The Kodiak Island Borough informally introduced a draft list of items for its first allocation of American Rescue Plan Act funding at a Tuesday Assembly work session.
According to Interim Borough Manager Dave Conrad, the borough received $1.26 million in ARPA funds in October and will receive a second allocation next year. The funds are considered one-time money disbursed from the $1.9 trillion COVID relief bill signed by President Joe Biden in March.
Conrad said he and other staff have thoroughly considered recommendations on how the borough should use the money with established federal guidelines.
“These are non-recurring funds, so if you’re going to spend them, you don’t want to create a program that you would have to continuously fund,” Conrad said. “You want to do single-stroke real items that will affect the taxpayers and the community.”
Those items, he said, include infrastructure and the items that align with the borough’s responsibilities.
ARPA funds allocated to local governments are based on revenue loss during the pandemic, while using Fiscal Year 2019 as a base. Conrad said the borough lost $7.44 million in revenue reductions over the past 18 months.
The revenue loss includes a $5 million loss in state school bond debt reimbursement, $935,000 loss in severance taxes, $403,000 loss in interest ratings and $440,000 loss in solid waste revenues.
Conrad said the ARPA list could change depending on the assembly’s desire but stressed “we need to figure out how we are going to spend this money.”
Among the first things Conrad recommended was to place $500,000 back into the general fund to replace lost revenues, one of the provisions ARPA guidelines allows.
“This way we’re putting money back into the general fund and won’t have to rob money from someplace else,” Conrad said.
The borough currently expects a $713,000 shortfall related to less-than-expected school bond debt reimbursement from the state. The borough budgeted on a 50% reimbursement, something that occurred when Gov. Mike Dunleavy reduced it from 100% when he signed the state budget in June. However, the borough was informed later that it would only receive 36.8%, creating the shortfall.
Another $300,000 would be allocated to a health assessments need, design and planning for the Providence Kodiak Island Medical Center/Kodiak Community Health Community center complex. The borough signed a three-way memorandum of agreement Nov. 4 to tackle the island’s medical needs over the next 20 years.
Both Providence and KCHC lack sufficient space for their outpatient care programs, and have stressed the need to expand or restructure the allocated space. Conrad said the original estimate for addressing the issue was $24 million, not including any demolition work, based on a 32,000-square-foot space.
However, with insufficient space, Conrad said that cost can increase.
The MOA signed by all three parties stipulates that each agency will contribute money to the overall needs. KCHC has $300,000 it will contribute and Providence is seeking grant money of its own.
“If we all put in $300,000, we will be pretty close to 65% design documents, if not more, but the other entities will need to tell us what their needs analysis are and needs do change,” Conrad said. Conrad said by having the borough use the ARPA funds for the design services, it would mean it would not have to use borough money generated from tax revenues.
Another $100,000 of the APRA funds would be allocated to fund tourism expenses for two years.
“We don’t have enough money right now to fund tourism fully,” Conrad said. “Tourism affects everyone across all of your socio-economic levels. We can fund it for two years and you won’t have to worry about it in your budget.”
Another $100,000 would be spent to address Chiniak School’s water treatment system. The money would be used to evaluate drilling a new well versus the current one — drill a well or design a new system.
Conrad said he could justify using ARPA funds because water treatment and broadband infrastructure are among the items allowed under ARPA guidelines. The borough currently has $75,000 allocated in the current fiscal year budget to address the school well.
“We could free up $75,000 in our current budget to use for something else,” Conrad said.
Conrad proposed spending $150,000 on stormwater infiltration and collection improvements for the Kodiak Island Borough Landfill.
“We believe somewhere along the line there is a failure — either a liner or a cistern — because we are getting leachate into our stormwater and the state will not be pleased if they figure that out,” Conrad said.
Leachate is a contaminated liquid that is generated from water percolating through a solid waste disposal site, accumulating contaminants, and moving into subsurface areas. The landfill has had previous issues with leachate, most of it resulting from years of heavy rainfall. The Alaska Department of Environmental Conversation and the borough agreed on a settlement in 2020 to address the issue, including improvements to the leachate pretreatment facility.
Conrad said the $150,000 would be used to hire a contractor to track the source of the leachate leak.
“We divert the stormwater so that we don’t have to treat it, but if it’s being infiltrated by leachate then we are defeating our own purpose,” Conrad said.
The remaining $100,000 of the ARPA funds would be allocated to a 95% design schematic for Peterson Elementary’s roof and heating, ventilation and air conditioning system. Peterson Elementary’s roof has seen better days and has been on both the borough and Kodiak Island Borough School District’s capital improvement projects lists for a decade.
“The reason we can go with this project is because air circulation and purification in a school is a priority,” Conrad said. “It just happens that the ventilation system is on top of Peterson’s roof structure, so you can’t do one without the other.”
Assembly Member Aimee Williams asked when the borough had to spend the money. Conrad said the funds have to be committed within a certain time, but not necessarily spent.
Under APRA’s guidelines, the borough would have to commit the funds to specific projects by Dec. 31, 2024. Unspent funds wouldn’t have to be returned until Dec. 31, 2026.
“You will need to commit or spend your funds you receive on the first tranche before the federal government will release the second round,” Conrad said.
Assembly members voiced support for the list.
“Fixing the landfill is a plus and fixing the tourism budget is another,” said James Turner. “The well system out in Chiniak is something I think we just keep talking about, so it’s time to get something done about it. The hospital memorandum I’ve been in favor of since it was first brought forward.”