Legislature(1993 - 1994)
01/28/1993 01:00 PM House CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
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.
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