Legislature(1997 - 1998)

02/24/1997 01:37 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  HOUSE BILL NO. 86                                                            
       "An  Act  relating to  the  payments in  lieu  of taxes                 
       program for  cities  in the  unorganized  borough;  and                 
       providing for an effective date."                                       
  TOM WRIGHT, STAFF, REPRESENTATIVE  IVAN testified in support                 
  of HB 86.   He noted that  HB 86 establishes the  Payment In                 
  Lieu  of  Taxes  program  (PILT)  within the  Department  of                 
  Community and  Regional Affairs   for home rule  and general                 
  law  cities  located  in  the  unorganized   borough  within                 
  federally designated areas of Alaska.                                        
  This  program  is  financed  by  funds  the  state  receives                 
  annually from the federal government under 31  U.S.C. 6901 -                 
  31 U.S.C. 6902. An amendment,  sponsored by Senator Stevens,                 
  was passed as  part of  the Omnibus Parks  and Public  Lands                 
  Management Act  of 1996 (P.L.  104-333, sec. 1033)  to allow                 
  cities in the unorganized borough to receive payment.                        
  Mr. Wright observed that the main purpose of this bill is to                 
  provide  a  method  for  the  Department  of  Community  and                 
  Regional Affairs to distribute this funding and to establish                 
  criteria to determine whether a city is  eligible to receive                 
  payment under the program  as intended by federal law.   The                 
  amount of money to be distributed to each eligible home rule                 
  and  general law  city in  the unorganized  borough will  be                 
  based upon the population  of the city, as certified  by the                 
  commissioner  of the  Department of  Community and  Regional                 
  Affairs, for  the fiscal  year preceding the  year in  which                 
  payment is made to the city.  The bill establishes an annual                 
  payment date of November 1.  Money received from the program                 
  may  be used  for any general  purpose for  which a  city is                 
  authorized under federal, state or local law.  Finally,  the                 
  bill is given an  immediate effective date in order  to meet                 
  the first year's application and payment schedule set out in                 
  the bill.                                                                    
  In  response  to a  question  by Representative  Davies, Mr.                 
  Wright clarified that there are  eleven federal census areas                 
  within the unorganized borough.  The legislation pertains to                 
  federally entitled  lands within each  federal census  area.                 
  Payment will be based on the formula that is currently used,                 
  the  amount of  acres divided  by the population  within the                 
  federal census area.                                                         
  In  response  to a  question  by Representative  Martin, Mr.                 
  Wright stated  that  there  has  not  been  an  analysis  of                 
  revenues  unorganized  communities  receive  through  school                 
  districts  or  their  relationship   to  the  PILT  Program.                 
  Representative  Martin   asked  if  the   legislation  would                 
  discourage organization.                                                     
  Co-Chair  Therriault  noted   that  boroughs  receive  money                 
  through similar programs.   He  acknowledged that access  to                 
  federal   funds  could   take   the   pressure   away   from                 
  Co-Chair  Hanley asked  the  dollar  amount  per area.    He                 
  suggested that  the legislation  may offer  an incentive  to                 
  incorporate.  Mr.  Wright explained  that funds are  divided                 
  among incorporated communities.  Unorganized communities are                 
  counted but do not receive this funding.                                     
  Co-Chair  Therriault  noted  that  the  Southeast  Fairbanks                 
  Census  District  has  a  population  of just  under  6,000.                 
  Within this area  only Delta Junction (population,  828) and                 
  Eagle  (population 146)  are eligible.   Based on  the total                 
  area population (5,913)  the estimated PILT payment  is $278                 
  thousand dollars.  This amount  would be split between Eagle                 
  and Delta Junction.  If other  areas incorporated they would                 
  receive a share of this amount.                                              
  AFFAIRS agreed  that  the State's  payment is  based on  the                 
  total population and entitlement area  in the federal census                 
  area.  Once  the State  receives the check  for the  federal                 
  census area  they pay  only the  incorporated municipalities                 
  within the area.                                                             
  In  response  to a  question  by Representative  Davies, Mr.                 
  Rolfzen clarified that  the check will  not be based on  the                 
  amount of people  living in the  incorporated areas.  It  is                 
  based on the total population in the federal census area.                    
  Co-Chair  Hanley  explained  that  the  payment is  made  on                 
  property that could be taxed.   In response to a question by                 
  Co-Chair Hanley, Mr.  Rolfzen noted that  municipalities can                 
  use the money for any governmental purpose.                                  
  In  response  to a  question  by Representative  Martin, Mr.                 
  Rolfzen observed that  the federal  calculation is based  on                 
  federal  census   numbers.    The   State's  calculation  to                 
  municipalities  utilizes  the  Department  of Labor  figures                 
  based supllied by the Permanent Fund Division.                               
  Representative   Martin   questioned  if   federal  resource                 
  payments are subtracted.   Mr. Rolfzen explained  that there                 
  are two options (used by the  Bureau of Land Management) for                 
  calculating PILT payments.  Federal census areas can receive                 
  $.93  cents  per acre,  after  subtracting the  prior year's                 
  federal payments in forest receipts  or $.13 cents per  acre                 
  without the subtraction of forest receipts.  The method that                 
  provides the  greater payment is used.  (Each federal census                 
  area  is  calculated  separately.)     He  argued  that  the                 
  legislation  is   an  incentive  to  local   governments  to                 
  incorporate or remain incorporated.                                          
  Co-Chair  Therriault observed  that  if  Tok organized  they                 
  would be eligible  for $154 thousand  dollars.  Mr.  Rolfzen                 
  recounted  that   there  are   other  programs   that  offer                 
  incorporated cities greater support.                                         
  Co-Chair Hanley noted that second  class cities receive more                 
  money through Municipal Assistance and  Revenue Sharing.  He                 
  asked  the  responsibilities of  second  class cities.   Mr.                 
  Rolfzen replied that second class cities are responsible for                 
  raising  revenues  and  providing services.    Incorporation                 
  allows  greater  control  over local  affairs.    State laws                 
  provide guidelines for municipal functions.                                  
  In  response  to  a  question  by Co-Chair  Therriault,  Mr.                 
  Rolfzen  explained  that  federal law  provides  that,  if a                 
  school  district  is  completely  independent  of  the local                 
  government and forest receipts are  passed through the local                 
  government, forest receipts do not have  to be deducted.  He                 
  clarified that school districts in Alaska are not considered                 
  to  be  independent of  local  government because  taxes are                 
  generated to pay  for school  districts.  Therefore,  forest                 
  receipts going to  a school district in  Alaska are deducted                 
  from PILT payments.                                                          
  Co-Chair  Hanley referred to  SB 29.   Mr. Rolfzen clarified                 
  that  SB  29  would  raise  the minimum  entitlement,  after                 
  deductions,  for   Municipal  Assistance  to   $40  thousand                 
  Co-Chair  Hanley  asked  if  administrative  costs  could be                 
  deducted from federal funds.  Mr. Rolfzen did not think that                 
  federal funds  could be  used  for administration  purposes.                 
  There are no federal provisions for administrative costs.                    
  Representative Grussendorf observed that PILT funds are more                 
  general and less restrictive than  forest receipt funds.  He                 
  asked for the Department's position.                                         
  AND  REGIONAL  AFFAIRS   testified  via  the  teleconference                 
  network.  He  stated that  the Department  of Community  and                 
  Regional Affairs supports HB 86.                                             
  In  response  to a  question  by Representative  Mulder, Mr.                 
  Rolfzen  noted that  estimates are  based on  the best  case                 
  scenario.    He pointed  out that  the  program has  been in                 
  existence  for 20 to 50 years.   He expected funding for the                 
  program to continue.                                                         
  Representative Foster MOVED to report HB 86 out of Committee                 
  with individual  recommendations and  with the  accompanying                 
  fiscal note.  There being NO OBJECTION, it was so ordered.                   
  HB 86 was reported out of Committee with "no recommendation"                 
  and with a zero  fiscal note by the Department  of Community                 
  and Regional Affairs.                                                        

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