Council debates free main allowance on gas line

As the city closes in on approving a final assessment roll for the Natural Gas Homer Special Assessment District, the Homer City Council at a work session on Monday debated an idea that could lower property owner assessments. Should the people who helped fund the gas line get a rebate in the future from the free main allowance, a fee paid by customers who hook up for natural gas service from Enstar?

Last week, the city released its final assessment roll. Property owners have until 5 p.m. March 16 to make written objections to the roll. The council will make adjustments to the roll and adopt a final roll at its March 23 meeting. Assessment payments are due staring this summer.

The free main allowance comes from a fee collected by Enstar from new customers. Part of its tariff with the Regulatory Commission of Alaska, the free main allowance is a way to recover from customers part of the cost of building a gas line. Starting in April, Enstar will send the city periodically a check from the free main allowance fees collected. That money will go into a reserve account. City Attorney Tom Klinkner said he estimated about $600 per hookup would be paid into the free main allowance reserve. If the assessment of about $3,300 is paid in full, the property owner might get a refund up front. Property owners paying the assessment over 10 years might get the refund later, perhaps as forgiveness of some final payments. 

“The question is for you when you get to that year 8 or year 9, do you want to put that money from the free main allowance back to the people who bore the assessments or for something else?” Klinkner asked.

Klinkner did note that under its loan from the Kenai Peninsula Borough that paid the $12 million to build the gas line, the free main allowance has to be kept in reserve until the loan is paid off, about eight years out. However, the city could pay the rebate from some other city funding source, he said.

Council member Beau Burgess said that the council didn’t have to bind future councils to a decision on the free main allowance.

“Why not defer the decision to whatever council is sitting at the table then in that fiscal environment?” he said. “That seems to be the most fair and prudent thing to do.”

Council member Gus VanDyke said he thought money earned from the free main allowance should go back to the people who financed the gas line.

“Isn’t money that reduces the amount of debt, doesn’t that money actually belong to the people since it reduces the amount we had to borrow?” he asked.

Council member Francie Roberts said she wondered if the council should make a decision now on how it pays the free main allowance so as to encourage people to pay off assessments earlier. Not making a decision doesn’t encourage people to pay off up front, she noted.

Roberts also asked about how Kachemak City dealt with its free main allowance payments.

“I think they got a free main allowance. Why haven’t we gotten a free main allowance?” she asked.

Klinker noted that Kachemak City had been on a different construction schedule and finished its gas line in 2013. Kachemak City also funded construction through private investors and has already paid off half its debt.

Action on how the free main allowance would be paid could be part of the decision on the final assessment roll, Klinkner said. He suggested rolling the free main allowance refund process into the assessment roll ordinance and said he would be happy to draft such an ordinance showing how funds would flow and other specifics.

Michael Armstrong can be reached at michael.armstrong@homernews.com.


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