Legislature(1999 - 2000)
05/11/1999 08:08 AM 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 May 11, 1999 8:08 a.m. MEMBERS PRESENT Representative Andrew Halcro, Co-Chairman Representative John Harris, Co-Chairman Representative Carl Morgan Representative Lisa Murkowski Representative Fred Dyson Representative Reggie Joule Representative Albert Kookesh MEMBERS ABSENT All members present. OTHERS PRESENT Representative Eric Croft COMMITTEE CALENDAR SENATE BILL NO. 156 "An Act relating to municipal incorporation, to reclassification of cities, to municipal boundary changes, and to dissolution of municipalities." - MOVED HCS SB 156(CRA) OUT OF COMMITTEE CS FOR SENATE BILL NO. 110(RLS) am "An Act relating to liability for the release of hazardous substances involving certain property acquired by a governmental entity; relating to making a determination as to when a hazardous substance release has occurred; relating to liability of a party other than the party responsible for the initial release of a hazardous substance; and providing for an effective date." - MOVED CSSB 110(RLS) am OUT OF COMMITTEE *HOUSE BILL NO. 24 "An Act relating to reimbursement to a municipality for certain property tax revenues lost to it as a result of a tax exemption for certain residences; and providing for an effective date." - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: SB 156 SHORT TITLE: MUNICIPAL CLASSIFICATIONS AND BOUNDARIES SPONSOR(S): COMMUNITY & REGIONAL AFFAIRS BY REQUEST Jrn-Date Jrn-Page Action 4/16/99 949 (S) READ THE FIRST TIME - REFERRAL(S) 4/16/99 950 (S) CRA, FIN 4/26/99 (S) CRA AT 1:30 PM FAHRENKAMP 203 4/26/99 (S) MINUTE(CRA) 4/27/99 1134 (S) CRA RPT 3DP 4/27/99 1134 (S) DP: TIM KELLY, PHILLIPS, MACKIE 4/27/99 1134 (S) ZERO FISCAL NOTE (DCRA) 5/04/99 (S) FIN AT 9:00 AM SENATE FINANCE 532 5/04/99 (S) MOVED OUT OF COMMITTEE 5/04/99 (S) RLS AT 3:15 PM FAHRENKAMP 203 5/04/99 (S) MINUTE(FIN) 5/04/99 (S) MINUTE(RLS) 5/04/99 1220 (S) FIN RPT 7DP 1NR 5/04/99 1220 (S) DP: TORGERSON, PARNELL, PHILLIPS, 5/04/99 1220 (S) PETE KELLY, DONLEY, ADAMS, WILKEN; 5/04/99 1220 (S) NR: GREEN 5/04/99 1220 (S) PREVIOUS ZERO FN (DCRA) 5/06/99 1272 (S) RULES TO CALENDAR AND 1 OR 5/6/99 5/06/99 1272 (S) READ THE SECOND TIME 5/06/99 1273 (S) THIRD READING 5/7 CALENDAR 5/07/99 1304 (S) READ THE THIRD TIME SB 156 5/07/99 1304 (S) PASSED Y20 N- 5/07/99 1308 (S) TRANSMITTED TO (H) 5/08/99 1256 (H) READ THE FIRST TIME - REFERRAL(S) 5/08/99 1256 (H) CRA 5/11/99 (H) CRA AT 8:00 AM CAPITOL 124 BILL: SB 110 SHORT TITLE: HAZARDOUS SUBST. RELEASE: GOVT ENTITY SPONSOR(S): SENATOR(S) WILKEN Jrn-Date Jrn-Page Action 3/18/99 601 (S) READ THE FIRST TIME - REFERRAL(S) 3/18/99 601 (S) JUD 4/12/99 (S) JUD AT 1:30 PM BELTZ 211 4/12/99 (S) MINUTE(JUD) 4/23/99 (S) JUD AT 1:30 PM BELTZ 211 4/23/99 (S) MOVED CS(JUD) OUT OF COMMITTEE 4/23/99 (S) MINUTE(JUD) 4/29/99 (S) RLS AT 11:50 AM FAHRENKAMP 203 4/29/99 (S) MINUTE(RLS) 4/29/99 1169 (S) JUD RPT CS 1DP 2NR 1DNP NEW TITLE 4/29/99 1169 (S) DP: TAYLOR; NR: TORGERSON, DONLEY; 4/29/99 1169 (S) DNP: ELLIS 4/29/99 1169 (S) ZERO FISCAL NOTES (DOT, DEC) 5/04/99 (S) RLS AT 3:15 PM FAHRENKAMP 203 5/04/99 (S) MINUTE(RLS) 5/05/99 1249 (S) RLS TO CALENDAR W/CS 1 OR 5/5 SAME TITLE 5/05/99 1249 (S) PREVIOUS ZERO FN (DEC, DOT) 5/05/99 1251 (S) READ THE SECOND TIME 5/05/99 1252 (S) RLS CS ADOPTED Y11 N9 5/05/99 1252 (S) ADVANCED TO THIRD READING UNAN CONSENT 5/05/99 1252 (S) READ THE THIRD TIME CSSB 110(RLS) 5/05/99 1253 (S) PASSED Y17 N3 5/05/99 1253 (S) EFFECTIVE DATE(S) SAME AS PASSAGE 5/05/99 1253 (S) TAYLOR NOTICE OF RECONSIDERATION 5/06/99 1277 (S) RECON TAKEN UP - IN THIRD READING 5/06/99 1277 (S) RETURN TO 2ND FOR RESCIND MOTION UC 5/06/99 1277 (S) MTN TO RESCIND ACTION IN ADPTNG RLS CS 5/06/99 1278 (S) ACTION RESCINDED ADPTNG RLS CS Y11 N9 5/06/99 1279 (S) HELD IN 2ND W/QUESTION PENDNG TO 5/7 CAL 5/07/99 1299 (S) RLS CS ADOPTED UNAN CONSENT 5/07/99 1299 (S) AUTOMATICALLY IN THIRD READING 5/07/99 1300 (S) RETURN TO 2ND FOR AM 1 UNAN CONSENT 5/07/99 1300 (S) AM NO 1 OFFERED 5/07/99 1300 (S) AM TO AM 1 ADOPTED UNAN CONSENT 5/07/99 1300 (S) AM NO 1 AS AMENDED ADOPTED Y20 N- 5/07/99 1302 (S) AUTOMATICALLY IN THIRD READING 5/07/99 1302 (S) PASSED ON RECONSIDERATION Y20 N- 5/07/99 1303 (S) EFFECTIVE DATE(S) SAME AS PASSAGE 5/07/99 1308 (S) TRANSMITTED TO (H) 5/08/99 1256 (H) READ THE FIRST TIME - REFERRAL(S) 5/08/99 1256 (H) CRA, JUD 5/11/99 (H) CRA AT 8:00 AM CAPITOL 124 WITNESS REGISTER DOUG SALIK, Researcher for Senator Tim Kelly Alaska State Legislature Capitol Building, Room 101 Juneau, Alaska 99801 Telephone: (907) 465-3822 POSITION STATEMENT: Testified on behalf of the bill's sponsor. KEVIN WARING, Chairman Local Boundary Commission 333 4th Avenue Anchorage, Alaska 99501 Telephone: (907) 269-4559 POSITION STATEMENT: Supported SB 156. KEVIN RITCHIE Alaska Municipal League 217 Second Street Juneau, Alaska 99801 Telephone: (907) 586-1325 POSITION STATEMENT: Supported SB 156. DAN BOCKHORST, Local Boundary Commission Division of Municipal & Regional Assistance Department of Community & Regional Affairs 333 West 4th Avenue Anchorage, Alaska 99501 Telephone: (907) 269-4580 POSITION STATEMENT: Answered questions. SENATOR WILKEN Alaska State Legislature Capitol Building, Room 514 Juneau, Alaska 99801 Telephone: (907) 465-3709 POSITION STATEMENT: Testified as Sponsor of SB 110. PAUL COSTELLO, Land Management Director Fairbanks Northstar Borough 809 Pioneer Road Fairbanks, Alaska 99701 Telephone: (907) 459-1318 POSITION STATEMENT: Testified on SB 110. TIM ROGERS, Legislative Program Coordinator Municipality of Anchorage 632 West 6th Avenue Anchorage, alaska 99501 Telephone: (907) 343-4467 POSITION STATEMENT: Supported SB 110. LARRY DIETRICK, Program Manager Division of Spill Prevention & Response Department of Environmental Conservation 410 Willoughby Avenue, Suite 105 Juneau, Alaska 99801-1795 POSITION STATEMENT: Discussed the department's concerns. CRAIG TILLERY, Assistant Attorney General Environmental Section Civil Section Department of Law 1031 West 4th Avenue, Suite 200 Anchorage, Alaska 99501-1994 Telephone: (907) 269-5100 POSITION STATEMENT: Answered questions. BETH HAGEVIG, Legislative Administrative Assistant for Senator Wilken Alaska State Legislature Capitol Building, Room 514 Juneau, Alaska 99801 Telephone: (907) 465-3709 POSITION STATEMENT: Answered questions. JONATHON LACK, Legislative Assistant for Representative Halcro Alaska State Legislature Capitol Building, Room 418 Juneau, Alaska 99801 Telephone: (907) 465-4939 POSITION STATEMENT: Offered information on SB 110. VIRGIL NORTON PO Box 141796 Anchorage, Alaska 99514 Telephone: (907) 776-5481 POSITION STATEMENT: Discussed concerns with SB 110. ANNETTE KRIETZER, Legislative Assistant for Senator Leman Alaska State Legislature Capitol Building, Room 115 Juneau, Alaska 99801 Telephone: (907) 465-2095 POSITION STATEMENT: Responded to concerns with SB 110. ACTION NARRATIVE TAPE 99-32, SIDE A Number 0001 CO-CHAIRMAN HALCRO called the House Community and Regional Affairs Standing Committee meeting to order at 8:08 a.m. Members present at the call to order were Representatives Halcro, Harris, Morgan and Dyson. Representatives Kookesh, Joule and Murkowski arrived at 8:09 a.m., 8:10 a.m., and 8:11 a.m. respectively. SB 156-MUNICIPAL CLASSIFICATIONS AND BOUNDARIES CO-CHAIRMAN HALCRO announced that the first order of business before the committee would be SENATE BILL NO. 156, "An Act relating to municipal incorporation, to reclassification of cities, to municipal boundary changes, and to dissolution of municipalities." Number 0081 DOUG SALIK, Researcher for Senator Tim Kelly, Alaska State Legislature, informed the committee that SB 156 was requested by the Local Boundary Commission. This legislation has been reviewed by Legislative Legal and Research Services. The Local Boundary Commission and the Alaska Municipal League (AML) support SB 156. He explained that SB 156 makes some changes to Title 29. One change is to the language pertaining to how the Local Boundary Commission may amend, accept, or reject petitions. There is an attempt to make the language consistent in order to reduce confusion for petitioners. Secondly, SB 156 will statutorial endorse the Local Boundary Commission's practice of amending certain petitions. For example, if a second class city wanted to dissolve, the Local Boundary Commission may want to amend its petition which would require the city to deal with its debt before being allowed to dissolve. REPRESENTATIVE KOOKESH pointed out that most communities in rural Alaska would dissolve because they cannot make it. Those communities would not have wanted to dissolve if they had the money to pay the bills. MR. SALIK deferred to those on-line. REPRESENTATIVE KOOKESH stressed that it does not make sense. He predicted that most local municipalities in rural Alaska faced with this would simply walk away from it. Number 0365 CO-CHAIRMAN HALCRO referred to the Local Boundary Commission's report to the legislature dated January 29, 1999. That report requested some statutory changes allowing greater flexibility to the commission as well as language to address legal challenges. Under the requested language from the commission's report, there is no reference to the retainment of debt nor is that language in the proposed statute changes. "Is that the intent?" MR. SALIK deferred to a member of the Local Boundary Commission. Number 0532 KEVIN WARING, Chairman, Local Boundary Commission, testified via teleconference from Anchorage. The Local Boundary Commission supports SB 156 as drafted by the local affairs agency. This legislation has no fiscal impact. Furthermore, the proposed changes encompassed in SB 156 would close the door to potential litigation and the related costs to the state. Mr. Waring stated that SB 156 achieves the following two worthwhile purposes. First, SB 156 would make the language of five separate statutory sections uniform. This is language that allows the commission to amend and approve petitions for reclassifications, incorporations, annexations, detachments, mergers, and consolidations after dissolution. Existing statute utilizes varying language in the five separate sections which are subject to interpretation. Upon research of this language, the variance in the language was by chance and not purposeful. He noted that the proposed changes in SB 156 do not change the original legislative intent of the language, but merely make the language uniform and remove a potential source of confusion and litigation. MR. WARING continued with the second purpose of SB 156. The legislation would adopt language that acknowledges the Local Boundary Commission's authority to impose conditions on petitions that it does not approve. The Local Boundary Commission already has this power and in some sections of these statutes, specifically the dissolution statute, the commission is already implicitly authorized to impose conditions on dissolution petitions. He noted that to date the Attorney General's office has supported the Local Boundary Commission in its exercise of this power. In the last five years, the commission has imposed, about 12 times, various types of conditions on petitions. This power has been utilized to protect the state's interest. He informed the committee that since 1994, there have been seven dissolutions of city governments. As required by law, the commission has used conditions to ensure that municipal assets were properly disposed of and debts paid. "Dissolving municipalities are creatures of the state. Therefore, the state has an interest in ensuring that public assets are properly disposed of. Similarly in several incorporations, where the petitioners propose to finance new local governments through the imposition of sales taxes or bed taxes. We have conditioned approval of incorporation on simultaneous approval after the local incorporation election of an appropriate tax." The main purpose is to close the door to possible litigation. Mr. Waring pointed out that Title 29 currently requires as a part of dissolution, that the municipality be free of debt or make appropriate arrangements to satisfy creditors. Number 0945 REPRESENTATIVE MURKOWSKI pointed out that Mr. Waring's letter and testimony have stated that ambiguities will be clarified and hopefully, eliminate legal challenges. Is this currently a problem or is this in an attempt to prevent such suits? MR. WARING noted that there was a past case which dealt with the ambiguity that is trying to be clarified here. In controversial cases, the commission's statute and regulations are closely inspected for any ambiguities. Mr. Waring said that he did anticipate that the commission would be challenged on both of these matters sooner or later. CO-CHAIRMAN HALCRO referred to the January 28, 1999 report from the commission which discusses litigants, Yakutat, asserting that the commission does or does not have certain authority. The ambiguity of the language allows arguments to be tailored to the litigant's needs. He asked if that was a safe assessment as to the need for these clarifications. MR. WARING replied yes. The commission would like to keep such issues from going to court. REPRESENTATIVE KOOKESH referred to the language on page 3, subsection (a) of SB 156 which indicates that the commission grants dissolutions, if in the best interest of the state. Most communities contemplating dissolution would not be thinking of the state, but rather what is in the best interest of the community. Furthermore, the last sentence of SB 156 which states, "Otherwise it [Local Boundary Commission] shall reject the petition." is not realistic. If a community wants to dissolve, the community will do so whether the commission rejects the petition or not. This is of concern. Number 1184 MR. WARING said that Representative Kookesh has a good point. This legislation does not seek to change the intent of any existing legislation. In fact, existing legislation already includes language referring to the "best interest of the state". REPRESENTATIVE DYSON inquired as to what SB 156 would accomplish besides impacting those communities desiring to resolve their state sponsored relationship. MR. WARING reiterated that SB 156 would make uniform the Local Boundary Commission's procedures governing how the commission amends and accrues petitions for incorporation, boundary changes, dissolutions, consolidations, et cetera. Currently, there is different language describing how the commission shall make amendments in five separate sections. The proposed revisions encompassed in SB 156 make this uniform as well as clearly authorizing the commission to place conditions on various petitions. Mr. Waring reiterated that the commission desires this to be validated in statute in order to preclude legal challenges. Number 1365 KEVIN RITCHIE, Alaska Municipal League, noted that the committee should have a letter in the packet from AML which supports SB 156. CO-CHAIRMAN HALCRO inquired as to whether Mr. Ritchie had discussed the situation surrounding dissolutions with rural communities. MR. RITCHIE replied no. REPRESENTATIVE KOOKESH commented that he has not had anyone contact him regarding this legislation. He asked if there was any discussion at all on this issue by the AML. He assumed if there was not, that there is no problem with the legislation. MR. RITCHIE stated that SB 156 is viewed as a technical change. He recognized the validity of the issues brought forth by Representative Kookesh, but indicated that there may be another arena to discuss that issue. REPRESENTATIVE DYSON pointed out that SB 156 will be heard next in House Finance. He inquired as to what AML has done to notify rural, local governments of this legislation. MR. RITCHIE explained that the AML has a bulletin which lists all the municipal bills and information regarding those bills is published every two weeks. There has not been a particular effort in the newsletter to respond to SB 156 because it is viewed as a technical change. Such legislation is also referred to the Local Government Subcommittee of the Legislative Committee. The subcommittee did not have any flags regarding SB 156, however this particular issue was not raised either. Number 1558 REPRESENTATIVE JOULE inquired as to how many municipalities would be faced with dissolution in the face of cuts to municipal assistance and revenue sharing. If the legislature eliminates revenue sharing over a three year period, how would SB 156 affect a community's ability to dissolve. He asked if any discussion had occurred regarding the future. MR. RITCHIE informed the committee that many municipalities came forward in the face of the full elimination of the municipal assistance and revenue sharing. The full elimination would have resulted in a 40 to 60 percent reduction of the total operating budget for many municipalities. Even with a third of that remaining, there would still be a 10 to 20 percent reduction of the operating budget for many municipalities. Many of the small municipalities are on the edge. Mr. Ritchie described most municipalities as like a Rotary club with a small staff. Any reduction makes a significant difference to small communities. Approximately 10-15 municipalities testified that they would have to dissolve if a full elimination occurred. He predicted that even with a one-third cut, it would be likely that the dissolution rate would increase significantly. Mr. Ritchie said that he was not prepared to answer the question regarding how any change to the language would affect that eventual dissolution. CO-CHAIRMAN HALCRO noted that current statute reads, "If the local boundary commission determines that a municipality fails to meet the standards for dissolution, it shall reject the petition." He inquired as to examples of the standards for dissolution. MR. WARING deferred to Mr. Bockhorst. Number 1818 DAN BOCKHORST, Local Boundary Commission, Division of Municipal & Regional Assistance, Department of Community & Regional Affairs, emphasized that the provisions of SB 156 do not raise the standard with respect to dissolutions. Currently, state statute provides that dissolution may occur only if in the best interest of the state, AS 29.06.500, and if the municipality is free of debt or has satisfied its creditors with a method of repayment, AS 29.06.470. The commission has adopted regulations in 19AAC.10.280 which provide for factors and criteria the commission considers when acting on a petition for dissolution. MR. WARING echoed Mr. Bockhorst's comments that the provisions in SB 156 do not seek to change the ground rules, but only make the language uniform and clarify that the commission impose conditions on petitioners, as is already in law. REPRESENTATIVE DYSON inquired as to what would happen to the creditors of a local government that is insolvent when that government dissolves. MR. WARING said that he believed that such a local government cannot dissolve unless satisfactory arrangements are made with the creditors. Otherwise, the state does not legally dissolve that local government. REPRESENTATIVE DYSON assumed then that the creditor's remedy is to go to civil court. MR. WARING said, "I think whatever, you know, arrangements they would need to go to be satisfied...." REPRESENTATIVE DYSON asked if there would be a situation in which those liabilities would accumulate to the state. MR. WARING cited AS 29.06.520 which deals with succession to assets and liabilities. That statute indicates that the assets and liabilities would revert to the state. In further response to Representative Dyson, Mr. Waring stated that such has not happened to this point. He felt that such a situation had not occurred because of the requirement for the proper disposal of the assets and the liabilities met before the dissolution occurs. Mr. Waring noted that the cases in Alaska are fairly modest financial cases. Number 2075 REPRESENTATIVE MORGAN inquired as to what would happen if a city council just walked away and closed the doors. He noted that he was involved in the Municipality of Aniak for six years on a volunteer basis. MR. WARING pointed out that AS 29.06.450 addresses such a situation. He said that the current law reads, "The department shall investigate a municipality that it considers to be inactive, it shall report to the local boundary commission on the status of the municipality. The commission may submit its recommendation to the legislature, that the municipality be dissolved in the manner provided for submission of boundary changes in Article X, Section 12 of the state constitution." REPRESENTATIVE MORGAN reiterated his question regarding what will the state do if a local government does not want to run the government. MR. WARING said that the aforementioned statute addresses a situation in which there is no local government. He indicated that the thrust of this legislation is that the commission and the legislature would take action to dissolve the municipality by an action rather than default. REPRESENTATIVE MORGAN commented that many of those running the second-class cities do not do so for the glory which is not received. Number 2288 REPRESENTATIVE KOOKESH reiterated his discomfort with the language, "in the best interest of the state". He was also uncomfortable with the language, "it shall reject the petition". Those are two open-ended areas that should be reviewed by the Local Boundary Commission and the AML. CO-CHAIRMAN HARRIS commented that this legislation merely clarifies what is presently in statute. REPRESENTATIVE KOOKESH recognized that, but noted that the change in circumstances with regard to municipal aid places cities in a different position than last year. He indicated that should be reviewed. CO-CHAIRMAN HARRIS said that he did not disagree with Representative Kookesh. He believed that these issues would arise more often through the process. REPRESENTATIVE DYSON asked if there is a reason that SB 156 needs to move forward quickly. MR. SALIK clarified that if SB 156 does not go forward this session, the Local Boundary Commission will continue to operate along these lines. REPRESENTATIVE DYSON inquired as to the reaction from Mr. Salik and those from the commission to on page 2, line 21, after "," insert, "local community in question," MR. SALIK said that he believed that would be acceptable. Number 2440 MR. WARING pointed out that the commission's regulations list a number of specific criteria regarding what constitutes "in the best interest of the state". Much of the list deals with the local interests such as if there are alternative means by which the service needs by the local community could be served. Local concerns are a central factor in the interpretation of "the best interest of the state". MR. WARING informed the committee that five of the seven dissolutions were involuntary meaning that the local government stopped functioning. In those cases, the commission had to review the situation and make recommendations for dissolution. In each case, matters were resolved satisfactorily with the local communities. MR. WARING said, in response to Representative Dyson's earlier question, that the commission would prefer the existing legislation, but would accept the amendment if the committee so chose. REPRESENTATIVE DYSON surmised then that the commission already does this per regulation. Therefore, placing it in this law would not be a disservice to the current practice. However, it would be a slight constraint in the commission's ability to move away from that perspective in regulation. MR. WARING commented that the amendment might inhibit the commission's ability to approve dissolutions due to the entrance of another separate standard in law to be satisfied. Number 2577 REPRESENTATIVE DYSON moved a conceptual amendment which would include language referring "to the best interest of the affected community" wherever there is reference to "in the best interest of the state". There being no objection, the conceptual amendment was adopted. CO-CHAIRMAN HARRIS referred to Section 5 which relates to AS 29.06.500. Under that statute, subsection (b) allows for an appeal which is not maintained in SB 156. MR. WARING clarified that Section 5 of SB 156, only affects subsection (a) of the statute. CO-CHAIRMAN HARRIS referred to the last sentence of AS 29.06.500 (a) which reads, "The commission may amend the proposal and accept the petition." He asked if that would address Representative Dyson's aforementioned concerns. MR. WARING replied yes, and noted that is how the commission works. CO-CHAIRMAN HARRIS asked if that sentence was eliminated in the bill due to legal reasons. MR. WARING explained that the language was made uniform in these sections and relocated at the beginning of those sections. Number 2830 REPRESENTATIVE MURKOWSKI pointed out that the commission's report to the legislature discusses the best interest of the state utilizing the language "the balanced best interest" in regard to annexations. That report defines "the balanced best interest" as a proposal must serve the best interest of the whole when all interests are considered. As previously mentioned, the "best interest" is set forth in the commission's regulations. The report refers only to annexation and may not relate to dissolutions. Therefore, Representative Murkowski felt that the conceptual amendment was bringing the intent closer. MR. WARING informed the committee that in the 1980s there was statutory language referring to "the balanced best interest of the state and affected local governments". Therefore, the commission was required to ensure that the best interest of the government desiring detachment, the government from whom the territory would be detached, and the state be considered separately. In 1985, the legislature brought all those under the common umbrella, "the balanced best interest of the state as a whole." The commission would be required, per its regulations, to balance the best interest of all parties concerned. TAPE 99-32, SIDE B CO-CHAIRMAN HALCRO noted that the committee should have just received legislation that his office has been working on. He indicated that this legislation was drafted after discovering that municipalities do not have rights, if in a situation in which the municipality could not pay its debts. CO-CHAIRMAN HALCRO closed the public testimony and inquired as to the wishes of the committee. Number 2877 CO-CHAIRMAN HARRIS moved that the committee report HCS SB 156 out of committee with individual recommendations and attached fiscal notes. There being no objections, HCS SB 156(CRA) was reported out of committee. The committee stood at-ease from 8:48 a.m. to 9:00 a.m. SB 110-HAZARDOUS SUBST. RELEASE: GOVT ENTITY CO-CHAIRMAN HALCRO announced that the next order of business before the committee would be CS FOR SENATE BILL NO. 110(RLS) am, "An Act relating to liability for the release of hazardous substances involving certain property acquired by a governmental entity; relating to making a determination as to when a hazardous substance release has occurred; relating to liability of a party other than the party responsible for the initial release of a hazardous substance; and providing for an effective date." SENATOR WILKEN, Sponsor of SB 110, Alaska State Legislature, provided the committee with the following example in order to put into perspective the reasoning behind SB 110. The Fairbanks Northstar Borough currently, has 14 properties with taxes in arrears which total a little over $500,000 in past taxes. Those taxes are not being paid because the property owners realize that the borough cannot take over those properties due to the perceived or actual contamination on the property. The borough is concerned that if those properties are taken by the borough, the borough would be immediately liable for the contamination. The borough would not be liable under federal law and the borough would be able to foreclose on past taxes and determine what should be done with the property. This is not the case under state law. Senator Wilken stated that SB 110 aligns state law with federal law. SENATOR WILKEN read the following sponsor statement: This bill will assist municipalities in performing their statutory duty to enforce liens for delinquent real property taxes. Tax foreclosure is a mandatory process leading to the taking of a tax deed that places the title to a tax delinquent property in the municipality's name. Some properties with delinquent taxes are contaminated. Municipalities are concerned that they may be held liable for pre-existing contamination of foreclosed land with significant environmental remediation costs. The federal Comprehensive Environmental Response, Compensation, And Liability Act (CERCLA) exempts by definition state and local governments who acquire property through "bankruptcy, foreclosure, tax delinquency, abandonment, or similar means." However, the state law which addresses liability for damage caused by the release of hazardous substances, AS 46.03.822, does not precisely mirror the federal law. SB 110 will amend AS 46.03.822 to ensure that the federal and state laws are similar in this respect. The municipality may therefore have title to the contaminated property without involuntary exposure to cleanup. Changes in the Senate also recognized the need to extend this courtesy to innocent third parties, which are not directly responsible for contaminating the property they have acquired. Subsection (m) clarifies state law to say that "a party, other than the party responsible for the initial release, who had no reason to know that a hazardous substance was disposed of on, in, or at the facility and who has acted responsibly upon discovering contamination...may not be held liable for the spread or migration of the hazardous substance except by an action of intentional misconduct or gross negligence." Number 2711 SENATOR WILKEN noted that the committee packet should contain letters of support from Anchorage, Kenai, Ketchikan, and the Fairbanks Northstar Borough. He said that it is helpful to review CSSB 110(RLS) am in two distinct sections. The first section being from page 1, line 7 to page 2, line 8 which addresses the personal liability. The second section is page 2, line 9 through to the end of the bill which addresses the municipal liability. The legislation began with a zero fiscal note, but through the process a large fiscal note was added. There were some language changes which has resulted in an indeterminate fiscal note. Senator Wilken expressed his desire to report the bill from committee with the indeterminate fiscal note in order to refine the fiscal note. CO-CHAIRMAN HALCRO noted that there are two proposed amendments, one prepared by Co-Chairman Halcro and one prepared by the Department of Environmental Conservation (DEC), which may address subsection (m). He asked if Senator Wilken had an opinion on those amendments. SENATOR WILKEN said that he had not seen Co-Chairman Halcro's proposed amendment. With regard to DEC's amendment, Senator Wilken pointed out that DEC's amendment would require a title change. Co-Chairman Halcro's amendment would delete subsection (m) entirely returning the bill to its original form which would be difficult. Therefore, Senator Wilken opposed both amendments. CO-CHAIRMAN HARRIS asked if this legislation made anyone immune from intentional contamination to property when that person abandons that property. SENATOR WILKEN replied no. Number 2518 PAUL COSTELLO, Land Management Director, Fairbanks Northstar Borough, testified via teleconference from Fairbanks. He informed the committee that there is a mandatory process under state statute. This legislation attempts to make state statute mirror federal statute in order to take these contaminated properties and proceed through the tax foreclosure process to sale if necessary to recoup the taxes. He echoed Senator Wilken's estimate that the Fairbanks Northstar Borough would be looking at approximately $500,000 in past due taxes, penalties, and interest. TIM ROGERS, Legislative Program Coordinator, Municipality of Anchorage, testified via teleconference from Anchorage. He informed the committee of the Municipality of Anchorage's support of this legislation. REPRESENTATIVE MURKOWSKI assumed that the support indicated by Mr. Rogers was in reference to the CSSB 110(RLS) am. MR. ROGERS stated, "We support the original bill that was introduced." There is no desire to limit the municipality's liability when it acquires property. The main concern is with the mandatory tax foreclosures. REPRESENTATIVE MURKOWSKI noted that the amendments before the committee would eliminate subsection (m) or substantially change subsection (m). She asked if Mr. Rogers had any comment on subsection (m). MR. ROGERS said that he had no objection to the elimination of subsection (m). CO-CHAIRMAN HARRIS noted that Anchorage is the largest municipality in Alaska. He inquired as to how many situations of abandonment of property with contamination the municipality faces. MR. ROGERS estimated that at any given time there could be 10 to 12 such properties. He offered to provide the committee with specifics. In further response to Co-Chairman Harris, Anchorage bears the cost. For example, there has been a case which has been going on for the last four or five years which has cost in excess of $50 million. He agreed with Co-Chairman Harris that the local tax payers basically bear the burden. Number 2282 REPRESENTATIVE MURKOWSKI asked if the Municipality of Anchorage had a problem with leaving subsection (m) in the legislation. MR. ROGERS said, "No, I don't believe we do." CO-CHAIRMAN HALCRO asked if there is a foreclosure on contaminated property, would the cost of remediation be passed on to the owner or does the city assume complete responsibility and liability. MR. ROGERS stated that the municipality would attempt to collect that cost from the previous owner of the property, but that is not always possible which would result in the municipality acquiring the total remediation bill. Number 2183 LARRY DIETRICK, Program Manager, Division of Spill Prevention & Response, Department of Environmental Conservation (DEC), informed the committee that the department has worked with the sponsor on this legislation. He said that the department is not opposed to the innocent landowner provision, although he noted there is currently such a provision in law. Mr. Dietrick emphasized, "Language changes to this statute are, in our view, are very important, are very critical because they have the effect of shifting the underlying liability for costs of the cleanup and damages from the spiller to the state." He explained that the fiscal note is indeterminate because some of the ambiguous language in subsection (m) which may change the fundamental scheme for the spiller pays principle. MR. DIETRICK stated that the language of concern is on page 3, line 5, subsection (m) which reads, "first introduced into the environment." The other language of concern is on page 3, line 6, subsection (m) which reads, "party responsible for the initial release" . Both are undefined terms which determine who is liable and who caused the spill. Frequently, there are underground spills which leach into a water supply years after the initial spill. In such a situation, the argument that such a situation is not an initial release is utilized. Such an argument creates legal difficulties. He informed the committee of the "Mylos Reefer" (ph), a vessel which has been aground for about 10 years now. The initial release containment, control, and cleanup was completed. Yet, this past summer some of the washings from the fuel tanks were released. He asked if that would be an "initial release", a "new spill", or an "old spill." He asked if the owners of the "Mylos Reefer" (ph) should be relieved of responding to this subsequent release. MR. DIETRICK stated that the goal is to achieve clarity in the language in order to avoid the ambiguity for the spiller in subsection (m). REPRESENTATIVE MURKOWSKI agreed that the language, "first introduced" is problematic. The proposed amendment does not contain that language. Is there a definition for "initial release" in existing statute? MR. DIETRICK replied no. He reiterated that the language, "initial release" and "first introduced" are both concerning. CO-CHAIRMAN HALCRO clarified, in response to Representative Murkowski, that the amendment with lines drawn through the text of subsection (m) and new language is from DEC. That amendment attempts to address the indeterminate fiscal note. MR. DIETRICK confirmed that the department has worked with the Department of Law on this amendment. Number 1844 CRAIG TILLERY, Assistant Attorney General, Environmental Section, Civil Section, Department of Law, testified via teleconference from Anchorage. In response to Representative Murkowski, Mr. Tillery explained that the language "initial release" is not liked due to the lack of a definition. However in the context of the second sentence, the language does not create the problem it does in the first sentence which is essentially a definition of the term "release." The language "first introduced into the environment" appears to be a temporal definition for release which is utilized for the purpose of determining liability. If one returns to subsection (a), there is an argument that liability, which is only for damages resulting from a release, could be defined as only being liable for the first introduction into the environment. Therefore, once introduced into the environment any subsequent migration of a contaminant through forces of nature would not be compensable. Mr. Tillery believed that to be a very serious problem with the first sentence. MR. TILLERY expressed concern with the word "responsible" which is subject to at least two definitions. One definition refers to a legal responsibility which would really mean liability, although that is not specified. He indicated that it could be interpreted as a fault-based word. If that interpretation is the case, the liability would be limited to only an individual who was responsible per the language of the second sentence. That is of concern because a person may transport a contaminant, but is not the owner of the contaminant. This would be the difference between an oil company and a shipper. He posed the scenario of a major oil spill in which the shipper has limited assets and the oil company is not responsible. Therefore, that entity may be released from any liability with this language. Mr. Tillery noted that the word "party" is not defined and that the word "person" is utilized everywhere else in statute. He said that "person" would be preferable. Number 1677 REPRESENTATIVE KOOKESH asked if there is a statutory definition of "a governmental entity." The sponsor statement only speaks to municipalities. MR. DIETRICK stated that the statutory definition of "governmental entity" is not included in AS 46.03.826. MR. TILLERY noted that "governmental entity" is not defined in this section. However, it is defined in AS 46.03.822 (c)(2). CO-CHAIRMAN HALCRO referred to page 2, line 10, which reads, "A unit of state or local government" that seems to be fairly broad. REPRESENTATIVE KOOKESH commented that the language "governmental entity" should be defined. Number 1520 BETH HAGEVIG, Legislative Administrative Assistant for Senator Wilken, Alaska State Legislature, said that she did not have the definition for "governmental entity" either. As Senator Wilken stated early, he intended to sponsor this legislation on behalf of the Fairbanks Northstar Borough. The bill originally was intended to cover municipalities as well as other agencies such as the Department of Transportation. CO-CHAIRMAN HARRIS asked if SB 110 received a House Judiciary Committee referral. MS. HAGEVIG informed the committee that there were two Senate Judiciary Committee meetings. She also acknowledged that the bill has received a House Judiciary Committee referral. CO-CHAIRMAN HARRIS noted that the bill sponsor requested that there be no House Judiciary Committee referral. REPRESENTATIVE MURKOWSKI pointed out that the title of SB 110 utilizes the word "party" as does subsection (m), but the remainder of the bill utilizes the word "person." CO-CHAIRMAN HALCRO asked if Ms. Hagevig had reviewed the amendment from DEC. MS. HAGEVIG replied yes. In further response to Co-Chairman Halcro, she said that she was not familiar enough with the law to comment. The focus had been on the municipality side. She indicated that Ms. Lynch, Attorney for the Municipality of Anchorage, may be able to comment. MR. DIETRICK expressed concern that these terms are ambiguous and therefore, open to interpretation. This possibly insulates a legitimate spiller who is liable to pay. The possible argument for the spiller would shift the costs for the event to the state. Therefore, he agreed with Co-Chairman Halcro that those concerns were the reason for the indeterminate fiscal note. In any given year, at least one such situation costs in the millions of dollars. Mr. Dietrick explained that the state finances these costs from the response account. If such a situation occurs and the burden is shifted to the state, the response account would be lowered below $50 million which triggers the two cent tax. Such a cycle would continue for each such case. REPRESENTATIVE MURKOWSKI inquired as to what the original bill included. MS. HAGEVIG specified that the language on page 2, line 9 through page 3, line 2 would be the closest to the original bill. CO-CHAIRMAN HALCRO inquired as to the reasoning behind inserting subsection (m) in the Senate. MS. HAGEVIG explained that there were concerns in the Senate Judiciary Committee and the Senate floor. The concern was that the legislation provided an exemption from liability to governmental entities, without extending the same privilege to innocent landowners under similar obligations. REPRESENTATIVE KOOKESH reiterated his concern with the lack of a definition for "governmental entity". He stressed, for the record, that the language on page 2, line 10, "A unity of state or local government" does not exclude tribal governments or associations. Number 1050 JONATHON LACK, Legislative Assistant for Representative Halcro, Alaska State Legislature, informed the committee that he discussed the definition of a "governmental entity" on another matter with Tam Cook, Director, Legal and Research Services. He explained that Ms. Cook indicated that the language "governmental entity" is usually utilized in titles for the legislation to be broad. The language utilized in statute is "municipality" which is defined in AS 01.10.060(4) as "'municipality' means a political subdivision incorporated under the laws of the state that is a home rule or general law city, a home rule or general law borough, or a unified municipality." REPRESENTATIVE KOOKESH reiterated his concerns regarding the lack of a definition of "governmental entity." He also reiterated his comment that a "governmental entity" does not exclude tribal governments and associations. REPRESENTATIVE MURKOWSKI referred to AS 46.03.822 which speaks to remedial action regarding liability for the release of hazardous substances. That statute refers to "the state, a municipality, or a village" which seems to be used throughout this section of statute which subsection (m) of SB 110 would fall under. Representative Murkowski surmised then that "governmental entities" are construed to be "the state, a municipality, or a village." Number 0860 VIRGIL NORTON, testifying via teleconference from Kenai, informed the committee that he was testifying as a citizen. He noted that he is a project manager for a contaminated site on the Kenai Peninsula. The remediation for this contaminated site was done by the Environmental Protection Agency last year. The site is expected to be closed this season. MR. NORTON pointed out that he has had much experience with this statute. He expressed concern with the innocent land owners. He noted that he helped craft some of the language which was adopted in the Senate Judiciary Committee. The idea with the Senate Judiciary Committee's amendment was to always place liability on the person who pollutes or contaminates land. Initially, Mr. Norton was concerned with regard to who would ultimately bear the costs of a contaminated property that was acquired by a borough or municipality if the emphasis is not always placed on the person who does the pollution. He was also concerned with the original language which had a way of coloring the existing statute to deny a person the innocent land owner defense. He believed that his client was a test case for this statute. Mr. Norton did not object to changing the language "party" to "person." The idea behind subsection (m) is that the polluter should bear all the liability and an innocent land owner, who acts responsibly, does not bear the liability. He stressed the need to preserve the innocent land owner defense in AS 46.03.822. He said that he accepted the language referring to the due diligence of the land owner in checking out the property. REPRESENTATIVE MURKOWSKI asked how Mr. Norton would interpret the term "responsibly" in reference to the innocent land owner defense. MR. NORTON explained that "acting responsibly", per the existing statute, is that land owner attempting to remediate, contain and prevent leaching of contamination that the land owner has discovered. An innocent land owner could incur an enormous expense. For example, Mr. Norton's father-in-law incurred over $1 million in expenses. This is a liability issue; who will ultimately pay. REPRESENTATIVE MURKOWSKI indicated the possible need to clarify what "acting responsibly" would mean through a list to be placed in statute. MR. NORTON noted that one using the innocent land owner defense would have to obey all the current federal environmental regulations encompassed in Title 46 and the DEC's regulations. MS. HAGEVIG pointed out that "acting responsibly" is discussed in AS 46.03.822(b)(2) which reads: "in relation to (1)(B) or (C) of this subsection, that the person, within a reasonable period of time after the act occurred, (A) discovered the release or threatened release of the hazardous substance; and (B) began operations to contain and clean up the hazardous substance." CO-CHAIRMAN HALCRO requested that Ms. Krietzer comment on some of the concerns raised. Number 0232 ANNETTE KRIETZER, Legislative Assistant for Senator Leman, Alaska State Legislature, said that she did not doubt that Mr. Tillery had concerns regarding, "first introduced into the environment." Ms. Krietzer said, "I will quote from the state's attorney general's opinion regarding CERCLA, 'Courts have complained about the in artful, confusing, and ambiguous language and the absence of useful legislative history in interpreting CERCLA. It is not a model of legislative draftsmanship and the statute is riddled with inconsistencies and redundancies.'" She assumed that Mr. Tillery assisted in the development of the fiscal note and the language explaining that note. The explanation of the fiscal note says that the language is unclear, ambiguous and causes uncertainty which Ms. Krietzer indicated was the case because state language parallels CERCLA. With regard to Mr. Tillery's example of a ship on the rocks, subsection (m) refers to a facility which per the statutory definition would not include a marine vessel. She said that some of DEC's arguments are "somewhat specious." Nothing in the statute nor this bill relieves a party from "acting responsibly." It merely extends the liability protection given to municipalities to an innocent land owner which CERCLA allows. In statute the problem is that the state... TAPE 99-33, SIDE A MS. KRIETZER explained that subsection (m) is trying to make it very explicit as to what the innocent land owner defense is. REPRESENTATIVE MURKOWSKI referred to subsection (m) which includes language indicating that an unknowing party not responsible for an initial release "may not be held liable for the spread or migration of the hazardous substance except by an act or intentional misconduct or gross negligence." She inquired as to how "acting responsibly" would tie in with "intentional misconduct or gross negligence." Number 0136 MR. TILLERY expressed concern with the last phrase in subsection (m). That phrase would imply that if a person were at fault that person may not be held liable, which he understood earlier testimony to indicate was not the intent. Furthermore, the last phrase would seem to be exculpatory for all forms of liability not just that liability in AS 46.03.822 which is different than the municipality's bill. The municipality specifically limits the nonliability phrase to under this section. Therefore, Mr. Tillery felt that the last few lines of subsection (m) are too broad. MR. TILLERY clarified that his earlier comment regarding liability spoke to the first sentence which seems to be an independent thought from the second sentence. The second sentence is limited to a facility which does not include a vessel. The first sentence does not have a limitation and would include a vessel. MS. KRIETZER asked if the language on page 3, line 4 which reads, "a release shall be considered to have occurred when a hazardous substance is first introduced into the environment" relieved Mr. Tillery's concerns. MR. TILLERY indicated that it eliminates a few of his concerns. He said, "It still leaves open the situation when you have a large storage tank or any kind of a tank or any kind of a release, and that release falls and hits the environment. At that point, there is now a definition. That is a release. That is the event for which someone is liable. When that contaminant now begins to migrate, as a result of gravity, of ground water flow, as a result of pressures or whatever it begins to migrate. Now there is an argument that once it gets beyond that initial contact with the environment, then no liability exists. So, it helps to get rid of vessels, but it does not solve the problem. The problem is that in that first sentence, you are essentially defining a fundamental term of the statute which is the term release. When you do that, it--there is a tendency for these things to have ramifications that go far beyond the intent of the drafter. And I believe that is what has happened in this case." CO-CHAIRMAN HALCRO noted that SB 110 has a House Judiciary Committee referral. He suggested that the committee report the bill from committee. He asked if there was anyone wishing to testify on SB 110. There being no one, the public testimony on SB 110 was closed. Number 0532 REPRESENTATIVE MURKOWSKI commented that she was not satisfied with the legislation as it currently exists. Many issues have been raised and many questions remain unanswered. She said, "I'm not entirely certain if this is something that needs to move through quickly, whether we have more time to consider it here. It certainly needs work in the Judiciary Committee. ... If we had time for another hearing on the matter it probably wouldn't hurt us either." CO-CHAIRMAN HALCRO noted that the bill sponsor expressed the desire to move the bill forward. Co-Chairman Halcro expressed concern with the indeterminate fiscal note. In the long run, Co-Chairman Halcro was concerned with what the state would have to absorb because of that. He noted that there is the argument that the proposed amendments would require a title change which would be suitable for the House Judiciary Committee to review. REPRESENTATIVE DYSON suggested, "Maybe we pass this out, it's not going to get through the process, I don't think, this year and if we ask...Representative Murkowski, that if in the Judiciary process, ..., things come up that are back to being a community concern that you let this committee know and we can request to get it back." Number 0759 REPRESENTATIVE DYSON moved to report CSSB 110 (RLS) am out of committee with individual recommendations and the accompanying fiscal note. CO-CHAIRMAN HALCRO objected for discussion purposes. He asked if Representative Murkowski had any problems with that. REPRESENTATIVE MURKOWSKI said that she would be happy to report back to the committee and let the committee know if she felt it appropriate for the bill to return to the House Community & Regional Affairs Committee. CO-CHAIRMAN HALCRO removed his objection. There being no objection, CSSB 100(RLS) am was reported from committee. CO-CHAIRMAN HALCRO apologized to those present to testify on HB 24. Due to time constraints it would have to be rescheduled. ADJOURNMENT There being no further business before the committee, the House Community & Regional Affairs Standing Committee meeting was adjourned at 9:55 a.m.