City council made big progress on the 2014 budget at their meeting last night, but that didn’t spare them from a tough discussion about funding capital projects.

In all, the city is planning $60 million in intensive upgrades to utility plants. About $40 million of that will come from loans and grants, but the rest will need to be paid out of the general fund. After a presentation by Mike Hubbard, of the Financial Engineering Company, council hammered out a basic strategy for handling these costs.

They turned down a plan that would repay the general fund by sharply increasing utility rates. They did, however, say that they want the utilities to start operating at a slight profit. Right now, many break even or run at a deficit. They also want to phase in any rate increases over a few years, instead of implementing them all at once.

As a tradeoff, the city might need to collect more sales tax to supplement utility revenues. Any increases in the sales tax would ultimately have to be approved by voters.

This plan could still raise the average consumer’s monthly bill by at least $25 -- and pinning down the effects on industrial users will be even harder.

Councilor Tom Enlow pointed out that industrial rates can’t be averaged, because they’re charged different fees based on usage and access. Nevertheless, public utilities director Dan Winters tried to provide a ballpark estimate.

He told council that under the proposed plan the three biggest processors -- UniSea, Westward, and Alyeska Seafoods -- could see a jump of $41,000 a month, or half a million dollars a year in their bills.

None of these numbers are final. Hubbard, the consultant, will perform a more detailed rate study and try to get more information on how raising the sales tax could affect different user groups. Council will take up utility rate increases again at their May 28 meeting.

After the financing discussion, council unanimously approved a $19.3 million contract with Alaska Mechanical to build the city's new wastewater treatment plant.

And after weeks of work, council voted to approve an amended 2014 operating budget, and the capital budget. Those will move to a second reading and public hearing at the next scheduled meeting.

As part of the operating budget discussion, council approved an amendment that adds an extra $10,000 to the scholarship fund for next year. They also finalized the scholarship funding for this year’s high school seniors. The number wasn't disclosed at the meeting, but it will be revealed at graduation this weekend.

Finally, even though Unalaska is facing big expenditures, the council voted not to increase the city’s property tax. The rate will stay at 10.5 mils -- although there could be additional revenue from an ongoing reassessment of local property values.