Legislature(2001 - 2002)
02/07/2001 01:30 PM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 programs. · 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 redistributed. · 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 impacts. 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 properties. CHAIRMAN TORGERSON asked, "If they did oil and gas property would they require them to levy a tax on all the residents of the borough?" 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 instituted. He also wanted information on land grants available to each borough. 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 boroughs. 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 needed. 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 opportunities. 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 organization. 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 teleconference.