Sitka Assembly Special Meeting on FY2027 Budget and Enterprise Fund Rates

The City and Borough of Sitka Assembly held a special meeting on February 26, 2026, to discuss and provide direction on the Fiscal Year 2027 municipal budget, with a focus on enterprise fund rate recommendations. Finance Director Brooke Volschenk presented a detailed overview of rate-setting principles and proposed adjustments for Electric, Water, Wastewater, Solid Waste, and Harbors funds. The Assembly provided consensus to proceed with the recommended rates, while also raising concerns about long-term capital needs, the financial health of other enterprise funds, and potential use of visitor enhancement funds for convention subsidies.

Consent Calendar

• None. The meeting proceeded directly to new business.

Public Comments & Testimony

• None during either public comment period.

Discussion Items

• Electric Fund: Staff recommended no change to the energy rate (0% increase) but completion of the third and final year of a three-year customer charge phase‑in, which would add approximately $8 per year for a typical residential customer. Assembly members debated the wisdom of a zero percent increase, with some advocating a small increase (1%) to avoid larger future hikes. Others supported the zero percent as a one-year relief after several years of increases, noting that the customer charge phase‑in still generates some additional revenue. Staff clarified that the recommendation does not address long-term capital needs, and future rates may need to rise.
• Water Fund: A 6% rate increase recommended (about $4/month for unmetered residential) driven primarily by the new $18 million critical secondary water project, which will add ~$1 million in annual debt service starting in FY27. Assembly members noted that even with the increase, water service remains a good value compared to private systems.
• Wastewater Fund: A 2% rate increase recommended (about $2/month) to maintain working capital for a required $13 million effluent disinfection project. The fund received a $10 million congressional directed spending award (pending formal agreements) requiring a ~$3 million local match. Staff confirmed that sufficient working capital exists but would be largely depleted. Assembly commended the fund's improved health after prior rate increases.
• Solid Waste Fund: A 2% rate increase recommended (about $2/month for a typical 96-gallon can). Staff noted the fund is sensitive to contract and fuel costs. Discussion included a separate review of roll‑off container rate structures to better align cost recovery.
• Harbors Fund: A 4% rate increase recommended, consistent with the 2024 harbor rate study guidance (inflation plus 1.5%). For a 32-ft vessel, this adds about $7/month. The recommendation had been sent to the Harbors Commission but no recommendation had been returned. Staff emphasized that even 4% does not fund long‑term replacement needs (e.g., Eliason Harbor ~$54 million), and the fund remains in the worst financial shape among enterprise funds.
• Other Enterprise Funds (Airport, Marine Service Center, GPIP): Assembly member Carlson asked about the financial health of these funds. Finance Director Volschenk stated it was too early in the budget process to provide detailed projections. She noted the airport fund faces challenges due to incomplete phase‑two construction and unsettled leases; GPIP has adequate revenue for operations but not capital replacement. The Marine Service Center fund is stable and simple.
• Potential Use of Visitor Enhancement Fund: Assembly member Carlson proposed using bed-tax revenue to subsidize convention center fees at Harrigan Centennial Hall, particularly for off‑season events, to attract more visitors and generate additional sales and bed tax. The idea was discussed but no action taken; it will be explored further.
• Airport Fish Box Storage: Assembly member Riley suggested that a planned fish box storage room at the airport should be funded by those who ship fish boxes, rather than from the general fund, consistent with enterprise fund principles.

Key Outcomes

• The Assembly provided general consensus to proceed with the recommended enterprise fund rate adjustments: Electric 0% (with final customer charge phase‑in), Water 6%, Wastewater 2%, Solid Waste 2%, and Harbors 4%. These recommendations will be incorporated into the proposed FY2027 budget unless significant new information arises. Formal adoption occurs during the budget approval process.
• The harbor rate increase remains subject to a pending recommendation from the Harbors Commission; if the Commission recommends a different rate, the Assembly will decide.
• Staff will continue work on long‑term capital plans for all enterprise funds, with a particular focus on harbors and electric.
• The Assembly directed staff to review the feasibility of using visitor enhancement funds to subsidize convention facilities, and to ensure that new infrastructure (e.g., airport fish box storage) includes cost recovery from users.
• The next budget meetings will present the general fund draft budget and the enterprise/special revenue fund budgets.