Soldotna city administrators are sounding early warning bells about the city’s ability to pay for infrastructure projects. City officials are starting to discuss how to best stabilize the city’s financial future. City officials aren’t interested in cutting back services, which they say could necessitate some kind of new tax or other revenue source.
During a work session late last month, city administration presented a 40-page review of the city’s infrastructure and financial trends. City Manager Janette Bower says the report shows the growth rate of city spending is outpacing how much money it takes in.
“I don't want this to come off as the, you know, sky is falling, things are going wrong – not at all true,” she said. “But we do
both, all of us, all the department directors are here, as you can see, want you to know where we are with projects, where we are with our finances and what's ahead.”
Most of Soldotna’s revenue comes from its 3% sales tax, enacted in 1984. Last year, it brought more than $10 million into the city – more than half of the city’s operating revenue. The city also levies a property tax and a lodging tax, which each account for less than 2% of city income.
Overall, the city is bringing in more money than it was 20 years ago – roughly 80% more. But the city’s spending over the same time period has grown by 157%. It still takes in more than it spends, but the gap is closing.
“This reduces the amount of funding available annually for capital projects, and increases reliance on fund balance and one-time funding sources and also in our investment accounts as well,” Bower said.
The city says it’s spending more because it costs more to provide services than it did 20 years ago. And the city also offers more services now.
Last week’s discussion comes as the city stares down deferred maintenance at its ice arena. Last month, city council members agreed to spend almost a quarter of a million dollars on various repairs to the facility. But there’s more work to be done – around $9 million worth of work. Replacing the arena’s refrigeration system alone is estimated to cost over half that – $5.3 million.
The city could either try and do it all at once, or it could break the project into smaller pieces.
Soldotna Vice Mayor Lisa Parker says the city should focus on what it can afford.
“We're at the point where we need to do the must-haves,” she said. “The would-be-nice — it's kind of like when we did the field house, there were a lot of ‘would-be-nice’ to put into the field house, but we've had to defer that. So I would say the same thing for the ice arena. Go with the must-haves, and we'll work on the would-be-nice.”
In either case, the city floated taking on debt in the form of a municipal bond as a possible funding source, which requires a local ballot question and voter approval. Then, the city would pay back that debt over time. Soldotna will be paying off the $15 million bond approved in 2022 for the Soldotna Field House, which opened last summer, until 2053.
But there’s a hiccup. The city is already spending almost one-and-a-half million dollars per year to repay five existing bond debts – including for the construction of the Soldotna Field House and expansion of the Soldotna Public Library. And the Alaska Municipal Bond Bank has been paying attention.
Melanie Imholte is Soldotna’s finance director. She says the bank wants to make sure Soldotna has enough of its own money to pay off the debt it's taking on.
“When they did the financial capacity assessment, they're not seeing how, if we continue issuing bonds, that we would be able to continue paying the debt service on those,” she said. “So they would want to see something to help cover that.”
So, what can the city do to address those concerns? Because it’s not just the sports complex that needs work. The city has identified $4 million worth of work needed to Marydale Avenue – one of Soldotna’s most important roads. Some, but not all of that funding will come from Congress.
One option is to raise the city’s sales tax. The 3% rate was set in the mid-1980s. A half-percent bump would generate an additional $1.7 million per year. The city could also put the revenue in a dedicated fund for projects.
“The city will always have needs, and it's really, in my mind, it's nice to have this put aside to say ‘this is what we're going to use it for,’” Bower said. “Major maintenance and capital projects are hard for municipalities to pay for.”
Soldotna city council members generally favored an intentional approach to the city’s financial structure moving forward.
“Here in the City of Soldotna, we should be being proactive, as you pointed out, in making sure that we’re keeping our facilities strong,” Parker said.
Later that evening, the council approved spending more than a million dollars on separate infrastructure projects. Of that, more than $200,000 is going to a protective cover for the city’s winter sand storage pile. The rest will be used to replace the roof at the city’s maintenance shop.
