NJUS awaits fuel barge, money in hand

NJUS staff and City of Nome’s public works department have been set to welcome the Vitus Energy fuel barge coming over the horizon bringing diesel fuel to add to existing inventory to bring the supply NJUS tanks to over three million gallons.
However, the shipment, expected around July 24, will not come until late next month. John K. Handeland, utility manager, explained that Vitus is bringing a new barge that will allow the vendor to deliver Nome’s fuel in two loads.
“With adequate product on hand, I opted to wait, as opposed to having Vitus use their smaller barges before the end of July, which would have required nine to 10 trips back and forth, at added time and cost,” Handeland explained.
Nome Joint Utility Systems has 2.2 million gallons on order, the price of which has already been financed through Northrim Bank.
The NJUS Board of Directors agreed to accept a loan from Northrim at the proposed interest rate of 2.85 percent for a 2017 fuel note of $4.4 million that the utility will combine with other operating funds of $31,500 to make up the fuel expenditure needed.
The Nome Common Council approved the loan at a special meeting on July 7. At that meeting, Handeland provided the Council with a breakdown of costs going into the $4,431,500.
The list starts with a payment of $3,982,000 to Vitus Energy for 2.2 million gallons, figuring a cost per gallon of $1.81per gallon. Add to that $0.035 per gallon for Port of Nome wharfage fees to total $77,000. That brings the cost to $4,059,000. Now add $147,500 in miscellaneous other costs: Port of Nome—dockage, line handling, transfer monitoring labor, 10,000; legal—bond attorney, $3,500; legal—fuel contract by city attorney, $1,500; Yukon Title Co. escrow fee, $4,000; independent fuel quality testing and quantity verification, $10,000; Tank farm maintenance and cleaning, $40,000; pollution liability insurance, $40,500; tank farm insurance, $38,000; all adding up to an additional fuel cost of $147,500. Now add a big ticket Wells Fargo final payment to cash out a previous loan—$225,000. The grand total for fuel now comes to $4,431,000.
The Council has approved a loan of up to $5.5 million.
This year Wells Fargo came back with a willingness to fund the fuel at 2.65 percent interest, while Northrim Bank said 2.85 percent. NJUS Board of Directors voted unanimously to go with Northrim Bank. Northrim beat out Wells Fargo on the big details—the security to back the loan and flexibility of the interest rate.
Wells Fargo wanted the loan backed by a more secure City General Obligation Bond that would have made the City of Nome raise property taxes to pay the fuel loan if necessary. Northrim responded with an offer to take a note from NJUS based on a Utility Revenue Anticipation Bond.
Handeland and directors favored not having the City borrow the money for them.
“What we asked for was a [tax exempt] utility revenue anticipation [note]. We’re getting back to a position of standing  on our own,” he said.
In other business, the utility has boosted sewer and water infrastructure upgrades officially to a high priority. The move will also boost the City’s chances to obtain state municipal matching money. NJUS has made upgrades in the east side of town starting with Kings Place a top local priority.
“This is a resolution that we ask for annually at this time. We are expecting the State will be putting out their municipal matching grant program again, but it is a competitive rating, and by having the community show that this is the number one priority, there is an additional 50 points that are awarded in our scoring,” said Handeland.


The Nome Nugget

PO Box 610
Nome, Alaska 99762

Phone: (907) 443-5235
Fax: (907) 443-5112


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