Legislature(1997 - 1998)
02/24/1997 01:37 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 86 3 "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 4 federal funds could take the pressure away from organization. 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. BILL ROLFZEN, PROGRAM MANAGER, DIVISION OF MUNICIPAL AND REGIONAL ASSISTANCE, DEPARTMENT OF COMMUNITY AND REGIONAL 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 5 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 dollars. 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. LAMAR COTTEN, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY 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 6 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.