Legislature(1999 - 2000)
02/25/1999 08:03 AM House CRA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
February 25, 1999
8:03 a.m.
MEMBERS PRESENT
Representative Andrew Halcro, Co-Chairman
Representative John Harris, Co-Chairman
Representative Lisa Murkowski
Representative Fred Dyson
Representative Reggie Joule
Representative Albert Kookesh
MEMBERS ABSENT
Representative Carl Morgan
COMMITTEE CALENDAR
*HOUSE BILL NO. 76
"An Act relating to an exemption from and deferral of payment on
municipal taxes on deteriorated property; and providing for an
effective date."
- MOVED CSHB 76(CRA)OUT OF COMMITTEE
*HOUSE BILL NO. 1
"An Act relating to collective bargaining agreements and
arbitration awards of class (a)(1) municipal employees."
- HEARD AND HELD
HOUSE BILL NO. 19
"An Act relating to the maintenance of certain access structures."
- BILL HEARING POSTPONED
(* First public hearing)
PREVIOUS ACTION
BILL: HB 76
SHORT TITLE: MUNICIPAL TAXES ON DETERIORATED PROPERTY
SPONSOR(S): REPRESENTATIVES(S) HALCRO, Dyson
Jrn-Date Jrn-Page Action
2/03/99 132 (H) READ THE FIRST TIME - REFERRAL(S)
2/03/99 132 (H) COMMUNITY AND REGIONAL AFFAIRS
2/05/99 147 (H) COSPONSOR(S): DYSON
2/25/99 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 1
SHORT TITLE: MUNICIPAL COLLECTIVE BARGAINING CONTRACTS
SPONSOR(S): REPRESENTATIVES(S) BRICE
Jrn-Date Jrn-Page Action
1/19/99 18 (H) PREFILE RELEASED 1/8/99
1/19/99 18 (H) READ THE FIRST TIME - REFERRAL(S)
1/19/99 18 (H) CRA, LABOR & COMMERCE
2/25/99 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
MARC MARLOW
Marlow Development Corporation
2600 Railroad Avenue
Anchorage, Alaska 99501
Telephone: (907) 258-9662
POSITION STATEMENT: Discussed HB 76 and the McKay Building
project.
STEVE VAN SANT, State Assessor
Department of Community & Regional Affairs
333 West 4th
Anchorage, Alaska 99501
Telephone: (907) 269-4605
POSITION STATEMENT: Discussed concerns with HB 76.
REPRESENTATIVE BRICE
Alaska State Legislature
Capitol Building, Room 426
Juneau, Alaska 99801
Telephone: (907) 465-3466
POSITION STATEMENT: Testified as Sponsor of HB 1.
KEVIN RITCHIE
Alaska Municipal League
217 2nd Street
Juneau, Alaska
Telephone: (907) 586-1325
POSITION STATEMENT: Discussed the Alaska Municipal League's
position on binding arbitration in general
and requested more time to have a specific
response to HB 1.
DON ETHERIDGE
District Council of Laborers
710 West 9th Street
Juneau, Alaska 99801
Telephone: (907) 586-3707
POSITION STATEMENT: Supported HB 1.
MARK DRYGAS, Business Agent
Fairbanks Firefighters Association
Captain, Fairbanks Fire Department
PO Box 71739
Fairbanks, Alaska 99707
Telephone: (907) 488-6001
POSITION STATEMENT: Supported HB 1.
DAN HOFFMAN, Sergeant
Fairbanks Police Department
656 7th Avenue
Fairbanks, Alaska 99701
Telephone: (907) 459-6500
POSITION STATEMENT: Supported HB 1.
MATT SODEN, Sergeant
Fairbanks Police Department
656 7th Avenue
Fairbanks, Alaska 99701
Telephone: (907) 459-6500
POSITION STATEMENT: Supported HB 1.
RANDY COFFEY, Detective
Fairbanks Police Department
656 7th Avenue
Fairbanks, Alaska 99701
Telephone: (907) 459-6500
POSITION STATEMENT: Supported HB 1.
DAVE MAITLEN, Police Officer
Fairbanks Police Department
656 7th Avenue
Fairbanks, Alaska 99701
Telephone: (907) 459-6500
POSITION STATEMENT: Supported HB 1.
PERRY WILLIAMSON, Police Officer
Fairbanks Police Department
1221 Lois Lane
Fairbanks, Alaska 99712
Telephone: (907) 459-6500
POSITION STATEMENT: Discussed binding arbitration.
LEONARD BROWN, Detective
Fairbanks Police Department
656 7th Avenue
Fairbanks, Alaska 99701
Telephone: (907) 459-6500
POSITION STATEMENT: Supported HB 1.
ACTION NARRATIVE
TAPE 99-9, SIDE A
Number 0001
CO-CHAIRMAN HARRIS called the House Community and Regional Affairs
Standing Committee meeting to order at 8:03 a.m. Members present
at the call to order were Representatives Halcro, Harris,
Murkowski, Dyson, Joule and Kookesh. Representative Morgan was
absent.
HB 76 - MUNICIPAL TAXES ON DETERIORATED PROPERTY
CO-CHAIRMAN HARRIS announced the first order of business before the
committee would be HOUSE BILL NO. 76, "An Act relating to an
exemption from and deferral of payment on municipal taxes on
deteriorated property; and providing for an effective date."
CO-CHAIRMAN HALCRO, Sponsor of HB 76, stated that HB 76 makes
technical changes to HB 399 which was passed last year. HB 399
authorized municipal governments to exempt or defer municipal
property taxes on deteriorated property in the hope that developers
would redevelop deteriorated properties into productive properties
ultimately placed on the tax rolls. Co-Chairman Halcro explained
that HB 76 clarifies the following areas: whether a municipality
may either partially or totally exempt a property from property
taxes; provide an exemption that may begin any time on or before
substantial rehabilitation begins; and prohibit an exemption and
deferral of property taxes from being in effect simultaneously.
CO-CHAIRMAN HALCRO noted that Representative Dyson had signed on as
a co-sponsor of HB 76. The legislation has also been introduced in
the Senate. The packet includes letters of support from the
Anchorage Assembly, the Downtown Partnership, and the United
Brotherhood of Carpenters and Joiners of America Local Union 1281.
The intent of HB 399 was to allow municipalities to renovate or
encourage development of dilapidated properties. One much
discussed such property is the McKay Building. The packet includes
photos of the proposed renovation of the McKay Building(ph).
Number 0337
REPRESENTATIVE JOULE noted that when HB 399 left Senate Rules last
year, the language "totally" was deleted. He asked if Co-Chairman
Halcro knew why "totally" was deleted.
CO-CHAIRMAN HALCRO pointed out that the committee packet contains
testimony from Attorney Margaret Rawitz, who helped draft HB 76.
There is confusion as to why "totally" was deleted. If a developer
is allowed to have a total exemption or deferral of property taxes,
then the developer does not pay taxes on the dilapidated property
while doing rehabilitation.
CO-CHAIRMAN HARRIS asked if the exemption would exempt the building
or would it include the property as well.
CO-CHAIRMAN HALCRO said that the exemption would apply to the land
as well as the building.
Number 490
REPRESENTATIVE MURKOWSKI referred to the inserted language
"beginning on or any time" which she understood from Ms. Rawitz's
letter that the language was inserted in order to provide the
municipality flexibility. Does this language provide the
municipality the option to grant a referral three years after the
beginning of renovation?
CO-CHAIRMAN HALCRO explained that most municipalities are required
to begin tax referrals/exemptions on the first day of the year. If
the rehabilitation does not begin until June, six months is lost.
This language provides the municipality with the flexibility to
begin the tax deferral any time during the calendar year.
REPRESENTATIVE MURKOWSKI believed that the language left it very
open. The language does not limit the referral/exemption to any
time in that given tax year.
CO-CHAIRMAN HALCRO referred to Ms. Rawitz's testimony which says,
"The new language would allow a municipality to delay the exemption
and/or deferral until the renovation work has been substantially
completed." He noted that there is a tremendous amount of local
control in this area. The technical changes in HB 76 would allow
the municipality the flexibility, but approval at the city council
or assembly level would be necessary.
REPRESENTATIVE MURKOWSKI expressed the need to make Ms. Rawitz's
comments clear in the language of the legislation. Representative
Murkowski understood that this is an option given to the
municipalities, but she expressed concern that this language is an
open-ended provision.
CO-CHAIRMAN HALCRO referred to page 1, lines 8 through 10 which
reads: "A municipality may by ordinance permit deferral of payment
of taxes on all or some types of deteriorated property for up to
five years beginning on or any time after the day substantial
rehabilitation, renovation, or replacement of any structure on the
property begins." Co-Chairman Halcro said although the state
statute may be open-ended, the municipalities are the local control
in this case.
Number 0876
MARC MARLOW, Marlow Development Corporation, informed the committee
that last year HB 399 received 11-0 resolutional support from the
Anchorage Assembly, passed the House of Representatives 40-0,
passed the Senate 19-0, and subsequently the Governor signed it
into law. The Anchorage Assembly passed an ordinance amending
Municipal Code to reflect HB 399. Mr. Marlow explained that the
municipal attorney requested clarification of some points which
resulted in HB 76. Mr. Marlow noted that he originally requested
that HB 76 be considered due to his opinion that Alaska has
buildings that are deteriorating and aging. This law, which many
states have in order to facilitate redevelopment of areas that
would not otherwise be redeveloped, is patterned after a
Pennsylvania law. The McKay Building is an example of the benefit
of passing HB 76. Mr. Marlow acknowledged that it could be some
time before this law would be utilized again since there are not a
tremendous amount of older buildings, but dealing with just the
McKay Building would be worth the effort.
With regards to the McKay Building, the design is finished, the
plans have been turned into building safety, the building permit
number has been assigned to the project, and the plan review should
require eight to ten weeks in the process. Mr. Marlow expressed
appreciation in making these amendments to afford the municipal
attorney more comfort with the language.
Number 1109
MR. MARLOW explained that the McKay Building could not move forward
as a straight business deal without this law. Even with the
property tax exemption and deferral, the McKay Building project is
having difficulties. This will help the municipality have more
funds in the treasury for property taxes long-term. Currently, the
McKay Building does not provide any revenue and would cost
approximately $3 million of tax payer money to tear down the
building. Under this scenario, the McKay Building would create
many jobs and in 10 years the municipality would receive
approximately $200,000 per year in property taxes. The area
surrounding the building would increase in value; this would be the
beginning of a renewal on the east end of downtown Anchorage.
REPRESENTATIVE MURKOWSKI mentioned her specific interest in the
McKay Building since it is a blight in her personal skyline. She
asked if the July 1, 1999 effective date of HB 76 would affect the
development process.
Number 1221
MR. MARLOW replied no. He explained that the property tax
exemption and deferral that any municipality may pass does not go
into effect until there is performance. This prevents
municipalities from extending property tax exemptions and deferrals
on property that is never renovated. Mr. Marlow said that the
performance on the McKay Building would not be completed until well
into 2000.
MR. MARLOW said that it does not matter when the exemption and
deferral begin. The language was inserted to allow the exemption
and deferral to begin the next tax year after completion of the
project, after the performance was accomplished. Mr. Marlow
pointed out that if the exemption and/or deferral began three years
after the completion of the project, the property would be paying
property taxes in between.
MR. MARLOW, in further response to Representative Murkowski,
reiterated that the redevelopment design for the McKay Building is
complete and has been turned into Building Safety in Anchorage and
that process would take approximately eight weeks. The financing
vehicle is in the third phase of a four phase period of
consideration which would not be completed any earlier than 60 days
from now. Mr. Marlow hoped the renovation would be started in July
or early August and would require approximately 11 months to
complete. By the summer of 2000, people should be able to move
into a safe and renovated McKay Building.
MR. MARLOW informed the committee that last year a market study by
a Seattle research firm concluded that the McKay Building's 123
unit apartments would be filled within four months of its
completion. The target market for these apartments is anyone, but
Mr. Marlow believed that it would be appealing to the young, 20
something person, who works downtown. The marketing will take
place in the newspaper and the Internet. In response to
Co-Chairman Harris, Mr. Marlow felt the McKay Building would be
renamed.
Number 1475
STEVE VAN SANT, State Assessor, Department of Community & Regional
Affairs, testified via teleconference from Anchorage. He noted
that he did not have a chance to testify on HB 399 last year and
had not talked with Representative Halcro about HB 76, but had
discussed SB 54 with Senator Kelly. Mr. Van Sant directed the
committee to the language on page 1, lines 9-10 which Co-Chairman
Halcro said was intended to allow the exemption to begin any time
during the year. To date, all exemptions in Alaska begin the first
day of the tax year, January 1, and the supreme court has ruled on
that matter. Therefore, Mr. Van Sant expressed concern with
allowing partial year exemptions. With regard to the McKay
Building, Mr. Van Sant would recommend to Anchorage that the
exemption begin January 1 which seemed to be what Mr. Marlow
indicated.
MR. VAN SANT referred to page 1, lines 13-14 which does not
indicate that the municipality may collect interest on deferred
taxes. Currently, only one statute allows deferment of taxes which
is the agricultural exemption and deferment. The agricultural
exemption and deferment allows the municipality to collect deferred
taxes with interest at eight percent. Mr. Van Sant suggested
language specifying that the municipality would not lose interest
on deferred taxes should be added. He believed it would be almost
administratively impossible to as lines 13-14 say, "if ownership of
only part of the property is transferred, all tax payments
attributable to that part are immediately due ...." If ownership
is transferred, Mr. Van Sant wanted all deferred tax payments to be
due and payable at that time, including the eight percent interest.
Mr. Van Sant noted that as a state assessor he is typically opposed
to exemptions and deferments. However, in the case of the McKay
Building, Mr. Van Sant applauded Mr. Marlow's plans and reluctantly
backed down from his usual stance understanding this would be for
the good of the community and would like for the project to move
forward.
Number 1689
CO-CHAIRMAN HARRIS asked if Mr. Van Sant suggested on page 1, line
13 after "immediately due" insert "interest".
MR. VAN SANT clarified that on page 1, line 13 delete "only" and
insert "any" and on line 14 after "payments" insert "including
interest at eight percent" and delete "to that part". On page 2,
line 1 delete "attributable to that part". In further response to
Co-Chairman Harris, Mr. Van Sant explained that eight percent
interest is desirable because that is consistent with the statutes
for agricultural deferments.
Number 1800
MR. MARLOW agreed with Mr. Van Sant that once the property is
transferred, the deferred portion of the taxes should be paid.
However, the interest on this type of exemption or deferral was
specifically avoided. Mr. Marlow explained, "When a person applies
for and receives a farm deferral, what they are saying is: I have
a piece of property that in the open market place might be worth
many, many more dollars than than what I'm using it for. And so,
I want that, you know, it might be assessed at a value that's much
higher than its use as a farm. And so, a person applies for the
farm deferral and the taxes back seven years are counted at the
lower rate, but the interest that -- the interest accrues so that
when that farmer decides I'm going to sell my property now on the
open market place and collect all this money that I wasn't paying
taxes for here; kind of recompensates the municipality for the
taxes that they weren't paying on a higher value back seven years."
In this case, Mr. Marlow explained this addresses property that
without this incentive would have no hope of being renovated. Such
a property would then be placed back in the market place and made
taxable at its highest value. Mr. Marlow emphasized that applying
interest to a deferred portion would be a disincentive to those
goals.
REPRESENTATIVE MURKOWSKI asked if the issue regarding interest had
surfaced during prior discussions.
MR. MARLOW could not testify if the issue of interest publicly
surfaced in the past. Certainly, the issue of interest was
considered during the creation of the legislation. Interest was
specifically avoided with respect to the deferred portion.
Number 1992
CO-CHAIRMAN HARRIS restated Mr. Van Sant's point that state statute
only allows tax deferrals to begin January 1 which would seem to be
at odds with the language on page 1, line 9. Co-Chairman Harris
asked if Mr. Marlow would have a problem with including language
indicating the deferral would begin at the beginning of the tax
year.
MR. MARLOW believed that the language in HB 76 was used in order to
allow the municipality to begin the deferral and/or exemption the
following tax year after performance to be compliant with state
law. Mr. Marlow did not recall any discussion or intent to allow
the exemption in July or August. Mr. Marlow said that whatever
would be necessary to ensure clarity on that issue would be fine.
CO-CHAIRMAN HALCRO noted that Ms. Rawitz drafted an ordinance for
the Municipality of Anchorage which created a tax exemption and
deferral program. Co-Chairman Halcro read the following from Ms.
Rawitz's testimony: "Since most municipalities would prefer to (or
are required to) begin a period of exemption or deferral on the
first day of the tax year, it is appropriate to permit an exemption
to begin at any time on or after the beginning of renovation, since
renovation is not likely to begin on the first day of the tax
year."
CO-CHAIRMAN HARRIS inquired as to the legality of the language.
MR. MARLOW said that he believed that was the intent.
MR. VAN SANT stated that he was comfortable with the language, as
long as the record reflects that the intent of the committee was
not to change the manner in which exemptions are attached as of
January 1. From working with the municipality and its attorney on
this ordinance, the day Mr. Marlow broke ground would be the day
the exemption would begin. Mr. Van Sant further understood the
intent was to have a delay of a year until more substantial
completion was accomplished which is what Mr. Van Sant understood
the reasoning to be for this language.
Number 2182
MR. MARLOW agreed. The exemption should not be initiated until the
performance or substantial completion has been accomplished and the
next tax year begins. Mr. Marlow agreed with Mr. Van Sant's
assessment of the intent of the language regarding the beginning of
the exemption or deferral.
CO-CHAIRMAN HALCRO said that HB 76 is a win-win situation for all
communities. Co-Chairman Halcro used the McKay Building project as
an example of how this legislation would be beneficial. This
legislation would allow a developer to invest money in the McKay
Building which once on the property tax rolls would reduce
everyone's property taxes in Anchorage, employ people, and create
a foundation in the neighborhood. Co-Chairman Halcro said he would
appreciate support on HB 76.
Number 2310
REPRESENTATIVE DYSON moved to report HB 76 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, it was so ordered.
The committee took a brief at-ease from 8:37 a.m. to 8:40 a.m.
REPRESENTATIVE MURKOWSKI moved that the committee rescind its
action on HB 76 for the purposes of an amendment. There being no
objection, HB 76 was before the committee.
Number 2350
REPRESENTATIVE MURKOWSKI moved the committee adopt the following
amendment:
Page 1, line 13
Delete "only"
Insert "any"
Page 1, line 14
Delete "to that part"
Page 2, line 1
After "due", delete "and the deferral attributable to that
part ends."
Therefore, the language on page 1, lines 13-14 would read: "if
ownership of any part of the property is transferred, all tax
payments attributable are immediately due."
CO-CHAIRMAN HALCRO pointed out that deleting "to that part" would
mean that the taxes would be due on the whole property not just the
sole portion.
REPRESENTATIVE MURKOWSKI understood from Mr. Marlow's testimony
that if any part of the ownership was transferred, at that time any
deferred taxes would be due.
MR. MARLOW indicated that was correct.
CO-CHAIRMAN HARRIS asked if there was objection to the amendment.
There being no objection, the amendment was adopted.
Number 2490
REPRESENTATIVE DYSON moved to report CSHB 76(CRA) out of committee
with individual recommendations and the accompanying fiscal notes.
There being no objection, it was so ordered.
HB 1 - MUNICIPAL COLLECTIVE BARGAINING CONTRACTS
Number 2523
CO-CHAIRMAN HARRIS announced that the next order of business before
the committee would be HOUSE BILL NO. 1, "An Act relating to
collective bargaining agreements and arbitration awards of class
(a)(1) municipal employees."
REPRESENTATIVE BRICE, Sponsor of HB 1, stated that HB 1 puts
meaning back into collective bargaining. During negotiations
employees generally have the following two tools: the right to
strike and binding arbitration. Within the Public Employees
Relation Act, Class(a)(1) employees such as firemen, policemen, and
hospital staff do not have the right to strike. Since Class(a)(1)
employees do not have the right to strike to ensure finality within
the negotiating process their negotiated contracts are submitted to
binding arbitration.
The situation can become problematic if during the negotiation
process, the employers and the employees agree on a contract which
is subsequently disapproved by a city council. The employee
organization has no means by which to compel good faith bargaining
in the future. Problems also arise when the employee and employer
have the negotiations submitted to binding arbitration and the
arbitrator's decision is not funded by the council or assembly.
Once again the firemen and policemen are left in limbo with no
venue to compel good faith negotiation in the future. This
legislation, HB 1, would reestablish the "binding" in binding
arbitration.
Number 2680
CO-CHAIRMAN HALCRO expressed concern with the broadness of
Class(a)(1) employees, specifically regarding hospital employees.
REPRESENTATIVE BRICE asked if the employees of a hospital where
life-dependent functions occur should be allowed to strike. The
public policy has been not to allow hospital employees to strike.
If hospital employees want to be included under the Public
Employees Relations Act (PERA) those employees must negotiate under
binding arbitration as well. Representative Brice pointed out that
hospital employees do provide life-saving services.
REPRESENTATIVE KOOKESH asked if there had been a group of employees
that did not have a venue for redress.
REPRESENTATIVE BRICE replied yes. The Fairbanks Police Department
had a contract go to binding arbitration. The decision was made to
fund the incremental increases to pay as well as food and clothing
allowance requirements which were not funded. When the case was
submitted to superior court, the court ruled that the council did
not have to honor the binding arbitration.
REPRESENTATIVE KOOKESH inquired as to the general rule in the
United States regarding Class(a)(1) employees.
REPRESENTATIVE BRICE said that he could provide that information.
In response to Representative Murkowski's question, Representative
Brice said that since no effective date is specified the
legislation would become effective 90 days after signature.
Number 2953
KEVIN RITCHIE, Alaska Municipal League, apologized to
Representative Brice since the Alaska Municipal League had not
completed discussion of HB 1. The Alaska Municipal League
discusses public policy issues with its legislative committee which
on this issue resulted in many questions. Mr. Ritchie noted the
complexity of binding arbitration and labor law as well as the
delicate balance between binding arbitration and a local
council/assembly with the ability to set a tax rate without
mandated issues. He identified the later as perhaps what HB 1
addresses.
TAPE 99-9, SIDE B
Number 2983
MR. RITCHIE pointed out that when two parties reach the final offer
through a collective bargaining process, the offers could be close
or very far apart. When the decision goes to an arbitrator, the
arbitrator chooses something in between the two final offers.
Currently, councils and assemblies have the ability to appropriate
or not appropriate because what is best for a community must be
determined. Mr. Ritchie read the Alaska Municipal League's
position on binding arbitration which follows:
The League opposes imposing binding arbitration on local
governments and school districts. Binding arbitration hinders
local elected officials' ability to determine their personnel
costs and prevents local governments from having complete
control of determining the local tax rate. The scope of
decisions with regard to what local government can afford, is
best left to the local bodies possessing that knowledge.
Mr. Ritchie stated that he would continue work on this issue as
well as talk with the sponsor on this issue.
CO-CHAIRMAN HALCRO noted that HB 1 has been on file for quite some
time. He was surprised that there was not one letter of opposition
from any local governments. Is this not an issue for the local
governments?
MR. RITCHIE acknowledged that there have not been a lot of bills
this year, but the League has not completed discussion on all of
the bills. This issue was not brought to the League during the
interim as it could have been. Currently, Mr. Ritchie estimated
that the League is tracking 20 or 30 bills.
Number 2852
CO-CHAIRMAN HARRIS said that he could see both sides of this issue,
especially having experience with local government and being a
member of a labor union. Where are essential emergency personnel
left if they do not have the right to strike and cities are not
bound by the terms of any agreement with those employees?
Co-Chairman Harris indicated that these employees seem to be left
in limbo in many cases.
MR. RITCHIE said that in most cases contracts are an agreement
between two parties, but that is not so with binding arbitration.
Mr. Ritchie also saw both sides of the issue. There may be a
better solution. Mr. Ritchie emphasized that this is a very
complex area that would require much analysis and discussion which
has not yet been returned from the municipal attorneys and
councils.
CO-CHAIRMAN HARRIS stated that he would not be reporting HB 1 from
committee today in order to receive more information from various
groups.
REPRESENTATIVE DYSON concurred. Representative Dyson was surprised
that HB 1 did not result in comments from many local governments.
What would be a reasonable time frame to receive responses from
local governments?
MR. RITCHIE estimated that two weeks would be a reasonable time
frame.
Number 2715
DON ETHERIDGE, District Council of Laborers, supported HB 1.
Binding arbitration is designed to reach an agreement, to determine
the balance of the various sides. This legislation would make
municipalities work harder to reach an agreement that everyone
could live by. With regard to a previous question about
Class(a)(1) employees, Mr. Etheridge informed the committee that
Alaska Labor Relations determines which public employees are
classified as Class(a)(1). Mr. Etheridge said that once an
agreement is reached that agreement should be followed.
CO-CHAIRMAN HARRIS noted that school teachers do not fall under
this classification.
MR. ETHERIDGE replied no. In order to fall under this
classification, the employee must work in the area of life or
property protection.
CO-CHAIRMAN HARRIS cited AS 23.40.200 Classes of public employees;
arbitration subsection(b), "... If an impasse or deadlock is
reached in collective bargaining between the public employer and
employees in this class, and mediation has been utilized without
resolving the deadlock, the parties shall submit to arbitration to
be carried out under ...." He asked if that section refers to
municipalities.
MR. ETHERIDGE said that portion of statute would refer to
municipalities that are under PERA.
Number 2544
MARK DRYGAS, Business Agent, Fairbanks Firefighters Association and
Captain, Fairbanks Fire Department, testified via teleconference
from Fairbanks. Mr. Drygas supported HB 1. The Fairbanks Fire
Department has had an expired contract since 1995. Negotiations
have been ongoing for over three years. In the past, the Fairbanks
Council has not funded the arbitrators award. The Fairbanks
firefighters are at disadvantage and not playing on a level field.
Mr. Drygas explained that the firefighters are compelled by law to
utilize binding arbitration if an impasse is reached and they are
compelled to abide by binding arbitration. If an arbitrator found
that the firefighters were overpaid or ruled that a change in the
contract be made which would negatively impact the employees, the
employees are bound by that ruling. However if the arbitrator
found that wage increases were necessary, the city would have the
opportunity not to fund that. The Class(a)(1) employees are bound
by the negative impacts of the binding arbitration without the
advantage of the positive impacts. Mr. Drygas noted that the
Fairbanks firefighters had not received a wage increase since 1990.
MR. DRYGAS said this situation only recently occurred due to a
court decision. Under previous contract negotiations, the
Fairbanks firefighters and the municipality felt that binding
arbitration was an option during an impasse. The Fairbanks
firefighters have never gone to arbitration in the five or so
contracts with the city. In each instance, negotiations and
agreements on a collective bargaining agreement have occurred. Mr.
Drygas said that all contracts do not go to binding arbitration and
that is not the hope. In the specific case of the firefighters in
Fairbanks, Mr. Drygas did not foresee any resolution to contract
negotiations without HB 1 or something similar.
Number 2340
REPRESENTATIVE JOULE asked if he understood Mr. Drygas correctly.
Representative Joule understood that if negotiations reach an
impasse, the parties go to arbitration. If there are negative
impacts in the decision of the arbitrator, the employees must abide
by those recommendations while if the arbitrator's decision has
negative impacts to the municipality, the municipality is not
required to abide by that decision.
MR. DRYGAS said Representative Joule's assessment was correct. The
arbitrator's decisions are subject to legislative approval,
therefore a spending increase. The city basically can pick and
choose what it wants to fund or agree to from the arbitrator's
decision. The employees, however are bound by the arbitrator's
decision.
CO-CHAIRMAN HALCRO inquired as to the number of times Mr. Drygas
had been to binding arbitration in the last 15 years.
MR. DRYGAS said that in the 25 years of contracts with the city,
the Fairbanks firefighters have never gone to binding arbitration.
Until the supreme court case, previous negotiations between the
city and the Fairbanks Firefighters Association felt that binding
arbitration was binding. Mr. Drygas wanted the option of binding
arbitration in order to foster the spirit of good faith bargaining.
Number 2187
DAN HOFFMAN, Sergeant, Fairbanks Police Department, testified via
teleconference from Fairbanks. Mr. Hoffman supported HB 1. He
said that Co-Chairman Harris crystallized this issue with his
earlier question: where are Class(a)(1) employees left if these
employees cannot strike and the city does not have to fund an
arbitrated award under a contract? Mr. Hoffman pointed out that
arbitration is a fair and objective process. If Class(a)(1)
employees are bound by the arbitrator's awards to the agency, the
negative side, then the city should be bound by the awards to the
employees.
MR. HOFFMAN informed the committee that the Fairbanks Police
Department is under the contract that expired in 1993. During the
last contract that went to binding arbitration, the city failed to
award one of the arbitrator's findings which has halted all of the
contract negotiations and collective bargaining. He indicated that
the city could keep the police department under the old contract
forever. The police officers do not have any recourse. Mr.
Hoffman emphasized the need for contracts to be negotiated in good
faith and that the option of binding arbitration truly be binding.
REPRESENTATIVE MURKOWSKI had the impression that there are not many
situations that lead to binding arbitration. She was concerned
with the selective process that allows a municipalitiy to pick and
choose which of the arbitrator's decisions to fund. How much of a
problem is this?
Number 1950
MR. HOFFMAN said, in his opinion, this is the largest labor problem
facing the state. This situation has only arisen from a recent
court decision. Prior to the court decision, municipal bodies or
local governments felt that binding arbitration was binding.
Therefore, the local government worked as hard as possible to come
to an agreement and in the case of an impasse an arbitrator's award
was considered binding. In the fine print of PERA, the phrase
"subject to legislative funding" was discovered and used so that
local governments did not have to fund an arbitrator's award. Mr.
Hoffman believed that if this situation is not remedied, every
local government in a position to bargain will use this phrase to
take away any meaning to binding arbitration.
REPRESENTATIVE MURKOWSKI asked if there have been other instances
in which a municipality has selectively funded an arbitrator's
decision since the Fairbanks case.
MR. HOFFMAN was not sure, but reiterated that this is a recent
problem. The problem is occurring now, after the court case,
because local governments are currently coming to the table to
negotiate new contracts. Mr. Hoffman said this is why there are
attempts to put a stop to the problem before it becomes a big
problem.
MR. HOFFMAN, in response to Representative Dyson, said that a
Sergeant in the Fairbanks Police Department receives an annual
salary of $55,000-$70,000 with a total salary and benefit package
of 34 percent above the salary.
Number 1784
CO-CHAIRMAN HALCRO noted that the information in the committee
packet says that the council did fund pay raises, but did not fund
the four percent increase in meal and clothing allowances. He
asked if that was correct.
MR. HOFFMAN replied no. After the expiration of the 1993 contract,
the attempts to negotiate a new contract have been unsuccessful.
Mr. Hoffman agreed that the Fairbanks Police Department has not
received a wage increase in six years.
MATT SODEN, Sergeant, Fairbanks Police Department, testified via
teleconference from Fairbanks. Mr. Soden supported HB 1. With
regards to the Fairbanks Police Department's contract, the police
department did go to binding arbitration on the wage issue as well
as the clothing and meal allowance. The arbitrator ruled that the
Fairbanks Police Department should receive a 12 percent increase in
wages spread over about a four year period. The city council
refused to fund that ruling and exercised the "subject to
legislative approval" language in PERA. That issue went to the
supreme court where the court supported the council's decision not
to fund the wage increase. Mr. Soden believed that HB 1 would
correct that discrepancy and allow true binding arbitration. He
believed that the scale is currently tipped heavily in favor of the
city. With regard to the previous question about the prevalence of
this problem, Mr. Soden did not see any reason why local
governments and such would not take advantage of the situation in
the future.
Number 1575
RANDY COFFEY, Detective, Fairbanks Police Department, testified via
teleconference from Fairbanks. Mr. Coffey supported HB 1. He
informed the committee that he was a past president of the
association and has been around for 18 years under the city
ordinance, collective bargaining, and binding arbitration. Mr.
Coffey said that binding arbitration has worked in the past. The
arbitrator is utilized in order to help move the process along and
narrow down the points of contention.
DAVE MAITLEN, Police Officer, Fairbanks Police Department,
testified via teleconference from Fairbanks. He supported HB 1.
Mr. Maitlen said, "The Public Employees Relations Act, under the
Declaration of Policy states in part, 'The legislature declares
that it is the public policy of the state to promote harmonious and
cooperative relations between government and its employees and to
protect the public by assuring effective and orderly operations of
government. The legislature further finds that the enactment of
positive legislation establishing guidelines for public employment
relations is the best way to harness and direct the energies of
public employees eager to have a voice in determining their
conditions of work, to provide a rational method of dealing with
disputes and work stoppages, to strengthen the merit principle
where civil service is in effect and to maintain a favorable
political and social environment.'" This language makes the
legislative intent clear, however the legislative intent is not
reflected in AS 23.40.215, Funding and legislative approval with
regards to Class 1 employees. Currently, a municipal employer is
not compelled to fund an arbitrator's binding award while the
employee is bound by the arbitrator's decision. The City of
Fairbanks has refused to fund arbitrated wages for police and fire
departments under the aforementioned statute. Therefore, the wages
for police officers have not changed since 1992 and the contract
for police officers expired June 30, 1993. The wages for
firefighters have not changed since 1990. How can one be assured
that binding arbitration is binding on both parties? Mr. Maitlen
believed that HB 1 would resolve this issue and urged the
committee's support of HB 1.
Number 1300
PERRY WILLIAMSON, Police Officer, Fairbanks Police Department,
testified via teleconference from Fairbanks. He informed the
committee that he has been a Fairbanks police officer for the past
17 years. Mr. Williamson echoed prior comments that the Fairbanks
Police Department employee's union and the City of Fairbanks felt
binding arbitration bound both sides. Binding arbitration has
worked in the past. This "loophole" took away the city's
commitment to binding arbitration. Mr. Williamson did not believe
that the legislative intent of PERA was to allow the city that
"loophole." Mr. Williamson said that he was present to inform the
committee of the situation in order to change the language to
commit both sides in binding arbitration.
Number 1186
LEONARD BROWN, Detective, Fairbanks Police Department, testified
via teleconference from Fairbanks. He informed the committee that
he had been with the police department for 23 years. Mr. Brown
supported HB 1. Mr. Brown believed that the local governments have
not commented on this issue because the local governments know this
is wrong.
MR. BROWN posed the following scenario as an example. What if
suddenly legislators were required to pay their own travel expenses
which the legislator would believe to be unfair. What if that
issue was taken to binding arbitration and the arbitrator ruled
that the state should pay for travel expenses, but the state did
not fund the travel expenses. That is a similar situation to the
Fairbanks Police Department which has not had a contract with the
city for six years.
MR. BROWN said that this situation has come down to dollars with
the city council which cannot do its job in finding the funding
when necessary. The legislature is in the same position facing
cutting budgets, but when an arbitrator has decided the budget
should be funded the legislature has done so or negotiated. He
stated that the cities believe they do not have to fund contracts.
For the first 15 years of Mr. Brown's experience with the police
department, working out the issues together was the approach. Mr.
Brown emphasized that employees such as himself have no avenue for
recourse if the city does not fund a negotiated contract. Mr.
Brown wanted what is fair and equitable for all involved.
REPRESENTATIVE DYSON mentioned that legislative travel home for
Representatives has been reduced from five visits to one visit.
Representative Dyson shared Mr. Brown's consternation.
MR. BROWN said that the travel scenario could be any number of
issues such as pay. Mr. Brown believed it sad for the transition
to the "them vs. us" attitude which has not been the case in the
past.
REPRESENTATIVE KOOKESH pointed out that the Minority has only
received one paid visit home each year.
Number 539
CO-CHAIRMAN HALCRO surmised from Mr. Brown's testimony that this
problem of not funding an arbitrator's award has happened in the
case of the Fairbanks Police Department only once. Co-Chairman
Halcro also understood Mr. Brown to indicate that over the last
couple of years the city council has become miserly and refused to
negotiate; is this attitude due to the lack of available funds or
the general dislike of the Fairbanks Police Department?
MR. BROWN believed that the city council is probably in the same
position as the legislature as far as down-sizing and funding is
difficult. However, it is the job of the city council to find the
funding for a decision from an arbitrator. Mr. Brown did not
believe the city council hated the police department. The
Fairbanks Police Department has not received a wage increase in six
years. He pointed out that the rest of the country has caught up
to Alaska's pay scale. In conclusion, Mr. Brown said the city
should be held accountable to the arbitrator's decisions.
REPRESENTATIVE MURKOWSKI noted that she too had received the
impression from Mr. Brown's testimony that the city was retaliating
against the police department. Representative Murkowski understood
Mr. Brown's response to Co-Chairman Halcro to be that the situation
basically comes down to fiscal concerns.
REPRESENTATIVE JOULE reminded the members that much legislation is
passed due to a single incident; just two weeks ago this committee
passed legislation in response to a single incident. Sometimes it
is necessary to get behind a single incident to avoid multiple
incidents.
Number 0123
CO-CHAIRMAN HARRIS asked if binding arbitration is utilized and
communities are making decisions based on a lack of funds, will an
arbitrator's wage increase award result in the laying off of
employees to pay for the service.
MR. BROWN said, "I guess you could always say that they could say
well, if we have to pay you money then we're going to have to lay
off people. I certainly wouldn't put that past the city to do
that, instead of trying to find a reasonable way to find funding."
TAPE 99-10, SIDE A
[RECORDER MALFUNCTION; APPROXIMATELY ONE MINUTE OF TESTIMONY WAS
MISSED, DURING WHICH TIME MR. BROWN AND CO-CHAIRMAN HARRIS SPOKE.]
Number 0003
MR. BROWN stated, "We've always given back to the city; in every
situation where they said, 'We're going to lay people off,' our
officers have gotten together and said, 'Okay, we'll give this up.'
But it's not all just about total money or dollars. It just comes
down to an entire contract. If they don't fund one item, you have
no items. And then they go back to - like here we are - a contract
that's six years old." He said they gave up 3 percent one time,
and perhaps 4 percent another time, for at least a three-year
period, so that the city wouldn't lay off officers. He emphasized
that with no contract, they are at the city's beck and call.
Number 0329
REPRESENTATIVE DYSON requested that the next hearing be delayed
until hearing from the Alaska Municipal League, in which case he
would defer his questions. He then told members he had misspoke,
and that he believes he was reimbursed for three trips; however,
none of the trips he had wanted to make this year to conferences
were being funded.
Number 0422
CO-CHAIRMAN HALCRO asked whether there have been contract talks or
ongoing discussions.
REPRESENTATIVE BRICE said there are.
CO-CHAIRMAN HALCRO recalled that in Anchorage there had been a
situation for years with the firefighters, with a delay because the
city had appealed the binding arbitrary award, taking issue with
how the determination was made. When the supreme court ruled
recently that the city had to abide by the final terms and
conditions, the taxpayers were left to foot the bill, including
interest. Co-Chairman Halcro noted that the committee had heard
from only one side on the Fairbanks situation. He inquired whether
the city council had done cost studies or surveys that showed that
the Fairbanks Police Department officers were paid more than the
national average, for example. He asked what the feeling is in
Fairbanks.
REPRESENTATIVE BRICE replied that the bill has been out for a
month, and there was talk about it for a number of months before
that. However, there has been no feedback. He said he cannot
speak to the city council's response, then suggested Mr. Drygas or
Mr. Soden could address the issue. He stated his own understanding
that there are regular Tuesday meetings where the negotiations have
been fruitless.
Number 0750
MR. DRYGAS explained their contract expired at the end of 1995.
Since November of that year, they have tried to negotiate weekly.
The city has a proposal on the table that would decrease wages for
firefighters; starting firefighters now make $11.69 per hour, the
same wage as in 1990. Although arbitration had been discussed, the
city has indicated they may not fund an arbitrator's decision. Mr.
Drygas emphasized that his association has tried to negotiate in
good faith and has made many changes to the contract. However,
anything that deals with economics or benefits is at a stalemate.
There is neither a right to strike nor arbitration, and without
some method of resolution, he foresees this continuing for some
time. Mr. Drygas pointed out that even if the firefighters had the
right to strike, he could not do so because of the nature of the
job.
MR. DRYGAS told members that with binding arbitration, a third
party could resolve these differences in a fair manner. The city
could bring up lack of funding and wage rates, for example, and the
arbitrator would come up with an equitable decision. It would be
a way to resolve the dispute without a work stoppage. Used by many
municipalities around the country, arbitration is both a good way
to resolve disputes and to maintain a harmonious relationship.
Number 0894
PATRICK COLE, Attorney, City of Fairbanks, testified via
teleconference. He indicated that two weeks ago, the city council
passed a resolution opposing HB 1 unless the city could opt out of
PERA [Public Employees Relations Act]. Both he and the city have
great respect for the firefighters and police officers. He
believed financial problems are not due to any attempt to punish
employees; most of their nonbargain unit employees are in the same
financial situation that the unions are in. Years ago, the city
negotiated contracts and was able to make pay increases frequently.
However, Mr. Cole believed the tax revenues today are roughly equal
to what those 20 years ago. The city has been under a financial
crunch, and has lost many employees to layoffs, RIPs [retirement
incentive programs] and nonreplacement over the past 15 years.
Luckily, in the past five years some employees have been replaced,
but the city is still very short of prudent levels of service for
the community, not only in police and fire protection, but also in
other areas.
MR. COLE told members that five years ago the city, in reviewing
the law, noticed that since the passage of PERA the state has been
able to "nonfund" contracts, which it has done many times with
police contracts. Nothing forbade cities from having the same
ability, and the current situation is the result of the city
invoking that law, trying to use the same tools to save money that
the state can use. Mr. Cole said his ground rules prevent him from
saying anything about what has gone on at the bargaining table, and
therefore he cannot comment on Mr. Drygas's assertions. However,
they have been negotiating. Their contracts have a so-called
evergreen clause, so that contracts do not expire, therefore there
are contracts negotiated in the early '90s which still exist. The
city has struggled with the ability to provide services within its
budget. He noted that a tax cap in Fairbanks prevents raising
taxes beyond a very tight formula, and revenues are a significant
problem.
Number 1119
CO-CHAIRMAN HALCRO announced that the committee would hold HB 1
over; it would probably be addressed again in a couple of weeks
after a response from the Alaska Municipal League and others.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 10:00 a.m.
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