Legislature(2001 - 2002)
04/29/2002 04:22 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 359
"An Act relating to organization grants for mergers,
consolidations, or unifications involving third class
boroughs."
This was the first hearing for this bill in the Senate Finance
Committee.
MARY JACKSON, Staff to Senator John Torgerson, Chair of the Senate
Community and Regional Affairs Committee, which sponsored this
bill, testified. She spoke of two communities contemplating a
consolidation and informed that a review of statute revealed that
the proposed consolidation is not eligible to receive
organizational grants.
Ms. Jackson stated this legislation would permit the receipt of the
organizational grants, with $200,000 provided in the first fiscal
year and an additional $200,000 in the second year. She compared
this to the amounts granted to other entities under existing
statute of $300,000 the first fiscal year, $200,000 the second
fiscal year and $100,000 the third fiscal year.
Senator Leman commented that he supported the efforts of the City
of Haines and the Haines Borough to consolidate, however, he was
unclear why the State of Alaska should pay $400,000 for this
process. He asked what activities must be funded, and whether these
expenditures were incurred by the State when other local
governments were consolidated, such as the City and Borough of
Juneau, the Anchorage Municipality, and the City and Borough of
Sitka, etc. He understood the need for the State to cover certain
expenses for areas that were not previously organized to encourage
them to organize.
Ms. Jackson answered this legislation is specific for third-class
boroughs and that Haines is the only area of the State with this
form of government.
Ms. Jackson read from existing statute as follows.
Sec. 29.05.190. Organization grants to boroughs and unified
municipalities.
(a) For the purpose of defraying the cost of transition
to borough government and to provide for interim governmental
operations, each borough or unified municipality incorporated
after December 31, 1985, is entitled to organization grants as
follows:
…
Senator Leman asserted there is no information included in the
backup information for this legislation indicating the necessity
for these expenditures in the Haines situation.
Ms. Jackson stated that the Senate Community and Regional Affairs
Committee determined it is important that the organizational grants
be offered to third-class boroughs, although in a lesser amount
than awarded to unorganized areas.
Senator Leman asked if this question arose in the Senate Community
and Regional Affairs Committee.
Ms. Jackson affirmed the question was posed and it was determined
that some amount should be provided. She expressed that budget
constraints are the "business" of the Senate Finance Committee.
Senator Leman supported efforts to encourage the organizing of
unorganized communities.
Senator Leman reiterated the need to understand the reason for
expending the State funds. He qualified the expenditure could be
justifiable and necessary, but he had no information to prove this.
MARCO PIGNALBERI, City Manager, City of Haines, referenced a
handout titled "Outline Estimate of Costs for Consolidation" that
details the anticipated costs involved in coordination [copy on
file]. He spoke to expenditures made to date for such services as a
consultant and legal fees to address litigation on the issue. He
noted that the local governments have covered these expenses to
date.
Mr. Pignalberi asked and answered why the State must pay $400,000
for these expenses, asserting the question instead should be why
the State does not appropriate $600,000 for these efforts because
that is the amount currently authorized for newly formed boroughs.
He stated that the Local Boundary Commission is unsure why the
consolidation is excluded from existing statute. He surmised that
in 1985, when third class boroughs were deleted from this portion
of statute and the $600,000 grant provision was added, it was not
anticipated that the Haines governments would consolidate.
Mr. Pignalberi stated the $600,000 grant program is for the purpose
of establishing first class city and borough governments. He
stressed this process is "part of the constitutional fulfillment"
that requires the State to work toward obtaining the least number
of governmental entities and the fewest number of tax assessing
entities. He asserted this has been the goal of the Haines
community since 1998. He spoke of an upcoming election to determine
whether the city and borough governments should be consolidated.
Mr. Pignalberi noted a cost benefit to the State from this
consolidation in that of one less applicant would be requesting
state grant funds in the future.
Mr. Pignalberi also stressed the new city and borough would provide
a stronger local government.
Mr. Pignalberi also pointed out a stipulation in the Alaska
Administrative Code requiring that consolidations must be completed
within two years. He asserted this could not be accomplished within
the deadline without the services of a contracted consultant.
Senator Ward asked the consequence if the State does not provide
the requested $400,000 in grant funding.
DAVID BLACK, Mayor, City of Haines, surmised the city would
continue its efforts for consolidation. However, he cautioned that
the anticipation that borough residents would incur increased costs
could provide the incentive for those voters to not support
consolidation. He informed of a recent election in which the
question to consolidate failed by two votes. He surmised the
proponents of the consolidation "are working in a very narrow
margin."
Senator Ward asked if the election included both city and borough
residents.
Mr. Black affirmed.
LUCY HARRELL, Member, Haines Borough Assembly and Haines School
Board testified to comments she has heard indicating that receiving
funding for this transition could be the "crucial" influence to
convince voters to approve the consolidation.
Ms. Harrell reminded that the current Haines Borough is a third
class borough and therefore its authority is limited to taxation
and school operation. She stated that current activities are being
conducted by the Borough assembly "in gray areas" of its
authorization. As a result, she stressed, it is difficult to
convince residents to run for public office, given the questionable
legalities of their actions as a government. She told of the few
people holding multiple offices. She asserted the intent to create
a government that "represents all people in the area."
Ms. Harrell spoke to the unfairness of providing grant funding for
other organizational efforts while excluding the Haines government.
She asserted the Haines consolidation would require both the
formation of a new government and the dissolution of the existing
system.
Amendment #1: This amendment inserts language into the title of the
bill, following "boroughs", to read as follows.
An Act relating to organization grants for mergers,
consolidations, or unifications involving third class
boroughs; and relating to identification by the Local Boundary
Commission of areas that meet the standards for borough
incorporation.
This amendment also adds a new bill section on page 2, following
line 2, to read as follows.
Sec. 3. The uncodified law of the State of Alaska is
amended by adding a new section to read:
REVIEW OF UNORGANIZED BOROUGH. The Local Boundary
Commission shall review conditions in the unorganized borough.
th
By the 10 day of the First Regular Session of the Twenty-
Third Alaska State Legislature, the commission shall report to
the legislature the areas it has identified that meet the
standards for borough incorporation and the basis for its
determination, and make recommendations for legislative
consideration.
Senator Wilken moved for adoption.
Senator Austerman objected for an explanation.
Senator Wilken stated this amendment instructs the Local Boundary
Commission to identify those areas where organization into a local
government is feasible. He recalled past unsuccessful efforts in
this matter and assured this amendment was drafted with the
assistance of the chair of the Local Boundary Commission. He
emphasized it is not his intent to slow the process of passage of
this legislation. However, he stressed the matter requires "serious
consideration" and that he did not anticipate any member of the
legislature opposing the identification of "those areas that are
able to help themselves."
Senator Austerman commented he also did not want to hamper efforts
in passage of this bill, although he wanted input from the sponsor.
Senator Wilken assured that if the sponsor indicated opposition to
this amendment, he would remove it at a later date.
Ms. Jackson agreed Senator Torgerson has supported these efforts in
the past. She qualified he could have concerns if a fiscal note
were generated.
Senator Hoffman commented that it is "highly probable" this
amendment "drastically slow down and possibly kill this
legislation."
Senator Austerman asked if legislation has been introduced in the
House of Representatives that addresses grant funding for the
Haines government as well.
Co-Chair Kelly replied such a bill does exist.
Senator Austerman removed his objection to adoption of the
amendment.
The amendment was ADOPTED without objection.
Senator Ward asked for clarification of the outline of estimated
costs handout. He questioned the amount that must be spent during
the first year of consolidation rather than deferred to the second
year.
Mr. Pignalberi stressed the need to undertake the process as
quickly as possible. He stated all expenditures would not be known
until the process is underway. He expressed intent to accomplish
the consolidation in one year, and noted statute requires
completion in two years.
Senator Ward asked for an explanation of the "litigation
contingency."
Mr. Pignalberi told of the previous attempt for consolidation
undertaken in 1998 and a subsequent lawsuit involving a utility
operating within the city. He informed he has been told that those
parties opposing consolidation would attempt to identify issues
whereby a lawsuit could be brought to stop the efforts. He noted an
on-going legal dispute relating to consolidation regarding a
service area has incurred $25,000 in expenses.
Senator Ward asked what would occur if this bill passed into law
yet the Haines voters rejected the consolidation proposal.
Mr. Pignalberi noted the Haines government would not receive the
funds. However, he indicated that the efforts to consolidate would
be repeated.
Senator Ward questioned the manner in which the grants would be
appropriated.
Mr. Pignalberi explained that the funds would be appropriated for
the fiscal year in which they would be expended.
Mr. Pignalberi spoke to past grant appropriations for other newly
incorporated boroughs and surmised that the Haines consolidation
process could be completed in one year if the funds were provided
immediately. He detailed the timeline of conducting the elections
to consolidate and choose new assembly members.
Senator Leman referenced the aforementioned handout, which he
totaled at a maximum of $420,000 in grant funding. However, he
pointed out the language of the legislation states "for the
purposes of defraying the cost of transition." He remarked this
appropriation would cover the entire identified cost, rather than
just defray the cost.
Mr. Pignalberi disagreed and listed expenditures the city has paid
to date including consulting fees and litigation settlement costs.
He stated the handout identifies "broad categories of costs here
that are not meant to be detailed because we have no one available
to us who has gone through this before." He noted the city's
auditors have provided the estimates listed in the handout.
Senator Leman stated the legislature as recently as 1994 has
stated, "these grants don't apply to a borough incorporated by
consolidation or to a unified municipality." He stressed the intent
is for local governments to consolidate to form boroughs, and
expressed the situation in the community of Haines is different.
Mr. Pignalberi reiterated the purpose of the Haines effort is to
fulfill the Alaska constitutional requirement to create the least
number of government units and taxation jurisdictions and the most
effective local government. He again referred to the Local
Boundary Commission's assertion that this effort should be funded.
He remarked, "It's hard to make a template" to fit "every situation
around the State and fit it fairly." He pointed to efforts in the
City of Skagway to form a borough government and stressed that
community would be eligible to receive $600,000 in grant funding
for the effort.
Senator Leman agreed the grant funds would be available if the
areas considered for consolidation into a borough if the Local
Boundary Commission determined the efforts to be feasible. He
suggested Haines, Skagway, Gustavus and Tenakee Springs could be
consolidated into one borough. He did not support funding a change
of the City of Skagway to become the Borough of Skagway.
Mr. Pignalberi expressed he could only comment on the issue of the
Haines governments.
Mr. Pignalberi again spoke of the $1 to $2 million State funds that
would be saved within ten years as a result of a Haines
consolidation because the City of Haines would no longer exist and
therefore be eligible to receive capital improvement project (CIP)
grants.
Ms. Harrell, commented that a third class borough is not "a borough
as you understand it" but is rather a "sick dinosaur" with the
intention of avoiding forming a borough government and therefore
must be "put to rest".
Senator Leman did not oppose this argument, but stressed that based
on the information provided to the Committee, the State would
provide all the transitional costs as opposed to sharing the cost
with the local government.
Ms. Harrell responded $400,000 would not pay all the transitional
costs. She noted the borough is responsible for school operations
and stressed that a third class borough is prohibited from
deferring funds from school expenses to use for consolidation
efforts. She listed political activities and economic development
as activities the third class borough is prohibited from
participation. She stated this appropriation would not pay the
entire cost of consolidation, but only "a chunk".
Senator Wilken moved "to report SB 359 as amended from Committee
with individual recommendations and attached fiscal note."
There was no objection and CS SB 359 (FIN) MOVED from Committee
with a $250,000 forthcoming fiscal note from the Department of
Community and Economic Development.
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