Legislature(1995 - 1996)
03/13/1996 01:35 PM Senate CRA
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SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE
March 13, 1996
1:35 p.m.
MEMBERS PRESENT
Senator John Torgerson, Chairman
Senator Randy Phillips, Vice Chairman
Senator Tim Kelly
Senator Fred Zharoff
MEMBERS ABSENT
Senator Lyman Hoffman
COMMITTEE CALENDAR
SENATE BILL NO. 280
"An Act relating to the mandatory incorporation of certain boroughs
in the unorganized borough."
SENATE BILL NO. 293
"An Act relating to municipal capital project matching grants for
a municipality organized under federal law as an Indian reserve;
and providing for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 280 - See Community & Regional Affairs minutes dated
2/28/96.
SB 293 - See Community & Regional Affairs minutes dated 2/28/96.
WITNESS REGISTER
Deb Davidson, Committee Aide
Senate Community & Regional
Affairs Committee
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Offered information on SB 280
Lamar Cotten, Deputy Commissioner
Department of Community & Regional Affairs
P.O. Box 112100
Juneau, AK 99811-2100
POSITION STATEMENT: DCRA has concerns with SB 280
Eddie Jeans
School Finance
Department of Education
801 W. 10th St., Suite 200
Juneau, AK 99801-1894
POSITION STATEMENT: Offered information on SB 280
Jackson Lomak
Akiachuk, AK
POSITION STATEMENT: SB 280 in unconstitutional
Mike Gatti, Borough Attorney
Matanuska-Susitna Borough
350 East Dahlia Ave.
Palmer, AK 99645-6488
POSITION STATEMENT: Testified in support of SB 280
Dennis Watson, Mayor
City of Craig
P.O. Box 725
Craig, AK 99921
POSITION STATEMENT: Has concerns with SB 280
Ms. Marla Adkins
P.O. Box 461
Cordova, AK 99574
POSITION STATEMENT: Opposes SB 280 in current form
Eric & Denny Weathers
Deep Bay
Cordova, AK 99574
POSITION STATEMENT: Testified in opposition to SB 280
Ms. Jane Brown
P.O. Box 92
Glennallen, AK 99588
POSITION STATEMENT: SB 280 is unconstitutional
John Kunik
P.O. Box 83
Glennallen, AK 99588
POSITION STATEMENT: SB 280 is unconstitutional
Herman Dillback
P.O. Box 902
Slana, AK 99586
POSITION STATEMENT: SB 280 is unconstitutional
Dan Billman
HC01, Box 1706
Glennallen, AK 99588
POSITION STATEMENT: Does not support SB 280
Bernard Goodno
c/o P.O. Box 92
Delta Junction, AK 99737
POSITION STATEMENT: SB 280 is unconstitutional
Marlin Starnes,
City Council Member
City of Delta Junction
P.O. Box 1293
Delta Junction, AK 99737
POSITION STATEMENT: Has concerns with SB 280
Gene Ottenstroer
c/o P.O. Box 1059
Delta Junction, AK 99737
POSITION STATEMENT: Opposes SB 280
Ms. Jeanne Phipps
c/o P.O. Box 544
Delta Junction, AK 99737
POSITION STATEMENT: SB 280 is unconstitutional
P.R. Miller
P.O. Box 384
Delta Junction, AK 99737
POSITION STATEMENT: Does not support SB 280
Elsie O'Bryan
City Council Member
City of Houston
P.O. Box 27
Houston, AK 99694
POSITION STATEMENT: Supports SB 280
Ms. Kathleen Sloboda
P.O. Box 262
Glennallen, AK 99588
POSITION STATEMENT: Testified in opposition to SB 280
Ralph Tronrud
School Board Member
Skagway School District
Box 523
Skagway, AK 99840
POSITION STATEMENT: Suggested changing SB 280 so boroughs
could form voluntarily
Ms. Barbara Kalen
Box 317
Skagway, AK 99840
POSITION STATEMENT: Opposes SB 280
Roy Brittian
HC60, Box 330-M
Copper Center, AK 99573
POSITION STATEMENT: Opposes SB 280
Alfred Krinke
P.O. Box 545
Glennallen, AK 99588
POSITION STATEMENT: Does not support SB 280
ACTION NARRATIVE
TAPE 96-14, SIDE A
Number 001
SB 280 MANDATORY INCORP OF CERTAIN BOROUGHS
CHAIRMAN TORGERSON called the Senate Community & Regional Affairs
Committee meeting to order at 1:35 p.m., and brought SB 280 before
the committee as the first order of business.
DEB DAVIDSON , committee aide, explained that at the last meeting on
the legislation, a committee substitute was adopted that basically
puts in a schedule for the incorporation of the boroughs. The
original version provided that DCRA would have borough proposals
completed by July 1, 1997 for submission to the Local Boundary
Commission. However, it was realized that this was probably a
little too optimistic so a transition schedule was inserted in the
new committee substitute to give the department more time to put
the borough proposals together. Once the Local Boundary Commission
approves the borough proposal, it would then go directly to the
Division of Elections for the election of borough assembly members
and the choice of areawide powers. The Local Boundary Commission
would have to bring any annexations before the Legislature for
approval or disapproval.
Ms. Davidson directed attention to a backup packet including a
breakdown of fiscal implications, new fiscal notes, as well as a
schedule of incorporation for boroughs, based on 1994 values.
SENATOR TORGERSON asked if the state assessor has indicated when he
will reassess the values in the REAAs, because the only information
that is currently available is the 1994 values. MS. DAVIDSON
replied that the state assessor indicated that if SB 280 passes, he
will start immediately on estimating the property values.
SENATOR TORGERSON noted the breakdown of the fiscal implications
shows that the 1994 estimated value of property not currently taxed
by local governments in rural areas amounts to $3,100,154.6. It
also shows the preliminary estimate of cumulative cost to the state
through fiscal year 2002 for the incorporation of the unorganized
boroughs is $13,216,600.
MS. DAVIDSON explained in estimating a possible savings of
$17,708,600 by the consolidation of school districts, she used
figures for administrative costs contained in the Department of
Education's report entitled "The Report Card of School Districts."
She noted the packet contains a fiscal note from the Department of
Education, but it does not show the actual savings that could be
realized by the merging of school districts.
Number 168
SENATOR ZHAROFF asked if in estimating the value of property not
currently taxed by local government, did it include federal lands,
Native allotments, regional and village corporation lands. MS.
DAVIDSON answered that it was estimated only on taxable property.
SENATOR ZHAROFF commented that he would like to see figures on how
much revenue is generated by school districts under PL 874, because
probably as much as 90 percent of the PL 874 monies that are
generated by the non-taxable property in the state goes to the
state and 10 percent goes back to the districts.
Number 225
LAMAR COTTEN , Deputy Commissioner, Department of Community &
Regional Affairs, stated the department supports the concept of SB
280. They believe there are a number of non-financial benefits to
areas to consider organizing as boroughs such as promoting economic
development, the implementation of planning, approaching certain
social programs in a more comprehensive regional basis, and the
ability to finance a capital construction project along with some
state assistance.
Mr. Cotten said DCRA's position is that they like the thrust of the
bill, but they are concerned about the areas that in some cases may
have high evaluations but also have a number of circumstances that
restrict them from receiving the benefits of taxation that the
other new rural boroughs have achieved. He noted one of the
reasons there isn't a property tax in Bethel is because there is
such a scattering of taxable property and non-taxable property,
whether its an old Native townsite, or Native allotment, or other
restricted deed. Consequently, politically, a lot of local
governments have steered away from having a property tax because
one neighbor pays and the other one doesn't. Also, another issue
to consider, particularly in the Western Alaska region, is the
income levels, the high unemployment and the ability to attain a 4
mill levy.
Number 335
JACKSON WOMACK , Chief Executive Officer for the Yupik Nation,
testifying from Bethel, speaking to what he believes is the
unconstitutionality of the legislation, stated tribes possess the
right to form their own government, to make and enforce laws in
both civil and criminal matters, and tribal governments are not
subordinate to state government. SB 280 is an infringement to the
right of self-government.
SENATOR TORGERSON stated that nobody is taking away their right to
tax anything, but the question is if the public monies that go to
them as a sovereign nation should come to them from areas other
than within their own taxing jurisdiction. He added they want the
state of Alaska to continue to pay for their services and yet not
recognize any of the authority that the state of Alaska wants to
impose upon the rest of its residents, and that is
unconstitutional.
Number 400
EDDY JEANS , Foundation Program Administrator, Department of
Education, advised that the department did prepare a fiscal note,
however, at this point, it only deals with the phase-in provision
under the foundation program.
Mr. Jeans explained that under DCRA statutes, once a borough has
been incorporated, it has up to two years to assume the educational
duties. Under the foundation program, the municipalities receive
an additional grace year of no required local effort, a 2 mill
equivalent of a 2 mill tax levy in the second, 3 mills in the third
and 4 mills in the fourth. Utilizing the time frames contained in
SB 280, the first fiscal note the Department of Education could
build was in the 2001 as a fiscal cost.
The real impact will be in the Impact Aid Program. Under that
program, the state of Alaska currently recognizes $30,000,000 to
$35,000,000 annually that goes to school districts in the
foundation program. When a municipality has a required local
effort, as they do in Alaska, and when a district contributes over
the 4 mill required local effort, the amount of impact aid that the
state may recognize in the foundation formula is reduced by the
proportion that they exceed that required local effort.
Mr. Jeans advised that the Department of Education proposes to run
a schedule of the foundation program as it is today, and then run
it out to the year 2007, when they would actually recognize all of
the boroughs being incorporated and show how this is going to
impact the deductible impact aid of the foundation program. Based
on the projected assessed values, the foundation program would
recognize approximately $12,000,000 in increased required local
effort. He added he believes that once the schedule is completed,
it will be offset by a large chunk of loss in impact aid revenue
that is recognized in the formula.
Number 430
SENATOR TORGERSON commented that the legislation does not set up
any taxation methods, it is just the formation of the boroughs.
The recommendations on how this is done is going to be part of the
negotiations between now and the time these boroughs are formed.
The intention of the bill is to get everybody thinking about and
forming their boroughs.
SENATOR ZHAROFF said he is not opposed to any borough formation or
the state being sectioned as boroughs, but he supports a process
where it comes from the people up rather than from the government
down. He believes the legislation sets up a time frame that causes
some problems.
Number 445
SENATOR ZHAROFF asked if any of the boroughs are having financial
problems. He is aware of one borough that has a concern with the
amount of non-taxable land within its boundaries. LAMAR COTTEN
responded that he was not aware of any, and he noted the last five
that have been organized all have fairly strong tax bases. He also
related that another issue the department has looked at and
discussed over the years is that when people have looked at
organizing a borough in the eastern part of Alaska, including the
pipeline, the taxation that borough would be allowed to tax on the
oil and gas property would be deducted from those funds that would
go to the general fund. He said he is not sure how much of a
benefit there could be to the state under certain circumstances
such as that and these types of issues need to explored and talked
through.
Number 525
MICHAEL GATTI , Borough Attorney, Matanuska-Susitna Borough,
testifying from the Mat-Su LIO, stated the Mat-Su Borough believes
the legislation is a good start in incorporating areas into
municipalities so they can start paying their own way.
Responding to an inquiry made by Senator Zharoff earlier in the
meeting as to the powers of a second class borough, Mr. Gatti said
there are three mandatory areawide powers: planning, assessment
and taxation, and education. There are a number of other powers
that a borough can exercise by ordinance or through a vote of the
people.
Mr. Gatti expressed the Mat-Su Borough's keen interest in the
legislation, and he said they believe other municipalities are
quite interested in it as well. He noted there is an attack on the
Mat-Su Borough's boundaries from another organized borough that is
taking place, and while SB 280 doesn't address that, they believe
the more boroughs that are organized and paying their own way, the
less likelihood there will be of people trying to do "tax shopping"
in an effort to get a better deal for their money.
Number 544
SENATOR ZHAROFF asked what Mr. Gatti meant by "paying their own
way." MR. GATTI responded that when saying "paying their own way,"
it means those municipalities that provide a local effort to
provide those essential local services, tax themselves at a level
that can contribute to the support of those services. He added, in
general, they think the state has been paying for what in essence
is local services for quite some time in the unorganized areas.
Number 574
DENNIS WATSON , Mayor of Craig, testifying from Craig, said as a
city they do their own planning, their own taxing, and he believes
they are pretty effective at it, better than most boroughs and
better than the state is. He said there is some problem as far as
being able to access fishery taxes by a borough, but this allows
that to happen in most places. The fishery taxes that are being
collected in some of the boroughs out to the west of them are in
addition to the state fishery tax or landing tax so it is an
additional burden on the fishermen who are already in trouble right
now. He related it has been a feeling of all the communities in
the Craig area that a borough is not acceptable. He suggested the
uniqueness of any area in the state as compared to another needs to
be considered.
TAPE 96-14, SIDE B
Number 010
MS. MARLA ADKINS , testifying from Cordova, stated she is not
opposed to a borough, but she is opposed to both borough and city
governments. She observed that as far as closing the fiscal gap in
Juneau, right now the state takes the raw fish tax for various
areas, and if boroughs are formed, the boroughs will take that tax,
so she doesn't see that as helping to close the fiscal gap. She is
opposed to SB 280 in its current form, and she does not believe a
borough should be formed without a vote of the people.
Number 075
MS. DENNY WEATHERS , testifying from Cordova, stated her strong
opposition to SB 280, basically because of level of service. If
the area she lives in was incorporated into a borough they would
lose their school system, and they cannot travel to Cordova for
schooling. All they would get out of it is being taxed.
ERIC WEATHERS , testifying from Cordova, also stated his opposition
to SB 280. He and his wife live on an island outside of Cordova,
and when he goes to Cordova to shop he pays city taxes. If they
become part of a borough, it will mean more taxes for him.
Number 101
MS. JANE BROWN , testifying from Glennallen, voiced her opposition
to SB 280 because she believes it is unconstitutional. She pointed
out that as far as Glennallen carrying its own weight, they live in
an area where sanitation, garbage, sewer and medical are all
private enterprise. She said as far as taxing the pipeline in
their area, it is on the decline, and passage of the legislation
will be a large burden on the individuals living there. She also
pointed out that most of the land in that area is uninhabited
swamp, and if it were taxed, it would probably decrease the value
of the residents' property.
Number 120
JOHN KUNIC , testifying in Glennallen, stated his opposition to SB
280 because there is no basis for a tax in that area and there is
no industry. He also believes the legislation is unconstitutional.
Number 128
SENATOR TORGERSON pointed out that for 1994 the assessed evaluation
for the Copper River Basin is approximately $65,000,000, and if oil
and gas property is included, it is another approximately
$600,000,000, so there is some assessed evaluation.
Number 132
HERMAN DILLBACK , a resident of Slana testifying in Glennallen,
echoed earlier testimony that SB 280 is unconstitutional. He
suggested incorporation should be based on an autonomy level that
the communities have themselves in order to contribute to the
revenues of the state. He said if the state is concerned about the
revenue that it is sharing with the communities all over the state,
communities that don't have an economy that will produce some sort
of income and a revenue sharing to the state, he doesn't understand
why they should be put in a situation where they are taxed and not
able to produce any money as a personal income to support
themselves.
Number 152
DAN BILLMAN , a resident of Lake Louise testifying in Glennallen,
said the real issue is school tax where residents of that area feel
there is an unequal school tax. He suggested looking at other
legal ways to tax statewide, but not to force the formation of
areas that aren't ready for a borough government and putting that
burden on its people.
Number 180
BERNARD GOODNO , testifying in Delta Junction, spoke to the
unconstitutionality of SB 280 and his rights as a citizen under the
U.S. Constitution. He said it is not up to the state to force its
people to do anything, and he wants a lot less government, not
more.
Number 190
MARLIN STARNES , a member of the Delta Junction City Council
testifying in Delta Junction, said there are a lot of issues in the
legislation that might have to be addressed if it were to work at
all. He said reference was made to the 1994 estimated assessed
evaluation, however, they have already lost approximately
$50,000,000 in evaluation in that area.
Number 205
GENE OTTENSTROER , testifying in Delta Junction, questioned where
the revenues will come from to pay for all the "conveniences" that
will come with the formation of a borough. In his opinion, putting
a borough on Delta is a monkey on their backs that can only turn to
the state and jump on theirs. The state will end up supporting
another government and holding the bag in the end. He questioned
under what authority the Legislature has to force them into a
borough.
SENATOR RANDY PHILLIPS responded that basically, the Legislature
serves as the assembly for the unorganized areas of the state, so
that's where the authority comes in.
Number 241
MS. JEANNE PHIPPS , testifying in Delta Junction, stated SB 280 is
unconstitutional. She asserted the right to property does not come
from the state, it comes from the Creator. She said it is time for
legislators to perform their oaths of office, which is first to
uphold the U.S. Constitution. She urged to vote no against putting
the people into bondage through a fraudulent incorporation.
Number 275
P.R. MILLER , testifying in Delta Junction, said many areas in the
Lower 48 are getting away from boroughs because they are a
duplication of effort and taxes and a loss of money. He said Delta
Junction is paying its own way, they are just not charging 7 mills
on the pipeline to take care of Delta Junction. The state gets
that money and funds it back to them in aid that they require. He
suggested there should be a statewide sales tax, a statewide income
tax and a statewide land usage tax, and then doing away with the
boroughs and the state will make money in the long run.
Number 315
ELSIE O'BRYAN , testifying in Juneau in support of SB 280, related
she is deputy mayor of Houston, which is a second class city
located within the Matanuska-Susitna Borough. She said the city
of Houston has been subjected to inequitable treatment for many
years on school funding. The residents within that area fund
approximately 85 percent of all school costs from local tax
dollars. She observed the Alaska Constitution calls for equitable
treatment of all the people, but she questioned how it could be
equitable to have one portion of the state contributing towards the
services provided and another area not doing so. She said several
people have talked about the unconstitutionality of forcing
boroughs, but she would raise the question of the
unconstitutionality of not forcing boroughs.
Number 381
SENATOR ZHAROFF commented that there hasn't been a state income tax
for many years so a lot of the revenue is generated from oil
royalties, the fishing industry, etc., so it's not that you are
giving people something that really isn't theirs.
Number 412
MS. KATHLEEN SLOBODA , testifying in Glennallen, stated her strong
opposition to the formation of a borough in the Glennallen area.
She believes the bill was created out of spite because some people
are unhappy that others, perhaps, are not having to pay as much as
they are. The borough only creates infrastructure to increase the
population, and with that increase of population, it just becomes
another city.
Number 456
RALPH TRONRUD , a school board member in Skagway, stated his concern
with the legislation is that it mandates the formation of boroughs.
He said Skagway is paying its own way, however, their area is in
one of the proposed boroughs that's being looked at. He believes
if Skagway was put into the same borough as Haines, which has a
larger community, both communities would lose their autonomy. He
suggested changing the legislation so that boroughs could form on
a voluntary basis.
Number 482
BARBARA KALEN , testifying in Skagway, said Skagway has been an
incorporated city since 1900 and they have paid their own way. All
of the land that has any commercial use, any residential use, any
use whatsoever is in the city limits of Skagway. She said Skagway
does not need another layer of government, and they do not like
being mandated for something that they do not need and do not want.
Number 500
ROY BRITTIAN of Copper Center, testifying in Glennallen, voiced his
opposition to SB 280, and said he doesn't see why people should be
forced into anything. A lot of people in the Copper River Valley
area farm and most of them just barely make ends meet. Adding
borough taxes is all they need to put them out of business.
Number 530
ALFRED KRINKE , testifying in Glennallen, said if the Legislature is
going to impose another layer of government, which a borough is,
then you have automatically picked up a whole lot of expenses that
people don't want to pay for. He suggested if the Legislature
needs money to close the fiscal gap, there are several other ways
of raising it.
There being no further witnesses to testify on SB 280, SENATOR
TORGERSON asked for the pleasure of the committee.
SENATOR RANDY PHILLIPS moved that CSSB 280(CRA) and the
accompanying fiscal notes be passed out of committee with
individual recommendations. SENATOR ZHAROFF objected and stated he
believes mandating the formation of boroughs is going to cause a
lot of problems, particularly under the proposed boundaries.
TAPE 96-15, SIDE A
Number 005
SENATOR TORGERSON called for a roll call vote. The roll was taken
with the following result: Senators Kelly, R. Phillips, Torgerson
voted "Yea" and Senator Zharoff voted "Nay." The Chairman stated
the motion to move CSSB 280(CRA) out of committee with individual
recommendations carried.
SB 293 CAP PROJ MATCHING GRANT FOR INDIAN RESERV
SENATOR TORGERSON brought SB 293 before the committee. He stated
that because a similar bill has passed the House and has been
referred to the committee, it would be taken up the following week.
There being no further business to come before the committee, the
meeting was adjourned at 3:10 p.m.
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