The Kodiak City Council enacted a sewer rate hike of 5 percent per year for five years during its regular meeting Thursday.

A study by the consulting firm CH2M Hill concluded “existing sewer fees are not sufficient to fund operation and maintenance and capital improvements for the sewer system into the future,” according to the ordinance.

“It’s a complex collection system,” city manager Aimée Kniaziowski said. “It’s old.”

The new rates go into effect July 1.

This plan is a scaled down version of CH2M Hill’s initial hike plan — mostly 5 percent a year, but for a ten-year period — proposed to a council work session on May 20.

The council also took the unusual step of approving a second supplemental appropriation of $8.94 million to the city’s fiscal year 2014 budget. The addition brings the year’s total budget to $52.07 million.

The bulk of the appropriation, about $7.7 million, will go to capital projects funding related to the planned Monashka Bay pump house.

According to a city staff memorandum, “All expense appropriations requested in Supplemental Appropriation No. 2 are funded by increased revenue sources, additional state and federal grant sources, and use of fund balances and transfers.”

Included in the supplement is a $789,000 change order for work in the Aleutian Homes subdivision by Brechan Enterprises.

The council passed the first supplemental budget on Feb. 13.

In other business, the council approved a contract with Stein Industries to replace the city water system’s chlorine storage tank liners. The replacement is expected to give the tanks another 15 years of use.

Stein’s bid represents a savings over a previous plan by Whitney Equipment Company to replace the tanks outright, Kniaziowski said. Whitney bid $33,803 while Stein projected a cost of $284,220.

The council gave final approval to the lease of a 0.407-acre lot on Near Island to Afognak Native Corp. for $930.67 per month for five years. The corporation intends the lease to secure the view of St. Paul Harbor from its new headquarters building and would not be allowed to erect any structures.

“This is a short-term lease, not a long-term lease,” Kniaziowski said.

A city budget for fiscal year 2015 passed in first reading. The budget is based on expected revenues of $46.39 million from all sources, or 7 percent less than the current year.

Kniaziowski said the decrease in revenues would be offset by reduced spending. She called the proposed plan “primarily a maintenance budget.”

The largest increase in expenses comes under benefits for the city’s 120 full-time employees and 5.15 part-time equivalent jobs. Salaries, wages and benefits account for 41 percent of the total budget, according to a staff memorandum.

Public testimony on the budget will be taken at the June 12 council meeting.

Funding for Part B of the Monashka pump house construction was awarded to Arctic Slope Regional Corp. SKW Eskimo for $4.4 million. An additional $834,000 will go to CH2MHill for engineering services.

City council members wished finance director Mary Munk and parks and recreation director Charlie Powers well as they leave their city posts, and they congratulated building inspector Doug Mather on 25 years of service.

The city council will hold a work session at 6:30 p.m. today in the Kodiak Public Library multipurpose room.

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