Prop C would expand SPH service area into ocean

Lower Kenai Peninsula Borough voters will consider a ballot question, Proposition C, that will expand the South Kenai Peninsula Hospital Service Area. 

While the intent is clear, the actual expansion may confuse voters since it shifts the service area boundary into the ocean — an area with no registered voters. The expanded service area targets one class of property: oil rigs that might anchor in the new area, such as the Endeavour-Spirit of Independence and Furie Alaska jack-up rigs that anchored in English Bay off Port Graham last winter.

The specific question Proposition C asks is: Shall the boundaries be expanded to include the area below mean high tide in Kachemak Bay and Cook Inlet? A “yes” vote approves the expansion and a “no” vote opposes the expansion.

If passed, the expanded SPH service area:

• Would not include the uplands, that is, the towns of Seldovia, Port Graham and Nanwalek;

• Would not affect anyone with property like docks connected to the area below mean high tide, and

• Would not even increase taxes for any oil rigs in the service area on Jan. 1.

What the expanded service area would do is get for the SPH service area the 2.3 mill service-area property tax out of a 20-mill property tax charged by the state of Alaska for oil and gas property. Oil companies already pay 20 mills to the state, and would not pay more. 

What would change is the SPH service area’s share of that 20 mills. The borough already gets 4.5 mills in property taxes from rigs in the borough. If passed, 2.3 mills of that 20 mills also would be collected for the SPH service area, about $2,000, Kenai Peninsula Borough Assembly member Bill Smith said he estimated.

“Nonetheless, it seemed to me the principle should be applied,” Smith said. “Those people that would benefit from the proximity to the hospital should support it.”

A mill is 1/1,000th of a dollar. A 2.3 mill tax on $100,000 of property value is $230.

If a worker on the rig got injured, he or she would go to South Peninsula Hospital for treatment, Smith said.

“It makes sense that they’re part of the service area,” he said.

Proposition C and redirecting oil property taxes to South Peninsula Hospital would benefit South Peninsula Hospital, said spokesperson Derotha Ferraro.

“Addressing an expected decrease of capital fund is one objective of our five-year strategic plan,” she said. “This would help us do that.”

As Smith noted, South Peninsula Hospital benefits any workers on oil rigs in the area, Ferraro said.

Most of the funds raised for the SPH service area go to pay off bond debt for South Peninsula Hospital building expansions. The current SPH service area includes the lower peninsula from Clam Gulch south, including Ninilchik, Anchor Point, Homer, Fritz Creek and the south shore of Kachemak Bay from Fox River to Neptune Bay, including Halibut Cove.

Smith introduced Ordinance 2014-26 last summer at the borough assembly. The ordinance was amended to exclude about 25 properties on islands in the new SPH service area. 

Some properties have land in the tidelands because of what’s called avulsion, that is, erosion or earthquake action that caused the property line to extend into the ocean. That property is usually split for assessment purposes, Smith said, with the tideland property having a minimal assessed value.

Because the SPH Service Area Board couldn’t put Ordinance 2014-26 on its agenda before the assembly meeting, it didn’t weigh in on the question until its Sept. 11 meeting. Chair Judith Lund said the service area board after the fact unanimously approved bringing the ordinance to the assembly and putting the question to the voters. Lund said the service area board did so just to “cross its t’s and dot its i’s.” The service area board cannot take a stand on the proposition itself.

The SPH expansion dodges another question: Why not expand the service area to include Seldovia, Port Graham and Nanwalek, communities that also use South Peninsula Hospital? In a memo to the assembly on Proposition C, Smith noted that question.

“I believe it is a topic to be explored and could be a ballot issue submitted to voters in the future,” Smith wrote.

Smith, whose term ends in October and is not standing for re-election because of term limits, said that as a practical matter it would be politically difficult to get voters to tax themselves for a service they already get. He said residents of the SPH service area who use the hospital should get a break on fees charged them.

“I have advocated that the taxpayers of the service area should be able to avail themselves of the lowest rate that the hospital gives out for the services, but as you can imagine, that’s not a favored opinion,” Smith said.

Michael Armstrong can be reached at

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