The Sitka Community Land Trust has completed three homes, and is working on building two more, in its new cottage neighborhood on Halibut Point Road (the S’us’ Héeni Sháak Community).

The goal is to construct a total of seven cottages on the land trust’s current property, and develop seven more on an adjacent parcel recently conveyed by the Sitka Assembly.

Learn how to apply for a Sitka Community Land Trust cottage.

The homes were sold for about $260,000 — far below the market value for a new home in Sitka. In a presentation to the Sitka Chamber of Commerce on Wednesday (11-17-21), land trust co-executive director Randy Hughey said that the organization’s formula for affordability included keeping the houses small, selling only the houses and not the land, and using grants to subsidize site preparation and utilities.

Home buyers will take 25-percent of the equity (based on appraised value) when they move out of their homes, which will allow them to make a downpayment on another property on the open market, and allow the Land Trust to sell to a subsequent buyer at close to the original cost — creating perpetual affordability.

 “Which is very different than most affordable housing models, whereby the first owner gets an affordable house, and then they capture all of the increase in equity over time,” Hughey said. “And pretty soon it no longer is able to be purchased by a person that let’s say 80% of the area median income.”

Hughey and fellow co-director Mim McConnell discussed some of the hurdles that the land trust had overcome to get this far, including winning people over to the idea of sharing the equity on a $260,000 investment.

Hughey said buying a home from the land trust was a “rung on the ladder out of renting.” He thinks the math works, especially given the condition of many homes on the open market in Sitka.  

“If you can buy a house on the open market, then you probably should,” said Hughey. “If there’s some hesitation in my answer there, it’s because some of the homes that people can buy needs so much work, and are such energy sinks compared to a six-star rating, all electric home, with no maintenance to be done. But there’s a lot to be said about that in terms of quality of life, in terms of do want to work on a home? If you have the desire, then maybe getting out and buying that fixerupper is absolutely a thing. If that’s not your thing, this pretty good deal. Just in terms of your lifestyle, as well as I believe your economics, certainly as it relates to rental.”

Hughey described additional plans for the project, including storage sheds, a common workshop, an outdoor play area and shelter, and a gravel path following the Mills Street easement up to Edgecumbe Drive. Grant funding would help cover the costs of the shared amenities, again to keep down the purchase price of the houses. The land trust is trying to keep their prices in a sweet spot: Not low-income, but somewhere in the middle.

“Who qualifies, who can buy one of our houses? We allow people up to 120% of the area median income to buy our houses,” said Hughey. “Well, that gets into an area where perhaps those people could buy a house on the open market, and perhaps not. None of our buyers approach that level yet at this time. And then so at the bottom in how much money does it take to buy one of our houses? Ballpark something on the order of $50,000 annual income, annual household income. That would be about the maximum the monthly payments to buy the houses. We’re currently producing these three bedroom houses about $50,000 income is going to be needed to get there, which is $25/hour total household income.”

Anyone interested in applying for a home from the Sitka Community Land Trust has to take an eight-hour online home choice class from the Alaska Housing Finance Corporation. SCLT co-executive director Mim McConnell said that land trusts had a “stewardship approach to homeowners,” and was willing to work with them through financial difficulties. Nationwide, McConnell said the default rate for land trust homes was only 4-percent.

This week marks the end of KCAW’s Building Solutions series, a special look at affordable housing solutions in Sitka and Southeast Alaska. To conclude, KCAW’s Erin McKinstry circles back to the Sitka Community Land Trust and talks with Co-Executive Directors Mim McConnell and Randy Hughey. The organization has started an affordable cottage neighborhood with a unique model to help new homeowners enter the market. 

KCAW I just wanted to start off by talking about what exactly a community land trust is and specifically how it works in Sitka for someone who might not be familiar.

RH The model of ownership is that land is acquired and placed into a trust. A trust is a legal mechanism that holds assets for beneficiaries. So the land itself is in this trust. A house is built on the land, and the deed of the house is separated from the deed of the land, and the buyer purchases only the house. That in Sitka saves the cost of a lot, which can be $100,000, just like that. Then the house that we build is very small. So as far as the initial affordability, it’s only that there’s no land cost, and the house is small. 

That affordability is protected over time by a profit-taking limitation at resale. So if a person buys the house at it’s appraised value, then at a period in the future, it’ll be appraised again. And the difference between those two appraisals, they will take 25 percent of the increase in that appraised value. So if they bought it at 200,000 and 10 years later, it’s appraised at 300,000, they get $25,000. And then we sell the house at $225,000. So we’re always selling the house at less than the appraised value. This way, the house does not inflate more than incomes are inflating. So a person at the same income level, let’s say they were at 80 percent of the area median income when they bought it, someone at the 80 percent of area median income 10 years later can still buy that house.

KCAW Yeah, thanks. Thanks for explaining that. So both of you have been involved with this project for a long time since the beginning, basically of the Sitka Community Land Trust back in 2014. And then even before that for you Mim, and I guess I just would love to know from each of you like what exactly made you want to get involved with this kind of work? 

MM Well, I just kind of slid into the affordable housing area of life. But it wasn’t anything, that’s not anything I was trained in or…Mostly it was through getting involved with issues locally. And I got on the Long Range Planning Economic Development Commission, which no longer exists. One of the things that the commission worked on was the long range plan for the community. So we wanted to pick a topic that would benefit from a new way of doing a comprehensive plan. We picked affordable housing because we knew that was the big issue. And it just seemed like identifying some solid steps with action plans and everything would really help move that forward, rather than just talking about ideas all the time. And there were other people in the community that ended up getting involved in that process. And that just kind of led to more and more interest and activity. And that’s when a community land trust idea came up, that’s when the cottage neighborhood idea came up. So this group just kept pushing on it. And that’s 2010. So that’s when I got more involved in it, and the more I learned that it just seemed like a really good thing to put my energy into. And I really liked the idea of the community land trust, and I started attending conferences, national conferences and trying to learn more. And that’s where I met the guy we ended up hiring, the consultant, for helping us create the community land trust. We were going to try and do it on our own. But the more I looked into it, the more overwhelmed I got. And the more I realized, we didn’t know and we’re going to have to learn. So fortunately, we were able to hire Michael Brown and so he helped us create this organization or this project is what we were calling it at the time.

KCAW And Randy what made you want to get involved with this kind of work?

RH Someone from the organization called me and said your name came up with someone that might be interested in helping us work on affordable housing and I said ‘okay.’ It was really quite without deep consideration. Housing has been a problem in Sitka for the 30 years that I have been here. It’s a tremendous problem. In 1990 when we arrived, there were zero places to rent. And I mean, literally zero, we couldn’t find one. We wanted to rent, we didn’t know if we really like it here. And then there were two houses on the market that we could afford to buy, so we bought the better of the two. We didn’t want it. We didn’t like the house, we weren’t sure if we liked the town. We were in the fortunate position at least of having enough money for a downpayment. And so we just bought a house. And every single year, housing is a crisis, sort of it’s a tremendous problem: availability, quality of the stock, affordability. There aren’t enough buildings, they cost too much, and there’s way too many buildings that people shouldn’t be living in. That is at least a 30 year problem, but everyone I’ve ever talked to who was here before says that was has been there. The place where I saw affordable housing to be a crisis was serving on teacher hiring committees over the decades that I worked for Sitka School District, and having people say yes to a job, look around for a house and call us in two weeks and say we’re not moving there. You know, because there was no way that it worked. And they couldn’t possibly afford to buy what was on the market. And many employers can echo this story.

KCAW Yeah. And just sort of more generally, Randy, you talked about the fact that affordable housing has been an issue in Sitka as long as you can remember. And I just wonder, like, what are some of the reasons that you think that is like, like why do you think affordable housing is such a big challenge here?

RH Well, the driving thing is that there isn’t much land, right? We’re stuck between the Tongass and the Pacific. If we were surrounded by you know, 100,000 acres of privately-owned land, the free market of the United States economy would be much more at work. But because there’s such a powerful constraint, there’s the artificial constraint of land scarcity, it is common in Sitka to buy land and have someone build a house and the amount that you spent on the land and the house to exceed the value of the home that you create, that you’re in a negative position when you get done building it. So you have a small amount of land, a small labor pool, excessive costs of shipping, adding on top of the cost of building materials in the United States. So all of those things are absolutely beyond our control.

KCAW Yeah, absolutely. I was wondering if the Sitka Community Land Trust has any plans beyond the cottages that you’re working on right now? Are there other projects in the works or other like long-term goals associated with the organization? 

MM Our corporate documents say that we can work outside of the community to help with affordable housing in the region. The idea with that was to help other outlying small villages that might need some help. So we’ve had some inquiries over the years. But the farthest that’s ever gone to the point of having an actual Zoom meeting with residents was with Tenakee Springs. So it’s just at the very early stages of conversation and, and that came about through representative Jonathan Kreiss-Tomkins, and he had been in Tenakee and heard their issues about affordable housing and gentrification that’s going on there and thought of us. And so he connected us with some of the residents there. So we’ve just started talking about how we can help.

KCAW Sure yeah, that makes sense. I mean, I think if we have issues with affordable housing here in Sitka, a lot of these smaller places definitely do too.

MM Especially in Tenakee, they have a lot of Juneau residents that have second home there. And so it makes it challenging to find a place to buy and to find something that’s affordable. There’s not much for making income there. And they’re having a hard time hanging on to younger populations of people and they seem pretty interested in what we were sharing with them about how the CLT works.

KCAW Yeah, that’s really cool. Randy, do you have anything to add as far as that’s concerned?

RH Locally, so we intend to keep building houses. We, you know, is the intention, the organization to complete this neighborhood that we’re involved in now, move on to other parcels. And you get to…well, the city owns a large amount of land. And so if it wants to continue to put land into the trust and enable us to develop, there are some large parcels that whole neighborhoods could be developed in. Also, there are little bits and pieces of land scattered all throughout Sitka, that are potentially able to be developed just to house here and a house there or a cottage here and there kind of thing. And the advantage of these little parcels is that the utilities are nearby. So there’s water, sewer, electrical and telecom infrastructure close. If you take a large undeveloped parcel of land somewhere that the city owns, and you’ve got to start by putting in the roads and the water and the sewer, you know, you’re half a million in the hole before, you know, even get started or more. So, you know, kind of the short answer is we hope to continue to build houses after this whole neighborhood is done. By we, I mean, some other younger people besides Mim and I. We’re of an age where this torch will be passed. And it’s just not that long. And so I would love to pass it off at a point where everybody knew what the next step was, there was some work to do immediately in front of you. Like Hemingway always said about writing, at the end of the day, stop only at a place where you know what you’re going to write in the morning and see keep the organization moving forward like that. But that that point still not that far away.

Throughout April and May, KCAW News is airing stories about affordable housing solutions every Friday as part of our “Building Solutions” series. Erin McKinstry is a Report for America corps member.

Chandra Watson has been living with her mother on and off her whole life.

The 34-year-old single mom works full-time at a local bank and normally waits tables on the side, but that work dried up during the pandemic. She can’t afford to rent a place right now, so she and her three kids share a corner of her mother’s single-story home–Watson and the baby in one room, and her 6 and 11-year-olds in the other. She said that’s been particularly challenging during the pandemic.

“It’s been a lot of time together that we’re not used to,” she said. “And there’s nowhere to quarantine. We all have to share a space.”

In 2020, fair market rent for a three bedroom was more than $1800, and a 2020 Rental Market Survey placed Sitka’s average total rent higher than any other area in the state. With such high rental rates, saving to buy a house can feel like an impossible dream for many young Sitkans. When starter homes in good condition do come up for sale, the price point is often out of reach for many young professionals.

“It seems like it’s near impossible,” Watson said. “There’s no way I would be able to afford like a $450,000 house that needed work.”

But thanks to a new affordable housing development, Watson and her kids will be moving into a brand new home of their own later this summer. And at $265,000, the price tag is $100,000 less than Sitka’s average listing price. She’ll pay between $1300 and $1400 a month for housing.

“As a younger, single mother, doing this all on my own,” Watson said. “There was no other way that I think in this town that I would’ve been able to pursue this if it weren’t for this program.”

The first home in the S’us’ Héeni Sháak Community cottages neighborhood was finished last summer, and two others are under construction. The long-term goal is to build a tightly-spaced community of around 14 affordable, single-family homes.

A big part of what makes the homes so affordable is that the homeowner’s aren’t buying the land underneath. That belongs to the Sitka Community Land Trust, the organization behind the housing development. An empty lot can easily cost $100,000 in Sitka, said the organization’s Co-Executive Director Randy Hughey.

“There isn’t much land, right? We’re stuck between the Tongass and the Pacific,” he said. “It is common in Sitka to buy land and have someone build a house, and the amount that you spent on the land and the house to exceed the value of the home that you create. That you are in a negative position when you get done building it.”

Hughey said a lack of affordable housing has been an issue in Sitka since he first moved here 30 years ago, and likely long before that.

“Every single year, housing is a crisis. It’s a tremendous problem–availability, quality of the stock, affordability. There aren’t enough buildings,” Hughey said. “They cost too much, and there’s way too many buildings that people shouldn’t be living in.”

The model

The cottage’s project has been in the works for years. Back in 2015, the city sold the land to the Sitka Community Development Corporation, the pre-cursor to the Sitka Community Land Trust. The land, along with two adjacent lots that the organization still hopes to acquire, were designated for affordable housing by a 2006 referendum. They also received money from the Rasmuson Foundation, SEARHC, and other donors.

The Sitka Community Development Corporation started looking into the community land trust model back in 2013. The idea is that instead of selling the land to a homeowner, it’s placed into a trust. Homeowners sign 99-year renewable leases for the land and pay a small monthly fee. They also choose from a handful of designs for simple, small structures, which helps lower construction costs. And the community land trust serves as a resource to the potential homeowner throughout the application and construction process.

“It’s not what will solve the affordable housing problem in Sitka in and of itself, but it matches a piece of the problem,” Hughey said.

There are around 300 community land trusts nationwide, but Sitka’s is one of just three in Alaska. The other two are in Juneau and Anchorage.

The model has been around for 50 years, but it’s become more popular over the last decade, said Michael Brown of Burlington Associates, a community land trust consulting firm.

“There’s a recognition of the community land trust’s ability to make sure that housing remains permanently affordable, not just affordable to the initial occupant,” Brown said. “[That’s]…a reason that there’s been growth.”

Affordability sticks with the house over time. If a homeowner decides to sell, the community land trust controls the resale and sets limitations on the new purchase price. That can be a drawback to the homeowner because they likely won’t get as much for the house as they would on the free market. But they will get all of the money they put into it and then some.

For Sitka’s model, that looks like 25 percent of any increase in appraised value. For example, if the homeowner buys one of the cottages for $200,000, and when they want to sell, it’s appraised at $300,000, they get the money they put into it plus $25,000. Then, the Sitka Community Land Trust sells the house to a new buyer for $225,000–less than its appraised value.

“I want to be very clear that community land trusts are not challenging individual rights to ownership. What we’re really trying to do is help provide access to people who are locked out of that because of market conditions and household incomes. Those are issues beyond their control,” Brown said.

Brown helped Sitka set up their community land trust, which was officially founded in 2016. He said each community’s model is unique.

“There’s a C in CLT. These are community-based organizations…It’s more than simply providing affordably-priced housing. It’s about being good stewards of the land. It’s about creating housing affordability, but it’s also about making sure that services and resources are available to the people who live in the housing,” Brown said. “It’s not about running their lives, but making sure that we’re doing whatever we can to help enhance the likelihood that people are going to be successful over time, helping them to make successful transitions out whenever that’s the right time.”

Looking forward

The price point for the cottages isn’t accessible for everyone. Generally, people need to make at least 80 percent of the area median income to afford the payments. That’s around $60,000 for a couple. And even then, many don’t have enough savings for a down payment, especially since the cost of living in Sitka is so high, said Co-Executive Director Mim McConnell.

“We’re trying to get the house prices down enough to make it so people can afford a mortgage. And we’re finding that challenging. We’d love to have the home prices less than they are,” McConnell said.

She said opening up additional financing options, like rural development or VA loans, could help. For now, their target audience is young professionals looking for a starter home, which McConnell said isn’t uncommon for a community land trust.

“And our community needs those people,” McConnell said. “I mean, police officers, fire department, nurses, teachers–they’re all very important parts of our community and if they can’t afford to live here, we’re in trouble.”

It isn’t just the cottages that the Sitka CLT is working on. They’ve also thought about developing individual homes as land becomes available or is donated to the organization. And they’ve thought about working in other communities in Southeast, like Tenakee Springs.

Sitka’s community land trust does face some hurdles. They still need to acquire two more parcels from the city, which a 2006 referendum designated for affordable housing. And they’ve had to temporarily halt construction on any additional homes because the pandemic has caused the cost of materials to skyrocket, making home prices both unpredictable and unaffordable.

And even for pre-pandemic home buyers like Watson, the price is still steep: she’ll put about half her income toward housing costs. But she said, it’s worth it to have a home of her own. Her 6-year-old son Cameron said he can’t wait to paint his own room.

“My mind is like racing with all these different things I can do with the house to design it, how to decorate it, how many just new memories and experiences and traditions the kids and I can put in here,” Watson said. “I’m so excited to have this new start with them.”

After having her third kid last year, she thought about leaving for a more affordable place. But now, she says, she’s sticking around for good. This is where her family and support networks are.

This is her home. 

Throughout April and May, Raven News will be bringing you stories about affordable housing solutions every Friday as part of our “Building Solutions” series. Erin McKinstry is a Report for America corps member.

The Assembly sold Lot #1306 to Sitka’s Community Land Trust in 2015 for a proposed cottage neighborhood. (Map courtesy of CBS)

After a tense debate and a close 4-3 vote, the Assembly denied a request from the Sitka Community Land Trust (SCLT) for financial assistance to clean up contaminated soil. The pollution was uncovered after breaking ground on an affordable housing project, which aims to build seven cottage homes on land held in trust. With their vote, the SCLT will have to look elsewhere for money.

Downloadable audio.

The former industrial lot was polluted by the city and the state over decades of use. While digging trenches this June, the Sitka Community Land Trust found a degree of pollution they weren’t aware of when buying the land from the city two years ago.

In 2006, citizens voted to dedicate the site to an affordable housing project (Informational Ord 2006-32 minutes and election results).

Last month, they brought the issue before the Assembly, requesting $47,000 from the Southeast Economic Development Fund to cover half the cost of cleaning up and building around the contaminated soil.  Assembly was torn about what to do with the budget ordinance (Motion and SCLT Agreement): who is responsible for those chemicals now and who should assume the cost of their removal?

In the end, the majority told the Sitka Community Land Trust to take care of the problem themselves. That included Richard Wein, Steven Eisenbeisz, Aaron Bean, and Matthew Hunter.

Both Wein and Bean mentioned how, in purchasing the land for $1 , the Land Trust did agree to cover any future soil remediation work. Wein wanted to uphold that contractual agreement to the letter and said doing otherwise would create a bad precedent. “If prior agreements can be breached, then the value of what this agreement tonight does to future promises…I’m not sure. You can’t keep making agreement after agreement, and breach it and breach it,” he said.

In 2014, the Assembly approved sale of Parcel 1306 on Halibut Point Road for $1. The SCLT assumed the risk of any further testing of soil and the majority of the Assembly wanted to uphold that agreement. (Excerpt from Ordinance No. 2015-56)

Assembly member Steven Eisenbeisz thought it best to pass the added cost on to home buyers. “I’m more in favor of the land trust dealing with their own issues on this and slightly increasing the price of the houses,” he said, arguing that the price of homes would not raise significantly – about $7000 on average.

Back of the envelope calculations by Wein estimated this would raise monthly mortgage payments by $30 to a 30 year period and $49 for a 15 year period. Keep in mind: with home prices unlisted, it’s tough to pin these numbers down. But the hypothetical figure was a touch point for several Assembly members during the debate.

“I would argue that $30 or $49 a month for a lot of people is quite a bit of money,” said Kevin Knox, on the opposing side.

Knox felt that tacking on any cost – even in the double digits – would undermine the goals of the affordable housing project. He further argued the city should take care of pollution it created. At the last Assembly meeting, representatives of the Sitka Community Land Trust said the Alaska Department of Environmental Conservation does not recognize waivers of environmental responsibility.

Given these factors, Knox, Ben Miyasato and Bob Potrzuski voted for the measure. With an even split, Mayor Matthew Hunter broke the tie.

“I keep coming back to $30 a month and I know that is a very, very huge amount of money for a lot people, as evidenced by the amount of information we get utility bills go up that much. However … I don’t like this, but I think I’m probably going to be the fourth no vote tonight on this one. That based on precedence this is going to set and the fact that this project can still get done, even without the city money. And this is not fun,” Hunter said.

Hunter stated earlier in the meeting that he hopes the land trust model is a success for Sitka, inspiring other communities with a shortage of affordable housing.

Land trust chair Randy Hughey inspects the oily sheen in a trench at the site of the Halibut Point Cottages. He hopes to find a way to mitigate the contamination without passing on the costs to future buyers “who weren’t even born when this happened.” (KCAW photo/Robert Woolsey)

While the Assembly may be opting out, the Sitka Community Land Trust is all in. They’re in the process of installing helical pilings to avoid digging deeper into petroleum deposits underground and shipping 120 cubic yards of contaminated soil to Juneau.

The cost of all this work is $88,000, nearly half of which will be paid for through the sale of a parking lot to a local vet clinic.

As for the other half of the tab the Assembly won’t pick up? Executive Director Mim McConnell says it must be paid sooner, rather than later. One option the board could consider when it meets on October 16th is selling some of its land.

“Especially the parts that we can’t build on. We’re backed up against a steep hill.  There’s land there. We would probably approach those neighbors and ask if they’re interested in buying the piece that fronts their property,” McConnell said.

What McConnell doesn’t want to see is – contrary to the Assembly’s thinking – is homeowners absorbing this cost. “That’s not what we’re about. I think somehow this needs to be dealt with in a way that doesn’t make life more difficult for the home buyer,” she said.

Board President Randy Hughey agrees. Both Hughey and McConnell were out of town at the time of the Assembly meeting and not able to testify before the Assembly. But over the phone with KCAW, Hughey was firm in saying that affordable housing was a chronic problem and that local government should play a bigger role.

“For 20 years, we’ve seen the demographics of the town change to an aging population, declining school population, and it’s my belief that affordability in housing is one of the critical factors in that change in demographics,” Hughey said. “We can fix that, but it’s going to take some sacrifice. It’s going to take more than just free land into a land trust to solve the problem.”

Be that as it may, the majority of the Assembly drew a line in the soil on the issue of contamination and voted to support the project with vocal praise, but not with cash.

You can find more coverage of the Sitka Community Land Trust here and of the Sitka Assembly here.

Land trust chair Randy Hughey inspects the oily sheen in a trench at the site of the Halibut Point Cottages. He hopes to find a way to mitigate the contamination without passing on the costs to future buyers “who weren’t even born when this happened,” and the city may provide financial assistance. (KCAW photo/Robert Woolsey)

Contaminated soil has been discovered at the site of the Old City Shops at 1306 Halibut Point Road, where the Sitka Community Land Trust is breaking ground on a neighborhood of cottage homes. The Assembly directed staff to provide $47,000 of financial assistance for soil clean-up by a 4-3 vote. They’ll vote to approve that funding next month.

Downloadable audio.

The issue of affordable housing hits home for many in Sitka, including those at the Assembly table.

Deputy Mayor Bob Potrzuski is scouting a home for his daughter and having a hard time finding one. “She needs somewhere to live and I’ll be darned if we can find anywhere. If the community land trust is an option and if we’re looking at homes that people can purchase at $169,000, $179,000, or $200,000 to move into, I think that’s a great thing,” Potrzuski said.

Fellow Assembly member Steven Eisenbeisz could relate. “I fully understand your children’s position. I’m 32-years-old and not able to purchase a home in this town as a business owner,” he said.

But the two differed on whether the city should give the Sitka Community Land Trust (SCLT) more money to mitigate contaminated soil . The 1306 parcel was polluted over many decades by industrial use and while the Alaska Department of Environmental Conservation (ADEC) cleared the area for redevelopment in 2008, this latest discovery has slowed construction. 

While digging trenches for water and sewer lines this June, SCLT found an oil sheen. They called upon ADEC and hired an environmental engineering firm, Nortech, to evaluate the land further and make recommendations. 

While most of the material is safe to go back in the ground, 120 cubic yards must be dug up and shipped to Juneau. The chemicals weren’t discovered during a 2006 survey of the land by Carson Dorn.

The SCLT will must also be creative about building above petroleum deposits, discovered beneath three of the seven lots. SCLT Chair Randy Hughey told the Assembly the material is safe, but crosses regulatory thresholds.

“We propose the use of helical pilings instead of conventional footings and foundations to avoid digging. That’s the first thing we can do. The other thing is that the trenching to take water, sewer, and electrical services to the seven sites will be very shallow. We’re going to stay above two feet and insulate, to keep from freezing.”

The SCLT requested $62,000 from the Assembly Tuesday night (09-26-17) for this soil remediation work. They have $41,000 of their own money to put towards clean-up, generated from the sale of land to the Pet’s Choice Clinic for a parking lot.

After entering executive session to get legal advice from the city attorney, the Assembly was torn about what to do. If they don’t award the Land Trust this money, the starting price for all seven homes would rise. Hughey estimated that a one-bedroom home (825 sq. feet) would rise from $175,000 to approximately $182,000.

Eisenbeisz said the price bump still made the home affordable. “That’s about half the cost of what a starter home would be in Sitka right now, so to me that’s a very small increase to the cost of doing business.”

Potrzuski then asked Mim McConnell, the Executive Director of the Sitka Community Land Trust, how it felt to ask for more money given SCLT’s contractual obligation to clean up any contaminated soil themselves.

McConnell said, candidly, that it didn’t feel good — that it’s been the school of hard knocks to get this project off the ground. But she also appealed to the Assembly to continue being an active partner in the cottage neighborhood. “We’re not pros at this. We just care a lot. And we’re trying to be smart and careful and just do it right. If all we ever got was seven houses out of that land, we have enough parking legally to make those seven homes work,” McConnell said.

Assembly member Aaron Bean wanted McConnell to know that while he supported the work, he agreed with Eisenbeisz that the city should not absorb this added cost. “There’s a lot of things that need to take place without the intervention of tax dollars being put into this. And I’m not saying it’s not a good idea and it’s not appropriate, but at certain times you have to let the market be what it is,” he said.

Calling in over the phone, Assembly member Tristan Guevin had a different philosophy of government. “I do think it’s government’s responsibility to provide affordable housing. While it’s tough to swallow, I think with the amount of investment you’re asking for from the city, if we can get seven affordable homes out of that, that’s definitely worthwhile. That’s going to benefit Sitka,” Guevin said.

In the end, the Assembly narrowly moved forward with awarding the money. They directed city staff to draft an agreement for $47,000 to the Sitka Community Land Trust. That and a budget ordinance will appear before the Assembly for a vote at their next meeting on October 10th.

Bob Potrzuski, Tristan Guevin, Mayor Matthew Hunter and Kevin Knox voted in favor of the motion. Steven Eisenbeisz, Aaron Bean, and Aaron Swanson voted against.

By Mim McConnell

At the start of the 21st century Sitka was running out of power, affecting the ability to diversify and develop our economy. Using +/- $100/barrel, environmentally harmful diesel fuel with our antiquated generators was not a good option for increasing electric generation. The best solution was Phase 3 of raising the height of Blue Lake Dam.

Mim McConnell (KCAW photo/Robert Woolsey)

Preliminary engineering in 2007 estimated the project would cost around $50 million. By the time design development was done in 2008, the cost had increased to $100 million. The state committed to funding 50%. In 2011, $11 million in contracts were awarded for custom fabrication and the crane. In late 2012, general construction bid costs came in at $145 million, which was shockingly higher than engineers had estimated in 2008.

The city staff and Assembly were suddenly faced with a difficult decision. There were three options presented: cancel, re-bid, or proceed. On 9/11/2012, they voted to proceed, knowing electricity rates were projected to rise to 15.8 cents per kWh. This decision was based on having already invested a substantial sum, the need for increased electric generation, and with a commitment to try to secure additional funding from the state and federal governments.

The years that followed brought staff and the mayor in front of legislators, governors, and our congressional delegation, looking for help. Some additional help from the state came but they could no longer commit to the 50%, and so three additional low-rated bonds were issued to pay for completion of the dam, refinancing Green Lake (in our favor), and paying the balance on the turbine. The four electric revenue bond issues totaled just over $126 million.

In spite of the rate increases, Sitka still has affordable power when compared to other communities around the state, and even the Lower 48. When oil prices once again go over $100, and additional local institutions convert to interruptible power, more electricity will be used and rates will go down.

It’s important to keep in mind that Sitka has an infrastructure that is equivalent to a city of 100,000 in the Lower 48. There are no regional utilities to share expenses; Sitka has to supply everything. With the hydroelectric project complete, we now have a reliable, 100% clean, affordable electric system that is almost unheard of both in Alaska and the Lower 48.

The Assembly and community will always be making difficult choices. Assembly members are elected to represent the community, and to do their best in making wise, educated, discerning decisions. Staff members are grilled, debate at the table can be heated as differing opinions are voiced, and finally, those difficult decisions are made. This is what a working democracy looks like.

Mim McConnell is a former assembly member and mayor of Sitka.

Outgoing Mim McConnell and incoming Mayor Matthew Hunter served four years together on the Sitka Assembly. He presented McConnell with a gavel and offered thanks for her seven years of service. (Emily Kwong/KCAW photo)

On Tuesday night (10-11-16), nearly everything changed about the Sitka Assembly. They swore in a new mayor: Matthew Hunter. New members: Kevin Knox and Aaron Bean. All in a new building. The Assembly chambers were revitalized in the remodel of Harrigan Centennial Hall.

The Sitka Assembly first honored outgoing members. Deputy-Vice Mayor Ben Miyasato was true to form, encouraging citizen participation as he did at nearly every meeting in his tenure. “We do have comission seats open. We do have committee seats open. I’ve always said this again and again and again and again and I’ll say it again. If you want input, it is important that you either attend those and serve on those,” Miyasato said.

Assemblyman Aaron Swanson was characteristically concise. “Do I have a time limit?,” he joked after stepping up to the microphone. He added, “I just want to thank the city of Sitka for allowing me to serve the last three years. It’s been a privilege to serve with these other members, so thank you.”

Mayor Mim McConnell, who was elected in 2012, said “One of the things Matt [Hunter] is going to discover as Mayor is that when you introduce yourself as the Mayor of Sitka, [other people] go, “Ohhhh Sitka!” Being Mayor of Sitka is really cool. If you want to be a mayor from somewhere, this is the place to be mayor from because this place has an excellent reputation worldwide, as far as I know,” McConnell said.

McConnell offered thanks to the city staff and encouraged the Assembly to support them. “Sitka, keep doing what you’re doing. You’re on the right path. Keep talking to each other and working out your differences and finding common ground,” McConnell said.

The Assembly also certified the results of last Tuesday’s municipal election (10-04-16) and swore in new members Kevin Knox and Aaron Bean. They appointed Swanson to take over Hunter’s seat for a one-year-term. Swanson was the third highest vote getter, followed by Alexander Allison and Evy Kinnear.

Passing of the Gavel as 2016 Assembly Begins (Slideshow)

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Marijuana money for student travel

On Tuesday night (10-11-16), the Sitka Assembly established a dedicated travel fund for student activities. The fund will draw upon state fees for marijuana licenses.

See ordinance here: Ord 2016-39

Each state fee costs $5000 and local communities receive half of that. With this fund, Assemblyman Steven Eisenbeisz says the marijuana industry could raise $8000 to $10,000 a year for activity travel sponsored by the Sitka School District. Right now, student travel is funded through city dollars and fundraising within the schools.

Aaron Bean, owner of the grow and retail operation Green Leaf Inc., objected to the ordinance, which had its second and final reading last night.

During persons to be heard, Bean talked about the importance of keeping marijuana out of young hands. “If we’re funding school programs and the kids that are traveling know where these funds come through, I would hate to encourage…it’s not direct advertising, but I feel like it’s priming if that makes sense. I wouldn’t be in favor of that as a business owner.”

Mim McConnell, who completed her final meeting as Sitka’s Mayor Tuesday night, said that while she understand where Bean was coming from, there is precedent. McConnell said, “To me, it’s kind of like the tobacco tax going to the hospital. We don’t give it to the hospital and people thinking, ‘Money going to the hospital? Let’s smoke more.’ So hopefully that’s not what people are thinking.”

The ordinance passed unanimously, on second and final reading.

Money for geotechnical and legal support

The Assembly appropriated $100,000 for geotechnical work with Shannon & Wilson, a firm assessing landslide risk and mitigation in Sitka. The firm previously conducted a study of the South Kramer area. The Assembly also appropriated an additional $150,000 for legal representation from outside attorney David Bruce. Individuals whose lives and property were impacted by the Kramer Avenue landslide have filed suit against the city. Both appropriations were approved on first reading.

FEMA will also be funding a two-year landslide mapping project in Sitka.

Roles, Responsibilities Assigned

Bob Potrzuski was chosen as Deputy Mayor and Steven Eisenbeisz as Deputy-Vice Mayor. The 7-member body also divvied up liaison duties among the city’s boards, commissions, and committees.

Gary Paxton Industrial Park Board of Directors: Steven Eisenbeisz

Health Needs and Human Services Commission: Tristan Guevin

Historic Preservation Commission: Aaron Swanson

Sitka Community Hospital Board: Steven Eisenbeisz, with Kevin Knox as an alternate

Investment Committee: Tristan Guevin, with Matt Hunter as an alternate

Library Commission: Matthew Hunter

Local Emergency Planning Commission: Bob Potrzuski

Parks and Recreation Committee: Kevin Knox

Planning Commission: Kevin Knox, with Aaron Bean as an alternate

Police and Fire Commission: Aaron Swanson

Port and Harbors Commission: Matthew Hunter, with Bob Potrzuski as an alternate

Tree and Landscape Committee: Bob Potrzuski (appointed during the Assembly’s meeting on Tuesday, October 25th)

Informational Liaisons

Southeast Economic Development Association (SEDA): Steven Eisenbeisz

Sitka Tribe of Alaska: Aaron Bean, with Bob Potrzuski as an alternate

Sitka School District: Bob Potrzuski

Utility Director Bryan Bertacchi addresses the Assembly on Tuesday night (10-11-16). The city is trying to figure out how to support the electric fund in light of declining electric usage in Sitka. (Emily Kwong/KCAW photo)

The Sitka Assembly is raising electric rates for the second time this year, by an average of 7% across the customer base. That will close the gap in the electric fund for FY17. But the relief is short-lived. To address future shortfalls, the Assembly wants to dip into other pockets in the city’s wallet before raising rates again.

Downloadable audio.

Electric Rates Rise by ~7%, higher reconnection fees too

The new Assembly is inheriting an electric fund that isn’t paying for itself.

Why? Well, the Electric Fund is paid for by those who use electricity. But Sitka customers aren’t using nearly enough. The money isn’t there to keep up with debt payments for the Blue Lake Dam and to fix power plants and transmission lines in need of repair.

So, for the past few years, the Assembly has been raising electric rates to make up the difference and to catch up to inflation. The problem is, the hikes have been pretty big in recent years. By 40% in 2010, restructuring in 2012, 10% in 2014, 7% in 2015 , and now 7% on top of an additional 5 % earlier this year. Customers are struggling to pay and disconnections are at an all-time high.

McConnell said this was the major conundrum before the Assembly. “Where is that sweet spot where you can make some increases and improvements and get the things done that need to get done, but not be so overwhelming to the community?”

For this year, they think they’ve found the sweet spot. This most recent ordinance (Ord 2016-38) – approved 6-1 – increases electric rates by 7% on average.

The Electric Department has also changed the rate structure by eliminating the tier for customers who use less than 200 kWh/month and less than 800 kWh/month. Now, all residential customers who use 1000 kWh/month pay $0.12 per kWh.

Electric rates have increased six times in the past six years for a few reason. Namely, to pay off the Blue Lake Dam, catch up with inflation rates, and compensate for declining usage from warm winters and customers switching to diesel or wood stoves. Source: CBS Electric Department. Graph: Emily Kwong/KCAW

There’s also a 5% raise for monthly connection fees. For Harbors, the increase is from $8.75/mo to $19.50/mo to pay for replacement of failed meters. The ordinance further alters construction guidelines and customer service procedure, the most notable of which is doing away with door-hangers when bills are delinquent and a disconnection is pending.

Eisenbeisz voted “no” on the ordinance. He also made a motion to delay the reading so the new Assembly members could weigh in. That was voted down.

His second motion had to do with the emergency reconnection fee, which is how much the city charges for re-connecting a customer outside of business hours. The ordinance raises that fee from $200 to $500. Eisenbeisz said, “That $500 charge might have been a little excessive. Mr. Sweeney and Mr. Bertacchi have suggested that $350 would be closer to the actual cost.”

Jay Sweeney, the Chief Financial and Administrative Officer, and Bryan Bertacchi Utility Director, approached the public bench. They explained that $500 was an average costs, when taking into account variables like holidays, equipment, and other ancillary costs.

This explanation seemed acceptable to Hunter, who likened it a $500 fee for a float plane to Baranof Warm Springs. “It’s $500 no matter what the weather is. That’s what it will take to get there. This is the same kind of thing. It’s $500 to get your utility service re-connected if you didn’t pay and need it now. It just seems reasonable in that sense as a business if we’re operating it as a business,” Hunter said.

To reconnect electrical service during business hours (8 a.m. to 4 p.m., Monday – Friday) will now cost $100 ($50 for the disconnect). It previously cost $20 ($10 for the disconnect).

The reconnection amendment failed, 5-2, with Eisenbeisz and Ben Miyasato voting yes. And the overall ordinance – electric rates and all – was passed.

***

Electric Fund and FY18 Budget Planning

The Assembly then took a short recess, in which Deputy Mayor Matthew Hunter was sworn in as Mayor and Aaron Swanson appointed to a one-year-term. The 7-member group spoke candidly about how to electric fund crisis in the future. Rates will likely go up again. But the Assembly wants to do what it can do buttress the electric fund with money from elsewhere.

Hunter said, “Rates are going to have to go up some more in the coming years. And we can keep it moderate and try to keep it to something less than that drastic 40% a few years back. And we’re going to work hard to do that and we need to hear from people what kind of things you would like us to trade to keep our rates low.”

City Administrator Mark Gorman, at the direction of the Assembly presented a list of options. See that list here: revenue-sources-electric-fund

Here’s a list of all the money in the city’s reserves that can be accessed by the Assembly to address the fiscal gap. (Graph from CBS Administrator Mark Gorman)

“Where do you want us to go? My strong recommendation is that we go into reserves and present the Assembly with a plan to be totally out of reserves within three years. And I think we can get there,” Gorman said.

Here’s a list of possible revenue sources for the city, compiled by City Administrator Mark Gorman. CORRECTION: Increasing the sales tax cap to 10k can be accomplished through Assembly action alone. (Graph from CBS Administration)

While the Assembly took no action, they spoke openly about their preferences. Aaron Bean wants the Assembly to consider land sales. Eisenbeisz says he’s scratched off eliminating the senior sales tax exemption, while Assemblyman Guevin said he’d be open to a program that is needs-based. “I do think there are a number of seniors who can afford to pay that sales tax and looking at our demographics, we’re moving towards having a quarter of our population in that category,” Guevin said.

Here’s a breakdown of the General Fund allocation for last year. Roughly 1/4 of the city’s money goes toward the Sitka School District. The general fund budget was reduced by $1 million last year. (Graph courtesy of CBS Administration)

All of these are ideas for now, but there are some knowns.

• The draft of the FY18 budget currently has a $3.5 million deficit – $2.5 million in the general fund and $1 million in the electric fund.
  • *The shortfall may increase if the Alaska state legislature reduces community revenue sharing, school support, and PERS/TERS contributions. Also at stake is federal government support through Secure Rural Schools and Payment in Lieu of Taxes
• The city has written into the budget a subsidy of $1.7 million from the general fund into the electric fund.
• The city has written into the budget an extra $900,000 for the Sitka School District.
• The Assembly will begin their budget process three months earlier than usual, to better align with the Sitka School District. See full schedule here: fy18-budget-process

To close the gap, the Assembly will likely pursue a combination of what Gorman has called “the three ‘R’s” – reductions, reserves, and revenue. Property tax revenue is officially off the table. Voters rejected the ballot question to raise property taxes last Tuesday (10-04-16).

Assemblyman Bob Potrzuski voiced frustration over that. “There was $1.1 million that the Assembly had pledged to subsidize the electrical rates. So now the citizens have put us in a situation to solve the problem. And we’re going to solve it,” said.

Speaking during persons to be heard, Matt Donohoe responded that it wasn’t the public that put the Assembly in this position. “It was the former Assembly that decided to pursue an incredibly expensive infrastructure project without funding that put the public in this position,” Donohoe said. He then added, “I have a lot of respect for the people that take the time to serve on this Assembly. There’s no way I can do it. I don’t know how you guys can do it. I hope we can steer our way through this problem.”

And steer they will. The Assembly plans to hold a visioning session, that’s open to the public, on November 19th to talk about what to do next. Assemblymen Knox mentioned he had a cabin booked that day, but was willing to change his schedule. Eisenbeisz responded in saying, “Welcome to the Assembly.”

Tonight’s regular meeting (10-11-16) of the Sitka Assembly will take place in the newly renovated Harrigan Centennial Hall. Outgoing officers will be thanked, incoming officers sworn in, and the Assembly will hit the ground running on it’s biggest challenge: how to close a $3.5 million budget gap. (Emily Kwong/KCAW photo)

Tonight’s regular meeting (10-11-16) of the Sitka Assembly will take place in the newly renovated Harrigan Centennial Hall.

See agenda here: Assembly Agenda 10_11_16

At 5 p.m., the city will host a ribbon cutting to mark the opening of the new building. The doors of the facility, which includes expanded meeting space and a new museum, will be thrown open to the public.

The Assembly will gavel in at 6 p.m. to address a variety of old business. That includes reviewing – on second and final reading – an ordinance (Ord 2016-38) to raise electric rates by 5%, among other changes, to cover a deficit in the electric fund. Also on the agenda is an ordinance to funnel marijuana licensing fees into a student activities travel fund and another to dedicate $250,000 from the public infrastructure sinking fund to landslide risk assessment and legal representation.

The Assembly will also certify the results of the municipal election and recognize outgoing Assembly members, which includes Mayor Mim McConnell, Vice-Deputy Mayor Ben Miyasato and and Assemblyman Aaron Swanson.

McConnell was elected to Mayor in 2012 and says leaving the position is “bittersweet.” Her advice to future Assembly members is to keep an open mind. “You may have all these great ideas about what needs to happen in City Hall and in our community but when you get to the Assembly table and you learn about how the city works and all the boxes and boundaries are – about what you can and can’t do – then there’s this reality check about, “Oh, I can’t do that,”” McConnell said. “Then there’s also the reality check that there’s six people at the other table and you need to listen to them. And they might change your mind. You might learn something from each out!”

After reconvening, McConnell will pass the gavel to incoming Mayor Matthew Hunter. The Assembly will then swear in newly elected members Kevin Knox and Aaron Bean and assign roles of Deputy Mayor, Vice-Deputy Mayor and Assembly Liaisons.

The Assembly will also discuss appointing an individual to complete the final year of Hunter’s term, as he’ll be assuming the role of Mayor. To qualify, this individual must be a registered voter and a resident of Sitka for the past year. The Assembly could open the process to the public, inviting letters of interest, or appoint someone to the role.

Customarily, the Assembly has looked within the election pool and appointed the third highest voter getter, who in this case is Aaron Swanson. Swanson ran unsuccessfully ran re-election this fall and though Hunter hasn’t spoken with his fellow Assembly members, he likes the idea of bringing Swanson back.

“[Swanson’s] been on the Assembly for the past three years. This is a one-year-term. I know from personal experience it took me two years to figure out what I was doing at the table. To really understand the ins and outs of city government and make informed decisions. He’s already done that for the last three years. It just seems like the most reasonable course of action to me,” Hunter said.

The Assembly will have 20 days, starting today, to appoint that person. And whoever it is will have to hit the ground running. The budget process will begin early this year to better align with the school district and the departure of City Administrator Mark Gorman.

At the close of tonight’s meeting, Gorman will review the FY18 budget, which right now has a deficit of $3.5 million. In light of Proposition 1 failing, which would have partially resolved that gap with property taxes, Hunter says the Assembly needs to explore other options.

“The ball is going to be in the Assembly’s court this time. We really need to work hard. There’s other ordinances and stuff like that we could do, but primarily we need to approach the budget problem and close that gap. And if we can come up with a plan to do that over 2 or 3 years, that will be an excellent outcome. I’ll be very proud if we can at least make progress on that in our first year,” Hunter said.

About a third of that gap is within the electric fund. If that rate ordinance passes tonight, that deficit is $1 million. To subsidize the electric fund, Gorman will present a list of revenue streams and other funds the Assembly can tap. Some, like the permanent fund or increasing the sales tax, would require a ballot proposition. Others, like the bulk water fund or an excise tax on bulk fuel, could be put into motion by the Assembly alone.

The Assembly meeting begins at 6 p.m. in Harrigan Centennial Hall. Raven Radio will join live in progress, following Alaska News Nightly.