Officials make pitch to council for bonds

At Monday night’s regular Homer City Council meeting, with a bare-bones council attending and few controversial items on the agenda, much of the meeting involved pitches by city and borough officials on upcoming bond propositions. Speaking were:

• Homer Public Safety Building Review Committee chair Ken Castner on Proposition 1, a $12 million bond and a 0.65-percent seasonal sales tax increase to fund a new Homer Police Station;

• Kenai Peninsula Borough Mayor Mike Navarre on two borough ballot propositions to raise the taxable sales amount to $1,000 and phase out half of a $300,000 senior property tax exemption; and

• South Peninsula Hospital spokesperson Derotha Ferraro, on a $4.8 million SPH Service Area bond to upgrade the hospital operating air handling and ventilation system and expand the Homer Medical Center.

The city proposes to replace its outdated Heath Street cop shop with a new police station and jail at the corner of West Pioneer Avenue and the Sterling Highway. About 60 percent of the 28,000-square-foot building would repurpose the Homer Educational and Recreational Complex, or HERC. If the bond passes, the city would borrow up to $12 million. It would finance the bond with a 0.65-percent, April 1-Sept. 30 sales tax — an increase to 5.15 percent from the current 4.5 percent city sales tax. That tax would go away once the bond was paid off. With the Kenai Peninsula Borough sales tax of 3 percent, in Homer customers pay a total sales tax of 7.5 percent. That would go up to 8.15 percent under the proposed seasonal sales tax.

“We want to deliver to the police what they need to maintain an effective fore for the next 40 years,” Castner told the council.

Final design has not been done. Castner said the $12-million figure is a not-to-exceed cost, and that it could come down. Using the HERC should result in a cost savings, Castner said.

Much of the HERC would be used for facilities like evidence storage. Castner said about $2.5 million would be needed to upgrade the HERC.

In a follow-up phone interview, Castner said the total construction cost would be $7.5 million. A large civic project includes other expenses like engineering, permitting fees, 1-percent for art and construction contingencies. He said he thought the new station could be as little as $9.4 million.

“I’ve worked really hard to get everybody off the $12 million number,” Castner said. “That’s what I do for a living. I estimate projects.”

A 2012 architect’s report estimated renovating and bringing up to code the HERC would be $10 million. Castner dismissed that estimate as overpriced.

“I never gave it any credence at all,” he said.

Castner told the council that the new station also would accommodate changes in crime prevention policy with more meetings with the public and the space to hold it.

“They’re not just a crime fighting organization. They’re not just guys on the street,” he said of the police. “They’re doing a lot more social interaction in the hope it leads to prevention.”

Castner said as chair of the Public Safety Committee he sees his role as a champion for the police.

“They’re not going to come here and complain,” he said. “You need to have some empathy for the conditions they’re working under.”

Mayor Navarre made his pitch for borough Propositions 3 and 4. Prop 3 would raise from $500 to $1,000 the taxable sales amount. It also would exempt sales tax on residential rents. Prop 4 would eliminate over time an optional senior property tax exemption of $150,000 on top of the mandated state exemption of $150,000, or $300,000 total. Prop 4 would reduce over time the total senior property tax exemption from $300,000 to $150,000, bringing the borough exemption in line with most other municipalities. Both propositions would be voted on by all borough residents.

The borough assembly already passed other tax code changes not requiring voter approval, such as now requiring nonprofit organizations who sell items to charge and collect sales tax. The tax changes are in response to cuts in state funding like revenue sharing, Navarre said.

“The borough will need to increase revenues or reduce spending,” he said. “We’re trying to prepare and get ahead.”

The borough caps the sales tax on the first $500 of a purchase. If adjusted for inflation, $500 in 1965 dollars would be worth $3,000 today, Navarre said. Under the $500 sales tax cap, the Homer sales tax of 7.5 percent would be $37.50. Under the $1,000 cap, it would be $75.

Raising the cap to $1,000 would raise an estimated $3.6 million for the borough. The rent exemption would result in $700,000 less, with a net of $2.9 million.

The senior tax exemption change wouldn’t affect seniors now getting the exemption or those who turn 65 before Jan. 1, 2018. Alaska law mandates a $150,000 exemption. Prop 4 would over time reduce the $300,000 borough exemption to the state mandate of $150,000. It would phase out the optional exemption on this schedule:

• For seniors who reach 65 between Jan. 1, 2018, and Dec. 31, 2020, the optional exemption is $100,000, for a total exemption of $250,000.

• For seniors who reach 65 between Jan. 1, 2021, and Dec. 31, 2023, the optional exemption is $50,000, for a total exemption of $200,000.

• For seniors who reach 65 after Jan. 1, 2024, there is no optional exemption, for a total exemption of $150,000, the state mandated exemption.

The senior property tax exemption also applies to service areas such as an emergency service area as well as general borough property taxes.

“If you need emergency services and you’re exempt if you’re over 65 for paying those, your next-door neighbor who may be younger is paying it,” Navarre said.

The senior property tax exemption is about $850 million in borough property value, about 12 percent of the tax rolls, Navarre said. Prop 4 wouldn’t eliminate a hardship exemption. Seniors who have a property tax bill more than 2 percent of their gross annual income can get the hardship exemption. It also doesn’t affect the unlimited property tax exemption for disabled veterans and their surviving spouses.

Ferraro spoke about another borough proposition, Prop 2, a $4.8 million bond proposition for the South Peninsula Hospital Service Area to be voted on by only that service area. It would pay for $1.8 million to upgrade the operating room air handling and ventilation system and $3 million for a 5,700-square-foot expansion of the Homer Medical Clinic, now owned by the borough and run by South Peninsula Hospital Inc., the nonprofit organization that also runs the hospital.

Ferraro said the operating room air system is outdated. Over the last 18 years, surgeries have tripled. At the same time the average heat index has increased, with more hotter days overall.

Homer Medical Clinic has become overcrowded, Ferraro said. The clinic serves about 9,000 patients, more than 60 percent of the service area. That’s double the number of patients the building was designed for. The expansion would provide more staff work space, more lab and imaging space, more consultation rooms and seven more exam rooms. That would allow the seven current medical staff to see more patients and to hire more doctors.

“There are not enough exam rooms for all the providers to work at the same time,” Ferraro said.

The annual bond payment would be $370,000 a year, Ferraro said. It would take .21 mills or $21 per $100,000 of property value to pay that. The good news is there will not be an increase in the hospital service area mill rate, Ferraro said.

That’s because based on an increase in property assessments, the bond payment could come out of higher property values. The service area has benefitted from some oil and gas properties that have increased overall property values. The service area also is reducing existing bond payments thanks to refinancing of current debt.

Also on the borough ballot will be Proposition 1, to approve a general obligation bond of $10.6 million for Central Peninsula Landfill improvements. That would raised property taxes $14.10 for every $100,000 of assessed property. The bond would be voted on by all borough voters. Homer has a solid waste transfer facility on Baycrest Hill, but waste is trucked up to the Central Peninsula Landfill for disposal.

Michael Armstrong can be reached at