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HomeMy WebLinkAbout1984-04-04 Council Minutesa , " A. 8. C. D. AGENDA KENAI CITY COUNCIL APRIL 4, 1994, 7:60 PM PLEDGE OF ALLEGIANCE ROLL CALL 1. Agenda Approval 2. *Consent Agenda - All items listed with as asterisk (*) are considered to be routine and non -controversial by the Council and will be approved by one motion. There will be no separate discussion of these items unless a Council member so requests, in which r se the item will be removed from the Consent Agenda ant, considered in its normal sequence on the agenda as part of the General Orders. PERSONS PRESENT SCHEDULED TO BE HEARD 1. Union Oil Representative - Drilling Wells 2. Kenai Peninsula Borough Representative - Incineration, Special Waste Site 3. Oscar Thomas - Sale of KUSCO PUBLIC HEARINGS 1. Ordinance 914-84 - Amend`_^; !Znzi Municipal Code - Public Vehicle Commission 2. Ordinance 920-84 - Increasing Rev/Appns - Camai Circle Assessment District - $68,555 3. Ordinance 921-84 - Increasing Rev/Appns,FAA Facility- $1,500,000 ns _ Community 4. Ordinance 922-84 - Increasing Rev/App y Center Design - $800000 5. Resolution 84-29 - Accepting State Grant - Lawton, Walker, Tinker, Rogers Water A Sewer - $32,451 6. Resolution 84-30 - Transfer of Funds - Shop EmpXoyee Training - $1,375 7. Resolution 84-31 - Continuation of Camai Circle Assessment District MINUTES 1. *Regular Meeting, March 7, 1984 2. *Regular Meeting, March 21, 1984 E. CORRESPONDENCE 1. Alaska Dept. of Health h Social Services - Local Government Support of Alcohol Treatment & Rehabilitation Services F. OLD BUSINESS 1. 80 Acres for Float Plane Basin - Appropriation & Acquisition G. NEW BUSINESS 1. *Bills to be Paid, Bills to be Ratified 2. *Requisitions Exceeding $19000 3. *Ordinance 923-84 - Increasing Rev/Appns - State Library Grant - $1,500 4. *Ordinance 924-84 - Establishing Assessment Fund - Regency Pointe - $310,000 5. *Ordinance 925-84 - Amending Kenai Municipal Code - Adding Title 14 - Kenai Zoning Code 6. Lease Application - Howard, Garner & Smith, Inc. - Retail Mall & Office Condo - CIIAP 7. Assignment of Lease - Beluga Development to E.N.C. Corp., dba Alaska Steel - CIIAP 8. Borgen Leases - Rescission & Arrearage 9. Discussion - Section 36 - Sale Brochure 10. Discussion - Sale of KUSCO H. REPORTS 1. City Manager 2. City Attorney 3. Mayor 4. City Clerk 5. Finance Director 6. Planning & Zoning 7. Harbor Commission S. Recreation Commission 9. Library Commission I. PERSONS PRESENT NOT SCHEDULED TO BE HEARD ADJOURNMENT KENAI CITY COUNCIL., REGULAR MEETING, MINUTES APRIL 4, 1984, 7sOO PM KENAI CITY ADMINISTRATION BUILDING MAYOR TOM WAGONER PRESIDING PLEDGE OF ALLEGIANCE A. ROLL CALL Present: Tom Ackerly, Sally Bailie, Jess Hall., Ray Measles, Chris Hunfor, John Wise, Tom Wagoner Absent: None A-1 Agenda Approval a. Mayor Wagoner asked that item B-4 be added, Earl Mundell, Peninsula Home Health Care b. Mayor Wagoner asked that item C-1, Ord. 914-84, be postponed c. Mayor Wagoner asked that items C-2 and C-7 be defeated in light of the letters from the Burnetts received this date. d. Mayor Wagoner asked that items C-8 be added, Resolution 84-32, Transfer of Funds - Street Light Repair - $1,700 e. Clerk Whelan explained item F-1, Float Plane Basin Land, was postponed from Nov. 30, 1983 to this date. Action was taken on this item on March 7, 1984, so there is no further need for discussion. The Council may wish to discuss it light of the letter from Dick Mueller, Info 0. f. Mayor Wagoner asked that the $1,700 PO distributed this date be added under item G-2, Requisitions Exceeding $19000. g. Mayor Wagoner asked that item G-4, Ord. 924, be deleted in light of the letter from Burnetts. (see A-1-c) h. Mayor Wagoner noted that item G-11 was in the packet but was not listed on the agenda. He asked that it be discussed after item G-5. i. Mayor Wagoner asked that item G-10, KUSCO, be discussed after item G-5 J. Councilman Ackerly noted that item C-7, substitute, was distributed this date. This would be submitted rather than defeating the resolution. (see A-1-c) Council approved the agenda as changed. A-2 Consent Agenda MOTION: Councilman Measles moved, seconded by Councilman Ackerly, to approve the Consent Agenda as submitted. MOTION, Amendment: Councilwoman Bailie moved, seconded by Councilman Measles, that item G-11 be added to the Consent Agenda. VOTE, Amendment: Motion passed by unanimous consent. U s �i• KENAI CITY COUNCIL APRIL 4, 1984 Page 2 MOTION, Amendment: Councilwoman Bailie moved to remove item G-5, Ord. 925-84 from the Consent Agenda. No second is required for removal from the Consent Agenda. VOTE, Consent Agenda as Amended: Motion passed by unanimous consent. B. PERSONS PRESENT SCHEDULED TO BE HEARD B-1 Union Oil Representative - Drilting Wells Bob Anderson, District Land Manager for Union Oil, Anchorage. He reviewed recent acticns by Union Oil regarding the Cannery Loop unit and correspondence to individuals involved for amendment of the unit. In 1978, well #1 was drilled, it was divided into blocks A&B. #2 (8) well was drilled in 1981, it was a dry hole. Y3 (A) was drilled, with gas in significant quantities. 44 was prepared in 1983, but was not drilled. They are asking for relief from drilling operations till 1986. One of the contingencies was establishing a participating area by Dec. 1983. In Dec. 1983 this was filed with the State. There was a difference of opinion between the working interest owners regarding the land. Union Oil represents most of the owners. A counter -proposal was made by one other owner. It was decided to delay due to lack of available market for gas, and put under existing regulations. This was the cause of the letter to those inside of the unit, asking for agreement to amend to delay establishing of participating unit.The 2nd letter was sent to those who live in the area, saying they were being tracted out. They will have 5 men making contacts with each person that received a letter, starting 4-10-84. They will have a 3 year work plan for the State. In 1986 Union Oil proposes seismic work to delineate the fault they feel is bounty fault and will drill #4 well. They project there will be a market for gas in this area at that time. In 1987 it will be put on production. Some of the minerals owned by the City will be addressed. Kevin Tabler will head up the group from Union Oil, they plan to be here up to 2 weeks. Councilman Wise said he had thought the current Cannery Loop unit will expire the end of June. Mr. Anderson replied, the unit would have 5 years from 1984 to contract down to that participating area. No participating areas have been established. They have been directed by the State to make effective date of participating area at the discretion of the State. This would extend beyond June 1984 time frame. Councilman Wise said he did not understand how the State could extend an agreement between private parties. Mr. Anderson explained the State has administrative responsibility jointly with the Federal. The Federal is small and was given to the State. No action was taken by Council. 8-2 Kenai Peninsula Borough Representative - Incineration, Special Waste Site Joe Arness, borough Assembly President. He io representing the Borough Mayor and himself. Something is transpiring that the City Council should be aware of. The Borough is looking into establishing an incinerator facility to handle solid waste. They have had 2 steps. The first was economic to see if there was sufficient solid waste and would generate enough BTU's. The second was to establish the point where costs will be minimum. It would serve Nikiski to .--.9. _� ..__ _ --__- /YID - - __ __-__ /��Pi.��•�� r- Vr KENAI CITY COUNCIL APRII. 4, 1984 Page 3 Sterling and Tuatumena, One site spas Kalifornsky near the Community College and the other was near the Kenai city limits. The next stage is investigating the best site for the conditions. The Borough people thought they should review with the City people prior to beginning. It is near the rifle range, but not within the City limits. They are aware the City has a well near there. The impact of a unit on the well is negliyible. They are proposing it for• septic wastes as well as the sewer treatment plant. There is water taken off prior to burning that has to be disposed of. They would like to have a leach field, so there will be impact on the ground. He believes the environmental impact will be important to the Assembly. They will be careful with the air and ground quality. He in a proponent of this. Regarding heat generation. It will drive a turbine to develop electricity. HEA has a substation next to Luke's Welding so they would not have to put in an installation. An ordinance will be introduced at the next Assembly meeting for the 3rd stage study funding. They have guide lines drawn up to go to bid. Should the Assembly choose to fund, when they receive the information, the City will be given copies, because*of Beaver Creek and the well. Assembly President Aeneas introduced Skip Bombard of the Kenai Peninsula Borough and Dan Crevensten of Tryck, Nyman do Hayes. Mayor Wagoner asked, in either plea, will there be pre-treatment of the water before it is put in the leach field? Mr. Bombard replied, that is one of the aspects they hope to derive from the study as to what pre-treatment will be required. Ii would be the equivalent of 6 households, not any stronger. The solids gain strength, the water remains uniform. They have looked at prior studies with Kenai h Soldotna sewer treatment plants. Somewhere in the neighborhood of 6,000 gallons a day would go into the ground at the outside. They have made contact with Engineer LaShot and have copies of well logs. Their consultant feels very optimistic about the site. Mr. Crevensten replied, there is some pretreatment and then it is diluted 50% with backwash. It should receive adequate treatment. Councilman Ackerly asked if they could handle fish wastes from the canneries. Mr. Bombard replied, from sports fish - yes, but not the canneries. Councilman Ackerly asked about oil wastes. Mr. Bombard replied, they have addressed that. All land fills in the Borough and all residents in the area will be able to put into waste tanks. Councilman Ackerly asked, sewer treatments also? Mr. Bombard replied, yes, but he would want to know where it came from and what it was first. Councilman Ackerly asked, where will the ash (from the incineration) go? Mr. Bombard replied, there is 90% reduction, 10: is ash, but not all is burnable. There is a need for an ash fill. They are considering one land fill for ash fill. The bird problem and odor problem will be eliminated. It is more manageable. They do not think they will deposit ash on site. Councilman Wise asked if the study will consider noxious odors and will it consider traffic impact. Will it be coordinated with Fish do Game? Mr. Arness replied, those things will be considered. Councilwoman Bailie asked about the Kalifornsky site. Mr. Bombard replied, it was looked at because of the proximity to municipal buildings that could be heated. The high school, Jr. High, Borough building and hospital. They could not amortize the costs. Kalifornsky school was relocated, they thought of using that trite, but could not. Councilwoman Railie asked, why they could not dispone of ash on site. Mr. Bombard replied, there is a possibility. Because of the potential for additional regeneration, they are not ruling it out. But they feel they have a nit.e that is acceptable. Councilwoman Bailie asked, would the public take their garbage to this site for incineration? Will this lie in addition to the present land fills in Kenai h �"'..:.�".�.:i�,� .a:.a. r::�-��=.��`sn,� �a�.--T�e�—ate.-,a�w✓�.st;�L'L7.LYE"4304I'16�L•Qr✓�i�'1i�7di�`-7��i� �ifiw KENAI CITY COUNCIL APRIL 4, 1984 Page 4 I Soldotna? Mr. Bombard replied, they will be shut down as land fills. They don't know which one. One will be i converted to ash fill and ash will be hauled there. Councilwoman Bailie said the expense of hauling ash should be considered. Has this been tried elsewhere? Mr. Bombard replied it is planned in Sitka. Mr. Crevensten said it is done in Prudhoe Bay, it is primarily paper. City Manager Brighton asked if this would be considered a toxic waste site with oil residue, Mr. Bombard replied no. Mr. Brighton asked if they knew what the water table was. Mr. Crevensten replied, it is close to the surface, they are studying this. Mr. Bombard added, it is estimated at 20 to 25 ft. Mr. Brighton noted this is the Kenai water supply. Mr.Bombard replied, they are aware of this. They are working with DEC. Mr. Brighton asked, is this the only site they are working with? Mr. Bombard replied, this is the most logical. Mr. Brighton asked if they felt comfortable that it supplies most of the water for the City if the ash is deposited thee'. Mr. Bombard replied, they are not considering it an ash depository. Mr. Brighton asked if it would bother them that they were disposing 6,000 gallons per day that could contaminate the water supply. Mr. Bombard replied, there i are over 6 homes closer to the well than this that are putting that kind of effluent into the ground now. the potential for interchange is a possibility but is low, that is why they are having the study. Mr. Brighton asked about the cost. Mr. Bombard replied, $90t000 for this phase, the total is $10 Million. He added, the potential long range items in the plant trill produce considerable amount of -- steam. They could provide heat reserves for the City to prevent winter freezing of water supply. Also, if the Borough and the City would concur to extend the sewer treatment plant effluent collect outside to Thompson Park, there is a possibility for effluent to go into the sewer treatment plant instead of leach field. This would not be '..;. 1 the solids. Mr. Brighton asked if this would be a substitute for Sterling site. Mr. Bombard replied, no, some of the products going there could be put here. Mr. Brighton asked, will the City be provided all information from the feasibility study for review, Mr. Bombard replied yes. Mayor Wagoner asked if they were considering just this site or the 2 sites on the list. Mr. Bombard replied, this is f the primary thrust. Mayor Wagoner asked if there was only one study. Mr. Bombard replied, there are 2 potential sites, this appears to be the best. There seems to be little reason for them to review that one. If this does not -- -- work out, they will use the other. Mr. Brighton asked if their criteria was economic or health. Mr. Arness replied, dollars do not enter in except they would have to -:= purchase property. Also, this is leas populated and will not become populated. It is away from Kalifornsky traffic. There is an HEA generator to hook into. Mr. Brighton noted that is economic. He asked if they would have to run a line i to the other site. Mr. Arness replied, one thing you learn about solid wastes, you will always have objections. Public Works Director Kornelis asked if they had looked into the oil refineries. There was an inquiry about an industrial water line in Beaver Creek. There are more people looking ' into that. They should be contacted. Mr. Bombard replied the quantity needed cannot be provided trom there. They • ,{ would have to draw from Kenai River. Artificial hosting of water would be needed, that is why this was looked at. Spin-offs increased with this site. The Kalifornsky Beach rY site sits in a hole, there is inversion with build-up of air pollution. An option is, they could take the tank off and dispose it elsewhere. Councilman Wise noted there is no public water at Beaver Creek. These wells were affected by our drilling. He asked if they would be studyinq this. Mr.Crevenst.en replied he would like to nee where the wells �14 N KENAI CITY CODUCIL APRIL 4, 1984 Page 5 are and how deep. Councilwoman Bailie asked,when the 9tudie0 are made and the derision is made, does the Council have the ability to change the decision? Mr. Arness replied no, from the standpoint of a veto. But if the City has objection booed on logic, the Aosembly will not approve. It is not in the City, he did not know if the City could have an effect other than through the courts. Mayor Wagoner asked if he would be coming hack to the City for public hearings when they do the study. Mr. Arneso replied yes. 8-3 Oscar Thomas - Sale of KUSCO Mr. Thomas noted the item will be up for discussion later in the agenda, He requested waiting till then. Council agreed to the request. 8-4 Earl Mundell - Peninsula Home Health Care Mr. Mundell explained, last year the Home Health Care program was started. It is tax exempt and provides for people to go into homes for health care. It gets people out of hospital earlier. They served 70 last month.It has been approved by Medicare. It has been financed by the Board of Directors and by donations. He is asking Council to use Federal funds to help get this off the ground. Anchorage has done it and it now almost self-sufficient. The agency feels they will be self-sufficient in one year. They ask $2.50 for each resident. They have asked Soldotne and the State Legislature. Councilwoman Bailie noted tax dollars go to the hospital, have the agency approached them? Mr. Mundell replied, they were told it cannot go through the hospital unless it was a division of the hospital. They are cooperating with the hospital. Councilwoman Bailie asked if it could be made a part of the hospital. Mr. Mundell replied, some of the directors want to remain autonomous rather than going to the hospital. Mayor Wagoner suggested this be diocussed at the April 18 meeting. Council agreed to the suggestion. C. PUBLIC HEARINGS C-1 Ordinance 914-84 - Amending KMC - Public Vehicle Commission MOTIONS Councilman Ackerly moved, seconded by Councilwoman Bailie, to postpone public hearing on this item to the May 2 meeting. Motion passed unanimouoly by roll call vote. C-2 Ordinanca 920-84 - Increasing Rev/Appns - Camoi Circle Assesoment District - $68,555 MOTIONi Councilman Ackerly moved, seconded by Councilman Measles, to adopt the ordinance. PUBLIC COMMENTS Jill Burnett, Box 1022, Kenai. They have submitted a letter to the City as sole owners. They have a buyer who does not wish to have an aaueoument districl, and asks that it not be acted upon. Motion fetled unontmourily by roll call vote. v„ KENAI CITY COUNCIL APR IL 4, 1964 Page 6 C-3 Ordinance 921-84 - Increasing Rev/Appns - FAA Facility - $1,500,000 MOTIONS Councilman Measles moved, seconded by Councilman Hall, to adopt the ordinance. PUBLIC COMMENTS Bob Bielefeld, Kenai Aviation. He is a lease holder at the airport. It is odd that the City will fund a government agency when we pay the government to operate. It would be a Z-fold tax. FAA is funded by the government and raids the aviation trust fund to operate. Every time we fly 8: is paid, freight is 5%, small aircraft is 120 a gallon. We are paying there also. He cannot see the City should build for the Federal government. If they want to build, let them pay their way. There are a lot of places $1-1/2 Million to $2 Million could be spent. The City intends to give them land at the airport and make the rest pay the going rate and they keep jacking up the costs. It does not have to be at the airport, it should be of benefit to the airport. They will not be looking at the airport. It does not have to be on valuable land. You will have to service these people, they will not all live in Kenai. Now much does the land appraise for? Did it take 9 months to negotiate? It takes a local citizen that long and they try to bill him for more. This is double taxation. MOTION, Amendments Councilman Wise moved, seconded by Councilwoman Bailie, to amend in accordance with Finance Director Brown's Memo. (After the grid WHEREAS, add "the City's non -reimbursable commitment to the project is $1,500,000, with any excess over that smount, up to $500,000 of costs, chargeable to the FAA as cent over a 20-year period, and--") VOTE, Amendments Motion passed unanimously by roll call vote. Councilman Wise said he has not seen a cost benefit analysis to justify giving $1-1/2 Million and leasing for $1 year and insurance. He did not see how this is going to be a break for the City.There will be some new residents for the City of about 40+ and 40+ new jobs. As Mr. Bielefeld noted, they will not all live in the City. We wili lose $200,000 income per year once it is in construction. The mill rate will remain the same, but taxes are going 30%-50%. He sees a problem in future years making up $200,000 in revenue. Mayor Wayoner said this is not a gift to FAA. They will not have title to the building or land. There would be additional pay role. In 20 years the building would be the City's and the land stays with us. We would have the option for full lease. It is revenue producing, the building will be worth more than the cost to build. 109 people were mentioned at Chamber, after the transfer there would 99 permanent residents. VOTE, Main Motion as Amended (passed): Yost Ackerly, Bailie, Hall, Meaeles, Monfor, Wagoner Nos Wise C-4 Ordinance 927..-84 - Increasing Rev/Appns - Community Center Design - $80,000 1 it !l ij KENAI CITY COUNCIL �1 APRIL 4, 1984 Page 7 MOTIONS Councilman Measles moved, seconded by Councilwoman Monfor, to adopt the ordinance. There was no public comment. Councilman Wise said he objected at introduction because we should not fund till we knew whether we would get State funds. This appropriation is for engineering. We have not firmed up the site or where the facility will be. Regarding operating expenses, we have no cost -benefit analysis. We have not discussed what we will do with the center. We are rushing headstrong into the project which may take devious twists. Will we bond, what are the operating expenses? Councilwoman Bailie said we have been discussing this for several years. She toured 3 fscilities in the State with other committee members. The Committee will bring an in-depth report reviewing all these subjects. She would like to see this ordinance approved so they can go on in a positive manner. Mayor Wagoner said there is no guarantee that $80,000 will be spent: till we get the report. We will need schematics. That is the reason for this. It will not be used for schematics but will make money available. It has been discussed since 1972 and voted on and passed 2 times. VOTE (Passed)s Yess Ackerly, Bailie, Hall, Measles, Monfor, Wagoner Nos Wise C-5 Resolution 84-29 - Accepting State Grant - Lawton, Welker, Tinker, Rogers Water do Sower - $32,451 MOTIONS Councilman Ackerly moved, seconded by Councilman Measles, to adopt the resolution. There was no public comment. Motion passed by unanimous consent. C-b Resolution 84-30 - Transfer of Funds - Shop Employee Training - $1,375 MOTIONS Councilman Measles moved, seconded by Councilwoman Monfor, to adopt the resolution. There woo no publics comment. Councilman Ackerly asked if the pro -rated requirement for pay -back will be included. Public Works Director Kornelia replied yes. Motion passed by unanimous consent. C-7 Resolution 84-31 - Continuation of Camai Circle Aasecosment District MOTIONS Councilman Measles moved, seconded by Councilman Ackerly, to adopt the renolut.ion. There woo no public. comment. M„ M 11 KENAI CITY COUNCIL APRIL 4, 1984 Page 8 MOTION, Amendments Councilman Measles moved, seconded by Councilman Ackerly, to amend the motion by submitting the substitute resolution distributed this date. VOTE, Amendments Notion passed by unanimous consent. finance Director Brown explained Council has to pass a resolution to continue or terminate. VOTE, Main Notion as Amondeds Notion passed by unanimous consent. C-8 Resolution 84-32 - Transfer of Funds - Street Light Repair - $1,700 MOTION: Councilman Ackerly moved, seconded by Councilman Measles, to adopt the resolution. There was no public comment. Motion passed by unanimous consent. D. MINUTES Minutes were approved by Consent Agenda. E. CORRESPONDENCE E-1 Alaska Dept. of Health do Socisl Services - Local Government Support of Alcohol Treatment & Rehabilitation ►ervices Mayor Wagoner noted this is the direction the State plans to move. They are trying to pat social services on the municipality. Councilwoman Bailie noted this was discussed during Municipal League, to urge Legislature to fund this. Is the Legislative Committee lobbying for this? Councilman Wise replied this is not a subject for the Board of Directors. No action was taken by Council. F. OLD BUSINESS F-1 80 Acres for Float Plane Basin - Appropriation & Acquisition Mayor Wagoner noted the letter from pick Mueller, Info p3. He suggested Administration► pursue this matter. Council agreed to the suggestion. G. NEW SU51NESS G-1 through G-4 - approved under Consent Agenda G-5 Ordinance 925-84 - Amending KMC - Adding Title 14 - Kenai Zoning Code MOTION: Councilman Meaules moved, seconded by Councilman Ackerly, to introduce the ordinance. KE:NA I CITY COUNC I I APRIL 4, 1984 Page 9 Councilwoman Bailie said she has had calls reyarding removal of the trees in the new subdivision on the spur. She in proposing additions to the zoning code. For too long we have been getting one thing on a proposal regarding landscaping and on final development they have failed to do the same thing. She contacted Anchorage. They separate into districts. When the permit is applied for, there has to be a landscaping plan. Then there is certification of occupancy, it must be approved. If it is not done right, certification is not given. In the winter they have a date tt:at it must be complete and monies are put aside till it is done. She asked that it be put in the Code. Mayor Wagoner noted we have a time frame for the Zoning Code by July 1. This could he given to P&Z after that date to be added. Councilman Wise it is essentially a Borough Code with only minor changes. We don't want to grant grandfather clstases prior to this. He asked that the PRUD portion now before the Borough be put in the ordinance. He added, the only thing we can apply landscaping to is leased lands. There should be separate ordinance for this. It would have nothing to do with the Borough Zoning Code. Councilman Ackerly objected to the sign portion of the Code. Land Manager Labahn noted the amendment distributed this date. Mayor Wagoner suggested this be added to other suggested changes after the July 1 date. Motion passed unanimously by roll call vote. G-11 PDA - Kenai Airport Projects - Additional Engineering Services Gary Silvers, PDA. The are under contract to proved contractual services for parking lot and itinerant parking at the airport. It has been on hold for the winter. It was suggested to extend itinerant parking, Mr. Silvers reviewed the plan. He explained, there would be more pads for planes and incroased revenue. They are set up for 90 day contract. After 21 days they shut down. They are now out of sequence and may enlarge. They will work with the contractor next week. The request is to provide additional monies for inspection beyond 90 days. Mayor Wagoner asked, who requested this? Mr. Silvers replied, Administration. He added, the way the parking lot is laid out, there is a big hole. They want to re-route the drainage to the hole. Public Works Director Kornelis said, there is a fence there. FAA would like to see it removed, there is no reason for it. Also, when the planes come in they have to go north, with this, they could go straight out. There was excess money in the grant. FAA has no objections to this. Mr. Silvers said they have the contractor now,this could be added as a change order. There will be cost benefit to the City, next year it would cost more. Councilman Wise asked if this is connected in any way to the FAA building lease. City Manager Brighton replied no. Mr. Silvers said draining will be used for 2 properties. Councilman Ackerly caked if a delay would create difficulties. Will it make the itinerant parking longer out of use? Mr. Kornelis replied the amount of time unavailable will be minimal. They will only be adding about 20 ft. It may hold up the contract. Mr. Silvers said it amount to 6-8 weeks of preparation. j Timing is critical. MOTIONS Councilmen Ackerly movers, seconded by Councilman Measles, for approval of contract. to cover itinerant parking at the airport. L� a KENAI CITY COUNCIL APRIL 4, 1904 Page 10 Councilman Wise said if this was critical, we should have had 2 weeks ago. He felt we were spending Federal moneys because we had them. Mayor Wagoner explained it was not in the original proposal because we thought it would run over. Councilman Wise noted we have had the bids since Sept. Airport Manager Swalley explained there was $300,000 available. If we don't use it, it gobs back to FAA. Mr, Kornelis added, the plans were done last year and were available, 2 or 3 people have looked at them. VOTE_ (Passed)s Yess Ackerly, Sailie, Hall, Measles, Monfor, Wagoner Nos Wise o4 Councilman Wise he has supported the airport project, but objects to doin� without information. G-10 Discussion - Sale of KUSCO Oscar Thomas, Vice President, KUSCO. He explained he was in Anchorage during the work session of March 28. There were no tapes or notes. Fie wished to address the comments by Jim White. Mayor Wagoner explained this was a work session and was not taped. Mr. Thomas said Mr. White had said he made an offer to purchase. This is not true. Mr. White said Far North would provide rate advantages to the City the same as Enstar or less. The proposed franchise agreement makes no reference to limiting rates made by Enstar or anyone else. Section 9 of his document, Change of Rates, provides for a purchase gas adjustment - he will discuss this later. Section 10 rates provide for an overall rate of return of 16%. In KUSCO's last meeting with APUC they were granted a 14.9: rate of return, in 1982. In order to achieve 16: they would have to charge $117,000 above APUC approval. With 1300+ customers, it would be $86 more per customer. Council could not get specific answ colt e�arying the financial capability of the operation'eepro8�"ction program, installation of transmission facilities and other components for dependable gas supply. Nor was KUSCO. Mr. White said he had heard there was a $4 Million offer before For North got into the picture. That is a ridiculous figure and Far North woo never in the picture as for as KUSCO was concerned. Mr. White said because of lack of competition, Enstar would be able to do what they please. F_nstor would be in the some position as for North. They would be under the regulatory authority of APUC. Council may have been told Kenai eustomero would pay the came roteo os Anchorage customers. Anchorage costs have been lower than Kenai since KUSCO began operation. The average annual revenue per MCF has been 35% less for Enstar tt-.!an for KUSCO. A 16 year track record has a lot of credibility. Mr. White said bigness is not conducive to efficiency. He would advocate continuing duplication of costs to be borne by the citizens of Kenai. Mr. White said there wou!j be a gas price difference between supplies owned by Enstar and reserves of For North, not shown to exist. He has seen no mention of cost differentials in favor of Enstar. tor. White suggested if Enstar fought on a short term franchise, they might not do any development. Section 12 of the agreement, requires they serve the City according to APUC rules. Mr. White suggested Mr. Covington take his pipe out of the ground and let someone else start over. KUSCU owns a $3 Million plant which would mean charging the consumer for replacement of this. Regarding the contract between Far North and Chugach Electric. Chugach has been given the 19t right of delivery on gas available from Far North up to 6 million cu. ft. pee day. Chugach has let right of refurial on qan in exreas of 6 million cu. ft. per day so long as excess is not bold to or coed by a For North nubsidinry. The price would be the same M V . _ KENAI CITY COUNCIL APRIL 4, 1984 Page 11 as outside the community. If the City owns KUSCO and buys qas from Far North, the City would have to wait for Chugach to take whatever it wanted, for gas that may or may not be there. Chugach has the right, if Far North properties are proved up, to purchase up to 30: of reserves at $1.16 MCF. This is in addition to the 21 billion cu. ft. alread, reserved for Chugach. There may be a shortfall of proven reserves. Chugach may need all it can obtain. If Kenai was subordinate to Chugach, they would be forced into the open market for gas. KUSCO has explored other proposals and feels Enstar is the best. Mayor Wagoner noted the request by Mr. White was verbal, not written. Mr. Thomas replied, it was extremely cloudy. He added, Mr. White had said financing would not be a problem but he did not say how it would be done. Ray Benish, Arthur Young & Co., Anchorage. The City has retained Arthur Young to review the proposed sale and possibility of acquiring KUSCO. Mr. Benish reviewed the background. On Feb. 15 KUSCO notified the City of the proposal. The City had 60 days to act. Enstar requesteds of Assignment of franchise b. Waiver of the City option to purchase KUSCO c. Waiver of option to purchase at termination of franchise d. Approval of transfer With purchase, certification has to be approved by APUC. KUSCO and Enstar are both APUC regulated. The impact on consumer rates was reviewed. They did not audit KUSCO or Enstar. They reviewed the financial records of KUSCO, but did not do a rate study. Considerations are gas contract purchase date and expiration of franchise. Options ores a. City purchase KUSCO b. City approve purchase and waive franchise right in 1987 c. City approve or express no approval but retain franchise right in 1987 (they could purchase the utility in 1987 ) If the purchase price could not be agreed upon, appraisers would be appointed. Fair valuation excluding good will would be the price. The reason for the purchase is, KUSCO cannot purchase new gas, the City is enjoying low rates. Enstar serves the surrounding area. Enstar costs are less. Enstar has management ability. Mr. Thomas is leaving, it is a good time to sell. There are available supplies of gas in Cook Inlet, 3.5 trillion cu. ft. It is used for commercial heat, electrical generation. It is all over Cook Inlet, a by-product of crude oil drilling. It has been pretty much explored. There are 2 contracts signed, the escalation clause in the contract is new. They don't know if the Enstar contract was good. $2.32 wellhead price does not seem bad. When Enstar negotiateo, world price of oil was soft, it was a good time to negotiate. Major gas utilities have lost the ability to get prices. Over the long run there will be escalation to the year 2000. For the next 4-5 years it will be stable or slight decline in fossil fuels. Then it will go up. Enstar has the advantage to meld old and new gas. In 1993 it rues out. The price on old gas is going up. The price of Enstar gas would go from $1.60 in 1983 to $5.41 in 1993. Gas purchase price for the City is 320, Enstar is $1.11. Enat.ar is estimated on a melded rate. In 1966, the City price would be $2.20 if they purchased new gas. Enstar is likely to bid the price of the City. Tariff filing - Kenai Field pays $.64, N. Cook - $3.74, West Fork - $.64, Belugs - $2.15. The contracts were approved by APUC. Enstar dzsa not know the coat, they estimated it as going up to $1.03. Gas forecast for Alaska Power, 1983 - $2.77,1984- KENAI CITY COUNCIL APRIL 4, 1984 Page 12 $2.57, 1993 - $3.30. This was to support the Susitna project. Dept. of Revenue estimate is conservative, no doubt it will go up. Comparing KUSCO A Enstars KUSCO is small - 1600 meters, 61,000 customers for Enstar. KUSCO is single service, is well maintained, no lines, does not have cheap gas to blend past 1986, has steady growth, no power generation, small improvements, small long term debt, closely held corporation. Enstar has a multi -city service area, extensive transmission lines, large integrated system, can meld cheap gas, rapid growth, large capital expansion program, subsidiary of a pa.ent firm. KUSCO gas sales are j up 36:, distribution up 223%, maintenance t.p 48% (they had ' to move lines for the City). Tariffs - KUSCO pays $2.17, Enstar pays $2.59. Arthur Young cannot predict costs to the City, there are areas of uncertainty. But they project costs to City customers would exceed Enstar to 1986. After that it decreases. They based the City rates on a contract without escalator. If the City acquired KUSCO, they don't know the terms. Items not on a spread sheet are Council time, Administrative time, learning costs, uncertainty on rates. With Enstar you have costs of escalation and expansion. Gas availability is good, Enstar price was not great, there are no major transmission line costs. Consumer rates - Enstar exceeds KUSCO. If Enstar acquires, rates will go up. If City acquires, rates will go up in 1986. KUSCO runs an efficient system. If the CiLy ran it, it would be a drain on Council but would save on other areas. If the City runs, dollars will stay in the City. Their s study concluded, there is a supply available, the City can probably be competitive but cannot get the gas to compete with Enstar melded rates through 1986. Option 01, the 60 day period is not sufficient. KUSCO should provide adequate documentation on impact. Before the City would purchase, they would have to have some assurance of a long term contract for supply of gas. Option 02, this goes back to the 60 day period again. Option #3, this would retain the City's rights, would give them time to negotiate. In 1987 the purchase price,whether KUSCO or Enster will be fair purchase price, not good will. It is advantageous to wait. The City has 2 years to review Enstar service. KUSCO has not established benefits of the sale. Enstar cannot predict price of gas. The 60 day period is not adequate. Council agreed to have a special meeting on April 11, 1984 at 700 PM at City Hall. (NOTEs This was subsequently changed to the Senior Center) PUBLIC COMMENTS r + a. Arthur Stites, N. Kenai. If royalty gas could be transported through Union lines, would they have an impact on the royalty oil. Would they have a melded price? Mr. Benish replied, yes, but it would not have the same effect. The City could sell royalty gas. Some will use more than others and get more benefit. It should help lower cost. b. Carmen Gintoli, 117 Deepwood Ct., Kenai. Will Mr. Benish attend the April 11 meeting? Mr. Benish replied yes. ! Councilman Wise said Union line from Kenai gas field is not a common carrier. It is a private gas line we are permitted i to tap. If we do have any other supplies, we would need a ? new gas line. Atty. Rogers replied, Mr. Benish did address i! that, but it would be a cost of Enstar. Councilman Wise ' said we have a problem with City share of royalty gas Revenues are dedicated to recreation funds. Mayor Wagoner replied, 500 of the Cannery Loop lease, but that would !. benefit the City. It would free up funds on GO budget that { support the Rec. Dept. I KENAI CITY COUNCIL APRIL 4, 1984 Page 13 c. Richard Barnes, Enstar. The overall effect io the consumer has 2 componentss -Cost of purchased gas -Cost of delivered gas $2.32 was a hard -negotiated price. The going price for the same in the lower 48 is $3.52. Cook Inlet is an isolated market, 9T1i value is what is saleable. He would be surprised if anyone got a contract without an escalator rate. The reason the City price is cheaper is because there was no escalator price for 16 years. They had a choice on escalator. They felt 15 year increase from oil products would be lower than inflation. OPEC has reduced prices because they could not sell. We are at 1/3 cost of fuel oil. Producers are unwilling to sell at fixed price. With a combination of lower cost of delivery and lower cost of gas, Enstar can provide lower cost. Mr. Benish said City requirements are much different. When Shell and Marathon look at Enstar they know they are big. Enstar has potential of adverse price to consumer. The general consensus is the cost will go up higher. If Enstar has guarantee of price and could meld, it would be hard to bid. Gas requirements are not the same, they might be competitive. Mr. Barnes said the average to peak sales is greater difference in Kenai than in Anchorage. You still have deliverable impact. Mr. Barnes replied, quantity has impact. Mayor Wagoner noted $3.52 in the lower 48 was difficult to negotiate. There Is no comparison there are tremendous transportation costs to the lower 48. Mr. Barnes explained, within the oil companies, the negotiators know the going price, they do this all over the country. Mayor -,.- Wagoner noted here we have surplus gas with limited market. Councilman Wise asked Mr. Barnes what his reply would be to Arthur Young Co. recommendation for option 0. Mr. Barnes replied, this would be difficult without knowing the plans of the City for 1987. =- Oscar Thomas, KUSCO. We have not had a healthy relationship with Union/Marathon, as Mr. Barnes had suggested. Mr. Brighton asked Mr. Thomas if they had ever quoted a figure, F Mr. Thomas replied no. Councilman Measles noted that on any negotiations for long - term gas contracts at fixed rate. Cook Inlet gas in locked — in now, but ARCO/Chevron and Cook Inlet Regional Corp. are - working on a proposal. He read in the paper that there is a possibility of joint venture to build a fairly large LNG plant on the Peninsula to take care of excess gas reserves. G-6 Lease Application - Howard, Garner A Smith, Inc. - Retail Mall & Office Condo - CIIAP MOTION s Councilman Measles moved, seconded by Councilmen Ackerly, to approve the lease application. f I Land Manager Labahn explained it is approximately 14 acres, is next to Dairy -Queen. MOT ION , Amendment s Councilman Wise moved, seconded by Councilwoman Bailie, to amend the motion providing acceptable landscape plan in detail, submit to PAZ for their approval prior to signing of lease. Councilman Ackerly noted it is only as good ns nriforeement. EMI B. KENAI CITY COUNCIL APRIL 4, 1904 Page 14 MOTION, Addition to Amendments Councilman Wine moved, with consent of second, to Add additional language that no building permit be released till certificate of occupancy unlesu they escrowed sufficient funds with the City to accomplish, Mayor Wagoner suggested an ordinance should be passed before we enforce. Councilwoman Sailte said we have one now, Mayor Wagoner said we are treating this one different then others. We should go after the people when they violate. We should not make sit example of one person. Councilman Wise said a lot of the trees strould be removed, but they should put something back. Councilwoman Bailie said there are no teeth in the ordinance now. We should start somewhere. They submit landscaping plane all over the State. Mayor Wagoner said we should go ahead with the landscaping plan, but no further. It ►o our fault, not the builders. He asked ►f there were provisos for the City to enforce this ettuation. Mr. Labohn replied it depended on the lease. Councilwoman Sailte ookad, how will we enforce? Mayor Wagoner replied, we can deny occupancy permit, Mr. Labohn added, -so could revoke the lease. City Manager Brighton said we have 2 sets of rules. If the land is bought, there are no rules. We can hold them to this if it is a lease. We should have the same rules for everybody, Councilwoman Bailie said it should be enforced when the building permit is issued. Councilman Wise added, it should be an ordinance exclueivo of the zoning code. Mayor Wagoner suggested referring to P&Z. Councilman Ackerly noted this is not a site plain, there to no landscaping. Councilwoman Bailie said P&Z hoe asked about the landscaping that, to not being enforced, Councilman Wiso said the plan to not platted or appraised, can they wait another month? Mr. I.abohn replied they would like sane conceptual commitment tonight,. Councilman Hall said we need more long range thought before we decide on the amendment. VOTE, Amendment (Failed)s Yeas Ackorly, Bailie, Wise Nos Hall, Measles, Monfort Wagoner VICE MAYOR MEASLES TOOK THE CHAIR, MOTION, Amendments __ , Mayor Wagoner moved, seconded by Councilman Hall, to amend the original motion that except for a submittal of i landscaping plan which will be referred to Council by P&Z that will agree with the concept contingent on receipt of lands plan. Motion, Amendment, penned by unanimous consent. I MAYOR WAGONER RESUMED THE CHAIR. Mayor Wagoner afiked that thin be uubmitted to P&Z and have on the agonds for the April 19 rnoef. ins. Land Manarier Labohn asked if Council wished it to be for public and private, but restricted to cornmorcial c;onutructlon. Council confirmed the royueut. VOTE, Main Motsun au Amendeds Mot ton passed by unfill irnoun cunrrrrnt.. KENAI CITY COUNCIL APRIL 4, 1984 Page 15 G-7 Assignment of Lease - Beluga Development to E.N.C. Corp., dba Alaska Steel - C11AP MOTIONS Councilman Wise moved, seconded by Councilwoman Bailie, to refer this to Administration. (To amend from corporation to personal guarantee) MOTION, Withdrawal and Approvals Councilman Wise moved, with consent of second, to withdraw the motion, contingent on the lease assignment being changed by Administration for approval. Notion passed unanimously by roll call vote. G-8 Borgen Leases - Rescission & Arrearage Mayor Wagoner explained the Borgens have said that as of Thursday (4-5-84) at 5s00 PM they will pey all money current. If they do not, Atty. Rogers will tie up any property he can. He requested the Council not to take any action. Council took no action. G-9 Discussion - Section 36 - Sale Brochure Land Manager Labahn explained they are still working on this. There are 5 major questions in the packet. Councilman Measles reforred to #4, time schedule. This should be in the documents so they will not hold for speculation. Mayor Wagoner said we are also looking at LIO's. Councilman Hall said the problem is, how are we going to be able to know what kind of development of residential land. The only way would be Lo sell in small lots and wait till all are sold, then sell more. Mr. Labahn suggested maybe it should be a combination of tracts. Councilman Measles suggested if we break into parcels, each would be a separate project. That would take care of the problem of a developer doing at his own time. It would not make any difference on #5, that would probably be an LID. The city should not put utilities in the subdivision. He agreed with the 4 large tract concept. Councilman Hall noted the possibility exists if we go down to small sizes we would have to put in streets. We would have to put assessment districts and re -allocate into smaller parcels. Mayor Wagoner said the City provides equal service to major parcel areas from 2 crossing areas. Smaller parcels cost more to develop. Councilman Hall suggested all be required to develop and put in main lines. City Manager Brighton said if they knew at the time they bid on the real estate that it was required, they bid knowing the requirements. The problem would be if no one bid on the property. We are trying to put all on the market at one time. He suggested putting 40 acres on and have it run into the main line and net for a year, then put another piece in. Mayor Wagoner noted the motion was made that it would be up for sale. Councilman Wise rioted there wao iin provision for dates of release. Mayor Wagoner noted p2, Council is on record to advertise all on the west aide of the highway. Mr. Labahn said the most crucial is the size of the lots and the City position on utility location. Councilman Hall said the problem is if we sell all 160 acres it looks like we are holding back to clot those prices. We are going to publish prices and they will have to bid more. Councilman Measles said the problem with riot setting fair market price i.a if we put 160 acres on the market and all sell for leas than fair market value, that will a•ffoct othor property in the area. Councilwoman ilailie ankayd if Iff -. fl KENAI CITY COUNCIL APRIL 4, 1984 Page 16 utilities with the main sewer line would make it higher market value. Councilman Wise replied yes, because it would be immediate developability (sic) but would need oversize lines at the crossings. MOTIONS Councilman Measles moved, seconded by Councilman Wise, that the Section 36 bluff site property be sold in 4 parcels - A, B, C 6 0. Motion passed by unanimous consent. MOTIONS Councilman Wise moved, seconded by Councilman Hall, that language be put in the bid on release clauses on subdivisions. Motion passed by unanimous consent. M0710Ns Councilman 'Wise moved, seconded by Councilman Measles, to set at appraised value. Motion passed by unanimous consent. MOTIONS Councilman Wise moved, seconded by Councilwoman Bailie, for no phased development requirement. City Manager Brighton asked if that would mean that high bid could be successful bidder on 40 acres and not develop for 15 years? Councilman Wise replied yes, but you are still in the neighborhood of 400 building lots. We built 200+ last year. We are not going to be able to develop these kinds of lots in phased manner. Are we going to require paved roads, curbs and gutters?There will not be that much building in the development schedule. Mayor Wagoner said this should be with P&Z. As long as the City is financing we should require percentage of the development. It is the best deal in the State. MOTION, Withdrawals Councilman Wise moved, with consent of second, to withdraw the motion regarding development. MOTIONS Councilman Wise moved, seconded by Councilwoman Bailie, to include in the brochure that there will be paved -streets, curbs and gutters, street lights and other appropriate amenities, and additional underground utilities. Motion passed by unanimous consent. MOTIONS Councilman Wise moved, seconded by Councilwoman Bailie, to have sealed bids. Motion passed by unanimous consent. Council agreed lit will be only by LI0's. 0 KFNAI CITY COUNCIL APRIL 4, 1984 Page 17 Mr. Labahro said he will have the final plat at the April 18 meeting. Street names also. Councilman Hall noted the other 2 main lines have water 6 sewer, will we have to do this before selling? They do not connect to newer services. Mr. Labahn said this could be discussed at the work session with P&Z. tie added the development schedule will be at the work session. Mayor Wagoner asked Administration set up a work session with P47. H. REPORTS H-1 City Manager City Manager Brighton spoke. s. There is a leak in the fine Arts building, it will cost $10,000 to fix. There will he an ordinance at the April 18 meeting. Mayor Wagoner said he thought the agreement was that they would cover maintenance. Mr. Brighton explained they do not have that much money. The longer the look exists, the more the building deteriorates. The people who did the roof are out of business, there was a guarantee. b. The State House defeated the utility relocation bill. We were surprised. c. The budgets will be ready for .a budget work session on April 16. finance Director Brown said they hope for a maximum of 2 meetings. d. Mr. Brighton suggested work sessions in the afternoon. Council did not agree. H-2 City Attorney None H-3 Mayor Mayor Wagoner spoke. s. He asked Administration to prepare a tarp ordinance for trucks carrying garbage. b. There are cars on Frontage Rd. advertised for sale. We should prepare an ordinar:re or enforce one if we have it. H-1 City Manager Report (Contd)i City Manager Brighton noted Mr. Ladd was in the audience. He told him the Fire Dept. and Building Inspector had a talk with the owner of the log cabin. They hopes to have it taken care of next, wack.(4-9-84) The Building Inspector has been talking with the owner of thy► log cabin by Kenai Joule. Administration is working on it. H-3 Mayor's Report (Contd)i c. Public Works Director Kornelis had sriid that, he wrote a letter to the State on reduction of the apeed limit by the Jr. High. He hail not had an answer, but he will check. d. On April 20 the Resource Development Council will have a lunch in Anchorage. 4 mumborn of Cuut�%-il and City Manager Brighton will attend. Clerk Wholon wits; aukttd to make arranyomentn. e I I a., I KENAI CITY COUNCIL APRIL 4, 1984 Page 18 e. Mayor Wagoner read a proclamation for Library Week and congratulated Librarian Deforest on the $750,000 for the library expansion. f. Mayor Wagoner noted the changes requested for the minutes are a total waste of time to transcribe. He suggested the minutes be limited to motions, who voted and the total vote. Councilwoman Bailie said it helps her in doing her research. City Manager Brighton said they get calls at City Hall for verbatims from the public. Those would not be available. We have a record available to protect ourselves. Councilman Measles said if he is absent from Council the minutes are the only way we can catch up. Clerk Whelan suggested an assistant to help her in preparing the minutes. She averages 2 days per meeting in preparing the minutes. Council agreed to keep the minutes as they are. H-4 City Clerk Clerk Whelan spoke. s. The telephone poll of March 30, 1984 was reviewed. MOTION: Councilman Wise moved, seconded by Councilman Hall, to ratify the telephone poll of Harch 30. Motion passed by unanimous consent. b. A review of the Clerk's Seminar of March 12 to 16 is in the packet. H-5 Finance Director None H-6 Planning & Zoning None H-7 Harbor Commission None H-8 Recreation Commission Recreation Director McGillivray spoke. s. He requested the cost of tarps be added to his budget for the trash trucks. b. The parks people are working on thn green strip. It should be cleaned before Clean -Up Day. c. The Rec. Commission had a meeting April 3. d. The residents of Spur and Lawton were interested in a ball park. He will research. E. Kenai park is not that far away. e. The accoustical panels are installed in the gym. f. The Rec. Commission and Beautification Committee would like traffic barriers on the ball fields. They make a request to an oil company for used pipe. They will have 2700 ft. of used pipe to use. 141 -- KENAI CITY COUNCIL APRIL 4, 1984 Page 19 H-9 Library Commission Librarian DeForest spoke. a. They have not had a meeting. b. The plans for Library Week will be coordinated with the Community Schools in a balloon launch. I. PERSONS PRESENT NOT SCHEDULED TO BE HEARD 8. Father Targonsky, Russian Orthodox Church. When he became involved with the Historical Society, he worked with trying to preserve the old Library building. He helped with locating funds for the Kenai Civic League as listed in the newspaper. The City will be receiving $500. He would like to ask the City to help in the Russian Church because it is an historical landmark and is open to the public. He is a tour guide. He would like to receive income as a tour guide with a salary from the City. He asked the Council to think about it. HB-709 will establish fees for tours through historical sites, it is in Committee now. b. Councilman Wise reviewed Title 29. The Municipal League Legislative Committee did not get to testify but it is now in Finance Committee. There may be some amendments. They are trying to get it through without amendments. c. Councilman Wise said Re?. Malone had said several capital budget bills wiped out the priority list on matching funds for City water & sewer. It is important we look at water do sewer projects and go forward with matching funds. One not on the list is basic service to E. Kenai across Beaver Crk. Public Works Director Kornelis said we do not have the sewer study from Wince, Corthell h Bryson. Mayor Wagoner asked if it would be $650,000 and match to take the line down. Councilman Wise asked, when are we going to get sewer in Thompson Park? Mayor Wagoner asked if there was a balance left of the $18 Million. City Manager Brighton asked, on the DEC prioritized list, would the low ones be moved up? Councilman Wise said those above were directly funded. He is interested in Thompson Pk. d. Councilman Measles requested an excused absence from the April 18 meeting for himself and Atty. Rogers. ADJOURNMENT: Meeting adjourned at 1 s 10 AM. Janet Whelan City Clerk t /srOV, Pf' by C01401 t k r •ti ii _ PARTIAL VERBATIM APRIL 4, 1904 COUNCIL MEETING G-7 Discussion on sale of KUSCO Mayor Wagoner: The first person up for persons scheduled to be heard would be Oscar Thomas. Oscar Thomass Mr. Mayor, Members of the Council, my name is Oscar Thomas and I'm representing Kenai Utility Service, my address is Box 614, Kenai. The reason that I'm here this evening in particular is in regard to a work session that I understood was held last Wednesday night by the Council with representatives from Far North Oil and Gas. (Can you hear me alright?) (Unknowns Just barely.) Our office received notification from the City of this meeting at approximately 2s45 p.m. The meeting I understand (thank you) was scheduled for 7. I happened to be in Anchorage at the time and could not be contacted in time to return. I understand that there was no tape made of the meeting, I'm not sure whether there were notes made by the City folks or not. Our office manager, Mrs. Lee Wall, attended the meeting representing us and took notes. I understand the meeting room was dark and there were audio interruptions and she has forewarned me that there may be errors in her notes. And the reason for telling you all of this is that if I have assumed something of a nature is not factual I hope that those of you that were present would please stop me and correct me. As I said before, I came really to address some of the comments made by Far North representative, Mr. Jim White, one or two of which gave me grave personal and professional concern and others were of a nature that I think need further public review. Mayor Wagoner: Excuse me Oscar before you go I want to make one thing clear though, that was not a meeting of the Council it was a work session and we generally do not tape work sessions. Oscar Thomass I wasn't criticising Mayor Wagoners I just wanted it for the record. Oscar Thomass Again I'm relying on the notes that we took under those conditions. 01 Mr. White apparently stated that he had made an offer to KUSCO for the Purchase of our asset. Within any "i reasonable definition of the word "offer" this is simply not true and I challenge him now to produce such an offer or a copy of it and in the absence of same I will assume acknowledgement that no offer was made. This is the only offer received by KUSCO and it came from Enstar on February 12, 1984 and was duly transmitted to I r =- A-_ PARTIAL VERBATIM April 4, 1984 Paqe 2 the City of Kenai on February 15, 1984 per the terms of our agreement with you. Secondly, I believe you were told that Far North would provide rate advantages to the people of Kenai "same as F.ristar or less". I cannot help but notice that the proposed franchise agreement between Kenai and Far North which was given to you by Mr. White makes no reference to limiting rates to those charges by Enst ar or anybody else. To the corn rary, Section 9 Rates, excuse me, Chasige of Rates, of his document provides for a purchase gas adjustment or a flow through of changes in gas costs and I will dwell on this further when I get to the contract with Chugach Electric. Further, Section 10 Rates provides for an overall rate of return of 16%. I would point out to you that in our last rate proceeding before the Alaska Public Utilities Commission we were granted an overall rate of return equalling 14.49,. This was in November of 1982. In order to achieve a 160% overall return we would have had to charge something in the area of $117,000 above what the Commission allowed to be fair and reasonable. This $117,000 would have been spread over our then existing 10351 customers for an average of $86.60 per year more per customer. Three, you were apparently not aide to get specific answers to questions about the financial capability of Far North in terms of buying KUSCO or in undertaking a drilling operation, a production program, the installation of transmission facilities, and the other components needed to Insure dependable goo supply for the community. Neither were we. 04. Mr. White ► reportedly said that he had heard that the original offer by Enotor for KUSCO woo $4 million before Far North got into the picture. I don't know where he heard this but it is a ridiculous assumption that anyor►e could pay anywhere near that amount in the first place, and Far North was never in the picture as far as we were concerned in the second place. 5. I believe you were told that because of lack of competition, Enstar would be able to do as they pleased. This is erroneous as Enstar would be in the game posh iori as Far North as an operator of the KUSCO system. They would by statute be under the requlalory authority of the Alaska Public Utility Commission and that body employs a large staff of experts in each area of utility operation and is well equipped to determine the appropriate rate structure for each operator for the State of Alaska. 6. You may have been told that Kenai customers would pay the same rates as Anchorage customers. What I think you were not told was that Anchorage consumer costs have been lower that Kenai costs in every year since we began operation. As a matter of fact, and this is verifiable, the overage annual revenue per mcf of qas has been 35.6% less for Enstar than for KUSCO. I personally think that a 16 year track record ties a lot of credibility. In referring to Enstar's size, Mr. White reportedly said that "bigness is not conducive to efficiency". I can only assume from this that Mr. White would advocate the continuation of the duplication of many facets of PARTIAL VERBATIM April 4, 1984 Page 3 gas operations even in the face of escalating gas costs. And, of course, such duplication of costs would be borne by the residents and the business people of Kenai. It was apparently noted that there would be a gas price differential between supplies that Enstar already owned and certain reserves reported by Far North but not yet shown to be in existence. I see tic mention of cost of service differentials which would be weighted heavily in favor of Enstar. There was evidently some discussion to the effect that should Enstar buy on a short term franchise basis, they might not do any development work. May I point out that Section 12 of the franchise agreement that Enstar would be taking over, requires the operator to adequately serve the City and inhabitants of Kenai according to the rules and regulations of the company that are on file with the APUC. Mr. White apparently made a statement to the effect that under certain conditions, and I'm quoting again "Mr. Covington should come and take his pipe out of the ground and let someone else start all over again". KUSCO presently owns utility plant with an original cost in excess of $2 million and replacement costs of well over $3 million. I find it hard to understand how a prospective utility Operator could advocate the replacement as $3 million worth of plant which would mean charging the customers on the level of investment. Perhaps Mr. White could explain to us how such action could serve the public interest. Finally, I would like to comment on the contract between Far North and Chugach Electric Association. There are several covenants in this contract that would give me cause, were I in your position, I will address only two of them this evening. A) It is my interpretation of that contract that Chugach has been given the first right of delivery on the gas becoming available for Far North up to the base contractual quantity of 6 million cubic feet per day. Additionally, Chugach has the first right of refusal on all available gas in excess of 6 million cubic feet per day so long as such excess is not sold to or used by a Far North subsidiary. The price for the excess gas would be the some price it was offered to purchasing outside the community. Now this says to me that if the City of Xenai owns the KUSCO system and wanted to buy gas from Far North, the City would have to wait in line for Chugach to take whatever it wanted before receiving 9ny gas at all for Kenai and we're still talking about gas that may or not be down here somewhere. 8) It is my further interpretation of that contract that Chugach will have the right in the event that Far North properties are proved up to purchase up to 300 of proven recoverable reserves at a price of $1.16 per mcf. Now this is in addition to the 21.9 billion cubic feet already reserved for Chugach in the bast: contractual quantity over the life of the contract. I see the potential for some bad scenerios here should Kenai become dependant upon Far North for gas supplies. One would be a short fall of proven reserves. Chugach might need all the gas available PARTIAL VERRATI14 April 4, 1904 Page 4 to obtain it's f, million feet a day. Another would be for Chugach to find itself with incressed load requirements then they would certainly ,jump on the 30% clause and leaving what for others? The third and worst scenario would be of course both of the above. Now getting back to item 2 regarding the flow through provision in the proposed Kenai Far North franchise agreement. What will happen would the Chugach contract to which Kenai would be subordinate that's the producing capability of the For North properties and For North is operating the KUSCO system. Obviously they are forced out into the open market for gas supplies, They pay the going price and they flow through those additional costs and they still have a much higher cost to service increment in the revenue requirement. Ladies and gentlemen I realize that you have an important and difficult decision to make on this matter in the very near future. Thank you for your time in listening to me this evening and I hope that I have given you additional insite that will help you in making that decision. When I came to you on February 15 of this year I told you that we had explored other alternatives to the acquisition of Kenai service area by Enstar and that we felt Enstar could provide the best public service at the lowest possible rates on a long term basis. We believe that to be true there and we believe that to be true now. Except to responding to any questions you may have, that concludes my presentation. Mayor Wagoners Any questions by Council? I have maybe not a question, I think what tor. White said over at the airport was that he had tendered you a verbal offer not, I don't think he alluded the fact that he had given you any written offer. Oscar Thomas: If he hinted even a verbal offer it was extremely cloudly and extremely vague. He did indicate to me ar► interest in the purchase and he told me that, as I recall, a conversation that financing would be no problem but he wasn't able to tell me how it would be financed. That was the extent of what you're referring to as an offer. Mayor Waguner: Any questions Council? Ray Banish spoke in length. Dick Barneu: I'm Richard Barnes with Enstar Corporation in Anchorage. I wart to comment on two aspects. I think that sometimes it's easier to simplify what the overall effect is to the consumer instead of lookinq at all the trees in the forest. We are talking about the delivered cost of gas over all the consumer, perhaps a significant length of time and as I talked about before, there are two components of that, there is the cost to I a] =■ PARTIAL VERBATIM April 4, 1984 Page 5 of gas, purchase gas, as Mr. Der►iuh has; pointed out And there is tht- cost of delivering that gas. We've, prior to contracting with Shell Oil and Marathon Oil spent (TAPE CHANCE) .....reserves; from Beluga. Marathon kept stringinq us along on terms and price and deliverability to the point where they knew we weren't out of gas but they knew we were getting down to the point where we had maybe 6 years of reserves left which is dangerously low for any gas company to qet to that point. When we made the contract, essentially had it finished with Shell, Marathon all of a sudden got very cooperative as to whether they would agree to sell gas out of Beaver Creek because they understood we would have ability to take as much gas as we needed out of Beluga and then Marathon would cont.nue to have shut in goo as they've had for the last several years. We negotiated hard on a price. The $2.32 base price that we negotiated did not come easy even at that point and why is that? The going price for that same gas in the Lower 48 on average is $3.50. We bought it for $2.32 and the oil companies felt like they were giving it array, so -to -speak. Mr. Banish pointed out that Cook Inlet is an isolated market and that's true, but the managements of oil companies understand that ultimately the btu value of that gas is what is salable, maybe it's not salable now but maybe it will be down the line so they are constantly doing present value calculations ae to what they can sell that gas in the future for, what they can sell it for today, and how they come out on a discounted cash flow basis. I would be shocked if the City of Kenai or anyone else were able to go to a responsible major oil company and get a contract for a long period of time to produce natural gas that has no escalator in it whatsoever, just the some as you cannot go down and borrow from the bank, at least, or savings and loan anymore at a low interest rate for a long period of time as easily as you could 20 years aqo. The reason that we are going to go back to 27 cent gas in 1986 or 1992 with Union and Marathon out of the Kenai field is that they aqreed to fix priee contract in the early 60o just as they did with the City of Kenai. The reason that you're 19% cheaper then the current price of delivered qas in Anchorage now is because you have the gas price that was set 16 years ago and it hasn't escalated because there is no escalator clause essentially in the contract except to pick up some coots that find to do with taxer, or at least if there were escalations they were very minor. We had the choice as to what kind of an escalator and in fact we proposed the escalator that tied to fuel oil. We did it for two reasons, the economists that we talked to felt that for the next 15 years which is the length of the contract period, that the projected increase of oil products from our base rate was going to be lower than inflation overall. They talked about flat increases for some three years accrued to maybe slightly declining that may be raising, rising PARTIAL VFRPATIM April 4, 1984 Page 6 at around a 6% inflation rate. You can yet all kinds of scenerios. Why do we believe, or why do they believe that the coot accrued is not going to no up as it did in 1979 and as it did in 1973, well at those times the western non -OPEC nations were highly dependant on OPEC oil, over 50% of the oil, over 60% of the oil came from OPEC countries. Well that's not true any more. OPEC now is producing 17 million barrels a day, in 1979 they were producing more like 31 million barrels a day. OPEC has had to reduce their prices because they couldn't sell at the rate they tried to hold with the cartel. So we had a choice as we did on a portion of our Kenai contract of what kind of an escalator we would have built in. The more common one is a wholesale price index but what is now called "producer price index" so that if the price of nuts and bolts in Chicago goes up, then to a certain extent your gas prices go up. Vie felt like it would make more sense for us to tie to fuel oil produced in Alaska. For one thing, that is the alternative fuel source. Currently on the equivalent basis if you are buying fuel oil you are paying around $7 an mcf equivalent for fuel oil. We're delivering it for $2 and well average was 38 cents in 1983 or actual average for all of our residential customers. So we're already at roughly a 113 of the cost for fuel oil. If fuel oil doubles in price, you'll still be a third of the price of fuel oil. So we felt that it had some relevance to us. Once again the producers were absolutely unwilling to sell to us and to reserve large quantities of gas to us at a fixed price. That was not in the cards. If we want maybe some short term contracts without them making heavy investment for deliverability, perhaps we could have got a fixed price for a few years. But we wanted quantities and producability or so-called deliverability and that's what we paid for and that's what we are going to give. So the projections that Mr. Beniah talked about have no escal at ions from 1986 out, if I understood what he said for Kenai gas if the Kenai City were to buy it and go outward. T think that that's perhaps not achievable and of course we wouldn't know until we try to do it, or you try to do it. Between the combination of the lower cost of delivering the gas and I think our lower price that we have because of melded price that we can show that over time that Enstar system can provide gas at a lower price. I would be willing to respond to any questions that you might have. Mayor Wagoners Questions by Council? Ray Renishs My only comment, I didn't really want to be unfair to Enster in not plotting the gas contracts but the City's requirements are much different. Again we looked at 61,000 customers versus 1,600, close immediate supply of gas, no transmission line costs, good health relationship with gas supplier. We don't have to talk about these huge volumes in the � ®r�i - i'.QGii7�� �,.--•' a ...-. - _= a�a- L3 � PARTIAL VERBATIM April 4, 1984 Page 7 deliverability and the other thing and of course when Shell and Marathon look at Enstar they know the biq game in town and they are going to be tough. I'm not saying that we can get, or the City can get 10 or 15 year contract without escalation. I think there should be an opportunity there and if anywhere, Enstar has the potential for adversely impacting the city consumer in Kenai that's in this escalation clause because even though Enstar's economist said that the real price of fossil fuel will not increase in 10 or 15 years, that not the general consensus right now. The thing is uncertain, we've got a lot of uncertainty there and they've got the past through adjustment, cost adjustment clause and the contract is approved by APUC. One month your bill is $48, the next month it's $51, $61 for 61,,e sarr.e type of weather, the same mcf consumption. So my only point is if Enstar had some kind of guarantee on the price anc could meld through 1993 I would say it would be really tough for the City to beat, but the City hasn't gone out there and negotiated. We don't kriw. And the gas requirements are different than Enstar. We might be competitive. Mayor Wagoners Do you want to say something? Dick Sorriest Just a response. When you talk about deliverability, that's the ratio of your average to your peak and your average sales to your peak is a greater differential in Kenai than it is in Anchorage because you don't have a more constant power Increment which actually uses, has less of a swing than a residential and commereiel load does so you do still have the deliverability issue ever though they are not huge quantities as you point out and I think that the quantities does have a material impact on what you can negotiate. Maybe Oscar could respond to that because he tried. Mayor Waqoners Oscar did you want to respond? Excuse me, one question before you leave the mike, Mr. Barnes, you basically eluded to $3.50 cost in the Lower 48 and that was why it was so difficult to negotiate your contract at $2.32 but I don't see the comparison because to oet this gas in the Lower 48 to service the same market you're discussing, there's a tremendous transportation cost too. Dick Barness I guess, Mr. Mayer what I was eluding to is that within the oil companies the same people negotiate the contracts for West Coast of U.S. and midcontinent and Alaska generally. There are people, that 'a what they do for a living is negotiate gas contracts for major producers, empiayees of the producers. So they know what the going price of gas around the country is and they understand what the value is on a btu basis and they also PARTIAL VERBATIM Apr►l 4, 1964 Page 8 understand that what it cost to discover and produce the next incremental piece of qss has qone up substantially over the years. Mayor Wagoner: I understand that my point was Dick Barness It was on their side of the table. Mayor Waqoner: My point was when yoG are starting to compare this gas to the market of gas down there I think you are talking about two different things because to get this gas down there and make a comparison you've got a tremendous transportation cost. And here ynu got a surplus of gas with a somewhat limited market at this time. Is that a true statement? Dick Barness That's true. Mayor Wagoners Now I'm not trying to argue with you. Dick Barnes: The reason our royalty gas at out of the north Cook Inlet was something like $3.75 is what this State was charging or $3.79 was that they did a net back from Japan on LNG and said ok what is the well head value of this gas after you take out the transportation processing. They said that the value of that gas that Phillips should have to pay royalty on or Enstar, if Enstar's buying it is $3.79 so I, there's the range of values that's on a net back basis from Japan selling at around $5 an mcf. Councilman Wises Mr. Barnes, as 1 understood Mr. Benish's presentation he is essentially saying the 60 days isn't long enough and perhaps the City should go for Option 3 which is to simply take no action and permit the sale to go through and reserve, and by taking no action reserve the right to purchase the system in 177, or 187. What is your firm's response to, I think we need before we meet next week to know what your response would be to that. 1 won't try to put you on the spot on this moment, you can back out or what, I think we should preferably have some type of response before we meet so we have a chance to review it. Dick Barnes: Well I think I would turn it around --your question, and ask if you want me to do that why don't you tell me what the City of Kenai's intentions are in 1987, and I will at the same time .. Oscar Thomas: Just very briefly I wanted to respond to a comment that Mr. Benish made a couple of times in different ways i think and that was about this fine healthy relationship that we have PARTIAL. VER13ATIP April 4, 1964 Page 9 with Union -Marathon. I don't know what the extent of his negotiations have been with these people, but mine have been pretty lousy. We've invited the City on several occasions to Join with us in trying to negotiate with them and haven't gotten anything from that. We've have meetings with Mr. Bradley who is the manager, west coast region, natural gas for Union. We've gotten nowhere with him. We went to the gentlemen that he reports to, Mr. Harry KEAGON, I'm not sure of his title but he's above Larry and we got nothing there so it looked to me like we were coming up with a dry hole. And I hate to, really why I'm up here saying this is I hate to set-, anyone in the audience get the impression that Union is all that neat to deal with, because we haven't found that to be true. City Manager Briqhtons Oscar, did they ever quote a figure to you? Oscar Thomass Never, never. Councilman Measles% One thing that kind of bothers me a little bit about any negotiations for long term gas contracts at a fixed rate right now. There's a little clour! hanging out there on the horizon that nobody's mentioned, didn't hear anything or see anything in Mr. Banish Is report, it's been brought out that Cook Inlet gas is locked in. It is now but there is a cloud out there with the possibility of this proposal by ARCO, Chevron and the Cook Inlet Regional Corporation and I don't believe the producers are going to be interested right now in talking to anybody about a long term, low price fixed rate, gas contract until everybody knows what's going to come out of that deal. Mayor Wagoners Can you elaborate a little further on that as to specific projects? Councilman Massless All I know is what I've read in the paper the last couple of weeks the possibility of a joint venture between ARCO, Chevron and Cook Inlet Regional Corporation to build a fairly large LNG plant on the Kenai Peninsula to take core of the gas, excess gas reserves. Mayor Wagoners Further comments by Council? Thank you. I guess it's Wednesday, next Wednesday at 7 o'clock. Hopefully we can make the decision then. End of verbatim. Yd `-�f .Cure Mary'JAnn Dore