Rising interest rates may jolt the city out of a plan to borrow money from the feds to repair the Green Lake Dam. Those repairs will move forward nevertheless – how to pay for them is a question the assembly will consider on Tuesday (2-14-23).
The assembly approved borrowing up to $4 million dollars from the US Department of Agriculture back in 2020, when interest rates were at 1.9%. But the city’s electric utility director Scott Elder and Finance Director Melissa Haley say staff has only recently learned that the low rate wasn’t locked in.
The city’s application was approved in July of 2021, but the process of drawing up contracts with the feds was slow. When they finalized the agreement in December of last year, interest rates had risen to just over 3.5% which would nearly double the interest expense from $1.3 to 2.5 million over a 30 year loan period.
A memo from Haley and Elder outlines the pros and cons of borrowing from USDA: The city would free up working capital and the process of borrowing from USDA would be cheaper than bonding, and it would be easier to secure more loans for the city’s Electric Fund moving in the future. But borrowing from the USDA means meeting additional federal requirements, which increases the staff time and cost.
In other business, the assembly will on final reading whether to donate $25,000 to the Alaska Trollers Association’s legal defense fund. It will consider a $92,000 appropriation to bolster the budget for the Parks and Recreation office. And it will consider whether to extend property and utility tax exemptions for the Sitka Historical Society’s museum at Harrigan Centennial Hall.
The Sitka Assembly meets at 6 p.m. tonight at Harrigan Centennial Hall. Raven News will broadcast the meeting live, following Alaska News Nightly.
