Seward: City Council Budget Work Session Oct 28 2026

Seward City Council is having a work session involving the budget. It's 5:30, and I'm going to turn it right over to administration to tell us what's happening tonight. Great, Madam Mayor, thank you so much. Tonight on our agenda, we have 3 departments: the library department, the harbor, and the electric. And so we're going to start with our general fund department, which is the library, and we have our library director, Yolanda Ryan, here.

And I'm going to go into the future, and here we go. So you'll see on this slide we have— oh, and I'll tell you what page as well, sorry. I never can see it. Do-do-do. Okay.

Sure do. So the library expenditure by department is on page 34 of your bigger numerical-looking packet. And so from FY26 to 27, we are seeing an increase of about 5.3%. And the major cost drivers behind that and the budget in general outside of personnel is building maintenance and repair, the contracted services for lawn, the boiler, HVAC. And we did a big investment in those, but those are still some ongoing costs.

And then we also have a janitorial service that cleans that building. It's our most visited and trafficked building, so we have it cleaned top to bottom every night, which is really helpful to make sure that we keep up on that, but it is also an expense. And they're there usually from like 11 to 2 AM, 3 AM. The big change that we're proposing this year in this budget for the library museum is jumping— is going from 5 to 6 full-time employees. And this is not an additional PERS position that we're creating.

What we did here was some inventive reallocating of the front desk position that was here in the city hall. That has about 50% of the same duties as somebody who would be at the library would do. So it's still just— it's just moving from one general fund department to the next because that position has to exist somewhere. We just wanted to make it utilized in the most effective way. And one of the reasons why this is something we're proposing this year is because you may remember we transitioned from 5 to 6 days a week at the library and we started relying on seasonal staff members because of that in a way that did not make them seasonal.

And so this kind of addresses that, creates a full-time position there to make sure that that library is open 6 days a week and is well-staffed in the summer months when there are a lot of people at the library. I was there on a cruise ship day once and was a little taken aback by how packed the building was. So that's the main thing I wanted to hit on of just making sure to emphasize that it's not a creation of a position, it's a shifting of a position from one general fund department to the other in a place that it will be much more utilized and a better, better, most, better bang for your buck, I'm going to say. And then I'll pass it over to Yolanda if she would like to add anything. No, I think that was a great intro, Kat.

Thank you. Yeah, because we were hiring training employees, you know, every few months or the seasonals, it's just not very cost-effective. So I think a year-round position would be beneficial for the community and for the staff member. And also with that, just some of our costs, like she was— Kat was saying, we have a lot more people coming to the library, it seems like, now, especially in the summertime. So our janitorial supplies went up and our just utilities and building maintenance is big.

So those are some of the bigger costs there. HVAC system is getting older, it's just had a lot of issues. The boiler and the heating's gone skyrocketed. So those were some of the bigger things besides staffing.

Questions for Yolanda?

No. Yes, Councilmember Callender. Yeah, thank you, Madam Mayor. Yes, ma'am. Just talking about, because of the recent history of maintenance and repair, because there have been some issues, and then we've— I know we've passed some resolutions up to help take care of some of that, but it just seems like, you know, we've dropped down quite a bit for the budget Has most of that stuff been taken care of, that we're not anticipating any big repairs?

We have a couple coming through that's budgeted for the next year. It's repairing the panel and the boiler system and the humidifier. So I think it should be more general repairs rather than the bigger things, hopefully. Yep, previously, in previous library budgets, we anticipated and budgeted for a significantly higher amount of maintenance and repair. But you may remember, I think about 2 months ago, Council passed a resolution to kind of rip the Band-Aid off and do a full repair and upgrade of humidifiers and things like that.

So we're hoping and anticipating that the budgeted maintenance and repair that we have in here is based off of historical and what we what we'll actually need in these next few years rather than a lot of quick, hurry, get down here and charge $15,000. Right. Okay. Anything else? Of course, this does include the museum too.

Yes. Thank you. I just have to say. But there is some revenue. Yes, Seward.

Oh, yeah. Yes, we do. Okay, I guess we're good. Thank you. Oh, easy peasy for Yolanda.

She wasn't nervous about that at all today. Next up, I'll invite the harbormaster, Tony, to come— is he out there? To come talk about his two enterprise funds, the SMIC Fund and the Harbor Fund. And I'm gonna direct you to pages Pages right after— the next pages, 36 to 40, for that. Uh, before Tony hops into kind of what his two departments do and what, uh, changes he's anticipating, I did want to point out on these two pages the variation between revenue and expenditures.

And the expenditures bar includes both cash expenditures and depreciation. And so if you look here in SMIC Fund revenue versus expenses, you'll see the revenue is higher than cash expenditures, but that depreciation amount is exorbitant. And then in the same, we see that in the Harbor Fund as well. We see that big gap there with the depreciation costs. Which are non-cash, so it's not necessarily that we need to have cash on hand, but the two funds are not generating enough revenue to cover those depreciations.

Usually in the Harbor and SMIC, those gaps are addressed with state or federal funds, grant monies, but over the next few years, we want to steer both of those funds more towards a greater self-reliance using grant money for additional services rather than standards ones. But a big reason why we didn't start that steering this year is we do anticipate a good amount of grant monies coming in over the course of the next few years with the announcements from the Coast Guard and a variety of infrastructure— port infrastructure grants that are out there. And so that's just a big, a big question mark usually of whether or not those grant monies will come in, and we don't budget for them. Over time, we'll start to transition more towards that self-reliance, but I don't necessarily think we now is the right time to do that with a lot of the promising updates that we're seeing in both of those areas. Unless Tony wholeheartedly disagrees with me, but I don't think he does.

Um, so I will pass it off to him to talk through SMIC and then the harbor. Thank you, Madam City Manager. Um, great intro, and the library presentation went entirely too fast. So in discussions with Seward, Finance Director Jusino, we are going to make some small changes this year to align our expenditures and our expenses and our revenue coming in. The first one we're going to propose is a rate increase of 10% plus CPI for our travel lifts for '27 and '28.

Wharfage will, as you recall in the past, that one's is on a biennial, so it's every other year and done on the even years. So that won't be affected in '27, but that will happen in '28 as, um, past that resolution in 2016.

One proposal that we're gonna go with is we'll pass our credit card fees on to the end user for the upcoming year.

And I have one other for you also.

Oh, nope, I'm sorry, that was—. Those were our 3 proposals.

So anticipating increases in some of the fees that are charged, specifically in the travel lift, because the—. Yep, touch on that. Yeah, go for it. Yeah, so that is one thing that we're seeing that a little bit that is— has been crazy after COVID and the last couple years with inflation is we're seeing an increase in our track lift maintenance that is hard to keep up with. For a great example is our cable for the 300-ton lift has gone from historically $10,000 to $12,000 for cable for that machine.

At the end of last year, it was $35,000 to replace the cable, and we do that every 3 years. After our last inspection this year, we we're gonna increase that out another year to get a little more life out of that cable, which will save us a little bit. In years past, for just a little back history, 20 years ago, we replaced that cable every other year. It was basically brand new cable that we replaced every other year. Then we extended out to 3 years, and now we're going to go to 4 years.

But at some point, there's a break there where you're just going too long and you don't want something catastrophic to happen with that machine, but recognize that we don't want to waste money as well either. So, so we're trying to keep up with that, and we're playing catch-up on some of that maintenance. After COVID, we skipped a few years on our inspections, and so we've had a lot of expenses going out and repairing some of these items on those machines.

Okay, yeah, questions?

I was just curious about the credit card fees. I mean, I think that's a good move. That's a lot of money, $76,000. Uh, has that been communicated to the ratepayers yet? It has not yet.

No, yeah, we are trying to change also the credit card processor, so it's a lot of changes in the background. But as soon as we have all of that set up, it will be communicated to the customers. Yeah, and then hopefully there'll be an option for them to pay automatically through ACH or something else. Yeah, and that's part of switching the processors as well. One of the funny things, if you think about— look at the city as a whole, is everybody in all of the different departments started accepting credit cards and doing payment processors at different times.

So we have a wide variety of payment processors, and we're trying to centralize those all down into the ones that fit best for as many departments as possible. So as we move forward with switching that payment processor, it's definitely something of being able to allow for ACH. We still receive a few amount of checks as well, which is helpful, and just being sure that we're managing that effectively.

Thank you. Okay, Councilmember Barnwell. Yeah, Tony, when I talked to you today, you were talking about the a lot of that depreciation is the jetty, uh, from the grant that you guys received. That was the start of the breakwater, correct? That was an example that I had— yeah, I had given you, and we were discussing that.

So how many years is that breakwater depreciation last on the summer? 50, 75, 50, I believe. Yeah, but it's a very expensive breakwater too, right? And so I think one of the things to remember about the harbor is they have a lot of expensive equipment and expensive projects that went into building it. We don't necessarily anticipate ever seeing a jetty, a breakwater replacement in Tony's tenure here.

If so, that would be a miracle, but otherwise—. Well, the possibility for it. It's within the realm of possibilities. But so it's not a— It's not a huge earth-shattering thing that that depreciation is so high, but it shouldn't be as high as it is because things do happen. And if you look to some of the cash— the revenue and cash expenditures do get dangerously close.

We're just trying to make sure that both of the funds that Tony is operating come in with a little bit more revenue so that they can handle those things if and when they come up, like cable replacements and the increased costs. Okay, one more question on SMIC. Is it tough to figure out pricing over there on the industrial side to be competitive with, say, Kodiak or some of the other players in South Bend?

Yes and no. I think when we compare, you want to make sure you're comparing apples to apples. And where Seward is different, that we run and operate our travel lift perform all our maintenance, where Kodiak, for example, they contract out their, their lift to, to another vendor. Homer has a— they have a travel lift as well, but it's owned by a private entity. So we're all just a little bit different.

So when you compare those rates, they may have a cheaper rate, but you're— they may make it on storage and doing the work on the vessel as well too. So A little bit different.

Great, thank you, Tony. Next, I am going to call in our general manager for the electric department on my cell phone.

That works. And Sully and I are going to share this. Your call has been forwarded to voicemail. The person you're trying to reach is not available. Wow.

So I will now— wow.

Call back, please.

Okay. Well, technology is only as good as the people on the other end of it. And Brian is amazing. So that is— what I— so I'll get started while we wait for— oh, there we go.

Hey, Brian. Hello. Hey, can you hear us? I can hear you for sure. Great.

Everybody, say something again so I can make sure other people can hear you. Hi, testing, testing. Yeah. I can see you also. I'm watching you on TV.

Great. I love it. So you saw You ignore my call. No, it just went to— wow, what that was.

Okay, so, um, I'm gonna sneak on over to the electric slides right here. The electric fund details and revenue and expenditures. These are also on page Give me a second. 45, 46, 46, 44, 45, 40. Starting at 44, 45, and 46.

And first I'd like to lay out the general groundwork on which we built this electric fund budget, and that is at a status quo. And so if you look at our different operating revenue and expenses we took into account an average CPI to move the expenses forward based off of that CPI. And this is a large shift from any of the other departments because we did much more detailed breakdown. But I think one of the things we wanted to recognize that was the discussions and the conversations going on around the electric utility and how any major changes or large investments or shifts in that might not necessarily be sticking for the long run. So this budget is based off of operating under the needs that our electric department has to keep the lights on, keep the employees, keep everybody running all year long for the next 2 years.

So you'll see, we see a very, very small increase in revenue and a very small increase in expenditures. This also would include a CPI increase to rates, so about a 3% increase to rates to make sure that we're keeping up with that as well. And it includes the— as with all budget documents, it includes the, the ability to be a fluid document. So it's not something that we're setting in stone today that we have to live and abide by for the next 2 years. These conversations are ongoing and we're going to treat it as such.

Some of the things that we have still ongoing in the department itself itself is our transition to PCS, the new software that went live at the end of the month, which is then going to lend us into being able to utilize the Uniform Chart of Accounts, the USOA, much more significantly to then begin continuing our journey to capitalizing labor and incorporating those. So, it's been a bit of a journey to get there, but the dominoes are falling in the right direction. We also anticipate deciding on a line of credit to fund the remainder of the infrastructure project in January. I did also want to have the budget finished first before doing that so we can see what each of those funds look like after the budget has been made. And so I meant to put a pause in between those two— those two points, but I started reading them as such.

I'll go back here to the details. Another note I'd like to point out is I think probably one of the biggest things taking up Brian's time in between everything else these days is the Shore Power Project and how we've been working on those. And that will most definitely increase our revenue, but we don't anticipate that going live until the 2029 cruise season. And so we're not incorporating any revenue from that in this budget, recognizing that that system will probably be completed at the end of 2028. If it happens earlier, amazing, and we'll adjust accordingly.

But at this time, we are still just so early in that process of getting things squared away that it didn't make sense to incorporate it when we don't anticipate it until the 2029 cruise season. And so, Brian, um, with that introduction, I will pass it off to you and see if you have anything to add. Sure. No, I think Kat did a great job of summarizing it. We are definitely in sort of a period of transition here.

We, as she noted, we've come live with PCS. We're, I believe we're on target to bring the Uniform System of Accounts online by the end of this year, if not early first quarter of next year. That's our goal. Once we do that, then we'll start capitalizing capital labor, which will change our expense budget, basically amortizing that labor over the life of the assets that are being installed. We've done— besides the infrastructure project, quote unquote, we've done a number of infrastructure improvements this year.

We cleared a lot of right-of-way. I know it's very expensive. We have about, I believe, 14 miles left to clear, but we're making good progress on that. We've done some undergrounding of a, of a line that gave us some problems crossing the Seward Highway over by the Breeze Inn, um, and the undergrounding on Lear Road. So we're in addition— and those are rolled into the actual operating budget, um, but, uh, and in addition to the actual infrastructure projects, just a brief update on the, on the ShorePower project.

Um, two things going on. One, we are We are working with our rates folks and trying to get a detailed estimate of the energy use of each of the ships when they're ported so that we can then project the increase in energy and the corresponding decrease in the base rates. Because if you sell more kilowatts, you spread those costs over a larger pool. So that analysis is underway. The project itself is in the procurement phase.

We're working on the contracts for procuring the BEZ and switchgear at Fort Raymond. We're about to put out a contract to build the distribution line from Fort Raymond down to the Shore Power site, and we're about to sign the contract to initiate the design of the actual Shore Power system that goes out on the dock to 35%. Hopefully we'll have that stuff out next week. So other than that, the RTO has been pretty quiet. We're still waiting to, waiting to out what happens with our transmission costs.

That could be a significant reduction. It could be a minor reduction or significant reduction in our operating expenses depending on how the commission comes out on that. And that, that's due out— they asked for another, a third 90-day extension, and I believe that is due right around the first week of December. So we should have some information on that.

And I'd be happy to take any questions if anybody had any. Apologize for not being able to be there tonight. Questions from council? Council Member Draper. Well, the first thing that jumps out at me is if you're looking at the, the line for 2026, um, actuals through June 30th, we're showing a total revenues of $10.5 million and expenses of $13.4 million.

Um, I'm sure I'm going to be assured that there are things in there that are going to be coming out, or what Can you explain that a little bit?

Brian, do you have an— I think on—. I, yeah, I don't know that I have that. So I would say with that, as we finalize the remaining quarter, that'll— or Q3 in here, that'll even out much more efficiently and effectively. We don't necessarily anticipate having that high of an over budget. It's just the seasonal aspect of it and bringing in revenue too.

So I don't have a firm answer for that, but it's definitely something that we can look at. Sully, do you have an answer? Surpluses. We are in the middle of a conversion for the chart of accounts, so the numbers there is not complete June 30th. So at the end of the year, we should have have all of those numbers in.

Yeah, I would, I would add to what Sully said. One of the big things that we kind of ran into as we were doing these 6/30 actuals to budgeted was that transfer over to PCS and how that impacted the reporting. So we will have firmer numbers on that, but I would take the, the reality of that 6/30 with thinking there's probably a little bit of things that are beyond that in Q3 that just haven't been. Yeah, a little scary. I know.

Yeah, but it's all part of this process towards becoming a much more sound, um, reporting. So I think when you— when we do this budgeted thing right in the middle of this process, it's a little like, ah, scary, nervous, on the edge of that cliff. But I do know on the other side of it, it's going to be so much well so much better well-oiled. Like, I've been doing a lot of the things in the PCS, and it's significantly more efficient in that way. So, and we'll have some updated ones on that for the final budget that goes into the ordinance as well.

But a good note. Councilmember Barnwell. Yeah, I have a question on contracted services, and I have a question about just an update on the rate study. And then rates projected out with 2 gaps. But on the contracted services, it kind of yo-yos from '24, was that $725,000, then up to $2.5 almost million.

So how much are we paying with Brian with MDA right now? And why are— that's somewhere around $600,000 or $700,000, isn't it? It's a not to exceed of $1 million. Oh, the first year it was $700 because it was not a full year. And so that includes this, um, both of our employees that we contract out with.

It was— we took those out of the personnel account, so there's— it's still higher than what that personnel would be, but that's included in that contracted services. And then it includes a lot of the other tools and things that we utilize within there as well. So I think as you look at a high jump from 7— from 2024 to now and across the past 2 years, that is MEA and then also us doing some more things and working with some more contractors in our department, but significantly that MEA contract. So how—. Yeah, and I think, Kat, just to jump in, the right-of-way clearing is a large part of that as well as Sturgeon that we use to supplement our crews in a number of different projects.

Okay, and then so how do we, how do we see clearly the differentiation between just day-to-day operations and the infrastructure built up? I mean, do we have—. So the infrastructure project itself is not accounted for in here, but there's also a difference between day-to-day operations and what we need to do to maintain the utility and the larger infrastructure project. Yes. So they come together in some ways.

Is that what you are saying? Brian, do you have something to say?

No?

The infrastructure project is allocated separately from this budget. Okay. Yes. All of that contracted services. It is day-to-day operations and maintaining our utility outside of the infrastructure project.

So for instance—. And as I noted, there are some minor capital what you would do where they're operating projects that you would capitalize because they're replacing construction units. And so, yeah. Yeah, that makes sense. But not like the overarching large infrastructure project as we refer to it.

So the Nash Road changeout on poles. Not in this. Not in here. Then it would be a significantly higher expenditure line. Yeah.

Second question I had was the rate study that we approved. Where are we at? With the rate study, and then second part of that is where, what's your expectation for 2GATS this year in terms of rates? Where are they at? What's the rumor on the street on that?

So I'll tackle the first one and leave the second rumoring to Brian. As you, we talk about the dominoes falling, the rate study was also in conjunction with the Uniform Chart of Accounts. So as we finalize switching to the Uniform System Chart of Accounts, once we can complete that rate study and present it out. So PCS installed, Chart of Accounts, rate study, capitalizing labor, it's all kind of wrapped into one. So the rate study we want to do after that transition is done by the end of this year, Q1 of next.

But the same contractor was also helping with allocating in the Chart of Accounts so that they have a really good intimate knowledge of our rates and everything that goes into it. And we've already negotiated surprised on that. Yeah, we— it was approved and funded, and we've been working on it now for a few months. A year. A year.

Yeah, it's been a long time, but it's a lot of work. And then, uh, Brian, what about Chugach and the rumor mill? You know, I— what I'd say right now is obviously rates are going up, primarily driven by, um, through using the simplified rate filing process. Um, um, these are base rates you know, based on what everybody's seeing as increases in costs due to CPI. And so you'll see that.

And, you know, those are capped, I think, at 8% and 12% over a year. But I don't think Chugach will be moving that much higher because they just completed a general rate— general rate case just several months ago. And I think the board will be reticent to raise rates significantly after that. So I think— I think in that sense, on the base rate side, you're going to see moderate increases, much like you're seeing here based on CPI. Fuel and cost, fuel and purchase power, you know, I don't see significant increases in the next, certainly not the next year, perhaps 2 years out as, as you know, as Tugatch begins to, as the Beluga River unit begins to decline and they're required to buy more of their fuel, which really should stretch out to about 2035.

But between now and— between now and 2035, I think that you'll probably see, uh, you know, somewhere in the neighborhood of a 35 to 40% increase in the fuel component of fuel and purchase power. And that's important to realize that fuel, I think, is about, uh, 70% of fuel and purchase power, because purchase power also requires— includes the purchases from Bradley and Eklutna of hydro energy. So you're going to see rates moving up. But, you know, no one really knows until we put our finger down on whether there's an AKL— well, there's going to be an import facility. What's the cost of that going to be?

And then what's the cost of gas out of the Pacific, whether it comes from Canada or Japan or the Australian Northwest Shelf? Japan on the secondary market. And then I think you'll see You know, then, and then you've got the AK LNG pipeline and what that comes, you know, so everybody's sort of up in, you know, just kind of waiting to see what all shakes out. It's going to be an interesting 24 months. Thank you.

Other questions? Councilmember Margo. Thank you, Madam Mayor McClure. Just for some historical context And these numbers just kind of jumped out at me. It looks like fuel for generators in 2024 was pretty significant compared to what we've seen for our actuals in '25 and then what is budgeted even out for '27.

It's almost $100,000 more. What happened? I'm going to invite Taylor to speak to that. Thank you.

So in 2024, we were charging all the fuel that we ran during outages to just the expense budget. And so in 2025, we moved that to bill it to COPA, the cost of power adjustment, so that instead of just hitting rates on expense, it's just hitting COPA briefly when we're running the generators. Which, when we're running our generators, you know, we're not buying power from Chugash Electric, and so it's a lower cost.

Okay, can I put out an idea that I had today? Okay, so over the past 5 years or so, we've been working on bringing down the general fund administrative fee. And so you'll see here on this slide, in FY24, that admin fee was $1.10 million, just shy of that, or $30,000 shy of that. In '25 and '26, we budgeted for that to drop even further, or drop further, down to about $700,000. And in '27 and '28, we're budgeting about $678,000.

And one of the things that I took away from our conversations last night and a general idea I wanted to put out for conversation as we probably here transition into more of a general discussion about the budget overall is that $678,000 is from the Electric Department directly into the general fund to cover expenses like my time, Sully's time, the department's time. But over Over the past few years, we've been trying to separate those out a little bit. And from the Electric Department in the past, we've gotten pretty high administrative fees in the past. And so as we look at this balancing of a seasonal sales tax versus a mill rate reduction and making sure that that benefit spreads out to the entire area in the community, I would maybe put onto the proposal plate for us to bring back later of getting rid of that administrative fee entirely. So that there's no administrative fee between the City of Seward and the City of Seward Electric Department instead of dropping by $1 mil in 2028.

And so with that, we would be able to reduce rates in 2028 by either $0.01 in the winter or $0.50 all year, which is a smaller impact than dropping property taxes, but it's spread out over the entire community to all ratepayers. It also helps us set up for whatever decision we make with the electric fund and with the electric department. That general fund administrative fee is probably— is hopefully going away. If we sell to another utility, that would go away. If we become our own cooperative, it would go away.

If we become a more municipal authority, it would go away. So this is preparing us now for what is the inevitable outcome with any of the decisions that we make this year, next year, in the year, in the future, while also giving us a rate reduction for our community that we can implement in 2028. And so I had this idea today. Brian, I called him, he said, that's the best idea. No, you didn't say that exactly, but you said yes, please, immediately.

And I do know that over, over the past, this has been a pretty big contention, spot of contention for the community. And so it's not in my proposal. It was just something that came to mind today as I was looking at the numbers we were discussing last night and the number on this slide today. And I wanted to throw it out there. I didn't tell Taylor.

Taylor, what do you think? Yeah, thumbs up.

And so yeah, open for questions or discussion or anything. And I'll keep Brian on the phone in case anything comes comes from him as well. But okay, uh, Council, just go ahead. Thank you, Council Member. Make sure I understand.

Eliminate the, um, mill rate reduction, eliminate the administrative fee, return that to the ratepayers? Yes. Okay, so 2028, no mill rate reduction, also no administrative fee from the electric department to the city of Seward and then the rates are able to be reduced. How much was the mill rate reduction? Was it about $400,000?

I mean, in dollars. About $400,000. If you have a— it was $550,000. Oh, $550,000. So we would find— I could find the delta.

Okay. It would be tough, but I could. Yeah. Sully's looking at me. I think we could find that delta because I think it would be very beneficial to accomplish that.

I also don't usually put out— I'm processing still. Sorry, I just got nervous now that I said it out loud. Well, we just heard. Yeah. So, what do you think?

Any thoughts at this point? We don't have to make— we're not making decisions. Nope, no decisions today on that, but I just did want to put it out into the ether. So go ahead, Mr. Barnwell. I'm kind of with Lori.

So you're passing it on to the ratepayers, which would increase their rates? No, it would lower the rate. Currently ratepayers pay $0.06. It would be able to reduce the rates by 1 cent in the winter or half a cent year-round. Then who pays that?

It would be paid for by the sales— the seasonal sales tax. So instead of dropping the mill rate, we're not accepting— we're not collecting that $678,000 from the electric utility. Rates are going down and the mill rate stays the same, but we can bring rates down for everybody. And that would—. I would recommend—.

Yeah, that would, that would be an advantage to all the people and renters. And renters. And it prepares us well for the long run of whatever decision we make with the electric utility. And then I also think as we talk about property tax exemptions, and doing some research on that today, there's such a small amount that we could work over the next year to bake those in in other regards. So I looked into a $75,000— with Lori's help just now, I had a significantly higher number, but I think it would only— Lori, do you want to— it would only be about $50,000 a year.

I'm still in the research and confirmation mode on it with the borough as to how many people are actually claiming the homeowner exemption. It's fewer than you think. So whether they would wake up more if it was on the city and apply for it on both ends, I think there's probably a significant amount of people that aren't taking advantage. Mm-hmm. And so as we explore property tax exemptions, none of those would go into effect until 2028 either, based off of the budget that we've proposed.

So I think that could be a longer discussion, and it probably wouldn't be a significant impact to the budget overall based off of what people are currently collecting. This recommendation, I feel, would have a strong impact on the financial well-roundedness of our Electric Department over time— or of our Electric Department and our general fund over time, setting us up for success in that realm, and then also allowing us to reduce to reduce the rates. Council Member Barnwell. But I thought every penny was $500,000. Is that right?

Every half a penny is $500,000, right? Or is it a penny is $500,000? Well, yeah, yeah, so a penny. Yeah, yeah, I'll get, I'll get, I'll get you guys. We're going to discuss.

Okay. Oh wait, yeah, we calculated it here. I'm sorry, I'm ready to hear. Oh, okay. I'm just wondering, anybody else up here at this point?

We'll come back to council then. Great. And you're done pretty much? That's it. That's all I got.

Okay, so now I'll take audience participation. Does anybody out there want to speak? Brian, gonna stay on the line? Yeah, Brian's still on the line. If you would.

Yeah. And we're gonna do this just Just so that the people on the television know, your name and if you live in town. I'm friends outside city limits and inside businesses. Madam Mayor, members of council, city manager. So, I missed the other night on the proposed sales tax, seasonal tax if you will.

I understand the ratio is 81% of the sales tax is taken in quarter 2 and 3, right? That's the majority of Alaska residents down there shopping too. Okay, so it's taken years for me as a business owner that's open year-round, there's not a bunch of us, to get the Anchorage people to come down and not worry about it. Not worry about that sales tax anymore because we try to be fair as we can be on pricing, etc. So, I mean, it's going to be another challenge because Anchorage is our competitor, as is Amazon.

So Amazon, if I'm standing correctly, you're paying them 9%, if I understand. But it will be a challenge on businesses to operate that way. And it will be a challenge on fishing charters, because at $450 at 9%, okay, that's extra $8, $9 a head per day per person. So, just that stuff there, I mean, I understand savings, I understand giving, I love the idea of the 1% reduction in taxes, versus no way, because you have outside people too. Okay, so I think that might be something.

I'm sure you'll be interested in your other stuff. But, it's very expensive to do business in Seward. Very expensive. Hard to stay open. You know, it's a seasonal town, seasonal business.

So, before you charge in the summer when we've got those people coming down to spend a weekend, then what we're going to to remember do it. Um, harbor fees, I don't know, don't need if that was for slips too, the 10%, or just for lifts. Just for lifts. Just lifts. Mhm.

Yeah. So like I said, it's not typically— I don't know if you ratioed out or not, right? Does it—. I think it's quarter— it's biannual payment, I guess. Yeah, biannual.

So it would have the cap So to go— Yeah. I mean, maintenance crisis hit me. I understand. We did some boilers this year, we did some motors this year. You know, my fuel bill was way up too.

So all this stuff is incremental to your residents of Seward also. Your sales tax has increased your revenue on that. You look at your inflation ratio for the last 5 years, 22, 27, 34%. Depending on market goods. So, when you're 6% sales tax, when your price of goods is going up, your revenue is going up, correct?

We don't sell any more things at the store. We don't sell more quantity, but it's more price per item because that's just the nature of what it is. So, it's going to be more after the extra 2%. Doesn't seem like a lot, but it's all about margins for city business. Business, or private business, on being healthy.

A lot of places closed. A lot of places shut down because it's just not busy enough. So, I would look at it, you know, I mean, I understand where you're going. I understand giving us a break in the wintertime because it's needed. But, most people are doing their homeowner projects in the summer.

Spring and summer. And, I'm not talking lumber and stuff. Stuff which isn't available in town anymore. What your people are spending, your locals are spending more of their money to get paint, plumbing, whatever they're going to do for their home projects is going to be at 9%. They're going to be doing it there, I'm sure of it.

Just a thought, you know, my two cents on that one. And, you know, I love the layout, you know, the way you got this. It's very easy to look at and read. So we're looking at $2.1 million is what I think it was on the sales tax increase. Yeah.

I believe it was right there, 2.1. My numbers are right, or my memory. So we increased our budget a million last couple of years, expenditures. Yeah. So how long are we going to cover that?

2.1 Is going to cover anything?

If we grow like we're growing. Because we've grown $3 million in 3 years. Rough numbers. And I understand the surplus we've got, you know, $45 to $55 million, but a lot of that you guys need is funding for Seward. I understand all that.

But it just seems like we're moving a lot of things there, and where's the future? Where are we going to be within a budget if we're doing this million, a million, a million, and now we're increasing our budget 2.1 million. Are we going to eat that away in 2 years, and then we're going to be looking at something else? Questions I have, because I can't operate that way either. You know, that's not my business.

Okay. Thank you. Thank you.

Hi, Steve Byerson, the size savings.

How much time do I have, Mayor? I don't think there's a limit. I was just trying to create some levity in the room. Obviously that joke went by.

I got a couple of questions on most of the items we talked about tonight. So, since Brian's on the phone, let's go to the electric. I think we—. I'm sensing we— well, first of all, it's Kat's request. I was actually coming here tonight to ask the administration a question about General Fund.

Administration, please. So, my question was to administration, I've looked at the history of general fund administrative fees, on all the funds. And, by the way, for my analytics, I consider general fund administrative fees part of the general fund transfer. So, you're talking about electric, in the past, you hear a number like 2 and a half million And that's because people were included with general fund admin fees, and the transfers were billed. And for the electric, we had a right-of-way fee that we charged, and we have lobbying fees.

So, when I look at what the transfer to the general fund is, I'm looking at the total transfer from a business unit to the general fund.

So, when I And I looked at the PILT's pretty easy. It's 8%, correct? Mm-hmm. Straight up. Your gross revenue of the business unit, 8%, that's your PILT.

General fund administrative fees, that's where my question was at tonight for you. I looked at the history since 2023, and I could go earlier, but I left it at 2023. And when I looked at coming forward to 2017, 28, where we're now seeing a request for some reductions in some of these funds, water and wastewater.

I don't, I don't understand how the formula is built because my question is, I see the general fund growing every year, million, million, million, and a lot of that has to do with wages. So I'm curious to find out why— then why aren't the general fund administrative fees, which I've been told are the services that the city provides from the general fund— mayor, vice mayor, finance department's a big part of the business enterprise funds because they're doing all the accounting— why hasn't that general fund administrative fee risen along with Cost is going up, so why— can you explain why that fee hasn't gone up in those funds? Yeah, I would say that the big thing is, as we've looked into past years and coming into this year, we wanted to make sure that it was an allocated formula across all departments. I think historically it was difficult to pick out exactly what made up that number on our end, so this year we, especially as seeing some was significantly higher and others was lower. And so this year we did 70/30— 70% of the revenue, 30% of the employee count.

And here, if you want to—. It's 70% of the cost of all overall city's budget leveraged with 30% of the employee cost. So what you're telling me is that prior to you two coming to work for us, it was a carryover number. We had no formula. Like the PILT that calculated the cost that were going to be shared.

We just carried it over with CPI. I did a little bit of researching. I think in '96, '97, they were having conversations to have a kind of an internal, like, study in where the allocation was happening. Somehow, but it was never—. So we're unsure.

Yeah, so we wanted to adjust it this year by making it uniform across all accounts, which I just kind of went against by saying dropping the admin fee for the electric fund, but I think one of the things we did want to make sure was that it was equal across all departments. But we are dropping water and wastewater. Yep. Okay, we'll get to those at another time. So that was my first question, because I was going, if it's payroll related, which I I was told a part of it is allocating your payroll.

Labor costs. All your payrolls have gone up for the last 5 years. Yes. But, the general fund administrative fee hasn't gone up. So, you see my confusion?

Yeah, totally. So, we adjusted it by creating a formula and following that. This formula is starting now. Oh, you're starting the formula now? Yeah, now.

All right. Okay. With respect to the electric, while I can appreciate us trying trying to give relief for electric rates, it almost seems like a Band-Aid to me, in a degree. And so I— while I applaud the effort, and I surely in 2023 rallied on the case that we've got to get this general fund administrative fee down, if you sell this utility, you've got to fill a $2 million hole. So you're reducing the size of the hole, but it— but we're also not only do we build an electric utility, we're not only building it structurally, we're building the whole entity across the street to be almost set up as a private business.

It's completely going to have its own personnel. You know, you may end up having to hire a finance director over there, because you've got a different accounting system. So, the way we're going, we're creating a separate platform. And so, I see where we've reduced the general fund fees recently because they've hired personnel, so we've reduced ours. So, thanks for explaining that.

I'm not quite sure I'm ready to support the throwing out the GL, the general fund administrative fee, until we maybe dive back into the budget a little bit. I was confused in the budget. We increased COPA rates, and in fact, we increased increased all the electric revenues by 4%. But, I looked at the COPA costs, and the COPA costs, which is a combination of both of those fees. So, it's the true gas power, and the power fuel cost, combined, is our COPA cost.

And so, the COPA costs went up, combined, 18%, but our revenues are only going up 4%. So, do you want to go back and maybe take a look at this? Because I don't know whether we're really looking at— and, you know, I guess I should say, can I make a statement? Before you do that, can I just make a statement? That's up to Madam Mayor.

You want to ask—. Pardon? Before she answered that, can I make a— just like a statement real quick? I understand for most of you folks that have been around the dais for a while, that there's been a general statement over the years whereby the budget has been described, it's not really a budget or money, it's really a place marker to just work from. But, you know, so I apologize because I come from private business and budgets really mean something to us and that we have to hold the line on those things.

Generate, we can't just increase taxes on a private business. So, that's kind of where I'm coming from, from a business perspective. So, I apologize in advance for asking, you know, a question about why is revenue only going up 4% but costs are going up 18%? And you may not have that answer today. So, you may want to—.

Well, so, costs are going up— sorry, what's the question you're asking? Your revenues for COPA are going up 4%, but your COPA costs in the two lines from Chugash—. Because those are costs that are paid by the— we're talking about our revenues that we charge our customers. Yes, ma'am. Because we only wanted— we are increasing rates by CPI, not by the same amount that our revenues that we're— so those charges are to the customer.

These are our revenues.

COPA revenues equal COPA costs, because it's a pass-through. Agree? Yeah, it's the cost of power that we pay to Chugach. And I'm just saying that if you add up all the COPA costs and the COPA revenue, and you match it against the COPA cost, there's a little bit of a gap. A big gap.

So, I'm going to Brian, do you have any thoughts on that? I'm hearing what you're saying. I don't have the numbers in front of me, but we have moved our fuel burn into COPA, where previously it was in general expense. And that could be the difference, but I don't have those numbers in front of me where I am right now. I apologize.

But we will look into it and get back to you. That's what I'm asking. Great. I'm asking you to do. So, it's hard for— so, you can sense I'm having a hard time supporting changing anything significant like the general fund admin fee until we get some of these bigger items kind of queued up.

On the electric, you know, again, this year we're generating— 2027, we're proposing ex-capital, about $600 million, $600,000 positive cash flow. So we're moving in the right direction because 2025 we lost about $250,000 cash flow. In 2026, year to date, it's hard to say what we were doing. And so on that note, because the actual column for 6/30 or 9/30 is a little bit in question, you can't really use that number to see how we're doing really in 2026. So, I don't know if we're making money or not yet.

So, it's just a question. And, so we're generating, we're proposing to generate a gain. And then, my question is, you mentioned we're going to do a rate increase, because we have a CPI. I never knew we had a CPI mandatory in our tariff tables, where we're going to do a CPI every year. It's not mandatory.

We didn't do it 2 years ago. Decrease rates, but rather than pushing off all the CPI increases and like we had in the past and doing them at once, would be more effective to increase by CPI annually. But no, it's not mandatory. We just thought it would be beneficial in the long run to increase by CPI. So, Robert Barnwell's question, we commissioned a rate study in January.

We don't have that rate study. With the rate study brought drive a rating, a justification for a rate increase, which I'm sensing we need? What I'd say is, before we answer that, I think we've got to get converted to the Uniform System of Accounts, which ideally we'll have completed by year-end or early first quarter. Once we've done that and accumulated some data where we have, you know, a line of sight into some of the cost elements that we don't have under the, um, under the, uh, municipal accounting structure, that's going to help us, um, articulate where rates really need to go. And, and, um, you know, we're obviously— we're making payroll and we're staying above board, but we really need that line of sight into actual cost elements to understand where, where things are going.

And that's really what drives the PCS and Uniform System of Accounts conversion. And, um, you know, I think everyone will be happy with the situational awareness that the community and the council will have once we have that line of sight into the various cost elements. But I wouldn't say which way it's going to go until we get that done. Let's just give us a chance to knock this out, and I think we'll, we'll be, uh, I think it'll— everyone will be very satisfied with the outcomes. But we also don't want to not address the fact that costs are increasing, so we incorporated the CPI to make sure that while that is happening, we cover the cost that we'll see and don't dig ourselves into a hole.

Absolutely. Yeah. So for the record, I just want to make a point. If we lost cash flow from operations pre-capital in 2025 of about $250,000, there's my concern, Ryan. You know, on a bar napkin, that tells me that that's a $250,000 cash loss.

That means no depreciation is out of the game, straight up cash we're digging into savings. So that alone tells me that a rate hike was necessary. Now, in 2025, did we have a bunch of expenditures on the Godwin thing. I don't know. I would, um, I would also like to add 2024, we saw a significant, um, the opposite happen.

So the, the way that an electric department, in any department itself, it struggles to fit itself into the box of an annual year. So when you look at 2024, we have a our cash flow. Yeah. And that— where was that from, Kat? That was from the rate increase that we then used to increase and help our department grow and take care of the needs that we need to for the electric utility.

I'll agree to disagree. It was due to Rob Montgomery telling us we needed a stylus ballroom at Chugach. We added $2 million more to the Chugach cost. So what I would like to request, Madam Mayor, is instead of looking backwards and digging into that and past utility directors. We take advantage of the expertise we have on the phone and in the room and maybe look forward and discuss the budget.

And we'll look into the situations and the things that you brought up and we'll go from there. Fair points. Okay. Wanted to talk about the harbor real quick, one or two points. We're against again in the harbor.

We have negative cash flow. And that's— that's we're burning through depreciation because depreciation is off the table. Cash flow is strictly cash. So to help that, Buzz, I would like to recommend for consideration, the harbor basically generates harbor rents from the renting of all the property in the harbor. And the parking lots are in the harbor.

In fact, I think the harbor maintains those. And so—. No, they do not. They don't? No, it's the Parking Enterprise Fund.

Okay. Well, let's change that. The Harbor tenants in the Harbor move their own snow. So, they maintain their own stuff. In that case, what I'm getting at is that would the Harbor be better served to have some rent revenue from the parking fund for the lots that they could— that they could use to generate revenue for the harbor.

Why, if you're not giving them rent for that, and you're asking Tony to generate more earnings, Tony might come to you and say, I'd like to take the north lot, and Mr. Tugas has plans for another hotel. So, if we build a hotel there, we can put our lease revenue on that lot. If you could generate lease revenues. So, I'm just trying to figure out a way to give the harbor some additional revenues to help out their cause. I mean, they just— parking fund doesn't pay any rent for the land that they're enjoying.

Where we're generating a sizable visitor tax. Parking is a visitor tax. So, just a concept. Question asked is, speaking of SMIC and in respect to helping our electric utility. Will I ever see a day before I go to the grave where SMIC will repay the $1.2 million that was borrowed from the electric fund, back to electric fund?

Are we ever going to see that? Just a question. I'm trying to help them out.

And then, what else do I have for you? I think I'll wrap up there. Okay, I think we might have someone else wishing to speak too. Thank you. Well, thanks for your time.

Does anyone else wish to speak? No? Okay, I thought you might. All right, I'm going to bring it back to council then. Any comments?

We got one more night of this to go. And Brian, can I—. Is there any questions or comments for Brian so that I can let him go? Thank you.

I don't see any. No. Okay. Thank you, Brian. All right.

Thanks, you guys. We appreciate it. Okay. Hung up on him. That's all we had tonight.

Wow. What's the score of the baseball game? There you go. Are we good to go? I'm seeing nods.

So for just before we do wrap up, I will highlight tomorrow we have Parks and Rec, the Police Department, the hospital funds and capital infrastructure. So looking forward to that as well. And this floor— all right, I do have one thing. All right, um, I'm new here as well and I missed, uh, the presentation on Monday about the tax, so I just want to go through a couple things with you, uh, starting with kind of why we need how it was formed and kind of where we go from there. So from what I understand, and that people came to admin about two very big items, the pool and the middle school, and admin was pretty clear that yes, we want to tackle these things.

However, in order to do so, we need to generate new revenue, and we are looking at how to do that without asking more of the people that currently live here. And so we are looking at a seasonal tax structure based around high visitation rates in order to support those two enterprises, right? Yes, I wouldn't use the word enterprise because there are other things that we term, but yeah, to support those two endeavors. I'm gonna make sure—. Enterprise is a good word.

Yeah. And then it's going to support a few positions that are needed to support those two things. And the growth of the city. Right. And then left— not left over, but rather you were looking at kind of three things in immediate relief, which is 0% in the winter.

And then you were looking at kind of the community resource, which we talked about the two things. And then kind of these TBD sort of relief that could be felt as well. Yes. Okay. And so from what I'm gathering here is that the mill rate was first introduced, then we had SPC with a proposition as well.

And then Councilmember Warner had a proposition for addressing housing. And then tonight, it was sort of countered that electric would be possibly the best way to sort of Go through. No, just because I look at the remarks about the business owners in town. And yesterday, I kind of, I don't know, rambled around a few points. And I asked like, is anyone— am I the only business member or owner on the board?

And that wasn't like a slight or anything like that. That was just to kind of understand some of the dynamics. Because what was described earlier is a big lift. And it is 100% true that the people that visit pay pay the sales tax. That is true.

But it's the business owners that are writing the checks, and they're writing the checks at times that, uh, they're buying inventory with money they don't have in the spring to help pay for things that they hopefully will have by the time that August kind of comes around. And the sales tax won't necessarily, as pointed out, affect industries equally. Fishing industry might be a little bit different than restaurants than retail, and so on and so forth. So I'm really happy to see someone come up and point these things out, not because I disagree with the tax, just because I want everyone to understand how it's going to be implemented and who's going to be carrying the burden of it. The point about Anchorage is a good point.

Not only through camping, but through Airbnbs and how people come and visit, through Silver Salmon Derby, through all these reasons. I mean, people in Anchorage, Alaska come down and visit Ansel Datna. And so they will take note of this. I know that getting off path dependency is hard and requires kind of difficult conversations. And so I just encourage those conversations to be done with decorum as it was done earlier, like I think you did a very good job of mapping things out of how it's difficult, why it exists, why it's probably necessary.

And so I just encourage more of that as we kind of go forward. And just one more note before we go into the 10th inning is on the mill rate/electric proposal. My only suggestion is that I think I think what we're trying to solve is there's an impact on city resources. We haven't quite measured what that is. We know we have a few issues.

We know it's housing. We know it's job retention. We know it's childcare. We also know it's just general affordability. And so I know that we are measuring tourism impacts through a study that's going to go forward, I think, this year.

What I would just suggest is that we set up a fund dedicated to tourism impact as a placeholder for that to sit until we as a body can really understand what it is. Because I think what people want to say is tourism paid for this. This thing that is universal to the people that live here year-round, that are looking for the benefit, that are looking for something something that says, I can live here in the winter. And I think that's what you were trying to do with the electric and the mill rate. And I think that's what the proposal— what was happening next to me and across the way is happening as well— is everyone's trying to solve the problem.

I just want to see it measured and discussed a little bit longer because I think the biggest hurdle first is simply just agreeing that the seasonal tax rate structure is doable. And I think the input is there. I think it's agreed on the output. Okay, thank you.

Anything else? Councilmember—. Just real quick, responding to Matt, you know, I was thinking about it, and I think it's easy for people that don't have a business to say, well, the businesses just collect that tax from the customers and pass it on. But, you know, but businesses are paying a whale of a lot of sales tax themselves too, you know, especially— not especially, I mean, think of boats going out filling out their fuel and paying taxes. It's not just—.

It's not just a pass-through for them too. I just wanted to point that out, that I was thinking of that. Something to think about. Anything else before we adjourn? Okay, I will adjourn our work session at 6:40 PM.