Assembly Clears Way for Loans to Homer, Kachemak City


     The Kenai Peninsula Borough Assembly has approved a rule change that could pave the way for the borough to loans funds to both Homer and Kachemak City. The money would be used to pay for construction of natural gas infrastructure.

     There are very specific rules about how the borough is allowed to invest its money. According to borough code, those investment vehicles include Treasury Securities, bonds and notes with an “A” rating from Moody’s Investor’s Service or Standard and Poor’s, and the Alaska Municipal League Investment Pool, among others.

     But assembly members can now add loans of up to $13.3 million to Homer and Kachemak City to that list. The money would be split between the two with the bulk of the funds going for Homer’s construction. And Borough Assembly member Bill Smith said the original project estimate for Kachemak City has increased slightly.   

     “In discussions with the city of Kachemak, when they were looking at their construction costs, they deemed to be somewhat higher than they first anticipated. And so this amendment moves the limit of $300,000 to $600,000 that could be loaned,” he said.

     Smith said he has heard concerns about moving forward with this plan, but he said investing the funds like this would generate a better return for the borough than having the money sit in a bank savings account. During the Tuesday night Borough Assembly meeting, members also amended language dealing with expected interest rates for each of the loans. 

     “This is an amendment to the interest rate statement for the city of Homer and we would delete 4.5 percent per year,” Smith said. “And the whole sentence would newly read ‘Interest rate shall be at a rate to be negotiated to accrue beginning on the date of each disbursement to the City of Homer’.”

     The same amendment was made for a potential loan to Kachemak City. There were six votes in favor of the ordinance change, 1 “no” from member Kelly Wolf, 1 absent member and Charlie Pierce, who is the Southern Division Operations Manager for Enstar Natural Gas Company, abstained from voting because of the perceived conflict of interest.

     This is only the first step in making the transaction. Now assembly members will need to negotiate rates and terms with the cities and discuss the measure again before any funds will be dispersed.