The Kodiak Island Borough Assembly discussed an ordinance that would change the possible uses of the Facilities Fund during a regular meeting on Thursday.
The Facilities Fund was set up from the revenue of the sale of Shuyak Island to the Exxon Valdez Oil Spill Trustee Council in 1995. Annual revenue from the fund, as the name suggests, is intended primarily to support facility maintenance and construction in the borough.
Currently, the borough may use excess funds, defined as 85% of annual investment income from the fund, each year. The remaining 15% is regularly referred to as “inflation proofing,” and is used to avoid a drop in the fund balance from year to year. As of June 2019, the Facilities Fund balance was $40 million.
However, in light of recent state budget cuts, the borough assembly has examined the possibility of allowing the borough to borrow from the fund. If approved, the ordinance under consideration would allow the assembly to approve loans and grants from the Facilities Fund to other borough funds.
Loans to be repaid in a period under a year would be subject to approval by the borough assembly. Loans for a period of more than a year would require voter approval. Grants to other statewide funds would not require a public vote. All loans would require the borough to pay an interest to the Facilities Fund that is “at least as high as the most recent return on investment of borough funds.”
Assembly members voted in December to allow using 100% of excess funds for debt service. Previously, the borough was allowed to use only up to 50% of excess funds for debt service, to ensure that sufficient funds were allotted to facility maintenance each year.
The assembly has discussed a possible expansion of the uses of the Facilities Fund in light of the decision by Gov. Mike Dunleavy to cut school bond debt reimbursement by 50%, a decision that will require the borough to allot an additional $2.6 million to debt service annually, including for the upcoming fiscal year.
The assembly voted to postpone a decision on the ordinance to a later meeting on March 19. The vote to postpone passed 6-1. Assembly Member James Turner was the only one to oppose the delay.
Assembly Member Duane Dvorak proposed an amendment that would require a vote on future loans and grants from the Facilities Fund to be passed by the borough in a two-thirds majority, requiring five out seven of the assembly members to vote in favor.
Assembly Member Julie Kavanaugh expressed support for the amendment. However, the assembly did not vote on the amendment.
“It puts some seriousness into using these funds that I think needs to be there,” Kavanaugh said. “I don’t take this lightly.”
Assembly Member Scott Arndt said he is opposed to allowing any use of the fund’s principal. Using the principal would prevent the borough from earning interest on funds.
“This ordinance does seem to lower the bar for accessing the principal of the Facilities Fund, and that had been something that has gotten a lot of public attention over the years, and a lot of pushback,” said Assembly Member Rebecca Skinner. “It was seen as a rainy day fund and some people may think it’s pouring down rain right now. Other people might view that it’s more important to preserve the corpus of this fund so that we can continue to earn interest.”
Kodiak resident Judi Kidder said she is opposed to the proposed ordinance.
“It’s like a golden goose,” she said. “The golden goose will lay bigger and bigger eggs, the more you feed it. You start tripping its wings and legs off — it’s going to lay smaller and smaller eggs.”
The ordinance is up for additional discussion at the upcoming assembly work session, scheduled for Thursday at 6:30 p.m. at the Kodiak Island Borough School District conference room.