Legislature(1995 - 1996)
04/23/1996 08:05 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 23, 1996
8:05 a.m.
COMMITTEE MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Scott Ogan, Vice Chair
Representative Joe Green
Representative Brian Porter
Representative Caren Robinson
Representative Ed Willis
Representative Ivan Ivan
COMMITTEE MEMBERS ABSENT
None
OTHER LEGISLATORS PRESENT
Representative Gene Kubina
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 280(FIN) am
"An Act relating to municipalities; the incorporation of certain
boroughs in the unorganized borough; the formation of separate
unorganized boroughs; and to taxation in the unorganized boroughs."
- HEARD AND HELD
HOUSE BILL NO. 136
"An Act mandating the sale of the Alaska Railroad; and providing
for an effective date."
- BILL POSTPONED
PREVIOUS HISTORY
BILL: SB 280
SHORT TITLE: MANDATORY INCORP OF CERTAIN BOROUGHS
SPONSOR(S): SENATOR(S) TORGERSON,Green,R.Phillips,Donley,Halford
JRN-DATE JRN-PG ACTION
02/09/96 2352 (S) READ THE FIRST TIME - REFERRAL(S)
02/09/96 2353 (S) CRA, STA
02/28/96 (S) CRA AT 1:30 PM BUTROVICH ROOM 205
02/28/96 (S) MINUTE(CRA)
02/28/96 2578 (S) COSPONSOR(S): DONLEY
03/13/96 (S) CRA AT 1:30 PM BUTROVICH ROOM 205
03/13/96 (S) MINUTE(CRA)
03/14/96 2736 (S) CRA RPT CS 3DP 1DNP SAME TITLE
03/14/96 2737 (S) FISCAL NOTES TO SB & CS (GOV,
DCRA-3,
03/14/96 2737 (S) DOE, LAW, DNR)
03/14/96 2737 (S) ZERO FNS TO SB & CS (ADM, DPS, DOT)
03/14/96 2737 (S) FIN REFERRAL ADDED
03/14/96 2746 (S) COSPONSOR: HALFORD
03/27/96 2928 (S) STA REFERRAL WAIVED Y12 N8
04/03/96 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/03/96 (S) MINUTE(FIN)
04/03/96 (S) MINUTE(FIN)
04/04/96 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/09/96 3099 (S) FIN RPT CS 5DP 1DNP NEW TITLE
04/09/96 3099 (S) PREVIOUS FNS(GOV, DCRA-3, DOE,
LAW, DNR)
04/09/96 3100 (S) PREVIOUS ZERO FNS (ADM, DPS, DOT)
04/10/96 (S) RLS AT 10:50 AM FAHRENKAMP RM 203
04/10/96 (S) MINUTE(RLS)
04/11/96 3155 (S) RULES TO CALENDAR 4/11/96
04/11/96 3163 (S) READ THE SECOND TIME
04/11/96 3164 (S) FIN CS ADOPTED UNAN CONSENT
04/11/96 3164 (S) AM NO 1 ADOPTED Y14 N6
04/11/96 3165 (S) AM NO 2 WITHDRAWN
04/11/96 3165 (S) AM NO 3 FAILED Y6 N14
04/11/96 3166 (S) ADVANCE TO THIRD READING FLD
Y12 N8
04/11/96 3166 (S) THIRD READING 4/12 CALENDAR
04/12/96 3202 (S) READ THE THIRD TIME
CSSB 280(FIN) AM
04/12/96 3203 (S) RETURN TO SECOND FOR AM 2 UNAN
CONSENT
04/12/96 3203 (S) AM NO 2 ADOPTED UNAN CONSENT
04/12/96 3203 (S) AUTOMATICALLY IN THIRD READING
04/12/96 3203 (S) PASSED Y13 N6 E1
04/12/96 3203 (S) TAYLOR NOTICE OF RECONSIDERATION
04/15/96 3246 (S) RECON TAKEN UP - IN THIRD READING
04/15/96 3247 (S) PASSED ON RECONSIDERATION Y13 N7
04/15/96 3251 (S) TRANSMITTED TO (H)
04/16/96 3794 (H) READ THE FIRST TIME - REFERRAL(S)
04/16/96 3794 (H) STATE AFFAIRS, FINANCE
04/23/96 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
SENATOR JOHN TORGERSON
Alaska State Legislature
Capitol Building, Room 427
Juneau, Alaska 99801-1182
Telephone: (907) 465-2828
POSITION STATEMENT: Prime sponsor of SB 280
RICHARD MAUER
Delta Greely School Board
P.O. Box 1302
Delta Junction, Alaska 99737
Telephone: (907) 895-4956
POSITION STATEMENT: Testified on CSSB 280(FIN) am
DORIS BENDER, Member
Chugach School District, REAA 21
P.O. Box 711
Whittier, Alaska 99693
Telephone: (907) 472-2353
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
TRUDY KOSZAREK, Member
Valdez City School Board
P.O. Box 1941
Valdez, Alaska 99686
Telephone: (907) 835-4263
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
DAVID LAWRENCE, Member
Valdez City School Board
P.O. Box 1
Valdez, Alaska 99686
Telephone: (907) 835-4493
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
JACQUELINE DICK, Member
Hoonah Public Schools
P.O. Box 390
Hoonah, Alaska 99829
Telephone: (907) 945-3577
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
DENNY WEATHERS
P.O. Box 1791
Deep Bay
Cordova, Alaska 99574
Telephone: (907) 424-3745
POSITION STATEMENT: Testified on CSSB 280(FIN) am
ERIC WEATHERS
P.O. Box 1791
Cordova, Alaska 99574
Telephone: (907) 424-3745
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
GEORGE YOUNG
Testifying for Wally Richardson
P.O. Box 388
Bethel, Alaska 99559
Telephone: (907) 543-2131
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
MYRON NANENG, President
Association of Village Council Presidents
P.O. Box 388
Bethel, Alaska 99559
Telephone: (907) 543-3521
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
THOMAS CRAFFORD, Vice President
North Pacific Mining Corporation
2525 C Street, Number 500
Anchorage, Alaska 99503
Telephone: (907) 274-8638
POSITION STATEMENT: Testified on CSSB 280(FIN) am
JOHN GLOTFELTY, President
North Pole Borough Planning Committee
2355 Sunflower Loop
North Pole, Alaska 99705
Telephone: (907) 488-8654
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
PAT POLAND, Director
Division of Municipal & Regional Assistance
Department of Community & Regional Affairs
333 West 4th Avenue, Suite 220
Anchorage, Alaska 99501
Telephone: (907) 269-4500
POSITION STATEMENT: Testified on CSSB 280(FIN) am
PETER RYNARD
HC 60, Box 3026
Delta Junction, Alaska 99737
Telephone: Not Available
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
PAUL TROTZKE
P.O. Box 2283
Dot Lake, Alaska 99737
Telephone: (907) 882-2664
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
GLEN MARUNDE
Box 193
Tok, Alaska 99780
Telephone: (907) 883-4601
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
BILL MILLER
Box 2262
Dot Lake, Alaska 99737
Telephone: (907) 882-2693
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
OLE BATES
P.O. Box 915
Slana, Alaska 99586
Telephone: (907) 822-3023
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
CECILIA CHMIELOWSKI
Mile 150 Richardson Highway
Glennallen, Alaska 99588
Telephone: Not Available
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
LAURAL TYRRELL
Central
Alaska 99730
Telephone: Not Available
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
PAT BUCHANAN
Central
Alaska 99730
Telephone: Not Available
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
MARY WILLIAMS
Central
Alaska 99730
Telephone: Not Available
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
JULIE ROBERTS
Tanana
Alaska 99777
Telephone: Not Available
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
RON DELAY
Tanana
Alaska 99777
Telephone: (907) 366-7207
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
SIOUX PLUMMER, Mayor
City of Skagway
P.O. Box 415
Skagway, Alaska 99840
Telephone: (907) 983-2289
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
JAMES R. FILIP
P.O. Box 419
Skagway, Alaska 99840
Telephone: (907) 983-2297
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
JULIAN PAUL WEIR
P.O. Box 275
Glennallen, Alaska 99588
Telephone: (907) 822-3902
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
NICK ZERBINOS
P.O. Box 371
Glennallen, Alaska 99588
Telephone: (907) 822-3451
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
HARRY TERMIN
HC 60, Box 115E
Copper Center, Alaska 99573
Telephone: (907) 822-3827
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
LEE ADLER
P.O. Box 285
Glennallen, Alaska 99588
Telephone: (907) 822-3766
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
ART GRISWOLD
873 Runamuck
North Pole, Alaska 99705
Telephone: (907) 488-7805
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
AL KETZLER, Chief Administrative Officer
Tanana Chiefs Conference
122 First Avenue
Fairbanks, Alaska 99701
Telephone: (907) 452-8251
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
ALAN LEMASTER
P.O. Box 222
Gakona, Alaska 99586
Telephone: (907) 822-3096
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
JOHN HANDELAND
P.O. Box 281
Nome, Alaska 99762
Telephone: (907) 443-6663
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
CHOW TAYLOR, City Manager
Galena
Alaska 99741
Telephone: (907) 656-1307
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
MARY MOSES, City Manager
City of Tanana
Alaska 99777
Telephone: (907) 366-7159
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
JOHN GILL
Nenana City Public Schools
Nenana, Alaska 99760
Telephone: Not Available
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
SCOTT JANKE
P.O. Box 1210
Cordova, Alaska 99574
Telephone: (907) 424-6200
POSITION STATEMENT: Chair James read his statement into the record
LARRY LaBOLLE
Lower Yukon School District
P.O. Box 32267
Mountain Village, Alaska 99632
Telephone: (907) 591-2411
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
PAUL SMITH, President
Tok Chamber of Commerce
Box 559
Tok, Alaska 99780
Telephone: (907) 883-4181
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
KIM ROTH
Box 427
Tok, Alaska 99780
Telephone: (907) 883-2890
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
MICHELLE STOUT
Box 532
Tok, Alaska 99780
Telephone: (907) 883-3745
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
JOHN KUNIK
P.O. Box 83
Glennallen, Alaska 99588
Telephone: (907) 822-5515
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
BERNARD GOODNO
c/o P.O. Box 92
Delta Junction, Alaska 99737
Telephone: Not Available
POSITION STATEMENT: Testified in opposition to CSSB 280(FIN) am
ACTION NARRATIVE
TAPE 96-57, SIDE A
Number 0015
The House State Affairs Committee was called to order by Chair
Jeannette James at 8:05 a.m. Members present at the call to order
were Representatives James, Willis, Porter, Ivan and Ogan. Members
absent were Representatives Robinson and Green. A quorum was
present to do business.
CSSB 280(FIN) am - MANDATORY INCORP OF CERTAIN BOROUGHS
The first order of business to come before the House State Affairs
Committee was CSSB 280(FIN) am. Chair James announced that
testimony would be taken today and Thursday, April 25, 1996.
Representatives Caren Robinson and Joe Green arrived at 8:06 a.m.
and 8:08 a.m., respectively.
CHAIR JEANNETTE JAMES asked Senator John Torgerson, Sponsor, to
present SB 280.
Number 0228
SENATOR JOHN TORGERSON, Sponsor, thought most legislators had seen
similar bills in the past. His starting point had been to look at
bills and committee minutes of previous mandatory incorporation
legislation in an attempt to ascertain where the stumbling blocks
had been and to address those problems before he introduced SB 280.
This bill actually starts with a report by the Local Boundary
Commission of the Department of Community & Regional Affairs
(DCRA), which established what is referred to as the Model Borough
Boundary within the state of Alaska. It took the unorganized
borough and divided it up into 18 suggested boroughs based upon
guidance of the Constitution and statutes for social, economic and
cultural activities within that area. The report started in 1988
and was completed in 1992 he believed, but nothing was ever done
with it. Therefore, he used that as the starting point for the
borough boundaries. He stated SB 280 started out as a mandatory
borough bill and the underlying thought was that those areas of the
state that could afford it would start paying for some of the costs
of government, particularly education. As this bill has evolved
through the process, it has ended up being basically just an
education funding bill that requires areas of the state currently
not contributing a local effort to education to pay that local
effort.
SENATOR TORGERSON further stated that it gets a little more
complicated. In keeping with the formation of boroughs, it
requests that by a time line established in one of the sections,
based upon the value of the boroughs, each area would have a vote
of the residents on whether to incorporate or not to incorporate.
He explained there was a prohibition in the statutes on third class
boroughs; the third class borough authority was education and
taxation. This bill started out as second class borough, which
adds planning as a third power, so they would have education,
planning and taxation. He noted that a lot of people objected to
having another layer of government in the mandatory portion so it
was decided to have an election. If the voters elect to
incorporate, they follow the current statutes on how to form a
borough which he noted had not changed. This legislation just
directs that the election happen based upon a time line that
reflects back to the assessed valuation of that area. If the
voters elect not to incorporate, there is a mill levy that is laid
upon the area for education. This bill speaks to a six mill levy.
He explained that the education formula is a mandated four mills or
35 percent of basic need, whichever is less. The reason this
legislation speaks to six mills is because there was a problem with
separation of powers between the Legislative and Executive
Branches. He noted the original bill had read four mills plus the
cost of collection, or equivalency. The Legislative Legal staff
however, advised that the legislature cannot give the authority to
the Executive Branch to set the mill rate which is what the
original language would have done. He chose the six mill rate, but
he believes that may be too high and he had a proposed amendment
that would lower it. He noted there was no fiscal note on what
DCRA would plan to charge for that, but conversations with the
assessor indicated it would be considerably less than what Senator
Torgerson had thought it would be.
SENATOR TORGERSON said there are currently four boroughs in the
state that do not have just a sole property tax, but have a sales
tax, bed tax, fish tax, property tax, resources tax or a
combination thereof. Under this legislation, if the area rejects
the borough proposal and decides to remain unincorporated, they
will become an unincorporated borough that will follow basically
whatever boundaries the Local Boundary Commission would submit,
which would probably follow the DCRA report. From there, DCRA
would determine if there is an equivalency. He noted the bill
provides for public hearings in every community with a population
of 500 or more and through public input, DCRA will decide how to
reach that equivalency; it may be a mill rate, sales tax or
whatever. The time line in the legislation starts with 1997 for
the first proposal for boroughs with an evaluation of $550 million
or more. There hasn't been a recent evaluation in rural Alaska
since 1994, which were the numbers he used. He assumed the numbers
are higher since everything else has gone up over that period of
time, but this is just a time line of when DCRA would start their
proposals and has no other effect in law. Therefore, anything with
a half-billion or more would come on in 1997 as far as when the
time line would affect the changes. That would be two proposed
boroughs - Prince William Sound and Copper River. The time line
for boroughs of $350 million to $550 million is 1998; $75 million
to $350 million is 1999; and the rest of the state or everything
that has less than $75 million is in the year 2000.
SENATOR TORGERSON indicated he had received a lot of calls
regarding this legislation and wanted to address some of the
questions that had been raised. First, does this bill directly
affect existing boroughs? It does not; this bill speaks only to
the unorganized borough. There are other proposals being looked at
by the Local Boundary Commission that affect annexation. The
legislature has no authority on annexation, only to reject the
proposal that might come before it as far as the annexation
proposals. He believed there were five areas that DCRA was working
on that would not be directed by this legislation other than
perhaps overlapping authority in terms of shifting other
boundaries. He reiterated this bill does not speak to annexation
into existing boroughs. Second, does this legislation enforce the
incorporation of boroughs adding another layer of government on to
residents in the unorganized boroughs without giving them a choice?
This bill does not form boroughs; it puts the vote before the
residents of that area as to whether or not they want to form a
borough. Thirdly, does this bill institute a new tax? He
commented that he has paid this tax since he was old enough to pay
a tax and that was education. It certainly is a new tax on areas
that haven't been taxed, but education tax is not new. He said
currently 87 percent of the state population live in boroughs and
are required to pay a local contribution. That 87 percent receives
74 percent of the state foundation formula; 5 percent live in
single site schools or cities outside of boroughs and receive 6
percent of the funding; and 8 percent of the population, which is
basically what this bill would affect, pays no taxes and receives
20 percent of the foundation formula. Again, this is not a new
tax, it's already paid by the majority of the people in the state.
There isn't any property value in an unorganized borough and what
land there is, is mostly exempt. He noted that none of the
exemptions in current statute were being changed. For example,
senior citizens will be afforded the senior citizen property tax
exemption, like people in his borough. Low income people are
already covered in statute. There will be a form to complete for
the exemption, the same as people in an organized borough.
SENATOR TORGERSON went on to say that according to the 1994
numbers, there is $3.1 billion in assessed valuation that is not
being taxed, of which approximately $1.7 is oil and gas property.
A six mill would generate $18.6 million in revenues per year. This
estimate already does not include anything that is assumed to be
exempt such as Native land, Native allotment lands, federal land,
etc., so it doesn't change any of the requirements as far as
taxation. Another question he had been asked is why tax the
unorganized borough at all - they don't receive any services? He
reiterated it is basically an education only bill. If they decide
to form to have more powers, that certainly is okay. What effect
does this legislation have on school districts and rural education
attendance areas (REAAs)? It has none the way the bill is written.
He said, "Again, this is something that should happen if we form
all into organized and unorganized boroughs, then the Department of
Education is going to have to look at combining school districts -
or they should look, it doesn't mandate that they do - to
consolidate some of the REAAs." Currently, 16 school districts
have 90 percent of the kids and the rest - up to 54 - are for rural
Alaska. Single site schools are their own district, so it takes in
a lot of that, too. If an area forms a borough, then there is an
automatic consolidation.
Number 1109
CHAIR JAMES noted for the record that Representatives Robinson,
Ivan and Green were in attendance.
Number 1139
SENATOR TORGERSON said lastly, he had heard a lot of comments that
this bill requires incorporation to occur too quickly. He noted
the time line in the legislation is subject to discussion. If an
area decides to incorporate, there are already phase-in provisions
in the statutes that a mill rate will be paid on a phase-in over a
four year period, so he didn't feel that was too encumbering. If
an area decides not to incorporate, then the tax is levied
beginning January 1 following the vote, since all the assessed
evaluations need to be in by January 1 by statute. He distributed
a copy of the valuations based on 1994 which breaks down the oil
and gas and all the other jurisdictions. He realized there was a
shift in dollars if an area was to incorporate - from pipeline
dollars. He noted the pipeline could be taxed up to 20 mills and
if an area was to incorporate and tax that area, that money would
actually shift from state government to the local government.
Again, it would be for education and he was willing to make that
switch if the money was being taken from the general fund and going
directly to education. There could also be a shift in fish taxes
if an area was to incorporate, whereby the state would take the
full 3 or 5 percent; if there was a local government, that would be
split with the local government. He invited questions from the
committee.
Number 1267
REPRESENTATIVE JOE GREEN questioned why a rural unincorporated
borough with a current significant disparity in education
allocation would want to incorporate.
SENATOR TORGERSON thought the committee would be hearing opposition
from 80 percent of the people who live in rural Alaska. The people
in favor of this legislation are the 92 percent of the population
that are currently paying for education.
REPRESENTATIVE GREEN said he could understand why the 92 percent of
the population who currently pay would support this bill, but he
wondered what could be done to entice the other 8 percent.
SENATOR TORGERSON responded he wasn't aware of any enticement.
However, it could be that if they incorporated, they would have
more destiny over local government. On the other hand, most of
them don't want a government. He added there is no incentive other
than having local ownership of their education, if they chose to do
so.
Number 1384
CHAIR JAMES said if an area incorporated, then automatically
schools within that proposed borough would form a school district.
She expressed concern about ownership of the school. In all of the
other boroughs, ownership of the school is with the borough, not by
the state. Therefore, keeping up the buildings and things of that
nature was the responsibility of the borough. She questioned if
the borough would own the schools or would the state continue to
own the school buildings.
SENATOR TORGERSON said this bill was silent on that issue. He
said, "As a rule, the old mandatory borough that most of us were
created under transferred ownership of the schools to the boroughs
at the time they became incorporated which was 1963." At that time
there were eight boroughs of which four voted to form and four were
forced to form. The mill rate was levied and was given to the
schools for maintenance. One of the considerations that would have
to be addressed during the public meeting process would be whether
or not to take over the schools. Most of the boroughs exceed the
four mill rate and the funding formula is four mills or 35 percent,
whichever is less of basic need. By statute, it can't go any lower
than that. He thought that would work in some of the rural areas,
but in others it might not work. That determination would have to
be made when the Department of Education came forward with their
proposals on how to combine, etc. He explained the time lines were
as follows: The DCRA prepares and submits a request to the U.S.
Department of Justice for pre-clearance under the Federal Voting
Right Act concerning changes in voting rights, borough
incorporation, dissolution of REAAs, dissolution of city school
boards, and dissolution of CRSAs, as well as the date and
procedures for conducting elections. This is something that would
be accomplished through the process done by the DCRA in their
public hearings. At that time, they would determine what the will
is of the people in terms of what to put on the ballot.
Number 1582
REPRESENTATIVE ED WILLIS questioned if a borough votes and rejects
forming an organized borough and then goes into an unorganized
borough, who would act as their assembly?
SENATOR TORGERSON responded "us."
REPRESENTATIVE WILLIS asked if that was in the Constitution?
SENATOR TORGERSON said according to the Legislative Legal staff, it
isn't really sitting as an assembly; we can effect it with basic
legislation. He added that a straight mill rate bill could be
introduced, but it wouldn't give the local economy or the
ownership.
REPRESENTATIVE WILLIS asked if it had been done historically?
SENATOR TORGERSON replied yes, to some degree.
Number 1665
REPRESENTATIVE CAREN ROBINSON asked why Senator Torgerson didn't do
a straight across-the-board school tax as had been done previously?
She commented that many people thought that rural communities
really are paying a major share through the PL-874 funds and asked
Senator Torgerson what his thoughts were on that.
SENATOR TORGERSON responded that PL-874 are federal funds and he
understood their qualifications are because they have federal lands
that are nontaxable in their jurisdiction. He noted there was a
zero fiscal note on the PL-874 funds as far as the impact. There
is a shift, but the shift is a zero impact. In response to
Representative Robinson's first question, he said the mandatory
borough part does have its own constituency where everyone thinks
the rest of the state should have boroughs, so he basically started
there. He agrees with the people who say they have a problem with
another layer of government that doesn't do anything. The state
can go ahead and fund that as long as it's not at a loss, so that
was the cost of collection part of the four mills. He said it's
just a judgment call. He believes there are some areas that need
to incorporate and have planning powers; they do that function now.
And then there are other areas that need to be put off for quite
awhile before they even look at incorporating.
Number 1756
REPRESENTATIVE BRIAN PORTER understood that if an area within a
current unincorporated voted to incorporate, they would have an
opportunity to go into the third class borough level.
SENATOR TORGERSON said that was correct and added that prohibition
was put on about the time the Haines Borough started. The assembly
actually sits as the school district in a third class borough and
it is the less power of the local government that we recognize in
the state. For some reason, a prohibition was put in the statutes
that said no more; you must at least have the planning capabilities
along with education and taxation. He's recognizing the minimum is
to have a local share for education, so it does remove that
prohibition on third class boroughs and directs them to come up
with a proposal for third class borough formations.
Number 1805
REPRESENTATIVE SCOTT OGAN asked who in Representative Ivan's
district, for example, would pay taxes?
SENATOR TORGERSON couldn't give a specific answer, but said it
might have been easy to levy a four mill property tax across the
board. The formula would be arrived at by the assessor having to
find the full and true value of the proposed borough boundary,
which will be multiplied by six mills as indicated in the
legislation. Then there would be a proposal on how to achieve what
that number is. So, if they have $100 million times six mills, the
local effort would be $600,000. He explained that local effort
could be achieved one of many ways; it could be two mills on
property, it could be all sales tax, it could be all resource tax
or whatever. It depends on the proposal that comes forward from
the Local Boundary Commission after the public hearing process.
For example, the Northwest Arctic Borough just has a severance tax
on Cominco, the mining operation; the Aleutians Borough has a fish
tax; and the Denali Borough has a bed tax and a severance tax on
Healy coal. They have to match that local effort - the four mills.
Because they're organized, the 35 percent affects them; four mills
times the basic need or whatever is less. They have chosen many
different ways to achieve that.
REPRESENTATIVE OGAN said assuming it's a property tax, who owns
private property in many of the rural areas. Native corporations
are exempt, but would improvements on Native corporation land or
private property owners basically be the only ones to pay if it was
a straight property tax?
SENATOR TORGERSON responded that was correct if it was a straight
property tax. He noted that any land that is Native owned and put
into any kind of development is not exempt. For example, a lot of
the villages still have their initial entitlement that has never
been developed and that would be exempt. However, if that land had
been developed, then it would become taxable. He said all that is
in current statute, so the bill was silent on that issue.
Number 1981
CHAIR JAMES said her observation over the last few years is there
has been a real market increase in the rural communities in trying
to establish some resource development to help themselves. The
focus of the Alaska Federation of Natives convention last year was
to be able to help themselves by getting development underway. She
questioned the timing of this issue insofar as having to pay a tax
on top of trying to develop their resources. She wondered if the
timetable laid out in the legislation was sufficient to allow these
communities to develop their resources so they would be in a
position to pay some taxes.
SENATOR TORGERSON thought that would be a judgment call based on
the project. He didn't think there was any operation that was
unlucrative to the point where the mill rate for education would
affect whether or not the project goes forward. He commented there
were a lot of projects in his borough that were coming on board and
it's a consideration as part of the plan that they would pay the
full mill rate for everything that happens in the borough. He
thought that a local area - a borough or unorganized borough -
would look favorably on paying their share of education.
REPRESENTATIVE GREEN expressed concern that there are at least two
areas and perhaps several more that have a potential for gold
extraction and asked Senator Torgerson if mineral extraction is
taxed the same way as oil & gas? In other words, there can be a
tax on unproduced proven reserves and this could be catastrophic to
a fledgling mine if there was an evaluation made of a large reserve
but they've only had a small process (indisc.).
SENATOR TORGERSON said he was not aware of any severance tax on
mines for unreserved. As a general rule, the resource in place is
real property and once it's extracted, it becomes personal
property. Therefore, anything that is extracted and sitting in a
pile could be taxed as personal property, but most of the
jurisdictions have exempted inventories and things of that nature.
However, it could happen. With respect to real property in place,
he thought that if an area owned the subsurface rights, which in
most cases they don't, then that could be taxable as real property.
CHAIR JAMES noted the state does have a mining license tax when a
mine is in production.
SENATOR TORGERSON commented it wasn't the production he was
concerned about but rather what's not produced.
Number 2208
REPRESENTATIVE IVAN IVAN commented that he represented one of the
least developed areas in the state. He said he wanted to address
the intent of the legislation and how Senator Torgerson had gotten
to this point. He asked if committee meetings had been held
throughout the unorganized borough areas so that people had an
opportunity to testify as the bill had been crafted?
SENATOR TORGERSON responded just teleconference.
REPRESENTATIVE IVAN said he would liked to have seen that done so
that individuals, community members and potential resource
developers would have been given the opportunity to testify. He
has heard some concern expressed from potential resource developers
and he certainly invited their input. He has enjoyed attempting to
reduce the red tape and/or regulations that prevented development
not only in mining, but in other business potentials that would be
a foundation for such a proposal. With legislation such as this,
he thought the areas affected should at least have an opportunity
to testify and work with the legislature to improve the bill.
SENATOR TORGERSON said this bill pays for education and if an area
refuses to pay the education cost now, he didn't know what the
benefit would be of holding public hearings; either they want to
pay education costs or they don't.
CHAIR JAMES asked if there were any further questions of the
sponsor. Hearing none, she invited testimony from Richard Mauer.
Number 2388
RICHARD MAUER, Delta Greely School District, said he had a question
regarding the property valuation increasing. He noted that with
the closing of the base in his community, property value was not
going up. In fact, in the last 12 years he has lost over $20,000
in valuation on his house before the base closure, so he didn't
think that coming in with a tax to help pay for education was a
good vehicle. He thought perhaps an income tax would be better
because his salary has increased while his property value has gone
down. He believed that was the case in other parts of the state,
not just in Delta Junction. He believed this bill boiled down to
forced consolidation of schools to pay for education, but forced
consolidation doesn't necessarily save money. His district just
went through that process, not for consolidation, but looking at
how to reduce administrative costs, etc. Many people don't realize
that when you try to reduce administrators, under current statute,
these people are tenured teachers so they have to be put back into
the classrooms. Lastly, he didn't think this bill was good for
children because the span of control from a local area was
broadened. In his particular case, this would tie them in with the
REAA of the Gateway School District which is 120 miles away. So
even if there was an unorganized borough with one school district,
which there is some ambiguity....
TAPE 96-57, SIDE B
Number 0001
MR. MAUER continued...wish to remain unorganized, but under the
statutes, do they become in essence an unorganized borough and then
have to have forced consolidation. That question had not been
adequately answered in his mind.
CHAIR JAMES thanked Mr. Mauer for his testimony and called on Doris
Bender to present her testimony.
Number 0022
DORIS BENDER, Member, Chugach School District, REAA 21, testified
there are 21,000 square miles in their school district with
approximately 15 miles of road. She objected to the failure to
hold hearings because none of their sites fall in the category of
having a population of 500 or more and expressed her concern with
the public not being informed. She said that Whittier is working
on a lot of economic development for the future. She was concerned
in terms of what would happen to the children in the mean time.
There isn't enough private property in Prince William Sound that's
completely surrounded by Chugach National Forest or the state,
including the Alaska Railroad; Whittier itself has got 99.2 acres
of private land. She said, "I think it's going to cost more to
evaluate what little private land is out there than you will get
back out in the next 20 years."
CHAIR JAMES thanked Ms. Bender for testifying. She called on Trudy
Koszarek to testify.
Number 0090
TRUDY KOSZAREK, Member, Valdez City School Board, testified in
opposition to CSSB 280(FIN) amended. She represented a small first
class city and she did not feel that all the questions had been
answered in terms of what would happen to Valdez. She said they
currently pay 20 mills of taxes which pays for over 50 percent of
their school budget. She referred to the Model Borough Boundary
Study which would combine them with Cordova and the Chugach REAA
and said there are two first class cities in there that already
provide for their education. She was concerned about an added
layer of government. She said she wasn't sure the anticipated cost
savings would occur. Their school district has reviewed it and has
found there probably wouldn't be a cost savings. They could
eliminate two superintendents from the three school districts, but
because of the travel involved there may not be a savings. Also,
the three sets of teacher contracts involved would probably come
out to the high end. Thirdly, she was concerned about loss of
local control. Currently, she can get into all the schools in her
district and she knows what is happening in each one. There would
be travel costs involved for her to get into Whittier, Cordova and
the other schools. Lastly, she said there were a lot of unanswered
questions. They would be the first ones to vote in 1997 as to
whether to consolidate and she believed there were a number of
questions that needed to be answered before they could do that.
Number 0176
REPRESENTATIVE PORTER said it was his understanding from the
sponsor's testimony that there would be no affect on current school
districts.
MS. KOSZAREK said that was still unclear.
REPRESENTATIVE PORTER said Ms. Koszarek was assuming they would be
forced to consolidate with an unorganized borough and his
understanding was that would not happen.
Number 0189
CHAIR JAMES recalled the sponsor had said that if they chose to
become a borough, then automatically all the schools within the
borough and the borough's boundaries would be put all together,
they then in fact would have a consolidated school district.
REPRESENTATIVE PORTER responded that was a local decision that
could certainly be made.
CHAIR JAMES commented they could decide not to be a borough.
REPRESENTATIVE PORTER assumed no one was going to do this and it
would go to Plan B. Under the Plan B scenario, no existing school
districts would be affected.
Number 0208
DAVID LAWRENCE, Member, Valdez City School Board, expressed concern
with the disparity. He thought there was disparity everywhere in
Alaska as it is now and this may create a greater burden. He
thought there was a potential of losing the $35 million in federal
funding.
CHAIR JAMES thanked Mr. Lawrence for his testimony and called upon
Jacqueline Dick to testify.
Number 0246
JACQUELINE DICK, Member, Hoonah Public Schools, testified that she
and the other board members were not in favor of CSSB 280(FIN)
amended. They do not want to consolidate because it is not good
for the school children or the families. The individual local
control would be lost and according to her husband, the mayor of
Hoonah, Hoonah is not financially prepared for a borough set up and
needs more time to research the issue. The Hoonah School Board
wants to know what the impact would be on the children's education
in their district. They do not view this bill as a cost saving
measure to their district; it creates another local government.
CHAIR JAMES announced the committee would begin taking testimony
from individuals testifying via teleconference.
Number 0339
DENNY WEATHERS testified from Cordova that she was not against
paying for education, but against the direction of the bill. She
was confused with Senator Torgerson's statement that school
districts would not be combined. She referred to Article X,
Section 6 of the Alaska Constitution and said the legislature would
be their assembly. This law is already on the books; the
legislature already is their assembly. Therefore, at any time if
they deemed it necessary according to Article X, they could charge
a school tax. Also, she stated for the record she opposed CSSB
280(FIN) amended and suggested the legislature look into reimposing
a school tax of $100 per person over the age of 18 working in
Alaska and a lower rate for low income individuals. According to
law, the state's requirements for education are supposed to include
language arts, social studies, mathematics, science, and
health/physical education. All the extra subjects should be paid
for separately. She thanked the committee for the opportunity to
testify.
CHAIR JAMES thanked Ms. Weathers for her testimony and called on
Eric Weathers to present his testimony.
Number 0438
ERIC WEATHERS testified from Cordova in opposition to CSSB 280(FIN)
amended. He said that most of the local resident fishermen still
living there don't have the means of support to pay any additional
taxes. He's not against school tax if it was a flat tax, but he
didn't feel there should be a property tax.
CHAIR JAMES announced the committee would hear testimony from
Bethel.
Number 0479
GEORGE YOUNG read the following statement for Wally Richardson:
"Madam Chair, members and hello to Representative Ivan, thank you
for giving us this opportunity to testify against SB 280. I am
glad to hear Senator Torgerson's comments that changed the whole
concept that was originally presented in SB 280 and if the purpose
is to fund education, let's go back to the $10 school tax per
person in the state. It previously worked. Perhaps even raise
that to $15. I can predict that our area, like in Delta, would
reject this issue if it came to a ballot initiative. There's
basically no economic base in our area to support it - no oil
development, no timber, no mining, no pipeline and especially this
year, no fishery. Representative Ivan, we need you to stand up for
our people; you know this wouldn't work in our area. Vote against
this bill. Thank you."
Number 0523
MYRON NANENG, President, Association of Village Council Presidents,
testified representing 56 villages on the Yukon/Kuskokwim/Delta.
He said it's ironic this bill is Senate Bill 280; he believed
Public Law 280 takes away a lot of responsibilities from the
villages. Once again, the state is trying to put more of the
burden on the villages. He wondered if committee members recalled
the days when the schools were being transferred to the state of
Alaska from the BIA system. In the early 1970s, there was a
lawsuit to get the state to provide its responsibility to the
villages by establishing schools. The state provided only its
educational system through the regional school (indisc.-coughing)
without allowing a family to even see their children for a number
of years and many of them were gone from kindergarten through their
adult years. If this legislation is passed, the schools will be
closed. He urged the committee to reject CSSB 280(FIN) amended.
CHAIR JAMES asked Thomas Crafford to testify from Anchorage.
Number 0618
THOMAS CRAFFORD, Vice President, North Pacific Mining Corporation,
testified that North Pacific Mining Corporation is a wholly-owned
subsidiary of Cook Inlet Region, Inc. and the owners of state mine
leases on which the Illinois Creek property near Galena is
situated. That property is on the brink of development which is
anticipated this year by their partner, U.S.M.X. He mentioned that
a question had come up regarding taxation of in situ resources;
specifically mineral resources. He thought that issue had been
addressed about three years ago before the legislature and there is
a specific exemption against the taxation of those in situ
resources. His specific comments related to what he perceived to
be the impact of this legislation regarding the mining industry.
He thought that because of the rural nature of minerals development
in Alaska, and in particular the capital intensive nature of that
development, the mining industry is going to be disproportionately
affected if SB 280 is implemented. The industry is currently
subject to rents and royalties that are on state lands, the mining
license tax and of course, the state income tax. Many of the
contemplated mineral development projects in the state are going to
be fly-in projects and removed from the actual village sites. They
will be in rural locations and not likely to receive any kind of
direct services from the borough, organized or not. Additionally,
many of these mining projects will be seasonal and the taxation
will be year round. Finally, this had been addressed in Nevada
where there were charges and taxes that had been levied against the
mineral development in Nevada. There were specific exemptions in
place for regulatory and environmentally mandated types of
developments that really don't go anywhere towards producing income
or profitability for types of developments that are required
through regulation. He thought those types of considerations
needed to be addressed when considering CSSB 280(FIN) amended.
CHAIR JAMES thanked Mr. Crafford for his comments and asked the
next individual in Anchorage to present his testimony.
Number 0749
JOHN GLOTFELTY, President, North Pole Borough Planning Committee,
testified the North Pole Borough has already assumed the full four
mill rate in their proposal; they have no opposition to paying for
school tax. They are diametrically opposed to CSSB 280(FIN)
amended for a couple of reasons. One, if people vote not to be in
a borough, the tax is going to be imposed on them which sounded to
him like taxation without representation. The second reason is
that unless the Alaska Constitution has been amended, it clearly
states the state will pay 100 percent. He didn't understand why
that was not understood. He said we should not squelch the rural
areas, consolidate them and destroy them through heavy-handed
government at whatever level. He urged committee members to vote
against CSSB 280(FIN) amended and give the rural areas a chance to
develop.
Number 0797
PAT POLAND, Director, Division of Municipal & Regional Assistance,
Department of Community & Regional Affairs, testified the division
provides a variety of services to local governments including staff
support to the Local Boundary Commission and the office of the
State Assessor. He said generally the division supports the
thrust of this legislation; that is, the implementation of the
local government article of the Constitution and local areas and
people taking greater responsibility for local services. However,
at this time the division feels there are far too many unanswered
questions and too many information gaps to proceed. While the
division has provided some very tentative estimates of taxable
property, they feel there is potential for tremendous variance for
those. He understood the Department of Education would be speaking
to the education impacts and while the Department of Education is
offering a fiscal note that basically shows a wash, DCRA is aware
that depending on how that's implemented, there could again be
tremendous variation. He said there's a lot of state land that
would potentially be transferred to local governments, there's
issues relating to fish tax and pipeline taxes that haven't been
answered. Finally, he thought there was a number of very important
ambiguities in the bill that need to be resolved before it moves
forward. He encouraged the committee to gather additional
information and fact finding before moving forward.
CHAIR JAMES thanked Mr. Poland for his testimony and announced the
committee would hear testimony from the Delta Junction
teleconference site.
Number 0894
PETER RYNARD testified in opposition to CSSB 280(FIN) amended
because it breaks down what the Constitution (indisc.) and the
state has to pay 100 percent. In Delta Junction, people don't have
the money to pay this and they would not vote in a borough and pay
taxes.
Number 0953
PAUL TROTZKE said he believes that less government is better. He
said he works approximately five months each year to support the
government. People live in unorganized areas because they like it
that way - socially, economically and geographically. Federal
taxes pay school bills and costs. He pays this tax every year. He
said time after time they have expressed their opposition to these
efforts. Another layer of government is not needed.
Number 1060
GLEN MARUNDE testified he has lived in the Tok area for 35 years
and had five children go through the school system from
kindergarten through the University of Alaska. He is a mechanical
and electrical contractor in addition to being the Chairman of the
Tok area Senate Bill 280 Legislative Action Committee. He referred
to Section 7, lines 17-21 of the committee substitute and said the
language in this section says the Department of Community and
Regional Affairs shall develop a proposed method of levying and
collecting taxes in separate unorganized boroughs and a proposed
method of establishing boards of equalization. He stated this
language is not compatible with Article X, Section 6 of the state
Constitution which says specifically the legislature shall provide
for the performance of services it deems necessary or advisable in
the unorganized borough allowing for a maximum local participation
and responsibility. It may exercise any power in an unorganized
borough which the assembly may exercise in an organized borough.
He believes this means the legislature must physically sit in
assembly for each one of the possibly 10 or up to 18 of the new
unorganized boroughs which may be formed because of this
legislation. The majority of the legislature - 31 members - would
probably have to be present to conduct business. The legislature
is not permitted to pass these responsibilities to the Executive
Branch as the bill attempts to do in Sections 6 and 7 wherein
important functions of responsibilities are passed on to the state
tax assessor and/or the Department of Community & Regional Affairs
which are part of the Executive or Administrative Branch, not the
Legislative Branch of state government. It is probable that the
legislature would have to sit in assembly quarterly, with a 31-
member majority to administer the local government and taxation
they may want to impose on each of the newly created unorganized
boroughs. It is obvious the methods of establishing a taxing
authority and a board of equalization as written in Sections 6 and
7 of SB 280 are not in agreement with the language of the state
Constitution which says the legislature must follow the specific
performance requirements of an organized borough. He said this
legislation is therefore unconstitutional. If this legislation
became law, the legislature would find itself deeply involved with
the administrative duties incurred even in the middle-level of
government for possibly 10 to 18 newly-formed organized boroughs.
Number 1266
BILL MILLER said one of his major concerns with CSSB 280(FIN)
amended is the fact that over the last 40 years, the small
communities and villages within the unorganized borough have built
an infrastructure and facilities within their communities. He
questioned whether under this legislation these facilities would be
turned over to the borough or whether they would remain within the
incorporated communities. If they are turned over to the borough,
the maintenance on these facilities would be degraded because he
was sure the facilities would not be maintained. Many of these
facilities were built with capital funds from the state with the
agreement they would be turned over to any municipality or any
government formed in the area. Also, revenues to maintain and
operate these facilities would be lost. He was opposed to CSSB
280(FIN) amended and felt the people in the unincorporated
communities and unorganized boroughs show a lot more organization
than a lot of the organized communities in the incorporated
boroughs.
CHAIR JAMES said the committee would now hear testimony from
individuals in Slana.
Number 1350
OLE BATES testified from Slana in opposition to CSSB 280(FIN)
amended in its entirety. He agreed with the comments expressed by
individuals in Tok and Dot Lake.
Number 1379
CECILIA CHMIELOWSKI testified in opposition to CSSB 280(FIN)
amended. (Note: Her testimony is indiscernible).
CHAIR JAMES advised the committee would now take testimony via
teleconference from Central.
Number 1430
LAURAL TYRRELL testified against CSSB 280(FIN) amended. She felt
the legislation could be better written. She was not against
paying for education but this issue is not just limited to
education. She felt they needed more input into the organizing and
meetings should be held at the local level.
Number 1505
PAT BUCHANAN testified in opposition to CSSB 280(FIN) amended. She
said no one in Central was opposed to paying for education but if
this is truly a bill for education, then there should be an
education tax. She had seen firsthand what goes on in a borough
that taxes people supposedly fairly to support education and how
the outlying rural schools do not benefit from any of those taxes.
Number 1576
MARY WILLIAMS testified she is a business owner in Central and is
opposed to CSSB 280(FIN) amended. She said that Central is a small
community with less than 100 people and two or three businesses.
She commented there were a lot of recreational and seasonal people
in Central and she wondered if they were going to be taxed.
Central has a very small tax base and she believed it would cost
more money to come out and assess people than what the state would
take in.
Number 1642
JULIE ROBERTS testified that Tanana is a very small community which
seems to get smaller every year. She has served on the Board of
Education for many years and was aware of the consolidation efforts
of the legislature. The people in Tanana survive on very basic
needs; there is a high unemployment rate and most of the land
around Tanana is Native land, so there would be very little money
produced from taxation in that area.
Number 1708
RON DELAY testified regarding the huge inequities that Senator
Torgerson was speaking of earlier regarding who supports education
and who does not and to what degree. The Senator seems to dismiss
the single sites as not providing their fair share. In the city of
Tanana, the city pays about two and one-half times the four mill
rate to support education. He said in terms of the dismissal of
PL-874 funds, he owns property in Fairbanks as well as in Tanana
and those lands which are tax exempt generate money the state does
not have to pay for education about six times what he as a taxpayer
in Fairbanks pays to support education. He didn't think the single
site funds or the PL-874 funds should ever be dismissed as
supporting education to a much higher degree than urban area
supporters. The studies on consolidation have shown there are no
significant savings to consolidation. He didn't feel this bill
would eliminate the huge inequities that were being discussed. The
people in Tanana pay about six times what he as a property owner in
Fairbanks has to pay to support education. He wanted everyone to
realize that PL-874 monies are significant in the small villages
and they are paying their own way, more so than the urban areas.
CHAIR JAMES inquired if there was anyone in Skagway wishing to
testify.
Number 1850
SIOUX PLUMMER, Mayor, City of Skagway, testified in opposition to
CSSB 280(FIN) amended. She thought that initially this legislation
was well intended to help support education, but as many people
have testified, there are a lot of serious problems as it stands
now. The city of Skagway could not support it primarily because
they already contribute significantly to their own school district.
It doesn't seem fair and equitable that they should be punished by
being levied a further tax if they chose not to be part of a
borough. She urged the committee not to pass CSSB 280(FIN) amended
out of committee. She suggested going back to the drawing board
and solve education's problem in a much more equitable way. She
felt this was another form of government that doesn't serve the
people well. She thanked the committee for the opportunity to
testify.
Number 1967
JAMES FILIP testified from Skagway on a couple of issues that were
unique to Skagway. First, there is no support for borough
incorporation in Skagway at the present time. Their proposed
contribution to education in FY 97 is $619,000 which is equivalent
to 6.25 mills or $763 per capita for the year. They feel that
force in the form of political or economic sanctions should not be
used to foster borough creation and Section 6 of the bill appears
to do just that. Borough development should be left to the
communities and the areas in which they serve to make decisions of
this magnitude. He thanked the committee for the opportunity to
testify.
CHAIR JAMES announced the committee would now take testimony from
Glennallen.
Number 2063
JULIAN PAUL WEIR testified from Glennallen in opposition to CSSB
280(FIN) amended, specifically the six mill tax. He was opposed to
any type of property tax and felt the old school tax should be
reimposed. A property tax is very unequal in that it punishes
businessmen because they would pay a lot more than the average
citizen. He believed a school tax with no exemptions would be more
appropriate. He commented there wasn't much land owned by private
individuals in that area; most of the land is Native land or state
and federal land.
Number 2170
NICK ZERBINOS testified that many (indisc.) cannot even afford to
support their local communities and school districts. Note: Mr.
Zerbinos testimony is indiscernible.
Number 2349
HARRY TERMIN testified against CSSB 280(FIN) amended. He couldn't
understand why the legislature would not listen when the public
spoke. He said any time another layer of bureaucracy was
introduced, there were additional costs which ended up with less
revenues and higher costs.
TAPE 96-58, SIDE A
Number 0013
LEE ADLER testified that he didn't know very much about this issue,
but he didn't feel they were at all ready for this legislation so
he was definitely opposed to CSSB 280(FIN) amended. He wondered
where the money would come from to cover the high cost of the
appraisal in that every piece of private property or land would
have to be appraised.
CHAIR JAMES stated the committee would next take testimony from the
Fairbanks teleconference site.
Number 0105
ART GRISWOLD testified in opposition to CSSB 280(FIN) amended. He
referred to the combination of the Gateway and Delta Borough
situation and said it just barely meets the requirements for the
first year by combining those two areas that are not economically
or sociologically compatible; one is agriculture and one is Native
lands and tourism. He was also concerned that this value goes on
a pipeline that is going to depreciate down to zero in the near
future, so that means the value of those lands would drop
considerably. He questioned how a tax would be figured on state-
owned farm land that farmers rent only under the land use agreement
for agriculture as it stands currently. He felt this legislation
had too many holes in it and needed a lot of work. He also
questioned who would be funding the start up of all these new
borough governments.
Number 0256
AL KETZLER, Chief Administrative Officer, Tanana Chiefs Conference,
testified in opposition to CSSB 280(FIN) amended. He said Tanana
Chiefs Conference agreed with many of the comments made in
opposition by previous testifiers.
CHAIR JAMES asked Alan Lemaster to present his testimony.
Number 0307
ALAN LEMASTER testified there appeared to be little support for
CSSB 280(FIN) amended in Alaska outside that of the legislature.
He understood that if they didn't form a borough, the state would
tax them at four mills. He said that would be about $4 million of
the $668 million that is assumed to be the value of their lands.
He noted their school budget is over $5 million so that means they
would be funding somewhere around 75 or 80 percent of the total
budget with these taxes. The rest of the boroughs pay less than 40
percent and he thought that was an inequity. He questioned if the
funds from the taxes would be placed in the general fund of the
state or dedicated to schools. If so, what would happen to the
dollars being spent on the services provided by the state
currently? Will those dollars continue to go to the borough or
would the state take them away? He referred to the constitutional
burden the state would be under when this was challenged in the
courts on the basis of the inequities that arise from taxing some
of the people and not taxing everybody. There appears to be
another inequity in that if they don't vote for a borough, then
they would have to pay taxes to the state where other people do
not. He wasn't sure that was constitutional. He asked where the
mythical figure came from that indicated the Copper Valley was
worth $668 million on the tax rolls. To his knowledge, none of the
businesses nor the individual property holders in that area have
ever been approached by a tax assessor. In listening to the
testimony that has been presented today, he said there is virtually
no support for this issue except for those in the legislature. He
urged the legislature to listen to the people rather than force
court challenges that neither the state nor the people in the
unorganized boroughs can afford. He thanked the committee for the
opportunity to testify.
CHAIR JAMES announced the committee would now take testimony from
the Nome teleconference site.
Number 0533
JOHN HANDELAND testified the Nome City Council the previous evening
had passed a motion unanimously opposing the passage of CSSB
280(FIN) amended and urging its defeat. The Nome City Council had
some major concerns about the substantial cost savings of the
consolidation alleged to in the sponsor's briefing paper. They
believed it would simply add an additional level of government that
would not save any cost. He also expressed concern about the
proposed borough boundaries as drafted. According to the
Constitution, it should be social, cultural and economic activities
integrated and there is certainly some diverse area in this
proposed borough which he didn't believe met that challenge.
Third, if the state was looking to gain some additional property,
this was probably a good bill. In the Nome area, there would be a
lot of property the state would have to take in foreclosure because
the villages in the area do not have the economic base to pay this
tax. Even though it has been indicated there would be no affect on
the Nome School District, they believe there would be whether they
voted for the plan or against the plan. The people in Nome are not
opposed to paying taxes to support their school district. In fact,
according to the city clerk, the equivalent millage they paid this
last year was 9.25 mills as a single site. They are not opposed to
taxation, but they are opposed to this borough plan and urged the
committee to hold this bill because it needed a lot of work. He
thanked the committee for allowing him to testify.
Number 0705
CHOW TAYLOR, City Manager of Galena, testified that she agreed with
the remarks of Pat Poland and those of Mr. Handeland. She said the
language in Section 6 states that funds may be appropriated for
funding regional educational attendance areas; however, that also
implies that funds may not be appropriated.
Number 0802
MARY MOSES, City Manager, City of Tanana, agreed with the remarks
of the individuals who testified in opposition to this bill. She
said that no one had touched on the impact this legislation would
have culturally and to the people living in rural communities; that
being further dividing the state's Native and non-Native
population. This is particularly true because all the Native land
could be held in trust and that would create a situation in which
only lands held by non-Native people would be taxable which creates
a form of segregation and discrimination. There is no guarantee
that it won't actually force reorganization of education and
government. If it does, in most of the rural areas it will be
along lines that would decrease the local control and cause
controversy and division among the community. Also, the city of
Tanana does not believe that holding hearings in communities over
500 in population only is fair in the rural areas because their
population is spread very thinly over a wide area. Also, the city
of Tanana contends this legislation does not consider the people
who live on subsistence land. To those individuals, the land is
their job and it would create a situation whereby their income
would be taxed at both ends. She thanked the committee for
allowing her to testify.
Number 0963
JOHN GILL, Nenana City Public Schools, testified there would be a
loss of local control and parental involvement if some of the
smaller districts were taken over by the larger ones. There would
be tremendous legal costs concerning compensation of school boards
and taxation. There would be costs for tax assessment and tax
collection even if it was done at the local level. He referred to
the six mills as an alternative if the people do not wish to become
an unorganized borough and said that would only be $600 per
$100,000 so he didn't think there would be any large increase in
savings. He believed a school tax should be considered as an
alternative.
Number 1042
SCOTT JANKE wasn't able to wait to testify so Chair James read the
following facsimile statement from Mr. Janke: "He opposes six mill
level. Not consistent with current law. Opposed time line for
formation of Prince William Sound Borough. That communities of
Prince William Sound are currently investigating the formation of
a borough and SB 280 time line causes undue pressure. If local
vote fails to create an organized borough, what happens to the
Cordova City School District which is funded locally? Do we lose
local control of education or are we forced to consolidate? Most
residents of Prince William Sound already pay a local contribution
for education."
CHAIR JAMES asked Larry LaBolle to present his testimony.
Number 1098
LARRY LaBOLLE, Lower Yukon School District, testified in opposition
to CSSB 280(FIN) amended as it currently stands. He thought there
was an economic issue and said in the Lower Yukon School District,
10 of the 11 villages are second class cities which charge sales
taxes and are having problems meeting their city budgets currently.
Over 90 percent of their students live on federal property, so
they receive impact aid for those students. If the church property
and school district property is taken out, almost 100 percent of
their students live on property that would be tax exempt if a
borough was formed. A feasibility study was done in this region in
the late 1980s or early 1990s which showed there was not a
significant tax base for the Lower Yukon region to support a
borough. He commented that the boundaries of the borough do make
sense. He believed that a school tax or an income tax was much
more realistic if the legislature was looking for additional
funding. On the other hand, if the legislature was looking for
school consolidation, he didn't believe this should be the vehicle
because blanket school consolidation does not make sense.
Disbursed districts, such as the Lower Yukon, are very expensive to
operate. The Lower Yukon School District's travel each month is
$100,000 for curriculum meetings, student activities which is not
a big part, supervision of school sites, school board meetings,
meetings of district-wide committees, et cetera which all involve
air transportation. He suggested the legislature look at the
economic feasibility before taking action on this legislation. He
believed there were better vehicles for raising additional funds.
Number 1246
PAUL SMITH, President, Tok Chamber of Commerce, testified that all
37 members of the Tok Chamber of Commerce were opposed to CSSB
280(FIN) amended. In terms of the senior citizen exemption, he is
a senior citizen in addition to being a businessman and questioned
what would happen in his particular case. Also, tourism has been
a big impact on Tok and it will continue to grow, so should the
tourists be taxed? He remarked that out-of-state workers on the
pipeline are taking home a large paycheck every couple of weeks and
not being taxed at all. He encouraged the committee to consider a
school tax or a state income tax. He said it had been pointed out
that people living in the rural areas don't contribute anything to
the urban areas. He said that was totally false. He personally
spends thousands of dollars every year in Anchorage or Fairbanks on
bed tax, sales tax or whatever the tax happens to be. He thanked
the committee for the opportunity to testify.
Number 1331
KIM ROTH testified that almost everything she had to say had
already been said, but she wanted to add a few comments. First, a
few years ago the Hickel Administration did a feasibility study.
The commission came around and looked at the actual tax base that
was available and concluded it would cost the state more money than
it would receive by forming a borough and collecting taxes. The
issue was dropped. She didn't understand why the legislature
continued to push an issue that was not feasibly possible. All the
rural areas with a tax base; i.e., Prudhoe Bay, Red Dog Mine, etc.,
are already a borough. She said if the state wants us to form a
borough, they have to allow us an economic (indisc.-coughing). The
only thing that would be in the perfect borough as designed by the
Department of Community & Regional Affairs, is the pipeline and
that's already taxed at 20 mills. The only other thing they have
is timber, because over 90 percent in that borough would be the
state, federal or Native land. The legislature not only needs to
look at their constituency, but must look at the good of the state
as a whole and this was not for the good of the state as a whole.
She referred to the disparity issue and said she thought most of
the school districts south of the Alaska Range and in Southeast
Alaska would blanch at the heating bills of the Tok school. In
looking at the money received as total (indisc.) education per
student is much more in the Bush than it is in urban areas. For
example, the heating and maintenance bills are much higher in the
rural areas than in urban areas because of being in the middle of
no where. No one objects to paying a tax for their children's
education, but something that hasn't been looked at is the
dividend. She thanked the committee for the opportunity to
testify.
Number 1453
MICHELLE STOUT testified from Tok and requested that before this
bill goes one more step, there be a complete accounting provided to
their representative of what the total cost would be to assess "all
taxable property" in the vast unorganized areas of the state. She
pointed out that in an era of strict budget cutting, the state
should carefully weigh the priorities for the use of the extremely
limited funds. She expressed concern about cutting out things that
enhance revenue production in rural areas; i.e., the public lands
and tourism offices, and then on the other hand spending this kind
of money to implement a plan which year after year had been proven
to be economically unfeasible. She said in conclusion, it seems
this bill would not only close down any development in the rural
areas, it could also open the state of Alaska to numerous losses,
which along with the practical impossibility of the assessment
process described in the bill, would end up costing the state of
Alaska far more than could ever be collected.
Number 1535
JOHN KUNIK testified from Glennallen that in the Glennallen area,
there are 632 students; they have a total budget of $5.4 million;
and total acreage of 21 million acres. Sixty percent of the
state's administration budget goes to six boroughs; the other 40
percent goes to the remainder of the state, which is nothing. He
said based on the state assessor's figures, of a 20 mill rate they
get about $12 million from their area. He pointed out there is no
tax base in their area. The majority of the property is not
taxable; less than 1 percent is taxable. Their unemployment rates
are among the highest in the state, yet they pay the highest
electrical rates and gasoline prices. He referred to Section 6,
page 3, line 10 of CSSB 280(FIN) am which states, "...may be
appropriated for funding for regional educational attendance areas"
and asked Senator Torgerson where the money would go if it didn't
go to the schools.
Number 1743
BERNARD GOODNO testified from Delta Junction that the citizens are
already paying and when the state can't live within their budget,
then it's time to downsize until they can. He said no new taxes
until then. He opposed CSSB 280(FIN) amended.
CHAIR JAMES announced this would conclude the teleconference and
thanked everyone for testifying. She asked Senator Torgerson for
his wrap-up comments.
Number 1765
SENATOR TORGERSON said he had made note of some of the questions
that had been raised. First, this legislation does not force
school districts to consolidate. He, however, thought that school
districts and REAAs should consolidate. He said, "across the
board, if you take the administrative costs and you have one school
district per organized borough, it's a savings of $17,700,000."
The Department of Education disputed those figures and indicated
the savings would be somewhere between $3.3 million and $5.1
million. In terms of disparity, the Senate had just recently
passed SB 244 which is the Governor's fix to the disparity problem
on the federal level; it doesn't speak to the foundation formula.
Basically, the Governor's remedy is to tax the taxed based
community some more and give the untaxed based communities $500
more unit value. He commented that a school tax or some other type
of tax would just throw the problem even further; the majority of
that statewide tax would still come from tax based communities and
87 percent of the population lives in those tax based communities.
It would raise more money from the people already paying it and
shifting that money out again under our own formula foundation
disparity of 8 percent of the people get 20 percent of the money.
The comment that the burden is greater because you have more exempt
property within your area, is not true. It is assessed evaluation,
times the mill rate, equals what is paid; if you're already exempt,
you're exempt. It isn't to try to match the total burden for
education; the basic need in all that comes from the mill rate and
its full and true value is found by the assessor. In terms of SB
280 being unconstitutional, he didn't share that thought. The
actual levying of a tax rests with the legislature which would
serve as an assembly in all the areas that chose to be unorganized
when the mill rate was set. With regard to how much money it would
cost to assess all the property in rural Alaska, in his opening
comments he had indicated the mill rate could be lowered from 6
mills to 4.5 mills. The state assessor had told Senator Torgerson
that it would be about $240,000 the first year and then it would go
up to $300,000+ for the additional years with approximately four
people being hired to do the evaluation. It wouldn't be the
millions of dollars the public thought it would be. He referenced
page 4, lines 9 and 10 which state, "Money from taxes levied under
this section may be appropriated for funding for regional
educational attendance areas" and said the legislature cannot
dedicate funds without a vote of the people. Relating to the
question of where does the money go if it isn't dedicated to
education, he said it may be appropriated back to the REAAs which
is done through the appropriation process currently in statute. He
said the legislature certainly doesn't have the authority to direct
that back to the REAAs if they collect the tax. However, if they
formed their own jurisdiction, in a third class borough they'd be
taxing for education. He pointed out that the senior property tax
exemption extends to seniors for their primary residence; it does
not extend to their property that is revenue enhanced like rental
property, for example. In conclusion, he said, "I was kind of
keeping track of the testimony. I know everyone was opposed that
testified but they weren't opposed to the tax. That number was
about even in my thought. So if the committee would like to just
gut the bill and come forward with an education tax of 4.5 mills,
that is certainly what the intent is of this legislation. By doing
so, you would be taking out the local economy and you would be
doing some of the horrible things that you heard these people
testify to. The intent of this bill was to give the maximum local
input to how they should pay their share of education costs."
Number 2014
CHAIR JAMES said that some of her concerns had been the cost of
getting the assessed valuation done, the method of using assessed
valuation, whether or not they use the cost basis or fair market
value basis and what kind of a percentage because almost always in
the local governments, there's a percentage of either fair market
value and/or cost basis. She also questioned how appeals to the
assessments would be handled. Finally, she expressed concern
regarding the requirement of only holding hearings in communities
with a population of 500 or more. She believed there were lots of
communities with a population of less than 500 and many times
people in the Bush don't hear about what is going on.
Number 2082
SENATOR TORGERSON responded that the requirement of the hearing in
communities with a population of 500 or more was an amendment made
on the Senate floor by a Senator from one of the rural areas. The
language in the original bill indicated it would be left up to the
Department of Community & Regional Affairs. The fiscal note
submitted by the Department of Community & Regional Affairs
estimated the cost to be $1,000 per meeting. The department's
response to how they intended to handle this was to use local radio
and broadcast media as much as possible and then advertise when
those meetings would take place. He doubted the department could
effectively go out and talk to everyone. But again, their methods
of getting information out to rural Alaska have been the same since
statehood. He understood there may be an amendment to reduce it to
300 or more and he really had no objection to that; it was up to
the department. He said, "As far as the tax and what way to put
the tax on, you know I don't think I'd be in favor of doing a
special way of doing taxes that's different for my borough than the
rest of Alaska." It's already in statute and this bill does not
affect how property is assessed or instruct the assessor to treat
people in rural Alaska differently than in other parts of the
state. The assessed valuations are set in statute for oil and gas
property, mining property, et cetera, as well as the exemptions.
It should apply to everyone equally.
Number 2170
CHAIR JAMES said, "I think it was the fellow from Skagway who was
concerned because at a four mill rate, the amount that that would
collect because of the values they have there was a much larger
percentage of their money they spend on schools and this bill in
its own present form allows people to pay in any old way. It
doesn't say they have to have a property tax; it says they could
have fish tax, a bed tax, a sales tax, whatever, but it does say
the tax would be four mills times this appraised value, whatever it
is. So, in that particular case, if the appraised value is more
and 4 percent is a larger percent of what they're spending for
schools, how could we provide that kind of flexibility so that it
wouldn't unfairly treat that group." She believed it should be an
either/or situation such as the current four mills or the 30 or 35
percent as a maximum.
Number 2212
SENATOR TORGERSON said this bill doesn't actually address Skagway;
Skagway is under an annexation proposal. He pointed out the bill
doesn't call for just a 4.5 tax; it must be the equivalency and the
proposal submitted from the Department of Community & Regional
Affairs would have all that laid out as to how they'd match that.
If they are an unorganized borough, first and second class cities
which Skagway is, will be exempt because they are currently already
collecting taxes. He said, "I know of none of them that are paying
below their requirement by state statute of the single site schools
or in this case the first and second class cities." When they
formed a first and second class city, one of the powers that was
given to them by statute was to have a city school district. So,
they are currently doing that already. He found it interesting
these people were opposed to these bills because most of the first
and second class cities have a large number of students coming from
outside their jurisdiction and basically this would help reimburse
for that.
Number 2274
CHAIR JAMES said she understood that. Her summation of the
testimony heard today was that people really resist another level
of government and resist being told they must do something, but the
bottom line is they don't really mind paying the tax. She herself
was not totally convinced that property tax was the right way to
go. She announced the bill would be held over until the following
Thursday.
ADJOURNMENT
There being no further business to come before the House State
Affairs Committee, CHAIR JAMES adjourned the meeting at 10:20 a.m.
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