By SHANNON HAUGLAND
Sentinel Staff Writer
The Assembly on Tuesday approved a motion to advance $4.1 million into the Sitka Community Hospital Fund to settle a liability.
The fund contains the city’s tobacco tax revenues, and since the sale of the hospital to SEARHC it has been used to cover expenses associated with the sale.
The liability – the “Office of Inspector General Stark Anti-Kickback liability” – was discovered during the due diligence process of the hospital sale.
The budget item passed on introduction in a 5-2 vote at the regular Assembly meeting. Voting in favor were Kevin Mosher, Kevin Knox, Thor Christianson, Steven Eisenbeisz and Mayor Gary Paxton. Richard Wein and Valorie Nelson voted against.
The ordinance explanation said:
“In conjunction with the Asset Purchase Agreement entered into between the City and Borough Assembly and SEARHC relative to the sale, the CBS agreed to place funds into a City Funded Escrow Account with the General Fund to be used to settle future liabilities, including the OIG Stark Anti-kickback liability. The OIG has now proposed settlement terms to the Municipality.”
The city plans to put money from the general fund into the Sitka Community Hospital Dedicated Fund to cover the liability. The general fund will be repaid with a combination of tobacco tax revenues, funds remaining from the sale of the hospital business, and annual payments from SEARHC.
Wein, in voting against the ordinance, called the expense “a self-inflicted wound, based on inexperience by a number of people.” He said the city is seeing the proceeds from the hospital sale dwindle.
NSRAA Project
The Assembly passed a resolution authorizing the city administrator to apply for a $3 million grant from the U.S. Economic Development Administration to fund the city’s critical secondary water source project, and a hatchery improvement project by the Northern Southeast Regional Aquaculture Association.
The grant is being requested to support “future design and construction and delivery infrastructure to the benefit of both the city and NSRAA...” the resolution says.
It states the city and NSRAA “need a means to provide water to their facilities in Gary Paxton Industrial Park when Blue Lake penstock is unavailable.” The project will use already allocated funds for the required 50-50 match.
“NSRAA and CBS are working on a potential partnership to install a water intake to serve our new water filtration plan and the hatchery,” an explanation from the city says.
City Administrator John Leach told the Assembly in a memo that the city is in the process of designing a water filtration plant that will provide potable water to citizens when the Blue Lake Dam penstock is not available.
“The project will require the design and construction of an intake structure in Sawmill Creek to collect raw water and deliver it by gravity to pumps that will, in turn, deliver the water to the new filter plant,” he wrote in a memo.
He said the project is fully funded with a combination of Water Fund working capital and a loan from the Alaska Department of Environmental Conservation State Revolving Loan Program.
“Public Works staff have identified a grant-funding opportunity that would offset some of the ADEC loan and would like to pursue this opportunity,” Leach said.
NSRAA uses the Blue Lake penstock to provide water for its hatchery at Gary Paxton Industrial Park.
“Because of this, NSRRA will also need a means to deliver water to its hatchery when the penstock is unavailable,” he said.
The grant is for up to $3 million to support future design and construction of water collection and delivery infrastructure to the benefit of both the city and NSRAA; and to use already allocated project funds for the required 50/50 local match.
NSRAA said the hatchery at the industrial park provides benefits to the whole town.
“NSRAA’s Sawmill Creek Hatchery in the Gary Paxton Industrial Park is a large contributor to the local salmon fleet and the region as a whole, producing approximately 1.8 million coho salmon smolt and 45 million chum salmon fry annually. Fish reared at Sawmill Creek Hatchery are released at two local sites, Deep Inlet and Crawfish Inlet,” wrote Scott Wagner, general manager of NSRAA. “Crawfish Inlet, in particular, has been a huge success for the local salmon fleet contributing over $8.35 million in ex-vessel value in 2019, and a total economic benefit to the salmon fleet in 2018 of over $14 million. In a dismal wild fish return year in 2019 the Crawfish Inlet project provided approximately 9.4% of the entire value ex-vessel to salmon fishermen in all of SE Alaska.”
NSRAA is also in the process of expanding the facility for up to 2 million Chinook smolts.
