Utility costs could rise

PALMER -- Officials at the city of Palmer, having won the right to provide water and sewer service to the new Mat-Su Valley Medical Center in early March, are now considering how to handle the costs of this hard-won privilege.

Through a federal appropriation for construction of a new water and sewer line to the new Mat-Su Valley Medical Center, $5 million has been made available, and the rights, awarded by the Regulatory Commission of Alaska in March, have gone to Palmer in accordance with an agreement reached in late February between the hospital and both cities.

This money will cover approximately 75 percent of the construction costs of the sewer and water line, the price tag of which is currently about $6.5 million. This leaves roughly $1.5 million to be scraped together by the city itself.

"Things have to happen very quickly here," said Palmer City Manager Tom Healy at the May 25 meeting of the Palmer City Council, referring to the need for decisive action as construction of the hospital proceeds.

Healy mentioned that the city could float a low-interest loan with the Department of Environmental Conservation, with interest rates as low as 1 percent.

Council Member Tony Pippel said he liked this proposal, and said the rate Healy had quoted was very fair.

"Borrowing at 1 percent is just like borrowing from your uncle," Pippel said.

Pippel also advocated searching for funds from additional sources, such as going back to the congressional delegation with a request for more federal funds.

"I'm just trying to make sure that Palmer doesn't get in the hole on this," he said.

However, at the June 8 meeting, city attorney Jack Snodgrass said he was pretty sure the city couldn't try to match federal funds with more federal funds, and that Palmer should look elsewhere to foot the water and sewer bill. Snodgrass did, however, say water and sewer rates could reflect capital expenditures, so raising service fees could help to recoup any money spent.

Healy agreed. "We might be able to get money from our patrons, but not more federal money," he said.

Council Member Steve Carrington said he would like to receive funds from other sources, but the city agreed to pay the costs of expansion and should be prepared to do so. "This is a responsibility we took on when we made this agreement," he said.

The city is shooting for a total cost of $1.5 million, however, Pippel suggested that the city err on the side of safety by putting an item on the October ballot asking for the voters' blessing to float a loan of up to $2 million. This may be accompanied by a proposition to raise utility rates for users of Palmer's line.

Pippel said this action could be justified by the fact that the extension will change the entire scope of existing water and sewer provision in Palmer.

"We're not just talking about providing service to a new hospital, we're talking about extending our service area to a new set of customers," he said.

However, Pippel also admitted that the extension might hold limited appeal for current users of Palmer's system.

"It's of some benefit to our rate payers, but not much benefit," he said.

Council Member John Combs said this should be more a matter of providing service to future customers than a matter of altering the service provided to current customers.

"I think we're really going out and planting the flag as far as these water and sewer boundaries are concerned," Combs said.

The council will consider the matter further at its next meeting, on June 22.

Contact Daniel Spoth at daniel.spoth@frontiersman.com.