Palmer seeks more money for utility project

March 27, 2005

KATE GOLDEN/Frontiersman reporter

PALMER - The city's Southwest Utility Extension Project is moving along despite still being in limbo over a multimillion-dollar dearth in funding.

"The question about full-funding this project has been a question and remains a question to this day," City Manager Tom Healy said.

Originally, the city agreed to pay 25 percent of the costs of extending water and sewer lines out to the site of the under-construction Mat-Su Regional Medical Center. The project estimate then was closer to $8.5 million.

But city council members said they would stick to the 25-percent commitment even though the current estimate is about $5 million more than they originally expected.

Such commitment means that Tuesday, the council authorized Healy to spend $1.3 million, or about 45 percent, of the utility fund reserves on the project.

They still have another $3.5 million to go.

"It's been a busy last couple of weeks," Public Works Director Rick Koch said.

Koch, Healy and Mayor John Combs moseyed down to Juneau this month to explain the problem to Gov. Frank Murkowski's chief of staff Jim Clark, Alaska Department of Transportation Commissioner Mike Barton and Alaska Department of Environmental Conservation Commissioner Kurt Frederickson.

"I don't think that I left there thinking that there's any immediate funding in sight for the project," Koch reported to the council Tuesday.

But Koch, Combs and Healy all said they were hopeful.

How the current funding breaks down:

To fund the city's 25-percent promise, Palmer voters approved in October 2004 a $2.3-million release in revenue bonds.

The U.S. Department of Agriculture's grant of 75-percent funding was based on the earlier estimate and limited last month to $7.3 million, $2.4 million of that approved last year and another $4.9 million expected to be announced Monday.

Healy said that the city "tapped out" USDA funding.

Stick it to the borough

Palmer and hospital officials argue that the utility extension and the hospital itself will carry benefits to the entire region.

"Building in the hospital has already increased land speculation in that area," hospital spokesperson Elizabeth Ripley said. "The Southwest Utility Extension Project is only going to enhance the value of that property."

"The borough is the big winner in this thing who has invested almost nothing," Koch said. "They stand to make almost a million dollars a year off that hospital in property taxes."

He suggested that the hospital could provide $2.5 million in return for tax relief, and "in a very short amount of time, the borough would recoup that money."

Mat-Su Borough Manager John Duffy said the hospital might be able to file for a economic development incentive program that would help. It would require a borough analysis, and the Assembly would make the final decision. The only other option would be for the Assembly to directly appropriate money.

Meanwhile, Valley Hospital is three months ahead of schedule. In light of that and the Palmer project's uncertainty, the hospital installed its own well and septic system.

The fix is intended to be only temporary, Ripley said.

"We are trying to support Palmer in all their endeavors to supply funding," Ripley said.

But the hospital would much rather exhaust federal and state funding options before putting up a multimillion-dollar chunk up front, even if it were to be reimbursed in the end. Ripley said that to that end, Valley Hospital CEO Norman Stephens has been lobbying in Juneau and Washington, D.C.

Wherefore the added costs?

A longer southern route avoided land disputes but added another mile and a half of line to the project. The cost of the pipe went up 15 percent. Three lift stations turned out to be much more expensive than expected. And project engineers based their cost estimates on getting a waiver from DEC for a three-foot separation between sewer and water lines, instead of the mandated 10 feet.

But DEC wouldn't go any lower than five feet, saying there wasn't enough precedent to prove the system's safety below that.

Palmer negotiated that point with the DEC commissioner at the Juneau meeting. Koch said Barton's briefing from DEC officials was "not entirely accurate." While Barton agreed to revisit the issue, he was "noncommittal," Koch said.

"I think that's as good as we were going to get out of that," he said.

'We'll make it work'

"We don't really know if we have a project, do we?" Council Member Tony Pippel said.

"That's correct, sir," Combs agreed.

Koch and Combs were adamant that the project get out to bid before it gets any more expensive.

"When it goes to $20 million - well, if we keep waiting on this and don't get it done, I imagine we'll reach that number someday," Combs said.

Despite the uncertainty about the total, Koch said there's enough money now to certify funding for base bids in the next three to four weeks. The bidding process, he said, will more precisely establish the cost of the project, and could even prove it cheaper than the estimates.

If a bid is awarded mid-April, Koch expects major construction can begin mid-July at the earliest and be completed by September 2006.

And the city will explore the possibility of postponing or even eliminating the water line from the project. Healy and Koch said the sewer was the most important part to get moving.

"We will be back for the water," Combs said.

In the worst-case scenario, if the project died completely, the city might be able to find a small grant to cover a portion of the money the city has already spent from the utility fund.

"Sewage, like politics, runs downhill, and we're at the bottom of the hill," Pippel said. "If this thing's going to blow up, we're going to be the ones with all of it all over ourselves."

"We'll make it work somehow," the mayor said. "I don't think they're going to want to be hauling their own stuff out there for too long."

Contact Kate Golden at kate.golden@frontiersman.com.