Point of View: Weighing financial uncertainty amid harbor expansion plans
I attended the Homer City Council June 2 special meeting with a presentation by HDR on the four preliminary designs proposed for the Homer Harbor expansion to accommodate more large vessels. I appreciate the open discussion that followed where council members expressed some discomfort about being pressed into a decision about which alternative they preferred without first knowing the environmental impacts of each alternative, which might entail mitigation costs. I don’t recall that this topic was covered by the consultant.
The council also expressed concern about not knowing the financing ramifications for each alternative, especially costs that will need to be covered by the City of Homer. Mention was made of using a bond to provide the needed funds. However, there was no discussion as to what type of bond the city should use. There are two options: general obligation (GO) bond or revenue bond.
A GO bond would need approval by Homer voters. A survey in the recent comp plan revision gives good indication of what Homer area residents envision for the future. It seems to me that this contrasts with the direction of harbor expansion planning, which is to transition from the current harbor, now serving mostly recreation boaters and smaller commercial fishing boats, to an industrial harbor, attracting a different user and much larger vessels. If so, a vote on a GO bond would be asking Homer residents to pay for a project they may not see as being consistent with their vision for Homer. That could be a problem. If a vote did approve a GO bond, the discussion would demonstrate weak support (i.e., risk) that could increase bond interest rates.
On the other hand, a revenue bond might be a better approach. Wikipedia describes a revenue bond as “a special type of municipal bond distinguished by its guarantee of repayment solely from revenues generated by a specified revenue-generating entity associated with the purpose of the bonds, rather than from a tax.” In essence, the cost causer (i.e. industrial user) is the cost payer. This relieves local property owners and taxpayers of this obligation. It also encourages a more affordable size to the project — none of this think big and hope someone else will pick up the tab, which often leads to boondoggles.
I encourage the city council to decide that the funding that the city needs for its share of whatever project is deemed affordable will only be via a revenue bond. That would spare them the uncertainty and worry that a GO bond entails.
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One last point, some of the bigger is better advocates claim that the city needs to provide a harbor with capacity for future growth. This is the same argument made by educators when the State of Alaska was wallowing in oil revenues. So bigger schools were built. The result is that now we are closing these schools because of the decline in students. No one predicted that. We live in very uncertain times. About the only thing one can predict is that this won’t last. Smart financial decisions wait for the right time to invest. Maybe this isn’t the time to decide which alternative is best.
George Matz is a Homer resident.