Palmer makes utilities top priority

PALMER -- Palmer City Council has made the Southwest Utility Extension, a project to extend the city's water and sewer utilities nearly six miles outside the city limits, its number-one priority in a grant application to the Alaska Department of Environmental Conservation.

In a special meeting held Sept. 7, city council members voted to make the Southwest Utility Extension Project the top funding priority in a series of four grant applications to the DEC.

Before last week's meeting, the city's top funding priorities for water and sewer utilities were a $250,000 grant to be used for upgrades to the Palmer waste-water treatment plant and a $750,000 grant for the replacement of several steel water mains in downtown Palmer. These were given a lower funding priority in favor of the utility extension, a project being undertaken with Valley Hospital.

"This [utility extension] is a big project, a very important project," city manager Tom Healy said. "At this point, it's a matter of putting all our resources into it."

Although the extension of Palmer's water and sewer utilities out to the area of the new Valley Hospital facility off the Glenn Highway goes miles outside the city limits, it is not outside the city's utility service area.

The council is asking for $1 million for each utility extension, water and sewer -- twice what the original priority scheme had set forth. The total cost of the treatment plant upgrades and water main replacements is only $1 million, as opposed to the $2 million for the utility extension.

But the city council has submitted applications for all four projects, filing separate grant applications for each, so there remains a chance the city could receive additional grant money for projects other than the utility extension.

There is some disagreement on the city council, however, about whether grant funds should be used for a utility extension that will not immediately benefit the residents of the city of Palmer.

The city must come up with 25 percent of the total cost of the extension -- an estimated $2.3 million for an $8 million-$9 million project. The U.S. Department of Agriculture has agreed to cover 75 percent of the cost through grant money.

The 25 percent the city is responsible for was going to come from a $2.3-million bond proposal that will go before voters in the Oct. 5 municipal election. However, if the state DEC grant comes through, most of the $2.3- million bond will not be necessary.

That would also mean much of the initial cost the city is covering would not be recoverable from the beneficiaries of the utility line; bonded indebtedness can be recovered over time through different rate schemes, but grant funds cannot be recovered.

Bond money can also be used for a variety of projects, while grant money is specific to the project for which it is granted.

Some council members have a problem with the allocation of grant money to a project outside the city.

Tony Pippel, a Palmer City Council member, said in a phone interview that he disagrees with the way the city has decided to allocate grant money.

"I understand it's smart for the city to secure as many funding sources as it can for this project," Pippel said. "But part of the reason for proposing a $2.3-million bond to fund the city's portion of the cost was that we could recover the cost from the beneficiaries of the line. Voters might get this [DEC] grant, but now it will be applied to a project from which we can't recover the costs, because it's a grant. We should make the primary users of this line pick up more of the costs of installing that line."

But a memo from Healy was sent to council members before the special meeting last week. In that memo, Healy said the city should concentrate all available and potential resources on the utility extension project to assure adequate funding. At this point, Healy said, it is not assured that voters will approve bonded indebtedness for the project when it comes up for a vote on Oct. 5.

If the state DEC approves the grant and it goes in the governor's budget, it will go to the Legislature in January and the funds would be available after July 2005.

If voters do not approve the bond, and if the grant does not come through, the city will have to pay for the extension using its utility reserve funds.

Contact John Davidson at john.davidson@frontiersman.

com.