Council Seeks Answers on Valdez Permanent Fund

Council Seeks Answers on Valdez Permanent Fund

By Lee Revis
Editor, Valdez Star

CITY HALL- A bid to use half of the earnings from the Valdez Permanent Fund left more questions than answers after a work session by the Valdez City Council a week ago Monday night.

The Permanent Fund Committee, which met at the direction of the City Council to weigh in on the ramifications of using 50% of earnings from the fund, valued at around $98 million. The committee recommended that the fund remain untouched. "We as a committee decided we didn't want to touch that money," said Council Member Bob Leisy, who also sits on the permanent fund committee.

This did not sit well with some of the other members of the council. While some favored using half of the fund earnings to establish an emergency cash reserve, Mayor Bert Cottle is looking for a way to fund the construction of the new junior high school. "The voters voted to put the school in," declared Cottle, who was defending his position on using the funds.

"I recognize that people voted," replied Council Member Dorothy Moore, who also sits on the permanent fund committee, "but that was before Alyeska started the gloom and doom."

According to Leisy, Valdez City Schools lost 32 students from the last school year to the current year, raising the question whether or not it would be prudent to build a new school with declining enrollment in Valdez City Schools.

To further complicate matters, a memo dated February 10 from the former City Manager Dave Dengel states: the city cannot sell the bonds to finance the project because the city is currently being sued by Polar Tankers (shipping company for Conoco Phillips) and SeaRiver Marine (shipping company for Exxon Mobil) over the personal property tax on vessels. Until this lawsuit is resolved the city cannot sell the general obligation bonds to pay for the school construction.

"Why don't we bring the bond people here?" asked Cottle, who felt it is dubious that the city can not bond a project while sitting on an asset worth approximately 98 million dollars. No one on the council or city administration who were present at the meeting had a concrete answer as to why the project is not bondable. Cottle is concerned that if the city waits too much longer to begin building a new middle school that the 60% funding from the state, worth around $9 million dollars, will be lost. The estimated cost of the project is around $16 million and he see earnings from the fund as the solution for funding the balance.

Under current policy, the fund is supposed to grow to $120 million, after which time the earnings on the principal of the fund are to be used to offset tax revenue losses to the city due to declines in the value of TAPS. However, by ordinance, the city council can use one half of the actual gains from the fund for city business. However, the money from last year's gains can not be used by council without a public vote due to the fact that the managers for the fund have been reinvesting the gains back into the fund. Once those monies are added to the principle of the fund, they can not be spent by the council without a vote from the public.

Many members of the council were caught off guard by the news that the funds are out of their reach, at least for this year. According to Christine Sasse, Finance Director for the city, the fund made approximately $8.2 million last year. Return to top of page.