessment. That money would be funneled back through the borough, eventually reimbursing the original USAD residents, he said.

Developments not part of the original USAD would tie into an existing main with a new main, he said, and in that case, there would be no benefit and no reimbursement for the original USAD residents.

Curtis Thayer, spokesman for Enstar, said creating a loop increases the company's ability to deliver gas to consumers even if there is a break somewhere in the line.

Also, the project requires a stretch of 4-inch line and another stretch of 2-inch line, and the cost is based on those sizes. Enstar, however, will increase the size of the 4-inch portion to 6 inches at its own expense, a move that anticipates future growth in the area, Thayer said.

Nelson said he and the others upset about the process are not seeking to halt the project. That, he said, was unlikely anyway.

"Money is not the main issue," he said. "We hope to get some kind of reasonable concession because they didn't disclose all the facts."

He said there were "a few of us" considering civil action.

The assembly has the discretion to vote down the USAD construction resolution, even absent written objections from half or more of the property owners.

Hal Spence can be reached at hspence@ptialaska.net.



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