Legislature(2001 - 2002)

02/07/2001 01:30 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          SB  48-MUNICIPALITIES:INCORP/PROPERTY VALUATION                                                                   
CHAIRMAN  TORGERSON read the  full title of  SB 48. He said  Senator                                                            
Wilken  had   given  the  sponsor's   statement  and  the   Boundary                                                            
Commission had given their  initial reaction in the 1/31/01 hearing.                                                            
CHAIRMAN TORGERSON asked  Pat Pollen to come forward and address the                                                            
revenue impacts of SB 48 to municipalities.                                                                                     
MR. PAT  POLAND,  Director of  Community and  Business Development,                                                             
said that in an effort  to explain the possible fiscal impacts of SB
48  he had  summarized  the  statewide programs  and  the  potential                                                            
impacts of each. There  are extreme variations by region, so to have                                                            
a meaningful discussion  about a particular region, calculations for                                                            
that region  would have to be addressed.  He said that Bill  Rolfzen                                                            
was  available  to  answer  technical  questions  on  the  following                                                            
   · National Forest Receipts Program: Distributes federal funds                                                              
     for education and  roads only to organized boroughs, REAAs, and                                                            
     cities  within national  forests. If  both national forests  in                                                            
     Alaska were  wholly included in organized boroughs,  four REAAs                                                            
     and  16 cities located  within the unorganized  portion  of the                                                            
     Tongass  and Chugach National  Forests would become  ineligible                                                            
     for funding.                                                                                                               
     Potential Impact: The $5,567,748 currently received each year                                                            
     by the four REAAs and 16 cities would be shifted to organized                                                              
     boroughs. The organized boroughs would assume responsibility                                                               
     for education in the areas previously served by the four REAAs                                                             
     and in 9 of the 16 cities that currently provide education                                                                 
     services. The revenue is redistributed, not lost.                                                                          
   · Payment in Lieu of Taxes (PILT): This program provides                                                                 
     payments   to  local  governments   containing  federal   lands                                                            
     (national  forest,  national  parks, etc.).  Due  to a  special                                                            
     Alaska provision,  96 cities in the unorganized borough receive                                                            
     PILT funds amounting to $5.1 million annually.                                                                             
     Potential Impact: If the unorganized borough became                                                                      
     incorporated as boroughs, the cities located within those                                                                  
     boroughs would become ineligible for PILT funds. Those funds                                                               
     would subsequently be distributed directly to the new                                                                      
     boroughs. Again, this is a shift in revenue, not a loss.                                                                   
   · State Revenue Sharing: Unincorporated communities and                                                                    
     volunteer   fire   departments   (VFDs)  located   within   the                                                            
     unorganized   borough  qualify  for  funding  under  the  state                                                            
     revenue   sharing   program.   Currently,   65  unincorporated                                                             
     communities  receive a total  of $241,000 annually and  21 VFDs                                                            
     received a total of $12,000 annually.                                                                                      
     Potential Impact: Upon incorporation of a borough, these                                                                 
     entities would no longer be eligible for funding. Their                                                                    
     allocations would be redistributed to all municipalities under                                                             
     the existing revenue sharing formulas. Monies would be                                                                     
   · Unincorporated Capital Match Grant: There are currently two                                                              
     state  capital matching  grant programs.  One program  provides                                                            
     funding  for   municipalities  that  share  available   funding                                                            
     through a  formula-based allocation. A second  program provides                                                            
     fixed  $25,000  capital  matching  grants  for  unincorporated                                                             
     communities located  within the unorganized borough. Currently,                                                            
     74 unincorporated  communities participate and  receive a total                                                            
     of $1,850,000 annually.                                                                                                    
     Potential Impact: If the unorganized borough were incorporated                                                           
     entirely as boroughs, the unincorporated communities would no                                                              
     longer be eligible for direct participation in the program.                                                                
     Funding for the unincorporated community program would be                                                                  
     rolled into the municipal capital match program in which the                                                               
     newly incorporated boroughs would participate.                                                                             
   · Fisheries Business Tax: Under the Department of Revenue Shared                                                           
     Fisheries  Business  Tax  Program,  cities located  within  the                                                            
     unorganized  borough  retain  one-half of  the  state fish  tax                                                            
     collected  based on fish processing that occurred  within their                                                            
     respective  city boundaries.  Last year,  30 cities located  in                                                            
     the  unorganized borough  received  a combined  total of  about                                                            
     $7.7 million.                                                                                                              
     Potential Impact: Cities located within a borough are required                                                           
     to split the local share with the borough. Consequently, after                                                             
     incorporation of a new borough, half of this locally shared                                                                
     amount would be distributed to the new borough in which the                                                                
     city is located. This change in distributing fish tax funds                                                                
     would occur over a five-year period.                                                                                       
MR. POLAND stressed that  this was a quick review but that analyzing                                                            
a  particular  region  is  necessary   in  order  to  draw  accurate                                                            
conclusions about impacts.                                                                                                      
CHAIRMAN TORGERSON  asked about needing  feasibility studies  before                                                            
boroughs are enacted.                                                                                                           
MR. POLAND  said there is  no such requirement.  Rather, there  is a                                                            
provision  in statute allowing  regions to  request grants  of about                                                            
$100,000 to  do feasibility studies.  The fiscal note reflects  that                                                            
amount  being spent  for  an on  the ground  contractor  to  collect                                                            
feasibility  data such as  potential revenue  sources and  financial                                                            
CHAIRMAN   TORGERSON  asked   where  the   responsibility  lay   for                                                            
determining titles and boundaries.                                                                                              
MR. POLAND  said  they anticipate  spending  up to  one-half of  the                                                            
$100,000 in  that area. They would  take a professional sampling  to                                                            
determine the  nature of the property in an area.  Their expectation                                                            
is that in  the majority of the cases,  property tax isn't  going to                                                            
be the mechanism  used to generate revenue to support  a borough. If                                                            
it were, it would come  from a principle source such as  oil and gas                                                            
CHAIRMAN TORGERSON  asked, "If they  did oil and gas property  would                                                            
they  require  them to  levy  a tax  on  all  the residents  of  the                                                            
MR. POLAND said yes, they would.                                                                                                
CHAIRMAN TORGERSON  asked whether  a title search would be  required                                                            
on all properties before the tax is levied.                                                                                     
MR. VAN  SANT said that,  in most cases,  some title searches  would                                                            
have  to  be done  to  determine  ownership,  which  properties  are                                                            
taxable and where tax bills should be mailed.                                                                                   
CHAIRMAN TORGERSON asked  for the fiscal note prepared several years                                                            
ago on this issue.  He was particularly interested  in the provision                                                            
for  oil  and  gas  property  valuations   if  property  taxes  were                                                            
He  also  wanted  information  on  land  grants  available  to  each                                                            
MR.   POLAND   said  10   percent   of   the   vacant,  unreserved,                                                             
unappropriated  property is available  for land grants to  boroughs.                                                            
Any land that is resource  rich is already reserved by the state and                                                            
not selectable.                                                                                                                 
SENATOR AUSTERMAN  asked Mr.  Poland about  cities around the  state                                                            
that have dropped their  classification because they couldn't afford                                                            
to keep the city or municipality going.                                                                                         
MR. POLAND said there were  several communities that dissolved about                                                            
six  or  seven  years  ago.  Although  the  small  governments  were                                                            
struggling,  the primary motivation  in these cases was a  desire to                                                            
embrace tribal government.                                                                                                      
SENATOR AUSTERMAN wanted  to know the impact this bill would have on                                                            
these types of communities.                                                                                                     
MR. POLAND  said there  shouldn't  be direct  financial impacts.  He                                                            
pointed out  that one of the strengths  of a regional government  is                                                            
that  issues  that are  difficult  to  deal with  on  an  individual                                                            
community level are more easily addressed on a regional level.                                                                  
SENATOR  KELLY  asked  why  there  were  no  longer  any  3rd  class                                                            
MR. POLAND said that 3rd  class boroughs were basically incorporated                                                            
school  districts with  no planning  power. It was  thought that  if                                                            
there  was  going to  be  a regional  government  they  should  have                                                            
planning  power. Through  legal amendments,  the  2nd class  borough                                                            
became  more flexible  and the  3rd class  boroughs  were no  longer                                                            
Number 593                                                                                                                      
CHAIRMAN TORGERSON called for public testimony.                                                                                 
Side B                                                                                                                          
MR. WAYNE SCHAFFER from  Slana, outside Tok, said that people is his                                                            
area see no reason  for boroughs or taxation since  there was no tax                                                            
base in the area.                                                                                                               
MS. DIANNE JENKINS  AKIN from Tok spoke for the chamber  of commerce                                                            
and herself.  She said there  is no tax base  and most lands  in the                                                            
area are either  federal or native. She said that  they want to know                                                            
where the  seat of  government would  be located  and what  benefits                                                            
they could expect to receive.                                                                                                   
MAYOR ED ZEINE  of Cordova said the  Cordova City Council  has given                                                            
unanimous approval for  SB 48. Two years ago, they conducted a study                                                            
to  review  the economic  benefits  of  forming  a borough  and  how                                                            
Cordova and  Prince William  Sound would  be affected. The  Boundary                                                            
Commission has a copy of that study.                                                                                            
MR.  R.J.  KOPCHAK  said Cordova  and  other  Prince  William  Sound                                                            
communities had studies  done beginning in the early 1970s. In 2000,                                                            
there  was  an  economic  profile  of  Prince   William  Sound  done                                                            
documenting  the economies  of the  region. It  was determined  that                                                            
there are sufficient resources to fund a borough government.                                                                    
Cordova  favors  SB  48 due  to  frustration  relating  to  regional                                                            
government  over the last  several decades.  This bill removes  many                                                            
obstacles and  makes it possible for a motivated community  to bring                                                            
a  borough  government  to  regional  attention.  They  see  borough                                                            
government  as beneficial  to  education,  land use,  and  long-term                                                            
resource management.                                                                                                            
Number 526                                                                                                                      
CHAIRMAN  TORGERSON  asked why  Cordova didn't  petition  to form  a                                                            
borough without the bill.                                                                                                       
MR.  KOPCHAK said  that  a regional  petition  relating  to  borough                                                            
government is  fairly complicated and drawn out and  that Cordova is                                                            
a very small  town without the human  resources to bring  a petition                                                            
to fruition.                                                                                                                    
CHAIRMAN TORGERSON thought  that perhaps the petition process should                                                            
be studied if it presented such difficulties.                                                                                   
MICHAEL NELSON  from Tok testified  that he couldn't see  that taxes                                                            
are  justified  in  areas  that  are  small  and  without  many  job                                                            
DAVE DENGEL,  City Manager of Valdez,  said the city council  hasn't                                                            
taken an  official position  on SB  48 but that,  in the past,  they                                                            
have objected  to any legislation  requiring formation of  boroughs.                                                            
Section 2 of SB  48 causes the most concern because  Valdez wants to                                                            
be able to vote  on whether or not they form or join  a borough. The                                                            
city willingly  pays  a substantial  amount for  education and  they                                                            
will continue  to do so. However,  it is important to note  that the                                                            
tax base in  Valdez is declining from  five to ten percent  per year                                                            
due  to  devaluation  of  pipeline  properties.  Understanding   the                                                            
implications of  the decline in valuation is important  for not just                                                            
Valdez but the entire Prince  William Sound when considering borough                                                            
Number 466                                                                                                                      
CHAIRMAN TORGERSON asked  whether Mr. Dengle anticipated the council                                                            
taking a vote for or against as a resolution.                                                                                   
MR. DENGEL said they probably would.                                                                                            
SENATOR PHILLIPS  asked Mr. Shafer  from Slana if he felt  he should                                                            
pay something toward the cost of education.                                                                                     
MR. SHAFER  said  the revenue  base in his  area was  zero and  that                                                            
imposing taxes  on the residents would cause the businesses  in town                                                            
to fail and jobs to be lost.                                                                                                    
SENATOR PHILLIPS  said that the unorganized areas  of the state were                                                            
going to  have to pay something  toward education  even if it  was a                                                            
reduced amount.                                                                                                                 
MR. JOE  RILEY  of Gakona  asked if  the lands  belonging to  Native                                                            
corporations would be taxed.                                                                                                    
CHAIRMAN  TORGERSON said  that Congress  exempts undeveloped  Native                                                            
lands from taxation.                                                                                                            
MR. RILEY asked  if they would have  a say in the type of  tax to be                                                            
levied if this bill were to pass.                                                                                               
CHAIRMAN TORGERSON said  that this bill lets the department nominate                                                            
areas to go  before the Boundary Commission.  There would  be plenty                                                            
of opportunity for public comment.                                                                                              
MR. RILEY  said he  would like  to see  more than  the one  required                                                            
public hearing.                                                                                                                 
CHAIRMAN  TORGERSON said  that was  a good point.  He then  reminded                                                            
everyone  that  the purpose  of  this  meeting  was to  take  public                                                            
testimony and not to debate the merits of the bill.                                                                             
MS. DEBBIE MUIR from Tok  said that the community isn't ready to pay                                                            
taxes and they  are particularly unhappy  at the prospect  of having                                                            
the right to vote on annexation or borough formation taken away.                                                                
CHAIRMAN  TORGERSON asked  for any other  public comment. There  was                                                            
none so he closed the public comment portion of the meeting.                                                                    
Number 345                                                                                                                      
CHAIRMAN TORGERSON  asked Mr. Poland whether the $300,000  grant for                                                            
incorporation  expenses  should be  adjusted upward.  He  referenced                                                            
Cordova's  comment that they  couldn't afford  the current  petition                                                            
application for borough formation.                                                                                              
MR.  POLAND  said  some clarification   was  in order.  It  was  his                                                            
understanding  that the city  of Cordova  commented that with  their                                                            
existing  resources they don't  have the  capacity to fully  explore                                                            
and  develop   a  petition.   Separate  from   that,  there   is  an                                                            
organizational  grant providing  $300,000 the  first year,  $200,000                                                            
the second  year  and $100,000  the third  year that  would go  to a                                                            
region after it had formed a borough.                                                                                           
He also said that  a law was put on the books a number  of years ago                                                            
allowing  a region to apply  for up to $100,000  in grant monies  to                                                            
explore  the  feasibility  of  establishing  a borough  but  to  his                                                            
knowledge, that program was never funded.                                                                                       
CHAIRMAN  TORGERSON  asked if  they had  funded the  Prince  William                                                            
Sound study.                                                                                                                    
MR.  POLAND didn't  believe  so; that  Coastal Zone  Management  was                                                            
involved there.                                                                                                                 
SENATOR PHILLIPS  asked what "each  area having the opportunity  for                                                            
public comment" meant.                                                                                                          
MR. POLAND said the general  practice is to go to population centers                                                            
but that  the department  and commission  makes  an effort to  allow                                                            
everyone to appear in person and be heard.                                                                                      
CHAIRMAN  TORGERSON said  that issue had  been addressed  previously                                                            
but it  might warrant  revisiting.  He asked for  other comments  or                                                            
questions. There were none.                                                                                                     
CHAIRMAN  TORGERSON  announced that  the bill  would  be held  over.                                                            
Public testimony  would be taken on Saturday February  10, 2001 from                                                            
1:30  to  3:30  p.m.   Senator  Phillips  would  be  available   via                                                            

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