Session 01-24, a Regular Meeting of the Homer City Council was called to order at 7:30 p.m. by Mayor Jack Cushing at the Homer City Hall Council Chambers located at 491 E Pioneer Avenue, Homer, Alaska, and opened with the Pledge of Allegiance.

The Council's Committee of the Whole met from 4:28 p.m. to 6:00 p.m. and discussed the regular meeting agenda and the development of City wide survey questions.

PRESENT: COUNCILMEMBERS: CUE, FENSKE, KRANICH, LADD, MARQUARDT YOURKOWSKI.

STAFF: CITY MANAGER DRATHMAN

CITY CLERK CALHOUN

FINANCE DIRECTOR BAUGH

PUBLIC WORKS DIRECTOR MEYER

ACCT. SUPERVISOR MACK

AGENDA APPROVAL

(Addition of items to or removing items from the agenda will be by unanimous consent of the Council. HCC 1.24.040.)

The agenda was approved by the consensus of the City Council with the following changes: Item D. on the Consent Agenda deleted, the IFQ resolution from the Mayor will be forwarded for the January 14th Regular Meeting. Addition of backup information for Memorandum 01-70. Pages 41-48 were inadvertently included, and are to be disregarded. Informational: Memorandum through the City Manager, Re: Dispatch Software Upgrade and a letter from the Chamber of Commerce regarding Ordinance 01-53(S).

PUBLIC COMMENTS UPON MATTERS ALREADY ON THE AGENDA

Michael Hawfield, Director of the Pratt Museum, encouraged the Council to act favorably on Councilmember Yourkowski's proposed amendment to the budget for 2002 that increases the amount of the City's contribution to the Homer Foundation. He emphasized that the Pratt Museum benefits greatly from the Homer Foundation program and the Homer Foundation benefits greatly from this process. He encouraged the Council to set aside some amount for the City's own fund and help the non profits through that program.

Darrel Oliver, Food and Beverage Manager at Lands End Resort, commented about the water and sewer rates and the article in the last Homer News wherein it was reported that the Council plans to try to achieve parity between the Spit and uptown water and sewer rates. He reported that his first reaction was joy, noting that this is the time of year when Lands End is working on budgets. Mr. Oliver commented on the number of employees at Lands End, over 70, and changes in the Chartroom Restaurant. He stated that as a twenty year resident of Homer his number one goal has been to cater to the locals and that he is just as happy as everyone else to get the town back come the end of September. He shared that nothing made him happier than, last year, to see the locals bring their relatives and friends to Lands End. He advised that due to his commitment to his executive chef, himself and employees they will continue to improve and it is these employee's welfare that he would like to address. He rhetorically queried if there was anyone here that does not know someone at some time who worked at Lands End in some capacity, adding that he would be surprised if there were and that Lands End is the largest employer of entry level people in Homer. He pointed out that the Lands End employees have children in the Homer schools, mortgages, shop in the stores, and pay for the City amenities. Mr. Oliver commented that there are reasons those employees do not have benefits and some of them have been with Lands End for over 10 years. He stated that the money saved on the water and sewer bill, his fourth largest expense, would enable him to offer his employees medical benefits. He stated that, according to Council minutes, the higher rates on the Spit were established to offset the cost of rebuilding the water and sewer lines. He relayed that when the bike trail was constructed the state replaced those lines, at little or no charge to the City, so for the last five and a half years Lands End has paid at least $700 more for the rebuilding of the pipe wherein there was no charge to the City. According to Mr. Oliver, everyone seems to agree that no one should have to pay more than anyone else. However, he suggested that there seems under the "phase in"in the Drathman Plan "his" sewer rates will increase 22% next year, adding "yikes". He emphasized that those on the Spit are no more a "unique economic engine" than those business on Pioneer Avenue or Bunnell Street. He stated that, like the Mayor and Council, they love Homer , will raise our families here, will support the City and schools and will bend over backwards to help the Mayor and Council make Homer the greatest place on the Earth. He asked to hear any arguments on why everyone should not be treated the same. He noted the difference between the three year "phase in" plan and that total parity to the average home owner is an additional $4.54 a month, adding that he is willing to pay his fair share at his house. He concluded his comments by stating, "So, without worrying about political agendas or your home phones ringing off the hook, please be fair. Do the right thing and fix this thing for good. Let's do it tonight."

Jon Faulkner, owner and operator of the Lands End Resort, encouraged the Council to adopt the amended plan that is parity. He gave a notebook presentation, which he submitted to the City Clerk for the record. He commented on Resolutions 01-80 and 01-81, which he opposes. He applauded City Manager Drathman and Finance Director Baugh for coming up with a more reasonable plan, however, it defers parity. The notebook presentation points on "Why Parity Now?" are as follows:

• A rate plan must have a rational, legally defensible basis. Number of people squawking is not rational.

• Rate stabilization: Commodity Rate changes 1996 - 2000. His commodity rate has changed every single year for water and sewer. He cannot budget. Do not need three more years of rates going up and down.

• Fairness: Lands End pays $235 a month more than an in town hotel for sewer and $542 a month more for water. This is $777 a month or $9,325 per year. Even under the Baugh Plan, the "phased in" approach, Lands End is paying $410 more for water and $270 more for sewer than the Bidarka. This is $8,160 a year more that Lands End pays. These rate quotes are based on a 2 inch meter and 100,000 gallons of usage.

He stated that he disagrees that "parity now" puts an onerous burden on the average user and here is why:

• The difference in the Baugh Plan and total parity is insignificant for the town users, but it is huge for Lands End. The difference in the two plans for a 2 inch user is $14 per month for water and $8 for sure for a total of $22 a month. For a 5/8 inch user at 3,600 gallons a month is $1.75 a month for water and $1 for sewer for a total of $2.75 per month. For Lands End the difference is $410 a month for water and $270 a month for sewer for a total of $680 per month. Therefore, $22 per month is all that the Council is debating for a 2 inch meter user and $2.75 is all that is being debated for an average 5/8 inch meter that consumes 3,600 gallons a month.

• It is fair to those who work on the Spit. They pay too, along with the business owned or operated. The additional costs come out of the workers pockets.

Mr. Faulkner stated that he is willing to write a check, tonight, for $4,100 to his employees health fund, because that is 50% of what he expects to save in the first year if the Council passes parity tonight. He asked the Council to consider that this is money that they are taking out of the pockets of the people who work for him, the people who deserve health insurance and who deserve a raise.

• The Spit had a 100% increase in meter fees in 1997 and another 10% in 2000.

He presented a letter, that he will give to the City Clerk, that he wrote to, then City Manager, Val Koeberlein in May of 1998. This letter, according to Mr. Faulkner, summarized his testimony to the Council and demonstrated what was supposed to be a revenue neutral impact to Lands End, turned out to be rate increases of between 23% and 54% per month.

• The City can create parity on the Spit now with little to no financial consequences, because it is $8,000 for Lands End to create parity. Yet there is discussion to appropriate an additional $20,000 to the local non profits. Therefore, he questioned that parity on the Spit is going to some how jeopardize City finances. There can be parity on the Spit and incremental increases in town to achieve both objections.

• It encourages business investment.

• Improves and inspires confidence in government. Any time there is a system that is fair it inspires confidence.

Nancy Hillstrand, Coal Point Trading on the Homer Spit, noted that they have not come in and said much as the water and sewer rates were going up and up and up. She thanked the Council for taking this into consideration and thanked the City Manager for thinking about making this more fair for everyone, which is really the way this needs to go on the rates. She admitted that she does not understand a lot of what is happening and does understand a little bit of why the Council wants to wait a little while. She emphasized that they, on the Spit, have been paying quite a lot more than anyone else in the town of Homer. She stated that, not meaning to be too greedy, it would sure be nice if the rates could become fair as soon as possible. Mrs. Hillstrand pointed out that anything that will help the Spit businesses do business will, of course, help all of Homer. She advised that she plans to learn more about this and hopes that the outcome will be parity, fairness. She agreed with Jon Faulkner and encouraged the Council to have adjustable rates for the up town rates, while bringing the Spit rates into fairness. She expressed her opinion that the burden of the rates has been placed on the Spit rates since 1995. She reported that they thought about using salt water to get off the city system, so anything the Council could do to make this fair would be appreciated.

RECONSIDERATION

CONSENT AGENDA

(Items listed below will be enacted by one motion. If separate discussion is desired on an item, that item may be removed from the Consent Agenda and placed on the Regular Meeting Agenda at the request of a Councilmember.)

A. Homer City Council regular meeting unapproved minutes of November 13, 2001. Recommend approval.

B. Resolution 01-90, Of the City Council of Homer, Alaska, Establishing the 2002 Regular Meeting Schedule for the City Council, Library Advisory Board, Parks and Recreation Advisory Commission, Advisory Planning Commission and the Port/Harbor Advisory Commission. City Clerk. Recommend adoption.

Memorandum from City Clerk and confirmation from Advisory Bodies as backup.

C. Resolution 01-91, Of the City Council of Homer, Alaska Urging the ADOT/PF to Place Highway Improvements on the Sterling Highway from Mile Post 42 to 60 as the Highest Priority. City Manager. Recommend adoption.

PULLED UNDER AGENDA APPROVAL. Mayor will submit for the January 14th Regular Meeting. D. Resolution 01-92, IFQ issue. Mayor. Recommend adoption.

E. Resolution 01-93, Of the City Council of Homer, Alaska Authorizing the City Manager to Execute the Homer Community Schools Agreement for Joint Use of Equipment and Facilities in the Amount of $20,823. City Manager. Recommend adoption.

F. Resolution 01-94, Of the City Council of Homer, Alaska Supporting the Construction of the Baycrest Trail Head and Agreeing that the City of Homer will Assume the Maintenance and Ownership of the Baycrest Trail Head, if Constructed by the State of Alaska. City Manager. Recommend adoption.

G. Resolution 01-95, Of the Homer City Council Supporting the Repeal of Proposal No. 17 as Presented by the Board of Fisheries, per AS 16.05.251, this Proposal will Limit the Salt Water Catch, from November 1 through March 31, to Two King Salmon. Councilmember Fenske. Mayor. Recommend adoption.

H. Memorandum 01-68, from City Clerk, Re: Canceling the December 17th special meeting. Recommend approval.

I Memorandum 01-69, from Mayor, Re: Appointment of Michael Armstrong to the Library Advisory Board and Steve Smith to the Road Standards Committee. Recommend confirmation.

J Memorandum 01-70, from City Clerk, Re: Liquor License Renewal for Happy Face Restaurant. Recommend non objection and voice approval.

K Memorandum 01-71, from City Manager, Re: John Thompson dba Hertz/Pioneer Car Rental Lease. Fiscal Note: Estimated annual revenue of $70,000.00 to Airport Fund. Recommend approval.

FENSKE/CUE - MOVED FOR THE ADOPTION OR APPROVAL OF THE RECOMMENDATIONS OF THE CONSENT AGENDA AS READ.

VOTE: YES: FENSKE, LADD, YOURKOWSKI, MARQUARDT, KRANICH, CUE.

Motion carried.

VISITORS

ANNOUNCEMENTS/ PRESENTATIONS/ BOROUGH REPORT/ COMMISSION REPORTS

A. Mayor's Report on AML and ACoM.

Mayor Cushing advised that he put all the handouts that go with his report in his office in a single book so that anyone who wants to borrow that book, may. He noted that the report is just on the meetings that the City paid for and that he has reported back to the Council at other meetings about the Coastal Policy Council and Kenai Peninsula Borough Reapportionment Committee meetings. He reported that the twelve member Reapportionment Committee met about the composition of the school board last Thursday. He stated that there was a 5/7 vote by the Committee to keep these seats the same as the borough assembly, which would be nine members by district instead of the current seven at large. The recommendation will be forwarded to the Assembly, who will identify the actual districts. The assembly will take this matter up over the course of the next year, does not have to go with the Reapportionment Committee recommendation and the voters will vote on this on October 30th of next year. He gave some examples of districts and stated that the City of Homer, if deemed necessary, may weigh in on this matter and should probably do so within the next couple of months.

PUBLIC HEARING(S)

ORDINANCE(S)

A. Ordinance 01-51, Of the City Council of Homer, Appropriating Funds for the Calendar Year 2002 for the General Fund, the Water Fund, the Sewer Fund, the Port/Harbor Fund, Debt Funds, Capital Reserve Funds (Conditional Expenditures). City Manager. (First Reading 10/22/01, Public Hearing 11/13/01, Second postponed on 11/13/01, Second Reading 12/10/01.)

Ordinance 01-51(S), Presented for public hearing on November 13, 2001.

YOURKOWSKI/CUE - MOVED FOR THE ADOPTION OF ORDINANCE 01-51 BY READING OF TITLE.

KRANICH/CUE - MOVED TO AMEND AND ADOPT ORDINANCE 01-51(S) BY READING OF TITLE.

VOTE:(primary amendment 1.) YES: KRANICH, CUE, FENSKE, LADD, YOURKOWSKI, MARQUARDT.

Motion carried.

YOURKOWSKI/CUE - MOVED TO AMEND ORDINANCE 01-51(S) FUND 100 DEPARTMENT NUMBER 350 ACCOUNT NUMBER 5830, HOMER FOUNDATION, (BUDGET PAGE) PAGE B75 TO INCREASE THE AMOUNT BY $20,000 MAKING THE BALANCE $120,900.00.

It was noted that the total is actually $120,000 with the amendment. There were no objections to changing the total to$120,000.00.

The amendment was discussed extensively, specifically as to what account(s) from which to appropriate the $20,000.00. No account was identified, however, it was suggested that the $20,000.00 could come from the General Fund, Fund Balance or that there simply would be enough revenue to cover this appropriation. Pros and cons were discussed regarding the use of the General Fund, Fund Balance. Concern was expressed regarding the general state of the economy and that no appropriations should be from the General Fund, Fund Balance. There was desire expressed that the Council have a balanced budget and some Councilmembers expressed their opinions that this amendment leaves the budget unbalanced.

VOTE: (primary amendment 2.) YES: MARQUARDT, CUE, FENSKE, YOURKOWSKI.

NO: KRANICH, LADD.

Motion carried.

FENSKE/MARQUARDT - MAKE A MOTION OF THE MONIES BUDGETED TO THE HOMER FOUNDATION, FOR DISTRIBUTION TO NON PROFITS, THAT 20% BE DEPOSITED TO THE CORPUS OF THE CITY OF HOMER ENDOWMENT.

Council discussed the 20% and the desire to make the account self sustaining.

VOTE: (primary amendment 3.) YES: YOURKOWSKI, MARQUARDT, KRANICH, CUE, FENSKE, LADD.

Motion carried.

LADD/KRANICH - MOVED TO DECREASE ACCOUNT 100.350.5830 PAGE B75 BY $20,000.00.

There was discussion to not take the $20,000 from Fund Balance and to reappropriate monies from other accounts.

Mr. Ladd stated that he had made an error on the amendment and wanted to take the money from 100.112.5210 on B21.

With non objection and comment the account number was changed to 100.112.5210.

This is the professional and special services for the Chamber of Commerce.

With non objection the motion to amend was withdrawn.

LADD/KRANICH - MOVED TO AMEND TO REDUCE FUND 100 DEPARTMENT 350 ACCOUNT 5830, PAGE B75, BY $20,000.00.

Councilmember Ladd affirmed that his motion is to take out the $20,000.00 that the Council just put in the Homer Foundation.

FENSKE/ - CALLED FOR THE QUESTION.

VOTE:(Call for the question.) YES: FENSKE,

NO: CUE, LADD.

Councilmember Cue noted that she voted in accurately.

Mayor Cushing called for a revote on the call for the Question and elucidated what a "yes" vote did and what a "no" vote did.

REVOTE: YES: CUE, FENSKE, YOURKOWSKI, MARQUARDT.

NO: LADD, KRANICH.

Motion carried.

Mayor Cushing elucidated what a "yes" vote did and what a "no" vote did on the amendment.

VOTE:(primary amendment 5.) YES: FENSKE

Councilmember Fenske wanted to change his vote.

Councilmember Kranich called for a point of order, noting that the Mayor had explained, very clearly, the vote, immediately prior to calling for the vote and that Councilmember Fenske's vote should stand.

Councilmember Fenske called for a point of order for clarification on what is being voted.

Mayor Cushing called for a recess at 8:29 p.m., reconvening at 8:40 p.m.

Mayor Cushing read from Roberts Rules of Order the process for a Councilmember to change his or her vote; that a member has the right to change his/her vote up to the time the vote is finally announced.

REVOTE:(primary amendment 5.) YES: LADD, KRANICH.

NO: FENSKE, YOURKOWSKI, MARQUARDT, CUE.

Motion failed.

Discussion ensued regarding the increase to the Homer Foundation.

VOTE:(main amended motion) YES: CUE, FENSKE, YOURKOWSKI, MARQUARDT.

NO: LADD, KRANICH.

Motion carried.

B. Ordinance 01-53, Of the City of Homer Extending Ordinance 98-03(A), Amending Homer City Code Chapter 9.04 to Create a $100,000 Personal Property Exemption, to Exempt Certain Motor Vehicles from Personal Property Tax, and to Levy a Flat Tax on Certain Watercraft, Scheduled to Sunset December 31, 2001. City Manager. (First Reading 10/22/01,Public Hearing 11/13/01, Second reading directly after public testimony.)

Ordinance 01-53(S), Presented for public hearing on November 13, 2001.

FENSKE/KRANICH - MOVED FOR THE ADOPTION OF ORDINANCE 01-53 BY READING OF TITLE.

KRANICH/CUE - MOVED TO AMEND TO ADOPT ORDINANCE 01-53(S).

VOTE:(primary amendment): YES: MARQUARDT, KRANICH, CUE, FENSKE, LADD, YOURKOWSKI.

Motion carried.

Councilmember Kranich voiced his belief that this flat tax on water craft has helped a large number of boats or vessel owners. He pointed out that this Ordinance does not have a sunset date. He advised that the substitute includes a category of vessel registration and some other clarifying language requested by the City Attorney.

VOTE:(main amended motion) YES: KRANICH, CUE, FENSKE, LADD, YOURKOWSKI, MARQUARDT.

Motion carried.

CITY MANAGER'S REPORT

A. City Manager's Report

The City Manager reported that one of the high mast lights, adjacent to the harbor office, collapsed in the high winds on Saturday. He briefly advised the Council of the repair process.

B. Game Permits Report

COMMITTEE REPORT

Councilmember Marquardt briefly reported on the first meeting of the Parking Task Force held on December 4, 2001. The next meeting is scheduled for January 15, 2002 with following meetings to be held on the first and third Tuesdays of each month. He reported that City Planner Tucker is the Chair and the other members present, besides himself, were: Police Lt. Rosencrans, Realtor Tom Hall, and Port/Harbor Commissioner Kilcher as alternate to Commissioner Choate. The members not present were Mike McCune, the Fish Factory, and Planning Commissioner Smith. Mr. Marquardt relayed his excitement to be working on this Task Force and with these gentlemen.

PENDING BUSINESS

NEW BUSINESS

RESOLUTIONS

A. Resolution 01-80, Of the City Council of the City of Homer, Alaska Amending the City of Homer Fee schedule Regarding the Sewer rates. City Manager.

Memorandum from Finance Director as backup regarding water and sewer rates.

KRANICH/CUE - MOVED FOR THE ADOPTION OF RESOLUTION 01-80 BY READING OF TITLE.

KRANICH/CUE - MOVED TO AMEND RESOLUTION 01-80 TO INCORPORATE THE RECOMMENDATION OF THE FINANCE DIRECTOR AS NOTED IN HIS DECEMBER 5, 2001 MEMORANDUM ON PAGE 151 OF THE PACKET.

Council discussed the Resolution with the proposed 50% increase, Finance Director's recommendation and the concept of phasing the parity for the Spit rates. The Finance Director's recommendation seemed the most palatable.

VOTE:(primary amendment) YES: LADD, YOURKOWSKI, MARUA4RDT, KRANICH, CUE, FENSKE.

Motion carried.

The rates per the amendment are as follows:

Commodity rate per thousand gallons of water $4.70 6.03

Monthly Customer Charge $3.40 3.69

General Monthly Service Charge and Spit Service Charge by meter size.

Meter size General Spit

Service Charge Service Charge

5/8 $11.25 $40.63

5/8 $12.22 $62.41

5/8 $12.72 $46.19

3/4 $16.88 $60.94

3/4 $18.32 $93.62

3/4 $19.08 $69.29

1 $28.14 $101.57

1 $30.54 $156.03

1 $31.80 $115.48

1 1/2 $56.27 $203.15

1 1/2 $61.08 $312.07

1 1/2 $63.60 $230.96

2 $90.04 $325.04

2 $97.72 $499.30

2 $101.75 $369.53

3 $196.96 $711.02

3 $213.77 $1092.23

3 $222.59 $808.36

4 $354.53 $1279.86

4 $387.78 $1966.01

4 $400.66 $1455.04

6 $787.85 $2844.1

6 $855.07 $4368.91

6 $890.35 $3233.43

Sewer System Residential or Residential Equivalent Dischargers Who are not Water System Users. Sewer system dischargers who are not water system users shall be charged at the rate of $36.08$42.01 $37.50 (variable rate ($16.46 $21.09) based on 3,500 gallons per month plus general service charge ($11.25 $12.22 $12.72) plus monthly customer charge ($3.40 $3.69) per month.) The City reserves the right to adjust this rate based on the characteristics of the service for non-residential or non-residential equivalent users. Customers who receive septage service shall be charged an additional $4.96 $5.02 per month.

Sewer System Dischargers Who are Members of Kachemak City LID. Kachemak City Local Improvement District (LID) members have contributed to the initial cost of the sewer treatment plant and the collection system. Kachemak City LID dischargers connected within the LID and the City

of Homer shall bill Kachemak City in one lump sum at the rate of $32.68 $38.33(variable rate($16.46 $21.09) based on 3,500 gallons per month plus general service charge $11.25 $12.22$12.72) plus septage cost ($4.96 $5.02) per month for each residential or residential equivalent discharger. Kachemak City shall be responsible for payment to the City of Homer.

Seasonal Sewer Meter fee is $121.10.

VOTE:(main amended motion) YES: YOURKOWSKI, MARQUARDT, KRANICH, CUE, FENSKE, LADD.

Motion carried.

B. Resolution 01-81, Of the City Council of the City of Homer, Alaska Amending the City of Homer Fee Schedule Regarding the Water Rates. City Manager.

Memorandum from Finance Director as backup regarding water and sewer rates.

KRANICH/CUE - MOVED FOR THE ADOPTION OF RESOLUTION 01-81 BY READING OF TITLE.

KRANICH/FENSKE - MOVE TO AMEND TO ADOPT THE RECOMMENDATIONS OF THE FINANCE DIRECTOR'S DECEMBER 5, 2001 MEMORANDUM REGARDING WATER RATE ADJUSTMENT INCLUDED ON PAGE 161 OF THE PACKET.

There was a brief discussion regarding the Finance Director's recommendation versus full parity. Empathy was expressed for the Spit rate payers, however, it was noted that the Finance Director's recommendation is the most palatable.

VOTE:(primary amendment) YES: CUE, FENSKE, LADD, YOURKOWSKI, MARQUARDT, KRANICH.

Motion carried.

The rates per the amendment are as follows:

Commodity rate per thousand gallons of water $4.20 $4.31

Monthly Customer Charge $4.22 $5.93

General Monthly Service Charge and Spit Service Charge by meter size.

Meter size General Spit

Service Charge Service Charge

5/8 $19.46 $87.28

5/8 $18.26 $95.96

5/8 $19.13 $70.93

3/4 $29.19 $130.92

3/4 $27.38 $143.94

3/4 $28.70 $106.40

1 $48.65 $218.2

1 $45.64 $239.9

1 $47.83 $177.33

1 1/2 $97.31 $436.21

1 1/2 $91.28 $497.79

1 1/2 $95.66 $354.66

2 $155.69 $698.26

2 $146.04 $767.66

2 $153.05 $567.46

3 $340.57 $1527.43

3 $319.47 $1679.27

3 $334.79 $1241.32

4 $613.02 $2749.38

4 $575.05 $3022.68

4 $602.63 $2234.38

6 $1362.27 $6109.73

6 $1277.89 $6717.06

6 $1339.17 $4965.29

When a customer uses more the 20,000 gallons per month the following services charges are:

Meter Size Excess Use Exceeds General Surcharge Spit Surcharge

5/8" 20,000 gal $29.19 $130.92

5/8" 20,000 gal $27.38 $143.94

5/8" 20,000 gal $28.70 $106.40

5/8" 70,000 gal $48.65 $218.20

5/8" 70,000 gal $45.64 $239.90

5/8" 70,000 gal $47.83 $177.33

3/4" 70,000 gal $48.65 $218.20

3/4" 70,000 gal $45.64 $239.90

3/4" 70,000 gal $47.83 $177.33

Bulk water sales. A commodity charge of $4.20 $4.31 $7.471,000 gallons of water shall apply to bulk water sales provided by tanker truck or fire hydrant plus an additional surcharge of $3.16 $3.01per 1,000 gallons of water in order to offset debt service and capital replacement and customer service costs.

VOTE:(main amended motion) YES: FENSKE, LADD, YOURKOWSKI, MARQUARDT, KRANICH, CUE.

Motion carried.

C. Resolution 01-82, Of the Homer City Council Amending Resolution 01-130(A) Establishing a Maximum Capital Reserve Fund Balance and Replenishment Schedule for the Water Fund. City Manager.

FENSKE/CUE - MOVED FOR THE ADOPTION OF RESOLUTION 01-82 BY READING OF TITLE.

There was no discussion.

VOTE: YES: KRANICH, CUE, FENSKE, LADD, YOURKOWSKI, MARQUARDT.

Motion carried.

D. Resolution 01-83, Of the Homer City Council Amending Resolution 01-129(A) Establishing a Maximum Capital Reserve Fund Balance and Replenishment Schedule for the Sewer Fund. City Manager.

FENSKE/CUE - MOVED TO ADOPT RESOLUTION 01-83 BY READING OF TITLE.

There was no discussion.

VOTE: YES: MARQUARDT, KRANICH, CUE, FENSKE, LADD, YOURKOWSKI.

Motion carried.

E. Resolution 01-84, Of the City Council of Homer, Alaska Revising the Port and Harbor of Homer Terminal Tariff No. 600.

Resolution 01-84(S), Of the City Council of Homer, Alaska Revising Certain Portions of the Port and Harbor of Homer Terminal Tariff No. 600. City Manager. City Clerk.

Memoranda from Port/Harbor Director requesting an amendment.

Memorandum from Finance Director regarding City Manager suggested amendments.

FENSKE/LADD - I WOULD LIKE TO MOVE TO SUBSTITUTE RESOLUTION 01-84(S) FOR RESOLUTION 01-84.

Councilmember Ladd suggested that the motion read for substitution and adoption prior to the Mayor reading the motion into the record. There were no objections. The motion now reads:

.... TO SUBSTITUTE AND ADOPT RESOLUTION 01-84(S) FOR RESOLUTION 01-84.

FENSKE/ - MOVED TO AMEND TO INCORPORATE THE WORDING SUGGESTED BY THE CITY ATTORNEY, THAT IS, 'ANY PORTION OF THE TARIFF NOT EXPRESSLY MENTIONED IN THE RESOLUTION REMAINS IN EFFECT'.

Councilmember Kranich pointed out that this wording is included and is noted on page 187 of the packet.

Motion died for lack of a second and, almost simultaneously, was withdrawn.

LADD/CUE - MOVED TO AMEND LINE 48 UNSTRIKE .875% AND STRIKE 1.5%. (Page 188 of the packet, this was a typo when the percentage was changed to 10.5%.)

VOTE:(primary amendment 1.) YES: FENSKE, LADD, YOURKOWSKI, MARQUARDT, KRANICH, CUE.

Motion carried.

YOURKOWSKI/MARQUARDT - MOVED TO AMEND RESOLUTION 01-84(S) LINE 48 ALL ACCOUNTS DELINQUENT... CHANGE THE 60 DAYS TO 90 DAYS.

There was quite a bit of discussion by the Council, including discussion about the administrative fee.

VOTE:(primary amendment 2.) YES: FENSKE, YOURKOWSKI, MARQUARDT.

NO: CUE, LADD, KRANICH.

MAYOR: TIE VOTE: YES

Motion carried.

Now reads line 48 and 49: (.875%, 1.5% per month). All accounts delinquent 60 90 days after billing date will be assessed a $250 administrative fee.

YOURKOWSKI/CUE - MOVED TO AMEND RESOLUTION 01-84(S) LINE 180 AFTER THE WORDS "SEINE SKIFFS" INSERT "OR WORK SKIFFS" AND ON LINE 181AFTER THE PERIOD INSERT "WORK SKIFF IS DEFINED AS A BOAT THAT IS USUALLY CARRIED ON THE DECK OR SUPER STRUCTURE OF THE MOTHER VESSEL AND IS REGULARLY USED IN THE COMMERCIAL ENTERPRISE OF THE MOTHER VESSEL".

Discussion points: There are plenty of boats in the harbor that have work skiffs that are used in the maintenance of the hull and it seems odd to draw a distinction between the seine skiffs and work skiffs. There should be something in place to discourage the practice of tying seine skiffs to the stern of the mother vessel, to encourage pulling these skiffs up out of the water to reduce the congestion in the harbor. There is no desire to financially impact the fishing community. The fishing community has got to be good neighbors with the recreational users in the harbor and this policy may facilitate the opposite. There was concern that this privilege may be abused. It may be difficult to tell the difference between a seine skiff and a working skiff. There should be a better defined policy, and perhaps an additional registration or prior approval of the harbormaster with notation that "this work skiff goes with this mother vessel". It was reported that the Port/Harbor Director, during the budget worksession on December 3rd, had stated that if there is a complaint the harbor officers do respond and will work to alleviate the congestion.

VOTE: (primary amendment 3.) YES: KRANICH, CUE, FENSKE, LADD, YOURKOWSKI, MARQUARDT.

Motion carried.

Now reads line 180 - 181: All vessels in the harbor are subject to these rates, except properly registered seine skiffs or work skiffs attached to the mother vessel. Work skiff is defined as a boat that is usually carried on the deck or super structure of the mother vessel and is regularly used in the commercial enterprise of the mother vessel.

MARQUARDT/YOURKOWSKI - MOVED TO FURTHER AMEND TO INCLUDE THE CHANGES AS NOTED IN THE FINANCE DIRECTOR'S MEMORANDUM OF DECEMBER 5, 2001 ON PAGE 205.

Appreciation was expressed to the Port/Harbor Commission for their recommendations and work on the rates. It was noted that these recommended cold storage rates are for revenue enhancement.

VOTE:(primary amendment 4.) YES: MARQUARDT, KRANICH, CUE, FENSKE, LADD, YOURKOWSKI.

Motion carried.

Change the cold storage rates to as follows:

Cold Storage $325 $300/month

(Cold storage rate structure $275/per month for two consecutive months

is for storage area of eight feet $250 per month for three consecutive

feet by ten feet) months

Month by Month Minimum one month rental

Inspection $50/hour

VOTE:(main amended motion) YES: YOURKOWSKI, MARQUARDT, KRANICH, CUE, FENSKE, LADD.

Motion carried.

COMMENTS OF THE AUDIENCE

Kevin Hogan; commercial fisherman, President of the Auction Block Company and a partner in an entity known as Harbor Leasing; talked to the Council about the City's leasing policy on property out on the Spit. He noted that his land lord, Mr. Marty McGee, on the Spit is in the audience. He reported that Mr. McGee has a current lease with the City, is very frustrated and is also trying to negotiate a lease on Lot 12B on the Homer Spit. He expressed his extreme disappointment that the Mayor and Council have not responded to the letter to them from Mr. McGee and that this is an embarrassment to the community. Mr. Hogan commented about the City objecting to the criticism that the City of Homer is anti business, yet the City does not show the courtesy of a replying to the correspondence from Mr. McGee. He noted that courtesy goes miles and no response to this letter raises his blood pressure. Mr. Hogan advised that he had a similar experience with another community that he was proposing to do business with, did not pursue that project and relayed his personal frustration with trying to do business with the City. He voiced his belief that the Auction Block has a track record of contributing enormously to the economic development of this community and has done millions and millions of dollars of business in this town. He stated that at the present time "they" are still interested in leasing property from the City, however, the capital that they had reserved for the development project in Homer has already been directed to another coast community with plans to proceed with development in that community. Mr. Hogan pointed out that life is short and they do not have the time to go through all of the hoops with the City of Homer. He voiced his belief that eventually they are going to get there, but in the meantime they are going to continue to do business and get a return on their investment elsewhere. He commented in regard to the lease proposal that was forwarded to the City wherein a 20 year lease term was requested to amortize the lease and get the return on the investment. He relayed that the City stated that the maximum term is 15 years, however, he countered, in reviewing other leases he found that is not the case. He reported that the City gave a draft lease to Harbor Leasing and told them to mark it up however they wanted for a point of starting discussions. He advised that Harbor Leasing replied with 34 items they felt were reasonable departures, adjustments and some were just plain common sense. The first correspondence from the City Administration was that the City was not going to talk about it, was not interested, and to forget it, which was the point Mr. Hogan obtained copies of all of the other leases on the Spit and started reviewing these point by point. Mr. Hogan noted that while the City would like to represent that they have a standardized lease policy, that is just not the case, most of the leases are not in compliance and there are some non compliance holes that one could drive the Tustemena through. He stated that he did not particularly object to special provisions being made to one tenant or another to make their business operation work, which is to the City's benefit to make concessions and do what needs to be done. Mr. Hogan emphasized that as one of the City's biggest customers he has not asked the City for a single thing, with the only input from the City being a couple of years ago when one of the Councilmembers told him to take his business and move it out of town. He voiced his preference that the City of Homer start working with business. At this point he referred to Mr. McGee's situation where he has been the lease holder of the most performing asset the City of Homer has ever had, with millions and millions of dollars of economic activity generated from his lease. At the present time Mr. McGee's lease is coming to an end. Assuming that the Mayor and Council have all read Mr. McGee's letter, Mr. Hogan expressed his opinion that Mr. McGee deserves the courtesy of at least opening discussions to renew his lease. He shared his knowledge, through a letter from the City Manager, that discussions are occurring on at least one other lease on the Spit. Policy was adopted four or five years ago on non renewable leases, prior to that it was an assumption that when lease terms were up the owner of the improvements would have a chance to renegotiate the lease. Mr. Hogan stated that, as far as he knows, "this" is not being applied, at all, to any other lease. He referred to the listing of the lease that he has, the Fish Factory lease was an assignment, assumption renewal and a rewrite. The other one on the Spit is negotiating an extension, has a lot of non compliance and should be put out to bid. He emphasized that if the City is going to have this policy then it should apply to everyone. He voiced his lack of understanding as to why the City is not giving Mr. McGee the courtesy of a conversation. Regarding the argument that the City is anti business, he reported that he has a whole stack of examples. He relayed his experiences in dealing with the City of Homer: Frustrating, rude, and that there have been either exaggerations or down right deceptions. Mr. Hogan informed the Council that he does business in Seward as well, and that he could not be more thrilled with the way the City of Seward treats him, a huge departure. He emphasized that he has made concessions in Seward and paid more money than he has to, because of the courtesy extended to him. Seward has not told him to take his business and leave town, but has said that they would do whatever they can to keep him there and that they want to work with him. He voiced his desire to see the City start giving serious consideration to how this image could be turned around. He voiced his opinion that it is incumbent upon the Council to start exerting some leadership. He queried the Council if they knew how Homer became the number one halibut port. Mr. Hogan advised that as one of Mr. McGee's tenants he may have to look at relocating in the next couple of weeks and does not know to where he will be relocating, an added expense that he does not need to go through. He reiterated that there has never been an asset of the City that has performed more fully and returned more economic benefit to the community. He encouraged the Council to review the image of Homer at their next worksession. He inquired why people keep stating that Homer is anti business. It is not because people are just flakes and keep throwing rocks at the Council, there is some validity to this mantra that Homer is anti business. He offered to write up all the inequities in the leases if the Council is going to do something with it, however, he will not waste his time or money just for fun.

Marty McGee, owner of the Manley Terminal properties, reported that seven years ago when he assumed the lease he did not think he would be in the situation he is in today, adding that he is not naive about real-estate or the real estate market. He advised the Council that he is a professional evaluator of real estate, the Municipal Assessor for Anchorage. He pointed out that no other jurisdiction in the state has the policy that the City of Homer employs, in fact it is just the opposite. He offered to quote exactly from the Alaska Administrative Code, what the situation is with leasing the property at the Airport. He reported checking with all of the other municipalities and boroughs in the state and that they encourage, not discourage the extension of leases. He pointed out that he has invested over $300,000 in this community, has taken property that was in default and very poor physical condition and turned it around to be, probably, the City's most profitable asset on the Spit right now. He relayed hearing a lot of criticism, indirectly, about his property being run down, having a poor appearance and a lot of junk in the yard. He stated that he spent $5,000 last year trying to clean it up and that this is all related to the fishing industry, and to the fact that he has tried to do business with Homer businesses through out his tenancy, a number of who have defaulted and gone out of business. A few years ago he came before the Homer Harbor Commission trying to do an assumption and sale of a portion of the property to a company that was buying fish and processing it here in Homer. This was approved unanimously by the Harbor Commission and torpedoed by the City Council. Those people tried for a year and a half to figure out what the City of Homer wanted in terms of their development. They had architectural plans, a contractor, loans arranged with Key Bank in Kenai, and had all the assets in place. That company is still a successful fish selling company, but does not buy or process any fish in Homer. He emphasized that this is directly a result of what has gone on with the Homer City Council. He noted that he has tried to communicate with the Homer City Council and with the City Manager directly, which is why he forwarded the letter. He received no response, therefore, he does not know what it is that the City wants, and does not know where to go with the discussion. He emphasized that he does know that he is facing a financial crisis, a crisis he would not face in any other leasing jurisdiction in the state, one that is unique to Homer and Homer's leasing policy. He offered to discuss this with the City Council and this is why he has asked for this to be an agenda item. The lease policy should be one that encourages economic development and works with the citizens of Homer to provide opportunities for the citizens of Homer. He advised that he is accompanied by several of the tenants in his building, Homer business owners that will be displaced if he loses the lease, especially if what he hears is true that the intent is to demolish the building. He pointed out that his tenants are trying to open and operate businesses and he is trying to work with them. It is foolish for anyone who is a land lord of commercial property to think that they are anything but a partner with the people that are his tenants, their success leads to his success. He relayed that this is the reason he worked with Doug Stewart and every other tenant that he has had trying to make their operation a success. He voiced his belief that he has a good opportunity to go forward with that, which is the only reason he asked for an extension of the lease. He found, after he had acquired the lease, that he was unable to borrow any money against the property because the term of the lease was too short, which has also lead to a number of vacancies recently. He emphasized that he cannot offer a tenant a lease longer than his term of lease, which is often needed in order to get a business established. Therefore, a number of the people he has entered negotiations with have broken off negotiations. He has tried diligently to find fish processing businesses to locate on the property, having offered to demolish and replace buildings if he could attract them to the property. He has found none, no one wants to process fish. He relayed that everyone he has contacted in the fishing industry, the major players, have stated that they are significantly struggling to make their currently owned assets functional. This is the reason plants are closing in Kenai and other areas around the state. The fishing industry is facing a significant crisis. He is willing to take the opportunity to work on this and move forward to get businesses established. He would like to give the building a face lift. He reported that seven years ago he immediately went to the City Planner and raised the question of what other things he could do with the building. He emphasized that everything he felt was economically viable, the City Planner told him that he would not be allowed to construct on the property and therefore is very frustrated. He cannot move forward and has not been able to for seven years. When he thought that he was moving forward with the sale and assignment he was stopped by the City Council. He voiced his desire to enter into negotiations with regard to where he can go with the lease, although his objective is at least a 20 year lease, which is reasonable to support the improvements. He asked Council for a few months and direction from them to enter into negotiations regarding what would be feasible and what they want to accomplish on the property. He stated, on the record, that he would like to ask for the minutes of this meeting, that he has asked for the minutes before, the past two times here in Homer and has never received any minutes.

Bill Teener, South Central Radar, advised that he runs a business that sells and services marine electronics along with other products and services. His business was established in 1975 and has been on the Spit most of that time, except the first two years. He emphasized that the Spit is where his business needs to be located and he has been in the McGee complex since 1980, a good location. He voiced his belief that he needs to be on the premises or around the boat harbor somewhere and that over the years he has been on Hillstrand's Land, which is private. He commented that, he did, at one time, encounter trying to get a lease on a piece of property and that he blew that himself. He stated that he is stuck if in fact the lease goes out to bid and someone else gets it and the buildings are torn down. He interjected that he would not blame Mr. McGee if he did tear them down, this is his investment and why give it to someone else. Mr. Teener relayed that he does not know where he is going to relocate, there is no other private property other than Hillstrands; therefore, it appears that he will have to move off the Spit. He encouraged the Council to change their minds and deal with Mr. McGee on his lease. He shared his knowledge of Alan Parks passing through the Council to open it up so that everyone has the opportunity to have a lease, even if someone else has already put an investment into the property. He urged the City to think about the fact that Mr. McGee has had seven years and quite a bit of investment in the property, as well as what the City is doing to the other people in the complex that are going to be thrown out. He voiced dissatisfaction with the Council wanting to slice this property up into three parcels and that it may be a year before anything is available to him, and that he does not know what to do. He asked the Council to please consider talking with Mr. McGee and to maybe come up with a way to deal with this lease.

Steve Zimmerman, a business owner in the McGee complex, stated that he is in the same position as the rest of the business owners. He commented that it has not been mentioned that half of the businesses that live on the Spit 12 months out of the year are in the McGee complex. He pointed out that now is the Council's chance, if the Council wants to cut the economic base of the Spit for retail in half. However, now is also the Council's chance to keep these businesses on the Spit. He urged the Council to talk to Mr. McGee, to at least give him a deal that is not going to tear down the buildings in two months.

Gary (Gil) Mayforth, commented that he had been reading in the paper and listening to the news lately. He commented on having the opportunity to have Mr. Drathman stop by the Methodist Church the other week. He stated that he was glad to hear and thanked Mr. Drathman for mentioning that a town the size of Homer is always going to need its volunteers. Mr. Mayforth read the Homer Tribune's December 5th article, last paragraph: "This is getting characterized as volunteers getting pushed out of the picture and that isn't the case at all, said Drathman. We're still going to have to have volunteers to make the system work." Mr. Mayforth commented that the strange thing to him was the report this morning on KBBI and that "his take" on the Fire Chief's last sentence was that within five to ten years the City will probably be moving to a paid system. He advised that this was an eye opener for him and that he suddenly did not know which direction the City was headed. To Mr. Drathman, he inquired as to whether the volunteers were really needed or if the Fire Chief has another idea.

COMMENTS OF THE CITY ATTORNEY

City Attorney Tans was not present.

COMMENTS OF THE CITY CLERK

City Clerk Calhoun wished all Happy Holidays and noted that there are no more Council meetings until 2002.

COMMENTS OF THE CITY MANAGER

City Manager Drathman thanked the Council for their work on the budget. There was a brief comment regarding the Local Boundary Commission (LBC) helicopter tour and auto tour of the proposed annexation area scheduled for Thursday, December 13, 2001. The LBC will be conducting meetings on Friday and Saturday and carrying over to Sunday if necessary. He voiced his hope that all of the Council would be present for the hearings, adding that the Department Heads will be there from beginning to end and will answer any questions that the LBC may have.

COMMENTS OF THE MAYOR

Mayor Cushing stated that this budget is one of the most balanced budgets the Council has had and predicts that the audit will show that the budget is way over balanced since the Council is very conservative in their thinking and very fiscally conservative. He stated that he is not afraid at all about the additional $20,000 to the Homer Foundation. The Mayor commended the Council for their work on the Spit water and sewer rates, pointing out that the differential Spit rates have been around longer than the bike trail. He commented that he had brought forward the idea of changing the differential at the time of the bike trail and there did not seem to be the political or administrative will at the time to change the rates. He voiced his opinion that this rate change will be healthy for the general business climate on the Spit. Mayor Cushing commented on the audience comments regarding the leasing process and noted that Councilmember Yourkowski, as a Planning Commissioner had been in exactly the same situation and had to rebid on the lease wherein he had invested time and money. He stated that his point is that this is not a unique situation and the leases have taken the direction that the Council, as a body, wanted to take. He reported that fisheries/fishermen have indicated that the Homer Port is very competitive. He emphasized that for every one person that says Homer is a bad place to do business, he hears about ten people say that this is a great place to do business. He concluded by saying that the lease (McGee Lease) issue is not over.

COMMENTS OF THE CITY COUNCIL

City Councilmember Fenske commented on the McGee letter and that he did not feel it appropriate to answer that letter personally and that the Council has to speak as a Council. Regarding the negotiation of leases, he advised that this is why the Council has a business manager. He voiced his hope that the policies that have been put into place over the years and are continuing to be put into place, although not perfect, are getting better and that the playing fields are becoming more level. He advised that five, six or eight years ago the largest complaint on the Spit was the disparity in the lease price per square foot. He agreed that it is best when the process is a level playing field and that he recognizes that there are some old leases. He stated that hopefully the last leases in the last three or four years have the same applied policy.

Councilmember Kranich noted that the Council did a lot of business tonight and that he agreed with some of the things they did and did not agree with some things. He stated that he has to support the position taken by the entire Council. He commented about the recent situation on the Spit and that he has questioned the City's Lease Policy. He advised that he will attempt to obtain a copy of the State/DOT's Lease Policy and see if there is anything in that policy that the City of Homer can incorporate. He commented about lease terms and will see if there is anything the City can glean from the State's policy.

City Manager Drathman interjected an appreciation to the Finance Director, Accounting Supervisor, Finance Staff and Department Heads for their work on the budget.

Mayor Cushing seconded the note of appreciation.

Councilmember Ladd also, as the Clerk had, wished everyone a Merry Christmas and a good New Year. He reminded the Council that in January they will be working on the Community Survey and that he looks forward to working on the survey. He thanked the Budget Director and Manager for putting the budget together, he expressed his opinion that the budget was well presented this year and easy to work through. He voiced agreement with Councilmember Kranich that there is a good budget and this is something they will work with, but that he is sorry that the $20,000 was voted on beyond what should have been included.

Councilmember Marquardt thanked the Council and staff for producing a good budget this year. He wished everybody the best New Year. He followed up on the lessees comments and that he feels the Council heard a one sided story with probably some valid points. He stated that he would like to see the lines of communication opened up, adding that he is not sure of the time table and that the City Manager has been very busy. He noted that it is obvious that these gentlemen have been a part of the healthy economic development on the Spit and do deserve an open ear. Mr. Marquardt emphasized that he will do what he can to ensure that they get a fair hearing on this lease policy.

ADJOURNMENT

There being no further business to come before the Council the meeting was adjourned at 10:15 p.m. The next regular meeting is scheduled for January 14, 2002 at 7:30 p.m. The Council's Committee of the Whole meets at 4 p.m. on January 14, 2002. The special meeting scheduled for December 17, 2001 is canceled.

______________________________________

MARY L. CALHOUN, CMC, CITY CLERK

Approved: _____________________________