City of Kotzebue grapples with budget and infrastructure challenges

The City of Kotzebue is tackling several critical infrastructure issues along with leadership changes. City staff and council members convened Jan. 6-7 for an annual budget retreat to look at short- and long-term priorities. From the Cape Blossom Road and water and refuse projects to financial changes, the city has a lot on its plate.

Cape Blossom setbacks

One improvement the city is eyeing is a half-complete 11-mile road that would connect Kotzebue to a potential site for a deep-water dock. The Cape Blossom Road project is now several decades in the making. The first four miles of the road were constructed in the summer of 2023, but the remainder is still in limbo as funding becomes more cloudy.

The project has doubled in cost and money initially allocated by the Alaska Department of Transportation for the project isn’t enough to cover the construction.

“What was anticipated to be around a $60-ish million project is now around $120 million,” said Kotzebue’s outgoing City Manager Tessa Baldwin.

The higher price tag means the city needs to find an additional $2 million match to access grant funding. The city has reached out to other local entities like the Northwest Arctic Borough and Kotzebue’s tribe to help fund the project – but both have removed the road from their top priority lists. The Northwest Arctic Borough shifted more of its energy toward its village public safety officer program, while the Native Village of Kotzebue has been focused on building a new office and preschool building.

A recent study on the road and port project conducted by Dowl Engineering and Northern Economics casts further doubt on the economic benefits of the project. Baldwin called the findings, which have not been released publicly, “hard news for everyone.”

Kotzebue Public Works Director Russ Ferguson put it more bluntly.

“The rate study shows that it’s not going to save the community any money,” Ferguson said. “Why is the state going to continue on the path of the Cape Blossom Road fund for us when other communities may need it more?”

Kotzebue’s newly-appointed Financial Director Michael Laughlin was also critical, saying he fears Cape Blossom could become Kotzebue’s “white elephant,” citing a notorious multi-million dollar failed airport project outside of St. Louis.

Several council members opted for taking a more cautious approach to the project, and have moved it down their funding priorities. Plus, there are other pressing projects, including Kotzebue’s baler building.

Baler building in need of repairs

The baler building is a critical component of Kotzebue’s waste management, and the central hub for refuse operations. Baldwin said the building has several “dire” structural issues and needs floor repairs.

“This is one project that we cannot ignore this year,” said Baldwin. “It’s been in a dilapidated state that could potentially harm the utilities that we provide to our residents.”

City representatives said repairs to the baler building could cost over a million dollars. The city council is considering raising utility rates as a precautionary measure if the baler building does not receive funding from the state legislature this session.

Drinking water improvements

Kotzebue’s drinking water also remains a critical issue. The city has secured funding for a design to replace the Vortac Lake Dam, one of two municipal water sources. The council passed a resolution at its January 7 meeting for a contract with Drake Construction and Dowl Engineering to move forward with upgrades to the water treatment plant’s filtration system.

As an interim fix, Kotzebue’s Public Works Department plans to purchase individual water filters for each household. The move comes after manganese in the city’s drinking water last April was above levels set by the Environmental Protection Agency for infants under six months old. Ferguson said the filters will cost the city around $55,900, including shipping.

“I had initially requested that I try to get us those no later than March,” said Ferguson. “Just the sheer volume of them was kind of an issue.” Ferguson said it’s important that they arrive before the spring, when thaw can stir up sediment in Vortac and Devil’s Lake.

The city also has prioritized replacing two of the city’s aging water loops, Swan Lake and Lagoon, estimated at $30-35 million dollars. Kotzebue has five water loops which feed drinking water to the community from a centrally-located water treatment plant. The City of Kotzebue has already secured about $2.5 million from the State’s Revolving Fund – a state-managed low-interest loan program- for initial planning and design of loop replacements. Last February, Swan Lake loop experienced several failures which cut off city water to nearly 800 residents for several weeks. It will probably take between five and 10 years to replace both loops, according to city officials.

“We have a lot of work ahead of us …”

The city also listed an erosion and flood protection project, an emergency center, washeteria, landfill expansion and telecommunications upgrades as its capital priorities.

“We do have a lot of work ahead of us for the city with projects that are upcoming and equipment that needs to be repaired,” said Kotzebue Mayor Derek Haviland-Lie.

And that work may be compounded by department vacancies. Baldwin’s last day as city manager is Jan. 17, although she’ll stay on as an independent contractor until her replacement is hired. Several other departments are also still hiring or will soon be shortstaffed.

The city still does not have a fire chief. Recently-appointed Police Chief Christopher Cook volunteered to take on the position until a replacement is found. Kotzebue Human resources administrator Rachel Belamour also announced her resignation at the January 7 meeting. Her wife Gem Belamour who works as the city planner also resigned.

City Finances

At the same meeting the council, at the recommendation of the city Finance Director, Mike Laughlin, is considering severing ties with Wells Fargo. The city plans to put out a request to other companies to handle its banking.

Following a data breach in the state’s retirement system, Laughlin began working on establishing a third-party banking account to hold city employee’s retirement benefits until the issue is resolved. The city also plans to contribute up to $10,000 based on the amount employees have previously paid into its retirement fund. The council also approved a contract with Vitus Terminals, LLC for fuel services for the remainder of 2025.

An exact date for the next council meeting has not been set, but a representative from the city said it would likely be the first week of February.