When Nome’s massive port expansion project ground to a halt last month, over $82 million in funds earmarked for the project sat frozen in a general account. Now, the city is set to earn some interest – to the tune of a quarter million dollars a month – on the funds as they await a new round of bids.
Interim City Manager Brooks Chandler called the move a “no-brainer” in a memo issued to Nome’s Common Council. At Monday night’s council meeting, Chandler said he discovered the opportunity while reviewing the terms of Nome’s delayed port expansion project.
“It was noted that there was a provision in the Project Partnership Agreement which allowed the city to instead of having the Corps sit on the money while they went through a rebidding process, to open an escrow account where it could earn interest which would accrue to the benefit of Nome,” Chandler explained.
Just last month, the U.S. Army Corps of Engineers cancelled bid solicitations for the project, citing that the bids received were above their statutory limitations.
Northrim Bank’s Nome Branch Manager, Drew McCann, sat in the back of the room as the council reviewed a resolution authorizing the transaction. He shared that the interest rate on the account will be tied to the Federal Reserve of New York’s Effective Federal Funds Rate (EFFR), minus 70 basis points.
“A month with this amount of money even at a modest interest rate, is a significant amount of cash,” Chandler said.
As of November 25, that rate would be 3.88%. At $82 million in principal, the account is set to yield over $265,000 in interest a month. The only catch is that interest earned by the account would need to be used for purposes related to the port project, like additional design work by PND Engineers, Inc.
City of Nome Mayor John Handeland said that the funds would remain in the account until a contract is awarded. The port’s newly-appointed Acting Port Director, Joy Baker, said to the council that the rebid process won’t open for a few months, giving the account ample time to earn interest.
“Joy, is February the date?” Handeland asked.
“Ish,” Baker responded.
“Yeah, February-ish. Having that we’re gaining interest, opposed to nobody gaining interest … It’s a win-win for the city and is allowed under the PPA,” Handeland said.
Present council members voted unanimously in favor of passing Resolution No. 24-11-01.
