Legislature(2001 - 2002)

03/22/2001 09:11 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 48(CRA)                                                                                                  
"An Act  relating to  the determination  of full  and true value  of                                                            
taxable municipal  property for purposes of calculating  funding for                                                            
education  and certain  other programs,  to incorporation  of  third                                                            
class  boroughs,  to  incorporation   of  certain  boroughs  in  the                                                            
unorganized  borough and annexation  of portions of the unorganized                                                             
borough  to  boroughs   and  unified  municipalities,   and  to  the                                                            
formation  of separate unorganized  boroughs;  and providing  for an                                                            
effective date."                                                                                                                
                                                                                                                                
                                                                                                                                
Senator  Wilken,  Sponsor,  referred  to  some  handouts  that  were                                                            
presented to the Committee.   He spoke to the handouts entitled "The                                                            
Need  to Reform  State  Laws Concerning  Borough  Incorporation  and                                                            
Annexation" by  the State of Alaska Local Boundary  Commission (LBC)                                                            
and  "Background  on  Boroughs  in  Alaska"  by  the  Department  of                                                            
Community  and Economic  Development  and the  "Equity in  Education                                                            
Funding Act."  He summarized  that SB 48  simply asked the  question                                                            
"can you help."  He pointed out that 92 percent of  Alaskans pay for                                                            
education  and 8  percent do  not pay  anything for  education.   He                                                            
noted  that those  8 percent  command 21  percent  of the  education                                                            
budget.  He explained  that SB 48 simply looked in  an organized and                                                            
professional manner  at those places that do not and  asked "can you                                                            
help?"  He indicated  that 84 percent of Alaska is  in boroughs that                                                            
they did not vote for,  4 percent of Alaska is in boroughs that were                                                            
voted for and the rest is in unorganized Alaska.                                                                                
                                                                                                                                
Senator Wilken  further reported  that Alaska  is the only  state in                                                            
the union  that  has unorganized  areas.   The Constitution  of  the                                                            
State of  Alaska envisioned,  back  in the early  1960s, how  Alaska                                                            
should be organized as  it matured and developed over time.  He said                                                            
that SB 48 would  leave existing law in place, but  provided another                                                            
method  for  organizing  Alaska.    Under  the  current  system  the                                                            
petition is filed and it  goes through public hearings and the Local                                                            
Boundary Commission  goes over the  areas affected and receives  all                                                            
sorts  of  input  and develops  what  amounts  to  a  structure  for                                                            
organization.   Next, it  would be voted on  and brought before  the                                                            
legislature,  which  would  have to  take  action within  a  certain                                                            
timeframe to deny  the vote.  He pointed out that  SB 48 suggested a                                                            
different way.  He explained  that the process does not start at the                                                            
local level, but rather  at the departmental level and they nominate                                                            
each year  areas of  the unincorporated  Alaska  that they feel  may                                                            
have the  capacity to organize  and support  government.  The  Local                                                            
Boundary  Commission  has  the  charge  to  go to  those  areas  and                                                            
validate  that nomination  and the Local  Boundary Commission  would                                                            
make a  decision and  come before  the legislature.   He  summarized                                                            
that in simple  terms there would be two changes:   one, the process                                                            
starts  at the  departmental  level; and  two, the  provision for  a                                                            
public  vote is not  in SB  48.  He  noted that  existing law  still                                                            
would stay in place for those that want to voluntarily organize.                                                                
                                                                                                                                
Senator Wilken referred  the book entitled "The Need to Reform State                                                            
Laws Concerning Borough  Incorporation and Annexation" and indicated                                                            
that it was a  book that they have come out with every  year by law.                                                            
He pointed out that it  was the basis for SB 48.  He said that SB 48                                                            
was supported  by a 5-0 vote on October 31, 2000.   He detailed that                                                            
of the  unorganized  area amounts  to 375  square  miles, 11  census                                                            
areas, 37 of the school  districts, 19 regional education attendance                                                            
areas,  96  of Alaska's  145  cities  and  66 percent  of  all  city                                                            
government.   He pointed out that  there are 11 standards  that need                                                            
to be met.  He  pulled out one in particular; "each  area (organized                                                            
or  unorganized)  should have  a  population  and area  with  common                                                            
interest."  He  indicated that the LBC would have  to check off each                                                            
standard in  order for them to come  up with a plan to bring  to the                                                            
legislature.    He  said  that  it  was  the  blue  print  for  this                                                            
legislation.                                                                                                                    
                                                                                                                                
Senator Wilken  continued, "Founders intended that  regions would be                                                            
classified as  organized boroughs or unorganized boroughs  depending                                                            
on their  readiness and  capability for government."   He  explained                                                            
that  what SB  48 did  was take  the 375  thousand  square miles  of                                                            
unorganized  area  and section  it  up and  asked, "what  areas  can                                                            
help?" He said  that the Mandatory  Borough Act of 1963 stated,  "No                                                            
area  incorporated  as an  organized borough  shall  be deprived  of                                                            
state services,  revenues, or assistance  or be otherwise  penalized                                                            
of incorporation."    He suggested  that organized  Alaska is  being                                                            
penalized  by unorganized  Alaska  without unorganized  Alaska  even                                                            
asking, "can  you help?"  First, in  his mind what drives  the whole                                                            
issue  [referring to  a chart]  is that general  fund contributions                                                             
between the  years of FY97  and FY02 that  support operation  of the                                                            
school districts  was an  average of $124  million out of roughly  a                                                            
$700 million  budget.  He  said that the  legislature needed  to ask                                                            
the question  "is it valid and can  those that don't pay  today help                                                            
pay?" He  pointed out  that $124  million was  going to unorganized                                                             
Alaska without any validation of that contribution.                                                                             
                                                                                                                                
Senator Wilken  explained  that on the capital  budget side  between                                                            
the years FY92 through  FY01 they have spent $197 million on capital                                                            
spending in  Rural Education Attendance  Areas (REAAs).   He pointed                                                            
out that there is $20 million  a year going out for capital spending                                                            
without any  local contribution.   The problem  that creates  is all                                                            
the people  in organized  Alaska have working  people having  to pay                                                            
four mills to get a nickel  of state money.  For example, he pointed                                                            
out a  list of capital  improvement  projects by  the Department  of                                                            
Education and  Early Development where  in one instance the  City of                                                            
Kenai  had a project  with a  total of  $550,871 and  the people  of                                                            
Kenai were going  to come up with $165,261 and the  state would come                                                            
up with $385,610,  because Kenai is a borough.  In  another instance                                                            
there was  an REAA  project with a  total of  $981,237 and the  REAA                                                            
would  come  up with  $19,625  and  the  state would  come  up  with                                                            
$961,612.                                                                                                                       
                                                                                                                                
Senator Wilken referred  to a chart titled "1998 Per Capita Earnings                                                            
From Local  Employment" and pointed  out that there were  only three                                                            
of the  REAAs that  had per capita  earnings  from local  employment                                                            
higher than those in ten  organized boroughs.  He said that at least                                                            
it validated  the  question that  there is  economy  out there.   He                                                            
noted that they think of  the amorphous area as destitute, but it is                                                            
not destitute.   He  referred to a  newspaper that  was sent  to him                                                            
dated  November   16,  Thursday,   and  there   is  a  real   estate                                                            
advertisement  for  homes  that  are  for sale  all  over  close  to                                                            
$200,000,  which tells  him two  things:   one, there  is value  out                                                            
there; two, there  are arms-length transactions going  on.  He noted                                                            
that when  the home  is bought it  establishes  a value between  the                                                            
buyer and the  seller, which means  there is a way to quantify  what                                                            
goes on in  the unorganized area and  establish value.  He  referred                                                            
to  the  next  chart  titled  "REAA  Wages  and Average   Employment                                                            
(FY1999)".                                                                                                                      
                                                                                                                                
                                                                                                                                
SFC 01 # 50, Side B 10:05 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator Wilken  further pointed out that in 1999 in  the unorganized                                                            
areas 15,848  people made $388 million  in earned wages and  in 2000                                                            
16,257 people  made $405 million in  earned wages.  He said  that to                                                            
him it begs  the question that there  is wealth out there  and there                                                            
is an economy.   He reiterated  that SB 48  asked the question  "can                                                            
you help?"  and if  they can  help than  they should  help like  the                                                            
people in  organized Alaska.   He believed  that it would be  a ten-                                                            
year project.   He added that it was the job of the  legislature not                                                            
to  focus  their  resources  on the  amorphous  area  known  as  the                                                            
unorganized borough, but rather on targeted areas.                                                                              
                                                                                                                                
ROBERT KOPCHAK,  Director,  Planning and  Community Development  for                                                            
the City of Cordova,  read the following testimony  into the record:                                                            
                                                                                                                                
     The City of Cordova has been in favor of the formalization of                                                              
     a borough  government for the  Prince William Sound  and Copper                                                            
     River  region for  many years.   In  the past  two decades,  at                                                            
     least four  borough studies for the area have  been undertaken.                                                            
      These are  in addition to the work done by the  Local Boundary                                                            
     Commission,   and  represent  significant  investment   by  the                                                            
     community and the  state.  The Cordova City Council has adopted                                                            
     a  "Borough Priority",  and an  additional  "in house"  borough                                                            
     economics  study  was  completed about  four  months  ago in  a                                                            
     continuing effort to move this governance issue forward.                                                                   
                                                                                                                                
     For  our region  the  borough government  concept  seems to  be                                                            
     economically  desirable, and politically difficult.   There are                                                            
     significant  disincentives for the formation  of a borough, and                                                            
     few resources  available to provide for the level  of financial                                                            
     analyses  and concept promotion  needed to gain broad  regional                                                            
     approval.   In areas with diverse interests,  concentrations of                                                            
     population,   and  rich/poor   communities,   current   borough                                                            
     formation  law  allows  the "haves"  to  dictate  the  regional                                                            
     politics  related to  borough formation  at the expense  of the                                                            
     "have nots".  I would offer the following example.                                                                         
                                                                                                                                
     The  model boroughs  proposed  by the  LBC for  Prince  William                                                            
     Sound (5)  and the Copper River Basin (6) would  be combined to                                                            
     reflect   a   more   "ideal"   approach   to   responsive   and                                                            
     representative   regional   government.      Entire   drainages                                                            
     undivided by multiple  political/jurisdictional borders provide                                                            
     for  the maximum local  participation  in decisions that  would                                                            
     affect residents  of the region.  This borough  would encompass                                                            
     the  entire   drainage  system,   reflect  the  interconnected                                                             
     dependence  on regional  resources, and  the shared risks  from                                                            
     pollution  and catastrophic oil spills that damage  subsistence                                                            
     lifestyles,  economies and ecologies  Coastal Zone Management,                                                             
     Platting,  and  other   related  land  use  issues  within  the                                                            
     drainage would be  consolidated, and communities would share in                                                            
     the risks and rewards  related to resource development and land                                                            
     use.   Drainage boundaries would  allow "upriver" residents  to                                                            
     share in the value  of fisheries resources exploited by coastal                                                            
     communities,  resources  that depend on  the upriver areas  for                                                            
     their   health  and   vitality.     Coastal  communities,   and                                                            
     communities  removed  from  oil  transportation  corridors  and                                                            
     ports,   would  share   in  the  value   of  the  business   of                                                            
     transporting  oil.  Sharing  in this  value during normal  safe                                                            
     operations  would  help  offset  the  impacts  from  inevitable                                                            
     spills and catastrophic events.                                                                                            
                                                                                                                                
     Each community  within this region  shares a dependence  on the                                                            
     resources  supported by the waters of Prince  William Sound and                                                            
     the   Copper  River/Bering   River.     Some  communities   are                                                            
     completely  dependent  on the  fisheries and  subsistence  game                                                            
     found within the region.   Over 75 percent of Cordova's economy                                                            
     is directly tied to  the fisheries of PWS, the Copper River and                                                            
     North  Gulf of Alaska.   In  PWS, Chenega  and Tatitlek  are 95                                                            
     percent dependent  on true subsistence and commercial  fishing.                                                            
      Although  the shipment  and loading of  oil is a huge  part of                                                            
     the  regional  economy,  few of  the  benefits of  the  dollars                                                            
     generated  by  this part  of  the regions  economy  are  shared                                                            
     outside  Valdez  and the support  service  communities  located                                                            
     adjacent  to the  pipeline.   It is  interesting  to note  that                                                            
     "down  stream" communities  most  likely to  be damaged by  oil                                                            
     spills enjoy  virtually none of the economic  benefits from oil                                                            
     transportation  and  shipment.  A  break in  the pipeline  at a                                                          
     river  crossing   has  the  potential  of  devastating   salmon                                                            
     production  on  the Copper  River,  impacting  subsistence  and                                                            
     commercial  fishing communities, both upriver  and coastal, for                                                            
     generations.   These communities  receive no benefits  from the                                                            
     shipment  of oil across  lands and waters  put at risk.   It is                                                            
     unconscionable  that a  community at  slight financial  risk to                                                            
     oil  spill   damage  has  a   reserve  account  in   excess  of                                                            
     $70,000,000  from regional oil  transportation revenues,  while                                                            
     neighboring  villages   and communities   whose  economies  and                                                            
     subsistence  lifestyles were  damaged by and are still  at risk                                                            
     to spills struggle.                                                                                                        
                                                                                                                                
     Most communities in  this region do not contribute to the local                                                            
     cost  of education,  and facilities  and  programs suffer  from                                                            
     limited  budgets  spent on  duplicate  administration.   It  is                                                            
     interesting  to  note that  in a  recent evaluation  of  school                                                            
     students ability to  take the standardized graduation tests, it                                                            
     was in  communities with the  greatest tax base/student  ratios                                                            
     that students  performed best.   Revenues produced from  modest                                                            
     borough  taxes  would easily  pay the  cost  of a consolidated                                                             
     regional education  program and still allow for local education                                                            
     control.   In the region, the  benefits of modest tax  programs                                                            
     in an  expanded regional  base are significant.   After  paying                                                            
     the  costs  of  Borough  government  administration,   regional                                                            
     education   costs,   and  platting/coastal   zone  management,                                                             
     sufficient  revenues   would  remain  to  provide  $100,000  in                                                            
     revenue  sharing to each community,  and a per capita  share of                                                            
     any revenue  surplus.  This would  be after a $450,000  deposit                                                            
     to  a  Borough  Reserve  account.     For  the  Prince  William                                                            
     Sound/Copper  River  Region, a  borough makes  financial  sense                                                            
     from an education  and a revenue sharing standpoint.  Why isn't                                                            
     there a borough?                                                                                                           
                                                                                                                                
     The ineffectiveness  of the voluntary incorporation  provisions                                                            
     of the 1961  law is evident in the fact that  only 4 percent of                                                            
     Alaskans  live   in boroughs   that  were  formed  in  a  truly                                                            
     voluntary  manner.    That is  contrasted  to 82.6  percent  of                                                            
     Alaskans  who live in boroughs that were formed  under the 1963                                                            
     mandate  drafted  by Representative  Rader.   It  must also  be                                                            
     recognized  that most of the  boroughs that formed voluntarily                                                             
     had  extraordinary resources  that make  boroughs particularly                                                             
     attractive.   The North  Slope accounts  for 25 percent  of the                                                            
     residents  of Alaska that have  formed voluntary boroughs,  and                                                            
     their tax base is an enviable $1,550,950 per capita.                                                                       
                                                                                                                                
     If we  look at the "ability to  pay" as it relates to  existing                                                            
     and proposed  boroughs, we note that 10 of the  12 areas in the                                                            
     "unorganized borough"  have a larger per capita income than the                                                            
     Mat-Su,   which  was  compelled  to  form  a  borough   through                                                            
     legislative  action.  Of the  "Top Ten" areas on the  state per                                                            
     capita  income list, it is notable  that #6(the Cordova/Valdez                                                             
     census area) is the only non-borough area.                                                                                 
                                                                                                                                
     The  difficulty in  using local  initiative  to form a  borough                                                            
     results from  decades of incrementally expanding  disincentives                                                            
     to  borough   formation.    An  unfair  burden   is  placed  on                                                            
     communities with the  fewest assets.  To even begin the borough                                                            
     process  they must  pursue  complicated, difficult  and  costly                                                            
     processes.  The resources simply are not there.                                                                            
                                                                                                                                
     Boroughs  empower  regional  populations  and  enable  them  to                                                            
     provide  for their own interests.   With a modification  in the                                                            
     borough formation  process that removes some  of the burdens to                                                            
     formation, additional boroughs will follow.                                                                                
                                                                                                                                
KEVIN WARING, Chairman, Local Boundary Commission, read the                                                                     
following testimony into the record:                                                                                            
                                                                                                                                
     Chairman Donley, Chairman  Kelly, and members of the Committee,                                                            
     thank  you for  this opportunity  to testify  on behalf  of the                                                            
     Local  Boundary  Commission  on Senate  Bill  48.   One of  the                                                            
     duties  of  the Local  Boundary  Commission  under  the  Alaska                                                            
     Constitution  and under  state law  is the  duty to review  and                                                            
     approve   or  disapprove   all   proposed   city  and   borough                                                            
     incorporations and  boundary changes. The Commission would play                                                            
     a central  role in implementation  of SB 48.  My purpose  today                                                            
     is  to explain  how the  Commission  views this  bill, and  its                                                            
     responsibilities under the bill.                                                                                           
                                                                                                                                
     First,  some history  on the origin  of SB 48.   Over the  past                                                            
     year,  the Commission has worked  to develop a new legislative                                                             
     approach  to borough incorporation in the unorganized  borough.                                                            
      We held several work  sessions to study the issues and to work                                                            
     on  draft  legislation.    In  October,  the  Commission  voted                                                            
     unanimously  to approve a draft bill, and to  make it available                                                            
     for  legislative consideration.   Our  goal was to put  forward                                                            
     for  legislative  and public  discussion  a fresh  approach  to                                                            
     incorporation  of new  borough governments  that was  uniformly                                                            
     fair,  accountable, and within  the framework of existing  law.                                                            
     The  Commission  believes  that the  legislation  that  Senator                                                            
     Wilken  and the  co-sponsors  have introduced  as  SB 48  meets                                                            
     those goals.                                                                                                               
                                                                                                                                
    As background for the  proposed legislation, the Commission also                                                            
    prepared and provided to committee members:                                                                                 
       • a position paper on "The Need to Reform State Laws                                                                     
         Concerning Borough Incorporation and Annexation";                                                                    
       a factual booklet that provides background on boroughs in                                                          
         Alaska; and                                                                                                            
       • a four-page handout that summarizes key points about the                                                               
         Commission's proposal and how it fits into existing law.                                                             
                                                                                                                              
    SB  48 as  amended has  eight  sections.   My remarks  focus  on                                                            
    Section   4,  which  authorizes   a  new   method  for   borough                                                            
    incorporations  and annexations  in unorganized  areas.   I will                                                            
    talk about  the new method proposed for borough  incorporations.                                                            
     The method  proposed  for annexations  of unorganized areas  to                                                            
    existing boroughs works similarly.                                                                                          
                                                                                                                                
    Section  4 of  SB 48 authorizes  two  new steps  in the  borough                                                            
    incorporation process:                                                                                                      
      · a new first step to initiate a borough incorporation                                                                    
        petition; and                                                                                                           
      · a new last step to approve a petition.                                                                                  
                                                                                                                                
     New First Step: Incorporation by Administrative Petition                                                               
                                                                                                                              
     Under  current law,  a petition for  borough incorporation  can                                                            
     only  be  initiated  voluntarily  by residents  of  a  proposed                                                            
     borough.   Few  have volunteered.    Only four  percent of  the                                                            
     State's residents  live in boroughs that were  created by local                                                            
     initiation.   Another 83 percent  live in boroughs established                                                             
     by  the 1963  Mandatory Borough  Act, an  extraordinary act  of                                                            
     local government legislation.                                                                                              
                                                                                                                                
     Section  4 of  SB 48  adds a new  option  for incorporation  by                                                            
     administrative   petition.    It  directs  the   Department  of                                                            
     Community  and  Economic  Development  to  prepare  annually  a                                                            
     preliminary  list,  with supporting  analysis,  of unorganized                                                             
     areas  that reasonably appear  to satisfy existing legislative                                                             
     standards  for borough incorporation.   It further directs  the                                                            
     Local Boundary  Commission to select from this  list areas that                                                            
     may warrant  incorporation, and  to instruct the Department  of                                                            
     Community  and  Economic  Development  to  prepare and  file  a                                                            
     petition  for incorporation.  The Commission  would then follow                                                            
     the process now established  in law for public review and local                                                            
     public hearings on petitions.                                                                                              
                                                                                                                                
     New Final Step: Petition Approval                                                                                      
                                                                                                                              
     Section   4  also  proposes   a  new  final  step  to   approve                                                            
     incorporation  petitions initiated under SB 48.   This new step                                                            
     is  modeled on  the process for  approval of  city and  borough                                                            
     annexations  established  by Alaska's  Constitution, which  was                                                            
     overwhelmingly ratified by the voters in 1956.                                                                             
                                                                                                                                
     Briefly,  Article  X, section  12  of the  Alaska Constitution                                                             
     established   a method  for  approval   of municipal   boundary                                                            
     changes  without local  election.   The  first legislature  put                                                            
     this  process into  law. Some  annexation  proposals,  whatever                                                            
     their  merits, are  not well-received  by  affected  residents.                                                            
     Therefore,  the  Constitution  and  legislature  established  a                                                            
     method by which contested  petitions that met standards set out                                                            
     in  law could  be approved  by  the Local  Boundary  Commission                                                            
     without  a local  election,  but  were subject  to legislative                                                             
     veto.   Legislative  review  annexation has  been successfully                                                             
     used  for over  100 city  and  borough boundary  changes  since                                                            
     statehood.   Most significant annexations are  approved by this                                                            
     method.                                                                                                                    
                                                                                                                                
     Similar   to  the  existing   method  for  legislative   review                                                            
     annexation, Section  4(c) of SB 48 authorizes the Commission to                                                            
     approve   incorporation    petitions   that   meet   the   same                                                            
     incorporation  standards  that  apply  to all  other  boroughs,                                                            
     without a local election but subject to legislative veto.                                                                  
                                                                                                                                
     Apart from  these two new steps for initiating  and approving a                                                            
     borough  incorporation or annexation  petition, the  Commission                                                            
     would:                                                                                                                     
        · standards for borough incorporation now in law, and                                                                   
        · follow other procedural requirements now in law,                                                                      
          including local public hearings, written decision by the                                                              
          Commission explaining its decision, and opportunity for                                                               
          administrative and judicial appeal.                                                                                   
                                                                                                                                
     The  proposed steps  include significant  checks and  balances.                                                            
     Before  an  incorporation  could  take  place  under  this  new                                                            
     method:                                                                                                                    
        · the Department of Community and Economic Development must                                                             
          find that a region likely satisfies incorporation                                                                     
          standards;                                                                                                            
        · the Commission must find that the petition meets all                                                                  
          applicable standards and should be approved on its                                                                    
          merits;                                                                                                               
        · the Commission's decision is subject to administrative                                                                
          and judicial review; and                                                                                              
        · the Commission's approval is subject to legislative veto.                                                             
                                                                                                                                
     Concerns Raised in Public Testimony                                                                                    
                                                                                                                              
     Next, I want to address  three specific concerns that have been                                                            
     raised in public testimony.   A statement of how the Commission                                                            
     would  implement SB  48, if adopted,  may help  dispel them  as                                                            
     unfounded.                                                                                                                 
                                                                                                                                
     First,  there  has  been  concern  that  the  Commission  might                                                            
     approve incorporation  of areas that did not  have the economic                                                            
     resources  to  support  borough government.    Existing  law-AS                                                            
     29.05.031-already   requires  a  Commission  finding  that  the                                                            
     economy  of any area proposed  for incorporation has  the human                                                            
     and financial  resources needed to support municipal  services.                                                            
      The Commission's  regulations, at 3 AAC 110.055,  spell out in                                                            
     detail  the  factors  on which  the  Commission must  make  its                                                            
     findings.    Given  the  public  concern  on  this  topic,  the                                                            
     Commission  is working  with  DCED staff  to develop  objective                                                            
     economic  benchmarks that a region should meet  before it would                                                            
     be nominated for incorporation.                                                                                            
                                                                                                                                
     Second,  there has been concern  that the Commission  might not                                                            
     hold   adequate  local   public  hearings   for  incorporation                                                             
     petitions  filed under the bill.   SB 48 specifically  requires                                                            
     the  Commission to hold  at least one  local public hearing  in                                                            
     each  affected region.  In  practice, the  Commission's  intent                                                            
     would  be to  hold local public  hearings  at regional  centers                                                            
     and, at  minimum, in any community  with 400 or more  residents                                                            
     and  in every home rule  and first class  city in the  affected                                                            
     region.                                                                                                                    
                                                                                                                                
     Third,  there has been concern  that the Commission  might move                                                            
     quickly  to  approve  numerous   borough  incorporations.    In                                                            
     reality,  given  the  resources   and  time  available  to  the                                                            
     Commission  and its staff, the Commission could,  at most, take                                                            
     up one  or two petitions a year.   In our view, implementation                                                             
     of this law would likely stretch out over many years.                                                                      
                                                                                                                                
     Establishment  of  borough  governments  has been  a matter  of                                                            
     conflict  for as long  as Alaska has been  a state.  With  that                                                            
     contentious history,  it is easy to lose sight of the fact that                                                            
     borough governments  have played an enormously positive role in                                                            
     Alaska's  development.   For most of  the state, boroughs  have                                                            
     been  the means  to fund  and  deliver local  public  services,                                                            
     accountable  to  local  residents.   In  local  matters,  local                                                            
     government  usually governs best.  Boroughs have also  been our                                                            
     main  tool  to influence  economic  development  for  community                                                            
     benefit.   For example,  it is hard to  believe that urban  and                                                            
     rural  communities   and  regions  affected   by  oil  pipeline                                                            
     construction,  oil and gas and  mining development,  management                                                            
     of  forestry and  fishing  resources, growing  energy  demands,                                                            
     growth  in tourism,  and rapid  urbanization  would have  fared                                                            
     better without borough government.                                                                                         
                                                                                                                                
     To sum  matters up, the Commission  does not view SB  48 as the                                                            
     second  coming  of  the  1963 Mandatory  Borough  Act,  or  any                                                            
     similar  legislation.   The Commission is  not on a mission  to                                                            
     foster  boroughs for  the sake  of boroughs.   Unlike the  1963                                                            
     Mandatory Borough  Act, SB 48 provides for a measured, case-by-                                                            
     case evaluation of  each proposed incorporation.  Each petition                                                            
     will  be evaluated on  its merits. Proposals  that do  not meet                                                            
     statutory  standards  will  not be  approved.   And,  as  under                                                            
     current   law,  even  if  a   petition  meets  standards,   the                                                            
     Commission  can  reject  the  petition  when  there  are  sound                                                            
     reasons to do so.                                                                                                          
                                                                                                                                
     In  closing,  the Commission  believes  the  new incorporation                                                             
     steps authorized  by SB 48 meet its goal for  an approach that:                                                            
        · uniformly implements the standards for borough                                                                        
           incorporation in existing law, but respects the diverse                                                              
           circumstances in different rural regions;                                                                            
        · provides checks and balances; and                                                                                     
        · is modeled on existing law and minimally changes law.                                                                 
                                                                                                                                
Senator  Wilken noted  that on page  33 of the  handout titled  "The                                                            
Need  to Reform  State  Laws Concerning  Borough  Incorporation  and                                                            
Annexation"  there were five  members listed  from across the  state                                                            
and four  judicial  districts  and pointed  out that  they were  all                                                            
volunteers.    He   indicated  that  they  presented   to  him  five                                                            
amendments  and he said  that he was  okay with  three of them.   He                                                            
supported their effort  to make SB 48 better and hoped to bring a CS                                                            
to the Committee next time.                                                                                                     
                                                                                                                                
Senator  Hoffman  wondered  if  any  of the  members  of  the  Local                                                            
Boundary Commission were Alaska Native.                                                                                         
                                                                                                                                
Mr. Waring answered not at this time.                                                                                           
                                                                                                                                
Senator Hoffman  stated that the question  Senator Wilken  asked was                                                            
"Can you help?"  and the question he had was "Can  it hurt", because                                                            
he believed that  SB 48 was divisive and would further  divide urban                                                            
and rural Alaska.   He said that when  they look at the communities                                                             
in the  unorganized borough  90 to 95 percent  of those communities                                                             
are predominately  Alaska  Native.   He  pointed out  that they  are                                                            
heavily dependent  on the subsistence lifestyle.   He explained that                                                            
just because  they own land does not  mean that they can  pay and if                                                            
there was  a property tax  placed on those  people in rural  Alaska,                                                            
what land that  they do have he believed would end  up being lost in                                                            
foreclosure.   They do  not have the  necessary income  to pay.   He                                                            
asked  the representative  from the  Local Boundary  Commission  how                                                            
many municipalities  in Alaska have  opted to dissolve and  how many                                                            
in the past ten years have  formed or moved on to first-class cities                                                            
in rural Alaska.                                                                                                                
                                                                                                                                
Mr. Waring  responded that  he believed that  3 or 4 municipalities                                                             
have dissolved.                                                                                                                 
                                                                                                                                
Senator Hoffman wondered if that was in the last ten years.                                                                     
                                                                                                                                
Mr. Waring  reiterated  approximately 3  or 4.   He said that  there                                                            
have been  a number  of boroughs formed  in the  past ten or  twelve                                                            
years.                                                                                                                          
                                                                                                                                
Senator Hoffman  clarified his point  and stated that the  direction                                                            
of government  in  rural Alaska  was moving  away from organization                                                             
under state law  and moving forward and incorporating  under federal                                                            
law.  He said  that to add another  layer of government to  one that                                                            
does not  work does not make  sense to him.   He believed  that even                                                            
though  the  thrust  behind  this  was to  pay  for  education  this                                                            
legislation  goes far beyond  that.  He reiterated  that this  would                                                            
further  divide  urban and  rural  Alaska.   He noted  that  federal                                                            
receipts  presently  pay many  of the  services provided  for  rural                                                            
Alaska.  He  said that when they look  at the health corporations  a                                                            
substantial  portion of those dollars  come from federal  government                                                            
and  a very  small portion  of those  dollars  are paid  for by  the                                                            
state.  The  corporations are formed  to receive federal  dollars in                                                            
the unorganized  boroughs.   He said that  if SB 48 passed  possibly                                                            
one or two boroughs would  be formed on an annual basis, but all too                                                            
often when something  is beneficial to urban Alaska  and detrimental                                                            
to  rural Alaska  many  financial  dollars  are  spent there.    For                                                            
example, in the fight for  subsistence the Legislative Council spent                                                            
several  thousand  dollars when  it  was in  the interest  of  urban                                                            
Alaska and not  in the interest of rural Alaska.   He concluded that                                                            
the legislation  clearly divided urban  and rural Alaska.   He added                                                            
that if they went out and  asked whether rural Alaska wanted to move                                                            
toward  more federal  intervention  or more state  intervention,  he                                                            
believed  that they  would want  more federal  intervention and  for                                                            
that reason he informed  the Committee that he was opposed to SB 48.                                                            
                                                                                                                                
Co-Chair  Kelly  explained  that  the  intent  of the  bill,  as  he                                                            
understood it,  was that if rural Alaska could pay  than they should                                                            
pay some part  of it. He declared that frankly he  was getting tired                                                            
of comments  regarding divisiveness  and the rural and urban  split.                                                            
He pointed  out that throughout his  time in the legislature  he has                                                            
seen a lot of  dollars going to rural Alaska and rural  Alaska seems                                                            
to get  what  they ask  for except  for maybe  on  subsistence.   He                                                            
suggested  that Senator  Hoffman check  the Bill  of Rights on  that                                                            
before he started talking about the rural and urban split.                                                                      
                                                                                                                                
Senator Wilken associated himself with Co-Chair Kelly's remarks.                                                                
                                                                                                                                
Co-Chair  Kelly appointed  SB  48 to  a subcommittee  consisting  of                                                            
Senator Leman, Senator Wilken and Senator Hoffman.                                                                              
                                                                                                                                
[Heard and Held]                                                                                                                
                                                                                                                                
                                                                                                                                

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