Legislature(2003 - 2004)
02/26/2004 08:04 AM House CRA
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ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
February 26, 2004
8:04 a.m.
MEMBERS PRESENT
Representative Carl Morgan, Chair
Representative Kelly Wolf, Vice Chair
Representative Pete Kott
Representative Ralph Samuels
Representative Sharon Cissna
MEMBERS ABSENT
Representative Tom Anderson
Representative Albert Kookesh
COMMITTEE CALENDAR
HOUSE BILL NO. 431
"An Act relating to the municipal dividend program; and
providing for an effective date."
- MOVED HB 431 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 431
SHORT TITLE: MUNICIPAL DIVIDEND PROGRAM
SPONSOR(s): REPRESENTATIVE(s) MOSES
02/04/04 (H) READ THE FIRST TIME - REFERRALS
02/04/04 (H) CRA, STA, FIN
02/26/04 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE CARL MOSES
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the sponsor of HB 431.
ADAM BERG, Staff
to Representative Carl Moses
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions regarding HB 431.
CHRIS HLADICK, Manager
City of Unalaska
Unalaska, Alaska
POSITION STATEMENT: Testified in support of HB 431.
KEVIN RITCHIE, Executive Director
Alaska Municipal League (AML)
Juneau, Alaska
POSITION STATEMENT: Testified on HB 431.
BRUCE BOTELHO, Mayor
City & Borough of Juneau
Juneau, Alaska
POSITION STATEMENT: Urged enactment of HB 431.
JEANNIE JOHNSON, Finance Chair
City & Borough of Juneau Assembly
Juneau, Alaska
POSITION STATEMENT: During discussion of HB 431, announced
support of the [municipal dividend] concept.
GARY LEWIS, Member
City Council
City of Wrangell
Wrangell, Alaska
POSITION STATEMENT: Urged the committee to pass HB 431.
ACTION NARRATIVE
TAPE 04-6, SIDE A
Number 0001
CHAIR CARL MORGAN called the House Community and Regional
Affairs Standing Committee meeting to order at 8:04 a.m.
Representatives Morgan, Wolf, Kott, Samuels, and Cissna were
present at the call to order.
HB 431-MUNICIPAL DIVIDEND PROGRAM
CHAIR MORGAN announced that the only order of business would be
HOUSE BILL NO. 431, "An Act relating to the municipal dividend
program; and providing for an effective date."
Number 0074
REPRESENTATIVE CARL MOSES, Alaska State Legislature, sponsor,
remarked that HB 431 is simple legislation that should've been
taken care of a number of years ago. He emphasized that Alaska
has many communities that are hurting and although the
[legislature] expends a lot of effort encouraging rural
communities to incorporate, there is no incentive for them to do
so. This legislation would go a long way toward encouraging
incorporation. Numerous communities, he noted, are on the verge
of bankruptcy. Representative Moses opined that if the desire
is to have healthy, local governments, then [the legislature]
should do something like [HB 431]. He further opined that this
should be done with no strings attached due to the differing
needs of the communities in Alaska. For example, in some
communities a washeteria is of the highest importance while in
others a boardwalk is the priority. Representative Moses
expressed hope that the committee would forward HB 431 from
committee today and that the legislation would become part of
the state's long-range fiscal plan.
Number 0325
REPRESENTATIVE CISSNA inquired as to why communities can't fill
needs, such as for a washeteria, through private industry.
REPRESENTATIVE MOSES responded that he was sure [that private
industry does fill those needs] in communities if it's
profitable. However, he was sure that in some of the smaller
communities [a washeteria] wouldn't be profitable.
REPRESENTATIVE CISSNA inquired as to the advantages a washeteria
would provide in terms of survival.
REPRESENTATIVE MOSES recalled that in the past there wasn't
running water or sewer facilities, and consequently folks didn't
have washing machines at home.
CHAIR MORGAN added that sometimes the washeteria is the only
place to obtain fresh water. Furthermore, in some communities
there are certain conditions, such as permafrost, that [prevent]
private businesses from coming in to provide particular needs of
a community.
REPRESENTATIVE SAMUELS pointed out that the only structural
problem is that if there are no earnings, then the cities would
be in the same boat they are now. He highlighted that the point
of the percent of market value (POMV) is to stabilize the cash
flow, no matter its purpose. Therefore, he asked if
Representative Moses envisioned HB 431 being used in conjunction
with some mechanism to stabilize [the cash flow]. He noted that
at one point in the last 12 months that there were no earnings
because of the way "we" operate. Representative Samuels said
that he didn't have a lot of "heartburn" with the idea of HB
431. However, without fixing the underlying structure [the
state] will potentially be in the same boat it is now.
Number 0612
ADAM BERG, Staff to Representative Carl Moses, Alaska State
Legislature, agreed. He explained that under HB 431 [the
municipal dividend] would provide a set amount to each community
based on population. If the balance of the earnings reserve,
after distribution of the permanent fund dividends and
inflation-proofing, is less than the full amount going to the
communities, then that lesser amount would be used.
REPRESENTATIVE SAMUELS posed a situation in which there were no
permanent fund dividends. If there are no earnings, then the
citites that have been trying to budget will [face] a year in
which they receive nothing. "I don't know how you fix it in
here, or if it has to be this, or if it has to be part of POMV,
or if you're just willing to take your chances [and] if we don't
do anything else, you still want to do this," he remarked.
MR. BERG commented that he didn't know if [HB 431] is
necessarily "trying to fix it." If there is money left in the
earnings reserve, it would allow the cities the opportunity to
know how much money they will receive. Therefore, it will help
them in their budgeting and planning. He agreed that if there
is no money going to the cities, the cities would be in the same
situation as every citizen in the state.
REPRESENTATIVE MOSES interjected that hopefully the above won't
be a problem under the POMV.
Number 0745
REPRESENTATIVE CISSNA related her impression that there is the
state economy and the small communities that have been around
since long before statehood. She opined that the state's oil
money is better divested to local governments because local
governments do a better job of spending it. Representative
Cissna expressed the need to discuss what good it does to divest
money to the local governments.
MR. BERG opined that one of the benefits of giving the money to
the local communities is related to the communities' ability to
tax its citizens now. Therefore, as assistance from the state
has decreased, communities have had to ask for more from its
citizens. When money returns to a community, the community has
the option to decrease some of the costs passed on to its
citizens.
Number 1041
CHRIS HLADICK, Manager, City of Unalaska, testified in support
of HB 431. He opined that there are a lot communities in rural
Alaska that are in trouble and if rural Alaska doesn't work,
then Alaska [as a whole] doesn't work. Every dollar that is
spent in rural Alaska returns to Anchorage in one form or
another. Without the money to operate, these small communities
aren't going to operate. Furthermore, these communities aren't
going to file for dissolution, rather they are going to walk
away. In some cases, [communities] will stop carrying the
necessary insurance for their infrastructure [when monies
dwindle]. Therefore, Mr. Hladick said he applauded anything
that can be done to help these smaller communities.
MR. HLADICK emphasized that revenue sharing has "gone away." He
noted agreement with Representative Samuels. He opined that
POMV is something that needs to be done in order to ensure
[stable funding]. Mr. Hladick concluded by saying that it would
be great if the committee could develop some form of HB 431.
Number 1180
KEVIN RITCHIE, Executive Director, Alaska Municipal League
(AML), informed the committee that the adoption of a POMV
approach to managing the permanent fund is part of AML's and the
Alaska Conference of Mayors' platform this year. With that
stable income some of the income could be allocated to the
municipalities, as is done in other states. He noted that all
states do, to some extent, allocate money to municipalities.
Mr. Ritchie highlighted that the state is the only entity that
equalizes resources around the state. As Mr. Hladick mentioned,
most of that money returns to the larger communities in Alaska.
In fact, a few years ago a study done by the North Slope Borough
tried to estimate how much money returns to Anchorage from rural
Alaska. The study estimated that about one-third of the jobs in
Anchorage were related to serving [rural] Alaska. Although many
of the small communities may not have a large cash economy,
these small communities have resources that are fairly
sustainable from the federal government. Mr. Ritchie said that
he likes to think of it as an ATM machine for urban Alaska, one
which doesn't run out of money. In terms of that thinking,
small communities, if for no other reason, are critical to the
entire economy of the state.
Number 1317
MR. RITCHIE turned to the tool of distributing money to
municipalities through a municipal or community dividend, and
opined that the public will accept the concept of a dividend to
their community from the earnings of the permanent fund. Where
the money would go would be decision-making at the local level.
Mr. Ritchie pointed out that Governor Walter Hickel introduced
the community dividend, which was the same concept as that
embodied in HB 431. Governor Hickel also created the capital
matching grant program for municipalities so that municipalities
could have funds to match federal funds and other funds in order
to build infrastructure. However, that program as well as
revenue sharing is slated for no funding this year.
MR. RITCHIE drew attention to the document that specifies the
fiscal year 2003 operating budget of the municipalities in
Alaska. He commented that it's stunning that a city can be run
for $65,000 a year or $103,000 a year. "In rural Alaska, you're
getting probably the greatest bang for the buck in government,"
he remarked. Mr. Ritchie stated that often small communities
are the glue that holds the entire structure together, which is
the definition of government. Therefore, what these communities
accomplish with their budgets is fairly efficient. Mr. Ritchie
concluded, "That kind of stable revenue coming in through
commonly owned resources, which would be the earnings of the
permanent fund in this case, certainly is something that the
Alaska Municipal League not only supports but thinks is very,
very important."
Number 1519
REPRESENTATIVE CISSNA turned to the issue of rural community
survival and the needs that the state provides to rural
communities. Representative Cissna opined that there is more to
investing in the survival of [rural] communities than just the
money that comes to Anchorage.
MR. RITCHIE reminded the committee that he believes that most
people think of rural Alaska as a key component of Alaska when
they think of Alaska. Therefore, maintaining Alaska as it was
found was a critical responsibility at statehood. Although he
acknowledged that towns come and go, many of Alaska's
communities may predate statehood by thousands of years. In
today's world, things such as oil, utilities, washers and
dryers, health care, and transportation are incredibly important
to everyone no matter their location. Therefore, maintaining a
basic level of services is a responsibility of state government
and that means doing so where the citizens live. Mr. Ritchie
pointed out that Appalachia, poor communities throughout various
states, is a good example of communities that need additional
[financial] support beyond what can be created with their own
local resources.
REPRESENTATIVE CISSNA turned to the future with world population
expansion and the warming of Alaska. She predicted that with
the worldwide growth of the population there will be a lot of
people living in Alaska. She characterized small communities as
the placeholders, which create a healthy place to come.
Number 1750
REPRESENTATIVE KOTT turned to the amount of the municipal
dividend, which specifies a minimum of $40,000 per community.
He asked if $40,000 is enough or too much. He also inquired as
to what should be an individual's stake in the community. For
instance, the City of Kupreanof has a budget of $41,400. Under
HB 431, the municipal dividend would provide $40,000, and
therefore leave $1,400. When the $1,400 is divided by the City
of Kupreanof's population, each resident of Kupreanof should
contribute $50 toward the city's government. He asked if that
is reasonable.
MR. RITCHIE opined that AML would endorse stair stepping some of
the impacts. Mr. Ritchie acknowledged that $40,000 isn't much
to a community of 3,000 people, but pointed out that it may be
more than appropriate for a community of 25 people. Mr. Ritchie
asked the committee to imagine a community of 200-300 people on
a river in the Yukon-Kuskokwim delta region where there isn't
enough money to make it with an $80,000 budget of which $40,000
is [funded] from the state. If that $40,000 goes away, the
community can't insure its infrastructure. Furthermore, there
has to be a strong government in order to dissolve and negotiate
with the state. In most cases, most [communities] just walk
away. In talking with state officials, Mr. Ritchie related his
understanding that 17 communities didn't hold elections, which
is a bad sign. Furthermore, a number of small communities are
cutting road maintenance and public safety. Mr. Ritchie opined
that $40,000 may be too much for a small community while for a
larger community of 200-300 people it would be too little,
especially in the context of $6-$10,000 increases every year for
the foreseeable future for PERS [Public Employees' Retirement
System] and TRS [Teachers' Retirement System] as well as
increased insurance costs. He noted that the average insurance
cost for a small community to insure liability and
infrastructure is $25-$40,000, which is a significant cost that
won't go away. For a small community of 150-300 people, he
suggested that $70,000 would be a sustainable amount [for a
municipal dividend].
Number 1964
BRUCE BOTELHO, Mayor, City & Borough of Juneau, spoke in favor
of HB 431. Mr. Botelho returned to Representative Cissna's
earlier question regarding the role state government should play
in the survival of small communities and offered that the basic
response is that [smaller communities] are where people live.
Mr. Botelho mentioned that perhaps he tends to approach this
more from a legal standpoint due to his professional training.
In the federal constitution, the state is viewed as the
fundamental building block of the federal republic.
Simultaneously, the towns, villages, and cities are the building
blocks of the state. At the local level, is where the "rubber
meets the road." When people experience government it's not at
some distant location, rather it's near their home, in their
neighborhood, and work place. It's at the local level, where
people expect to receive police and fire protection, clean
water, and the existence of schools, libraries, and health care
facilities.
MR. BOTELHO recalled the first decade of the State of Alaska's
existence, well before oil was flowing. [During that time]
there was a partnership between state and local governments in
the form of revenue sharing. These state dollars were intended
to help local governments in performing their tasks as well as
providing some level of fiscal stability. However, these forms
of unrestricted revenue sharing have all but disappeared. Mr.
Botelho acknowledged that the state's fiscal instability has had
devastating impacts to various local governments. At the same
time, because of good planning and management, Alaska is the
envy of most of the nation because of its almost $28 billion
fund. Still, the cuts at the state level have resulted in some
combination of tax increases or dramatic reductions in services.
He highlighted that some local governments are better able to
tax than others. However, those taxes can only occur when there
is economic activity to tax.
MR. BOTELHO pointed out that citizens aren't telling
[government] that they want less fire service or police
protection, rather citizens want these things, and they want
their communities to survive as well as thrive. The
aforementioned can only happen, he opined, if there is some
financial bridge to better times. Mr. Botelho related his
belief that HB 431 is a good foundation for that bridge,
although it's only part of a larger picture. Still, it's an
essential element. Mr. Botelho concluded by urging the
enactment of HB 431.
Number 2291
REPRESENTATIVE SAMUELS mentioned the discussion that there is a
disconnect in Alaska between it's people and the state due to
the various funding mechanisms. Therefore, he asked if a
community [those in the community] should be required to pay
some nominal amount [to fund their local government] so that
[the residents of the community have] some ownership in the
[local government].
MR. BOTELHO related his general view that where there is an
ability to contribute to government, that should take place.
The [ability to contribute] is going to vary from community to
community. Ultimately, he hoped that the committee would look
to legislation that would benefit the greatest number of people,
recognizing that there will be some inequities in which some
small communities may receive proportionately more than one
might believe is just. Mr. Botelho remarked that HB 431
provides a good paradigm for going forward to provide support.
He related that for him the specific dollar amount is less
essential than the principle that it reflects, which is to
provide predictability and stability to communities. He
recalled the earlier question regarding [the municipal dividend]
being something that could or could not be tied to POMV [which
could place] "us" at the whim of the market, and said, "Clearly
that's a risk." Both AML and the City & Borough of Juneau have
endorsed "that model" because it will provide greater stability
over all. Mr. Botelho said, "But I believe the program commends
itself under either the current format -- it puts us at greater
risk because of that absence of taking a look at the overall
value of the fund." He said that if he were the person writing
history, he would like to see [the municipal dividend] as part
of the overall reform of the management of the fund itself.
Number 2459
JEANNIE JOHNSON, Finance Chair, City & Borough of Juneau
Assembly, related that in her role she has been sitting in on
departmental meetings with the city manager. Ms. Johnson said
that it's difficult to determine from where more cuts will come.
Therefore, she announced support of the [municipal dividend]
concept.
Number 2517
GARY LEWIS, Member, City Council, City of Wrangell, related that
he was thinking about HB 431 this morning, noting that when he
awoke this morning the water ran, the toilet flushed, the
streets were plowed, and the electricity worked. The
aforementioned are the services being discussed today. These
services are supplied by local governments. Mr. Lewis related
that this morning he recalled that this is the twentieth year he
has talked with the legislature and in those 20 years, the main
theme has been to stabilize revenue to municipalities which
provide the earlier-mentioned services. For about half of the
20 years, Mr. Lewis said he has been supporting Representative
Moses' legislation for a community dividend. Therefore, Mr.
Lewis requested that the committee give HB 431 serious
consideration and pass HB 431.
Number 2589
REPRESENTATIVE KOTT asked if Mr. Lewis believes that individual
citizens in various municipalities should have some ownership in
their municipality by providing some form of payment for the
services that have been mentioned.
MR. LEWIS answered that in most cases [the citizens] do [pay for
the services]. For instance, individual citizens pay for
utilities. He noted that there is no way to charge for the
general services of police and fire protection.
Number 2635
REPRESENTATIVE CISSNA recalled that in a meeting with Mr. Lewis,
he related various ways in which Wrangell has come up with ways
to generate revenues. She said she understood [Wrangell] to be
trying to build a healthy, productive, and safe community. She
asked if it would be an impediment to the community's desire to
build industry, if it used a portion [of the revenue generated
by the community] to pay for both state and local government.
MR. LEWIS highlighted that Wrangell is a very depressed
community that is in survival mode and [the community] is
feeding off the public savings in order to develop industry to
get something happening in the area. Furthermore, Wrangell
taxes at the highest sales tax rate in the nation at 7 percent,
along with a 12-mill property tax. This community is in dire
straights, and therefore he was very appreciative of the people
in the community who are putting forth the effort to change.
REPRESENTATIVE CISSNA commented that she sees a dual disconnect,
which she explained as the citizens of the state not
understanding what they receive from the state government as
well as the [state government] not understanding what a small
local community faces in trying to survive.
MR. LEWIS acknowledged that there may be many services provided
by the state that may not be recognized at the local level.
However, every person that [the legislators] represent benefit
from the services provided by that community. He indicated that
now the services provided by the state are coming more into
focus as some of the rural communities are losing public safety
officers.
CHAIR MORGAN announced that public testimony was closed.
Number 2836
REPRESENTATIVE KOTT announced that he supports the concept of HB
431. However, he expressed concern with the way in which the
legislation delineates the $40,000 and "how that percent equates
to the bottom line." Again, he turned to the budget of the City
of Kupreanof. In 2003, revenue sharing for the City of
Kupreanof was $22,000, which leaves a balance of about $19,000
that he assumed the population of 23 picked up. Representative
Kott reiterated his belief that the concept of HB 431 is good,
adding that he believes the House Finance Committee will, at
some point, have the opportunity to review it. He indicated
that there may be another way to reach the same end, without
establishing a minimum because, "to some extent, it does
penalize those municipalities that ... reach the plateau that
would allow them, on an as-needed case-by-case citizen basis,
that is to have the requisite number at $250 to reach that
$40,000 plateau." He further expressed the hope that there
would be some encouragement for municipalities to consolidate so
that they could [reach the $40,000] rather than the state
provide it for every city. Representative Kott concluded by
expressing the hope that this legislation would be moved from
committee.
CHAIR MORGAN announced his intention to pass HB 431 from
committee.
Number 2993
REPRESENTATIVE KOTT moved to report HB 431 out of committee with
individual recommendations [and the accompanying fiscal notes].
TAPE 04-6, SIDE B
[Not on tape, but reconstructed from the committee secretary's
log notes, was the following:
CHAIR MORGAN, upon determining there were no objections,
announced that HB 431 was reported from the House Community and
Regional Affairs Standing Committee.]
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:52 a.m.
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