Legislature(1993 - 1994)
01/28/1993 01:00 PM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE January 28, 1993 1:00 p.m. MEMBERS PRESENT Representative Harley Olberg, Chairman Representative Jerry Sanders, Vice-Chair Representative Con Bunde Representative John Davies Representative Cynthia Toohey Representative Bill Williams Representative Ed Willis MEMBERS ABSENT None COMMITTEE CALENDAR Overview of the Department of Community and Regional Affairs *HB 73: "An Act relating to state and local taxation and other state regulation as affected by the Alaska Native Claims Settlement Act, as amended, and related federal statutes; and providing for an effective date." PASSED FROM COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS (* first public hearing) WITNESS REGISTER Edgar Blatchford, Commissioner Department of Community and Regional Affairs P.O. Box 112100 Juneau, AK 99811-2100 Phone: 465-4700 POSITION STATEMENT: Provided information related to the Department of Community and Regional Affairs' (DCRA) programs Bruce Geraghty, Deputy Commissioner Department of Community and Regional Affairs P.O. Box 112100 Juneau, AK 99811-2100 Phone: 465-4700 POSITION STATEMENT: Provided information related to the DCRA's programs John Walsh, Deputy Director Division of Community and Rural Development Department of Community and Regional Affairs P.O. Box 112100 Juneau, AK 99811-2100 Phone: 465-4890 POSITION STATEMENT: Provided information related to the Community Development Quota program of the DCRA Representative Eileen Maclean State Capitol, Room 507 Juneau, Alaska 99811-1182 465-4833 POSITION STATEMENT: Prime Sponsor, HB 73 Jack Chenowith, Legislative Legal Counsel Legislative Affairs Agency 130 Seward Street, Suite 409 Juneau, AK 99801-2105 Phone: 465-3867 POSITION STATEMENT: Provided legal expertise on HB 73 PREVIOUS ACTION BILL: HB 73 SHORT TITLE: ANCSA STATE TAX EXEMPTIONS BILL VERSION: SPONSOR(S): REPRESENTATIVE(S) MACLEAN TITLE: "An Act relating to state and local taxation and other state regulation as affected by the Alaska Native Claims Settlement Act, as amended, and relate federal statutes; and providing for an effective date." JRN-DATE JRN-PG ACTION 01/18/93 102 (H) READ THE FIRST TIME/REFERRAL(S) 01/18/93 102 (H) CRA, JUDICIARY, FINANCE 01/28/93 (H) CRA AT 01:00 PM CAPITOL 124 ACTION NARRATIVE TAPE 93-2, SIDE A Number 000 CHAIRMAN HARLEY OLBERG called the meeting to order at 1:04 p.m., and noted a quorum was present. Number 030 COMMISSIONER EDGAR BLATCHFORD, DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS (DCRA), said the DCRA was the smallest department in state government and had already withstood the greatest budget reductions. "We lost 41 employees last year," said the Commissioner. COMMISSIONER BLATCHFORD continued by outlining the DCRA's budget saying, "93.4 percent of DCRA's general funds are pass through funds, leaving only 6.6 percent for administration. 73.7 percent or $78 million dollars of all general funds are (distributed) through two programs, the municipal assistance program and the revenue sharing program." Number 118 (Representative Davies arrived at the meeting at 1:10 p.m.) COMMISSIONER BLATCHFORD continued, "The following reductions were taken to meet our original five million dollar reduction request. $2.8 million dollars in homeowners property tax exemption, and $820,000 in the renters rebate and $125,000 out of organizational grants and we would reduce Alaska Legal Services to the FY 92 level by $100,000 to $475,000. We will reduce day care assistance programs by $500,000 and eliminate the one-time funding of SB 238, or the Rural Development Initiative Fund which provides loans for entrepreneurs located in rural Alaska communities of populations of 5,000 or less..." COMMISSIONER BLATCHFORD added that the DCRA was requesting an operating fund increase of $456,000 for "administration maintenance" which included funding for six new positions. Number 166 BRUCE GERAGHTY, DEPUTY COMMISSIONER, DCRA, referred to the DCRA handouts the members were given and pointed out that they illustrated the department by program. MR. GERAGHTY expounded upon the following programs: The Financial Outreach Services to Enhance Recovery program which is a "model management system" used in small communities "to keep them out of trouble with the IRS and run more efficiently." The Remote Utility Business Advisor (RUBA) program which is also "tied in with the Department of Commerce." The Internodal Surface Transportation Enhancement Act (ISTEA) program which represents $8.2 million dollars in "flow through" federal dollars. Regarding the Alaska Native Claims Settlement Act (ANCSA) 14(c)(3): At the present time, the DCRA is only able to process seven communities in their 1,280 acre entitlement per year. According to MR. GERAGHTY, if the DCRA's capacity in this area was not increased, they would not complete their backlog for 30 years, and this was a major barrier to economic development as many communities were "land-poor". MR. GERAGHTY concluded RUBA, ANCSA and ISTEA worked well together because all initial planning, basic infrastructure, and economic activity were set out and integrated from the start in each community. Number 267 MR. GERAGHTY said emergency regulations had just been signed to implement SB 238. The DCRA had logged 260 inquiries from rural entrepreneurs about this program. He also referred to a local autonomy task force to recommend changes to the governor and legislature pertaining to small talent pools in rural Alaska communities and the rate of "burn out" that prevailed. Additionally, MR. GERAGHTY spoke about the Alaska Rural Development Council which was formed in October to "break through some of the barriers we have to economic development in this state." Number 327 JOHN WALSH, DEPUTY DIRECTOR, DIVISION OF COMMUNITY AND RURAL DEVELOPMENT, DCRA, testified about the Community Development Quotas (CDQ) program rendering many specifics about the program. He made the following points: The boundaries of the program include the Bering Sea waters, outside of the three mile limit in the federal Exclusive Economic Zone. The CDQ program currently included only pollack, but there were already efforts underway to include halibut and sablefish. Fifty-five communities were eligible to participate. The CDQ program began in December, 1991, and was approved by December 4, 1992. The groups involved were able to harvest 96 percent of their quota in less than 30 days which represented about 19 million dollars in income. The DCRA was given a supplemental appropriation of $100,000 for FY 92 and $200,000 for FY 93 for the CDQ program. This went towards the cost of operations in rural Alaska and to help organize the 55 communities to apply. The communities formed into groups which applied in competition for 101,000 metric tons of pollack. Because they over-subscribed, everyone had to take a reduced award but everyone got a portion. Number 490 REPRESENTATIVE CYNTHIA TOOHEY asked where the CDQ harvests were processed. MR. WALSH said all but one, or four out of five, utilized offshore processors. REPRESENTATIVE TOOHEY asked if the offshore processors were Alaskan or American. MR. WALSH indicated they were American offshore processors. Number 504 COMMISSIONER BLATCHFORD said the CDQ program had evolved suddenly. "The whole goal is to develop a self-sustaining economy in Southwest Alaska. The goal is that local people catch the fish, process the fish and eventually market the fish. The people don't have the skills right now or the capital, so we are required to go outside of the state or wherever to find a joint venture partner," he added. COMMISSIONER BLATCHFORD added further, "What we have done is we've intruded on an outside fishery which lies outside, off the coast of Alaska" and, "the burden of this program...lies on the six applicant groups, they must succeed and the State of Alaska cannot allow them to fail. If they fail, we will lose the opportunity to fish in the Bering Sea for Alaskans, forever." Number 549 REPRESENTATIVE TOOHEY asked if there was a stipulation requiring Alaskan workers. MR. WALSH replied that the burden was on the groups to "activate their population and get them involved anywhere and everywhere they can." REPRESENTATIVE TOOHEY asked if the DCRA's four year CDQ plan included land-based development. MR. WALSH replied in the affirmative. He added that, "because of the nature of this industry, the offshore component of the fleet was more attractive to these groups." Number 599 HB 73: ANCSA STATE TAX EXEMPTIONS CHAIRMAN OLBERG interrupted the DCRA overview to let Representative MacLean, the prime sponsor of HB 73, testify on behalf of her bill. Number 613 REPRESENTATIVE EILEEN MACLEAN, PRIME SPONSOR of HB 73, stated the bill had been introduced primarily to bring state law into compliance with federal law. She explained that in 1987, federal law was changed to continue the property tax exemption from federal, state or local taxation on ANCSA (Alaska Native Claims Settlement Act) land indefinitely, or until development occurred. House Bill 73 reflected those changes in state law to avoid confusion in the application of the state's tax laws, she said. REPRESENTATIVE MACLEAN advised that some technical or stylistic wording changes to update state law had been included in HB 73. She noted the bill did not expand or reduce any benefits already mandated by federal law, but merely cleaned up state law and ensured obsolete state statutes did not lead to misinterpretation by state assessors and others who worked with Alaska's tax law. REPRESENTATIVE MACLEAN noted HB 73 had a zero fiscal note from the Department of Revenue, and that a similar bill (CSHB 451 (RES)) had passed the House last year, but was left in the Senate Rules Committee at the time of adjournment. She said, "To my knowledge, there were no problems and concerns, its just a technical bill cleanup." CHAIRMAN HARLEY OLBERG considered HB 73 quite straightforward and suggested the committee complete the DCRA overview before further discussion of HB 73. Number 648 COMMISSIONER BLATCHFORD resumed the discussion on CDQ's cautioning that, "...if it does not succeed, then it will foreclose the opportunity for Alaskans to fish in the Bering Sea forever, in the words of Clem Tillion". REPRESENTATIVE JOHN DAVIES asked for elaboration on why Alaskans "would be foreclosed forever if this group fails." Number 666 COMMISSIONER BLATCHFORD said, "Because we're dealing with federal waters, there is a great deal of pressure coming from outside companies, the Washington Fleet, the Oregon- based fleet and also foreign owned companies. The competition is swift, it's incredible. I don't think Alaska is going to be able to suppress the political influence of the Northwestern states forever and that's why we've been very fortunate to get this door cracked open." Number 675 MR. WALSH expanded on the Commissioner's last statement. TAPE 93-2, SIDE B Number 729 MR. GERAGHTY gave a history of the Bering Sea fish resource and how it came to be that Alaska did not fish the Bering Sea until CDQ's. He added, "You are probably going to see infrastructure needs, in order to get the processing on shore. Some communities, all they need to bring it on shore is a safe freshwater source for processing..." REPRESENTATIVE CON BUNDE asked if people from the communities actually did the fishing or if they sold their portion of the quota. MR. WALSH gave an example which explained the partnership arrangement between the community who had the quotas and the vessels with technical experience which were used during the first CDQ fishery in December, 1992. REPRESENTATIVE BUNDE asked if there was a potential relationship between the CDQs and Tyson Seafoods Co. MR. WALSH said Mr. Tyson was quite familiar with CDQs and seemed to have a commitment towards domestic marketing of Alaska surimi. According to Mr. Walsh, Mr. Tyson's company, Arctic Alaska, was not currently in partnership with a CDQ group but might once market demand was determined. Number 882 CHAIRMAN OLBERG stated this was a remarkable program considering it had only been in existence one year. REPRESENTATIVE TOOHEY asked what the eventual return to the state would be. MR. WALSH said it was hard to quantify what a job was to people in areas which had "no outlook". He further claimed possible reduced social costs and eventual development of value-added processing as consequences of the CDQ program. REPRESENTATIVE TOOHEY rephrased her question to include direct revenue which the state would realize. MR. WALSH said there were presently no taxes which applied to fish harvested in federal waters. Number 968 REPRESENTATIVE BILL WILLIAMS asked why other local fisheries did not add to the wages of the community fishermen. MR. WALSH said they had to address each fishery separately according to the individual management plans but that often the same vessels stayed in those waters, maintaining the same local crews, for the other fisheries. CHAIRMAN OLBERG called an at ease at 2:10 p.m. CHAIRMAN OLBERG reconvened the meeting at 2:16 p.m. with all members present and took up HB 73. He gave a brief history of CSHB 451, the predecessor of HB 73, which nearly passed last session. Number 100 REPRESENTATIVE ED WILLIS asked what the various municipalities and boroughs thought of HB 73. Number 110 JACK CHENOWITH, LEGISLATIVE LEGAL COUNSEL, LEGISLATIVE AFFAIRS AGENCY, testified that, "There ought not to be any further harm done to municipal taxation. Most assessors...are very well aware of the provisions of the Alaska Native Claims Settlement Act and the exemptions to the Act and subsequent amendments to that act have brought. What we are trying to do in the first two sections of this bill in the Title 29 amendments is only alert people who rely on Title 29 exclusively to the fact that there are further exemptions that have been legislated into effect in these last 20 years and that those exemptions do have a role or do have an effect on the municipal tax roles and give notice to them of that. I was cautioned a long time ago that if you don't get it in Title 29, in some cases it doesn't get read, it doesn't get noticed..." REPRESENTATIVE WILLIS asked if anything would be affected by the retroactive provision. MR. CHENOWITH replied in the negative and gave further explanation. Number 140 REPRESENTATIVE WILLIS asked about the effect HB 73 would have on land exchanges between Native corporations and municipalities and gave an example. MR. CHENOWITH set out the criteria in which an exemption would or would not continue. REPRESENTATIVE WILLIAMS gave an example of a current land exchange in Ketchikan. REPRESENTATIVE BUNDE asked about the limitations to the term "seasonal habitation" and gave an example. MR. CHENOWITH said, "The term that has been used is 'developed' and though the exemption from taxation applies to land that is undeveloped and is extended even when surveying, construction of roads, providing utilities and other similar actions normally considered to be component parts of the development process occur, the exemption is allowed. It's only when you put that property to use so a commercial activity, even a seasonal commercial activity, ought to bring it over the line to the point where the municipality would be able to levy and collect." REPRESENTATIVE WILLIS asked Chairman Olberg if any municipality had been consulted about HB 73. CHAIRMAN OLBERG said no because HB 73 was not new and had fared so well during the last session. REPRESENTATIVE WILLIS asked if any comments had been found while researching HB 73. CHAIRMAN OLBERG replied in the negative. REPRESENTATIVE TOOHEY asked if there were any changes to HB 73 since last year's session. MR. CHENOWITH indicated no substantive changes, only "housekeeping" changes were made. REPRESENTATIVE BUNDE reiterated HB 73 died last session purely due to lack of time and that Chairman Olberg had found no opposition to the bill. CHAIRMAN OLBERG concurred. Number 238 REPRESENTATIVE JERRY SANDERS moved that HB 73 be passed out of committee with individual recommendations. REPRESENTATIVE WILLIS voted "no recommendation" at this point because he wanted to check with the municipality of Anchorage. CHAIRMAN OLBERG suggested that Representative Willis sign the committee report accordingly. Number 257 REPRESENTATIVE WILLIAMS asked if he should abstain from signing the committee report due to his affiliation with a Native corporation. MR. CHENOWITH recommended that Representative Williams ask to be excused from voting when HB 73 reached the House Floor but indicated he could sign the committee report. CHAIRMAN OLBERG asked that the record show Representative Williams identified himself as a possible beneficiary of HB 73. Number 262 CHAIRMAN OLBERG noted there was a motion to pass HB 73 from committee with individual recommendations. Hearing no objections, HB 73 moved out of committee ADJOURNMENT CHAIRMAN OLBERG adjourned the meeting at 2:33.