Kodiak council weighs final approval of $5.6 million in state loans for Aleutian Homes pipes

The Kodiak City Council holds a public hearing Thursday, Oct. 22, on final approval of two ordinances that would let the city borrow up to $5.6 million in state loans to replace 50- to 70-year-old sewer and water lines in the Aleutian Homes subdivision.

The council passed both ordinances on first reading Oct. 8, 6-0 each, after Alaska News reported Oct. 3 that the loans were coming up.

One ordinance borrows up to $3.4 million from the Alaska Clean Water Fund for the sewer work. The other borrows up to $2.2 million from the Alaska Drinking Water Fund. The state would forgive $1.5 million of that loan, leaving $700,000 to repay. Both loans run 20 years with a 2.0875 percent finance charge.

The project replaces about 2,100 feet of asbestos cement lined sewer main, serving roughly 74 homes, and 2,600 feet of water line with PVC pipe. Interim City Manager Tim Putney's report puts the full project at $12 million to $14 million. These loans cover the first phase, from Birch Avenue to the 800 block of Hemlock Street. Delay, the report says, "means further degradation of the existing water system in the Aleutian Homes Subdivision."

Sewer and water revenue would repay the loans. A finance memo in the council meeting packet shows the city has not raised sewer rates since fiscal 2025 or water rates since fiscal 2021.

In that April memo, Finance Director Julie Liew projects sewer debt payments rising from about $378,000 in fiscal 2026 to about $1.02 million in fiscal 2028 as this loan and two others come due. The sewer utility's debt service coverage ratio falls from 3.86 in fiscal 2025 to a projected 1.27 in fiscal 2028. Liew wrote that a ratio above 1.25 is generally considered strong.

Liew concluded both utilities could carry the new debt but wrote that "a rate study for both sewer and water would be needed in the immediate future as the debt service and capital expenditure requirements increase."

Residents may testify at the hearing, part of the regular meeting at 6:30 pm in the Kodiak Public Library's Multi-Purpose Room.