Legislature(2007 - 2008)BELTZ 211
02/13/2007 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB72 | |
| SB3 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 72 | TELECONFERENCED | |
| *+ | SB 3 | TELECONFERENCED | |
SB 72-COMMUNITY REVENUE SHARING
3:34:33 PM
CHAIR OLSON announced SB 72 as the first order of business.
GINNY AUSTERMAN, staff to Senator Donny Olson, Alaska State
Legislature, presented SB 72 as follows:
SB 72 establishes a sustainable revenue sharing
program based on the owner-state concept. The
resources of the state belong to all Alaskans. Cities
and boroughs were formed by the state as political
subdivisions to provide services to the people.
Without revenue sharing, the entire cost of basic
services is borne by local taxpayers.
Skyrocketing fuel and retirement system costs and
inflation, in conjunction with severe cuts in revenue
sharing over the past several years have local
governments scrambling to continue providing even
basic services such as snow removal, road maintenance,
public safety, and the education of our children.
SB 72 provides a means for sustainable revenue sharing
in order to allow communities to continue providing
basic services. SB 72 would allow the legislature to
allocate six percent of certain natural resource
revenues to revenue sharing every year. Basing the
revenue sharing on the state's annual income allows
for the flexibility needed to continue the program
during lean years, when state revenue is down.
Without consistent, dependable revenue sharing,
provision of basic service will continue to decline.
Some small communities have already closed their
doors. SB 72 provides the tool to solve the problem of
helping local governments fund basic services.
3:36:37 PM
Senator Wagoner arrived.
TIM BOURCY, President, Alaska Municipal League (AML), and Mayor
of Skagway, said SB 72 came out of years of work by the AML.
Municipalities have been struggling with declining revenue
sharing, which started in 1985 and has declined ever since.
Revenue sharing is part of a basic foundation of Alaska. Without
stable communities business opportunities and opportunities for
children "just aren't there because we aren't providing the
basic services that they need." He said SB 72 would set aside
six percent of revenues created through natural resource sales
and put it in a sub-account in the general fund. The money could
then be allocated to the communities by the legislature. There
would be a base allocation of $25,000 to unorganized
communities, $75,000 to organized municipalities, and $250,000
to boroughs, he explained.
3:38:48 PM
MR. BOURCY said there would also be a per capita distribution of
any remaining funds. The AML believes this is a sustainable
program, and it is appropriate because the communities will
benefit when the state benefits from high oil and gas prices,
and when there are hard times, the communities will share in the
cost by tightening their belts. People in communities have
become increasingly frustrated with local tax increases, he
said. The Fairbanks vote this fall is an indicator of the
backlash "of what we are facing at the local level." The
declining revenue-sharing money has had a direct impact on
increasing property taxes. Under SB 72, $144 million will be
allocated in the next fiscal year based on revenue from the
previous year.
KATHIE WASSERMAN, Executive Director, Alaska Municipal League,
said she is available for questions, and she noted that Bill
Rolfzen from the Department of Commerce, Community & Economic
Development (DCCED) is available, and the Department of Revenue
(DOR) also provided assistance.
3:41:08 PM
CHAIR OLSON noted that the unorganized communities will be
receiving a third of the base allocation that organized
communities will get, but residents need the same services.
MR. BOURCY said that AML believes that Alaska's goal is to
organize, and incentives are important for future stability and
growth in the state. Unorganized areas provide some services,
and he wants to make sure that they get some money. The bill is
tiered toward organization, he acknowledged, but is not intended
to leave anyone out in the cold.
3:42:50 PM
CHAIR OLSON said it costs a fair amount of money for a community
to organize. Many do not have the resources to do that. "It is a
pretty steep road to climb," he stated.
MR. BOURCY said he agrees, and it is reasonable to assume that
there are certain areas in the state that won't ever have the
tax base to be organized as a normal municipality. It is the
will of the legislature to see what the best way to deal with it
is. The AML wants both areas to benefit, "but we do understand
that providing education and providing services from organized
areas is where the state wants to be."
3:44:18 PM
SENATOR STEVENS asked about past revenue sharing.
MR. BOURCY said he provided a chart of the annual appropriations
since 1985 when revenue sharing was $141 million. In 2005 it was
zero. In 2006 it was $6 million, which included PERS. The chart
also shows inflation-proofed figures and figures for SB 72. As
the resource revenues go up, the revenue sharing goes up. "We
share in the benefit and we share in the cost," he said.
3:46:05 PM
SENATOR THOMAS asked about excluding "oil and gas production,
property…cause you guys couldn't figure that out either, or
what?"
MR. BOURCY said, "The way the bill is written, it has some
additional things in it; that would be the oil and gas
production property taxes and other mineral taxation items. We
were looking at it from the base allocation…which comes from the
definition through the permanent fund, which is: mineral lease
rentals, royalty, royalty sale proceeds, federal mineral revenue
sharing payments, and bonuses. That is where AML believes that
that figure would be an appropriate figure and not to lump these
others taxes into this program, so that's kind of what we're
looking for."
SENATOR THOMAS said he hasn't found anyone who takes
responsibility for helping communities form boroughs. He said he
knows some are trying to figure out how it will impact them,
what they can expect, and what benefits are available.
3:47:51 PM
MR. BOURCY said he has personal experience with borough
formation because his city just went through a seven-year
process. There has been talk of a lack of incentives, he said.
It is a difficult process. He said DCCED should be an advocate
and assist the people trying to do it. There are a lot of
regulations and statutes that must be addressed, and they don't
seem to be as flexible as they could be. There is no money to
provide incentives, he noted, but "incentive packages have been
kicked around." There are a number of areas in the state that
would form boroughs if the process was more flexible, he opined.
How it fits into the bill, he can't say, but the incentive would
be an additional base allocation for municipalities or boroughs,
"but those come with additional costs, as well."
3:50:11 PM
MS. WASSERMAN said those communities can call DCCED, which will
walk them through the process.
MARK BEGICH, Mayor, Anchorage, said he appreciates the AML and,
he is supportive of the bill because it has sustainability in
the form of an allocated source of revenue: six percent of the
state's natural resource revenue. Anchorage would use the money
for property tax relief, but smaller communities have demand for
core services, he noted. All Alaskans own the natural resources,
and he supports this legislation and thinks it is a great step.
3:52:44 PM
CHAIR OLSON asked if the base allocation will be significant
enough to make a dent in property taxes.
MR. BEGICH said property taxpayers in urban areas are feeling
the pinch, and Fairbanks was a great example of where they have
"had enough." It will make a huge dent in the public's view of
their tax bill, he stated. The bill may give Anchorage a levy
drop of 1 to 3 mills, he speculated. He suggested a first-year
bonus as an incentive to communities that organize.
3:54:34 PM
SENATOR WAGONER asked about using this money to relieve the
property owners and the difficulty of increasing the mill rate
if oil prices drop to $15 a barrel.
MR. BEGICH said Anchorage educates the taxpayer, but it is never
an easy task to raise taxes. Anchorage has had to do it and
people accepted it because it was explained to them, he said.
That is why he likes the bill because "when times are good, we
go up, and when times are bad, we go down." He thinks that is
the fair way to do it, but anytime you have to raise one dime
more than the year before, it is no fun. Mayors do it every day;
"we have to. And as long as we communicate with our citizens, I
think we're OK in that arena."
SENATOR WAGONER asked if Anchorage's tax bill clarifies where
any reduction comes from.
3:56:46 PM
MR. BEGICH said the tax bill shows it, as required by state law,
and Anchorage actually highlights it. The assessment card also
shows what a person paid the previous year. Last year the tax
reduction was attributed to the legislature. It is all shown for
full disclosure and so taxpayers know their range in taxes.
SENATOR STEVENS asked if SB 72 would give Anchorage from $40-45
million, and how much relief that would be.
3:58:35 PM
MR. BEGICH said the total property tax between the school
districts and the city is almost $400 million, so that would
give about a 9 percent reduction.
JOHN WILLIAMS, Mayor, Kenai Peninsula Borough, applauded the
committee for the sponsorship statement; it takes vision to
create something that will benefit all the communities across
the state. He said he met with the other six mayors on the
peninsula, and his testimony is similar to what they would say.
He noted that in 1985, when revenue sharing reached its pinnacle
of $141 million, Senator Wagoner was mayor of the City of Kenai.
The revenue sharing program began a precipitous slide in 1986
when Mr. Williams became mayor. Revenue sharing dropped to $6
million--virtually non existent, he said. "We almost completely
forgot about municipalities and communities sharing in what we
call the ownership state." As municipal assistance was dropping
there was an increase in property tax, which is drawn from the
pockets of the people in the community. The question of how to
build a revenue-sharing program has been discussed "for some
time," and past governors have asked for a sustainable program.
"And I think this act fairly well does that." He echoed Mayor
Begich's comment of when the revenue is up we share, and when it
is down "we take our losses with everybody else." He believes it
will make citizens more aware of what the state revenues are
doing, where they come from, and how their tax rates reflect it.
4:02:52 PM
MR. WILLIAMS noted that the bill includes the disposal of
minerals including sand, gravel and stone. "I have to laugh a
little bit" because the state placed a recent burden on
municipalities when it raised the price of gravel. There is a
tendency for state actions to cause reactions in the communities
that cost them money. He said that SB 72 is well thought out,
and as a mayor, he looks for tax relief for his citizens. He
expressed his desire to alleviate some taxes on the citizens and
allow them to share in the wealth of the State of Alaska.
4:04:23 PM
SENATOR WAGONER quipped that he should never have left. He asked
what the Kenai Borough's portion of the PERS/TRS liability that
the governor has put into the operating budget is. Of the $463
million that she has put into the budget, what would be the
borough's and school district's portion of that?
MR. WILLIAMS said the total bill was about $12 million.
4:06:12 PM
LUKE HOPKINS, board member, Alaska Municipal League, Fairbanks,
said he is also the presiding officer of the Fairbanks North
Star Borough (FNSB) Assembly, which represents about 88,000
citizens. Revenue sharing has been an issue for everyone, "even
before the program was zeroed out by the previous governor." It
has been a dwindling revenue stream from the legislative system
since 1985. Along with the lack of inflation compensation, many
municipalities must rely more on property tax revenues or do
without services. Many local governments are in serious
financial conditions or have closed shop, halting day to day
operations. Revenue sharing under SB 72, which is not an
endowment but based on general fund dollars, could fluctuate
radically. He said many communities are in of the areas where
the natural resource extraction occurs, and these dollars flow
into the state coffers. The constitution says to share benefits
with the citizens, he noted. In the previous legislative session
there were 20 municipal revenue sharing bills proposing numerous
methods to supply funds, but there was little movement. He said,
"AML was even asked by then Governor Murkowski to come up with
proposed methods, and he liked using the POMV [percent of market
value] funding, but his ideas are another story."
MR. HOPKINS said AML looked at what was a fair basis for many
local governments, and SB 72 does not create an endowment to be
set aside. Endowments are difficult to create and not always
seen as a hands-off amount, he stated. Local elected officials
know the fiscal adjustments and ups and downs of tax caps and
new unfunded programs; they accept it every year. The 6 percent
keeps 94 percent for state programs. The last two years, the
FNSB set aside millions that have been used to pay down the
property taxes--lowering the mill rate. This is due to municipal
assistance from the state, and he thanked the legislature for
that. SB 72 sets a minimum floor to allow all communities to
receive funding that can make a real difference to staying open,
or for some of the unincorporated communities, it will keep
infrastructure functioning. He asked the legislature not to
spend two years trying to figure out what the program will be.
He urged passage of SB 72, and he noted that all the past
revenue sharing packages have relied on general fund dollars.
4:10:46 PM
SENATOR THOMAS asked, "You said 25,000 is unincorporated, and is
there a separate sheet of those entities or is that to be left
to be decided?"
MR. BOURCY said "There certainly [are] issues with what the
unincorporated--what signifies that. I believe, as it stands
now, it's 25 people and they have…those aren't identified; the
unincorporated totals are on the final page there. It's $1.7
million. But those would be communities of 25 people that
provide free services."
SENATOR STEVENS said he is has three spreadsheets, and the
second one says "minus incorporated city populations within
boroughs."
MR. BOURCY said if there is a city within a borough, the city
itself would get a separate allocation outside the allocation of
the borough, and the per capita would go to the city and the
other money would go to the borough. Regarding the fiscal note,
for FY08, 09, 10 and beyond, it doesn't show a fluctuation, but
that is a question for DCCED.
4:14:05 PM
SALLY SADDLER, Legislative Liaison, Department of Commerce,
Community & Economic Development, said the fiscal note uses the
assumption of FY06 minerals revenues, instead of trying to
predict the fluctuations in out years.
SENATOR STEVENS asked where in the spreadsheet are the $25,000
unincorporated communities.
MS. SADDLER said there are two tabs in the spreadsheet, one that
documents the numbers for the municipalities and one that
documents the numbers for the unincorporated communities. She
noted that the committee did not have that sheet.
4:15:45 PM
MS. SADDLER said there is also someone from the Department of
Natural Resources who can further clarify projected numbers.
SENATOR THOMAS asked what caused the dramatic change from
spreadsheet 1 to spreadsheet 2.
MS. WASSERMAN said changes were based on different issues that
pop up. Just like building a bill, she explained. One of the
issues was how boroughs and communities in the different
boroughs were dealt with. The AML ran different spreadsheets to
see how the figures would come out. The last spreadsheet offers
numbers "purely and simply on the bill as it stands now."
4:18:29 PM
SENATOR THOMAS asked how many communities are left out of SB 72
that may have been included in the past.
4:20:15 PM
BILL ROLFZEN, Division of Community Advocacy, Department of
Commerce, Community & Economic Development, said when the list
was developed the threshold was 25 residents, so there are a few
that are just below that, like Rampart and Point Baker. In the
past, if a community was just below the threshold, the division
would send a head count census manual and if they could prove
they had the 25, they would be back on the list.
SENATOR STEVENS surmised that an unincorporated community gets
$25,000, but nothing per capita.
MR. ROLFZEN said yes, that is a carry over from the old program.
4:21:22 PM
SENATOR STEVENS said but others do receive per capita money.
MR. ROLFZEN said that relates to incentives for incorporation.
SENATOR WAGONER asked about the government structure for a
community with 41 people qualifying it for the higher amounts.
4:22:23 PM
MR. ROLFZEN said it would be recognized as a political
subdivision and incorporated municipality, which qualifies it.
SENATOR WAGONER surmised that these communities only needed to
fill out incorporation papers to receive that money.
MR. ROLFZEN said the process is not simple. It includes many
reviews, public hearings, and ultimate approval by the Local
Boundary Commission. It is a several-year process.
4:23:15 PM
SENATOR WAGONER asked if all the communities on his list have
gone through the process.
MR. ROLFZEN said he believes that is correct.
SENATOR STEVENS said Akiachak is incorporated, and most
incorporated cities have property tax, pay for services, and
have a city council.
SENATOR WAGONER noted that they are functioning governments.
4:24:04 PM
TAMMY WILSON, resident of the Fairbanks North Star Borough, said
the community needs SB 72 and she supports the bill. She has
been watching what has been happening in the City of Fairbanks,
and fears that "the borough might do the same thing." She said
property tax relief is needed because the rise in assessments
has many people worried about what their tax might be. People
wonder how PERS and TRS will be funded, and how the senior and
disabled exemptions will be paid. As a member of a middle class
family, she said she feels like she is carrying the burden for
"a lot of these exemptions that have been done. I didn't cause
the PERS and TRS; I think the senior exemption and disabled vets
is an awesome thing, but I think the state should be the one
helping foot that bill, otherwise it falls on the other sector."
She said it is time for SB 72.
4:25:30 PM
SENATOR WAGONER asked if she is in the city or borough and what
is her mill rate.
MS. WILSON said she is in the borough, and the mill rate is 12.
TIM BECK, Fairbanks, said he is in favor of SB 72.
4:27:07 PM
JEROME SELBY, Kodiak, said the bill is desperately needed. The
constitution indicates that the minerals and natural resource
revenues belong to the people, he stated. Local government does
a lot of service for the communities, and some are really
hurting. If the communities are healthy, it is the best way to
save state money in the long haul, because the state won't have
to pay for Department of Environmental Conservation people to
provide safe drinking water, for example. The state is the one
that will have to pick up such costs. He said there are 40 or
more communities that have gone out of business or are on the
verge. The baseline figures were well thought out, he said. The
very basic services of an office with a clerk for four hours per
day and part-time workers dealing with water, sewer, and
snowplowing will cost about $80,000 to $100,000 a year. That is
why the bill suggests $75,000 plus a per capita amount. Boroughs
have educational responsibilities, he said, and that is why they
get more. He said the AML debated unincorporated communities and
the $25,000 came up as a guideline. He said AML tried to be
sensitive to the legislative preference of incorporation.
4:30:36 PM
MR. SELBY said encouraging incorporation is a separate
discussion. "What we're shooting for is some operating money to
keep communities healthy and operationally providing services to
their citizens," he concluded.
4:31:10 PM
SENATOR WAGONER asked if Mr. Selby would use the money to
provide services or for tax relief.
MR. SELBY said last year the Kodiak Island Borough did both,
including providing money for education, "and [it was] able to
take care of some other responsibilities as well as the PERS/TRS
piece of that whole legislation that you folks put together last
year." The bill last year was a huge factor for every
municipality in the state, he said, with its PERS/TRS assistance
and revenue sharing. If SB 72 passes, the community would like
to provide tax relief but it also needs help with education. He
said he wants the legislature to fully fund education, but it
requires an increased match from the community. Teacher salaries
are not competitive, and that needs some attention, he stressed.
4:33:35 PM
SENATOR WAGONER asked what Kodiak's mill rate is.
MR. SELBY said the base rate is 10.25, inside the city it is
12.25, and there are some service districts that are 13.5.
4:34:16 PM
VALERY MCCANDLESS, Mayor, Wrangell, said she echoes previous
testimony. The AML, which represents communities throughout the
state, has looked carefully at the issue. This bill is very
important to communities of all sizes, she stated. The
legislature has an opportunity "to address issues that have
support throughout the state."
SENATOR WAGONER asked about the mill rate of Wrangell.
MS. MCCANDLESS said it is 12 mills and will likely to go up. The
city also has a 7 percent sales tax.
4:35:51 PM
MS. SADDLER, Legislative Liaison, Department of Commerce,
Community & Economic Development, spoke on behalf of the
commissioner and the administration. She said they appreciate
the hearings on these bills, and it is a much-needed
conversation, but the administration has not taken a stand on
any current revenue-sharing bills. The governor has $48.1
million in the budget for local government assistance, and staff
is working on how to distribute that. She said she has a graph
that shows that revenue sharing in Alaska began in 1969.
4:37:12 PM
SENATOR STEVENS asked, "Are you processing a reduction-a budget
reduction--because of the governor's request for $150 million?
Is that an issue in your department?"
MS. SADDLER said there is an ongoing budget process, and part of
it is reconciling the revenue-sharing amount or local-government
assistance amount with any contribution the department can make
toward a reduction in general funds.
SENATOR STEVENS asked what the financial incentive is to
communities for incorporating.
MS. SADDLER said for a borough it is $300,000 for the first
year, $200,000 for the second year, and $100,000 the next year.
4:38:05 PM
MIKE FORD, Alaska Native Health Board (ANHB), said ANHB
represents over 119,000 Alaskans and provides health care
services for rural and urban Alaska. Healthy heath care systems
require healthy communities, he said, and SB 72 is a critical
component of the whole matrix of community services. Without
those other services--roads, public safety, power supply-there
can be no healthy health-care system. Revenue sharing is a
priority for ANHB, and it would like to see something go
forward. He recommended "some kind of per capita distribution
for unincorporated communities," because of large population
disparities. To provide one set amount for all those communities
is problematic, but he would like to see a bill go forward.
4:39:55 PM
SENATOR WAGONER referred to the communities that Mr. Ford said
are not treated adequately. "I sat through a lot of testimony
from some of the people from some of those communities, and
that's the way-it seems to me in their testimony-they wanted to
be treated." He said that two years ago he listened to several
hours of testimony on a bill by Senator Wilkin, "and I was
amazed at the attitude … leave me along; let me live and just
stay away from me. We don't want to provide any money for our
schools; we don't want to provide any money for any type of
services; just leave us alone." He said those were comments from
some of the people from the unincorporated communities who don't
want to be incorporated. He asked why the state should share
additional funds with people who don't want to provide the same
level of services. "That's a real stretch for me to go there."
4:41:22 PM
MR. FORD said there is a history of tension between incorporated
and unincorporated communities, but it is clear that the
Legislature prefers incorporation. He said he doesn't claim to
have the answer to the problem. Some communities don't have a
strong desire for the services, but there are plenty of
communities that do. It is not a simple process, and there needs
to be a tax base to make it pay. He said he is not saying to
provide per capita money without expecting something in return,
but giving a set amount to all unincorporated communities leaves
unresolved issues.
4:42:46 PM
CHAIR OLSON asked if Mr. Ford is requesting the same base
allocation for unincorporated cities as the incorporated ones.
MR. FORD said no, but there is a middle ground, and he referred
to Senator Wilken's bill.
4:43:19 PM
CHAIR OLSON set aside the bill.
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