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A state grant worth nearly $3.4 million targeting a project to build a new fire station in Nikiski cleared all but the last legislative hurdle at Tuesday's Kenai Peninsula Borough Assembly meeting.

Ordinance 2008-19-01 was approved for introduction by the assembly and set for a public hearing on Aug. 5.

Nikiski Fire Station No. 2 is 37 years old and inadequate for community emergency response, according to Nikiski Fire Service Chief James Baisden.

"Renovation of the existing structure is cost prohibitive due to existing electrical and plumbing issues, such as water drainage, leaking roofs, and rotting structural supports," he told the assembly in a memo June 26. "The original structure was built as a community center for Nikiski and was never designed or built to properly handle equipment and personnel to serve the community emergency medical and fire response needs."

The borough requested the state funding and the Legislature included the $3.375 million in the FY 2009 capital budget signed by Gov. Sarah Palin on May 9.

Capital Projects Director Kevin Lyon said Wednesday that the borough was looking at a couple of possible sites and doing some preliminary environmental work on those. Once started, he said, the project would take about a year to complete both design and construction.

Just when the project might proceed once the assembly acts to formally accept and appropriate the grant will depend on the outcome of another ordinance that would eliminate grant funds from the calculation of a project cost with regard to the $1 million spending cap that now prevents the assembly from approving expenditures in excess of that amount without a public vote.

If that difficulty is addressed, design work could begin in August, Lyon said. If a public vote were required first, the delay would put the project well into the fall.

The measure of concern is Ordinance 2008-17 (substitute), introduced by Assemblyman Gary Superman and Borough Mayor John Williams last month, which got the first of two public hearings Tuesday. The second is scheduled for Aug. 5.

That ordinance would alter the effect of a 2005 citizen initiative that capped the amount the assembly could spend without a public vote at $1 million. It was backed by the Alliance of Concerned Taxpayers (ACT) and approved by voters by a narrow margin of 140 votes. It also required a 60-percent majority approval by the electorate before the assembly could expend in excess of $1 million.

The terms of the ballot measure made federal, state and other grant funds part of the $1 million calculation. The new ordinance would eliminate grant funds from the $1 million calculation, meaning the cap would be applied only to borough funds.

Under state law, a successful initiative ordinance can be changed by assembly action after two years have passed since its approval by voters.

The measure also would exclude grants from such other organizations as the Rasmussen Foundation, the Denali Commission and others, from future cap calculations. Another provision would increase the amount that could be spent without voter approval in the North Peninsula Recreation Service Area from $500,000 to $1 million.

Ruby Denison, of Ninilchik, prime sponsor of the 2005 ballot measure, recently called the new ordinance a "creative accounting" method meant to circumvent the 2005 vote. Tuesday, ACT members James Price and Vicki Pate spoke against the new ordinance.

Supporters of the measure testifying Tuesday included Ryan Smith, CEO of Central Peninsula General Hospital Inc., and Baisden.

Superman, of Nikiski, said rising construction costs make the cap problematic for the borough, and the inclusion of grant funds in that calculation "significantly impairs the borough's ability to receive grant funds for capital improvement projects."

Requiring a costly, time-consuming public vote to expend grant funds could delay projects, increase costs, and perhaps hamper legislative efforts to make grants in the first place, Superman said.

"In my view, the best interest of the borough would be served by excluding grant funds from the code provision," he said.

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