Legislature(2011 - 2012)BARNES 124

01/26/2012 08:00 AM House COMMUNITY & REGIONAL AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 184 REFUND OF FISH BUSINESS TAX TO MUNIS TELECONFERENCED
Heard & Held
*+ HB 290 ESTABLISH ENDOW ALASKA GRANT PROGRAM TELECONFERENCED
Heard & Held
          HB 184-REFUND OF FISH BUSINESS TAX TO MUNIS                                                                       
                                                                                                                                
8:59:18 AM                                                                                                                    
                                                                                                                                
CHAIR MUNOZ announced  that the final order of  business would be                                                               
HOUSE  BILL NO.  184,  "An Act  relating to  the  sharing of  tax                                                               
revenue  from the  fisheries business  tax  and fishery  resource                                                               
landing tax  with municipalities; and providing  for an effective                                                               
date."                                                                                                                          
                                                                                                                                
8:59:36 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON , Alaska  State Legislature, speaking as                                                               
the sponsor  of HB  184, paraphrased  from the  following written                                                               
testimony [original punctuation provided]:                                                                                      
                                                                                                                                
     HB  184, Refund  of Fish  Business Tax  to Munis,  will                                                                    
     increase  the municipalities'  share  of the  Fisheries                                                                    
     Business Tax and the Fisheries  Landing tax from 50% to                                                                    
     75%. It  is the  intent that these  funds will  be used                                                                    
     for  port and  harbor infrastructure  maintenance. This                                                                    
     bill will  NOT change the  taxes levies. It  just deals                                                                    
     with the distribution.                                                                                                     
                                                                                                                                
     In 1986  the state  started to  divest itself  of ports                                                                    
     and harbors  to reduce operating and  capital costs. At                                                                    
     that time the  state owned 99 of the  125 harbors. Over                                                                    
     the following 25 years the  state has turned over 74 of                                                                    
     its harbors  to municipalities and boroughs.  It is now                                                                    
     up to  the boroughs  and cities  to maintain  their own                                                                    
     infrastructure.  Many of  the  ports  and harbors  that                                                                    
     support   the   infrastructure   for   our   commercial                                                                    
     fisheries,   are  rundown   and   in   need  of   major                                                                    
     maintenance or complete  rebuilds. Well maintained port                                                                    
     and  harbor facilities  are  critical  to the  economic                                                                    
     health of  our coastal  communities. Currently  we have                                                                    
     the Municipal  Harbor Grant fund  that helps  with this                                                                    
     maintenance. You  have in  your packet  a graph  of the                                                                    
     way  this fund  has been  appropriated in  the 5  years                                                                    
     since  it was  created.  It is  sporadic  and makes  it                                                                    
     difficult  for a  municipality  to  implement a  Harbor                                                                    
     plan if the funding  is always uncertain. This increase                                                                    
     in the Fisheries Business tax  will allow munis to take                                                                    
     advantage   of  a   sound   strategic   plan  for   the                                                                    
     development    and    maintenance   of    their    port                                                                    
     infrastructures.                                                                                                           
                                                                                                                                
     Under  the  current  system   funds  generated  by  the                                                                    
     Fisheries Business Tax  from processors are distributed                                                                    
     4 different ways:                                                                                                          
     Fish  processed  inside   a  municipality  are  divided                                                                    
     equally between the state and the municipality.                                                                            
     If the processing occurred  within an incorporated city                                                                    
     inside a  borough, the 50%  is divided  equally between                                                                    
     the two entities, city and borough.                                                                                        
     If the  processing occurred outside of  an incorporated                                                                    
     city the 50% goes entirely to the borough.                                                                                 
     On fish  that are  processed or  landed outside  of any                                                                    
     municipal  or  borough  boundaries   half  of  the  tax                                                                    
     revenue goes to the general  fund (state) and the other                                                                    
     half goes to the  Department of Commerce, Community and                                                                    
     Economic    Development    (DCCED).   The    department                                                                    
     distributes  its  share  among fishing  communities  in                                                                    
     Alaska  according  to  a  formula  that  proportionally                                                                    
     allocates  the   tax  based  on  the   pounds  of  fish                                                                    
     processed in  14 different Fisheries  Management Areas.                                                                    
     (you should have a map  of these areas in your packets)                                                                    
     The  percent that  goes  to  each fisheries  management                                                                    
     area  is  then  split  between  the  communities  by  a                                                                    
     locally    determined   formula    apportioning   equal                                                                    
     community shares  and per  capita shares.  This formula                                                                    
     will not change with HB 184.                                                                                               
                                                                                                                                
     In addition to  the fisheries business tax  HB 184 will                                                                    
     also   increase  the   municipalities'  share   of  the                                                                    
     Fisheries  Resource   Landing  tax  a  subset   of  the                                                                    
     Fisheries Business Tax. This tax  is on fresh fish that                                                                    
     is not  "processed in  state". This  fish can  be troll                                                                    
     dressed salmon,  gutted and gilled Halibut,  live crab,                                                                    
     and geoducks.  This is the  high value fresh  fish that                                                                    
     is exported live and that  is highly desirable. Our tax                                                                    
     distribution system  is clearly  diverting from  one of                                                                    
     the fastest growing parts of  the market. In some cases                                                                    
     the ports  where the  product is  landed does  not even                                                                    
     qualify  to receive  a  portion  of the  redistribution                                                                    
     under the current formula.                                                                                                 
                                                                                                                                
     HB  184  would,  in  addition  to  changing  the  split                                                                    
     between the  state and  the municipalities,  direct the                                                                    
     Fisheries  Resource   Landing  Tax  revenue   on  these                                                                    
     "unprocessed"   fisheries   resources   back   to   the                                                                    
     incorporated port  of landing and or  the borough where                                                                    
     they were  landed. This will  help more  accurately and                                                                    
     fairly cover  the cost of building  and maintaining the                                                                    
     infrastructure  utilized  in  generating  the  tax.  By                                                                    
     tying Fisheries Landing Tax  revenue return directly to                                                                    
     the  municipality where  the landing  occurred, HB  184                                                                    
     ensures  that ports  are compensated  fairly for  their                                                                    
     efforts and the revenues they generate.                                                                                    
                                                                                                                                
     I'm  sure  each of  you  are  wondering how  this  will                                                                    
     impact  the  areas  you represent.  You  have  in  your                                                                    
     packets a  table that reflects the  changes that cities                                                                    
     and boroughs can expect.                                                                                                   
                                                                                                                                
     HB 184 will  increase the fish tax  share with boroughs                                                                    
     cities  and communities  to help  with port  and harbor                                                                    
     maintenance  and  improvements.   It  will  also  share                                                                    
     exported unprocessed  fish tax with the  area where the                                                                    
     fish  was landed.  I urge  you to  move this  bill from                                                                    
     committee.                                                                                                                 
                                                                                                                                
9:05:23 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  moved to  adopt  CSHB  184, Version  27-                                                               
LS0576\R,  Bullard,  1/25/12, as  the  working  document.   There                                                               
being no objection, Version R was before the committee.                                                                         
                                                                                                                                
9:05:44 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON  explained  that  Version  R  includes                                                               
intent language relating  that the additional funds  will be used                                                               
for   marine  infrastructure,   improvements,  and   maintenance.                                                               
Version R  also includes  a new subsection  to have  the boroughs                                                               
and  municipalities  submit a  report  specifying  how the  funds                                                               
received were  used.  The reports  will be required for  both the                                                               
revenues  from  the  fisheries business  tax  and  the  fisheries                                                               
resource  landing tax;  the information  can be  compiled into  a                                                               
single report.   Version  R also  modifies the  existing language                                                               
for the  (indisc.) fish  and is  required when  a new  borough is                                                               
formed.                                                                                                                         
                                                                                                                                
9:07:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  inquired as to why  legislative intent is                                                               
being  used for  this proposed  change  rather than  making it  a                                                               
requirement.  She  then asked if historically the  50 percent has                                                               
been used  for docks and  harbors or has  it been used  for other                                                               
things.    She   further  asked  how  the   funding  for  various                                                               
communities would  look if  Version R passed;  that is  would the                                                               
needs of the docks  and harbors be met or would  it be some years                                                               
before it's met, she asked.                                                                                                     
                                                                                                                                
REPRESENTATIVE P. WILSON, speaking  to why legislative intent was                                                               
used,  related that  some communities  are wealthier  than others                                                               
and  thus may  be  able  to maintain  their  harbors better  than                                                               
others.    The  legislation  addresses  maintenance  and  repair.                                                               
Furthermore,  communities  receive  the  tax  revenues  now,  but                                                               
without  any  parameters regarding  where  the  community has  to                                                               
spend it.                                                                                                                       
                                                                                                                                
9:09:15 AM                                                                                                                    
                                                                                                                                
REBECCA  ROONEY, Staff,  Representative P.  Wilson, Alaska  State                                                               
Legislature, pointed out  that restricting the use of  the tax to                                                               
only marine facilities and harbors  and maintenance might make it                                                               
difficult to  use the tax revenues  for repairs to roads  used to                                                               
haul fish to market.                                                                                                            
                                                                                                                                
9:09:56 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER  asked  if leaving  the  intent  language                                                               
would mean  that there is  a prohibition against [using  fish tax                                                               
revenues] to build a playground in  a park.  She then related her                                                               
understanding  [from gestures  from the  sponsor] that  the [fish                                                               
tax revenues] could be used to build a playground in a park.                                                                    
                                                                                                                                
9:10:17 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   P.  WILSON,   in   response  to   Representative                                                               
Gardner's earlier question,  said the tax revenues  could be used                                                               
for other things.                                                                                                               
                                                                                                                                
9:10:31 AM                                                                                                                    
                                                                                                                                
CHAIR  MUNOZ interjected  that  the need  for  harbor repair  and                                                               
replacement  is  much  greater   than  the  increased  amount  of                                                               
funding.                                                                                                                        
                                                                                                                                
MS. ROONEY  related that there are  witnesses on line who  may be                                                               
able to speak to the overall need.                                                                                              
                                                                                                                                
9:11:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  clarified that  she understands  the need                                                               
and that her  question is regarding whether  communities can [use                                                               
the  fish   taxes  for  things   other  than  those   related  to                                                               
maintaining  and  improving  harbor  facilities].    If  so,  the                                                               
ensuing  question  then  is  why   would  the  aforementioned  be                                                               
desirable.    She  then  reiterated that  she  is  interested  in                                                               
whether historically  the 50  percent has  been dedicated  to the                                                               
infrastructure of the fisheries.                                                                                                
                                                                                                                                
REPRESENTATIVE P.  WILSON confirmed that the  current language of                                                               
the legislation  could result in  municipalities using  the funds                                                               
for something  besides the infrastructure of  fisheries, which is                                                               
why the intent language in Version R is important.                                                                              
                                                                                                                                
9:12:09 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SADDLER  asked   if   since   the  state   began                                                               
transferring the  responsibility for  ports and harbors  to local                                                               
communities  there   has  been   any  structure  for   the  local                                                               
communities to  pay for their ports.   He further asked  if there                                                               
is  any requirement  that local  communities provide  funding for                                                               
maintaining  them and  have they  being doing  so by  using their                                                               
portion of the fish tax and other revenues.                                                                                     
                                                                                                                                
REPRESENTATIVE P.  WILSON replied  yes and no.   Due  to sporadic                                                               
funding  to  the communities,  it  has  been difficult  and  many                                                               
harbors are in awful shape, she  said.  She then highlighted that                                                               
the report is required so  that [the legislature] knows where the                                                               
fish tax funds are being spent.                                                                                                 
                                                                                                                                
9:13:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  asked  if  the  state,  by  transferring                                                               
ownership of  the ports and  harbors to local communities,  did a                                                               
disserve  to  local communities  that  don't  have the  funds  to                                                               
maintain their  ports and harbors.    He then questioned  why the                                                               
increase in  percentage of taxes  going to the  communities isn't                                                               
increased to 100 percent.                                                                                                       
                                                                                                                                
MS. ROONEY explained  that 100 percent of the tax  isn't going to                                                               
the communities  because there are  some uses for the  50 percent                                                               
that  goes to  the state,  such as  the salmon  credits that  the                                                               
state receives.   As it is now, she said  she wasn't sure whether                                                               
the 25  percent provides enough  funds within the state  to cover                                                               
that.   Therefore, [the sponsor]  is working with  the Department                                                               
of Revenue (DOR) on that issue.                                                                                                 
                                                                                                                                
9:15:25 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DICK  inquired as to  how Delta Junction  would be                                                               
impacted.                                                                                                                       
                                                                                                                                
MS. ROONEY explained  that DCCED uses a formula  that spreads the                                                               
tax across  places that have  processors.  Since  some processing                                                               
is done  in Delta  Junction, it  receives part of  that tax.   If                                                               
there is an increase, it's likely because of the 75:25 split.                                                                   
                                                                                                                                
REPRESENTATIVE DICK pointed out that  there is a decrease in Holy                                                               
Cross, Shagaluk, and Russian Mission.                                                                                           
                                                                                                                                
MS.  ROONEY suggested  that the  decrease is  likely because  the                                                               
allocated  formula-based tax  is being  given to  the communities                                                               
where the fish is landed rather  than using a formula in terms of                                                               
where it was processed.                                                                                                         
                                                                                                                                
REPRESENTATIVE  P.  WILSON  clarified  that  the  chart  entitled                                                               
"Fisheries  Tax  Revenue  Share Analysis  and  Community  Revenue                                                               
Sharing" shows the amount in dollars not millions of dollars.                                                                   
                                                                                                                                
9:18:43 AM                                                                                                                    
                                                                                                                                
CARL   UCHYTIL,    Vice   President,   Alaska    Association   of                                                               
Harbormasters  and Port  Administrators  (AAHPA); Port  Director,                                                               
Docks and Harbors  Department, City & Borough  of Juneau, related                                                               
that AAHPA  is a strong supporter  of HB 184, which  he urged the                                                               
committee  to  move forward.    He  then  addressed why  it's  so                                                               
important  to receive  additional funds  for harbor  maintenance.                                                               
As was mentioned  the state used to own all  harbors in the state                                                               
that were  built in  the 1950s-1970s.   Over  the last  10 years,                                                               
many   of   the   state  harbors   have   been   transferred   to                                                               
municipalities.   Mr. Uchytil emphasized  that harbors  and other                                                               
marine facilities  aren't money-making  enterprises.   In Juneau,                                                               
the docks  and harbors  don't receive property  tax or  sales tax                                                               
support  for  maintenance.   Therefore,  Juneau  has to  rely  on                                                               
federal grants  and state-harbor matching grants  to recapitalize                                                               
the  harbors.   This legislation  would provide  more maintenance                                                               
funds to the  harbors in order to allow  municipalities to better                                                               
maintain  and recapitalize  the harbor  facilities.   Mr. Uchytil                                                               
related his understanding that when  the state owned the harbors,                                                               
the moorage  was pennies on  the dollar.   When the  ownership of                                                               
the  harbors  were  transferred to  the  municipalities,  it  was                                                               
impossible to increase  the moorage rates to  the level necessary                                                               
to  generate the  funds required  to  maintain the  harbors.   He                                                               
noted  that  the  [Juneau  Harbors  Board] is  not  in  favor  of                                                               
increasing moorage  rates.   In discussions  with a  local Juneau                                                               
fisherman, the local  fisherman claimed that his  moorage rate in                                                               
Juneau has tripled over the last  five years.  In conclusion, Mr.                                                               
Uchytil said  that HB 184  would be a  huge benefit to  those who                                                               
manage and maintain the harbors in the state.                                                                                   
                                                                                                                                
9:22:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER commented  that she has heard  a good case                                                               
for the  need of more  funding to address harbor  maintenance and                                                               
related infrastructure.  She then  asked whether HB 184 will make                                                               
much of a dent in the need.                                                                                                     
                                                                                                                                
MR.  UCHYTIL informed  the committee  that Juneau  receives about                                                               
$300,000  of the  fish tax  and it  is provided  directly to  the                                                               
Juneau  Docks  and  Harbors  Department.    The  new  percentages                                                               
proposed in HB  184 would provide Juneau  an additional $200,000,                                                               
which would  allow for  more maintenance  in the  Juneau harbors.                                                               
He characterized  the additional funds  as a "huge  windfall" for                                                               
the City & Borough of Juneau.                                                                                                   
                                                                                                                                
9:23:06 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  asked whether these extra  funds would be                                                               
enough.                                                                                                                         
                                                                                                                                
MR. UCHYTIL replied no, it would  never be enough.  He offered to                                                               
provide  members a  tour of  the Juneau  docks and  harbors.   He                                                               
explained  that within  the City  & Borough  of Juneau  Docks and                                                               
Harbors  Department, half  of the  costs  are for  staff and  the                                                               
other  half is  for  utilities.   There  are  never enough  funds                                                               
available  to set  some aside  for recapitalization  of projects,                                                               
rather they have  to rely on the state or  the federal government                                                               
for large recapitalization projects.   Having additional funds to                                                               
utilize for targeted maintenance would be beneficial, he opined.                                                                
                                                                                                                                
9:24:23 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER asked  if transferring  the ownership  of                                                               
docks  and  harbors  from  the  state  to  municipalities  was  a                                                               
successful effort.                                                                                                              
                                                                                                                                
MR. UCHYTIL  disclosed that he  has only been the  vice president                                                               
of the  City & Borough  of Juneau's Docks and  Harbors Department                                                               
since August.  He informed the  committee that the City & Borough                                                               
of  Juneau  purchased  DeHart's,  a private  dock  in  very  poor                                                               
condition, and has  secured funding to recapitalize  that dock in                                                               
the coming year.                                                                                                                
                                                                                                                                
9:25:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  surmised then  that the  roughly $300,000                                                               
Juneau receives from  the fish taxes has been  used for operating                                                               
costs not for rebuilding harbors or infrastructure.                                                                             
                                                                                                                                
MR.  UCHYTIL answered  that  would  be correct  for  Juneau.   He                                                               
explained that the  fish taxes are comingled with  other fees and                                                               
aren't segregated.                                                                                                              
                                                                                                                                
9:26:57 AM                                                                                                                    
                                                                                                                                
JOHN SWEENEY,  Finance Director, City  & Borough of  Sitka, began                                                               
informing  the committee  that the  City &  Borough of  Sitka has                                                               
passed a resolution in support of HB  184.  The City & Borough of                                                               
Sitka, he  related, believes HB  184 is critically  important and                                                               
strongly advocates  for its passage.   Within Sitka, there  is an                                                               
estimated amount of scheduled repairs  and maintenance that spans                                                               
the  next 20  years and  would cost  in excess  of $110  million.                                                               
Furthermore, three of  Sitka's five major harbors are  in need of                                                               
a substantial rebuild  or overhaul within the next  five to eight                                                               
years.   He opined that Sitka  has been lucky to  have a matching                                                               
grant included  in the  governor's capital  budget for  a partial                                                               
rebuild of the  Alaska Native Brotherhood Harbor.   The amount of                                                               
reserve  working   capital  in  Sitka's  harbor   fund  would  be                                                               
completely  exhausted if  used to  meet one  of the  three harbor                                                               
rebuilds needed  in the next five  to eight years.   He mentioned                                                               
that Sitka had internal  discussions regarding increasing moorage                                                               
rates.   However,  there  is  an upper  limit  on  the amount  of                                                               
moorage  increases  that  can  be  passed  on  before  it  drives                                                               
marginal commercial fishermen  out of business or  causes them to                                                               
relocate to a  different municipality.  In either  case, it would                                                               
be  difficult  and  devastating  for  Sitka,  particularly  since                                                               
Sitka's other major industry of  tourism has continued to decline                                                               
in the last several years.   Mr. Sweeney emphasized that the need                                                               
is great and  the municipality is committed to doing  what it can                                                               
with the  raw fish taxes  it receives in  order to help  fund the                                                               
maintenance.  However, the need  is so great that it's impossible                                                               
to achieve with the moorage mechanism that currently exists.                                                                    
                                                                                                                                
9:30:20 AM                                                                                                                    
                                                                                                                                
STEVE  CORPORON, President,  Alaska Association  of Harbormasters                                                               
and  Port Administrators  (AAHPA);  Director,  Ports and  Harbors                                                               
Department, City  of Ketchikan,  related if one  were to  talk to                                                               
the fishermen  who pay the fish  taxes, one would find  that back                                                               
when  the state  owned the  harbors  they didn't  mind paying  it                                                               
because the  funds came  back as  some of  the maintenance.   The                                                               
fishermen who  pay the  fish taxes  want those  funds to  go back                                                               
into harbors.   Although the  state did  a good job  building the                                                               
harbors and docks,  it didn't put much into them  after that.  As                                                               
the harbors  and docks  reached their service  life, it  was more                                                               
cost effective to transfer them  to the municipalities.  Over the                                                               
last seven or  eight years, all of the harbors  in Ketchikan have                                                               
been transferred from  the state to the municipality  and most of                                                               
those  harbors  need  to  either  be  substantially  replaced  or                                                               
rebuilt.   In order to "sweeten  the deal" when the  harbors were                                                               
turned  over  to  the municipalities,  the  state  provided  some                                                               
deferred maintenance funds.  Ketchikan  received $3.9 million for                                                               
its six  harbors.  However, about  $17 million worth of  work was                                                               
necessary to  bring them up  to par.   Ketchikan, he  stated, has                                                               
done a good job parlaying the  $3.9 million with other grants and                                                               
local  funding to  accomplish  $7 million  worth  of work,  which                                                               
leaves about  $10 million worth  of work yet  to do for  just the                                                               
harbors  transferred from  the state.   Beyond  the harbors,  the                                                               
fishermen in Ketchikan want a  drive down ramp constructed, which                                                               
would  be about  a $5  million project.   The  rate structure  in                                                               
place  for  decades  allowed Ketchikan  to  operate  its  harbors                                                               
without performing  any major maintenance.   Mr. Corporon related                                                               
that when  he took  his position as  the director  of Ketchikan's                                                               
ports  and  harbors  five  years ago,  he  met  with  Ketchikan's                                                               
finance director.   In order to have savings to  bond for $10-$15                                                               
million worth  of work not  including the  drive down ramp,  a 75                                                               
percent rate  increase was necessary.   The  aforementioned would                                                               
equate to a  15 percent increase over the next  five years, which                                                               
the customer base  can't handle.  Mr. Corporon  mentioned that he                                                               
was able  to convince  the Ketchikan City  Council that  the fish                                                               
tax  funds needed  to go  to the  harbors, and  thus that's  been                                                               
occurring for the last several years.   He pointed out that since                                                               
Ketchikan is a  city and borough, half of the  50 percent goes to                                                               
the borough  and the other  half goes to  the city.   The borough                                                               
has no harbor infrastructure, and  thus has been using those fish                                                               
tax  funds  for  things  other  than docks  and  harbors.    This                                                               
legislation has  caught the attention  of the borough,  which has                                                               
come to  the table with the  city and is working  on a memorandum                                                               
of understanding such that even  the borough's fish tax should go                                                               
to harbor infrastructure.   However, such is not the  case in all                                                               
municipalities  as  was  evidenced   at  a  recent  harbormasters                                                               
conference  where a  show of  hands  revealed that  the fish  tax                                                               
funds  of about  half of  the communities  attending went  to the                                                               
harbors; 25 percent of the  communities attending receive part of                                                               
the fish  tax; and  the remaining 25  percent of  the communities                                                               
attending  didn't receive  any of  the  fish tax.   Mr.  Corporon                                                               
opined that one of  the key elements of HB 184  is the attempt to                                                               
steer  the  funds to  the  harbor  infrastructure.   Polling  the                                                               
members of AAHPA revealed that  there are about $90 million worth                                                               
of projects,  which he  surmised was a  backlog of  projects when                                                               
the  transfer of  the harbors  from the  state to  municipalities                                                               
occurred.   In conclusion, Mr.  Corporon opined that HB  184 will                                                               
make a difference.                                                                                                              
                                                                                                                                
9:36:05 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  asked whether  it  was  an option  or  a                                                               
mandate from the state for  municipalities to take over ownership                                                               
of the harbor and dock facilities.                                                                                              
                                                                                                                                
MR. CORPORON  related his understanding  that if  the communities                                                               
didn't want the  docks and harbors, then the  state threatened to                                                               
sell  them; that  is  auction  off the  floats.   Therefore,  the                                                               
communities not taking  ownership wasn't a realistic  option.  In                                                               
further response,  Mr. Corporon clarified that  his understanding                                                               
was that  the infrastructure would  be sold/auctioned  because it                                                               
couldn't remain on state land and thus the harbor would go away.                                                                
                                                                                                                                
9:37:50 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER said  that although  he understands  that                                                               
the potential increase  in funding offered by HB  184 would help,                                                               
he questioned what would happen in five years.                                                                                  
                                                                                                                                
MR. CORPORON  answered that  the legislation  would make  a large                                                               
difference in  Ketchikan, particularly  since Ketchikan  has been                                                               
dedicating its fish tax to its  harbors.  If the borough provides                                                               
its portion  as well,  Ketchikan can  bond the  $5 million  for a                                                               
drive down ramp.  The desire  would be for more so that Ketchikan                                                               
could address the $10 million  in backlogged maintenance from the                                                               
transfer.    He mentioned  that  in  Ketchikan about  $80,000  in                                                               
additional revenue is  necessary for every $1  million desired to                                                               
be bonded, which amounts to about a 70 percent rate increase.                                                                   
                                                                                                                                
9:39:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER inquired  as to  why 100  percent of  the                                                               
entire fish taxes shouldn't go toward ports and communities.                                                                    
                                                                                                                                
MR. CORPORON acknowledged  that the fishermen use  more than just                                                               
harbors.   However, he reiterated  that if  harbor infrastructure                                                               
falls into disrepair, fishermen will go elsewhere.                                                                              
                                                                                                                                
9:40:15 AM                                                                                                                    
                                                                                                                                
TIM COTTONGIM,  Fish Group Manager, Juneau  Office, Tax Division,                                                               
Department  of Revenue,  in response  to Representative  Saddler,                                                               
explained  that 50  percent  of  the gross  tax  reported on  the                                                               
[fisheries  business tax  and the  fishery resource  landing tax]                                                               
returns   is  guaranteed   to  be   shared   with  the   impacted                                                               
communities.   To the  extent the activity  occurs outside  of an                                                               
organized  city  and borough  that  share  goes  to DCCED  to  be                                                               
allocated.   The  state's share  is subject  to credits  and thus                                                               
claims for the  salmon credit, the education credit,  or the Winn                                                               
Brindle  tax   credit  are  removed   from  the   state's  share.                                                               
Technically,  as long  as there  are credits  claimed, the  state                                                               
never receives  50 percent of  that tax rather it  receives less.                                                               
The salmon  credit currently  has a provision  limiting it  to 50                                                               
percent of  the tax on salmon.   Therefore, the maximum  credit a                                                               
processor  that  processes strictly  salmon  can  claim for  this                                                               
particular  program  is  limited   to  50  percent,  which  fully                                                               
protects the state's  share.  There are no  such limitations with                                                               
the education credit, except that  it can't exceed the total tax.                                                               
Again, any  time anyone  claims combined  credits that  exceed 50                                                               
percent, it  comes from the  state's share and thus  doesn't come                                                               
from the  community's share.  When  the share is increased  to 75                                                               
percent, there  is a risk of  there being more taxpayers  in more                                                               
communities  not being  able  to  cover this  share  back to  the                                                               
community with  their taxes alone.   For example, if  a processor                                                               
owed the  state $100  in gross  tax and  wanted to  claim credits                                                               
amounting to  $50, the state  would receive  $50 in cash  and the                                                               
community would be  guaranteed $50.  An increase in  the share to                                                               
75 percent  would result in the  state being $25 in  the hole and                                                               
would have to draw those funds from elsewhere.                                                                                  
                                                                                                                                
9:43:27 AM                                                                                                                    
                                                                                                                                
CHAIR  MUNOZ  asked  if  this proposed  change  would  cover  the                                                               
potential cost to the state.                                                                                                    
                                                                                                                                
MR. COTTINGIM  answered that there  are still  sufficient general                                                               
funds available  to cover the  implementation of HB 184  and thus                                                               
pay for the credits the state loses.                                                                                            
                                                                                                                                
9:43:56 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE AUSTERMAN inquired how large  of a dollar value is                                                               
associated to DOR in terms of the fisheries tax.                                                                                
                                                                                                                                
MR.  COTTINGIM   replied  that  DOR  still   expects  to  receive                                                               
sufficient  funds  from the  two  programs,  even after  credits.                                                               
However, this is assuming the behavior  remains the same.  If the                                                               
maximum  education credit  is increased  to $5  million and  more                                                               
processors using more, there is  the potential to erode what goes                                                               
to the state.                                                                                                                   
                                                                                                                                
9:45:45 AM                                                                                                                    
                                                                                                                                
KATIE  KOESTER,  Community  & Economic  Development  Coordinator,                                                               
City of  Homer, related  support for HB  184.   This legislation,                                                               
she opined,  addresses a fairness  issue in terms of  sharing the                                                               
funds  collected.   She echoed  earlier testimony  regarding that                                                               
there  is a  lot  of infrastructure  involved  in supporting  the                                                               
commercial fishing  industry.  Since  Homer facilitates a  lot of                                                               
fresh product being  trucked out, Homer doesn't get a  lot of the                                                               
fisheries business tax back because  the product doesn't meet the                                                               
definition of processed.  This  legislation would change that and                                                               
would specify that funds from  the fisheries business and landing                                                               
taxes would be spent on  harbor maintenance.  Returning the funds                                                               
back to the  communities where they are collected  will help with                                                               
the  deferred  maintenance  communities   have  faced  since  the                                                               
transfer  in  ownership,  she  opined.    This  legislation,  she                                                               
emphasized, will  help support the fisheries  economic engine for                                                               
Homer and  the state.   She guaranteed  the committee  that Homer                                                               
would be happy to return the funds to its port and harbors.                                                                     
                                                                                                                                
9:49:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  asked how  much of the  fish taxes  go to                                                               
Homer ports and harbors.                                                                                                        
                                                                                                                                
MS. KOESTER  related her belief  that all [the fish  tax] funding                                                               
goes to the enterprise fund, but  she expressed the need to check                                                               
with the Homer harbormaster.                                                                                                    
                                                                                                                                
9:49:59 AM                                                                                                                    
                                                                                                                                
CHRIS HLADICK, City  Manager, City of Unalaska,  began by stating                                                               
that he  appreciates what  the state  does to  support commercial                                                               
fishing  in the  state.   He  then pointed  out  that the  Alaska                                                               
Municipal  League  (AML)  resolution included  in  the  committee                                                               
packet relates support for an increase  of more than 50:50 in the                                                               
split  of revenues,  not  support  for HB  184  or expanding  the                                                               
program to  include the  unprocessed fish  definition in  HB 184.                                                               
The  aforementioned wasn't  discussed  when  that resolution  was                                                               
passed.   Mr.  Hladick  further  clarified that  the  tax is  not                                                               
generated in  the community where  the fish is landed  rather the                                                               
tax is  generated in the  community where the fish  is processed.                                                               
He commented  that it would  be interesting to know  the negative                                                               
economic impacts to  the communities wanting to  be involved with                                                               
this program.   The change  in the definition of  processing does                                                               
change  the  result  in  the  formula  as  it  redistributes  the                                                               
revenue.   Mr. Hladick  then related  his understanding  that the                                                               
intent  of the  shared fisheries  business tax  was to  share tax                                                               
revenue with  communities that have  onshore processing  in order                                                               
to help mitigate  the impacts of that activity  on the community.                                                               
However,  allowing the  proposed  change  to include  unprocessed                                                               
fish  in the  program would  defeat  the original  intent of  the                                                               
program.    Mr.   Hladick  stated  that  he  is   in  support  of                                                               
legislation  that  only  increases  the revenue  split  with  the                                                               
state.   He also related  support for  finding a way  to increase                                                               
funding  for  ports  and harbors.  In  conclusion,  he  expressed                                                               
concern with  legislation that changes a  long-standing tax share                                                               
program and  thus he suggested that  perhaps there needs to  be a                                                               
tax program to address unprocessed fish.                                                                                        
                                                                                                                                
9:52:34 AM                                                                                                                    
                                                                                                                                
TIM  ROONEY,  Borough  Manager, City  and  Borough  of  Wrangell,                                                               
related support  for HB 184 and  noted that the City  and Borough                                                               
Assembly  has  passed   a  resolution  in  support   of  HB  184.                                                               
Historically, Wrangell  has been successful in  obtaining funding                                                               
for  harbor rebuilds,  although  not so  successful  in funds  to                                                               
maintain its  harbors.   He noted that  Wrangell is  committed to                                                               
dedicate any  funds it  receives to its  harbors.   Currently, 75                                                               
percent of the  funds received go to Wrangell's  harbors, with 25                                                               
percent going to the general  fund.  Last year, however, Wrangell                                                               
decreased the amount going to  the general fund and increased the                                                               
amount going to  the harbors by 5  percent each.  The  goal is to                                                               
eventually  have 100  percent [of  the fish  taxes] going  to the                                                               
harbors.                                                                                                                        
                                                                                                                                
9:53:57 AM                                                                                                                    
                                                                                                                                
CHAIR  MUNOZ announced  that HB  184,  Version R,  would be  held                                                               
over.                                                                                                                           
                                                                                                                                
9:54:24 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER  requested  Mr.  Hladick's  testimony  in                                                               
writing.                                                                                                                        
                                                                                                                                
9:54:49 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE AUSTERMAN related his  understanding that the list                                                               
entitled  "Fisheries Tax  Revenue  Share  Analysis and  Community                                                               
Revenue Sharing"  relates the winners  and the losers  based upon                                                               
the proposed  percentage change.   He  expressed interest  in the                                                               
list  based   upon  the  proposed  distribution   change  in  the                                                               
legislation  but  without  the  change  from  50  percent  to  75                                                               
percent.                                                                                                                        
                                                                                                                                
REPRESENTATIVE P. WILSON answered that  she didn't think it would                                                               
look  very  good, which  is  why  she  wanted  both in  order  to                                                               
minimize  the  losers.    She  informed  the  committee  she  has                                                               
committed to  withdraw the  legislation if  both changes  are not                                                               
kept.                                                                                                                           

Document Name Date/Time Subjects
HB 184 sponsor stmt Ver D.pdf HCRA 1/26/2012 8:00:00 AM
HB 184
HB 184 CS Ver E.pdf HCRA 1/26/2012 8:00:00 AM
HB 184
HB 184 Ketchikan Resolution Motion.pdf HCRA 1/26/2012 8:00:00 AM
HB 184
HB184 AML Support Resolution.pdf HCRA 1/26/2012 8:00:00 AM
HB 184
HB184 Fish Tax Rev Share An.xlsx HCRA 1/26/2012 8:00:00 AM
HB 184
HB184 Petersburg Support Resolution.pdf HCRA 1/26/2012 8:00:00 AM
HB 184
HB184 Wrangell Support Resolution.pdf HCRA 1/26/2012 8:00:00 AM
HB 184
HB 290 Endow Alaska Sponsor Statement--Version E.pdf HCRA 1/26/2012 8:00:00 AM
HB 290
HB290-DCCED-DCRA-01-20-12.pdf HCRA 1/26/2012 8:00:00 AM
HB 290
HB184 Fish Mgmt Areas Map.pdf HCRA 1/26/2012 8:00:00 AM
HB 184
HB184 Muni Harbor Facilities.pdf HCRA 1/26/2012 8:00:00 AM
HB 184
HB184 AK Harbormasters Port Admin Resolution.pdf HCRA 1/26/2012 8:00:00 AM
HB 184
HB184 Fish Tax Revenue.pdf HCRA 1/26/2012 8:00:00 AM
HB 184
HB184-DCCED-DCRA-01-20-12.pdf HCRA 1/26/2012 8:00:00 AM
HB 184