Legislature(1993 - 1994)

01/28/1993 01:00 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                                                               
  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                              
  (* 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                                                   
  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                                                                   
  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                         
  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                           
       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                     
  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                                                                   
  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                   
       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                 
       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,                 
  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                                                                   
  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                                                                   
  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                       
  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                    
  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
  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                                     
  CHAIRMAN OLBERG adjourned the meeting at 2:33.                               

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