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1984-04-11 Council Packet - Special Meeting & Work Session
Kenai City Council Special Council Meeting April 11, 1984 Proposed Sale of KUSCO Work Session Airport Terminal Application .. .. � r... !i . . � � sir.. • .n....__. _.__... � � �. _.. • . CITY OF KENAI "Od i?apdai a/ 4"0" 210 FIOAL00 KONA1, ALAIfKA Mii TELIIPNONB 28'• 7636 NOTICE OF SPECIAL MEETING And Work Soosions There will be a Special Meeting of the Kenai City Council and interested persons at 7s00 PM on Wedneaday, April 11, 1984 at the Senior Citizens Center at Senior Court. To be diecusseds Proposed Sale of KUSCO 4 M* w w w s w A* w x*** N**** N** w 4 x w w x* w Preceding the Special Meeting on April 11, 1984, there will be a Work Session at the same location from 6sOO PM to 7s00 PM. To be diecusseds Airport Terminal Applications This will replace the Work Session on Airport Terminal Applications originally scheduled for this data at the Airport Building. * N** 0 w w* N** 0** 0 x w M x r M* w w w w w w s i w* The meeting of the Community Center Committee, originally scheduled for April lit 1984 has been postponed to April 129 1984 at 7sOO PM in the City Council Chambers. Janet Whelan, ✓ City Clerk DATEDs April 6, 1984 • J i / Meeting at son,lor center, The location at tb• Nsul C1tY Counctt , . The wet eWIN a drpoet sombsAl ap• wont aerAJoA and op" insamon oeOs •od owl W$doeodoybawboeu ow'"wmbe mooft go thebddAttiMKape1ftmor Cotdor. st"Et7pm. An mo ob to llot W11 pops odd the CotamU lr of the com om Scheduled (* meeuwwatddbo""Obwoodstgty Wedw#&y'h"beeupwtmIdUoWTbffS- llAq,,Bofb meetinpe aro opwt totbe publle, dsyat7p m.lnCWj&U, r r� y .. C.J� ' y — 9 . 'Ca w�JR•r2 G'49-94 KS VL h 1 .Nisi s r!-eA, (q.10, Peninsula ClarioW-7 MONDAY, Aptri19,1984 Vol.14, Issue 135 U The Peninsula Clarion/VAP.A. 438 410 Kenai council nears choice on gas issues Airport work session a so on Wednesday The Kenai City Connell will hold a special meeting Wendesday at City Hall to decide whether 0 wants to buy KUSCO, the asturet gas company serving 1.00 homes and businesses in the city. The meeting begins at 7 p.m. and the publie rosy stlend, The council wul also wrestle with an uw art of problems during a work session at 6 p.m, at the Kenai Airport. The council Is debating how It wishes to use the space once leased by the rite 64 bar. The bar went bankrupt, and the city will be able to lease the space spin this spring. Among the options are leaving the entire space as a bar for a new operator, spli Ins do space and using a portion of It as a 91111 shop, and relocating the Concorde Restaurant and putting a got shop In the space now occupied the the restusrant. The city ha received several requests to lease the space me a got shop and other endeavors. The work session is also open to the public, atlhaugb no official decision may bemsdethere. The especial meeting b expected to pro• duce a foe on the KUSCO Issue. Eastar, the natural gas company is Anchorage, Soldotas and Niklski, has offered to buy the Kensi system for �.44 mUlton. KI18C0 has a fiantdtbe with the city which allows Kent tie option of meeting the price and buying the utility. Kenai can We its option this month, or wait until the franchise expires in tW, Enstar has asked the city to w elve ail its option. A consultant for the city has recommpn& ed keeping the IM option, but allowing Enstar to go ahead with the purchase this spring 0 it desires. In the remaining three years of the franchise. Kenai should explore Iffix4erm gas ��, sold Ray Rpnnnish�rthur Vnproducers, A to school bedas IM fail. Now he **A*# qs- Yolanda 8tbrade►. Students break langua4 oyc""CARS" Asso"o Bello► „Language is the essence of a culture.,, says John Cook, director of the borough schools' bilingual program. "When the language goes, you toss the visible, darto• day signs of that gdture. The bilingual program has the com- plicated task of introducing non-English speaking students to American language and culture, and preserving Mile with their cultures, while at the some time teaching Native children their ancestral languages the bilinguel programs. The Kenai Peninsula Korough has the most diverse bilingual Pnsgrsrn in the state, Cook said, inaddition totesching Eriguslt to students who move here from other coun- tries. the district also teaches English and written PAWlan to children in the Old Believer communities of Nikolaevsic, Kachemok Selo. Doling and Pe"Maa. And there are programs to Well Sugcatun to children in Port tlrshsm and English Bay and Dena,ina to children in Tyonsk, The Native language programs are ► AGENDA G April 11, 1984 A. WORK SESSION - 600 PM Airport Terminal Applications 1. Memo from Airport• Manager Swalloy, 9-7-83 2. Letter from Raven Transit, 3-1-84 Letter from National Car Rental, 3.20-84 3. Memo from Airport Manager Swelley, 2-9-84, with Applications Attached 4. Memo from Airport Manager Swalloy, 4-10-84 5. Memo from Mayor Wagoner, 4-11-84 8. SPECIAL MEETING - 7s00 PM Proposed Sale of KUSCO - i 1. Letter from KUSCO, 3-27-04 2. Far North Oil 6 Gas Proposal 3. Excerpts from Marathon Contract 4. Report from Arthur Young Co., 4-4-84 C. MISC. ' 1. Alaska Municipal League Newsletter #37 I I I r COUNCIL MEETING OF I H n t i i MOVE TOt 1. Approve the transfer of the exclusive franchise dated { July 7, 1967, between the City of Kenai and Kenai Utility Service !. Company from Kenai Utility Service Company to Enstar Corporation, and i+ 2. Waive the City of Kenai's right to acquire the plant and �- system pursuant to Section 13 of the aforementioned franchise ! agreement, and 3. Waive the City of Kenai's rights to acquire the plant and system upon the expiration or termination of the aforementioned franchise, and !; fi 4. Approve the proposed transaction between Eneter Corporation and Kenai Utility Service Corporation in all respects. �a �i } V AIA v✓� +I r M N R. CITY OF KENAI " Dd 6ajaiW 4 4"a" ►. O, /Oft 660 KENA1, AWKA 99611 11161MON6 466 • 7636 September 7, 1983 MEMORANDUM TO$ Mayor and Council FROMs Jim Swalley, Airport Manage REs Airport Lounge Following are a few restrictions that I feel should be applied to the airport bar prior to its reopening: 1 ) No live music 2) Any device playing music, i.e., juke box, tape recorder, radio, etc.) shall be kept at a low to moderate level so as not to impede normal conversation or be offensive 3) Bar hours shall be 10 a.m. to 12 p.m. seven days per week 4) Lessee shall be responsible for maintaining the bar restroomS and make every effort to induce bar patrons to utilize them 5) The atmosphere shall be that of airport cocktail lounge. The attitude and conduct of the lessee and employees shall reflect thin atmosphere at all times. Also, attached is a diagram that would reduce the size of the bar and allow for a gift shop. JS/dq J x ~ sJ7 FF Vat Orr sliop .9 e xf. Sol AIA U,,'A Y 1 0 " _ _ --_AIIwi�P•M9w/N� - ___ ___ _ _ _ _ _ _ __T•_� __ .. -__. ._ Raven Transit,Inc. But & Llmorrrind Sorvicv P.O. Box 6007, AnchorsP, A "ko 00602 Phone19071283.4616 i Mar. 1984 Mr, William Prighton City Manager City of Kenai. Pox 580 Kenai, Ak. 99611 Dear Sir: Please consider this a request that Raven Transit, Inc,'s current lease be altered to allow Peninsula Ciasnics d/bla Rent•A-Dent to share our space. Raven Transit would continue to pay the full lease fee and Ront•A-Dent's parti.cipnti.on would be through staff- ing of a full time employee behind our counter, i do not belive that this arrangement would detract from or effect the operation of the Kenai Municipal Airport. Any license required, fees, taxes, etc, regard tng Peninsula Classic's business activity in the KenaL Community would be their solq responsi- bility. If you need furtaer information, please do not hesitate to contact me. Sincerely, RAVEN TRAVOIT. INC, 11auston D. Haynes President 1+DH/ps • J NATIONAL. CAR RENTAL SYSTEM MCIN5EE1 ALASKA SALES AND SERVICE, INC„ 1300 EAST FIFTH AVENUE ANCHORAGE, ALASKA 99501 11 TELEPHONE+ 9071 274.3695 Ar• 3-20-84 City of Kenai City Council P.O. Box 580 Kenai, Alaska 99611 Dear Councilmen, This is'in regards to Rent a Dent applying for admission into the Kenai Municipal Airport through Ravin Transit/AAI. National Car Rental requests that this be read during the public hearing. This latter should be entered on the record as an objection to the application in our absence. National Car Rental is adamantly against any proposal which would allow an additional car rental firm in the Kenai Municipal Airport for the following reasons$ 1) There simply is not enough business to accomodate a 5th agency on the premise. The City of Kenai, I am sure, does not prohibit the limitation of concessionaires but if allowed they must be on equal terms and conditions. 2) Public policy requires a limitation in Kenai. If we were to review history's of operations, there supports the fact that the market is not large enough for 5 concessionaires. The City of Kenai and the traveling public have an interest in continuous high quality service. This requires a healthy, viable business condition which can only come about through limitation. A vast majority of airports in the country recognize this fact and impose limitations without loss if revenue. 3) It is a State law, title 14 - Public Works - Chapter 3, Aviation, Subchapter S...Leasing State Airport Lands and Facilities, that under #681.06 Revenue - "Leases and priviledges granted should produce, fair and reasonable revenue to recover the costs of construction, operation or maintenance as is practicable". This is not possible should a Sth agency be allowed. ',AT �•JA[ r,AR RrurAi W,rE'; ;' r, r' ,' fiE GFFi R zH Cf'EEl� 5r6 ;'P f,EFiT F ;ATF", i l U 3 `,TATE1 ri.4.tm. FOR WOPLDIWOE RE50VAT6% CALL 10LL FREE G01J 37' 4W • 1-4 .10JESOTA CALL 809.662.6VA vnr x .�-r ••. <a 5-C 4) National Car Rental would like to remind the City Council of a precedence that took place during 1983 in Kenai. When National requested that we share a counter with AAI in the new terminal, that application was rejected because It was decided that two companies can not accomodate the same counter space. National was then forced to have a separate counter within the terminal and pay for the construction and monthly expenses of a counter that we did not want. With this recent decision, Rent a Dent can not be allowed to share present counter space within the terminal. If Rent a Dent is allowed this convenience, National would have to review our position in regards to possible legal ramifications. 5) The first reason for building a now terminal, was due to the fact of over- crowding. If. Rent a Dent application is approved, the airport would again be doubling up counter space. This too would alleviate available airport parking. I hope that the council will reject this application and protect our interests within the terminal. Sincerely yours, NQ;1,;14-1-71 al Car Rents cc: Avis JW. Polyefko Dollar Abdistant General Manager Hertz ! � r • • r . J X / C CITY OF KENAI P (3 rr,,. r,rro KE.NAI, A6n )KA 11111011 P1,40NE 10071203,1030 Februnry 9, 1904 MEMORANDUM IDS Mayor Tom Wagoner and Kenai City Council FROMs Jim Swalley, Airport Manager14 y SU83ECTs Airport Terminal Requests We currently have several roquestu on file for various activitioa/services within the airport terminal (copies attached). These include various gift shop ideas, additional snack bar apace, "automatic teller" bank service space and a request to loaae or cull "interior plantscaping" for the terminal. There is aina a verbal offer to donsto a large full -curve doll aheep head to mount on a wall and the possibility of more caged animale ouch ao musk ox, etc. Aloo, the City Manager is maintaining a list of persons interested in re -opening the airport bar (lounge). Mr. Gintoli prooentod a schematic design at a Council work session for redesigning the bar and reatourant to include a gift shop at a Council work oeaainn in September or October, 1903. At that time the eatimssted coot was $25,000 - $30,ODO. At Chia Limo there is $16,063 remaining in contingency from the terminal remodeling/exponuion grant. There Jo alsn $9,343 remaininq in the 1985-114 contingency budget. JS/kh 4 v.� C- 7 F � 1 17 616/ Wt • i� G� �:�:J Cl'.•) %)�;r. L•!7 .L . C .� ����t . ;L.....:�`.�c:a•-sue Il �. '`"' �1' ► UJ i ,..r• :c•" , . •.jai• ..r •.. , �,/',M.C� ;/G��(%' `j 1f� � I � 1 —' ^ ___.�._a-ra a..+ra����.�_�___ ....a amp-�. . rsw s.. .. .r... w.. w�.o.s... .w.r-.�vr .. �. �r..� �... •+•�sa� w.-n.rr. +r M . i i, • • r ;b • • , aq . F� c 1 April 26, 1983 n. City of Kenai Dear City Manager,, I would like to apply for a 10 by 12 foot space in the Kenai Airport for FA combination :snack Tsar and Gift Shop. FI I feel that duo to the grovith of the nir,port thin iould be a roal aGaet and a convonionco to the travalora coming in and out of the airport. I -vould approciat3 your attention on this matter. Thank you, . `. Gcor-ion, I. Tarlas s rT we L 1ft. �ti• r• •, 1 f P f 7- 7—_-- — .—........ •- — — _-- --- r —� _ _ �� -. r • ; J..�; /�5� , r ,:t.. �, 1. ., ;wlr .. iJfi..1R;(r {i••" t / { • J�+i•!°t'=�'••�'�':r�!•:�I/�at%'.•,. •: - . ,- :!�r�••• •�r•"�,'.', �•foq. I ''•,,•b� 7 y, i/� M�' 'r 7� 1 ,,'1/�• "�'r�� ' '•`A 4 .l''' •',1i?i r i. ' . • / , 1. 1/ 1 i s� � COI t ,;,,'�fi'� 1.' i' JL:`1/ rl n l .f i l • . • • � , � •/t,:7.�. •It �4 ail: �/ �/ . L � } f,��+/th.' j � •�S , j YY. • � I / • IwM�M�A/ii14JM : �.. • ' %i,' 7:f 1 • i % �C , ' � lii 's� +♦♦ �wMM MZ i. . r • • � �•'•• •IwA y�•. ... :-r �.p'b'':'�}l ' •M S' .I �„ � r j r r .`�xi, �'/ // � � %• • . .'I'1 sr�; �ri �• � J 1•iY j,,, •� ,' ,il4nY , . i r. �Ms� •� ��L r{i% 1 ��r I f 3'"•4% i s �• �. T! '1;, .,! . y_r„� {• `� '''w� i 1{ �j .t � � y� lj�f'Sj `Ji':(; � i. � �' ! j.•!•/! �' t' •w a�..�yj�//�"'r� A, ,•�•�' i���,.,' � .•df � 1Bi� y_(e�%yu'!•✓�; 'i 1 I +• ', , j� , •,,. y}'�-,".•',� I ,• •! . 7f �S�:yt �� - ��i ?lam w !rj �� J1.•f ;�( ' 01 ♦;r,1,.4.,%s •��; ,rA,'i it 1, f•.i,� �� n-0 s _ t r, .J . s . TLeabafloyHARBOR 263.4917 P.O.11©x 412 Konru. Ak, 99411 (101'ti1,1101 I)l;til(;NS N 1H II I.I)IX( is Liconund & Honglod � _. May 06, 1933 KF3nai Municipal Airport ATTt Mr. Janes Swalley, ?tanager P.O. no% 530 . Kanai, Alaska 99611 Dear Mr. 3wallcy, I would like to rent or, lease approximately 150 square feet or more of space in the KenAt ?Municipal Airport, This apace would be used for a eonconsion to sell oundrioo, magazines, candybara, souvenirs from the ourrounding area, and nick -nacho. At the present time, it is impossible for a traveler to purchase any of these items at our airport. Thin would be similar to the gift shop at the Anchorage International Air- port. P1eane let me know as noon as possible as I would like to have this ready for the auomer tourist seanon. If any furtimr information is nee(jim, please contact me at the above addrenn or call 283-4917. Thank you. Yourg truly, P Let? 11ai1oy r Tim Balloy 262,042 ' r F r � / C. A L i f. ,n,r --3 :, ..: 'A i't;l `I:.'.:":'M : 1'1tS1' u:.'':':' ;/^•/ 'i!f '� Jl3.i' i ii197i '1'1 i tSi 't i :1ST �4:1^t Kirffart• L J uttl3 J.s t/ c t, Atli AP .z1J1• �itr1. +I:# :e' 11,::11` nln,:tifan 1:fl+13: «'1 `lm cow,tlt;It• ::13 1'171:::s ')Y'tl t:l':tlt�i�1t,61f pil'.J.i ;tiLtl ::St:�� /511,.)I•nti to •l+trt 7'w `-ilorcd ,novel bt pr3ducnfl st t'ASt•?•Oi'�B�l::l�" f .-,urc. : a : i;J+Is••ts; ter'+ Iry iusl.ssi ttt �,ttirliag nn-1 L:S.t •,silolns:tal': pr3ci:s r sngo °ra:.,t :0 �; f % 1 • • ,�• i�9.:{i '� ' th'; 'Aw" s 11-'t;'A fln '!,-vy l op v SIi,:�Sl Wit? tu^::-tn �t:•`a for ut s 1:%, - 1-.,:',.ct :n 0;1.14 -Wit.;'', whip hil.1 iJ_rils :11i3 1 VIA,! t,) ,;l:;si :o sjeb •s;� ;;:1 �, .,, 1« .:1 !'• . , t • n , n; , s!:! f J' rt0;i t9st�J /..'!,':t tS otng, to ;hsi on l ti- st P, P nnO t)SS:!r' f, t fi.l,I ?hop i %10111;,i 'i,��3: ?�I t, }t,.3 ::'t J:::' tiini,': n +: t ! 'J:td 11dlil"lssrs 117 `. l;r v T may :4 17/2-'1'11.1 or "( 41 jis. „ i I c. :%un:il• (aur'isln� 6'tnrrs Drawer 3771 1 itenal, Alaska 00611•3771 Phon') (�07) ^ io•%r1r,3 Jt J 7, 150 i rit-r of k;enai F.S.r;crt ^er,miral nar,aper Jim ."Talley rorr Jint Fred Fraur. ar.0 myself woUd like to off1 ciall.dr renur et a mi.ninuM of 200 eq, ft, of Terminal apace for tre prupone of cper+itst; a gift ahop, Cqr irtent wculd be to cerr!• emall gifts and A.13rkan gifts, souvenir F.orai T rt'irto, dwentaFirta one rrylaW itme, Thia world 109 airilar to t,ift v!,o a in tt,? larger airport, trrrivalve A13o thore is the peanibilitj W1 earr;:r.A cirarettea one candy if the veridins; raachireo are not takir+g cara of. t zt, buairrm.,, o of rcur.^.c •det ld like to t-e In a good trfrMe area that would be rrerg VCtk VP irco"sir•:! nrd cry. Eirt, pa.,:rarrem, Vlan^n 1'?ti m, i:.^,i'."/, ae roar, r,:s ;:orsib3e whr.t might ba nvailahl�a ir, Ur, rear future, Sins'urnly I Ronald A, malcton I ' r r: I i AXNMULA SAVINGS Alaska's First Slato Savings and Loan Association .,� ri1 ICI October 21, 1983 r James E. Swailey Airport Manager City of Kenai P.O. Box 380 • Kenai, Alaska 99611 Dear Jims We at Peninsula Savings and Loan Association were chartered by the State of Alaska to service the financial needs of the Kenai Peninsula. Today people are making fewer trips to financial institution lobbies or supermarket service counters to obtain cash or perform various other money transactions, due to new innovations in banking. Businesses today require more Electronic Fund Transferring Systems, including Automatic Teller Machines (ATM), to ease their daily operations. To accomodate the growing needs of our customers we are joining a newly planned statewide network of ATM's. This network will also allow cardholder's the use of Instant Teller, Nationet, Visa and American Express, worldwide. Day to clay banking for the average parson'¢ cash and transfer needs will be better served by the Induction of our new AVA Syste.n. Due to our tie-in with ten other financial institutions (protected six more financial institutions added by mid 1984) in the State, our original card holder ba.e will at year end, be 203,579 Alaskans. These figures cover Alaska only, and do not include use, through our tie In with Instant Teller, Nationet Viia and American Express, Other Institutions on the Peninsula who use our shared ATM network are Alaska State Bank, Frontier Alaska credit Union and Ahiska U.S.A. Federal Credit Union. �17w♦ i�;,' k'I '... i.I. �+.• �.•—•...+-�...� �.. ..�.. -e. ...e-. .�m.�ew......�.. o.e�r.�. ..�.�r�r .�r�.r J_ " d I•J , Page 2 Due to the traffic of our common custo•ners through your terminal, and the added financial nupport we helleve an AIVA will provide your Uu.,A"Is, we would like to pursue this matter. 1 would like to arrange a mouting at your convenience, to diicuss this with you, answer any questions you may have and perhaps make a decision on placement and location. i - Sincerely, Galan McCord Peninsula Savings and Loan cc$ Pile GM/kds I e �< oil e► L,N ' M .� Awl. A ictsi Alaska's First Slato Savings sssd Loan. Association October 24, 1933 ' names E. Swalley Airport Manager City of Kenai P.O, Box 5S0 Kenai, Alaska 99611 Dear 3irns Thank -you for the walk through the terminal the other day, the discussion of possible locations for our ATM machine and what our requirements for placement would be. Several areas that we felt should be addressed at this time to help you in your decision for placement of our ATM in your terminal arcs f) f3ecause the ATM machine Is totally secure In Its own right, there is no need for addid,)nal terminal security, plus, it is desinned to be almost not effected by vandalism. 2) We understand that a contract has been signed by the Anchorage International Airport for an Alaska Option ATM machine- Similar future Installations In Fairbanks and several other key airports throughout the state are planned, so all state travelers will have available financial services. 3) Due to the fact that three other local financial in:titutions, - - - Alaska State Bank, Frontier Alaska Credit Union, and Alaska U,S.A.,- - - are lnvolv�•d with Alaska Option at this time, we feel that we otter the most non-competitive ATM shared system available: In the State, (presently 10 institutions state wide, 29 locations .and 203,000 plus, potential Alaskan Cardholder base). This makes our shared A riA system the best overall combined state wide netpvork. 4) No to our affiliation wit;t other national systrns sue-b as hs4t3nt Teller, Nationet, Visa/'•faster Char,;e and American Express, this t+irsninal ATIM , ;Aiinc will have tremendous usage from other people here on v:scation or bu•iine ss. ' e am! . 7�' 711 �f Page 2 3) Custo(nors, Incloding businei,;e% will be abbe to use, the systain for duposlts, ca4h advances, and transfam. Many supermarkets and retail outlets are Installing ATM machines to heap their customors by offering gruatar financial convenle.neas than ever before. 6) Due to the potential operation problems of machines that are thru-the-wall models and exposed to the cold weather, we prefer to have all our units indoors. Most malls close early and on Sunday, so potential 24 hour operation was not possible at a malt. Your terminal is ideally suited for ATM usage. 7) Space requirements are minimal. (On floor lay -out, page 2-13, we find that the back opening space required 14 3611 - 39e' Instead of 7 teat.) S) We discussed several locations for the AV-4, We believe that the most desirable location Is the south entrance, just Inside the Inner doors on the south wall. Other possibilities are the north entrance, just inside the Inner doors on the south wall, or a thru-the-wall unit near the north door, In the baggage claim area, Peninsula Savings and Loan has a very aggiressive policy with regards to our customers, ,and wa are detersnined us provide them with the best posslbta financial services. Our ATM offers nualed services to area residents and to visitors to the peninsula. With the ATM's added financial conveniences to your terminal, terminal business, and the local banking community, we. feel that the Installation of our bhared AT:d Syaewn will be of maximum banefit to us all, now and in the fuvire. Si ^ rely, -TIN vs- N C Won McCord For Cddle: J. Turner GM/kds 56CT1C•S ?. SYd"tEM SMIFICAT IONS ' This section descries the► pq,: icill cl;,srncteristics. environmental re.,tric- Lions ane electrical requirements for ti:e pocutel TT23G0 and TT23u0. This Wiringa aSpecification andeInstallationies DrawingsrinEithis section.)A.C. Power informtion is to 411 MYSIC-AL OiARACTERISTICS Dironsions: ! • lobby Unit 58.5" high, 28.5" deep, 31" wide. Secure Lobby 62" high, 32" deep, 35" wide. 1 Thru-the-wall unit 70" high, 32" deep, 26" wide. V05ht. Lobby Unit $00 lbs. Secure lobby 1900 lbs. .. Thru-the-wall unit 1500 lbs. , Capacities: Printer Capa Ity A11 14odels i Audit Printer 2,200 trans actions Receipt Printer 19500 receipts cur rnnc Cavacity kil 14 dell Each DenoM-{ination 2,200 single bill, (new currency) Total 4,460 bi 1 Ts OPEPAT JNG E11V1 r(3;VE11T , parEae (including Wind Chili Factor) ..1 T Console Front Panel -,;;°F to +12:•F (-31,C tm +57°C) -- Depositor! lnra«. -�5`r" to +165°r (-31°C to +57°C) '- ranc t +5U°F to 0` F r *1G°C to coz A� z1ee:reniCs odule to •5Si (+106C to ;32°C) f !1 %a'.c-1 E 1 I f - i k i f _ Y 1 ' f �I i C f t" 3 i it Lobby� nit 450OF to *90'F (+10"C to +22''C) Secure Lobby +50"F to b90°F (+10°C to +320C) Room )R,lative Humidity Console 0 to 100% flan-cendens8ting Front P8ne1 Depository I and 11 Throat 01to 1OOS Non-condensating Room All Models 10 to 80N non-condens>ating NOTE OPTIMUM RELATIVE HUMIDITY IS 50� MOTE ,I, A CLOSED R0014 pROVISIOtiS 1!UST EE tail+,DE TO DISSIPATE 3600 BTU's/HOUR ELECTRICAL CHARACTERISTICS P0wt. prc_oui remaAts Console povier is derived from Electronies Module ' Depository It 120 VAC 60 Hz Electronics Module 120 VAC 60 11,x Lobby Ufiit 120 41AC, 60 Hz Secure Lobby Unit 120 VAC 60 Hz POWER LIME Refer to lie power Wirifig Specification in this section. i1G : E CC;�TvojoUa OPk1:i,T1Oti OF THE V-317 AT i;:G'ri VC1.Tfa''3; (122 'JOLTS A.C. CKATES A 1,/:1:1314,04 11,EAT GUTPUT, GF 3,GC0 i;T1i/i1R). r,•.r. t;'S� (�:JC"�'s:L SPECS n730-002{�-GU1) - {Is - ^'fit w t• t/,r""�tr%'r"� '•" �'' glCni:C:�S WNTAIN"D III THIS FAII ..,., to i L.L"v!/ li... .Ndi%. °1, It,, ,�w��� c/'ll r.rJ�/�T �SIS�' 3�i. YIfi1- pryrll �p� .r. pP.�.n- /,'f/�•� r�Ir...'-Pw i G pil 1 .ad� Eaij. fl ,r.N 1{. { / al �r+�..11/ 1,1,( S.l: l.. i. ♦...II{ S !4i/{ f:'q..i., ;./.. 1.�+} f C p S .•q wlr n ./././•/'- •//� I/.-nri rrl✓ .�l•.i (•er�i�. i.) i�1 n,21 f: �!iil7u V1. (/iii r J ,y r ar Exhaust Watts Idle K 10" )m floor 200 Watts Idle (All along right side panel) 10 ;,:R FLCW - LOBBY Pave 2-II ' a� 1 t. =f i I, A I 3'6" I ri n i mum r A I 3' - �! -. �_.. •- -_- ;r- ,,.. ... ��: _41 31 -rP ,{--- q' 6" ---� --bl a-- 6" minimum Customer Area Conduit Entry R.N. or L.H. Side I at Base s Door Swing ISO,, . .3r minim ,uri 7 ( Rear Access Arna Pap 2-13 • `.J • � ee'�' ... a+'ro' . Women /� I l lot e , Men Foyer Lome -... Qlft 1061 ,• to e•ad eoo O.F. �.. �• �� Liquor atorsos Foyer ` Corridor L Klternn 0 Icanon rlrwntg'ntoll, ent�iloct I I o*� prot"'s4lonel b�..ding `AAA1 �rl� CITY OF KENAI P,tl, How bkt0 KF•NAI, ALASKA 00011 P/1nNF 41107► 203.1030 April 109 1984 MEMORANDUM TOs Mayor Tom Wagoner and Kenai Cit Council i FROMs Jim Swalloy, Airport Manager SUBJECTS Airport Lounqe Per Council's request, Mr. Gintolt has provided some alternate r drawings as to what can feasibly be done with the exiatinq Gate 54 area. Of the options available, reopening the premises "as tell would 1 naturally be the moot economical. However, it is my understanding that Council's intentions were to reduce the size of the operation in order to provide a lounqe area conducive to serving the traveling public. Also, vandalism in the terminal building has declined by about 95% since the closure of Gate 54. Of the remaining options, the most ideal - and most expensiva, would be to relocate the bar to the south end of the building, ' relocate the restaurant dining area to the present bar area and provide space for a gift shop in the present dining area. 'There is approximately $16,800 remaininq of the State grant that can be put toward alteration or renovation of any part of the terminal building. Durinq the lost work session much discussion woo centered around the availability of the Flight Service Station area in a few years. That would provide an ideal location for a lounge or restaurant except that Federal regulations require access for the handicapped in public faeilitles. in 1980 the elevator in City _ Hall cost $50 - 60,000 installed in now construction. JS/kh 1 I { I t _ 1 {;. April lit 1984 CITY OF KENAI 1 .() lif" h00 ONAI, ALASKA 00011 r/ PHONE: 10071 203.7030 MEMORANDUM i TOs Kenai City Council { FROMs Tom Wagoner, Mayor I SUBJECTs Proposed ENSTAR Purchase - KUSCO For the past several weeks the buy out of KUSCO by ENSTAR has ' been before the City Council and the Administration of the City , of Kenai. During this period of time, several discussions have taken place and several questions have been raised and answered or partially answered. 1 have tried to set forth some questions ' which I feel still need to be addressed at thm meeting tonight, and have tried to prioritize them in some semblance of order. The first list of questions would pertain to a scenario whereby the City of Kenai would retain their right to purchase the KUSCO utility system at the end of the franchise agreement in 19871 f j 1. If ENSTAR does purchase KUSCO what would be the immediate increase in gas costs to the City of Kenai user? What will be ENSTAR's rate increases for the next 12 month, I 24 month, 36 month periods? 2. With the completion of the Beluga gas line, what would be the increase in price to the Kenai goo conoumor, and how would this cost reflect the installation and construction of the gas system in Telmer and Wasille? 3. What are the approximate costa going to be for oyetem expansion or improvements carried out by ENSTAR during the next three year period if they are allowed to purchase the system at this time? 4. if ENSTAR does purchase KUSCO's system at this time, what would be the scenario as to the charging of the current KUSCO system with the $ .30 Union Oil agreement and goo currently contracted for by the City? in other words, would there be any reason for ENSTAR to build a connecting goo service line from their system to the KUSCO system prior to the end of the Union Gas Contract between Union Oil and the City of Kenai? I i t ft 'c EN I Also, would it benefit the City to pursue n minimum of a seven month extension on the current qno supply contract so that contract ending date would coincide with the franchise date of 1907? This wayp if Kenai elected to purchaso the KUSCO system back Prom ENSTAR, they would not he encumbered or have to argue about an encumbrance of the inner cannectinq line between ENSTAR's system and KUSCO's system. S. If the City does elect to opt to purchase the KUSCO system in 1987 as allowed under the current franchise, what will ENSTAR's position be at that time? Will there be litigation? Will the APUC recognize the City's rights under it's franchise agreement? 6. If the KUSCO system is purchased or.d operated by ENSTAR, when would the charges for the previously mentioned 60 million dollar gas line from 9eluge to Anchorage and other system improvements show up on Kenai consumers' bills as a rate increase? Aleo, what would the increase in price per thousand cubic feet be to each individual customer due to the construction of capital projects? 7. Would the APUC allow the $3509000 premium paid by ENSTAR to KUSCO to be recovered through a rate adjustment by ENSTAR? S. Will you please show the Council and the Mayor exactly what the breakdown is and what figures are involved in derivinq at the $2.4 million figure? The next set of questions I would propose would be questions that would pertain only if a motion came before the Council for the City to purchase the KUSCO utility at this times 1. If the City did elect to purchase KUSCO at thin time, would ENSTAR act as a contract manager for the KUSCO system? 2. What are the chances of ENSTAR wanting to buy the KUSCO system or another company purchaainq the system from the City In 1967jr if the City felt at that time it would be in the best interest of the Kenai consumer to divest the City of thio utility system? 3. If the City were to purchase KUSCO at this time, what would be the cost to the City and the users of the utility system to pay for the purchase price? In other words, would we have to pay the full $2.4 million or would we pay a lesser fiqure7 4. How would the City advertise the cost of purchaainq KUSCO? . i I I I I r S. Are there ways by which the City could purchnno KUSCO at this time, increa€e the quo prico to the current unara by approximately $ .30 per thousand cubic foot, deponit this money in an escrow account, and use thle money at a later date to establish a weighted nvernge coat of qau for the City for two to three years after the and of the current Union Oil • City of Kenai Coo Contract? 6. If the City did opt to purchase KUSCO, what time parameters would the City face at this time? These questions are merely questions that came to mind over the poet weeks time and in no way should be interpreted no on attempt to sway the Council or the Administration's views to one aide or the other. I would state at this time, as a matter of reality, that I am not sure that I have come to a final conclusion es to which decision the Council should make, and which decision would serve the boat interest of the people in the City currently on the KUSCO system. There are two things that bother me. First, to the time constraints the City is strapped with when dealing with the 60 day maximum response time in the current franchise, .Second, I am troubled by the fact that there are a tremendous amount of goo reserves currently available in the City of Kenai or the surrounding area, and yet people are telling the City Council and others that it would be impossible to gain a oatisfaetory goo contract over the next three year period to extend the gas supply well into the 21ot century. The lost question i would ask before closing this memo would be if ENSTAR did want to have the City waive it's purchase right under the current franchise agreement and all of the rights as extended the City by that franchise, why, instead of offering a $3509000 premium to KUSCO did they not extend that offer to the City or an offer similar to that one proposed to KUSCO as premium price in their buy out scheme? TWskh M ' r KENAI UTILITY SERVICE CORPORATION F.O. BOX 614 KENAI, ALASKA 90611 March 27, 1984 PHONK 203•7032 AREA CODE 001 Mr. Tim Rogers, City Attorney City of Kenai P. 0. Box 580 Kenai, Alaska 99611 Dear Tim, Reference in made to your letter of March 12, 1984 requesting a 60-day axtonaion to the option period the City of Kenai enjoys in connection with the purchase of this company's assets. I have discussed the matter with the KDSCo ahareholders as wall as with Dick Darnea of ENSTAR and the following issues were brought to lights 1.' The time -value of the money involved would create a loss of some 027,600.00, consorvatively estimated, to the owners of the KUSCO assets. 2. It would not be in the public interest to delay the dotermination of rosponoibiiity for the 1984 construc- tion season. 3. if ENSTAR is to asauma the responsibility for the KUSCO operation they much prefer to have the transition wail under way prior to my scheduled departure data of April 30. 4. To the bast of our knowledge the City of Kenai will have had adequate time prior to the deadline of April 15 to assemble and evaluate any information required to roach a decision. Certainly, no requests for informational data have boon made of us since the visit made to our Office by your conaultanto an March 14. For the reasons cited above we feel that we cannot honor your request for the extension and suggest that the City's option be handled in the mannor provided for in our Franchina Agreement. Sincerely, KENAI UTILITY SERVICE CORPORATION _�,2827?dam occur L. Thomas, Vice President OLT/rlw 1P40 ,y I UNCONDMIONAI. ACCI:PTAIJCI; OF VRANCHIBE AND PUtiC MP,, MIRt;Il14I1,11T Thin uneondit/anal aeeoptanae of Iranchino entered into by and between tho City of Nonni, horn inaftur callod City, under the Iowa of the otato of Alaska and Vac North oil 6 Gnus Inc„ hereinafter callod par North, an Alaol,.an corpocation duly qualified to do businoso in the otate of Alooka. WITNROGHT11 i WHF,RRAo, For North has potential natural gas producing proportion and pland to develop, produce and salt natural goo. WH1'RRAo, Par North thru wholly owned and or thrtt partially owned oubaidiorieos piano to own and operate natural gao pipe lines, and diatribution oyatomo. WHP,RP,Ao, the City piano to continue to purchase natural gas in accord to ita oxisting gag purchase agreement with Union Oil Co. and rosoll ouch gaa to any owner of the City natural gas franehiao and distribution 6y0t0m Cog the sago price and torma that it purchanod ouch goo from Union Oil Co. until Fob. 14, 1907, WHRRRAH, the portion to thin agreement have concluded a thorough series of the negotiations, public haaeLngo and public advor- Memento contemplating roaalo of tho Cityse one Pranchiao and natural goo distribution system and appurtancoa. WHP.RHAo, the City ohartec of the City roquiroo acceptance of the cold franehino within two wooka after paoaago of the ordinance containing the tormo and conditiono 00 not forth in attached ordinance No. of the City which won finally passed on the day of""`_�� y ,., s _ and heroin the terms of thin IrnrBM06 Agrouma:on' ' NOW TNP.RHVORE, in consideration of the mutual promises not forth horivin this purchase agroomont, and in said Ordinance No.___ of the City, it to mutually agreed an followas 1. For North hereby unconditionally aecnpto and pledges Lrrovo- cably to oxeeuta all of the termo and conditions of the franchise as not forth in Ordinanca,No._ •_ of the City. 2. par North agr000 the affective date of this acceptance shall be the data of execution hOreof. ]. The City acknowledges that par North is the entity with whom the said negotiations for oaid franehiao have boon aceompltshod and said entity to a valid oubointing corporation authorized to do buninoon in the otato of Alaska. 4. That Par North shall pay to the City the same amount that tiro City paid the nanai Utility Oerviea Corp. for ito diotribution system and appurtancoa alt to 27o days of the data of aecltptance and tits City upon ouch payment shall pans on the aforementioned in ito entirety, with clear title, to Par :forth. R. Par fforth shall manogo and operate the axiating gaa diatCihu- tion uyatom in accer4 to OrdLnonvoy No.�— from data of acceptance. r �!v.�' "li,�. tea'=.•.. _ _ ._ .. 6. For North shalt chiluet all rovonusn and dinponoo only such fundn nucunnary to maintain oprsrntlunal sffiaionay and continuo day to day huninene activity In the samo Mannar as it wan done at datu of aecuptaneu. An yy funds vomaining shall ho hold in escrow until the City has rouoived paymant in Cult for the ryas distribu- tion ayspam. Upon such payment the fund shall bocome tho pro- poety of par North. Konat, Alankaj... _ day of CITY OF K(;NAI PAR NORTH OIL 6 GAS INC. Sys............ STATR OF ALASKA ) nn. )RD JUDICIAL DISTRICT) moo i THIS to TO CORTIPY that on the day of before the undoroignod personally oamo "" agent of PAR NORTH OIL 6 OAS INC., and ack`nawlpQyociy�» e'�io aosi affixed and the said instrument was signed and sealed in behalf of said corporation by authority of its maid Doard of Divoctors, i and acknowlodgod said inotrument to be the Kati oP`rioii�'e'cir®orntl�n". 1i I fs61�AdSi`"vQBL'iL'"�>rt�f i�dti'I�o"� l��l�f t�A COMMISSION 6XVIRBS, a C I. V- .64". � " ..' , , - '16 CITY OY KENAI, ALAIIKA ORDINhUr"Y, NO, All ORDINANCE ({RANTING AN RXCI,USIVE VRANC11111% TO VAR NORTH OI1. & OAft IN(:, TO WCAT11, 1111MV, CON1tTRUCT OR CAUSE TO RK COHIt't'ttUC'i'BD, OR TO ()THORWIUI: ACAt1IRE, PIIRCUMP,, E9TN311), MAINTAIN AM OPERATE WITHIN AND TUROUG11 T1111 CITY OV KRIM, ALUM, A PLANT AR PGANTH AND WORKS, P014 THV,. PURCHASK( VItACEtliStf�G, Tt N1t6;0010N AND QI11TRIRU't'{011'Od�dAtT, 1106''PO VdAdltfll, flg1,G Atiti CITY oV KENAI AND THE IHHADITANT14 THBREOV, FOR HV,ATING, COOKING, OR OT111ilt PURPONBS BY M11ANH OV PIPES, MAINS, OR OTHERWIGO, (NPR, UNDER, AWNO, ACR01113 AND THROUOII ANY AND ALL t3THEV,TH, ALLBYS, VIADUCTS, 11111061110, ROADS, GAMER, PUBLIC WAYS AUD MACRO IN UAIP CITY OF KENAI, NIXING THR TBRMti THRRHOF, AND UE IT THUREVOR6, ORDAINBD BY THY. COUNCIL OV THE CITY OF HOAERs SY,C'9l(iM,li_Iiti1N't=Ov,f1uT11(�fiTR;Ys The oxaluniva tranehlan and right in huroby granted by the City of Kenai, hereinafter called tho "CI`1'Y0, to VAR NORTH oft, & GAB INC., an Alankan Corporation, hereinafter called the "Company", to locate, build, Construct or aausa to he construatod, or othorwine acquire, and town, purchana, maintain, oquip and operate into, within and through tho My a plant or planto and worka for tho purchaaaa, pro- aonning, tranomiasion and diotribution of gao for heating, cooking or any Othor domentic, commercial and industrial purp0000, with the right and privilege far the poriod and upon tho tormo and conditiona hereinafter oponifiod to furnlah, tranoport, doll, oporato and diotributo gao to the City and the inhabitants theroof for any domootie, commercial or industrial purponoa, (with the right and privilege to mako ouch connoetiono with said eytltnm as will enable the Company to supply gaa and to furnish aorviee to other outoldn the corporate limits of the City) by moans of pipes, mains, 00n4uito or othorwiao, over, under, along, across and through any and all stroots, alloys and public wayn and placan in the City, and on, over, under, along, aerono and through any extennion, connection with or continuation of too same, and On, over, under, atung, acrnsn and through any and all such now streets, ailoyn and public wayn an may horoiftor be laid nut, opanad, loeaterl or cNnntrugted within the corporate limits or boundarion of the (;ity an they now nxiast, or may hereafter ae 0xtande4. t i I i N C :� 1 ONCTION 2. USE OF STRErTSJ, .PUBLIC PLACP;U t aCITY NOT To COMNirTF In consideration of Company undertakings hereunder as evidsneed by its aeeeptanco hereof, the City agrous not to ongago in the businona of distributing and selling gas except to the Company during the life of thin franchise or any extension thereof in competition with the Company. j1jq.Uy! alLpeovida# at nq ox Onno to eho Company, all necessary oasomants and rights-of-WeY within _tea,pubila serootq and ways of the City as required to construct, maintain and operate the gas system. If casements are required over and through property not awned or controlled by the City, ouch casements shall be obtained by the Company at its own expense through purchase or grant or by such powers of acquisition as may now or hornafter be provided by law. Should City street construction or improvement require relocation of any of the Company'a facilities, reasonable notice shall be given and the relocation made at no coat to,the Cif SECTION 3_ LOCATION OP MAINS, otaca The Company, prior to entering into construction of the underground facilities, shall file with the City plans of the proposed construction and secure the approval of the City thoroforo, which approval shall not be unreasonably withhold, The Company shall, within sixty (60) days after completion of construction of any line in the public ways, file "aa-built" plans in duplicate with the City. The Company shall lay its i pipon, mains, and other gas equipment and apparatus and so locato the same in, under, along and aaroas the stroots, avenues, alleyn and public places of the City, and, no far no may he prac- ticable, avoid intorforring with the use of any street, alloy or other public place (or with the rights of facilities of nay other person or utility rightfully in the public ways) for the purpose of laying, maintaining or repairing gas mains, pipes or other appurtonaneea, including aorvice pipes. Except in case of emergency, it shall apply to the City for a permit to do so and shall give the City at Least throe (3) days' notice in writing 2 i t a i .r i- a� i thnruot, ana null not, during the proyruno of the work, unno- i cannarily obntruct Of) passage sr proper uno of such stroot, allay or other public place and shall Pile with the City dupli- cate maps or prints ohowing the proponud location thereof, Upon eompl,►tion of any conotru.:t.on or repair in the otrooto or public ways, and without unnoconoary delay, the Company shall rostoro said area to a condition equal to that existing prior to ouch construction or repair. If, by roaoon of roil or tom- parature conditions, permanent repairs cannot be made, temporary repairs shall be made and the area restored as soon as practical after the limiting conditions no longer exist. Should any repair of tho otroota fail during the twoivo (12) months next suc- cooling the excavation in question, the City nhall notify the i Company and if additional repairs are not made within thirty (30) days the City may have the repairs made and the Company shall be obligated to reimburse the City for the full cost thereof. a SECTION 4. ODORIZINa.OP 6ASt Any gas which does not natural! I ' y possess a distinctive odor to the extent that its pro- sonce in the atmosphere is readily detectable at coneentrationa T. of ono -half that required to produce an explosive mixture shall have an odorant added to it by the Company to make it detectable at such concentrationo. SECTION S. SERVICE STANDARDS AND CONTROGB: The Company agrees to provide and maintain its entire plant and system in ` such condition that is will furnish safe, adequate and continuous service. A .,XgESBURP.s_ (;as pronourc, as measured at the outlet of the Company0s service to any consumer, shall never be loos than two inches nor more than eight inches of water column where supplied for domestic purposes, and in the coca of industrial usage, ouch other pressure necessary to provide efficient service as agreed to by the Company. R _ RKPAT115; NOTICE_ OF INTERRUPTIONG : Whenever it is necessary to slut oft or interrupt r►orvicu for the puepono of making repairs or installations, the Company shall 4a so at ouch time as will eauoo the leant amount of inconvenience to its patrons, and unloso such rapairn are unforeseen and Immediately necessary it obislt give reasonable notice thereof to the custo- mary. -3• r' ��111111� R rr . ••d.lWi•.•«•/• - "Sp e..•....•:f •wow -- �r "�f��_..��4L•, . R ' l E i C y, 'A&T914 Ac,6L1RACV. ALL gan oorviuu uhall hu ouppliod through motero which uhall muanuro the amount of goo oupplind to any cuntomor n?;curatoly within a tolornnco of plug or minus two porcont (ea). Thu Company nhall at any time when raquanted by a connumor make a toot of the accuracy of any goo no rvieo motor free of chargof providod first that ouch motor hao not boon tooted within the twelve months prior to ouch roquont, and ooeond, that the consumer will agroo to aecopt the result of ouch toot mado by the Company as the basis for nottling differences. A written report giving tho ronults of each such toot shall be made to the connumor who roqueated it, the original record being kept on file at the office of tho Company for a poriod of at loaot two yearn. The City may require eoptoo of any and oil motor tosto and may require periodic spot teats of any motor, but no motor not the oubjocto of a euotemor complaint need be tooted more ofton than once ovory oevon (7) years. oCTIOH 6._ COt2PANY L1A8IIdTY. Tho Company shall no main- tain ito otructuroe, epparatuo and equipment as to afford all roaoonablo protection against injury or 4amago to poroono or property thorofroml and the City shall be oaved harmlono by the Company from any liability or damage accruing against the City arioing out of the negligent or othorwino tortiouo oxorciso by tho Company of the righto and privilogoo hereby granted, and the Company shall maintain public liability inouranco in the amount of 0200,000 for ouch porgon and 01,000,000 each occurrence for bodily injurion, and property innurnnce of 01,000,000 aggrogato, all of which may contain deductible amounto at the diocrotion of the Company. Thu City, nn between the City and the Company, shall not be liable to any third party for failure to properly ouporviso or inopoet the conotruetion or maintenance of"the Company'o phyotcal plant. Should the City be oubjoct to any suit on those grnunde the Company will nnoumo the defonoo of the name and pay any final jud(poont including cooto and attorney'a fees rendered against the City on ouch groundo. SECTION 7. RULHO AND REGULATIONS OF COMPANYs The Company, from time to time oo the Company shall elect, may promuigat•i and ootabiieh ronoonablo rulon and rnqulotinno for the conduct of the - 4 - r s , .1 Compan-/' n burin -an rind may hronarll+o thij farm of ,jpl)l jt atl')n anIf Contracts to be "Mraut-1 by .swMeanta bufore tlsey (shall bu ontitied to rocoiva ran or Blasi norvieo I:ram the Company inclurling ruquirornonta for ruanonable rlol,onitrs to nouurn payment to the Company for gas sold. Thu Company (shall fiio with tlw city Clark, or nuch other official an may bit Aossignatod by tho City, a COPY of such rulun and rogulationn and any amendmrintrs thereto, thirty (30) days prior to the affective dato thoroof, and (shall keep on Lilo in its offico, available to tho public, copion of nuch rulon, ratuo, rogulationo, terms and conditions from. timo to time adopted by it for the conduct (it its buoinana, and provided further that nuch ratan, rogulationn, tormo and conditions shall not be in conflict with the provisiono horoof, the Charter of Codo of ordinancon of tho City of Xonai or tho lawn of the State of Alanka. Ruch rulen and rogulationn shall he offoetivs.,! thereafter until modified, nuporooded or suboerluontly dinapproved for good cause. It in opocificAlly undoratood that the Company shall have the right and powor to require of ovary connumor a contractural right of ingreas and ngroors upon, and from, the connumorlo proportion for the purpose of installing sorvico, moving, changing and reading metors, innpocting maintaining or repairing motore, and for the purpono of testing, essarnining or inapocting the con- noeting pipe, pipe linen or latoraln and appliances of the con- numor, if, an and when the Co_npany chon000. Ig�rTtoli 0, Ito [.11MMUM , 011OWN. Tho Company shall not, an to ratan, charhon, nervier facilitien, rid(jors, rogulationn or in any other roupoet make or grant any prufaronee or advantage to any corporation or peroon, nor nubjoet any corper.Ation or pornon to Any proyudica or disadvantage, provided that nothinry in thin grant shall be taken to prohibit the ontablinhoant, from tixwj to time, of a graduatM odala of rhargon and claonlfiod rats nahortu- le(s is which any Cusstenner oominry within nuch claznificatian would bs sntitlod. UCTION 9, CIlANG9. 11ftl ME.)s If, during the Rar s of thin franchino, the root to th,s Company of thn gars sold under this franel►ico In inutjanir! or +lvcre.ss:+l, tise co+rsp<1117 -,rill peon on to it's -,ny s.winrys rir sirlitional +;oat r+lnul:ing t^eraf+ier. -`i- M IJECT1011 I().. ItA'14ai : Thu nuhodule of ratols ann.lxeu) horuto nl► "INhibit A" •-'11 he nffocitve uo Of tho off.uotivo date of thin franchino and no tow) thoreaftur as nuch Caton shall yield a roaoun,sble rat.i of Ceturn. The Company presently contemplaten that the Company should be entitled, under efficient management, to earn an overall rate of return of olxtoon % (16%) on the original coot of the plant used or useful and devoted to furnlohing oorvieo under this franchise, Loon accrued depreciation, Aftor the first yeor of operation, either party may apply for an a4juntmont of rates sufficient to earn a reasonable rate of return. sixteen 1 (16%) shall be a prima facie reaoonable Cato of return, but either party may introduce evidence no to what constitutes a roasonable Cato of return at the time of the hearing thoreon and the parmtootble Cato of return may be adjusted abovo or below oixtoon 8 (16%) b000d upon the ovidvnco oo oubmitted. The return to the Company shall be the amount remaining after deducting all other gr000 revenue requirements, including proper operating exponoon, interest, depreciation, and state and Federal Income Taxon. The regulatory body for determination of rates shall be the City Council ao provided in Alaska statutes section 29.100.144 unless the legislature oha ll provide or a court of compotont juriodiction shall rule that regulation of eaten under title franchise to under the jurisdiction of the Alaska Public service Commisnion. SECTION 11. EXT91101OH POGICYs During the term of thin franchise the Company shall, Without diocrimination, furnish ado- quato oupplino of gas to the City and to its inhabitants subject to ti►e Company'o rules and regulations as filed. In addition, the Company :►hall file with the City Clork thirty (30) days prior to their effective date its rules and regulations regarding Lxtennion Policy and, if required, shall file the name dith the Alaska Public flarvico Commlarsion, such rules and regulations will provide for the furnishing of Much service does not roquira the laying of yes mains, laturaln, or connections for a greater dirstanco than ro(;uirad by f►iv4 Company rul.rri and rogulationa fro-n any existing lateral for Mach cuntoxer, •ind whjr7 auah - 6 - I S 1' 40 0 uxtm►nirn► Ilrovon uhc►ntnnivally fuaniblo ao that it wo►►id not put aildition,il gout burden on uxiatinq uuntomore, anti the Company shall not ruft►ea to mako any oxtitnulon oxcvpt an pormittad by thane ruiun and roqulations, In additinn upon tuisoptaneo of thin franchise, the Company will keep available for, innpeutin►► of any connumor desiring name ito rutua ant) reguiationfs Off regardn its oxtannion pulioy. OPC'PION 12. TRAIVVER HY COMP HYt The Company, at Ito aptinn, may form a subsidiary and tranafor and assign this franahioo to ►such nahaidlary, mho Company shall not poll or transfer itn 61.►nt or nyotum to any other without the prior eonnont of the City and without giving tho City first option to purchano the nyntom at a price and on terms no lone favorable than any valid oefor tendered to the company. Vito City ohall have sixty (oo) days within which to give notice of the oxorciso of such option after notice by the Company to the City of such offor. Notting heroin contained ehall be conotruod to roquire consent or to prevent the Company from including this franchise or Ito plant or nyntom or any part thoroof in nny mortyago or trust doed executed for the purpuoo of obtaining monoy for corporato purp000n, Not withstanding the foregoing paragraph, the Company shall have no right to soli, assign, sublet or allow another to uno or operate under tl►in fran►;hiuo without the consent of the City, which consent shall not he unreasonably withhold. fit C7,tt)tl _13 _ PURMAOF 8 CITY s Upon the expiration or tor,- mination of thin franchina in whatevor way Ouch termination may bu brought about, or upon the surrender tboroof except under omi- nont domaln, the Company ronervoo tha right to salvage all of its piantfs, works and facilities, after ponting rennonabte bond natinfactory to the City to insure restoration of the City'n ntreota and alinys dimagod by Ouch nalvago nperation, Ilcwuvar, at tlso expiration or uthar termination of this franchina and jr•:Int, it another franchina neaaptable to the Company hret► not been granted to it anti it dnaO not d,.tniru tv nal"VVI its eyotem, the City, upon the fvgmunt of the fair valuation titeroof may purcharsu and tako over to itneif th,s gas e/Otum, dnrP5# plant and propurty ui ti►e creApatty to ttps city in It; r:ntiruty. Ie lsljoh evomt, the City Cuunf.il tarty r'f'luir? upon 7 .. , s _ - th►rty (30) dayn, notice that thn company in willing to nnenpt an the prtufs thornot: upnn nala to the City. It thn City Council dooms the price stated by the company to ba unduly hiiti► and disadvanta(joQun, it may ragisiro that the qus)ntion of Bair valuation he reforro4 to a Board of Appraisers eompoes)d of tires) profeeetunal onginoorn, each of whom shall have had at leant five yoare' oxpariunce in the dnnign, construction and oporationa of qan works ayntomo in citino or five yoara' oxporionco in tho valuation of public utilition proportion of equal magnitude to that to be nppraiaad, one to be soloetod by the City, one by the Company, and the two thus chosen ohali soloct the third, which acid third appraiser shall not be other - Woo employed by or ronnectnd directly or i0 irectly with the City or the Company, in ease tho two appraisore choson by the portion cannot agre.a on such thir4 apprainer, he shall be appointed by tho presiding ju490 of tho euportor Court for the Third Judicial District, Ouch Board of Apprainore "hall inspect and make inventory of tho property of the Company propouod to be purch4004 by the City, and for ouch purpeen shall have at all timers unrestricted acc06e to all property, premises, bgs)ke, rs)corde and reports of the Company, The A0ar4 of Appralsare n11411 boar any evidence pro- sontnd by either aide, and shall fist a value on th-S property to be purchased by the City. The board shall file with the City Council a full and detailed report recommending the price to be Paid by the City for th#a property to bo purchased. The apprainers Mail exclude from their valuation and shall not assign any value to good will or to the value of the franchioe but shall appraise only the than pronunt fair value of staid physical pro- portisla. The City and Company shall boar jointly, obaro and ahrarq aliko, thsj coot, includin3 fnan and expenses of the third oppral"or, and the Cant and expnnees of the 0n4r4, but the coati, inclu-Mvj fans ,and nxpanon of the other two mornber3 of tho 004r4 of Appratiura shall be paid by their re"pective nominstoref Chu 9s0at Ind estpsnso of tt;e intrgdUCtinn of evi4onCe Wfore the penrd of fippr•ai:eara nh,slt be paid by the partitn by or on whose - 3 - " it n Y r I tJ - bohaLf. :such evidencu Lis introduced. If the City Council dotnr- minun that the purchanu at :inch price would ho advantaryeoun and just W thu r,Ltixensl of Lila City, it shall proceed with nuch purchaao in tho mannov provided by law. In the nbsenco of fraud or error of law, the deeinion of the apprainor shall be final. Should this franehino be ruvokod or terminated for any roaaon and should a franchise then be granted to another, than, I and in that avant, it shall be a condition of the granting of the franchise to said thirst party that the grantee of the nuw franchise shall purchaao from RAIL NORTH OIL 6 GAB INC. the physi- cal properties subject to this franchise according to the manner and formula set forth in this section for purchase by tho City. f SECTION lA!. RECIPROCAL RIGHTS ON PURCHASEt In the event of decision by the City Council to untortako purchaao of the systofn, works, plant and property of the Company as provided in either of the two preceding sections it shall notify the Company as 1 promptly as such decision in made by its Council, and in the case of termination by expiration of the terms of this franchise, or any extensions thereof, such decision and notice must be had and i given at least nix months prior to such termination. Both par- ties agree to proceed in good faith to determine the fair valuation in the manner hereinabovo provided as expeditioualy as is reasonably possible. The Company further hereby affirmatively eovonanto to continuo operation of its system, works, plant and property as herein otherwise provided during any such period of determination of fair value, should the City so desire or require the City agrees that in the event the decision to purchase accom- panioa or follows termination at the expiration of the normal term of thin franchise or any oxtennion thoroon the Company will be permitted to retain ponoonnion and operation thereof until the purchaao by the City to finally connumated. SECTION 15: COMPLIANCE WITH CITY. CHAItTk�Rs The granting of thLn franchise in contingent upon compliance of all eonditionn procedunt contained in the City Charter, including but not 1 limited to deponit by the Company of the eatimated cost of tho referendum election, and unconditional acceptance of all terms of - 9 - 4 R� •,�1 the franchise prior to said refarandum nlnction The rt,)hts under the Chart•:r am nuhjoct to ti►e provi0ton not forth in Section NO. .,.,tl,, of the Chartue. DECTION 16: PVPt;CTIVY; OATP AND Pil,tllti OP ACCPPTANCFs This ordinance shall take effect as noon an it shall have been duly panned, adopted and published and approved at an oloction as required by law, and the acceptance thereof duly filed by the Company a0 heroin not out. The Company, its aueeossors, 10000e0 or assigns, shall, within thirty (30) days after the rseuits of said election has boon canvansed publicly by the City Council and spread upon the records of the minutes thereof and the rasults declared and certified, file with the City Clark, its aecoptanco of the same in writing, signed by ita proper oftienra and attested by its corporato noalt otherwise, the provisions of this franchise shall be null and void1 the data of ouch accep- tanco shall be the "effective data" of this franchise. SECTION 17. TERN OV FRANCHISEE: The rights, privileges and franchise hereby granted to and eonforrod upon the Company shall, unless this franchise he sooner terminated as heroin provided, oxtond for a term of thirty (30) years from the effective date hereof. SECTION 18; AXES PERMITS AND VEESs The Company shall pay all taxes legally aasesned on its real and personal property and all fees for iieonnoa and permits required by any subdivision of government, provided, IIOWOVQr, that the rates set forth in "Exhibit A" are not devised to provide revenue to pay any tax or charge of the privilege of doing business under this franchise other than the franchise tax not forth in Saction 0 of this franchise erdinanee. Should any other such tax or charge bo levied, the rates eharried by the Company may be adjuatol to pro- vide nufficiont additional rovonuo to pay such tax or charga. fiECTiOti 19, Ptt11GCllik.TAKs An consideration Coe Lisa granting of thin franchise, the Company agvvio to pay to the City an annual franchise tax oyual to two per c'fntum (24) of itK groan rovenuo roci:ivnd froin cuntomors within the corporate IL-,itg as they now exist or an such limits may be horeaftor 7xt,7n,I,!J. fI•jch pay.mants gnali he made witilin sixty (60) day') of the Clos't of s:o Company'3 fiacal year. 10 i I i )ll;(!Ttr)1l Z0 a TIME 1,11411' FOR Ct11111YIilU(-TJOIl) Thu 0mlr111y, tsy I the ,iceul►r,nllof off thin fran4hils,), Arir,u►n that it will ox,)e,sin•r ditigunau Lis the conatrtiction of A gar; dtotrlhuticsn nyatom, when gao ho'coman avaiLAbin, in Oct City of Kenai an that it will 140 in A pnnitien to nuppty nuah gAA to the c)nid City And ito Lnhabia tanto an r)onn ao proaticnhlo, oul►joct, howrrvr,r, to Auto of. Clod, .- oteikou And other circumotnneers over which the Company ban no contrail, 0110MIJ 2L; ARRITRATIONi Any dioptsto arining betwoon City and Company under any pruvirsionn hereof which cannot bo nott,trid t;y the partiers within a roannnable tilao may bo nuhmittod by oitbor LL party to arbitration, All dinputoo to be arbttrntod shall be out,- mitrod to and Molded by a board of throe arbitrators, ono to be appointed by Company, ono by City, ouch ode of which may to an ' employee, and a third by the two no appointed, If, oithor, party ohalb fait or refuse to appoint an arbitrator within thirty (30) days 4ft0r written nottoo ban horn given to it by tho other party ' naming the latter'o arbitrator, the party gluing neat) notLae t ahull have the right to royuont the Preuiding Judge of the U.0, tiilstrict Court for the pi0tviat of A1113PO, fitato of Alooka, to appoint not arbitrator for the party falling to make ouch appoint- munt, if the twri arblteatorrs then ah000n are unablo to agree l Open a third arbitrator, ouch arbitrator nball be appointed, upon applicatinn by nitbor party by tbo pruniding Judgo of the onid U43, pintrict Court, Tho docinion of a majority of the arbitra- torn, aftor a boarinq at which both parti,go shalt have an oppar- tunity to bo heard and to introduce ovidenae, oball ho hindinj i • upon the partioo bor,,)to, The coat of the arbitrritnr appointed by _i "" •""'' the Company 0111#11 bo puid by Cornpanys the cucst of the arbitrntcvr appointed by City obalt bo paid by Cityl and the cant of Cho third arbitrator nball ho borne eyunity toy Go:Op,9ny and City. fSYC'U. V1J1A11Ct , 14Vl10.R'I1ti)• The Company nhall furniall tw the City epIn 10-Ma"d AW. not larin ruqularly than onea ,s yf,ar aurlit'sA ClnanataL nr_rrtv,nant3 Gf the farm yunarally praoeribad by th,r Ve4oirAL priiJ.rr .^,ecrmin3ion, ,fntaoo differont and other fe)r,cs are ruquirrd by law, In Any ,rvesnt, Mist atatomont at►att Ln,l,llo, k' f - but n•it h,) 11s91t•r,1 t,')► I f 11 � f . (ii Ramon nK offtoorn an4 dirflotorn, (2) Annual prALt and lnnn fskistmmlintrs, (1) Annual tlatanea ()hoot. Tho night to nesona to Company finanatnl and onginuorinq records in nlnn uptnndnd to nny parent nr ()Uhnidiary company buying or aolling qan ar GUM nHrvLs(Jn to On Company. pAq'kj i1J .4.. R;G ,gl1;ili1j Tho cant() of publication and ndvortioing of, any opoeial olostion to ratify thin ordinanco and tho coat of prwiding oloattan officiate and hnotho tharofore or tho propor,tionato part Of tho soot() of publication and a4var- tLnin9 of any gonoral oloction in which tho ratification of thin ordinance in nuhmittad to tho otoctora of tho City of Konai, will be horno and a()()umod by tho Company, flPRAMI 24 ; plaAE�6N1[!e- /lUt3,7P;ET ,T[i�fTAT ,t,1ihi Tho torma Of thin franahtno arc horoby oubgost to nil valid onaatmenta of tho bogiolaturo of ALnokA and Of nny propOrly areAtod or ampoworad Public florvico Cemmiaalon of tho Otato, laid forma aro binding Upon tho partion, thoir ssuucassaaro and aooigno, f3P_rrPl(3t1.7;h ; YAf,%I:PYs if any noction, nubooction, paragraph, nontanan, knuno or phra()o of thin Ordinance Lo dooiarod unconntitutionai or invalid for any roanon, ouch doci- aLon a1sAi1 not Affect tho validity of tho romaining portion() of thin ordinanco, tho City Council horeby doclaring that it would 114VO pansod tilt, rmnainin+j part() of thin ordinanco if it had boon known that nurb othor, part or pacto thnrnof Nouid be doclarad Unconstitutional or invalid, lSYS;Tj611 7;f1; l3V111P;1(Rq t Thin franchino ordinanco ()nail bo oubrnittad to tho qualif.iod oluclorn of tho City of (tonal, and if appravod I,y a oimplo majority of th►► voton cant nt nueb ollset►on, shall becomfy offoctive an herein provided, or na rilquirod by lbw, glubILUati►in or thin ordinanos.► 011.11k too m440 try pootinj a copy on the City I101L flutietin board [or a pnrtod of tan dnya following itfs p4{ssf4y0 "Jn4 approval. 12 V. �' I Pnnnvd f.or L'Lrat rundin•7 by the city Council of tt►u City f ► Kanal, Al.+ngn, MG11 _ Jay of _ Public hetnrinry Mort on thu .-day of Vaimad on nncond and final madinq by tl►o City Council of thu City of Kanal, Aln+►ka, thin _.____,day of �_ _____.�►____. City of Konai Attantt i 19 � • ► t i EXHIBIT A FAR NORTH Ails B GAQ INC. KF,NAt, ALUM General Service Rate Sohodulai Montly Rates for the first 2,000 cubic foot or lona. per hundrud cubic foot for the next 3,000 cubic foot. per hundred cubic foot for all addLtional gas. Minimum tiillt per month, plua tax. li i �F7 - 14 - 1 I I = { f C P/� (e) Shall not exceed one hundred twenty degrees Fahrenheit 0 20*F) in temperature at the point of delivery. (f) Shall be commercially free from dust, gums, gum forming constituents, or other liquid.or solid matter which might become separated from the gas in the course of transportation through pipelines. 3. All units of measurements of gas required in this Article X. shall be at a temperature of sixty degrees Fahrenheit (60°F) and at an abso- lute pressure of fourteen and sixty-five hundredths (14.66) pounds per square Inch. 4. Buyer shall have the right to refuse to accept delivery of any and all gas which fails to meet the quality requirements of this Article X. XI. PRICE 1. the amount to be paid by Buyer to Seller for gas delivered to Buyer hereunder shall be as follows: (a) Subject to the provisions of Paragraph 2 below, —the, —base pXJ.ce _..to-beePPJO- ,bysff Ctt VI'fer for. gas�d 3y a WAJWRra. hereunder sbaU"be..$- 2—.32 Ver•;§cf. (b) As adjusted pursuant to the provision of Paragraph 2 below there shall be added to the base price a premium deliver - ability charge Of %35*4de1C'cf �fOr' ai-14as -dp1 i v,,,,eredAuri ng- the ,Xear..,1986. and thereafter•-during-•the4erm-hereof .,to -the• extent that:Seller«remaIns -committed_tg_deliv_er the ap'�p1�c,_,,ab1'e---Annual Coptract Quantities and.•maintains"the•ability••to-.de ver, year by- year ;"at-swing'facto'r�f 2:5'or more -during years"1986-throu�h ,j989;•2.26 or more during -the •year 1990-and 2.0 or mor - each -year ,,tpeneafter. For purposes. hereof. the .term.1'swing_factorl-shall -24- i 7- C mean the r1PowbtaIned:by-dividing-SeiIorIs-del 4very ..capacjty, by the 044ly;contract..quantity where the "datily-contract quantity" is the..Annual.p ontract-•Quant:ity divided by phree-hundred-sixty-fiug (%36�.). The Annual -Contract; quantity. -utilized -shall be that foosdt. ei ap,propr4., ;year-as•_set 3forst4-.I4Raragraph •d:•of-Article..:V.Al�,.gf.Ake date heareof. Notwithstanding other provisions hereof said Quantity(s) shall for the purposes of this Paragraph l(b) remain unchanged except for tho�se prov �d,,, a „agraph, „off ,e,R Y.Apd,J2 and 3 Ff Article V. , 2. It is expressly understood and agreed between the parties that the base price and premium deliverability charge provided for in Paragraphs l(a) and 1(h) shall be adjusted annually as follows: Effective January 1, 1984. and on January 1 of each year there- after during the term this Agreement is in effect, the base price and premium deliverability charge shall be adjusted by multiplying said base price and premium deliveratoility charge by the following ratio: The Posted Price of No. 2 Fuel Oil on the applicable January 1 divided by the Posted Price of No. 2 Fuel Oil on January 1, 1983. The term Posted Price shall mean the posted price of No. 2 Fuel Oil FOB Tesoro Refinery, Nikiski, Alaska. In the event that there ceases to be a posted price for No.*2 Fuel Oil at Tesoro's Refinery at Nikiski, postings for No. 2 Fuel Oil as published in Platt's Oilgram (or another mutually agreed upon publication in the event Platt's Oilgram discontinues publishing such quotes) FOB refineries at or near Seattle, Washington, shall be substituted in the ratio described above. -25- z 8 L _ a quantity of gas which is at least equal to the Annual Contract Quantity shown in the following schedule: Annual Contract Quantity Swing Rate Year (Mcf) (Mcf per day) 1983 81000,000 26,000 1984 91000,000 32,000 1985 91000,000 35,000 "WV0004,000� 'OO;OOA.V . 1987 14,000,000 110,000 1988 15,000,000 120,000 1989 16,000,000 130,000 1990 18,000,000 133,000 1991 19,000,000 130,000 1992 19,000,000 130,000 1993 27,000,000 125,000 1994 27,000,000 115,000 1995 27,000,000 95,000 1996 16,000,000 60,000 f 1997 12,000,000 36,000 j Total Contract Quantity 250,000,000 Mcf The gas to be delivered by Seller hereunder at any time and from time to time may, at Seller's option, be delivered from Seller's gas reserves underlying the leases covered hereby within the (a) the Kenai Unit Area, (b) the Beaver Creek Unit Area, or (c) the Trading Bay Unit Area ("Unit Areas"), or any combination thereof. In order to enable Buyer to develop hardware require- ments for each Unit Area, Seller will cooperate with Buyer" l y 'provi ding on March 1, 1983, and on January 1 of each year the eaf ter a written 2 year development plan for each Unit Area. ' 2. The Total Contract Quantity, the Annual Contract Quantities ; and the Swing Rates set*forth in Paragraph 1 of Article V hereof shall be reduced whenever and to the extent that any Lessor or lessors within the Kenai Unit Area, the Beaver Creek Unit Area or the Trading Bay Unit Area shall exercise partially or wholly any right to take in kind its share of royalty gas attributable to Seller's leaseholds and/or lands covered by this Agreement. -10- Asr,,of.,January 1 of �rthe-following-year-,the Annual-Contrac4 Quenti-ty(s )..s.hal,l..be•-the •.i denti fi ed • 1 ower :annual -contract vquanti.ty(s.).-as set for-th4n-nthe:hereinabove mentioned notice from Auyq.r;•provide'd;-.however, in Fonsideration of the rel ief provided..by. Sel.ler..to Buyer.,,.Buyer agrees"tW pay-to-rSeller. for. all gas -delivered a premium on the then .adjusted,:applicable gaVrice,..Jncluding any .premium deliverability charge -ln effect;ias=determined %by:Article-XI.as follows: If the Annual Contract The Adjusted Applicable Price Quantity is Reduced per MCF Shall be Increased By From To more th..••ti•OyO%=ors-+iess�s�;{;� an 10. '20.0% or less 12.6% more than 20.0% 30.0% or less •21.4% Thereafter, the Total Contract Quantity will be irrevocably re- duced by an amount equal to the difference between the scheduled quantity(s) and suc1. U. ►er annual contract quantity(s) ("released quantity(s)") and Seller shall have the right to commit and deriver all or any portion of such released quantity(s) for Seller's own use or to'any other purchaser. 1-f-5e edZmch-v,ei ed.quantity4s4-4o.4ts own ,us,e..or. another-purchaser.,..Sel-Ier-•shaaayhave-the-.night-and-opt4w to extend ,the.,term •of-this•-Agreement•by recommitting such quanta.ty(s4..ti)•8uyer•; includ- pg.a.Swing•Rate which;•when divided by.,the daijywaverage-of-the .quant4ty-•tor be -del ivered each year,...v .10 ds,,.a.ratio-of•,q-33;-otherwise"vporrthe same tbrms annddcondJtions set-for..th.,herein,-provided.Seller-giYes -Buyer-written-notice thr..ee.(3)ye�s prforr-to" tbar-and-of• the -term -of• -this -Agreement. ;.f-during"the'tb 'h'ereo{-euyer elecfs"'to`reduce the'Anhual Contract Quantity*as'set forth hereinabove, Buyer agrees to concurrentiyrdduce ip_,the same proportion the Annual -Contract •Quantity as -to -all• -other contracts• entered into by Buyer after November 1, 1982. Buyer also agrees to take gas ratably, in so far as operationally possible from all others supplying gas to Buyer during said year(s).' For the purposes hereof the term ratably shall • -12- 1. a N, T HE, R V@MGJ� ARTHUR YOUNG & COMPANY SUITE 600 1031 WEST 4TH. AVENUE ANCHORAGE, ALASKA 99501-6992 April 4, 1984 The Honorable Mayor and City Council City of Kenai Post Office Box 580 Kenai, Alaska 99611 Ladies and Gentlemen: Arthur Young is pleased to present this first draft of our study of the financial factors regarding the City' a, franchise right of first option to purchase RUSCO. Our final report will be submitted to the City at its next sche- duled meeting. This study was developed using available published documents and financial data. We did not conduct a cost of service study of KUSCO's present operations since this was not within our proposed scope of services and the tight time schedule ruled out a compre- hensive rate study. We recognize that the decision facing the City is an important one and that the City Council's decision will directly impact the price paid by City gas consumers. This report was developed to assist the City Council in arriving at a decision which will best serve the citizens of Kenai. Very truly yours, 4i _ dnr47 jJ L . i CITY OF KENAI COST OF GAS ANALYSES I. STUDY OBJECTIVE II. OPTIONS AVAILABLE TO THE CITY OPTION 1 OPTION 2 OPTION 3 III. SCOPE OF THE STUDY IV. CONSUMER COST OF GAS A. Gas Purchase Price 1. Comparative Cost of Gas B. Cost of Service C. Average Cost D. KUSCO Tariff E. Enstar Tariff F. Comparison of Average Bills V. KEY FACTORS AFFECTING DECISION VI. CONCLUSION s � 0 I. STUDY OBJECTIVE Arthur Young & Company was retained by the City for the purpose of analyzing the City's first option right to purchase KUSCO vs. ENSTAR's acquisition offer to determine which alternative would result in the least adverse cost impact to City gas consumers. The fundamental premise underlying our study was to minimize adverse cost impacts to City of Kenai gas consumers. -1- h.. II. OPTIONS AVAILABLE TO THE CITY The City has three options (Exhibit II-1) from which to choose as a result of the proposed sale of KUSCO to ENSTAR. Option 1: The City can exercise its first option to purchase KUSCO on the same terms and conditions as ENSTAR. in Section 13. Transfer by Company, the City's franchise agreement states this option: "The Company shall not sell or transfer its plant or system to another without the prior consent of the City and without giving the City first option ' to purchase the system at a price and on terms no less favorable than any valid offer tendered to the Company." Option 2: The City can approve the sale as proposed and waive its franchise right to purchase KUSCO upon expira- tion of the franchise in 1987. Option 3: The City can approve the sale but retain its first option right through 1987 when the franchise expires. This would allow the possible future purchase of the KUSCO system by the City in 1987. { The franchise agreement provides for a number of conditions. The City's franchise expires in July of 1987. Should the City not extend the franchise, the utility has the right to salvage its property. This appears unlikely since the cost of salvage would far exceed the value of the salvaged material. The City may then exercise its purchase I -2- right and acquire the entire gas distribution system. If a mutually agreed upon purchase price - cannot be determined, a three member Board of Appraisers would be established and their decision would be final. The method of valuation is then established as follows: "The appraisers shall exclude from their valuation and shall not assign any value to goodwill or to the value of the franchise but shall appraise only the then present fair value of said physical properties. -3- i III. SCOPE OF THE STUDY The purpose of our study was to perform a financial analysis to determine which course of action the City should follow to mini- mize possible adverse price impacts on gas consumers in the City of Kenai. The first stop of our study was to review KUSCO00 financial records to obtain historical information relative to plant costa, operations and maintenance costs and sales statistics. This data was analyzed to assess the different components which comprise KUSCO's cost of service. The previous five year period (1979-1963) was reviewed and a projected five year cost of ser- vice schedule and sales volume estimate were prepared. In performing this review, we relied on KUSCO's audited financial statements and other company financial records. Arthur Young & Company did not perform a financial audi% of KUSCO since this would have been beyond the scope of our study. KUSCO is regu- lated by the Alaska Public Utilities Commission (APUC) and main- tains its financial records in accordance with APUC guidelines. The second stop of our study was to evaluate the impact to City gas consumers of two possible alternatives. The alternatives are explained belows Option One - City Acquires KUSCO In this alternative we projected gas rates assuming the City acquired KUSCO at the same purchase price an the ENSTAR offer. The gas purchase price under the Union-Marathon/City gas purchase contract is maintained at the .30¢ mat level through calendar yearend 198E with an assumed 1986 gap purchase price of 02.20 mat. -4- This alternative assume© that the City purchases KUSCO by issuing fifteen year revenue bonds and takos over tho utility management functions as well As assuming all reoponoibility for operations, maintenance, capital improvement programs and administration. This alternative assumes that the City would sign a new gas purchase contract with pinion or other alter- nate supplier on a long term baois upon the expiration of the current contract in May of 1986. OptionTwo ENdTAR Aa wires NUSCO This alternative assumes that the City approves the ENSTAR acquisition and terminates its gas purchase contract with onion -Marathon. The continuation of the City's gas purchase contract would not result in a direct benefit to the City because ENSTAR's rate will be the same as its sorviao•wido rate. The uniform service wide rate of ENSTAR makes the con- tinuation or non -continuation of the City'a gas purchase contract an irrelevant ionuo in financial analysis of this alternative since the benefit of .300 mcf gas would be spread throughout ENSTAR's consumer base, in addition, the poeoible sale of union -Marathon goo for use by other than City gas consumers may be restricted by terma of the existing gas purchase contract. There are two possible variations of this option: One - City waives its franchise right to purchase in 1997. Two - City does not waivo its franchise right of purchase in 1987. •S- .1 ' � i IV. CONSUMER CAST OF GAS The coat of gas to the consumer is comprised of two components: A - Gas purchase price 8 - Cost of service A. Purchase Price of Gas KUSCO, in its presentation to the Kenai City Council on March 6, 1984, presented the following cost informations KUSCO ENSTAR sale Price 81.96 $1- 81' Cost of Delivery & Service 01.93 0. 70 1. Comparative Cost of Gas The City currently enjoys the benefit of an inexpensive gas purchase price. However, the current contract will expire in 1986 which will necessitate the City having to either renegotiate a now contract with Union/Marathon or seek another source of gas supply. The relative gas purchase price differential which the City enjoys is Illustrated belows -6- t .; I $ mcf City Gas Purchase Price $0.3 0 ENSTAR Purchase Gas Pricess Kenai Field 0.644 North Cook 3.744 West Fork 0.644 Beaver Creek 2.15S Beluga 2.155 Weighted average (Old/New) 1.116 Chugach Old Beluga River Contract 0.240 Chugach New Beluga River Contract 2.430 in Nay of 1986, the City's gas purchase contract expires and the City will be in the position of having to seek a new source of gas. This new gas is likely to cost in the range of $2.10 to $2.20 mof which represents an increase in excess of 500 percent. When severance tax is included, the cost of gas is estimated to cost from $2.24 to $2.35 per mcf. The more meaningful comparison can be made by including the total cost of gas under the new ENSTAR contracts since this will indi- cate the City's relative advantage in not having to pay gas transmission costs. Citys All inclusive Cost of Gas including severance tax $0.328 mcf ENSTAR/Shell Contract Wellhead Price $2.1S Severance Tax 0.1S Demand Charge 0.35 Fixed Pipeline Charge 0..3305 1986 New Pipeline Charge .26 Total Cost of Gas 03.21 Using ENSTAR's weighted average cost of gas (old and new) of $1.11856 as compared to the City's purchase price of $0.3000, the City pays only 27 percent of ENSTAR's cost for gas* inclusion of transmission pipeline costs ($0.30 mcf) and the demand charge r7r J f (00.35 mcf) results in the City paying only 17 percent of ENSTAR's cost of gas. The magnitude of the City's gas purchase price cost advantage should translate into a cheaper consumer gas rates. This, in fact, is the case since the KUSCO residential rate is less than ENSTAR's by approximately 19 percent. KUSCO 02.1720 mcf ENSTAR 2.5988 It appears that the City may be able to obtain gas at a rate below that of the ENSTAR-Shell and ENSTAR-Marathon contracts which were signed in 1982. However, ENSTAR's old, cheaper gas will allow it to obtain a melded rate of about $1.30 mcf in 1986 (excluding the new Beluga pipeline costs) which is below the estimated range of City gas prices of $2.24 to $2.35 in 1986. The City must either approve the ENSTAR purchase and waive its franchise right to purchase the utility system in 1987 or be pre- pared to initiate and successfully conclude negotiations for a new gas purchase contract. B. Cost Of Service The second component of the consumer price of gas is the utili- ties cost of service. Major elements which comprise KUSCO'S cost of service are: Distribution Expense Maintenance Expense Customer Accounts Expense Sales Expense Administration and General Taxes Other than Income Tax Interest Expense Employee Profit Sharing Federal Income Tax Net Profit (Return on investment) ..a- i j A , Approximately 70 percent of KUSCO'S cost of service is made up of labor costs. in addition, note that net profit is an element of cost of service since a return on investment is allowed. ENSTAR's cost of service is comprised of similar elements with the addition of costs for major gas transmission lines, in reviewing the KUSCO cost of service presented to the City Council on March 6, 1984, it would appear that ENSTAR has a lesser cost of service figure of 00.78 per mcf while KUSCO has $1.63 mcf cost. These cost figures are misleading since they represent an average costing approach. if the coat of service calculation is based on tariffs paid by residential and small commercial gas consumers, a much different comparison results. Co Average Cost Method KUSCO ENSTAR Sale Price 01.96 mcf $1.81 mcf Cost of Gas - .33 -1.03 Cost of Service $1.63 $ .78 Tariff Method (Average Monthly Usage) KUSCO ENSTAR Sale Price $2.1720 mcf $2.5988 mcf Cost of Gas -0.328-1.1185 Cost of Service $1.8 40 $1` 4 0 Despite having a higher and price of $0.42 mcf in the consumer tariff rate, ENSTAR has a cost of service benefit over KUSCO of $0.36 mcf. -9- n . D. KUSCO Residential Tariff 1, 1983 Yearly residential gas sales volume 226408 mof Average monthly sales 226,208 mcf - 12 w 18,850 m4f 1983 number of residential meters 1013 Average monthly sales per meter 18#850 mcf - 1,313 14.36 mcf (14,360 of) 2. Monthly gas price per mcf: 14,360 of 2 000 cf @ $ Boos of • 3 000 cf @ $0.24 per 100 of (0.24 x 30) 7.20 @ 0.17 per 100 of 15.91 Total Monthly Cost of Gas $31.19 3. Consumer cost per mcf: 031.19 - 14.36 mcf - 02.1720 FootFoot=t 1. KUSCO Gas Sales Summary 2. KUSCO APUC Tariff Rates - Residential 3. KUSCO statistical information 1983 lists residential rate at 02.143 mcf 1 -4- - _j I' 1.. i M E. ENSTAR Residential Tariff 1. Average KUSCO monthly sales per residential meter 14.36 mcf 2. Gas rate 00,22051 per 100 cf Gas rate $2.20$1 per mcf Tariff gas rate $2.2051 mcf Gas cost adjustment 0.0805 mcf Add adjusted tariff rate T2028FN mcf 3. Averago monthly gas costs 02,2856 x 14.36 mcf 032.82 Adds Customer Charge 4*50 4. Cost per mcfs 02#5988 mcf -11- ;i • l� ii } V, KEY FACTORS A. Gas Availability Recent studies indicate that the Cook Inlet area has approxima- tely 3.5 TCP (trillion cubic feet) of proven reserves of which 1.6 TCP remain uncommitted. The City has maintained a good business relationship for the last eighteen years with its current gas supplier, Union/Marathon. The City has had preliminary discussions with Union which indi- cate a willingness to discuss future gas sales. The possibility of the City being able to continue purchasing gas from Union/Marathon on a long term basis would be beneficial since the City could avoid gas transmission line costs. The City has also been approached by Par North, Inc, about the possibility of future gas sales to the City. To summarize, there are adequate uncommitted reserves of gas near Kenai. The City has maintained a mutually beneficial rela- tionship with its gas supplier, Union/Marathon and there is no reason to believe that successful negotiations could not be completed for future gas purchases. The City may also solicit other firms interested in selling gas on a long term basis. 8. Gas s Price ENSTAR has set the stage for future large quantity gas purchases in the Cook Inlet. However, the City's gas requirements are of a much smaller scale and the City is close to major fields. The City may well be able to negotiate a more favorable purchase price than ENSTAR becauso its needs are different. -12- y .' The City cannot expect to match ENSTAR's melded old/new gas purchase price but it may be able to negotiate a contract without stiff escalation provisions. This would favor the City since it would minimize the impact of large real price increases in fossil fuels. ENSTAR's old gas runs out in 1991 which will reduce their ability to dampen price increases by melding old and new. There is no reason to conclude that the City could not negotiate a gas purchase price competitive to ENSTAR's recent contract price. The conditions favoring a competitive purchase price such as soft world oil prices, lack of optimism for TAGS and ANGTS projects, large remaining uncommitted proven reserves and no immediate increase in export markets will continue to exist in the near future. C. Consumer Rates The impact on consumer rates is far from certain since projec- tions of future rates contain many estimates and assumptions. in the near term, the comparison of residential rates for ENSTAR and KUSCO can be made on the basis of the APUC approved tariffs. ENSTAR's current residential tariff will result in an increase in gas consumer costs. The amount of the increase will depend on the particular gas consumption of each customer. The relative advantage to KUSCO's residential consumers customers will disap- pear when the present gas contract expires in 1986. Small commercial users are likely to enjoy marginally cheaper gas under ENSTAR due to the minimum monthly bill of 0161,22 which is currently charged under KUSCO's tariff. The average monthly usage figure for small commercial gas consumers indicates that -13- the approximate equivalent usage amount of 91 mof is not being used by small commercial users and as a result their monthly gas costs are higher than if they were on the residential tariff rates. The relative difference between ENSTAR's and KUSCO's rates in 1986 will be dependent on the price of new City purchased gas, the upward or downward movement of ENSTAR's purchased new gas and ENSTAR's mix of old and new gas, the relative utility growth rates and ENSTAR'a debt service cost for its major pipeline expansion program* it is probable that the City's rate will exceed ENSTAR's rate in 1986 when the increased cost of new purchased gas will take effect. Thereafter, based on the City's ability to purchase gas on a fixed price basis and ENSTAR's depleting supply of old gas combined with real price escalation of its gas the City's rate will decrease relative to ENSTAR's and match ENSTAR's by 1991. -14- . ,4 VI. CONCLUSION KUSCO and ENSTAR have requested the City to take three specific actions. 1. Transfer the franchise from KUSCO to ENSTAR. I 2. Waive the City's franchise right to purchase the gas utility system in 1987. 3. Give an unqualified approval of the sale of KUSCO to ENSTAR. In making this request to the City, KUSCO and ENSTAR have sup- ported their ease with the following reasons. 1. KUSCO has been unable to successfully negotiate a new ; gas purchase contract. 2. ENSTAR has an adequate future supply of competitively priced gas. Y 3. ENSTAR is currently servicing the immediate surrounding area and can realize economies of operation by the inclusion of the KUSCO system into its own service area. 4. The cost of service will be less under ENSTAR since advantages of economies of scale favor the larger utility, i S. ENSTAR is a large professionally managed utility and will be able to provide cost efficient, safe operations. 6. The present manager of KUSCO will retire in the near future. ! The above reasons all appear to be valid and reasonable under the circumstances. Our study has concluded that there is an adequate supply of natural gas in the immediate area and that there is a likelihood i that the City would be successful in obtaining a long term com- I i i i d i potitively priced supply of gas. However, the price of this gas would exceed the current price by a large percent and would not be comparably priced to ENSTAR's melded gas price. Before any final decisions by the City to waive its purchase right in 1987 to made, a firm long term gas price should be established. Negotiations for the purchase of natural gas will require the dedication of the City's time and resources and should be undertaken in the near future. The following comments address each options Option Ones City Acquires KUSCO at ENSTAR's Offered Price The 60 duty response period provided to the City has not been sufficient for the City to undertake a detailed analyses of the purchase option. Since the City can preserve its purchase right through 1987, sufficient time is available for the City to study the acquisition in detail and to develop a greater public awareness of the key issues affecting the decision. There is not sufficient support of the long term benefits of lower consumer gas costs to warrant the City exercising its purchase option at this time. Prior to making the committ- ment to buy the system, the City should conclude a long term contract for the purchase of natural gas. Option Twos City Approves the Sale And Waives its Option to Purchase in 1997 This option would require the City to waive its purchase right in 1987 without having had adequate time to review the total cost/benefits of acquiring or not acquiring the system. -16- N .' of- - --- - ----------- - --- ----, �_-_�--- -- rt 1 n ` Option Three# City Approves the Salo But Retains Its Option ° to Purchase in 1987 This option would allow the proposed sale to ENSTAR but would retain the City's right to acquire the system in 1987 at the appraised fair value of the physical assets, The City would have time to obtain a contract price for future gas and allow a more accurate projection of future system revenue require- ments, L It is likely that the purchase price in 1987 would be lower than the current price of $2,4 million since the premium of 0350,000 dollars would not be a part of the purchase price, i In addition, the City would have had an opportunity to assess ENSTAR's operations and be in a better position to assess the impact on rates of ENSTAR's capital expansion program, -17- i 4 +. i 1 OPTIONS OPTION ONE • CITY PURCHASES KUSCO SUCs lRRN1i0N� CCT``TYYYDOUTCONTRRACTUAL NO APPROVAL BEOUtRED OPTION TWO ( • CITY APPROVES PURCHASE $ WAIVES FRANCHISE RIGHT TO PURCHASE NN NNcc TT 0 Jjjjh ENRRA UC: POVAL SQUIRED ( OPTION _THREE • CITY APPROVES & DOES NOT WAIVE FRANCHISE RIGHT TO PURCHASE • UPON TERMINATION OF FRANCHISE (7187) CITY MAYS IFOPURCl1ASEA�RICEOGANNOTt+BEEAGREED TO: ' Cl UAE ON LEC ONEOAPPRAFSAPPRAISERS r M Uf rIl TYSELECTS ONE P ISER TW RAISEERS SELEC WU R VAEUETOF'IPEYC�CALSPROPEW 8 REPRESENTS FAIR ' r; r COOK INLET GAS AVAILABILITY • PROVEN RESERVES 3.5 TCF • UNDISCOVERED GAS . pp 3 TCF (QNR) T6SGlh2STlkkTEoCOlCAIY - - REC�E�EljQkE�6 5.2 C GAS 2.04 TCF COOK INLET OASCONSUMPTION • HOUSEHOLD HEATING • COMMERCIAL APPLICATIONS • LNG 8 AMMONIA/UREA • ELECTRICAL GENERATION -- • C E MITTE liDACTS COOM j ` • ISC SER OVERED CONOMIC RECOVERY COOK I6LIT T TAL GAS 0 aatusn� cns neseayEs JAN ARY 1, 1982! COOK INLET BASIN OIL 8 GAS PROVINCE RESERVES (BCF) g 5112 i �yGA RSVEJH HI � Ro 'RV (1) 26j IgT9"I�URIVA1 1.1�� 1 i � u o0°R�90 ��i��4A` 9�� i IWA T ��G VyER (2) 2�io � A I 8 LAND (1) ,i ffl EllN�RB�NC����EL��STUDYUTLY IN SEO FORIOPNR�SSURE MAINTENANCE t El i COOK INLET GAS PRICE j}�R/SHELL EMAH A,(�J„ RATNON CONTRACTS i DEk HUAC A GCE 9-32/MCF (1986) i • S V AN p AX 0:15 i • FTXXE P P L NE CHARGE • CONT AC PR�CE U . • kENATA jON OFNINSUGAS PRICE BASED ON PRICE OF NO. 2 FUEL OIL- i • EFFEC L WAS TTU ;RICE TO SUBSTITUTE FUELS, NO. 2 6 CoA SHOULhllKPgS AMN PRCE SWINGS - ALTERNATE OAS PRICING j • NET BACgqKRRKKi GppR10EROELT�RCpDLNGICE SUBTRACT . I ill EIINNGL``OUEF CTION, CONDITIONING 8 fRA M S�l0N COS HUM S M XIMUM PRICE AID TO PRODUCERS, $3.00 f3.6 /MCF I OTHER FACTORS ggqq ccEE NN TTNN II i PNtIGERWASSN1GAT!pTESplr Nf O 1. It CE0WASPSOFT • ANGTS $ TAGS DEVE OPA ARE DIM • UNCcONMI) PROM ESERVES ARE PLENTIFUL • PALNROJECT TERMINATED i X CONCLUSION i EXPEttTNIGiiCRESLPGASIPRICC5CJNTfUTUREABOUT FUTURE PRICES ESTIMATED PRICE OF ENSTAR GAS TO CHUGACH ELECTRIC i KENAI 9 NEST FORK FIELDS 19 j 1983 837 $0.68 94 26.84 7111 01 q 9 268 26.28 8.77 0.82 8 : 980 099020.76 _ ( 22:84 f.0 4 99 i0o:;6 1 99 11•25 H9 1994 RESERVE RUNS OUT to rt I' I• SUMMARY OF COOK INLET BASIN GAS PRICE ASSUMPTIONS ($/MCF) Yf.ABENSTAR 983 $ 1.60 9gH 1.729NO 6 987 2:980 1 88 88 J-9�5 5 993 3: 7 1992.12 41 1993 Ml 6.62 8999 7.10 1996 48 1998 8.28 0 2 1189 8ffl:97 2 01 A 2002 11-28 EDOINOIE: BURNS & NCDONNELL FUEL SUPPLY ALTERNATIVES 1983 GAS PURCHASE PRICES (MCF) y�g (1) CITY ,(2) ENSTAR 1f986985 $ 0.328 $1:2639 2.20000 130039 f918 2.288 OM 2.NJ769323 1990 1:620 991 2.804 992 3.000 2.610 1993 3.210 2.9559 INFLATION TRANSMISSION LINE COST AND 2 PERCENT YEARLY YEARS ESCATLATIONSOF911!S9PERCENTOMASEU0 ED1989-1993AAVERAGE f •rue Me. A P1fth P9vlslen „„N Me. 334� Ca�amM � Fourth Revision 34 E offset w., p ENSTAR NATURAL GAS COMPANY DatarM1 nstlen efrPrehased Oas Cost Ad u. tenant (1) Current average cost of system gas supply: Base Supply Estimated Effective Rate Total Centro is Purchased an 1/01/84 (A x B) (a) (b) (c) a) Kenai Field 27,429,400 Mcf $0.644 S 17,664,500 b) North Cook 28,600 Mcf $3.744 107,100 c) West Fork 72,000 Mcf $0.644 46,400 d) Other Beaver Creek 9/0000000 Mcf $2.155 19,395,000 Beluga _2; 00.0ee Mcf $2.155 5.3_,_ 00 e) Total 39Me_,eee Mcf (2) Balance of Gas Cost Balance Account December 31, 1983 (Immediate prior month end) (negative If credit balance) $ 814,600 (3) Estimated Interest Income (Expense) pursuant to 708 c. (3) �22.400 (4) Total of (1), (2) and (3) above S 43,437,500 (5) Mcf Sales* 3a-A3_ 6.0o0 (6) Wolgh+od Average Unit Cost of Gas (4 / 5) $ 1.1185 (7) Cost of Gas Base Rate 1,0380 (1) (8) Purchased Gas Cost Adjustment (6-7) $ DAN" kef(R) (T) * For a 12 month period beginning January 1, 1984. IPursuant to Order No. _� U-83-38 rin K.I r.,t Ad... �- 6rr.u..0� sr, A6" Lane .. i an Title 0Pates b Planning Supervisor ' r FUEL PRICE PROJECTIONS SHERMAN H. CLARK NSD SCENARIO 1983 E/MMSTU Natural Diesel Turbine Beluga Nenana year Gas* �.i�..oil Saa-LC 1983 2.77 6.87 6.23 1.86 1.72 1984 2.57 6.55 9.94 1.89 1.74 1989 2.46 6.25 5.66 1.92 1.77 1986 2.81 6.25 5.66 1.95 1.83 1987 2081 6.25 9.66 1.98 1.83 1988 9.89 6.25 5.66 2.01 1.92 1989 2.96 6.43 9.83 2005 1.97 1990 3.04 6.63 6.01 2.08 2.02 1991 3.13 6.83 6.19 2.11 2.07 1999 3.21 7.03 6.38 2.19 2.11 1993 3.30 7.24 6.57 2.18 2.17 1994 3.39 7.46 6.76 2.21 2.22 1995 3.48 7.68 6.97 2.25 2.27 1996 3.57 7.91 7.18 2029 2032 1997 3.67 8.15 7.39 2032 2.38 1998 3.77 8.39 7.61 2.36 2.43 1999 3.88 8.64 7.84 2.40 2.48 2000 3.99 8.91 8.06 2.44 2.55 2001 4.10 9.18 8.32 2.48 2060 2002 4.21 9.45 8.57 2.51 2.66 2003 4.33 9.74 8.83 2059 2.73 2004 4.45 10.03 9.09 2060 2.79 2005 4.57 10.32 9.36 2.64 2.89 2006 4.70 10.63 9.64 2.68 2.93 2007 4.83 10.95 9.93 2.72 2.99 2008 4.97 11.28 10.23 2.77 3.06 2009 5.11 11.62 10.54 2081, 3.14 2010 5.25 11.97 10.85 2.86 3.21 9011 5.38 12.26 11.31 2.90 3.28 2012 $.50 12.57 11.40 2.96 3.39 2013 5.63 12.88 11.69 2.99 3.43 2014 5.77 13.21 11.98 3.04. 3.91 2015 5.90 13.54 12.26 3.09 3.58 2016 6.04 13.88 12.59 3.14 3.66 2017 6.19 14.22 12.90 3.19 3.70 2018 6.34 14.58 13.23 3.24 3.83 2019 6.49 14.94 13.56 3.29 3.91 2020 6.64 15.32 13.89 3.35 4.00 TABLE 12.3-8 1 . FUEL PRICE PROJECTIONS DOR 500/o SCENARIO DULY 1983) 1983 $/MMSTU i I Wtural Turbine ea cal_ CO.,.. L 1983 2.77 6.93 LOBO 1984 2060 5.80 '1.80 1989 2,43 9.37 LOB0 1986 2.47 9.30 1.80 1987 2091 5.23 1.80 1988 2,94 5.16 1.80 1969 2.58 9009 1.80 1990 2062 5.02 1.80 1991 2060 4*98 LOBO 1992 2.98 4.99 LOBO 1993 247 • 4091 LOBO 1994 2099 4.88 1.60 1999 2,93 4.84 LOBO 1996 2.92 4.81 LOBO t 19911 2050 4,77 1.80 ` 1998 2.49 4.74 1.80 1999 2047 4070 LOBO w 2000*0 2.46 4.67 1.80 M I r e includes 300MOT9 for pipeline transportation coat. All fuel prices remain constant after the year 2000. Sourest Alaska Power Authority i TABLE 12.3-16 i UTILITY SYSTEM COMPARISON • SMALL CUSTOMER BASE - 1,620 • SINGLE CITY SERVICE AREA • NO TRANSMISSION LINE • GAS DISTRIBUTION ONLY • ONE GAS SUPPLY SOURCE - UNION/MARATHON • an oLaoPH���t�ic8AP � • STEADTOGlOWT983 - YY EE1iIO0111RAETPKl0NCE AREA • SMALL IMPROVEMENTS $ RENEWALS • SMALL AMOUNT OF LONG TERM DEBT • CLOSELY HELD CORPORATION • LARGE CUSTOMER BASE - 61,000+ • MULTIPLE CITY SERVICE AREA • EXTENSIVE TRANSMISSION LINES f • LARGE INTEGRATED SYSTEM • MULTISW,FjLEAS SUPPLY CONTRACTS AARSOSpKATgTE KENAI/WEI FORK FIELDS • OLD,,KCENAI FIELD WES FORK MAl1NG OLONNEW 1993 • RAPID GROWTH 15% 1983 POWERPGENERATIONRVICE AREA • LARGE CAPITAL EXPANSION PROGRAM • LARGE AMOUNT OF LONG TERM DEBT • PARENTIARRMOF LARGE INTERNATIONAL y.� SIAT1 1 ��(�aLLiilL DECYEgo TO DAT•,,3 SALES POICE PER .* MR sz.143 G 0 FlElft 2.027 0951 WILD 00p • OVER-ALL GAS COST PER M.C.F. U NC L• SEVERANCE TAX) $ •328 ... AL VOLUME IE F ii L M ffAfti 2226,208 MA6 COM IM90IR WiL000D TOTAL 527,612 H.C.F. PURCHASES VOLUME ]THREE . LAYS j.. ACTIVE VE AT EN � LT^��� 1.3113 f"AliCOMM ER JJA 257 NGCO M EREIAE 49 WILDWOOD TOTAL KUSCO 5 YEAR PROFIT & LOSS SUMMARY I 1983 R YEAR . CHANGE . GAS SALES 1,042o296 36.8% OPERAT`NG EXPENSESs GA PURRCt ppSE 180,107 29•0 223.6 - DI T jjBUlION 126,280 - MA E ANCC 29o3ll CuMIR A COUNTS •8 ��gg yy 11.8 6. 11 SA - AT ON & GENERAL 157;716 �•5 - �J;Rffl 0 70,pp2yy 29•6 HAN INCOME 42,203 6.5 TOTAL OPERATING EXPENSES Z25,372 33.0 r OPERATING PROFIT 316,993 46.5 NON -OPERATING INCOME/(EXP) ( 27,448) —45.9 lit " AVI AGE NA06j 8.6% 2• 41: 4• 1 �6 .1 7.4 14.2 -13.4 1 t t CURRENT TARIFFS MONTHLY RATE,- RESIO TK _IAL 1 • KUSCO I 0 ESS iB.OS ` S 00�OOfCfr 0 N XT 3000 CF - 0• L 00 01 ALL AnglT10NAL GAS - INIMU OMUNALAPILL - $8.08 • ENSTAR ;2. oo pp - 0551PERRMCFO CF - N0� IN A�41 OONTHLYR �L[El MONTH MONTHLY CONSUMER _COSI.O,GAl • KUSCO COST PER MCF (14.36 MCF) $2.1720 t • ENSTAR COST PER MCF (14.36 MCF) $2.5988 ,II • JiSifl'S OUPIEKUjAqjFFREPPESENTS A 19.65 PERCENT SSA - '._'��---�' � .:-----`-• x��—. _,� .- ___ �---.-�.�=�=•dtlT` � lmaiiaaiA�.ei�l�:..El x•Ir�i�..-....e' .:s_ �� —: - i COMPARISON OF AVERAGE BILLS KUSCO vs ENSTAR TARIFFS KUSCO ` RESIDENTIAL _ M # OF CUST. MONTH CO SUMPTION (---TKTARIFFED COS ---) G FATE MSTAR (LESS) 32,437 1 88 1 27.3 $53.20 $66.911 (513.7 ) 26,960 1, 1 2 22• $45.36 $56.37 ($11.0 ) 1 2t� ,605 1, 81 3 20• $1q1.99 $51.81q (a 9.8 ) 18,949 1, 51 pp 15.2 i32.54 $39:13 Q 6.59) .203 ,2 11 5 11.qq a26.09 30 qq6 ( �-37�2 0 ,2i1 6 1:8 0 522.0p6 125.0pp ( •g8 ,O 5 ,Jz511 7 211.77 t qq•gg5 H 2:g11:13) 2518 3.6 111.86 $ 2.67 0.81l f,*3f3,251 9 9.2 E22.46 5.5gg ($ 3.12) ! 7,913 10 f 3.6 129. g7 $35.68 (f 5.71) 5,566 1,33 111 9.5 a39.88 $gq9.00 `E 9.12 27,302 110 3 12 20.8 $42.13 $52.03 (f 9.90� .i i 1 ' I " ASSUMPTIONS AFFECTING RATES • CITY ACQUIRES SYSTEM PRICE OF NEW GAS - CONTRACNGRMS SCA ATION PURCHASE PRICE OF KUSCO SYSTEM _ FINANCING TERMS - OPERATING METHODS - GROWTH gqRAJE NJEONSUUPRSPER CONSUMER - INFLATION • ENSTAR ACQUIRES SYSTEM j - CAPITAL EXPANSION PROGRAM - GAS PRICE ESCALATION TAK SOA 6AYOVOLUMES 1 - OLD/NEW GAS SALES GROWTH SATES VVOLUME PER CONSUMER LLECTRICAL GENERATION r! - NEW CUSTOMERS �� - INFLATION COST OF GAS PER MCF YEAR ENBTAR CITY�198q �LONTGROWTH) (HIGH GROWTH) 1J-96 2.5 �.17 2.08 2.00 198 g5 �.8� 1.77, 98 q.12 3.Sq �NO 1 qMD p.584 0 3g.q5 188'� 1993 .63 S•56 .94 3•44 1. I �I L i IN i �1�1�IMAlI�I1�AlIM�Nl�lilllillr _.. _ --- � - a MAJOR AREAS OF UNCERTAINTY c.li L..ACQUIRES j • POST 1986 GAS SUPPLY 8 PRICE TERMS • INTEREST RATES/FINANCING TERMS • ACHIEVABLE EFFICIENCIES OF OPERATIONS • HIDDEN COSTS TO CITY -.-.-, - DRAIN ON CITY COUNCIL B STAFF OF TIME 9 RESOURCES • INCREASED UNCERTAINTY ABOUT FUTURE RATES ENSTAR ACQUIRES • ESCALATION OF GAS PURCHASE PRICE •f • MASSIVE CAPITAL EXPANSION, I•E•, BELUGA LINE ME j . 7s t� v ] k Y I 1 I � 0 � I - -- :1�1�I�iiY��fN4/�+�il+��►.=.rats......,J/���r_'�--�1�..:.xrJc�d�u.r.=—.lt..�r.:—�---s..-..:.-�-3s,.-_�rRF,l�+..�*.�I�Ni�Mr=.w.1...11 �_ ,aa-n,i'` _ KEY FACTORS • GAS AVAILABILITY ADEQUATE UNCOMMITTED RESERVES GOOD BUSINESS RELATIONSHIP WITH UNION -MARATHON = - OTHER POSSIBLE NON -MAJOR SUPPLIERS • GAS PRICE _ 1 ENSTIEIR4TIMELDEDCl EEPRICE IS POSSIBLE BUT CANNOT 14ATCH i - NO MAJOR TRANSMISSION LINE COST U • CONSUMER RATES i CURRENT ENSTAR RESIDENTIAL RATES EXCEED KUSCO RATES SMALL COMMERCIAL RATES APPEAR TO FAVOR ENSTAR IF ENSTAR ACQUIRES, 1984 INCREASE IN RATES IF CITY ACQUIRES, 1986 INCREASE IN RATES • UTILI(Y OPERATIONS ' - KUSCO IS A MATURE, WELL MAINTAINED SYSTEM ENSTAR COULD MANAGE EFFICIENTLY f - CITY OPERATION COULD ENTAIL ,BRAIN ON CITY COUNCIL/STAFF. n SOME OPEEpEAT JOIAL EFFICTTIENC�0S• hoCNAJORtt APIlTALGEXPEND TURESAAREONECESSARY C 1 1 laska ` Mun* 105 Municipal Way, Suite 301 Juneau, Alaska 99801 d ; (907) 586.1325 LEg151ATIVE BvLLETW April 6, 19b4 a I i tN1Txi 91�_,_-AL w 99 67 - Utility Relocations The good names the bill FAILED the House 11-27 on Wednesday# The bad news Representative Furnace reconsidered but the utility companies didn't have the votsel the bill was returned to Rules "to correct technical problems". Translations allev time to gat the votes, Please the* the following individuals for their "no" votess Abood, Admo, Russell, Cato, David, Duncan, Flood, Fritz, Fuller, Goll, Grussandorf, Herrmann, Raponen, Lacher, Larson, Undsuer, Liska, Malone, McBride, Miller (Juneau), Pestinger, Phillipo, Szymenski, Ushling, Vaeka, Ward, and Wandte. I.LZ4NAre wondering why your Legislator isn;t Listed above - as�C themltt Municipal Assam -,re and Revenue Sharing: The gestate Finance Committev added $20.4 million to the Department of Revenue budget before closing it out Thursdayl That is full funding Oft) according to the January FY 84 rsvemu estimates. Us March estimates, out this week, peg corporate income tax proceeds at $325 million, which mains the shortfall may really be 027 million - but the Finance Committee went with the January FY 84 figures or $20.4 million which is a lot better then the Governor's January PY 83 estimatel The Senate Finance Committee to scheduled to close out the DCRA budget 4/11/84 and, so mentioned last week, Senator Faike hot proposed to add $2.5 million to Chapter 89, Revenue Sharing. The Now Finance Comittes has closed out both department's budgets at the Governor•# requested level. Indicate your support for full funding to your legislators, Capital Billet No doubt you are aware of the commotion this wok over the $714 million in projects the Governor approved and the $234 million he vetoed. The Governor admits solo mistakes, but, more importentiy, an inclination to approve many of the projects upon resubmission in subsequent bills if SO when the legislature address" other capital cost issues including the 4-dam pool, the Susieve blackmail clause, Mil, etc. HB 172 - Title 29s The bill which passed Judiciary 3/29/84 has not been scheduled for the week of April 9-15. Contact camittee their Adams or others on the Howe Finance Committee and ask for a hearing ASAP and passage of CM 172 (CRA) with no amendments. F— -4- ------ _i ' Legislative Bulletin a 37 - page 2 HEARINGS §5 530 - Alooka Power Autho lays RJR 32 - And Construction VaLeal ProJectet !H! 509 • Watans. Bradley Lake Hydra Proleatoil,lH! 684 Rnoalt±l ADDroeriation, A148ka Power Authoritys Senate Resources Wednesday, April 31 • 300 p.m. SJR 32 calls for smendinq the constitution and cresting a major projects fund, a.$. in owass of $100 million through annual deposits of 30% of state revenue through 1990. CSSr-, Road Mtenanee 8lnwiee Means House Finance, Tuesday, April 30 • 300 p.m. J 45B - Agriculture Rights to Lands Knee Resources, Toesdayp April 10 - 3100 p.m. This bill, introduced by Bettisworth, would require DhR to transfer all remaining rights to agriculture lands i.e. fee "to ownership, to owner or losses on request at no cost. The DWR may require a development plan Including covenants and dead restriction. FLOOR ACTION 0 589 - APAs CM 589 (Pin) an passed the House on reconsideration 29.9 and the bill was sent to the 8enatot. HB 009 ; State Bond Comsitteet CORD 609 (Pin) passed the House 39.0 and wan semi to the Senate where it was referred to the State Affairs, and Finance Committees. Mjft APA ADDrororiatlons COMB 664 (Pin) an peened the house on reconsideration 36-2 and the bill was sent to the Smog. 'Y 05 550 - Local Service Roads and Trsiiyr The CPA Commitees recorm*nded a committal substitute whieb differs from the Transportation Comittee substitute by raising the ADT from 400 to 750. Both versions say the money apportionisd by lormuls goes to borougho or to home rules cities and removes reference to first class cities as was the can prior to July 1981. 08 629 - Native Governments end CorDor�tiones CPA Committee reccmmmended a committee substitute to Include all federally recognized tribes. The bill was sent to the Judiciary Committee. C881! 31 - Road Nalatenance 8arvlose Areast Ths House Transportation Ca sittee recommended a committee substitute sod the bill w" sent to Now Finance. The committee substitute changes the date of the report showing use of the money for the previous fiscal year from October I to August 1. MW saw SD 539 - Cosssatit /l'.riminsi s Din bill introduced Yllozis SetltZ,_, , by the Judiciary Committee, revises work schedule and eats rates for em■unity work in lieu of a crlminsl "tence. Referred to Judiciary. CITY OFK E NA „OHea-ja W y4" 11 210 PIAAL00 KENAI, ALAOKA 09011 T13LEPHONE 203 • 7030 April 3, 1904 Cheryl V. Caruon, Chairman Cenoi'A1 Libertarian Party P. 0, Box 1039 Soldotna, Alacka 99669 ®ear too. Coruon, After much diocuanion and "soul aearching", 1 fool it in necooaery to decline your roqueat for advartiaing apace in the Kenai Airport. The bosle roaoan for this action Iv that the City to not and connot be nlignod with any political organization per ae. By. ollowing the Libertarian Party acceno to City advartiaing apace could be miaeonotrued by other political ontil•ioo that the city to andoraing the Libertarian platform. Politico boinq what they are, any action of thin nature could have adverse effects on tho City of Kenai in it'a efforts toward growth and developlaunt of 1•ht) City, amc-tlnq each and every citizen of the City. If you feel it noccionry to diueisno this manor any further, planoo feel fret) to eonl-aet. fire.. Sine roly, , 1/ dI" Al .,,/ Jim Swalley Airport Hnnager JS/kh Y � T VEHAVAZ LIBERTARIAN PARTY P.O. Box 1039 "r SOLVOTNAo ALASKA 99669 March S. 1984 CITY OF KENAI 216 Fidalgo Street Kenaig Alaska 99611 ATTENTION# Bill Brighton City Manager REs Advertising sign at Kenai City Airport Dear Bills Please find enclosed copies of correspondence that was had with the Airport Manager of the City of Kenai, Jim Swalleye You will note that said correspondence dates to November 1983 (per the date an my computer). Mr. Bwalley has • never answered me regarding these requests in writing. I have followed all telephone requests9 per his Instructions# in writing. Not long ago (you were in the hospital) Ted asked Jim about this matter and was told he (Jim) has not had the time to supply the list of advertising requests and the dates requested. I still don't have the list or any comminicationg either verbal or written, an this matter. I would ask that you please check into the matter, In order that a bonafide advertiser might fill one of the spaces that appear to be available. I await your prompt response --you can write to the above addrese or call me at 283-4321. As you will note, copies of this correspondence are being sent to the attention of Mr. Swally. I assure you that the DLP to anxious to welcome visitors and commuters to the City of Kenai and the Peninsula In a gracious manner. c"re'yg' he ry I Carson Chairman ecs Jim Swally Airport Manager Encs previous correspondence DENAI'AT LZUERTARZAN PARTY P.O, Box 1039 EDLDOTNA, ALASKA 99669 Jais"ary 9, 1983 CITY OF K,ENA I 216 Fidalgo Street Kenai, Alaska 99611 ATTENTIONS Jim Swalley REs Advertising sign at Kenai City Airport Dear Jims In November 1993 I wrote to your attention requesting space for advertising at the City Airport. You informed me that all the space was spoken for at that time. However, as I obsorvw at the Airport there are several spac" that are empty. I find it difficult to understand why anyone would pay for that space and not use it. I would appreciate receiving a list of requests and the dates the requests were made, in order to keep track of when the Danai'ai Libertarian Party might come up on the list. I can assure you that upon paying our TWO HUNDRED DOLLARS ($200.00) for the space, it will take us far less time to have our sign prepared than some of your other advertisers. I will look foreward to receiving the requested Information in the very near future. Thank you for your Prompt attention to this matter. Sincerely, Cheryl V. Carson Chairman 't 0 9 � 7 � C t w D'Naina Libertarian Party P.O. Box 1839 4 r Soldotnav Alaska 99669 CITY OF KENAI 210 Fidalgo Street Konai, Alaska 99611 ATTENTIONi JIM BWALLEY Airport Manager Dear Mr. Swalleys Please consider this letter as a formal request for the rental of an advertising sign at the Kenai City Airport. It its my understanding, per our conversation, that the cost of said sign is TWO HUNDRED DOLLARS ($200.00) per year. Please notify me as soon are possible regarding the avail- ability of said sign. You may contact me at the above add-- rees or by calling 283-4321. Thank, you for your prompt attention to this matter. Sincerely, Cherry Carson Chairman l Y i J 4 CMGWA 1410116 4YU141111 M41 of e111p1 R4111 19017 IAN.t 11 foul MIA IVA411IN 04MI 19A4 Ills 19M W Nei Nn N9f 1"1 199 1973 Iglu It" 19% 1911 191A 170 f111 "fit 'IV" tsai loll.«a..........r...r....r rearm reuren nnrw rennlr nwr11 noun rnulwr nu No xnnu oI I. - onolr Inl- nrnw mlrnr rnrlrrr Donor noon nnnrr anon 01 N 631f b,fltf i,31f bliss tits List $1310 631f 6311 t31f $1310 i.slf 61311 61310 6.31f 61310 61315 6.310 L310 6.310 Wlf$L Cost 6311 6,311 111,311 6,311 6,311 6311 6311 11,311 6311 L311 till 6,31% 6310 11,310 6,310 L310 6o31% 6,311 L311 6,311 010 KLUGA OM NA No NA N6 NA 0 NA h NA 04 0 04 to NA 0 NA NA N1 f61 ffl II'Kt1IJR OAII U011 low 1,I15 I'm Un low Lai I'm low 1st" I'm 7o4p 1,11111 I'm7fn$ 119" lolls 9.18% I.11% U111 0410 01d -- CIA I 11451 U13f u .1110 10,011 ILllbf Ito% loth / foil/ 01 1L3111 Lb" 51350 loss/ 4.lot 1140 1.410 0.481 01311 61310 61110 11111111114 ON-- ILIt 4.69 33,330 11,1110 ILKI ILK$ It %$ 9o161 1.141 11,61% FL31O LW 51t1 WAS 4,1511 6111 1.470 0,4111 1.340 6,114 6,310 Now Alil1i s f./0f L001 Lost f.l f 1,011111 1,005 LOU RAM #,M CON t.Nf fotlf RAN Leff 2.49 3,0101 /./11 1.010 11,4011 L/04 I1L110A C06L fee" loth Ltp low low Lql U11 low bip 71110 Leh LUI ?A11 1.0 7,164 7,100 1,14% U11% 7,101 WAs IN ow OIL 1 on 1. pall loth Un 7.11% 1*"% let$% 7Ah lAll 11,11111 bell l,ep U111 U1111 1101 f11A1 1,161 foist 71260 711816 1114% CM111 NMftM9l/ LNf LM LMf 6Mf LNI LON 14001 Lnl LON LOH L101 LO Lap Lnl tIM L1N L001 1,90% 4#14f 2,//+I OPINT1111110 CM/110011% FLW Ito to 194 1911 IM Nn ;,a I9I1 1993 1913 1914 1" 19111 141I 1994 lilt Ifn 0#1 t/13 I1f/ ••.•••« •«.•. •••••r••r••«•..• /1rrr/so /selosrr 1///H/r Wasrsel a//rr/r stages" 1/se/ser //15//11 I//10/18 11►1/ore /r//r//o r/Ismsse "losses 611/1r1// 911/N1// Porrsn/ rllrrrlr Ir/s11se rr/r/soo of-PNfs 111111115111115111110 6If fool fool I,ol fool loll 1,01 fool I,11 fool soot 1.01 I'll fool 1.01 1.01 1,o1 1101 1101 1.41 toil film 0 6 N 111>EN019 Ito 1,141 Ilslb Ir6M 11747 9,MI 11143 9,1111 114s1 4113 31117 313/6 45111 4796 4,1127 4fU1 4,939 5,517 5,614 4,117 P IICAIN11111L Flo 01111 f5 159 to u l51 14 171 Is ets IN 410) off) fill flit 63 336 elf fill (01 Fill, 111116lto CONIBIMIw lip 1915 1916 NK 19N to 1910 1991 1993 1911 1114 to 1916 111W to 1999 PAO e1101 tilt Rn ,r«aaa•a«•«r•«««.•««...• posefar ssnaol moo" goossur ass/rr asefrro feselrse ni/rao ///ssIss offense /shove orswom Inrresr tlses,,lr 1/0re004 presses 01Mnr relsltn .Troops elf .... a OLD flow Ill t4 14 t5 0 31 it s1 so x 3t n so 34 34 NA NA NA 114 to M Kw Kim w 150 Nf to M KI YA ill 4n 4n 471 51s 5M 501 6t3 661 711 Ill I26 616 V RUN WL 16 10 IN IN 19 06 p11 m 99 ifs M s14 33l XI 366 416 446 419 514 "1 � OWN W -- CIA 01 IN /N IN M Us sit 411 NI 541 bit its 141 795 eta 631 WA 1045 1149 offs OWN 0 -- Ntly 145 19 9M 926 tog IR 316 341 311 0 051 1111 611 616 691 IN $13 $91 094 911 /M WON OIL 6 w set 18 IN tit 0 fN fb1 tll 313 94 361 s/s 410 09 0 494 539 59A M 17f III 1011woI AAII Hoh Ilfb Ilop ILp Iloh foot 11,1 Ibp Ilfp 11,11% llfh It." Ilop 11,00 loop Ilop 11,00 If.h 11.0111 Il,ft 01011111101110141111111111 of 1100 fob lop 1,00 to lob L0f Lp fop to 1o1011 to Lp to 7,00 to ha I,p tot 110 RqM Mile COATI .awar««m•«w•.•rww.•ro•r•r 000IIA*VA1 60 010 010 010 60 010 0,f 10 t0 to 010 60 to fA 60 to to 60 to 010 f7L011111 (NILLIA7M) W ILL 16O 1t1 ILO ILI It$ ILI ILI ILL ILI 199 19,9 NA flog #log tlo9 114o1 f4.1 0,0 ILM INl7 N 10/90-101 910 69,01 6910 1fo0 99#0 to 010 010 0,/ to to to to 010 to to to 60 0.0 to ILIO all u (IIILLI/13M1 I147 21,7 04 stt Hot 61 0.0 to 61 tf Off LIP 60 to M 0.41 to 0.0 to to owl I" f//Mf•1A) to 6o t0 60 60 IA 611 to M 60 60 60 60 to to to 6o 0,0 LP t/ NMILU INILLI/MNI to to to t0 to to 6f to t1 oA 0A to 010 60 0,0 elf to to 0.11 ell AWL IfMllb 16/CW111 010 6f 010 I10 to 010 010 010 t1 010 I,0 010 010 010 to t0 too 61 $10 to WL lJW, 4NILLIANM) Ito ILf U t of 99A 34.1 41.6 0A 49A 55,6 114A 119,0 147.7 161.1 I7%6 1911 W.? f4t9 t11.3 to 13fioina 16/NW111 60 to 60 t0 to to 010 010 61 to 010 010 to t0 t0 010 to to t0 0A l6Nniom 4111LL14A) to to t0 to to to to to to 01f 60 IA t0 M to 010 010 O.f to to (11061f/Q1316/1W110 to to to 010 to to 010 ti 0A 0,1 010 010 0A 0.0 0./ 0.0 0.0 LO too t30 *mom (NILL/A1w1) to to to t0 0A to to Le to to to 010 tt 010 60 0,o t/ C11 t0 s'.1 "Mllffo Ifn*1Al to 010 to to to M elf to tl to 010 0,0 0,0 to to to to 010 60 t1 Il141KNA 111110AIN) to 010 to 010 to to 0,1 off to to 60 to 60 tt to to 0of 010 t0 1.0 1A60t/10111A Ills Ills Ills Ills Ills 1.15 Ills 1,16 1019 Ills 1.15 I'M 1,13 fill 1.15 1.19 loll 1.15 I.14 IA% WIN Lms I,01 fob 7fp 710% f104 71o0 Lb I.11 710% 110% lop L01 7104 7.05 7.04 left 141 710 fell fowl pair 1 A APPRAISAL OF F LOT 2, BLACK 29 COOK INLET INDUSTRIAL, AIR PARK OSCAR THOMAS BUILDING 0 CLIENT OSCAR THOMAS BOX 614 KENAI, ALASKA 99611 PREPARED BY ED WARFLE REAL ESTATE APPRAISALS P.O. Box 315 F Sotdotna, Alaska 99669 G' Il t EFFECTIVE DATE. OF VALUE • a NOVEMBER 23, 19b3 4- `a FILE NUMBER $13-717 5, i. I z . 3' ' OF q Phone . P.A. BOX Sib (Wi 262.7444 GOLOOTNA, ALASKA 9W9 December 60 1983 Oscar Thomas Box 614 Kenai, Alaska 99611 Dear Mr. Thomass As requested, I have conducted a study and appraised the real property known as the Oscar Thomas Building located on Lot 29 Block 20 Cook Inlet Industrial Air Park, for the purpose of reporting to you an estimate of the Subject's Market Value, as,of November 23, 1983, A discussion concerning the analysis and supporting data is contained in the following 37 pages of this report. Based on the examination and study made, I have formed the opinion that the Market Value of the Subject proper 5�y, as of November 23, 1983, was$ 02509000 TWO HUNDRED FIFTY THOUSAND DOLLARS To the best of my knowledge and belief, all statements and opinions contained in this report are correct. 4 Thank you for the opportunity of serving you. If you have any questions concerning the report, please feel free to call. Respectfully submitted, Edwin Be Narfle, C.R.A. Appraiser i I n li i c , - --- -- -. TABLE OF CONTENTS Title Page Letter of Transmittal Table of Contents Page CONTINGENT AND LIMITING CONDITIONS 1 SUMMARY OF SALIENT DATA ....................................... 2 PURPOSE OF THE APPRAISAL ...................................... 3 NEIGHBORHOOD AND AREA DATA .................................... 5 CURRENT ECONOMY--* ... 6 SUBJECT SITE DESCRIPTION ...................................... 7 SUBJECT MAP. .................................................. 8 HIGHEST AND BEST USE .......................................... 9 SUBJECT FEASIBILITY...........................................10 BUILDING DESCRIPTION......................'....................11 SUBJECT BUILDING SKETCH.......................................13 LANDS MARKET DATA COMPARISON.................................14 COMPARATIVE ANALYSIS AND CONCLUSION OF LAND VALUE.............17 COMPARATIVE LAND NAP..........................................18 EVALUATION COST APPROACH...................y.....................19 MARKET DATA APPROACH..................................21 INCOME APPROACH.......................................22 COMPARATIVE ANALYSIS OF RENTS .........................24 STABILIZED OPERATING STATEMENT ........................25 EXPLANATION OF EXPENSES. ..........................26 CAPITALIZATION - MORTGAGE EQUITY......................27 CAPITALIZATION RATE ANALYSIS ..........................2S RECONCILIATION AND CONCLUSION OF VALUE........................31 CONCLUSION AND CERTIFICATION..................................32 ALASKA AND REGIONAL DATA......................................33 ADDENDA Subject Photographs Kenai Peninsula Borough Map Area Map Qualifications of Appraiser z . Riad &&810 4Aft4&4& L Y . CONTINGENT AND LIMITING CONDITIONS The appraisal report, of which this statement is a part, is subject expressly to the following limiting conditions and assumptions That the legal description as given is assumed correct. No survey or search of title of the property has been made for this report, and no responsibility is assumed for matters which are legal in nature. That this report assumes good merchantable title and any liens or other encumbrances which may exist have been disregarded. That the appraiser by reason of this report is not required to give testimony or attendance in a court of law or any other governmental hearing with reference to the property in question, unless prior arrangements have been made. That the appraiser certifies that, to the best of his knowledge and belief, the statements and opinions as set forth herein, subject to the limiting conditions, are true and correct. That possession of this report or a copy thereof does not carry with It the right of publication, not may it be used for any purpose by any but the client without the consent of tht, appraiser, or the client and, In any event, only with proper qualification. That where the value of land and component or structural improvements are shown separately,. the value of each is segregated only as an aid to better•estimate the Alue which It lends to the whole parcel, rather that the value of that particular item as if it were by itself. Disclosure of the contents of this report is governed by the By -Laws and Regulations of the American Institute of Real Estate Appraisers of the National Association of Real Estate Boards. Neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser or the firm with which they are connected, or any reference to the American Institute of Real Estate Appraisers or to the M.A.I. or, A.M. designation) shall be disseminated to the public through advertising media, public relations media, news media, sales media or any other public means of communications, without the prior written consent and approval of the author. Page 1 gd 1060 SUMMARY OF SALIENT DATA OSTENSIBLE OWNERS Mr, Oscar Thomas LEGAL DESCRIPTIONS Lot 2, Block 20/Cook Inlet Industrial Air Park LOCATIONS The Subject is located on the east side of Willow Street, approximately one block south of the Kenai Airport terminal. LAND AREAS 22,500 Square feet RIGHTS APPRAISEDS Uu6scumbered Pee Simple Title . DATE OF VALUES November 230 1983 10 PURPOSE AND FUNCTION: The purpose of the appraisal is to estimate the Fair Market VslA of the real estate and its function is for financing purposes. HIGHEST AND BEST USES Defined: The available use that will produce the highest return in terms of money or other amenities. The Subject's highest and best use is to be utilized for commercial or industrial purposes. BUILDING SIZES 3,040 Square Peet ESTIMATED MARKET VALUES $250,000 Page 2 - /�LetL �O�tL J'��1��ZQlaQ�4 z Y � PURPOSE OF THE APPRAISAL r FAIR MARKET VALUE ' The purpose of the apprsiD61 report is to estimate the market value of the Subject with improvements. Market Value is defined by the American Institute of Real Estate Appraisers and the Society of Real 'i Estate Appraisers in their joint terminology. handbook as follows$ "The highest price its terms of money which a property will bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and - assuming the price is not affected by undue stimulus." C Implicit in this definition is the consummat.ioeilerof atoer abu under � specified date and the passing of title from s y , conditions wherebys , i. Buyer and seller are typically motivated. ° 2. Both parties are well informed or well advised and each acting in what he con- siders his own best interest. 3. A reasonable time is allowed 'f or.exposure in the open market. - 4. Payment is made in cash or its equivalent. 5. Financing, if any, is on terms generally available in the community at the specs- ! fled date'an& typical for the property ,..' type in its locale. 6. The price represents a normal considers- tion for the property held, unaffected by special financing amounts and/or terms, . ` services, fees, costs, or credits incur- red In the transaction. '• DATE OF VALUES November 23, 1983 i TYPE OF REPORT REQUESTEDs i,. full narrative with addenda. RIGHTS APPRAISED$ Unencumbered Fee Simple Title. I :. Page 3 I �ia� �'etate ,����ueals 11� Er. S r STATEMEMT OF THE APPRAISAL PRCBLEM The Subject is an office -warehouse complex which is presently being utilized by a utility company under a lease agreement to extend for the forseeable future. r The study conducted includes an analysis of land value, building costs, economic rents, comparable sales and factors relating to feasibility and market supply and demand. The market domparison approach reflects the principle of substitution j; whereby the market indicates that it will not pay more than a similar property could be purchased for. The Income Approach reflects the principle of anticipation, The quantity, quality and durability of an income stream is analyzed in conjunction with available financing to determine the Market Value of a property's income producing capability, The investor buys with anticipation of a particular return on ce pitai, The Cost Approach reflects the principal of,substitution. A buyer will typically not pay more than the cost to replace. This, of course, assumes normal market conditions, All three,approaehes•to�value were considered in the assignment. 71 Page 4 R&Je AA4 NEIGHBORHOOD AND AREA DATA The City of Kenai is located on the easterly bank of Cook Inlet in the central portion of the Kauai Poninaula. ` Once primarily a fishin —tca in and trading post type nai hborhood y 8 capping 8 P YP 8 g tj•, the discovery of oil, gas and other natural resources has converted the area into the largest, industrialized neighborhood in the State of Alaska. The majority of this industrial activity is located 10 to 12 c miles north of Kenai in Nikishki, Alaskae i Tourism and commercial fishing remain a very important part of the economy of Kensi, providing both revenue and jobs for government and private entities. Kenai is serviced by the Kenai Spur Highway which runs in an East to Westerly direction and extends North approximately 40 miles through Nikishki. The business district extends along the Kenai Spur Highway. with its concentration being in the Central downtown area. Carrs Shopping Center is the largest commercial facility within,the City. It contains Carrs Grocery Store, Pay Lees, a department store, , shoe store, travel agency and numerous small businesses. The First National Sank of Anchorage and Alaska State Sank have been located in r „ Kenai for some time and in 1983 it has seen increased banking • , competition, the construction of Arby's%Res.taurant, The Uptown Hotel, , numerous commercial projects were completed in 1983 and a new postal facility is planned. Sales of commercial land has had increased activity over the post Year rQ with *'number of projects scheduled to begin in 1984. The city's pp population has advanced from 4,324 in 1980 to 50232 in 1982. The residential vacancy factor is estimated at.0% with several new units - under construction. - s Page 5 k CURRENT ECONAMY Major factors effecting the economy are interest rates, terms of finsncing, confidence in National and StateGovernment vern enthad inistration# tourisms commercial and sports fiehinge pn community, and growth in the commercial community. Over the past two years, interest rates have gradually lowered and expansion has numerous businesses a in the andavailable jobs, causedanincreasepopulation Currently the economic attitude is optimistic, attracting investment capital from both within and outside the State of Alaska. --"" This upward trend is expected to continue. fr 7 if page 6 I ' r. l t= iv i 7 SUBJECT SITE, DESCRIPTION i LEGAL DESCRIPTIONs Lot 2, Block 2, Cook Inlet Industrial Air Park LOCATIONS The Subject is located on the east side of Willow Street, { approximately one block south of the Kenai Airport Terminal, LOT SIZES ' 229900 square foot -- - SHAPE AND TOPOGRAPHY s Square and level at road grade, UTILITIESs f Electricity, Telephone, Gas, Water and Sewer, SOIL ANALYSISs Gravel Substratum - good drainage, ACCESts Willow Street is paved with asphalt, provides two lanes of travel, has curb, gutter, storm drain and is publicly �. maintained, SITE DEVELOPMENTS 1 _ Paved parking area fronting on Willow Street (26' x SS'), The balance of the site is enclosed with a 6' high chain link fence with a double entry gate, RESTRICTIVE USES •; No encroaching easements ZONINGS a Light Indusitrial Page 7 dial vitals, Fit isal4alo l I? �, ��,OFA�q �1 49TJi*. r �1.... ...ur r•r•.. rrr 17I�►u. '�'14 .4:/ S. WtISME r ' • � oo �.,•.si�. spas ,,.•• ;�ti •44 ._ . • 4� Cram '+i p: i `•. EGG s pv ' A .','�r ',s; � a�o�cK ►��/'s` r. ,, . LEC7END otnd ' NOTES � ! CUDIN LINK FENc� eirs !%o vy crrY WQTGQ 6ND 5 wmlz a, bl::�f Z { �Loc V Dui L--r? sc / ,pi,;� 0• ,4 o� I hereby *.►Illy thag.t 1 Aars sa�rorod fM /elb.rip daci4r0 4 tl` • 1 eT % f3L{G 2 led In the WNW Reealtn District, loae� �N�Nq,, • leske Ow that the lmprorom to eilaotoo IAoroon ao 'ail Q r11Aln the poporly lines end Io not erellap or onaresch ti fhe p/Wrlr ry/nq *dJ0*Inl IAorote, Mof ne lmprore-- ` nto an Me pr*ioa4 "0 ed/e*eM IMnto on*roe*h an ,9ArnQ�r� ��t IAo O►emhlH In gwsd h erld ito ffoo we no roodroro, � L=C V G ronsmleobn I/nos a dMi di/ble eos«noMe an ab pslvoAfi e�vt es h01*sled Awson, Ku�iG0 OML��i Obted: Aft. ,IM c /o ' 01GAi� � '• � -4oY U14 • VC. NW , W4. IWI of and 46oee a �Y-40 MONO 4 =- HIGHEST AND BEST USE HIGHEST AND BEST-US91 Highest and Best Use is defined as the possible, feasible and permissable use that will yield the highest return in terms of money or other amenities. Highest and Best Use is fundamental to the concept of value. Land is valued as if vacant and available for the most pro- fitable likely use. Since change is always taking place, an analysis must be made, concerning today's most profitable use as a probability for the future. This analysis is essential for financing purposes as a change of use could dramatically effect value during the loan period. LAND The Highest and Best Use for the Subject site is to be utilized for commercial or industrial purposes. This is compatible with present zoning and neighborhood development. AS IMPROVEDt ti The Subject as improved is compatible with the Highest and Best Use as if vacant* d� ri Page 9 °a t AA64 A •r /i SUBJECT FEASIBILITY � • i At the present time the market indicates a demand for warehouse, j retail and office space, Numerous businesses are locating in the Subject's general neighborhood 'and continued demand is anticipated, The Subject's design and layout could be utilized,by numerous types of businesses with little or no remodeling required, 11 , The Subject has a feasible design of utility which will be able to move in a direction compatible with the market over the economic life of the building, i i +J 9 I Off -• a ' 'Page 10 r m •/ I I I auxt.nxty� _nr�cRx��xn�� SIZES Office Area - 1,440 Sq. Ft. Shop Area - 11600 Sa, Ft, Total Rentable Area - 3,040 Sq. Ft. YEAR SUILTs 1978 TYPE OF CONSTRUCTIONS - 36' x 40' Concrete block 40' x 40' Steel Seam FOUNDATIONS Reinforced concrete block and poured concrete. LF OOR= ' Reinforced poured concrete. , G I EXTERIOR VALLSs Concrete block a'Ysd steel. t� INSULATIONS F 2" aalls'and 4" ceiling urethane. ROOF S '. Urethane - steel. t Flit AT s . Yt YQ f a; Office - Cas • 5 � �;..,, • .�.• •; , hAtaater baseboard. �:� 1%%Y.Md:f►•,, •Shop - Gas unit "%° iXTXRiOR. HALLS s {;'�"�`,�.', Off Lee - Textured dry Wail Shop' insulation Page 11 rr dial � �4���ueals r 1 1 f j BUILDING DESCRIPTION; CONTINUED � CEILINOs Office - Suspended Shop - Insulation , LI6._ H..... TING s ' Florescent strip FLOOR COVE_ ING$ • Carpet and vinyl i ELECTRICALS , -Wired for 220 Volts FLII�MSIN,6t , 2 - ' 1/2 baths . WIND NS t Thermopene ADDITIONAL FEATUREy Security system and fire alarm, double glass entry doors, g' x 100 overhead door and the file storage room has a �. firewall.. I .. -., VARY s . ; Average._.: VUNICTIONAL UTILITY s Good - ali square footage is rentable and is of good design. ' RZMAINING ECONOMIC LIFE r it least 40 years. .4 �!r= � ,'" ' . . � is .;, .. _r.'.. • -f i Page 12 r 6 40' 8' x 10' OH Door Shur AREA t r. Hach f i . ROOM ! - s Rest ' ROOID Storage or Office Office area ` Rest -{ Roost Open office/reception �o area Office entry 40' Floor Plan Page 13 4 >- ' "tl i i I ' LANDs._ MARKET DATA i A search was conducted for similar sales of properties which would serve the purchaser as a suitable alternative to the Subject site. r The following sales were found which indicate the price range within which the market is reacting. A tabulation and discussion followss ' SALE Ol LEGAL SALES PRICE PRICE `` DESCRIPTION SIZE SALES DATE PER UNIT Lot 1, Bik. 3 23,000 SF $57o500 '$2.50 Lot 2, Blk. 3 20,800 SY $56,160 $2.70 Pidalgo Sub., 11-83 Proximity to Subject - 3 blocks south L ' Zoning - General Commercial Buyer Z�ks Lodge Seiler - City of Kenai ' L ' UTILITIES ACCESS E.T.G.N.bB. Good is I, �II T• s - Page 14 ' �� r- �'resl �'el4t� �j�y6�ralaals ti S LANDS MARKET_ DATA. CONTINUED SALE pZ LEGAL SALES PRICE PRICE UTILITIES DESCRIPTION SIZE SALES DATE PER UNIT ACCESS Lot So Bik. 1 640900 SP $175,000 $2.74 E.T.G.No6Bo Etolin Bubo 6-83 Good IProximity to Subject - 2 blocks; ssoutls Zoning - General Commercial Buyer - Alaska U.S.A. Credit Union ' Seller - City of Kenai Page 13 r a 'u I ~-----'------- - --- ~- — ---��wr'SALE 03 LOCAL SALES PRICE PRICE UTILITIES DESCRIPTION SIZE SALES DATE PER UNIT ACCESS Cook Inlet lade 10-83 Alt Park proxisity to Subject - I block south (same subdivision) Zoning - General Commercial Buyer Be& Air seller City of Kenai Page 16 - COMPARATIVE ANALYSIS AND CONCLUSION OF LAND VALUE All of the Comparables are similar in either size, utilites, zoning, soil condition or commercial exposure and were the most recent sales which have occurred. Most emphasis was placed on Comparable 03 as J being most similar to the Subject. 22,500 84. Ft. @ $3.15 per Sq. Ft. $70,875 After consideration of the available data, I have formed the opinion f that th±? gubject site in Fee Simple Title, as of November 239 1983 had a Market Value of $ Page 17 + low r woo .., u...1,'.f .t,. 0.e3r pA' ,•� �t tpri is r ) . d . taw• ,4f y �e F, � •', leak • 113 >r 1A f � �ri�y, fn �o":',:�b..tr•f • , 9 O .�%�� •'� .IA � ;.+%, ��� ' ,�'�'►�` - ... . pi. • - /,,r a ,�� ''• ... f80 CAM " , bob o �� � � '.` h r,Mt 110 {81 �wtt Nw0 Aa a }"P �9 .s �watO ""' is �,'• i ,/ It r ter ,p 4•, ut�"" irstt0.M�1. M 4I beach boso ' jrt.�"n ..-1�. ; —too � M410 1 •,,'` •, .s ., ' t, � ,petit tN� , yArnnR� uncb r �; 5 �; ' 1 ► tr r-`a �'�'u 4QA' 4 .�.;a to A 1930 +)',Ar ,�•!• SurW►' 'M.. ct.,., t pro ♦ 00 Qti ' ' �'D� ". r4� . �eonntorlt ��� s �j �=�'L•a;v ��� i.•�� �`���+�np ti �• , .... 776•83" r .... 262.4332 �yunt"sat n.:et •rt tt 1��. ' 4 gown"f a Area a • ' �. ter•' L 12 vamp Sites, ••.. 77V'V3YV "' S• • ,I,�'I�'r ?e rn16 S ......2a3.9a34 y,�s9�M''rrf Stu ttr►� it IigJor Isette r • � 4 1 a , ....776•l307 r • , � , e �iu,nr t ` '�,..,,.._ _ . � .. .2624670 ......W-7610 COAS vi +t I i I EVALUATION p i cOST APPROACH s Reproduction cost refers to the cost of exactly duplicating an Improvement with the exact some materials and design. Replacement cost refers to the cost to replace utility with today's materials considered similar in quality and utility* in the typical market, replacement cost is utilised as being'�the most feasible approach. I The procedure for the cost approach is as follows$ . 1. Estimate cost to construct improvements. 2. Estimate accrued depreciation. A. Physical determination B. Pugctional Obsolescence C. Adverse economic influence 3. Deduct depreciation from the cost of'new 4. Add other improvements t , 5. Add Land Value - 6. Result — indicated Value by Cost Approach The Cost Approach reflects the cost of substitutions Vhereby no prudent person will pay more for a property than the amount for which they can obtain by purchase of a site and construction of a building without undue delays a property of"equal desirability and utility, o a} f if � v;� •.. , i ;� .a y" , t . { . , - ... — - .4�.�jF 'i7;�1a F�' .I.�_ y�.:.!!� I.. �x � ....'� f�ft: '. �.3. C� •ri �_ i ! s' Page 19 4Ak 0 I �• r �t- f } EVALUATION r� COST APPROACH1 i Building { 1t440 Sq, fit, Office 8 065 0930600 10600 Sq, Pt, Shop ® $42 J67,200 Replacement Cost of Building New $160,800 Less Depreciation (5% Rounded) &MOO Depreciated Value of Building $152t800 Paved parking area and fence 080000 Site•developement, water and sewer $99000 Land Value .702875 Indicated Value by the Cost Appr ach $240t67.5 Rounder td $2400500 The cost calculations w re a combination of local costs and the Hardball Swift Cost IMU"Ing Book. r ''•..4 r- r '. �,I�lS %t C;ei ._ _ 1 .. '• i .. 1l..!I%�=JC:t2-i'.4• %Ohl CIO :1."t"..f, L' •" !!1b'.'if a e 't..,T , x:' �t'�Jff:: �..d' "t:'str, Y t,iR S irj� � o .. ,j. •Pt's ,1 � , :� �'L $ L' i'tit' Nn C < t. f' r. 1 � r, • • - ft.' , •i�',� - .... °841tt j..j,! (:Cs �.i,S.{:f4 ;i:' Iems• e v '; Ss l / t ti .. 'n� f 'i-r,•.-H�'u'��iSk.4 f,w !t*LiL•'ts. C.Ais�iAdo, ai�'.L ras•:, a : %.':;.• t.'?' � f � "` � � � �•�C�s!'.i.,'.�IL'�4!� :,9 ':tf ll,bss t.YiCr, �D�..s Ltl3 �... .. :. :.:. : :S d)• j U e "L !; fit;:; l ... dliD 2O tl' 4ti} f,p:,i•i �e r;t0jar In Ilan%b' r "}v:�,Y-/sd, 'j ' • t- i � °� t'i�J�i�lro'.�?�<s:n y^ ft% yT:; � .. ,:s.. , . � f.. . M ��V!irt=y to, 'a%:7'i. , F .� s.- O f,i1y'� ' i�i#sr,"iif►s`:sfoL' Got:sidp cj: f • r' • ' Page 20 _ ,Merl �sitat� ����eueals 4 t I 01 EVA1.UATION#--s CONTINIJi;D) MARKET_ APPROACH•: IThe Market Data Approach involves the direct comparison of the property being appraised to similar properties that have sold in a similar market with similar financing terms. Carefully analysed market data gives a good indication of the typical actions and reactions of buyers and sellers in the market place. Like 1 the Cost Approach, it is based on the principle of substitution. In 1 this approach it implies that a prudent pereen will not pay more to buy a property than it will cost to buy a comparable substitute property. STEPS IN THE MARKET APPROACHs i,. Research the market for similar properties. 2. Qualify price, terms and motivating forces. 3. Compare each comparable under general categories: A.., Time of sale • ► $� Location C. Physical characterAtics D. Condition of sale 4. ;Consider dissimilarities s.• 8ormulato an opinion from the pattern developed. Such an analysis of -comparable sales can be related to the Subject by the gross income multiplier or s capitalisation rate. The gross income multiplier is the relationship between gross income . and the selling price.. The utilization of this ,technique requires _, that ,the"Subjeet •and 'comparables be very. similar to each other because 4 expenses which occur due to age or design of the building are not `'' �a';. considered, in gross income. �j ..� �f� fig: p,.. •, ,•.f . capitalization rate is &-relationship between net operating income r before.taxes.and selling price. This method is most often utilized because, .46es� consider the operating expenses of the property. i Nr '•.... j:. .n o=d or ,to u ilize•tbe capitalization rats in a responsible scanner the +propertiei.bsing!compare d should be similar 1n basic characteristics Y ip 5,and; 8lghas `as►d.. $sst' Use. P,- in,�tth"sY'C,as for-.-pi�Subject, property no similar sales have oeeusred., 1. 4bereforo a ussalagful,,applieation of the capitalization rate or o�`iai`incosie.s'siltiplier• was not .considered feasible. p Lj_ sir. ,.• ,:r�,• :< 4; t�.,� •� .Y P�. �1•. •. s Page 21 W40 J�LaL �91edatc AA#sa&a& EVALUATION, CONTINUED INCOME APPROACHS The income Approach to value considers the quantity, quality and durability of an income stream. This, approach is based on the principle of anticipation, which refere to the present worth of future earnings and other benefits. In order to estimate the Subject's earning power, research is conducted as to the economic rent of the property by comparing the subject to similar properties which are leased. Capitalisation is a tool by which to convert income into value. Value Income Rate Mortgage Equity is a procedure by which the loan to value ratio, financing -terms and the equity yield rat% are considered in the •�,• analysis. Another method widely used in the income analysis is the discounted cash flow. The procedure for this analysis is to project the income r .+, stream for:the holding period and the selling price at the and of the period. 'Estimate the rate of return to attract investors and discount the income stream per year to a present value. The result of this ana yels reflects the present value of future benefits. this report both the mortgage equity and discounted cash flow ro'edures were utilised. > t ,:.{!�•�„''"ifP' �u Yy�r. iw.*,'-+�.�,.•.f�ie�+•• ir• -4'.i :r L'rti r�if f. � :c: /�i•<t .P�� ° ! i•-TlieI`eii it,y . �:1 li 4r• (i t : f ,Iys .1 'r. �:• mil.' . �'i '.: � ' � •Fs r r"" �'.A,�•.ti'fi"a*/t��`+'q?;.,��'t�._:�:^.,:_fi 4 ;., :1� ��...d>•:'::, Page 22 Haig RAP&&*Ma&4& . r f EVALUATION, (CONTINUED) INCOME. APPROACH s ' The technique of•the Income Approach is to convert income.into an estimate of value. The quantity, quality and durability of the projected income stream is analyzed in the decision making process. r•" ` In order to estimate the income producing capability of the Subject, a search was conducted and an analysis made of the most similar properties rented in the our - rounding area. A tabulation of these properties and rents followss rr' SIZE RENT. TERM OF BUILDING NAME r� $QoYT. S.Q.FT. TYPE LEASE UTILITIES •I, Redoubt Realty 11000 SIP $1.00 Office 1 year Landlord • 2, Vick Tylor 29400 SF $1.20 Retail 5 years Tenant (E) 3. 8enco Various $1.15- Office 3-5 years Landlord $1.40 ' * ;.:rl:•"4. Professional VarliVe $ .70 Office 1-5 years Landlord -_ Building -� Subject . Oscar Thomas 3,040 SF Office- .; Shop r The Subjeet.1a presently leased for $2,425 per month ($.SO per Sq. �..+�•s" Yt.), The lessee pays all expenses except for capital improvements. The lease is„with KUSCO (Gas Utility Co.) with a term of 10 years. �,� ,vim, �i,•�t _I r•'�X �•�r%aY:Ti• i�.� j. .% '•<�'µ,�' 1•.. ... 1 Y jy� aryl„ i..v •.i. �. rl�Y ''LLY '.: µ-n ', x(�'�5'�#', ter, r ^;.,.fF. �,� •• Page 23 j � �ea� �Atatd r��e�r�a�eals 1 Y COMPARATIVE ANALYSIS OF RENTS pew properties are leased which are similar to the Subject. Comparable 01 is located approximately 4 blocks south of the Subject and is similar in location and office space. Comparables 02 and 03 are located approximately 6 blocks south of the Subject and is considered superior in location. Comparable 04 is located approximately 6 blocks south of the Subject. It is an older building with a low cost base and is presently rented below economic rent levels. Typically office —shop type buildings average rents between the • different areas as opposed to setting a separate irate for office —shop. As a conclusion of the rent analysis, I have formed the opinion that the Subject's economic rent as of November'23, 1983 Wass 'AZ,t,y, $.85 per square foot j ,;,: •. 1�ly'xsftenanCn. Vol �,._ x1':,t" ..7'ac`�'�,,� + xgaae�a • "4 yo � •t n . �.s.:r 4ti'9Si,,�.,"p._�j:�'`�f'�{r;��tki�`t_' lsv ' '.S •"� ,. ' _ � .. 1 `� �L �,�J • �'-� }} SAX. Py 'i o:: , .. ii . �" .<it*S "*Ss "4!- � l , �Y;•:i�Ki .�n.r• ''l i•'�I .. I• • ,' page 24 ' •. t, STABILIZED OPERATING STATEMENT GROSS INCOMES- Building 3,040 Sq. Vt. 0 $.85 $2,584 Annual Gross Income $2,584 x 12 months a $31,008 y Less Lose From Vacancy b Collection 10% Rounded • 8 3 JO8 Effective Gross Income $27,900 f� EXPENSM Fixed s Taxes Tenant 41 'insurance Tenant Overatinas L , ` Management 6x $1,750 Snow Removal 200 Remodeling 500 Reserves 3 d 'Carpet 6 Contingencies 1.000 `..,Tenant Pays s t ''.utilities f Y°Janitorial f -maintenance i Total Expenses (paid by owner) $ 3.450 Ret-Operating Income $24,450 • - r , %fit, ; . . ; . ;�, ;:.;�,. � " •,a • ' .:�%r' ti :� ,i . ' ` 1 `1{` TTT s•• f! .••. r. Page 25 !! r• - 1 � 4 1 : s �iesL �'etat� �j$C�ilee�d 4 ,y 0 EXPLANATION OF EXPENSES With the exception of management and reserves for replacement# all expenses are paid by.the tenant. Reserves are estimated for replacing carpet and painting when and where needed. Page 26 CAPITALIZATION MORTGAGE EO UITY The Mortgage Equity Approach to capitalixation reflects the requirements of Mortgage and Equity capital In relationship to the quantity) quality and durability of the Income stream. The following assumptions are wades Loan to Value Ratio 75% Holding Period 10 years Term of Loan 20 years Interest Rate 12*5% Equity Yield Rate 16Z Increase In Valbe per year 5% 'Increase In Income per year Sz Value changes are estimated based on real dollars above Inflation factors. I r Page 27 9 CAPITA MATION RATE ANALYSIS r '9 The capitalization rate is the direct ratio between net income and value. Of the several types of capitalization rates, the most appropriate one applicable to the Subject's income stream is the overall capitalization rate. Annual net operating income divided by overall cspitalization rate indicates, property value. There are a variety of methods for deriving the overall rate. The select the method that best reflects the current appraiser must patterns in the real estate market as they pertain to the subject property and its financing. For example, if overall rates are derived from sales of similar properties with similar financing terms and fall. within a narrow range, additional analysis is not necessary@ n he real estate market in Alaska, this is rarely the case because financing terms are different and properties may vary in physical and loeational characteristics." in terms of the Subject property, there have simply been no sales of properties which were similar enough to produce any reliable overall rates. The method selected to derive an overall rate for the subject property is the mortgage -equity concept encompassing the most advantageous financing available and the effects of inflation over a typical period of ownership. 'k FORMULA The "Msater� Formula" • uspd to develop the overall rate Is r-qc1/aR� R o - 1+ J Vhr= R • overall capitalization rate Ye - equity yield rate Qb - change of value - change of income `=; M - mortgage loan to value ratio C - mortgage coefficient perceat of loan paid off 1/so - sinking fund factor once 20 awe . CAPITALIZATIONI CONTINUED ' The resulting capitalization rate was .086 Net Income $ Capitalization Rate Value $24,450 i .086 - $284.302 Rounded to - $204,000 DISCOUNTED CASH PLOW The analysis includes cash down payment, increasing net annual income and the reversion based on value at the and of the 10 year holding period. (Discount Rate 11%) Present value of future benefits before taxers $260,000 TWO HUNDRED SIXTY %OU•SAND DOLLARS This analysis assumes that an investor would accept a lower discount rate because additional tv benefits would raise the yield rate substantially. I _ :.� .. •=i'•'%nl n" .ram:.•_ - --- `i. T�.��;,:" . • `� • sir";,�i.�' •' ;.�•, ..�;��� •, t .0;; . Page 29 R"t Atlau 4A it4104& r ,i CAPITALXZATION.CONT.INUEp f FINANCIAL DATA Debt.Coverage Ratio lot year .96 Negative r . 5th year 1.54 Positive .� 10th year 2.48 Positive ( These calculations do not include taxes or insurance because they are paid by the tenant. Loan balance in 10 years at the time of reversion. Interest paid during the first 10 years $213,665.53 Principal paid during the first 10 years $ 41,965.67 Balance at reversion t $145,534.33 :r ., 4T`7fQQ�� • r�} ; Ply in,riy+/Y/�-.f = - . i.. .. - o - f . ;,." •,� - 'Ii.'1:�»!+; i� rt�t '��✓..ail_. .L. f - - ' ' r, •.i . � j 114 11; f%y��ts% �'i`f.�. t.:. •".•P. ,' , . 1 ;; .. ,4 ..} rp � r• + r .. .. Page 30 AMA& P4A a I" I i I _ J i ---.._ ,. .. .i a RECONCILIATION -AND CONCLUSION OF VALUE COST APPROACH$ MARKET APPROACHs INCOME APPROACHs .MORTGAGE EQUITY I� D.C.B. • . $240t5OO NA $284,000 ' 0260 tOOO . f Considering a rapidly advancing market the'methods utilized in the Coasi g p y g . valuation process Indicate a relatively tight range of value. ;Typically, commercial properties sell at prices strongly 'relating to tba,replacement cost. Investors over the past several years have also placed emphasis on the discounted cash flow analysis. Equal emphasis was placed on those two approaches to value. ' After.considerstion of the available data, I'have formed the opinion jthat.the.Subjeet in Fee Simple Title, as of November 23, 1983 had a Market Value of$ 02500000 TWO HUNDRED FIFTY THOUSAND DOLLARS ' ,.r -;i •- ''�' ter._...-.,�,..,. ;l'r .•!�.':F4/f.�(�•�1'�1 ,���n� Q.R.A. . Page 31 f . wa s I�iLR� ��OteiL !'�1�1�rZQl0ei�/ r I- I f • .1 ---� •��woruisiiwisiws►ss�s�� _... -- CONCLUSION AND CERTIFICATION I-certify that tills appraisal report has been made in conformity with, and is subject to, the requirements of the Codes of Professional Ethics and Standards of Professional Conduct of the American Institute of Real Estate Appraisers. I certify that I have no personal interest- in, nor bias toward, the -subject property, the subject matter'of this report or persons ievolved, and that my•compensation is not contingent upon the value estimated, The undersigned has prepared the analyses and conclusions of this report. ' ' 1 have personally inspected the property identified ass '.r _ LOT 20 BLOCK 20 COOK INLET INDUSTRIAL AIR PARK nn I-isve Doi: knovingly nor willfully omitted pertinent information and to the best of my knowledgev the statements made herein are true and correct fib, .•i'I. ii 1, -.% _ .., After '•consideration of the available data, subject to the Contingent and Limiting Conditions embodied in this report, it is my opinion that 1 the.•MarkeC-Value of the Subject in Pee Simple Title as of November 23, 1983, was$ >;. +;ss • rY 1= $250;000 TWO HUNDRED FIFTY THOUSAND DOLLARS . M4wi1i •.!;i/�'�igit'•7fi•"44iy.�,�jen: lh(JCf : .. •--: s. r- �• *?'r:3 ; 4r ; Cho AV" t6 i'Towtvit at the Sft f lit ii % ,. •• �� -of . 1,T' ?�� A' 6,► .ifs .' � _fykcwrj. ;j, ✓,'•."r: '' , f "•: . Ldtiid S: ,;NirfI&; C.R.A. �►. j �'• Page 32 I i f , ft r f / KENAY,UTILITY SERVICE CORPORATION } 1 FINANCIAL STATMENTS - Doiambor 31, ' 1983 ►:,t• 1 r, 14f 1• , I U , VOL", KOHL" A OSLN00nor • � CNl/JItAWbW Aaoiaua><!I . - J70P S/L'NARD ROAD ; / m ' BIGLER, KOHLER 3 OBENDORF 11 CERTIFIED PUBLIC ACCOUNTANTO 5 3109 OPENAao ROAp ANCMORAO&,ALASKA 99503 Ip09► OAAAIIA I r Board of Directors Kenai Utility Service Corporation We have examined the balance sheets of Kenai Utility Service Corporation as of December 31, 1983 and 1982, and the related statements i of income and retained earnings and changes In the years then ended. Our examinations were made nincac accordance with ial Position r generally accepted auditing standards and, accordingly, Included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, such financial statements present fairly the financial position of Kenai Utility Service Corporation at December 31, 1983 and 1982, and the results of its operations and the changes in its financial position for the years than ended, in conformity with generally accepted accounting principles applied on a consistent basis. . January 16, 1984 I _ F 11 f 1 l\ ' `e a � 1 1 I K1,'.KA1 UTMITY BERVICP CORPORAT HALAIMF 511rE.TS Decamber 31, 1983 and 1982 ASSETS 1983 1982 UTILITY PLANT, at cost $2,092,064 614.904 $1,876,712 570,105 Lose accumulated depreciation _1J4774160 -- 1,306,607 CURRENT ASSETS Cash 99,079 256,131 Receivables Customer accounts 158,361 148,678 income taxes 20,930 11199 - 514 Other 160,490 — 149,192 Loss allovanco for doubtful receivablea 1,000 179,490 1,000 148,192 Not receivables Materials and morebandise inventories 14,234 5,209 12,687 69067 Prepaid expenses Total current assets 298,912 423,077 DEFERRED CHARGES, at cost loss currant accumulated 51552 awrtLzation 3,159 $1 778 331 1,735,236 $ 3P See notes to financial ntate=ents. -2- 6 r Y a. i-.77r11 /' I LIABILITIES AND STOCKHOLDERS# 1983 1982 'STOCKHOLDrRS' EQUITY Common stock, par value $1; authorized 200,000 shares; issued and outstanding 150,000 and $ 150,000 $ 153,700 153,700 shares 70400 Additional paid -in capital 833.45_9 814 '394 Retained earningo 983.459 975,494 _ LONG-TERM DEBT, loss portion classified as 299 546 current �3133,627 " CURRENT LIABILITIES 29,591 23,672 ' Accounts payable 67,975 - 53,825 . I Customer deposits 70,218 129,222 Accrued liabilities Current portion of long-term debt _ 17.600 _ iS.400 , Total currant liabilitiau 185,384 222.t19 c ! DEFERRED AND OTHER LIABILITIES 34,600 31,400 Deferred income taxes Contributions in aid of construction 42,309- � 37,16139,395 86,550 � 550 �..I Customer advances for construction 193 63S - 68 405 1. .: D;ferred invootment tax credits � 3p9,94Z �..�.�_� ZZ3.996 1 7. 78,331 1 78 i !f I - k�_ F k i 1 i F , t. f 1� QNAL UTILITY BERVICE CORPORATION STATEMENTS OIL INCOME AND RETAINED EARNINGS Years andad Uacembnr 31, 1983 and 1982 1983 1982 OPERATING REVENUE ' Gan sales to cuatomere $1,033,626 $1,015,474 Other 8 739 _1.042.3 5 8 822 1.024,29 OPERATING EXPENSES Gas purchases 179,424 100,823 Operations and maintenance 510,056 451,608 Depreciation 10,027 61 250 7592507 6 Operating income 282,858 330,615 NON -OPERATING REVENUES, net 6,230 1,079 1 INTEREST ON LONG-TERM DEBT 33 678 _ (34,604) income bofore income taxes 255#410f% 297 090 ✓ INCOME TAXES (CREDIT) Current 105,220 131,353 Deterred 3 200 (2,740) 1282613 not income 146,990 168,477 RETAINED EARNINGS, beginning 814,394 781,742 EXCESS OF PURCHASE PRICE 08 COMMON STOCK OVERSTATED VALUE, (37,925) (135,825) DIVIDENDS PAID (90,000) RETAINED EAR91tICS, ending 833 459 $ 814,394 See notes to financial atatemento. -3• f_ H 7-1 KENAI UTILITY SERVICE CORPORATION STATEMENTS OF GRANGES IN FINANCIAL POSITION Years ended December 31, 1983 and 1982 r FINANCIAL RESOURCES WERE PROVIDED BY 1983 1982 Operations Not income $ 146,990 $168,477 Items not affecting working capital - Depreciation 70,027 61,250 Amortization- 2,393 2,381 Deferred investment tax credits 24,750 10,494 Deferred income taxes 3,200 (2,740) Working capital provided by operations 247, 36-0 ,S 2 Increase in long-term debt Increase in customer advances 3,846 - 84,036 12,025 Increase in contributions in aid of construction 5,148 3,841 ' Decrease in non -utility property 103 198 - 40,_ 39 35 ,9 6 FINANCIAL RESOURCES WERE USED FOR Refund of customer advances 31,188 4,200 Reduction of long-term debt 31,188 14,200 Acquisition of gas plant 247,927 115,252 Dividends paid 40,580 Cancellation of common stock 49,025 149,725 Rate hearing 6 956 Increase (decrease) in working capital $ (88,330) 72,521 i U . CHANCES IN WORKING CAPITAL Increase (decrease) in current assets Cash $(157,052) 0170,238 Receivables 31,298 (1,705) Inventories 1,547 (2,645) Prepaid expenses 858 _ (656) 125 065 165.232 i ' Increase (decrease) in current liabilities -__--_ Accounts payable 5,919 (524) _.. - Customer deposits 14,150 8,350 -- Accrued liabilities (59,004) 83,485 Current portion of long-term debt 2 00 1,400 85 3h 7 5 2,71 Increase (decrease) in working capital jJffi 330) $ 72,521 b- See notes to financial statements. I r -4- M r i v , i 0 1 KENAI UTILITY SERVICE CORPORATION NOTES TO FINANCIAL. STATEMENTS December 31, 1983 and 1982 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Kenai Utility Service Corporation is engaged in the sale of gas to the general public under authority of the Alaska Public Utilities Commission. The accounting policies that affect the more significant elements of the financial statements of the Company arc summarized as follows: a. Book of accounts: The Company maintains its book of accounts In accordance with the uniform system of accounts proscribed by the Alaska Public Utilities Commission. b. Inventoyleas Inventories are priced at lower of cost or market determined an the first -in, first -out method. C. Utility plants Utility plant is carried at cost. When utility plant is retired or otherwise disposed of, the book cost of the plant plus coat of removal and iosa any amounts received to charged to accumulated depreciation. The cost of main- tenance and repairs is charged to income as incurred, whereas, significant renewals and betterments are capitalized and deduction is made for retirements resulting from the renewals or betterments. d. Depreciations Depreciation is computed using the straight- line method. a. Deferred income taxes#. For federal and Alaska income tax Purposes, the Company has elected to compute depreciation using guideline lives whisk prior to November 1, 1974, wore shorter than book lives. In addition, the Company elected to capitalize and depreciate interest on con- struction which was deducted for tax purposes in prior years. Deferred taxes have been provided to reflect the tax effect on the resulting differences between financial and tax reporting. f. Investment tax credits investment tax credits are deferred and written off to income ratably over the life of the related asset. c, A KF:E'Al UTILITY S1:itVlCN, CORPORATION NOTES TO FINANCIAL STATEMENT6 (CON'T.) December 31, 1983 and 1982 2, UTILITY PLANT Utility plant, togothor with deproeinble lives, eonaistod of tho followings Depreciable . Liveu 1983 1982 Utility plant in nervica Distribution plant 35 yearn 01,904,917 $1,733,007 Intangible plant 35 yearn 40,689 40,689 General plant 8 years 146,458 103 ,016 Total utility plant ILAL2&064 $1,876,712 Depreciation oxpenoo charged to income woo $70,027 and $61,250 in 1983 and 1982, respectively. 3, LONG-TERM DEBT Long-term debt at December 31, 1983 and 1982 to oummarized as followss 1983 1982 Note payable to bank, payable a 038 per month including interest at 0.26 $313,566 0329,027 Equipment contract payable at per month Including discount interest. 3 580 37 7. 1W - 329,027 Less current portion 17,600 15,400 299 546 s JW1627 Current maturities of long-term debt for the nest five years are as followas 1984 $ 17,600 1985 19,600 1986 21,900 1987 24,300 1988 26,000 Thereafter J. 207,746 Subotantially all real and paraonal property of the Company has been pledged as collateral for the above dobta. In addition, the bank b h loans have been guarantood y t e sraJority stockholder. i -6- � lL KENAI UTILITY SERVICE CORPORATION NOTES TO FINANCIAL STATEMENTS (CON'T.) December 31, 1983 and 1982 4. REPURCHASE. OF STOCK On December 31, 1981, the Company accepted the offer of a stockholder to sell 15,000 shares of stock to the Company at $13.25 par share at such time as the cash flow of the Company would allow. Accordingly, on January 7, 1982, the Company repurchased 11.300 shares of the stock for $149,725. As part of the consideration, the Company transferred its non -utility property. The non -utility property was acquired October 23, 1981, and its cost of $103,198 approximates its market value as of January 7, 1982. On January 3, 1983, the Company repurchased the remaining 3,700 shares at $13.25 per share. 5. INCOME TAXES I The provision for income taxes consists of: 1983 1982 i Income taxes currently payable $ 80,470 $120,859 Deferred investment tax credits, net 24,750 10,494 Deferred income taxes arising from timing differences 3.200 12 740 Effective tax rate State income taxes Investment credits used Other $108d420 42.4% (7.8) .8 2.7 38.1% $128.613 43.3% (8.0) .6 3.5 39.4% 6. PROFIT SNARING PLAN The Company has adopted the Internal Revenue Service's "Restated Model Profit Sharing Plan Number 5613'. The profit sharing contribution was 034,135 in 1983 { and $33,010 in 1982. 7. COMM14_MKT i The Company has an operating lease for office, shop and yard space from one of its officers. Terms of the lease provide for rental payments of 1p2 #45u per month. The lease expires on $e tember 15, 1993, and there are no renewal prov s ons or purchase options provided or easo. Rental expense under the above lease was $29,400 in 1983 and 1982. The Company to obligated for minimum future lease payments of $29,400 per year totaling $285,425 through the expiration of the lease. In..�.nf.��o• i7 i I I i i`_.`..�...�w_N._ CITY OF KENAI FINAL REPORT XUSCO PURCHASE Too 10H., a LQCl IYOM[NU April ilt 1984 A10110I1 Y(1Ub11, Y, (,'OMI'AIJY 1,11111 (i011 10111 Wi f;1' 4111. AV( (NI11 AI'1(.1P)1W4 , Al P1;I(A 4141W1-54W The Honorable Mayor and City Council City of Kenai Post Office Box S80 Kenai, Alaska 99611 Ladies and Qentlemens We are pleased to provide our final report from our engagement to perform a financial analyses of the City's first option right to purchase KUSCO. t This report contains a statement of the options available to the City, together with our evaluation and conclusion regarding each optione it should be noted that the conclusions we have reached contain projections based on certain assumptions about future events which appear reasonable, based on our experience and other published data. However, no judgement is expressed or implied about the achievability of these projections and they are pro- vided only as indications of possible results for purposes of comparison, NO have enjoyed this opportunity to be of service to the City of Kenai and appreciate the excellent cooperation we have been given by all City staff. Should you have any questions about this report, please do not hesitate to Call Ray Banish or Clyde Sherwood of our Anchorage office at 279-0422. Very truly yours, i � e7- 7 --r f CITY OF KENAI FINAL REPORT PROPOSED KUSCO PURCHASE April 11, 1984 ., Qr°�i �ii �r��� • �pqq5 f; 1� F . 1 Table of Contents I. EXECUTIVE SUMMARY A. Key Factors 1. Gas Availability 2. Future Gas Prices and Contract Terms 3._ Cost of Service 4. Utility Operations and Safety S. Impact on Consumer Gas Rates It, OPTIONS -fit r- A. City Acquires in 1984 B. City Approves ENSTAR Purchase and Waives Its Franchise Right to Purchase in 1997 C. City Does Not Express Approval or Disapproval 71 of ENSTAR Purchase But Retains its Franchise Right To Acquire the System in 1987 and Becomes and Intervenor in the APUC Certification Process Ll III. CONCLUSION r N • I t ,1 i `' I. RXKCUTIVE SUMMARY This executive summary discusses the key factors which affect the ` decision now confronting the City. We also discussed a number of options available to the City and conclude with a recommended course of action. ff A. KIKX BACTVRS The key factors identified by our study as being crucial to the decision -making process area e Gas Availability L e Gas Price and Contract Terms e Cost of Service ' e Utility Operations 6 Safety e Overall Impact on Rates 1. Gas Availability 4. KUSCU has stated that it has been unable to obtain an ade- quate, reliable, long term supply of natural gas and that this inability to obtain gas is an important factor in it,a . �. decision to accept LNSTAR's offer. The current gas purchase contract which supplies gas to the KUSCO system is a City-Union/Marathon contract. KUSCO is not --,,. and never has been a party to this contract. To our knowledge, KUSCO has never requested the City to open nego- tiations with Union/Marathon to obtain a new gay purchase -1- e 1A contract nor did KUSCO inform the City that its negotiations were unsuccessful and request the City's support in obtaining a new contract, In addition, the City had undertaken preliminary discussions with union/Marathon regarding the possibility of gas purcha- ses prior to ENSTAR's offer of February 15, 1984. Therefore, it appears that KUSCO anticipated a major change in its relationship with the City by initiating negotiations for the purchase of gas. We have concluded that KOSCO's apparent inability to purchase natural gas does not by itself constitute strong support for ENSTAR's purchase of the system for the following reasons: • First, Cook inlet is not a gas -poor region. There are adequate supplies of gas within a short distance from the City. • Secondly, KUSCO did not notify the City of its lack of progress in its negotiations and did not request the City's assistance. This does not strongly sup- port the case that gas would not be available to either KUSCO or the City. • Thirdly, the City has received tentative indica- tions that onion/ Marathon is willing to consider the long term sale of gas. • Finally, alternate suppliers of gas have indicated a strong desire to negotiate a gas purchase contract with the City. r2� a r d li � n 1 . � 2. !1 1 , Future Gas Prices and Contract Terms There is unanimous agreement that following the expiration of t its current gas purchase contract in 1996, the cost of gas will increase markedly. We have further asserted that the new gas price will probably exceed ENSTAR's melded (old and new) gas cost. At this juncture, the City has not had sufficient time to negotiate the price and purchase terms to establish a reaso- nable purchase price for gas. in 1966, the City Council was `-' able to negotiate a competitively priced gas purchase contract. There is no reason to assume that the present City -� Council could not also negotiate a competitively priced contract. The ENSTAR price for new gas of 02.32 wellhead represents its own unique and particular gas supply requirements. Due to 1 ENSTAR's volume re uirements, the q producers were required to `. install special equipment which is reflected in higher cost gas. ,�:... The City has unique gas requirements which are small and modest in comparison to ENSTAR's requirements. These x requirements could wail translate into a lesser cost of gas f~ and a more favorable rice adjustment clause. D j The magnitude of the difference between the ultimate cost of gas to the City and ENSTAR's melded cost is impossible to - quantity without first having actively entered into nego- tiations with union/Marathon. 1 j r -3- a At this point, we have no indication that the City is in a disadvantageous position to negotiate a competitively priced gas purchase contract. 3. Cost of service Our study indicates that ENSTAR's current cost of service component is less than KUSCO's. This disparity is a reflec- tion in the advantages of economies of scale favoring the large ENSTAR consumer base. Two qualifications should be made concerning ENSTAR's current lower cost of service. • first, ENSTAR's cost of service will increase in 1966-1987 when 087 million in new plant is added into the rate base. Typically, the impact of new plant is most felt in the early years since high fixed plant costs must be spread over fewer con- sumers. As new consumers are added and sales volume increases, the cost per unit decreases. • Second, the City may be able to somewhat lower the cost of service should it purchase the KUSCO system in 1987 and avoid having to pay the 0380,000 pre- mium. 4. Utility operations and 8afM JCUSCO has been a well maintained and safely operated system. It is a contained, mature system and is very easy to operate since it does not have transmission lines, compressors, microwave systems or telemetry. -4- ENSTAR has the professional capability to manage the KUSCO system efficiently and safely. ENSTAR is currently operating in Sterling, Soldotna, Kalifonsky Seach, and on the North Road. The addition of the KUSCO service area should enhance the operational efficiencies of their total Kenai service area. The KUSCO system could also be operated by the City as a municipal one utility. This would require the City to hire an experienced gas utility manager and require the dedication of City Council and staff to address policy issues relating to the management of the utility. It is unrealistic to expect KUSCO's operating efficiencies to match ENSTAR's due to its smaller size. in addition, we can anticipate that some aspects of the operations would become more complicated and expensive due to the City's procurement and construction bidding requirements. These costs cannot be analyzed without first deciding how the City would actually manage the KUSCO system. Using 1983 cost data, we estimated savings of approximately 8450,000 per year under City ownership. This, however, must be offset by new debt service incurred to purchase the system. The amount of debt service will be a factor of the purchase price, rate of interest, term of loan and the amount of required debt service coverage. Using different interest rate assumptions, we found that in all cases the City experienced a net savings in operational cost over KUSCO but not enough to match ENSTAR's lower cost of service, we concluded that the City's lower operational cost is not of a sufficient magnitude to warrant City ownership. -3- R.F...w�� tF 1 Impact on Consumer Gas Rates The bottom line is how each factor, gas availability, gas price, cost of service and utility operations will impact the consumer cost of gas under City ownership as compared to ENSTAR ownership. Projections of future consumer gas rates is at best a dif- ficult and uncertain task. Precise estimates are impossible to make since our data is incomplete and has great variabi- lity over time. In the near term through 1996, City gas consumers are better off under KUSCO or City ownership. Following 1986, it appears that ENSTAR's rates would be lower than KUSCO's for a period of time. This statement should be qualified by three extremely important conditions: j a. The gas price and escalation factor negotiated by the I _ City. b. The effect on rates of the increased debt service cost Of ENSTAR's new gas transmission line. c. The rate of escalation or de-escalation in No. 2 fuel } oil. . it ej • r 6� • - t rn J�? i Ir 7 I II, OPTIONS A. CITY ACQUIRES IN 1984 The City can acquire the KUSCO system for $2,008,322 in 1984. This would require the City to interim finance the purchase until Utility revenue bonds could be issued. The purchase of KUSCO at this time would probably impair the !3 City's ability to negotiate a competitive gas purchase price I since the City would be in a "must buy" position. In addition, the consumer cost of gas is impossible to project without a firm i- gas purchase price. We can also expect that the City would pay more in 1984 than if it purchased the system in 1987 since the City would have to pay the premium over book of $350,000. i=. B. CITY APPROVES ENSTAR PURCHASE AND WAIVES ITS FRANCHISE RIGHT TO PURCHASE IN 1987 If the City exercised this option, it would agree to: 1. Transfer the franchise from KUSCO to ENSTAR. 2. Waive the City's franchise right to acquire the system in 1987. Ll 3. Approve in its entirety the purchase of KUSCO by ENSTAR. In our opinion, ENSTAR has not presented sufficient cost data to support the assertion that City gas consumers would benefit by lower rates should the City decide on this course of action. The '=1 City would give up its franchise right to acquire the system in �► 1987 without having attempted to obtain competitive gas purchase contracts by negotiating with potential suppliers of gas. I U -7- I J 1 a+ i� The City would commit its gas consumers to paying the established ENSTAR rates as well as committing them to future increases ;! arising from ENSTAR's aggressive expansion program and the uncer- tainty about potential escalating gas prices negotiated as a part *, of their new gas purchase contracts, r., C. CITY DOES NOT EXPRESS APPROVAL OR DISAPPROVAL OF ENSTAR PURCK BUT RETAIN IN FRANCHISE RIGHT TO ACQUIRE THE SYSTEM IN 1967 MWOBCOMES AN INTEMMOR IN THE APUC CERTIFICATTON PROCESS This option would allow the City sufficient time to determine a gas purchase p price and contrast terms through the negotiation process. Should the City not be able to obtain a long term supply of gas at a competitive price, it could approve the purchase and waive its franchise right with a concrete certainty that City gas consumers would benefit from ENSTAR's acquisition. In addition, should the ENSTAR purchase proceed, the City would ` benefit in its decision making by having access to data presented to the APUC during the course of APUC hearings to certify ENSTAR. The City could act as an intervenor in the APUC hearing process to ensure that its interests were addressed. The City would also benefit by retaining its franchise purchase right until 1987 by having more information on the impact on con- sumer rates of ENSTAR's increased debt service. ENSTAR's method of operating the system could also be evaluated on the basis of two years of operation. The possible advantages or disadvantages of ENSTAR's gas escalation clause could also be assessed with tour years of gas cost data. Finally, should the City decide to exercise its franchise right to acquire the system in 1987, the purchase price will be based on the fair valuations of physical property which would save the City approximately 0350,000 on the purchase price, U , P e I e {`f F �I 1 ' Bhould the City exercise this option and ENSTAR decide not to proceed with the purchase, KOSCO will continue to own and operate �! the system through the expiration date of the franchise agreement in 1987. The reasons which make the purchase of KUSCO attractive ;J to ENSTAR in 1984 will continue to be valid in 1987. This means that in the event that the City cannot purchase gas on a long term competitive price basis, the City could request ENSTAR to purchase the system at that time. City consumers would have the benefit of two years of lower rates with the added certainty that ` ENSTAR's purchase would result in lower rates than if the City had acquired the system. �.. r" t A R 3 i' .. F J Y � N III. CONCLUSION Option One would commit the City to purchase the KUSCO system without a firm price and supply of gas beyond 1986. If gas purchase negotiations were not successful or if the price was not competitive, the City would be forced to either sell the system or charge higher rates. We ranked this option as the second best alternative. Option Two would require the City to prematurely commit to waiving its purchase right in 1987 without having had a clear and demonstratable case that gas consumers would benefit. We ranked this as the least desirable alternative. Option Three presents the least amount of risk to the City and the greatest amount of flexibility. Specifically, the City could$ 1. Not approve the transfer of KUSCO's franchise by simply taking no action. The proposed sale would proceed as per SNSTAR's offer, or LNSTAR may choose not to purchase the system at this time. Z. Formally notify LNSTAR, KUSCO and the APUC that con- ditional upon the City's ability to negotiate a long term gas purchase contract, the City intends to exercise its franchise right to acquire the system in 1987. The City could also notify the APUC that it intends to intervene in the certification process. Under this option, SNSTAR would be put on notice that the City expected to exercise its franchise right to purchase the system -10- i r" u i 1' P 1 I I l IV once a longterm supply DD Y of gas was obtained. Should ENSTAR go forward with the purchase, the City could present its case to the i APUC and take other action as appropriate to protect its 71 franchise right to acquire in 1987. Should ENSTAR not proceed with its purchase of KUsCO, the present f KSSCO system would continue to operate until the City decided not to exercise its franchise right and acquire the system in 1987. in the event that the City was not successful in negotiating a long term gas purchase contract, it could then reverse its posi- tion and ask ENSTAR to acquire the system. f` LS u 1 n LP- -11- Y j i r a 1 1 1 � CITY OF KENAI COST OF GAS ANALYSES !_J I. STUDY OBJECTIVE II. OPTIONS AVAILABLE TO THE CITY OPTION 1 OPTION 2 ` OPTION 3 III. SCOPE OF THE STUDY IV. CONSUMER COST OF OAS A. One Purchase Price 1. Comparative Cost of Gas B. Cost of Service Q Co Average Cost 1. D. KUSCO Tariff Be Enstar Tariff F. Comparison of Average Bills V. KEY FACTORS AFFECTING DECISION -�.. VI. CONCLUSION - 1 . aJ Cd Y 9 I` I :i / M'1 i� lh 1 � t 1 I. STUDY OBJECTIVE Arthur Young Company was retained by the City for the purpose of analyzing the City's first option right to purchase KUSCo vs. ENBTAR's acquisition offer to determine which alternative would ;•� result in the least adverse cost impact to City gas consumers. The fundamental prsfaiss underlying our study was to minimize " r adverse cost impacts to City of Kenai use consumers. �l / I / F1 ..rt , a , Sf I li I 1 t j I p, II. OPTIONS AVAILABLE TO THE CITY The City has three options (Exhibit 11-1) from which to choose as !� f� a result of the proposed sale Of KUSCO to ENSTAR. Ootioonn is The City can exercise its first option to purchase KUSCO on the same terms and conditions as ENSTAR. r in section 13. Transfer by Company, the City's franchise agreement states this options "The Company shall not sell or transfer its plant or system to another without the prior consent of the City and without giving the City first option to purchase the system at a price and on terms no > a less favorable than any valid offer tendered to the Company." F7 option 2s The City can approve the sale as proposed and waive its franchise right to purchase KUSCO upon expira- tion of the franchise in 1987. i. Ootw, i_,s The City can approve the sale but retain its first option right through 1987 when the franchise L expires. This would allow the possible future purchase of the KUSCO system by the City in 1987, n The franchise agreement provides for a number of conditions. The City's franchise expires in July of 1987. Should the City not extend the franchise, _.�. _ ... the utility has the right to salvage its property. This appears unlikely since the cost of salvage would far exceed the value of the salvaged material. The City may then exercise its purchase �n t G right and acquire the entire gas di system. Zf a mutually agreed upon purcl cannot be determined, a three member Appraisers would be established and thei would be rinal. The method of valuatic established as follows: "The appraisers shall exclude from their and shall not assign any value to goods the value of the franchise but shall app the then resent fair value of said properties. -3- III. SCOPE OF THE STUDY The purpose of our study was to perform a financial analysis to determine which course of action the City should follow to mini- mize possible adverse price impacts on gas consumers in the City of Kenai. The first step of our study was to review KUSCO's financial records to obtain historical information relative to plant costs, operations and maintenance costs and sales statistics. This data was analyzed to assess the different components which comprise KUSCO's cost of service. The previous five year period (1979.1983) was reviewed and a projected five year cost of ser- vice schedule and sales volume estimate were prepared, in performing this review, we relied on KUSCO's audited financial statements and other company financial records. Arthur Young s Company did not perform a financial audit of KUSCO since this would have been beyond the scope of our study. KUSCO is regu- lated by the Alaska Public Utilities Commission (APUC) and main- tains its financial records in accordance with APUC guidelines. The second step of our study was to evaluate the impact to City gas consumers of two possible alternatives. The alternatives are explained below: Option One - City Aeauire� s KUBCO In this alternative we projected gas rates assuming the City acquired KUSCO at the same purchase price as the ENSTAR offer. The gas purchase price under the Union-Marathon/City gas purchase contract is maintained at the .300 mcf level through calendar yearend 1985 with an assumed 1986 gas purchase price of 02.20 mcf. -4- y This alternative assumes that the City purchases KUSCO by issuing fifteen year revenue bonds and takes over the utility management functions as well as assuming all responsibility for operations, maintenance, capital improvement programs and administration. This alternative assumes that the City would sign a new gas purchase contract with Union or other alter- nate supplier on a long term basis upon the expiration of the current contract in May of 1986. Option Two - RNSTAR Acauires K OCO This alternative assumes that the City approves the SNSTAR acquisition and terminates its gas purchase contract with Union•harathon. The continuation of the City's gas purchase contract would not result in a direct benefit to the City because ONSTAR's rate will be the same as its service -wide rate. The uniform service -wide rate of SNSTAR makes the con- tinuation or non -continuation of the City's gas purchase contract an irrelevant issue in financial analysis of this alternative since the benefit of .300 mcf gas would be spread throughout BNBTAR's consumer base* in addition, the possible sale of Union -Marathon gas for use by other than City gas consumers may be restricted by terms of the existing gas purchase contract. There are two possible variations of this options One City waives its franchise right to purchase in 1987. Two - City does not waive its franchise right of purchase in 1997. .go, r-77F +r I t IV. CONSUMER COST OF GAS The cost of gas to the consumer is comprised of two components: A - Gas purchase price B - Cost of service _. A. Purchase Price of Gas_ KUSCV, in its presentation to the Kenai CityCouncil on March 6 • l984, presented the following cost information: KUSCO ENSTAR sale Price 01096 $1 g1- . Cost of Gas - 33 -1.03 Cost of Delivery i Service 01.85 8� r. , 1. Comparative Cost of on$ The City currently enjoys the benefit of an inexpensive gas purchase price. However, the current contract will expire in 1986 which will necessitate the City having to either renegotiate a new contract with Union/Marathon or seek another source of gas supply. The relative gas purchase price differential which the City enjoys is Illustrated below$ I r- a MGM r ntr � City Gas Purchase Price $ ENSTAR Purchase Gas Prices$ Kenai Field 0.644 North Cook 3.744 West Fork 0.644 Beaver Creek 2.155 Beluga 2.155 Weighted average (Old/New) 1.116 Chugach Old Beluga River Contract 0.240 Chugach New Beluga River Contract 2,430 In May of 1986, the City's gas purchase contract expires and the City will be in the position of having to seek a new source of gas. This new gas is likely to cost in the range of 02.10 to $2 40 mcf which represents an increase in excess of S00 percent. When severance tax is included, the cost of gas is estimated to cost from 02.24 to $2.35 per mcf. The more meaningful comparison can be made by including the total cost of gas under the new ENSTAR contracts since this will indi- cate the City's relative advantage in not having to pay gas transmission costs. City$ All inclusive Cost of Gas including severance tax 00,328 mcf ENSTAR/Shell Contract Wellhead price $2 A S Severance Tax 0015 Demand Charge 0,35 Fixed pipeline Charge 0.30 02,95 1986 New pipeline Charge ,26 Total Cost of Gas 03.2r using GNSTAR's weighted average cost of gas (old and new) of $1.11856 as compared Li the City's purchase price of $0.3000, the City pays only 27 percent of ENSTAR's cost for gas. Inclusion of transmission pipeline costs (00,30 mcf) and the demand charge -7- (00.35 mcf) results in the City paying only 17 percent of ENSTAR's cost of gas. The magnitude of the City's gas purchase price cost advantage should translate into a cheaper consumer gas rates. This, in fact, is the case since the KUSCO residential �! rate is less than ENSTAR's by approximately 19 percent. KUSCO $2.1720 mcf 'l ENSTAR 2.5963 + It appears that the City may be able to obtain gas at a rate below that of the ENSTAR-Shell and ENSTAR-Marathon contracts which were signed in 1982. However, ENSTAR's old, cheaper gas will allow it to obtain a melded rate of about 01.30 mcf in 1986 (excluding the new Beluga pipeline costs) which is below the estimated range of City gas prices of 62.24 to 02.35 in 1986. The City must either approve the ENSTAR purchase and waive its ~� franchise right to purchase the utility system in 1987 or be pro - Pared to initiate and successfully conclude negotiations for a new gas purchase contract. k B. Cost Of Service k The second component of the consumer prise of gas is the utili- ties cost of service. Major elements which comprise KUSCO'S cost of service are$ Distribution Expense Maintenance Expense Customer Accounts Expense Sales Expense Administration and General Taxes Other than income Tax Interest Expense Employee Profit Sharing Federal income Tax Net Profit (Return on Investment) -8- . � a M ,"� I, I lJ Y .I Approximately 70 percent of KUBCo'S cost of service is made up of labor costs, in addition, note that net profit is an element Of Cost of service since a return on investment is allowed. ENSTAR's cost of service is comprised of similar elements with -, the addition of costs for major gas transmission lines# in reviewing the KUSCO cost of service presented to the City 'i Council on March 6, 1984, it would appear that ENSTAR has a i -� lesser cost of service figure of $0.78 per mat while KUSCO has !"i $1.63 mat cost. These cost figures are misleading since they _ represent an average costing approach, if the cost of service calculation is based on tariffs paid by residential and small 'A commercial gas consumers, a much different comparison results. C. Average Cost Method KUSCO EN` AR gale Price $1.96 mat $1.8 Cost of Gas .03 Cost of Servicef �. Tariff Method (Average Monthly Usage) j KUSCORNLTAR Hale Price 02.1720 mat 02,5918 maf Cost of Gas t Cost of Service .8 0 tit -�-- --- Despite having a higher and price of $0.42 met in the consumer - - - t tariff rate, ENSTAR has a cost of service benefit over KUSCO of - 00.36 met. g I i i L _ i ji- v i I. 1 1 D. KUSCO Residential Tariff 1. 1963 Yearly residential gas sales volume 226,208 maf Average monthly sales 2261206 maf = 12 ■ 18,850 mof 1 1903 number of residential meters 1,313 Average monthly sales per meter 18,850 mof T 1,313 14.36 maf (14,360 of) 2. Monthly gas price per maf: 14,360 of z j - 2 000 of @ $ 8.08 of �3�0000 of @ 00.24 per 100 of (0.24 x 30) 7.20 0.17 per 100 of 15,91 Total Monthly Cost of Gas 031.19 3. Consumer cost per maf: 031.19 r 14.36 mcf $2.1720 Footnotes _ 1. KUSCO Gas gales Summary 2, KUSCO APUC Tariff Rates Residential 3. KUSCO statistical Information 1903 lists residential �? rate at 02.143 maf o •10- f � R e� ,w4+AHls ■-... �..Aeun.rr.... -_. r ..: .... ., 1. �/�.--.� �irY.�' �_�Jsc�9 !3 " • �1 1 • 1 i I 1 E. ENS_ esidential Tariff 1. Average KUSCO monthly sales per residential meter 14.36 ma! 2. Gas rate 00.22051 per 100 of Gas rate 02.2051 per mcf _ Tariff gas rate 02.2051 ma! ` Gas cost adjustment 0 0803 mef Z Add adjusted tariff rate 021 56 me! �:J 3. Average monthly gas costs 62.2856 x 14.36 mat 032.82 J Adds Customer Charge 4.3SU 4. Cost per mofs 37.32 i 14.36 02*5998 met I . L 1 r i Jk11sa'���m�= i i J s i go RNSTAR Residential Tariff m 1. Average KUSCO monthly sales per residential meter 14.36 mcf 2. Gas rate 60#22051 per 100 cf �! Us* rate 02*2051 per maf _. Tarif9 gas rate 02#2051 mcf Gas cost adjustment 000605 mcf Add adjusted tariff rate 622*28566 mcf T. 3. Average monthly gas costs Li 02#2056 x 14.36 mcf 032,82 Adds Customer Charge , 4*50 . 4. Cost per mcfs 37.32 : 14.36 $2,5988 mcf �11 1� F. t ! t I I , Y , 1 Im V. KEY FACTORS A. Gas Availability Recent studies indicate that the Cook Inlet area has approxima- tely 3.5 TCF (trillion cubic feet) of proven reserves of which 1.6 TCF remain uncommitted. The City has maintained a good business relationship for the last eighteen years with its current gas supplier, Union/Marathon. The City has had preliminary discussions with Union which indi- cate a willingness to discuss future gas sales. The possibility of the City being able to continue purchasing gas from Union/Marathon on a long term basis would be beneficial since the City could avoid gas transmission line costs. The City has also been approached by Far North, Inc. about the possibility of future gas sales to the City. To summarize, there are adequate uncommitted reserves of gas near Kenai. The City has maintained a mutually beneficial rela- tionship with its gas supplier, Union/Marathon and there is no reason to believe that successful negotiations could not be completed for future gas purchases. The City may also solicit other firms interested in selling gas on a long term basis. B& Gas Price ENSTAR has set the stage for future large quantity gas purchases in the Cook Inlet. However, the City's gas requirements are of a much smaller scale and the City is close to major fields. The City may well be able to negotiate a more favorable purchase price than ENSTAR because its needs are different. -1a- The City cannot expect to match ENSTAR's melded old/new gas purchase price but it may be able to negotiate a contract without stiff escalation provisions. This would favor the City since it Would minimize the impact of large real price increases in fossil fuels. ENSTAR's old gas runs out in 1993 which will reduce their ability to dampen price increases by melding old and new. There is no reason to conclude that the City could not negotiate a gas purchase price competitive to ENSTAR's recent contract price. The conditions favoring a competitive purchase price such as soft world oil prices, lack of optimism for TAGS and ANGT8 projects, large remaining uncommitted proven reserves and no immediate increase in export markets will continue to exist in the near future. CO Consumer Rates The impact on consumer rates is far from certain since projec- tions of future rates contain many estimates and assumptions. in the near term, the comparison of residential rates for ENSTAR and KUSCV can be made on the basis of the APUC approved tariffs. ENSTAR's current residential tariff will result in an increase in gas consumer costs. The amount of the increase will depend on the particular gas consumption of each customer. The relative advantage to KUSCO's residential consumers customers will disap- pear when the present gas contract expires in 1906. Small commercial users are likely to enjoy marginally cheaper gas under ENSTAR due to the minimum monthly bill of 0161.22 which is currently charged under KUSCO's tariff. The average monthly usage figure for small commercial gas consumers indicates that -13- it Y � r a the approximate equivalent usage amount of 91 mof is not being used by small commercial users and as a result their monthly gas costs are higher than if they were on the residential tariff rates. The relative difference between ENSTAR's and KUSCO's rates in 1986 will be dependent on the price of new City purchased gas, the upward or downward movement of ENSTAR's purchased new gas and NNSTAR's mix of old and new gas, the relative utility growth rates and ENSTAR's debt service cost for its major pipeline expansion program. it is probable that the City's rate will exosed ENSTAR's rate in 1986 when the increased cost of new purchased gas will take effect. Thereafter, based on the City's ability to purchase gas on a fixed price basis and ENSTAR's depleting supply of old gas combined with real price escalation of its gas the City's rate will decrease relative to ENSTAR's and match ENSTAR's by 1991, -14- r w , VI. CONCLUSION KUSCO and ENSTAR have requested the City to take three specific actions. 1. Transfer the franchise from KUSCO to ENSTAR. Z. Waive the City's franchise right to purchase the gas utility system in 1967. 3. Give an unqualified approval of the sale of KUSCO to ENSTAR. In making this request to the City, KUSCO and ENSTAR have sup- ported their ease with the following reasons. 1. KUSCO has been unable to successfully negotiate a new gas purchase contract. 2. ENSTAR has an adequate future supply of competitively priced gas. 3. ENSTAR is currently servicing the immediate surrounding area and can realize economies of operation by the inclusion of the KUSCO system into its own service area. 4. The cost of service will be less under ENSTAR since advantages of economies of scale favor the larger utility. S. ENSTAR is a large professionally managed utility and will be able to provide cost efficient, safe operations. 6. The present manager of KUSCO will retire in the near future. The above reasons all appear to be valid and reasonable under the circumstances. Our study has concluded that there is an adequate Supply of natural gas in the immediate area and that there is a likelihood that the City would be successful in obtaining a long term com- MIS- u 17 i ri .i petitively priced supply of gas, However, the price of this gas would exceed the current price by a large percent and would not be comparably priced to BNNTAR's melded gas price. Before any final decisions by the City to waive its purchase right In 1987 is made, a f irm long term gas price should be established, Negotiations for the purchase of natural gas will require the dedication of the City's time and resources and should be undertaken in the near future. The following comments address each options ggtion Ones City Acuuires KUSCO at ENLTAR's Offered Price The 60 day response period provided to the City has not been sufficient for the City to undertake a detailed analyses of the purchase option, Since the City can preserve its purchase right through 1987, sufficient time is available for the City to study the acquisition in detail and to develop a greater public awareness of the key issues affecting the decision, There is not sufficient support of the long term benefits of lower consumer gas costs to warrant the City exercising its purchase option at this time, Prior to making the committ- went to buy the system, the City should conclude a long term contract for the purchase of natural gas, O2tion Twos CIt����roves the Sale And Wks Its 0otion�tothe Sale And Wks Its O0tion�to Purchase in 1987 This option would require the City to waive its purchase right in 1987 without having had adequate time to review the total cost/benefits of acquiring or not acquiring the system. -16- r E� i, F I= ,i opti_o_nT_hree.$ City Approves the dale But Retains its Option to Purchase in 1987 This option would allow the proposed sale to ENSTAR but would retain the City's right to acquire the system in 1987 at the appraised lair value of the physical assets. The City would have time to obtain a contract price for future gas and allow ^' a more accurate projection of future system revenue require- ments. "t it is likely that the purchase price in 1907 would be lower than the current price of 02.4 million since the premium of S350,000 dollars would not be a part of the purchase pricee r in addition, the City would have had an opportunity to assess ENSTAR's operations and be in a better position to assess the impact on rates of LNGTAR's capital expansion program. I b, ..i e w F ■ f s OPTIONS pPItu�E � CITY PURCHASES KUSCO q �jj!jjjjj, (IPPRO�ALo�E0U1REUCTUAL My ION rwo � CITY APPROVES PURCHASE B NAIVES FRANCHISE R16HT TO PURCHASE 'Uj 'llAjjh narioe rxeEe � CITY APPROVES i DOES NOT NAIVE FRANCHISE R160T TO PURCHASE � • UPON TERMINATION OF FRANCHISE (1/81) CITY MAYf pg� F�PU&C�ASEA�IC��GINMOTHBE R6REES TOi � � I a 80 p PRAISERS P SEPRESENTS FAIR iRA JER � i `f COOK INLET GAS AVAILABILITY RESERVES • PROVEN RESERVES 3.5 TCF • UNDISCOVERED GAS Ujh2ICA LY RECACOEyyERII TGAS(2N04 TCF ST kkTE, 02 TCEE ,COOK INLET 6AS CONSUMPT[0N • HOUSEHOLD HEATING • COMMERCIAL APPLICATIONS • LNG 6 AMMONIA/UREA • ELECTRICAL GENERATION i I11JT0T & JOM-MJ1TEDACTS ONOMIC RECOVERY GAS X CONCLUSION • ADEQUATE AVAILABILITY OF GAS Moll � NATJANhARYS1aE1982Es COOK INLET BASIN OIL 6 GAS PROVINCE RESERVES (BCf) �. G B Ll H H1 JJV 16 I'll � 6 1DtoS1I 1VN IR ) INAL i.l� VN 9 SA 19 1IVER (2) 21 NS RMD (1> 10 rvrn� vnv nwa.n�r.V r/r.71 �) FpRIEMIASN"YTjjpCU iRlEN,LYA IgYUSEDUFORjPUSSURE MAINTENANCEBUSKS8MCDO9l DY r -r_� `=.c 1 �-% KwsACI Hl.�6Y Rq Fa4 ie�rrvnw M'++++M r.w�w j COOK INLET GAS PRICE ENSIARICHELL x ENgTAR/MARATHON CONTRACTS L Ann • as • B E t/MCF (1986)�R J�1�iCHAR6E Ci1AC MCIE � • k ��AJA'�aI�N�L�AS PRICE BASED ON PRICE OF M0. 2 FUEL OIL- � 8 CDAL.MAS SHOULD�DAIOPEN PRICE il,18BSTITUTE gSFUELS, NO. 2 aLTeaxare cas netcIas • NET BSU�TR�6 sICEA0ELIVE&EDD�ICE MUM���ICESPAID TO PRODU6ERS'Mf3800 t3�85/� OTHER FACTOYS _�.... i AJJWA JspS��E��l�'I��NAFsRICE �Ap�18EOWASIL PSOFT pli Q6lI�� j��TR � �T VES ARE PLENTIFUL x x corcLusiea ffIRTNR6HEB REAL 6AS�PRILESCINTfETUREABWT FUTURE PRICES .lRtlk>���em.,..._a.It�w.;x!It..�.)L: ._,�:�._--AJ u �' «.0 iLlf Jl.--...�..._��F-J�fl.._.__.�_.�._—�����ut�.-..��LJI-+�JeIL�.:u�H�itau.'•. rrwr.%Y .• .... � - c• � ..-_ a.. ..mow �yw-^—...n � .u...a c.r,;..rq ✓ �M ��vw ra-� �wy9 hM^1�! r�rafeC! rwmrm �as7 F•xrM Yr-•+�M < ESTIMATED PRICE OF ENSTAR GAS TO CHUGACH ELECTRIC KENAI 6 NEST FORK FIELDS � TYLF7YR'T (37lICF ) 9 27. 7 11 .88 1390 . 1029 28 : �VE RUNS OUT lo I r SUMMARY OF COOK INLET BASIN GAS PRICE ASSUMPTIONS ($/MCF) YEAR ENSIAR 9 3 $ 1.60 8 9 1.82 987 2.6 .55 94. :7 1913 t2i 6.2 5 1.1p0 6 .y8 gggg1 �•gg5 998 g.28 1989 8.91 200 st 01 11-28 2002 i EOOTNOTEs BURNS 8 MCDONNELL FUEL SUPPLY ALTERNATIVES 1983 !•V I` e.._.�.._r- _ It F��� ` Ftl®iOi GAS PURCHASE PRICES (MCF) 1 1919 $0 328 $1:1185 0: 28 2639 91 9 � 0 Sol 1993 14 3 2-1 6 3.210 2:95igo (1) tSSRJjONO SFTRANSMISSION LINE COST AND 2 PERCENT YEARLY (2) BARNES" ENSTAR FORT1984-11l988SPER30IpSHEFORBY1989-1993AHERAGE YEARLY ESCALATION OF 11.5 PERCENT WAS USED• r I_ r O � r I r I n i - k . •AYE M04 ptfth P9vIl3lan ohm No,3_=�- Fourth Revision 34 show Ale. r ' ENSTAR NATURAL GAS COMPANY Determine�Flen ei Pad Q s as+ A-Ils+mnt (1) Current average cost of system gas suppiys Be" Supply Estimated Effective Rate Total 05ntiets Purehesese _ gn 1/01/Ad 1A x AZ (a) (b) (c) a) Kenal Field 270,429,400 Nat SO.644 S 17,664,500 b) North Cook 28,600 Not 53.744 107,100 c) Nest Fork 72,000 Not SO.644 460,400 d) Other Beaver Creek 9,0000000 Hof S2.155 190399400 Beluga 2-er Net $2.111e 5_3�87-90_0 e) Total 3o_e� Met S d2.6, A A = (2) Balance of Gas Cost Balance Account December 31, 1903 (immedlato prior month end) (negative If credit balance) S 814,600 (3) Estimated interest Income (Expense) pursuant to 708 c. (3) `+aee (4) Total of It), (2) and (3) above S aLa3A see (3) Nat sales* 3B aeo (6) Volghted Average Unit Cost of Gas (4 / S) $ 1.1185 (7) Cost of Gas Base Rate 1,.,0mo (1) (8) Purchased Gas Cost Adfustmrnt (6-7) $ a-aaas kaf(R) +► For a 12 month period beginning January 1, 1904. Pursuant to Order No. U-83-38 Taror save#* No, of,K ENSTAR Natural Gat Co DI Ion f SAP.Cd N an a raeff (T) Inv Drat ion ' Tj"OsP.ates b Planning Supervisor FUEL PRICE PROJECTIONS SHERMAN H. CLARK NSD SCENARIO 1983 $/MMBTU Natural Diesel Turbine Belup Nenaaa ku 0 se �0i 1983 2e77 6.87 6.23 1.86 1.72 1904 2097 6.99 5.94 1.89 1.74 1989 2.46 6.25 9.66 1.92 1.77 1906 2081 6.29 9.66 1.99 1.83 1967 2e81 6.25 5.66 1.98 1.83 1988 2e89 6.29 9.66 2.01 1.92 1969 2.96 6.43 9e83 2e09 1.97 1990 3e04 6.63 6.01 2.08 2002 1991 3.13 6.83 6e19 2.11 2007 1992 3.21 7.03 6e38 2.19 2011 1993 3.30 7.24 6e57 2.18 2.17 19" 3.39 7e46 6.76 2021 2.22 1999 3.48 7.68 6.97 2e25 2027 1996 3e57 7e91 7.18 2e29 2.32 1997 3.67 8.15 7.39 2.32 2.38 1998 3.77 8.39 7e61 2036 2.43 1999 3.88 8.64 7e84 2e40 2.48 2000 3e99 8.91 8.08 2.44 gags 2001 4e10 gels 8.32 2.48 2e60 2002 4.21 9e45 8.97 2.91 2.66 2003 4e33 9.74 8e83 2059 2073 2004 4e45 10.03 9e09 2e60 2079 2009 4.97 10e32 9e36 2e64 2.89 2006 4.70 10.63 9.64 2.68 2.93 2007 4.83 10.99 9e93 2.72 2e99 2008 4e97 1ie26 10e23 2.77 3e06 2009 Sell 11.62 10.94 2.81 3.14 2010 9.29 11.97 to.$$ 2.86 341 2011 9.38 12e26 11e31 2e90 3-28 2012 9.90 12e17 11e40 2e99 3.35 204 9e63 12.88 11.69 2099 3.43 2014 9e77 13.21 11.98 3.04 3.91 2019 9.90 13.94 12.26 3.09 3e58 2016 6e04 13.88 12e99 3.14 3.66 2017 6.19 14.22 12e90 3.19 3,79 2018 6.34 14.98 13.23 3e24 3.83 2019 6.49 14.94 13.96 3.29 3.91 2020 6.64 19.32 13.89 3.39 4.00 TABLE 12.3-8 �• , c it I bN y, 1 a FUEL PRICE PROJECTIQNS i DOR 60% SCENARIO (JULY 1983) 1983 $/MM8TU .-, ,1 Natural Turbine 1963 2.77 6.23 1.80 1984 2060 $Jo 'LOBO 1989 2043 9.37 LOBO 1986 2.47 9030 LOBO ' -, 1987 2091 9023 LOBO 1988 2.94 9.16 LOBO , ` 1969 2.58 9.09 logo .. 1990 2,62 9002 LOBO ,� 1991 2.60 4,98 LOBO 1992 1993 2.98 4*99 2.97 4,91 LOBO 1.80 • 1994 2099 4.88 2052 { LOBO 1996 4.8i 1.80 ` 4' 1997 1998 2090 4.77 2.49 4,74 logo 1O8o 1999 2047 4,70 LOBO -- 20000• 2.46 4.67 1.80 • Includes 306/WSTU for pipeline transportation cost. -- •* All fuel prices remain constsnt Otter the year 20000 !: Sources Alaska touter Authority TABLE 12,3-16 I •----i--...:� .—,m crseca r� �—�1 P`�I � I x`i �asr�i `..."".s 1 �'."Hy p'raq ems; ears. rss.� t a s-..s+a, p�r�a . I t f t a UTILITY SYSTEM COMPARISON • SMALL CUSTOMER BASE - L 620 • I LARGE CUSTOMER BASE - 61,000+ • SINGLE CITY SERVICE AREA • MULTIPLE CITY SERVICE AREA • NO TRANSMISSION LINE • EXTENSIVE TRANSMISSION LINES • GAS DISTRIBUTION ONLY • LARGE INTEGRATED SYSTEM • ONE GUNIOUPMARAT0810E • 6AS SUPPLY CONTRACTS MULTIPhEL AARA60 odif Aw JJTJORK FIELDS • NESPGA6 NO OL kP • OLD. CALBFISLD 0 G ILDIN - FppR W • pp A ppUNTT `` 1993 • STEAD G ON gS3 • RAPID RRyy CE AREA TY 0AN& 11IR 983 CITYSERVICE AREAPOWE10� - - MU PhlNER POKE ATION • SMALL IMPROVEMENTS 6 RENEWALS • LARGE CAPITAL EXPANSION PROGRAM 4 • SMALL AMOUNT OF LONG TERM DEBT • LARGE AMOUNT OF LONG TERM DEBT ` • CLOSELY HELD CORPORATION • PXBESjfIfjjMOFRLARGE INTERNATIONAL LM G lElEl AL WIDOp OVER-ALL GAS COST PER M.C.F. (INCL• SEVERANCE TAX) N.C. SA S VOLUME G � AL R �AL ID0 TO AL M.C.F. PURCHASES VOLUME DEGREE DAYS ACT[ MET RS AT ENDOF PERIOU WILD OOD TOTAL nEfJ U AT � t2 J:JJ7 719 f .328 222640 121k 547.63 9,328 1,o31 257 49 A&= rr»rr =a - s�Y.119 I KUSCO 5 YEAR PROFIT & LOSS SUMMARY 'AS SALES IPEBA 6 E Cg JJSI J� � "i� COUNTS TA ilillIJONNANgINtM�AL fUTAL OPERATING EXPENSES DPERATIN6 PROFIT NON-OPERATIN6 INCOME/(EXP) 19:3 YEAR CHANGE 1,042,296 36.82 180,18 3.612922025.�31 8.7 818 ,886 16 1 ;77 7Q..QS 2 66 WAS 6.6 725,372 33.0 316,993 46.5 ( 27,448) -45.9 t 1 � ---� ,�. __ �---,--• ��.-_., u�. �.._<a � ....,.,� ,�...s P®• /."`•^1 f'e."^^! nn"rc.� �ves� .—�I �'1 F*a� �v� �-4 lc�wsw I ` CURRENT TARIFFS MONTHLY RATE - RESIDENTIAL • KUSCO CF •�8 � I O�S�t§R ,�O�SR ALL TADDI�IONAL GAS M MU 1 � LL - $8.08 • ENSTAR $ 2 : �$51 & 0 Cf N 3 "iN�MAJIF TNLYSBILL R MONTH MONTHLY CONSUMER COST OF GAS • KUSLO COST PER MCF (14.36 MCF) f2.1120 • ENSTAS COST PER MCf (14.36 OICF) $2.5988 0 IMLREASE 8VUjjEjjSjAqj%jEFpESENTSOA 19.65 PERCENT i COMPARISON OF AVERAGE BILLS KUSCO vs ENSTAR TARIFFS RESIDENTIAL MCF M of COST, �� COPURIM (---T. AAIFFED COST---) 6 A E �( S) g��scQ EdS7AS 32 37 5�:20 :36.�1 � �3.7j gi 39.1 9 17fl,aewss� rse<-ci F un res-1.-� r.,�-� '.. r�aea !a —•1� �-� ='�^1 i-- r e�mxa nmacl I ASSUMPTIONS AFFECTING RATES • CITY ACQUIRES SYSTEM - PRICE OF NEW GAS - CONTRL&TERMS ESCA TION - PURCHASE PRICE OF KUSCO SYSTEM FINANCING TERM - OPERATING METHODS - _GROWTH pJgJE MM NE ONSUMERSPER CONSUMER - INFLATION • ENSTAR ACQUIRES SYSTEM CAPITAL EXPANSION PROGRAM GAS PRICE SC LATION - RKNEWOR PAIYOVOLUMES GAS II - _SALES SAR�OSTHyOLUME pER CONSUMER ELECTRICAL GENERATION " - NEW CUSTOMERS INFLATION 1 �l F i YEAR 7 8 1 90 3 i i .. r. i . . i i d l COST OF cas PER ncF ENSTAR CITY31984 ��OMi6&OMiH) (HIGHGROW 5: 81 2.31 8 1Us ;-49 q94 q. 1 q. :� .a 5.6 s: s: a :a MAJOR AREAS OF UNCERTAINTY CITY ACQUIRE • POST 1986 GAS SUPPLY 6 PRICE TERMS • INTEREST RATES/FINANCING TERMS • ACHIEVABLE EFFICIENCIES OF OPERATIONS • HIDDEN COSTS TO CITY ft DRAIN ON CITY COUNCIL 8 STAFF OF TIME 9 RESOURCES • INCREASED UNCERTAINTY ABOUT FUTURE RATES ENSTAR ACQUIRES • ESCALATION OF GAS PURCHASE PRICE • MASSIVE CAPITAL EXPANSION, I-E-, BELUGA LINE ;e*e 0 am 41mom oadomr x vs co sumow &01" . 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