Legislature(1995 - 1996)

03/13/1996 01:35 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SB 280 MANDATORY INCORP OF CERTAIN BOROUGHS                         
  CHAIRMAN TORGERSON  called the Senate Community & Regional Affairs           
 Committee meeting to order at 1:35 p.m., and brought SB 280 before            
 the committee as the first order of business.                                 
  DEB DAVIDSON , committee aide, explained that at the last meeting on         
 the legislation, a committee substitute was adopted that basically            
 puts in a schedule for the incorporation of the boroughs.  The                
 original version provided that DCRA would have borough proposals              
 completed by July 1, 1997 for submission to the Local Boundary                
 Commission.  However, it was realized that this was probably a                
 little too optimistic so a transition schedule was inserted in the            
 new committee substitute to give the department more time to put              
 the borough proposals together.  Once the Local Boundary Commission           
 approves the  borough proposal, it would then go directly to the              
 Division of Elections for the election of borough assembly members            
 and the choice of areawide powers.  The Local Boundary Commission             
 would have to bring any annexations before the Legislature for                
 approval or disapproval.                                                      
 Ms. Davidson directed attention to a backup packet including a                
 breakdown of fiscal implications, new fiscal notes, as well as a              
 schedule of incorporation for boroughs, based on 1994 values.                 
  SENATOR TORGERSON  asked if the state assessor has indicated when he         
 will reassess the values in the REAAs, because the only information           
 that is currently available is the 1994 values.   MS. DAVIDSON                
 replied that the state assessor indicated that if SB 280 passes, he           
 will start immediately on estimating the property values.                     
  SENATOR TORGERSON  noted the breakdown of the fiscal implications            
 shows that the 1994 estimated value of property not currently taxed           
 by local governments in rural areas amounts to $3,100,154.6.  It              
 also shows the preliminary estimate of cumulative cost to the state           
 through fiscal year 2002 for the incorporation of the unorganized             
 boroughs is $13,216,600.                                                      
  MS. DAVIDSON  explained in estimating a possible savings of                  
 $17,708,600 by the consolidation of school districts, she used                
 figures for administrative costs contained in the Department of               
 Education's report entitled "The Report Card of School Districts."            
 She noted the packet contains a fiscal note from the Department of            
 Education, but it does not show the actual savings that could be              
 realized by the merging of school districts.                                  
 Number 168                                                                    
  SENATOR ZHAROFF  asked if in estimating the value of property not            
 currently taxed by local government, did it include federal lands,            
 Native allotments, regional and village corporation lands.   MS.              
 DAVIDSON  answered that it was estimated only on taxable property.            
  SENATOR ZHAROFF  commented that he would like to see figures on how          
 much revenue is generated by school districts under PL 874, because           
 probably as much as 90 percent of the PL 874 monies that are                  
 generated by the non-taxable property in the state goes to the                
 state and 10 percent goes back to the districts.                              
 Number 225                                                                    
  LAMAR COTTEN , Deputy Commissioner, Department of Community &                
 Regional Affairs, stated the department supports the concept of SB
 280.  They believe there are a number of non-financial benefits to            
 areas to consider organizing as boroughs such as promoting economic           
 development, the implementation of planning, approaching certain              
 social programs in a more comprehensive regional basis, and the               
 ability to finance a capital construction project along with some             
 state assistance.                                                             
 Mr. Cotten said DCRA's position is that they like the thrust of the           
 bill, but they are concerned about the areas that in some cases may           
 have high evaluations but also have a number of circumstances that            
 restrict them from receiving the benefits of taxation that the                
 other new rural boroughs have achieved.  He noted one of the                  
 reasons there isn't a property tax in Bethel is because there is              
 such a scattering of taxable property and non-taxable property,               
 whether its an old Native townsite, or Native allotment, or other             
 restricted deed.  Consequently, politically, a lot of local                   
 governments have steered away from having a property tax because              
 one neighbor pays and the other one doesn't.  Also, another issue             
 to consider, particularly in the Western Alaska region, is the                
 income levels, the high unemployment and the ability to attain a 4            
 mill levy.                                                                    
 Number 335                                                                    
  JACKSON WOMACK , Chief Executive Officer for the Yupik Nation,               
 testifying from Bethel, speaking to what he believes is the                   
 unconstitutionality of the legislation, stated tribes possess the             
 right to form their own government, to make and enforce laws in               
 both civil and criminal matters, and tribal governments are not               
 subordinate to state government.  SB 280 is an infringement to the            
 right of self-government.                                                     
  SENATOR TORGERSON  stated that nobody is taking away their right to          
 tax anything, but the question is if the public monies that go to             
 them as a sovereign nation should come to them from areas other               
 than within their own taxing jurisdiction.  He added they want the            
 state of Alaska to continue to pay for their services and yet not             
 recognize any of the authority that the state of Alaska wants to              
 impose upon the rest of its residents, and that is                            
 Number 400                                                                    
  EDDY JEANS , Foundation Program Administrator, Department of                 
 Education, advised that the department did prepare a fiscal note,             
 however, at this point, it only deals with the phase-in provision             
 under the foundation program.                                                 
 Mr. Jeans explained that under DCRA statutes, once a borough has              
 been incorporated, it has up to two years to assume the educational           
 duties.  Under the foundation program, the municipalities receive             
 an additional grace year of no required local effort, a 2 mill                
 equivalent of a 2 mill tax levy in the second, 3 mills in the third           
 and 4 mills in the fourth.  Utilizing the time frames contained in            
 SB 280, the first fiscal note the Department of Education could               
 build was in the 2001 as a fiscal cost.                                       
 The real impact will be in the Impact Aid Program.  Under that                
 program, the state of Alaska currently recognizes $30,000,000 to              
 $35,000,000 annually that goes to school districts in the                     
 foundation program.  When a municipality has a required local                 
 effort, as they do in Alaska, and when a district contributes over            
 the 4 mill required local effort, the amount of impact aid that the           
 state may recognize in the foundation formula is reduced by the               
 proportion that they exceed that required local effort.                       
 Mr. Jeans advised that the Department of Education proposes to run            
 a schedule of the foundation program as it is today, and then run             
 it out to the year 2007, when they would actually recognize all of            
 the boroughs being incorporated and show how this is going to                 
 impact the deductible impact aid of the foundation program.  Based            
 on the projected assessed values, the foundation program would                
 recognize approximately $12,000,000 in increased required local               
 effort.  He added he believes that once the schedule is completed,            
 it will be offset by a large chunk of loss in impact aid revenue              
 that is recognized in the formula.                                            
 Number 430                                                                    
  SENATOR TORGERSON  commented that the legislation does not set up            
 any taxation methods, it is just the formation of the boroughs.               
 The recommendations on how this is done is going to be part of the            
 negotiations between now and the time these boroughs are formed.              
 The intention of the bill is to get everybody thinking about and              
 forming their boroughs.                                                       
  SENATOR ZHAROFF  said he is not opposed to any borough formation or          
 the state being sectioned as boroughs, but he supports a process              
 where it comes from the people up rather than from the government             
 down.  He believes the legislation sets up a time frame that causes           
 some problems.                                                                
 Number 445                                                                    
  SENATOR ZHAROFF  asked if any of the boroughs are having financial           
 problems.  He is aware of one borough that has a concern with the             
 amount of non-taxable land within its boundaries.   LAMAR COTTEN              
 responded that he was not aware of any, and he noted the last five            
 that have been organized all have fairly strong tax bases.  He also           
 related that another issue the department has looked at and                   
 discussed over the years is that when people have looked at                   
 organizing a borough in the eastern part of Alaska, including the             
 pipeline, the taxation that borough would be allowed to tax on the            
 oil and gas property would be deducted from those funds that would            
 go to the general fund.  He said he is not sure how much of a                 
 benefit there could be to the state under certain circumstances               
 such as that and these types of issues need to explored and talked            
 Number 525                                                                    
  MICHAEL GATTI , Borough Attorney, Matanuska-Susitna Borough,                 
 testifying from the Mat-Su LIO, stated the Mat-Su Borough believes            
 the legislation is a good start in incorporating areas into                   
 municipalities so they can start paying their own way.                        
 Responding to an inquiry made by Senator Zharoff earlier in the               
 meeting as to the powers of a second class borough,  Mr. Gatti said           
 there are three mandatory areawide powers:  planning, assessment              
 and taxation, and education.  There are a number of other powers              
 that a borough can exercise by ordinance or through a vote of the             
 Mr. Gatti expressed the Mat-Su Borough's keen interest in the                 
 legislation, and he said they believe other municipalities are                
 quite interested in it as well.  He noted there is an attack on the           
 Mat-Su Borough's boundaries from another organized borough that is            
 taking place, and while SB 280 doesn't address that, they believe             
 the more boroughs that are organized and paying their own way, the            
 less likelihood there will be of people trying to do "tax shopping"           
 in an effort to get a better deal for their money.                            
 Number 544                                                                    
  SENATOR ZHAROFF  asked what Mr. Gatti meant by "paying their own             
 way."   MR. GATTI  responded that when saying "paying their own way,"         
 it means those municipalities that provide a local effort to                  
 provide those essential local services, tax themselves at a level             
 that can contribute to the support of those services.  He added, in           
 general, they think the state has been paying for what in essence             
 is local services for quite some time in the unorganized areas.               
 Number 574                                                                    
  DENNIS WATSON , Mayor of Craig, testifying from Craig, said as a             
 city they do their own planning, their own taxing, and he believes            
 they are pretty effective at it, better than most boroughs and                
 better than the state is.  He said there is some problem as far as            
 being able to access fishery taxes by a borough, but this allows              
 that to happen in most places.  The fishery taxes that are being              
 collected in some of the boroughs out to the west of them are in              
 addition to the state fishery tax or landing tax so it is an                  
 additional burden on the fishermen who are already in trouble right           
 now.  He related it has been a feeling of all the communities in              
 the Craig area that a borough is not acceptable.   He suggested the           
 uniqueness of any area in the state as compared to another needs to           
 be considered.                                                                
  TAPE 96-14, SIDE B                                                           
 Number 010                                                                    
  MS. MARLA ADKINS , testifying from Cordova, stated she is not                
 opposed to a borough, but she is opposed to both borough and city             
 governments.  She observed that as far as closing the fiscal gap in           
 Juneau, right now the state takes the raw fish tax for various                
 areas, and if boroughs are formed, the boroughs will take that tax,           
 so she doesn't see that as helping to close the fiscal gap.  She is           
 opposed to SB 280 in its current form, and she does not believe a             
 borough should be formed without a vote of the people.                        
 Number 075                                                                    
  MS. DENNY WEATHERS , testifying from Cordova, stated her strong              
 opposition to SB 280, basically because of level of service.  If              
 the area she lives in was incorporated into a borough they would              
 lose their school system, and they cannot travel to Cordova for               
 schooling.  All they would get out of it is being taxed.                      
  ERIC WEATHERS , testifying from Cordova, also stated his opposition          
 to SB 280.  He and his wife live on an island outside of Cordova,             
 and when he goes to Cordova to shop he pays city taxes.  If they              
 become part of a borough, it will mean more taxes for him.                    
 Number 101                                                                    
  MS. JANE BROWN , testifying from Glennallen, voiced her opposition           
 to SB 280 because she believes it is unconstitutional.  She pointed           
 out that as far as Glennallen carrying its own weight, they live in           
 an area where sanitation, garbage, sewer and medical are all                  
 private enterprise.  She said as far as taxing the pipeline in                
 their area, it is on the decline, and passage of the legislation              
 will be a large burden on the individuals living there.  She also             
 pointed out that most of the land in that area is uninhabited                 
 swamp, and if it were taxed, it would probably decrease the value             
 of the residents' property.                                                   
 Number 120                                                                    
  JOHN KUNIC , testifying in Glennallen, stated his opposition to SB
 280 because there is no basis for a tax in that area and there is             
 no industry.  He also believes the legislation is unconstitutional.           
 Number 128                                                                    
  SENATOR TORGERSON  pointed out that for 1994 the assessed evaluation         
 for the Copper River Basin is approximately $65,000,000, and if oil           
 and gas property is included, it is another approximately                     
 $600,000,000, so there is some assessed evaluation.                           
 Number 132                                                                    
  HERMAN DILLBACK , a resident of Slana testifying in Glennallen,              
 echoed earlier testimony that SB 280 is unconstitutional.  He                 
 suggested incorporation should  be based on an autonomy level that            
 the communities have themselves in order to contribute to the                 
 revenues of the state.  He said if the state is concerned about the           
 revenue that it is sharing with the communities all over the state,           
 communities that don't have an economy that will produce some sort            
 of income and a revenue sharing to the state, he doesn't understand           
 why they should be put in a situation where they are taxed and not            
 able to produce any money as a personal income to support                     
 Number 152                                                                    
  DAN BILLMAN , a resident of Lake Louise testifying in Glennallen,            
 said the real issue is school tax where residents of that area feel           
 there is an unequal school tax.  He suggested looking at other                
 legal ways to tax statewide, but not to force the formation of                
 areas that aren't ready for a borough government and putting that             
 burden on its people.                                                         
 Number 180                                                                    
  BERNARD GOODNO , testifying in Delta Junction, spoke to the                  
 unconstitutionality of SB 280 and his rights as a citizen under the           
 U.S. Constitution.  He said it is not up to the state to force its            
 people to do anything, and he wants a lot less government, not                
 Number 190                                                                    
  MARLIN STARNES , a member of the Delta Junction City Council                 
 testifying in Delta Junction, said there are a lot of issues in the           
 legislation that might have to be addressed if it were to work at             
 all.  He said reference was made to the 1994 estimated assessed               
 evaluation, however, they have already lost approximately                     
 $50,000,000 in evaluation in that  area.                                      
 Number 205                                                                    
  GENE OTTENSTROER , testifying in Delta Junction, questioned where            
 the revenues will come from to pay for all the "conveniences" that            
 will come with the formation of a borough.  In his opinion, putting           
 a borough on Delta is a monkey on their backs that can only turn to           
 the state and jump on theirs.  The state will end up supporting               
 another government and holding the bag in the end.  He questioned             
 under what authority the Legislature has to force them into a                 
  SENATOR RANDY PHILLIPS  responded that basically, the Legislature            
 serves as the assembly for the unorganized areas of the state, so             
 that's where the authority comes in.                                          
 Number 241                                                                    
  MS. JEANNE PHIPPS , testifying in Delta Junction, stated SB 280 is           
 unconstitutional.  She asserted the right to property does not come           
 from the state, it comes from the Creator.  She said it is time for           
 legislators to perform their oaths of office, which is first to               
 uphold the U.S. Constitution.  She urged to vote no against putting           
 the people into bondage through a fraudulent incorporation.                   
 Number 275                                                                    
  P.R. MILLER , testifying in Delta Junction, said many areas in the           
 Lower 48 are getting away from boroughs because they are a                    
 duplication of effort and taxes and a loss of money.  He said Delta           
 Junction is paying its own way, they are just not charging 7 mills            
 on the pipeline to take care of Delta Junction.  The state gets               
 that money and funds it back to them in aid that they require.  He            
 suggested there should be a statewide sales tax, a statewide income           
 tax and a statewide land usage tax, and then doing away with the              
 boroughs and the state will make money in the long run.                       
 Number 315                                                                    
  ELSIE O'BRYAN , testifying in Juneau in support of SB 280, related           
 she is deputy mayor of Houston, which is a second class city                  
 located within the Matanuska-Susitna Borough.   She said the city             
 of Houston has been subjected to inequitable treatment for many               
 years on school funding.  The residents within that area fund                 
 approximately 85 percent of all school costs from local tax                   
 dollars.  She observed the Alaska Constitution calls for equitable            
 treatment of all the people, but she questioned how it could be               
 equitable to have one portion of the state contributing towards the           
 services provided and another area not doing so.  She said several            
 people have talked about the unconstitutionality of forcing                   
 boroughs, but she would raise the question of the                             
 unconstitutionality of not forcing boroughs.                                  
 Number 381                                                                    
  SENATOR ZHAROFF  commented that there hasn't been a state income tax         
 for many years so a lot of the revenue is generated from oil                  
 royalties, the fishing industry, etc., so it's not that you are               
 giving people something that really isn't theirs.                             
 Number 412                                                                    
  MS. KATHLEEN SLOBODA , testifying in Glennallen, stated her strong           
 opposition to the formation of a borough in the Glennallen area.              
 She believes the bill was created out of spite because some people            
 are unhappy that others, perhaps, are not having to pay as much as            
 they are.  The borough only creates infrastructure to increase the            
 population, and with that increase of population, it just becomes             
 another city.                                                                 
 Number 456                                                                    
  RALPH TRONRUD , a school board member in Skagway, stated his concern         
 with the legislation is that it mandates the formation of boroughs.           
 He said Skagway is paying its own way, however, their area is in              
 one of the proposed boroughs that's being looked at.  He believes             
 if Skagway was put into the same borough as Haines, which has a               
 larger community, both communities would lose their autonomy.  He             
 suggested changing the legislation so that boroughs could form on             
 a voluntary basis.                                                            
 Number 482                                                                    
  BARBARA KALEN , testifying in Skagway, said Skagway has been an              
 incorporated city since 1900 and they have paid their own way.  All           
 of the land that has any commercial use, any residential use, any             
 use whatsoever is in the city limits of Skagway.  She said Skagway            
 does not need another layer of government, and they do not like               
 being mandated for something that they do not need and do not want.           
 Number 500                                                                    
  ROY BRITTIAN  of Copper Center, testifying in Glennallen, voiced his         
 opposition to SB 280, and said he doesn't see why people should be            
 forced into anything.   A lot of people in the Copper River Valley            
 area farm and most of them just barely make ends meet.  Adding                
 borough taxes is all they need to put them out of business.                   
 Number 530                                                                    
  ALFRED KRINKE , testifying in Glennallen, said if the Legislature is         
 going to impose another layer of government, which a borough is,              
 then you have automatically picked up a whole lot of expenses that            
 people don't want to pay for.  He suggested if the Legislature                
 needs money to close the fiscal gap, there are several other ways             
 of raising it.                                                                
 There being no further witnesses to testify on SB 280,  SENATOR               
 TORGERSON  asked for the pleasure of the committee.                           
  SENATOR RANDY PHILLIPS  moved that CSSB 280(CRA) and the                     
 accompanying fiscal notes be passed out of committee with                     
 individual recommendations.   SENATOR ZHAROFF  objected and stated he         
 believes mandating the formation of boroughs is going to cause a              
 lot of problems, particularly under the proposed boundaries.                  
  TAPE 96-15, SIDE A                                                           
 Number 005                                                                    
  SENATOR TORGERSON  called for a roll call vote.  The roll was taken          
 with the following result: Senators Kelly, R. Phillips, Torgerson             
 voted "Yea" and Senator Zharoff voted "Nay."  The Chairman stated             
 the motion to move CSSB 280(CRA) out of committee with individual             
 recommendations carried.                                                      

Document Name Date/Time Subjects