Kodiak council takes final vote Thursday on $5.6 million in loans for Aleutian Homes pipes

The Kodiak City Council takes a final vote Thursday on borrowing up to $5.6 million in state loans to start replacing 50- to 70-year-old sewer and water lines in the Aleutian Homes subdivision. As the city takes on the debt, its finance director has written that the sewer and water utilities will need a rate study soon.

The council gave both loan ordinances initial approval Oct. 8, 6-0 each. Thursday's meeting includes a public hearing on them. Alaska News reported Oct. 3 on the loans when they first came to the council, along with a 2025 city request for state money that said a water line in the subdivision had failed without warning and disrupted residents.

The first phase would replace about 2,100 feet of sewer main and 2,600 feet of water line, from Birch Avenue to the 800 block of Hemlock Street, with PVC pipe. Some of the old pipe is asbestos cement. The sewer work serves roughly 74 homes.

Interim City Manager Tim Putney's report to the council puts the full project, to be done in phases, at $12 million to $14 million. Putting it off, the report says, "means further degradation of the existing water system in the Aleutian Homes Subdivision."

Most of the borrowing is for the sewer: up to $3.4 million from the state's Clean Water Fund. The water loan, up to $2.2 million from the Drinking Water Fund, comes with $1.5 million the state would forgive, leaving about $700,000 to repay. Both loans run 20 years at a finance charge of about 2.1%.

Sewer and water customers would repay the loans through their utility bills. In an April memo in the council packet, Finance Director Julie Liew projected the sewer utility's yearly debt payments would climb from about $378,000 in fiscal 2026 to about $1.02 million in fiscal 2028, as this loan and two others come due.

The memo measures how easily the sewer utility's income covers those payments. That margin falls from 3.86 times the payments in fiscal 2025 to a projected 1.27 in fiscal 2028. Liew wrote that anything above 1.25 is generally considered strong.

Liew concluded that both utilities can carry the new debt. But she wrote that a rate study for sewer and water would be needed soon as debt payments and construction costs grow. The city last raised sewer rates in fiscal 2025 and water rates in fiscal 2021, according to the memo.

Residents can testify at Thursday's hearing, part of the council's regular 6:30 pm meeting at the Kodiak Public Library.