Kenai City Hall on Feb. 20, 2020, in Kenai, Alaska. (Photo by Victoria Petersen/Peninsula Clarion)

Kenai City Hall on Feb. 20, 2020, in Kenai, Alaska. (Photo by Victoria Petersen/Peninsula Clarion)

Kenai will not bond water treatment project

The City of Kenai will not put before city voters a bond question related to the planned reconstruction of the city’s Water Treatment Plant pump house after it was determined such a vote was not legally required. Kenai City Council members during a special meeting last Friday voted to postpone indefinitely a resolution approving the proposed ballot language.

The City of Kenai on Aug. 1 was notified that its $1.2 million Water Treatment Plant pump house construction project, meant to improve the reliability of city water distribution, had been approved for full state funding.

The project money comes from the Alaska State Revolving Fund’s Drinking Water Fund, which offers eligible Alaska communities low-interest loans for the construction of water and sewer programs. Kenai City Manager Terry Eubank told council members during Friday’s special meeting that such funds received a boost through the federal Infrastructure Investment and Jobs Act.

“The mechanism, or vehicle, that was chosen to disperse these funds was the revolving loan funds that are utilized by states. It’s not been unusual for those revolving loan funds to have components of some amount of principal forgiveness. It’s a little bit unique right now that they’re utilizing these revolving loan funds with a hundred percent principal forgiveness.”

There was some confusion because, although categorized by the state as a loan, the full $1.2 million project amount is fully refundable, meaning the net impact for the city would be not incurring any debt. Still, the city charter requires voter approval if the city wants to borrow money.

“What’s problematic for us at the city is that they call it a loan, which, you know, on the surface looks like it could trigger our debt provisions within our charter,” Eubank said. “In reality, this is much behaving like a grant.”

The city solicited advice from JDO Law, a law firm out of Anchorage, about whether or not the Kenai legally needed to put the financial arrangement with the state before city voters for approval. The firm in an Aug. 10 memo to council members wrote that, because the city is not expected to incur debt, they don’t believe voter approval is necessary.

To cover the upfront costs, Eubank wrote in an Aug. 11 memo to council members, the city will need to temporarily delay three other capital projects until fiscal year 2026. Eubank said the delay “will not negatively impact the operations of the utility.”

“Looking at our own capacity for projects and things, we feel like this is the most expeditious way to move forward,” Eubank said.

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. Per the State of Alaska, the project includes rebuilding the city’s existing pump house with a larger, insulated structure with metal panels.

Friday’s special city council meeting can be streamed on the City of Kenai’s YouTube channel.

Reach reporter Ashlyn O’Hara at

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