Members of the Kenai City Council will convene Friday for a special meeting to pick a strategy for funding one of the city’s top capital priorities.

The City of Kenai on Aug. 1 was notified that its Water Treatment Plant pump house construction project, which would improve the reliability of city water distribution, had been approved for state funding. That’s according to Kenai City Manager Terry Eubank, who outlined in an Aug. 8 memo what that funding means for the project’s immediate future.

Money for the project, the city’s top priority when it comes to the water and sewer fund, is estimated to cost $1.2 million. The approved funds come from Alaska State Revolving Fund’s Drinking Water Fund, which offers eligible Alaska communities low-interest loans for the construction of water and sewer programs.

Although state funding is technically being extended to the City of Kenai as a loan, Eubank said that loan is eligible for full forgiveness by the state, meaning the city wouldn’t incur any debt.

Kenai’s charter requires city issuance of revenue bonds to be approved by a majority of voters. Eubank wrote that it was unclear to the city whether or not voter approval is legally required because the State of Alaska, though offering the funding as a loan, has set aside money to fully forgive that loan. Loan forgiveness is not guaranteed.

In his memo, Eubank lays out two options for city council members to consider.

First, the council could move forward without putting a bond question on the city ballot. The city would be expected to designate and pay for the project, and then seek reimbursement from the state. To cover that upfront cost, Eubank said the city would temporarily put three other capital projects on hold.

Alternatively, the council could ask voters for permission to incur enough bond debt to cover the loan amount. If a majority of voters cast ballots in favor of the proposition, the city would follow its regular process for bond issuance. If the proposition fails, the city would decline the loan offer from the State of Alaska and seek other grant opportunities for the project.

“Based upon the attached legal opinion, either option is (a) legal and viable path forward,” Eubank wrote. “The administration is seeking Council’s direction upon which option to proceed. Either option will result in the construction of a new water (pump house), the City’s Water and Sewer Utility’s number one capital improvement priority.”

Per Kenai’s most recent capital improvement plan, the city’s Water Treatment Facility was developed in 2011 and received improvements in 2015 and 2016. Construction of the pump house, the plan says, will update the pumps that move water from the plant to users and is needed to improve reliability of the system and increase the city’s ability to meet demand for water.

The amount of water the City of Kenai’s Water Treatment Facility treats on any given day ranges from a low in the winter of about 580,000 gallons to a peak of more than 1 million gallons in the summer, according to the city budget. In all, Kenai’s water distribution system serves about 2,000 connections.

Friday’s special city council meeting will be streamed live and available to watch back on the City of Kenai’s YouTube channel.

Reach reporter Ashlyn O’Hara at ashlyn.ohara@peninsulaclarion.com.