Legislature(2001 - 2002)

02/07/2002 08:12 AM Senate CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                        ALASKA LEGISLATURE                                                                                    
                           JOINT MEETING                                                                                      
     SENATE AND HOUSE COMMUNITY & REGIONAL AFFAIRS COMMITTEES                                                                 
                         February 7, 2002                                                                                       
                             8:12 a.m.                                                                                          
                                                                                                                                
                                                                                                                                
SENATE MEMBERS PRESENT                                                                                                        
                                                                                                                                
Senator John Torgerson, Chair                                                                                                   
Senator Alan Austerman                                                                                                          
Senator Randy Phillips                                                                                                          
Senator Georgianna Lincoln                                                                                                      
Senator Pete Kelly                                                                                                              
                                                                                                                                
HOUSE MEMBERS PRESENT                                                                                                         
                                                                                                                                
Representative Carl Morgan, Co-Chair                                                                                            
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Andrew Halcro                                                                                                    
Representative Drew Scalzi                                                                                                      
Representative Lisa Murkowski                                                                                                   
Representative Gretchen Guess                                                                                                   
                                                                                                                                
HOUSE MEMBERS ABSENT                                                                                                          
                                                                                                                                
Representative Beth Kerttula                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
Local Boundary Commission Annual Report                                                                                         
Homer Annexation                                                                                                                
City of Homer Presentation                                                                                                      
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Kevin Waring                                                                                                                    
        th                                                                                                                      
550 W. 7 Street Suite 1790                                                                                                      
Anchorage, AK 99501                                                                                                             
POSITION STATEMENT: Gave the Local Boundary Commission Report                                                                 
                                                                                                                                
Dan Bockhorst                                                                                                                   
Department of Community and Economic Development                                                                                
550 W. 7 Street Suite 1790                                                                                                      
Anchorage, AK 99501                                                                                                             
POSITION STATEMENT: Answered questions regarding Local Boundary                                                               
Commission action                                                                                                               
                                                                                                                                
Allan Tesche                                                                                                                    
        th                                                                                                                      
550 W. 7 Street Suite 1790                                                                                                      
Anchorage, AK 99501                                                                                                             
POSITION STATEMENT: Answered questions regarding Local Boundary                                                               
Commission action                                                                                                               
                                                                                                                                
Tamara Cook, Director                                                                                                           
Legislative Legal and Research                                                                                                  
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Answered questions regarding Local Boundary                                                               
Commission action                                                                                                               
                                                                                                                                
Mayor Jack  Cushing                                                                                                             
491 E Pioneer Ave                                                                                                               
Homer, AK 99603                                                                                                                 
POSITION STATEMENT:  Testified on Homer annexation                                                                            
                                                                                                                                
John Fenske                                                                                                                     
Homer City  Council                                                                                                             
1832 Sterling Highway                                                                                                           
Homer, AK 99603                                                                                                                 
POSITION STATEMENT:  Testified on Homer annexation                                                                            
                                                                                                                                
Curt Marquardt, Mayor Pro temp                                                                                                  
Homer City  Council                                                                                                             
1849 Highland Drive                                                                                                             
Homer, AK 99603                                                                                                                 
POSITION STATEMENT: Testified on Homer annexation                                                                             
                                                                                                                                
Ray Kranich                                                                                                                     
Homer City  Council                                                                                                             
Homer, AK 99603                                                                                                                 
POSITION STATEMENT:  Testified on Homer annexation                                                                            
                                                                                                                                
Michael Yourkowski                                                                                                              
Homer City  Council                                                                                                             
3059 Kachemak Drive                                                                                                             
Homer, AK 99603                                                                                                                 
POSITION STATEMENT:  Testified on Homer annexation                                                                            
                                                                                                                                
Rick Ladd                                                                                                                       
Homer City  Council                                                                                                             
P.O. Box 3364                                                                                                                   
Homer, AK 99603                                                                                                                 
POSITION STATEMENT: Testified on Homer annexation                                                                             
                                                                                                                                
Gordon Tans                                                                                                                     
Attorney for Homer                                                                                                              
Homer, AK 99603                                                                                                                 
POSITION STATEMENT: Testified on Homer annexation                                                                             
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 02-1, SIDE A [Senate CRA tape]                                                                                           
                                                                                                                                
CHAIRMAN JOHN  TORGERSON called the joint meeting  of the Senate and                                                          
House Community & Regional  Affairs Committees to order at 8:12 a.m.                                                            
Present  were  Senators  Lincoln,  Kelly,  Austerman,  Phillips  and                                                            
Chairman  Torgerson and  Representatives Halcro,  Scalzi, Guess  and                                                            
Co-Chairs  Meyer and  Morgan. Representative  Murkowski  arrived  at                                                            
8:25 a.m.                                                                                                                       
                                                                                                                                
The  first order  of  business  was the  Local  Boundary  Commission                                                            
Annual Report.                                                                                                                  
                                                                                                                                
KEVIN  WARING, Chairman  of  the Local  Boundary  Commission,  asked                                                            
Commissioner  Allan  Tesche,  appointee   from  the  third  judicial                                                            
district  and Dan Bockhorst,  commission staff,  to join him  at the                                                            
witness table.                                                                                                                  
                                                                                                                                
He announced  that  there are  two vacancies  on  the commission  at                                                            
present.  The  seats in  both  Northwest  and Southeast  Alaska  are                                                            
vacant.                                                                                                                         
                                                                                                                                
The commission  did file its annual report with the  Legislature, as                                                            
required by law,  and it addresses three principle  areas. The first                                                            
chapter gives an overview  of the commission and its basis under law                                                            
as well as activities  and functions. The second chapter  summarizes                                                            
the  commission's  activities  over the  last  year and  gives  some                                                            
information  about   pending  proposals.  Chapter  three   discusses                                                            
several  important  public   policy  issues  that  relate  to  local                                                            
government in Alaska.                                                                                                           
                                                                                                                                
He said his report would  be briefer than usual to give more time to                                                            
the discussion of the Homer annexation.                                                                                         
                                                                                                                                
The Alaska  Constitution established  the Local Boundary  Commission                                                            
(LBC)  to  ensure  that proposals  relating  to  boroughs  and  city                                                            
boundary issues will be  dealt with objectively and from a statewide                                                            
perspective.   The  state   constitution  and   statutes  give   the                                                            
commission  responsibility for reviewing  and acting upon  proposals                                                            
for the following:                                                                                                              
   · Incorporation of cities and boroughs                                                                                       
   · Annexation to cities and boroughs                                                                                          
   · Detachment from cities and boroughs                                                                                        
   · Reclassifications of cities                                                                                                
   · Dissolution of cities or boroughs                                                                                          
   · Merger and consolidation of cities and boroughs                                                                            
                                                                                                                                
In addition  to those  responsibilities,  the  commission has  other                                                            
powers and obligations  that are defined in statute  and include the                                                            
duty  to make  studies  and recommendations  on  local governmental                                                             
boundary issues.                                                                                                                
                                                                                                                                
Commission  members are not  paid, rather  they serve as  volunteers                                                            
and receive  no compensation for their  time spent on LBC  business.                                                            
The  Department   of  Community  and  Economic  Development   (DCED)                                                            
provides staff support to the LBC.                                                                                              
                                                                                                                                
The LBC met 15  times in the last calendar year. To  minimize costs,                                                            
they  would deal  with  several issues  at  each meeting  and  would                                                            
conduct   meetings    via   teleconference    whenever    practical.                                                            
Collectively,  the  members spend  hundreds  of hours  dealing  with                                                            
documents, attending hearings and doing LBC business.                                                                           
                                                                                                                                
In the  past year, the  commission acted  on several proposals  that                                                            
were submitted.  They approved  petitions  for the consolidation  of                                                            
the  City  of Ketchikan  and  Ketchikan  Gateway  Borough,  for  the                                                            
consolidation  of the  City of  Fairbanks and  Fairbanks North  Star                                                            
Borough, for  the incorporation of  the City of Talkeetna  as a Home                                                            
Rule City and  for the annexation to the City of Homer.  The outcome                                                            
of some  of those is clear.  The voters  in Ketchikan and  Fairbanks                                                            
chose not to approve those  consolidation proposals so they won't go                                                            
forward. The Talkeetna  voters will hold a vote in March and the LBC                                                            
approved an  annexation to the City  of Homer that is significantly                                                             
smaller than the original petition of more than 25 square miles.                                                                
                                                                                                                                
In April  of 2001,  residents of  Adak approved  incorporation  of a                                                            
Second-Class City  of Adak after the LBC approved  their petition in                                                            
2000.  LBC decisions  have frequently  been litigated,  but for  the                                                            
fifth year in a row, there  is no standing litigation against any of                                                            
their decisions.                                                                                                                
                                                                                                                                
The LBC continued  to review, update  and revise the regulations  in                                                            
the  Alaska Administrative  Code,  which  are the  regulations  that                                                            
govern  their business.  The  last time  the  regulations  underwent                                                            
comprehensive  review was ten  years ago and  since that time  there                                                            
have  been significant  changes  in state  statute  that affect  the                                                            
commission's   activities.    They  suggested    some  housekeeping                                                             
regulations   to  address   ambiguities  and   to  streamline   some                                                            
procedures for non-controversial proposals.                                                                                     
                                                                                                                                
They also proposed  a new requirement for a local  public hearing on                                                            
legislative review  annexation proposals to be held  before they are                                                            
submitted  to the  LBC. This requirement  would  apply to  proposals                                                            
such as the one the City of Homer initiated.                                                                                    
                                                                                                                                
They  held four  public work  sessions  on the proposed  changes  in                                                            
their regulations  in  the year 2000  and this  year they  published                                                            
notice of the regulations  and invited public comment. They held two                                                            
public  hearings  on the  regulations  and then  approved  a set  of                                                            
revised regulations  that are now  being reviewed by the  Department                                                            
of Law.                                                                                                                         
                                                                                                                                
The  following   significant  petitions   are  pending  before   the                                                            
commission:                                                                                                                     
                                                                                                                                
   · A vote  on the petition to consolidate  the City of  Haines and                                                            
     the Haines Borough will be held in Haines in March.                                                                        
   · A  petition  to  dissolve  the existing  City  of  Skagway  and                                                            
     concurrently incorporate a Skagway Borough.                                                                                
   · The City  of Wasilla has submitted a local action  petition for                                                            
     annexation  of about 300 acres adjacent to the  city. This type                                                            
     of  petition  will be  settled  by local  property  owners  and                                                            
     residents  and  would not  come  to the  legislature  if it  is                                                            
     approved.                                                                                                                  
   · The City of Palmer has submitted an annexation petition.                                                                   
   · There are  ongoing discussions about borough  incorporations of                                                            
     significant annexations in Wrangell and Petersburg.                                                                        
                                                                                                                                
The  following policy  issues  are  discussed in  Chapter  3 of  the                                                            
annual report and were  raised as normal commission responsibilities                                                            
to address local governmental boundary problems or issues:                                                                      
                                                                                                                                
   · The   Unorganized  Borough   and  its   failure  to  meet   the                                                            
     constitutional  requirements   set out  in  Article  10 of  the                                                            
     Constitution  and the disincentives  that are now in  state law                                                            
     that  tend  to discourage  borough  incorporation  and  borough                                                            
     annexations                                                                                                                
   · There  are ambiguities in state  law that affect the  authority                                                            
     of newly  incorporated municipal  governments to levy  property                                                            
     taxes during  the transitional period when they  are setting up                                                            
     to do business                                                                                                             
   · The adverse impact  of the Alaska Housing Finance Corporation's                                                            
     Small Communities Housing Loan Program on some boundary                                                                    
     changes                                                                                                                    
                                                                                                                                
UNORGANIZED BOROUGH                                                                                                           
                                                                                                                                
SB 48 would establish a  new method for incorporation of boroughs in                                                            
areas of the unorganized  borough that satisfy the  standards in law                                                            
for  borough incorporation.   The LBC  has  been supportive  of  the                                                            
concept embedded in the legislation.                                                                                            
                                                                                                                                
Statutes  now authorize  funds for  borough feasibility  studies  by                                                            
local  groups  wishing  to examine  the  pros  and cons  of  borough                                                            
incorporation, but funds  have never been provided for such studies.                                                            
The Prince of Wales Island  region and the Delta Greeley region have                                                            
both expressed  interest in conducting  borough feasibility  studies                                                            
and the  LBC recommends  the legislature  appropriate  funds in  the                                                            
approximate amount of $50,000.00 annually for such studies.                                                                     
                                                                                                                                
There  is $600,000.00  available to  newly incorporated  cities  and                                                            
boroughs  to  assist  in  their  set up  costs,  but  there  are  no                                                            
transition  funds  available  for  the consolidation  or  merger  of                                                            
governments.  There are local groups  looking at consolidation  that                                                            
have expressed  the wish that there be some lesser  amount available                                                            
to them to help bridge the extra costs of consolidation.                                                                        
                                                                                                                                
AMBIGUITIES IN STATE LAW                                                                                                      
                                                                                                                                
At present, state statutes  are unclear about municipal authority to                                                            
levy  property  taxes   during  the  period  immediately   following                                                            
incorporation, boundary  changes, dissolutions or reclassifications.                                                            
Specifically, the pertinent  sections of the statutes do not clearly                                                            
authorize  or prohibit  municipal  governments  that incorporate  or                                                            
change boundaries  after January 1, but come into  being during that                                                            
calendar  year, to assess,  levy and collect  taxes. The  commission                                                            
believes  it would be beneficial  to local  governments to  make the                                                            
ground rules  clear. Those  issues are fully  addressed on  pages 28                                                            
and 29 of the  annual report and they  offer some draft legislation                                                             
that  was developed  with  the  state assessor  and  some  municipal                                                            
assessors that would resolve this uncertainty.                                                                                  
                                                                                                                              
ALASKA  HOUSING  FINANCE   CORPORATION  SMALL  COMMUNITIES   HOUSING                                                          
ASSISTANCE PROGRAM                                                                                                            
                                                                                                                                
This  program  sometimes  affects  public  acceptance  of  municipal                                                            
boundary  changes because  the rates  are more  favorable for  rural                                                            
residents  and  this  stimulates  resistance   to  annexation  among                                                            
property  owners and home  mortgage holders  that would face  higher                                                            
loan rates if they are  annexed. AHFC board of directors has adopted                                                            
regulations that have resolved  this issue as it affects mergers and                                                            
consolidations but there  is still no solution for the situation for                                                            
annexation and  incorporation proposals. They continue  to work with                                                            
AHFC to find a solution that is financially acceptable.                                                                         
                                                                                                                                
CO-CHAIRMAN TORGERSON called for questions.                                                                                     
                                                                                                                                
REPRESENTATIVE  SCALZI  asked what  prompted the  concern  regarding                                                            
levying property taxes after January 1.                                                                                         
                                                                                                                                
DAN  BOCKHURST said  Homer  provides an  example.  If approved,  the                                                            
annexation  for the City of Homer,  it will occur on March  9. There                                                            
are some who  assert that if property  assessment value is  fixed as                                                            
of January 1 of  each calendar year then that date  also establishes                                                            
a date  by  which a  municipal  entity has  power  to levy  property                                                            
taxes. If the area isn't  in the corporate boundaries of the City of                                                            
Homer on January 1 2002,  then the question arises as to whether the                                                            
City  of Homer  has the authority  to  levy property  taxes for  the                                                            
period  of time  between March  9  and the  end of  the calendar  or                                                            
fiscal year.  There is  an Attorney General  opinion that  municipal                                                            
governments  have a duty to levy taxes  on property that  is annexed                                                            
after January  1 but in time for the  municipal government  to place                                                            
that property  on the tax role. In  many cases there is dispute  and                                                            
confusion among  city and borough  governments on this question  and                                                            
some insist  that the territory must  be within the jurisdiction  on                                                            
January 1  in order for it  to be taxable  for that period  of time.                                                            
The commission's proposal  would provide a mechanism to resolve that                                                            
ambiguity.                                                                                                                      
                                                                                                                                
MR. WARING  added it is easy  to see what  a fair outcome  would be;                                                            
that whichever  government is providing services at  the time should                                                            
be entitled to a comparable  share of the revenues. That outcome can                                                            
be achieved with  clarification in the statutes. The  alternative is                                                            
inevitably some litigation  of the issue. Statutory clarification is                                                            
a better resolution.                                                                                                            
                                                                                                                                
CO-CHAIRMAN  TORGERSON commented he  thought the commission  already                                                            
has broad  based authority  to accomplish  this  in their order  for                                                            
annexation or  detachment. There may be a 45 day legislative  review                                                            
process  but that  is  when the  order  becomes effective,  not  the                                                            
effective  date  of stipulations  that  the  commission  may add  to                                                            
annexation.  He said he's  not sure they  need legislation.  Rather,                                                            
"you just need to step out and do it."                                                                                          
                                                                                                                                
MR.  WARING  said  the  legislation  statutorily   states  that  the                                                            
commission has  that discretionary authority to place  conditions on                                                            
boundary changes.  He agreed they do have broad authority,  but they                                                            
are generally  conservative about venturing beyond  what they see in                                                            
statute  and regulation.  They would  feel more  comfortable with  a                                                            
statutory statement  that the Legislature  agrees this is  something                                                            
they should do.                                                                                                                 
                                                                                                                                
ALLEN TESCHE,  LBC representative from the Third Judicial  District,                                                            
said his view of state  statutes governing taxation is that they are                                                            
specific  and clear as to  the process that  should be followed.  He                                                            
too agrees  that they would  prefer having  clear guidance  from the                                                            
Legislature on  that issue rather than simply taking  a position and                                                            
waiting to see  what the courts decide. Personally,  he would rather                                                            
see  the issue  addressed  as a  policy  matter at  the legislative                                                             
level.                                                                                                                          
                                                                                                                                
CO-CHAIRMAN TORGERSON said  he disagreed but the question is whether                                                            
they have the  authority to put in the order when  taxes would start                                                            
being  collected  and when  they  wouldn't.  The LBC  isn't  arguing                                                            
whether they  have the authority,  they just choose not to  exercise                                                            
the authority.                                                                                                                  
                                                                                                                                
MR. TESCHE  said they question  whether they  have the authority  in                                                            
the first  place  and that  is where  the problem  starts. He's  not                                                            
comfortable with the proposition that they have the authority.                                                                  
                                                                                                                                
CO-CHAIRMAN TORGERSON  asked when Nancy Golfstead  resigned from the                                                            
LBC.                                                                                                                            
                                                                                                                                
MR. WARING thought is was in July.                                                                                              
                                                                                                                                
CO-CHAIRMAN  TORGERSON asked if there  were four commission  members                                                            
when the report was adopted.                                                                                                    
                                                                                                                                
MR. WARING  said they had four members  when the report was  adopted                                                            
and at  the time  of the  most recent  Homer public  hearing.  Mayor                                                            
Wasserman resigned from the LBC about a month ago.                                                                              
                                                                                                                                
CO-CHAIRMAN  TORGERSON  asked whether  the  request  for the  budget                                                            
amendment of $50,000.00  for help with borough incorporations  is in                                                            
the budget  request  to the  Legislature or  just a  request to  the                                                            
committee.                                                                                                                      
                                                                                                                                
MR. WARING said it isn't in any formal budget request.                                                                          
                                                                                                                                
REPRESENTATIVE   SCALZI  asked   for  background   information   and                                                            
justification  for  the  suggested  regulation  to require  a  local                                                            
public hearing  on legislative  review annexation  proposals  before                                                            
the petition is reviewed by the LBC.                                                                                            
                                                                                                                                
MR.  WARING said  legislative  review  annexations  are usually  the                                                            
controversial annexations;  the non-controversial ones are routinely                                                            
handled without coming to the legislature.                                                                                      
                                                                                                                                
The LBC put in a new requirement  that a local government submitting                                                            
a legislative  review annexation  petition  to the LBC should  first                                                            
have a  formal local public  hearing before  it is forwarded  to the                                                            
commission.  This did  not grow from  the controversy  in Homer  and                                                            
they did look  at pros and cons. On one hand, this  is an irrelevant                                                            
requirement  for many local  governments with  modest petitions  for                                                            
annexations.  It is another layer  of governmental requirement  that                                                            
would yield  no great benefit to the  petitioner or the commission.                                                             
However, periodically  there are petitions  that would benefit  from                                                            
full local  discussion. The  LBC thought it  would be worthwhile  to                                                            
put in this requirement  to ensure when there are pros and cons they                                                            
are  discussed  locally.  They don't  want  the  LBC to  become  the                                                            
audience  for things that  should be worked  out at the local  level                                                            
such as whether or not the petition should be filed.                                                                            
                                                                                                                                
REPRESENTATIVE  SCALZI  asked  if  public  comments  move  with  the                                                            
petition to the LBC.                                                                                                            
                                                                                                                                
MR. WARING said not necessarily;  the local government must document                                                            
that it passed  a resolution authorizing  the petition before  it is                                                            
accepted by the  LBC. However, the information that  is generated at                                                            
the public hearing would  not necessarily pass with the petition but                                                            
it would be  in the LBC staff file.  The commission is obviously  in                                                            
the situation  of being able to request any information  it believes                                                            
would help it make a decision  and lacking that information they can                                                            
draw their own conclusions.                                                                                                     
                                                                                                                                
There were no additional questions on the annual report.                                                                        
                                                                                                                                
CO-CHAIRMAN  TORGERSON announced the  next topic would be  the Homer                                                            
annexation.                                                                                                                     
                                                                                                                                
MR. WARING  informed committee members  he would be speaking  from a                                                            
paper prepared  2/7/02 titled Summary  of Local Boundary  Commission                                                            
Recommendation for Homer Annexation.                                                                                            
                                                                                                                                
Article  X, Section  1 of Alaska's  Constitution  defines how  local                                                            
government is dealt with  in this state. It says the purpose of this                                                            
section is:                                                                                                                     
                                                                                                                                
     ... to provide for maximum local self-government with a                                                                    
     minimum of local government units, and to prevent                                                                          
     duplication of tax-levying jurisdictions.                                                                                  
                                                                                                                                
Annexation  at the city level is the  means by which we get  to that                                                            
result.  It is  the  tool used  to prevent  proliferation  of  local                                                            
governmental units, to  minimize the number of taxing jurisdictions,                                                            
to facilitate maximum local  self government. It is a common tool as                                                            
evidenced by the more than  40 annexations for the City of Anchorage                                                            
between 1920 and 1975 when  it was unified. Many Alaskan cities have                                                            
had repeated  annexations.  It enables local  governments to  expand                                                            
their  jurisdictions  and  minimizes   the  number  of  tax  levying                                                            
jurisdictions.                                                                                                                  
                                                                                                                                
The City of Homer submitted  a petition to the LBC for annexation of                                                            
25.64  square miles  and the  LBC instead  approved  a petition  for                                                            
annexation  of 4.58  square  miles. He  stands by  the commission's                                                             
decision and  it is clear that the  commission did not rubber  stamp                                                            
the petition.  They took the information into account  and reached a                                                            
very different result than the City of Homer originally sought.                                                                 
                                                                                                                                
There are  three elements  to an  annexation decision  by the  Local                                                            
Boundary Commission:                                                                                                            
                                                                                                                                
   · There is a structured process defined in regulation and law                                                                
   · There are standards set out in law and regulation that the                                                                 
     commission follows                                                                                                         
   · There is a record of the facts as documented in the official                                                               
     record of the proceedings                                                                                                  
                                                                                                                                
The  process  was  carefully  set  out,  the  law  was  applied  and                                                            
documentation  of the reasons  is found in  the 42 page document  of                                                            
the  commission's  statement  of decision.  The  rationale  on  each                                                            
standard is laid  out so it is clear how the commission  reached its                                                            
decision.  It  is  a  structured  and  methodical  process  and  the                                                            
decision is not the result of an arbitrary or casual process.                                                                   
                                                                                                                                
The City of Homer annexation  was a lengthy and through process with                                                            
all the procedural  requirements observed.  Attachment A  summarized                                                            
the key steps in the Homer annexation proceedings.                                                                              
                                                                                                                                
There are fourteen  standards established  in law for LBC  decisions                                                            
on city  annexations. They  make certain  the respondents know  that                                                            
those  are  the  ground  rules  under  which  the  commission  makes                                                            
decisions  and it  is best  to focus  arguments  and information  on                                                            
those standards. Attachment  B lists the fourteen relevant standards                                                            
and their  basis  in statute  and regulation.  In  the statement  of                                                            
decision, each of those standards is dealt with in turn.                                                                        
                                                                                                                                
Based  on the  facts  in record,  the commission  found  that  their                                                            
recommended  annexation  of 4.58 square  miles  satisfied all  legal                                                            
standards. Some key background  for the recommended annexation is as                                                            
follows:                                                                                                                        
                                                                                                                                
    · The City of Homer was incorporated in 1964 and has had no                                                                 
      change in its upland boundaries in all that time.                                                                         
    · Since 1964 the population has grown four fold. The population                                                             
      of the greater Homer area has grown about ten fold.                                                                       
                                       thst                                                                                     
    · The City of Homer now ranks 11 in population and 61 in                                                                    
      terms of land area  among Alaska's 146 city governments. After                                                            
                                        thth                                                                                    
      annexation,  it would be  ranked 7  in  population and 48   in                                                            
      land area.                                                                                                                
    · The City of Homer already provides services used by residents                                                             
      of the area recommended  for annexation. Fire protection, EMS,                                                            
      library, parks and  recreation, bulk water supply, water/sewer                                                            
      service  to select  area,  and transportation  facilities  are                                                            
      provided.  It is difficult to determine who  is a resident and                                                            
      who is  not and find an equitable  way to make sure  those who                                                            
      benefit  from or have  access to the  services also share  the                                                            
      costs.                                                                                                                    
    · Annexation will increase real property taxes in the annexed                                                               
      area by 2.75 mills and extend the city sales tax to it                                                                    
                                                                                                                                
The record  consists  of a  City of  Homer petition,  14  responsive                                                            
briefs, written  comments on the petition  by 168 parties,  the City                                                            
of  Homer's  reply brief,  DCED's  Preliminary  Report  and  written                                                            
comments on it from 32  parties, DCED's final report and statements,                                                            
testimony, and public comments made at the local public hearing.                                                                
                                                                                                                                
In addition  to  the printed  record, the  LBC obtained  first  hand                                                            
observations by touring the area by automobile and helicopter.                                                                  
                                                                                                                                
He said  he wouldn't  list  all 14 standards  but  would respond  to                                                            
questions.  The commission did reach  a unanimous decision  that the                                                            
4.58 square  mile area did  meet all the  requirements. They  viewed                                                            
their decision as conservative.                                                                                                 
                                                                                                                                
Finally,  the commission  addressed two legal  issues raised  during                                                            
the annexation proceedings:                                                                                                     
                                                                                                                                
   · Application of HB 13 passed last year and codified as AS                                                                   
     29.35.450(c).  This is  the law that requires  a local  vote on                                                            
     the  change  of  a  service  area  boundary  before  a  borough                                                            
     government  can alter a service  area boundary. The  commission                                                            
     heard arguments and  they concluded that particular statute did                                                            
     not  nullify   the  commission's   authority  to  approve   the                                                            
     annexation  or to alter the affected  service area boundaries.                                                             
     They believe it is  in agreement with four Alaska Supreme Court                                                            
     cases  that have addressed  this issue.  The Department  of Law                                                            
     advised  that  provision   does  not impede   the commission's                                                             
     decision  to approve annexations and alter the  boundaries of a                                                            
     service  area. It is  his understanding  the Legislative  Legal                                                            
     and  Research Counsel  also advised the  Legislature that  they                                                            
     concur. This  issue has arisen in a number of  other annexation                                                            
     petitions and they reached a similar finding.                                                                              
                                                                                                                                
TAPE 02-1, SIDE B                                                                                                               
                                                                                                                                
   · The argument that the LBC should truncate the terms of elected                                                             
     local  officials  in  the  City  of Homer  and  require  a  new                                                            
     election.  The  rationale  was that,  due to  the  size of  the                                                            
     annexation,  it  would  add approximately   18 percent  to  the                                                            
     existing population  of the city. The commission elected not to                                                            
     truncate the terms based on the fact that:                                                                                 
                                                                                                                                
        o Homer Council members are elected at large and do not                                                                 
          represent a specific district                                                                                         
        o The terms of the mayor and two council members will                                                                   
          expire in October 2002, two more council terms will                                                                   
          expire in October 2003 and the last 2 council terms will                                                              
          expire in 2004                                                                                                        
                                                                                                                                
They could find  no basis for the commission taking  that initiative                                                            
and that would be a stretch of its authority.                                                                                   
                                                                                                                                
In summary, the commission  unanimously approved the petition on the                                                            
merits and the application  of the standards. They believe they took                                                            
a conservative  approach in defining  the area that was included  in                                                            
the annexed  area. Homer has not grown  as a compact tight  town; it                                                            
is very stretched  out following terrain  and developable  land. The                                                            
LBC decided  the area that is the  most immediately adjacent  to the                                                            
existing community and  most heavily developed warranted annexation.                                                            
The  LBC  didn't   feel  the  city  demonstrated  that   the  larger                                                            
annexation was warranted.                                                                                                       
                                                                                                                                
The sentiment  of the LBC is that  this annexation is long  overdue.                                                            
The point is to  put the apparatus of a city government  in place to                                                            
oversee the  period of development  rather than to come afterwards.                                                             
That  hasn't  happened  in  this  case  and  probably  some  of  the                                                            
objection to the annexation  stems from the fact that people develop                                                            
a stake in  the status quo and this  is a change in the status  quo.                                                            
                                                                                                                                
CO-CHAIRMAN TORGERSON called for questions.                                                                                     
                                                                                                                                
SENATOR PHILLIPS  asked about the  allegation that one commissioner                                                             
had a serious conflict of interest in this particular case.                                                                     
                                                                                                                                
MR.  WARING said  the petition  was  filed in  March  2000. The  LBC                                                            
operates under  both the Executive  Branch Ethics Act and  their own                                                            
bylaws that deal  with ethics issues. In June of 2000,  Commissioner                                                            
Tesche  filed notice that  he and  others in his  firm had  provided                                                            
some legal  services  to the  City of Homer.  At least  some of  the                                                            
advice  that was  given  related to  land use  issues.  They held  a                                                            
public hearing,  consulted the Attorney General's  office and looked                                                            
at both the  Executive Branch Ethics  Act and the LBC bylaws  before                                                            
determining  that  the financial  involvement  was  not substantial                                                             
enough  to disqualify  or  put any  cloud on  Commissioner  Tesche's                                                            
participation  or to constitute a conflict of interest  in the Homer                                                            
case. The issue continued  to be raised at subsequent points and the                                                            
commission continued  to think there was no substantial  conflict of                                                            
interest  because  there   was  a very  modest   level  of  previous                                                            
involvement by the commissioner.                                                                                                
                                                                                                                                
SENATOR  PHILLIPS  asked  whether  the  LBC  has  a  system  whereby                                                            
commissioners  are able  to recuse  themselves from  voting if  they                                                            
have a conflict of interest.                                                                                                    
                                                                                                                                
MR. WARING said  whenever there is any possible cloud  of this sort,                                                            
it is disclosed  to the commission  and they go through the  hearing                                                            
process described previously.                                                                                                   
                                                                                                                                
SENATOR  PHILLIPS asked whether  Mr. Tesche  disclosed his  conflict                                                            
right away.                                                                                                                     
                                                                                                                                
MR.  WARING said  it  is the  responsibility  of a  commissioner  to                                                            
disclose  to him as  Chairman as  well as the  Attorney General  any                                                            
possible  conflict  and there  are serious  consequences  if  anyone                                                            
fails to do so.                                                                                                                 
                                                                                                                                
SENATOR PHILLIPS said he was interested in how it was done.                                                                     
                                                                                                                                
MR. TESCHE responded in  accordance with the Executive Branch Ethics                                                            
Act  and  the   separate  ethics   standard  that  applies   to  the                                                            
commission,  he was  ethically  required to  offer a  letter to  the                                                            
Chair that set forth the  pertinent facts of the previous legal work                                                            
that he  did for the  City of Palmer  that might  be the subject  of                                                            
potential criticism. He  did submit such a letter and he did request                                                            
a determination from the  commission as to whether he could continue                                                            
to participate  on the merits  of the application.  In open  session                                                            
and  without his  participation,  the  commission  made appropriate                                                             
rulings on  both requests  and determined there  was not a  conflict                                                            
that would require  him to recuse. A copy of that  correspondence is                                                            
available to the  committee members if they so desire.  He said they                                                            
could  then see  what the  disclosure was  and that  would  probably                                                            
answer questions concerning the decision made by the commission.                                                                
                                                                                                                                
MR.  WARING  announced  he  had  a  copy of  Commissioner   Tesche's                                                            
original letter, the commission's  action, subsequent correspondence                                                            
on the issue and his reply.                                                                                                     
                                                                                                                                
SENATOR  PHILLIPS   asked  for  verification  that  the   commission                                                            
reviewed  the material and  determined there  was not a conflict  of                                                            
interest.                                                                                                                       
                                                                                                                                
MR. WARING  said they  made a decision  after  a public hearing  and                                                            
notice to interested parties.                                                                                                   
                                                                                                                                
REPRESENTATIVE  HALCRO  asked  what  type  of  appeals  process  was                                                            
available once  the commission amended the City of  Homer's petition                                                            
from 25 square miles down to 4.58 square miles.                                                                                 
                                                                                                                                
MR. WARING replied there  are two stages for anyone disagreeing with                                                            
the  LBC decision.  One is  the reconsideration   process, which  is                                                            
fairly limited in its scope.  There are specific criterion that deal                                                            
with a claim of  misrepresentational fraud or if there  were serious                                                            
errors in  the commission's  process or their  understanding  of the                                                            
law that warranted  the commission reconsidering the  decision or if                                                            
there  was information  available in  the period  after the  hearing                                                            
that  would   have  significant   bearing   on  the  basis   of  the                                                            
commission's  decision. Taking that  into consideration,  they might                                                            
reopen their decision.  Six or seven parties requested  they do that                                                            
but they chose not to do so.                                                                                                    
                                                                                                                                
There  is opportunity  for litigation  if someone  is convinced  the                                                            
commission improperly applied  the standard, did not have a basis in                                                            
the  facts, or  if the  decision  made did  not follow  the  process                                                            
properly. There is also  the legislative review of the LBC decision,                                                            
which provides an opportunity  for the legislature to determine that                                                            
they made a decision based on merit.                                                                                            
                                                                                                                                
SENATOR  HALCRO asked  whether the City  of Homer  asked the  LBC to                                                            
reconsider their decision to amend their petition.                                                                              
                                                                                                                                
MR. WARING said no they did not.                                                                                                
                                                                                                                                
SENATOR  HALCRO  found it  striking  that the  city  didn't ask  for                                                            
reconsideration  when their petition  for annexation was  reduced by                                                            
83 percent.                                                                                                                     
                                                                                                                                
MR. WARING suggested those  questions might best be addressed to the                                                            
city but they were accepting  of the decision at the public hearing.                                                            
                                                                                                                                
SENATOR  LINCOLN  asked  whether the  commissioner  from  the  First                                                            
Judicial District participated through the entire process.                                                                      
                                                                                                                                
MR. WARING  replied she  participated through  the hearings  and the                                                            
decision.  Commissioner Wasserman  resigned before  the vote  not to                                                            
reconsider,  but since the  vote was three  zero not to reconsider,                                                             
the resignation made no difference in the outcome.                                                                              
                                                                                                                                
SENATOR LINCOLN  said she  assumes there  was no participation  from                                                            
the commissioner from the Second Judicial District.                                                                             
                                                                                                                                
MR. WARING said that is correct.                                                                                                
                                                                                                                                
SENATOR  LINCOLN then  asked if the  LBC conducted  a total  of four                                                            
meetings on the Homer annexation.                                                                                               
                                                                                                                                
MR.  WARING replied  there  were two  commission  meetings. The  LBC                                                            
staff attended  some of the other  public informational meetings  to                                                            
explain the pros  and cons, the applicable statutes  and the process                                                            
by which the  commission does its  business. The commission  did not                                                            
meet on that until the final meeting is December.                                                                               
                                                                                                                                
SENATOR   LINCOLN  asked   if  any   meetings   were  conducted   by                                                            
teleconference.                                                                                                                 
                                                                                                                                
MR. WARING told  her the reconsideration was teleconferenced.  There                                                            
was Homer participation  in some of  the procedural steps  and there                                                            
was a great deal of interest  from residents regarding the suggested                                                            
regulation  change requiring  a local  public hearing.  This was  an                                                            
idea from a Homer resident and the commission agrees.                                                                           
                                                                                                                                
The   commission  has   open  meeting   requirements   and   exparte                                                            
conversations  are not their way of  doing business. As a  matter of                                                            
course,  the commission  does  not discuss  cases  among  themselves                                                            
until they are at the public hearing.                                                                                           
                                                                                                                                
SENATOR  LINCOLN referred  to a  map of  the area and  asked him  to                                                            
speak  to   why  the  commission   added  two  sections   more  than                                                            
recommended by DECD.                                                                                                            
                                                                                                                                
MR. WARING  pointed  out that  the area  outlined in  red shows  the                                                            
staff's  recommendation. At  the hearing,  owners from the  adjacent                                                            
160 acres  requested  that their property  be added  to the  annexed                                                            
area. They  thought it  would improve their  opportunity to  develop                                                            
their property. The second  area that was added lies along the coast                                                            
and is sloped  land. The city requested  that area be added  so they                                                            
could  have jurisdiction  to  protect the  scenic  qualities of  the                                                            
area.                                                                                                                           
                                                                                                                                
SENATOR  LINCOLN referred  to the map  again and  asked about  a pie                                                            
shaped piece that is not included in the boundary.                                                                              
                                                                                                                                
MR. WARING replied  that the commission does the best  they can, but                                                            
there  will  always  be disagreements   and because  of  the  ground                                                            
conditions at Homer, it  is impossible to draw a bright line between                                                            
developed and not developed.                                                                                                    
                                                                                                                                
He then asked  if she was referring  to the area outlined  in green.                                                            
                                                                                                                                
SENATOR LINCOLN  said she  was referring to  a portion of that  area                                                            
that looks  very populated.  She then  pointed to  another area  and                                                            
asked about that.                                                                                                               
                                                                                                                                
MR. WARING  apologized  that he was  referring to  a different  area                                                            
when he answered the question.                                                                                                  
                                                                                                                                
SENATOR LINCOLN said she was trying to follow his answer.                                                                       
                                                                                                                                
MR. WARING  explained the area encircled  by the green blue  line is                                                            
the existing  City of Kachemak,  which predates  the City of  Homer.                                                            
The City of Homer  has grown to the point it butts  against the City                                                            
of Kachemak and one of  the reasons the LBC did not approve the area                                                            
proposed  by the  City of  Homer is  that it would  have  completely                                                            
encircled the  City of Kachemak. Generally,  commission regulations                                                             
do  not favor  creating  in-holdings  of that  sort.  It is  already                                                            
incorporated  as a city, it  is not an area  that the City  of Homer                                                            
sought and  it did  not ask to be  included in  the petition  so the                                                            
commission did not consider it.                                                                                                 
                                                                                                                                
REPRESENTATIVE  SCALZI ensured all present that the  scrutiny of the                                                            
questions  in no way impugns  on the integrity  of the work  done by                                                            
LBC staff but  they certainly don't want there to  be any appearance                                                            
of a rubber stamp.                                                                                                              
                                                                                                                                
He  asked about  the  standard that  says,  "the area  proposed  for                                                            
annexation  does  not  include  entire  geographical  area  with  no                                                            
population…"  For  clarification  he said,  "The  area  that has  no                                                            
population,  from  the  top of  West  Hill over  to  Skyline,  which                                                            
includes  the  reservoir,  I  would assume  although  the  city  has                                                            
territorial  powers  there granted  by the  borough,  that area  was                                                            
included  because  of the  watershed  more  so than  any  similarity                                                            
between the populated area."                                                                                                    
                                                                                                                                
MR. WARING agreed  that is the city's water supply  and they do have                                                            
some concern  about the  long-term adequacy  of their water  supply.                                                            
The area  doesn't include  the watershed  as much  as the  reservoir                                                            
itself. There  is some development  going on  in that area  and they                                                            
thought it  was simpler and  sounder to give  the city jurisdiction                                                             
over that area.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  SCALZI  asked  for  confirmation  that the  LBC  did                                                            
recognize the  area was largely unpopulated  and that does  not meet                                                            
standard number five.                                                                                                           
                                                                                                                                
MR. WARING replied  their reading of standard five  is different and                                                            
it is  very natural for  annexations to  include unpopulated  areas.                                                            
That  is  part of  the  point  of  annexations.  The  standards  for                                                            
boroughs  and cities are  very different;  borough standards  accept                                                            
the fact that  there will be large unpopulated areas  within borough                                                            
jurisdiction.  The  standards for  cities  are different;  they  are                                                            
meant to be places  of settlement now or in the near  future and the                                                            
requirement is  that there not be large unpopulated  areas. However,                                                            
they do provide for reasonable growth over a ten year period.                                                                   
                                                                                                                                
                                                                                                                                
REPRESENTATIVE  SCALZI asked if he  would concur that the  standards                                                            
are very subjective.                                                                                                            
                                                                                                                                
MR. WARING  responded there  is judgment needed  and they try  to be                                                            
consistent.  He doesn't concede  that the  judgments are  arbitrary;                                                            
the judgments are informed.                                                                                                     
                                                                                                                                
MR. TESCHE  said the  key point  is judgment.  When considering  the                                                            
relatively  small  piece  of  property  being  questioned  and  when                                                            
historic growth  patterns of the more  developed areas of  Homer are                                                            
considered, it  is reasonably foreseeable that within  the next five                                                            
to ten  years there  will be  additional development  such that  one                                                            
could say that particular  property is no longer rural in character.                                                            
It is more  a question  of judgment on the  particular facts  rather                                                            
than a truly subjective  standard based on feelings  or perceptions.                                                            
                                                                                                                                
REPRESENTATIVE SCALZI referred to standards eight and nine:                                                                     
   · The City of Homer has provided a suitable transition plan for                                                              
     extension of City services.                                                                                                
   · The boundaries approved by the commission include all areas                                                                
     necessary to provide essential city services on an efficient,                                                              
     cost-effective level.                                                                                                      
                                                                                                                                
Obviously, the commission  thought those standards were met. He then                                                            
had a  question about the  approximately  $1.6 million in  increased                                                            
revenue the  city would get according  to the final review  plan. He                                                            
asked whether  the commission  considered  the mill rate  adjustment                                                            
that would  take place  in relation  to the services  that would  be                                                            
added or  are currently being  used. "In other  words, I didn't  see                                                            
anywhere in  the transition plan that  would be a reduction  rate of                                                            
the mill rate  on how those things would be, the new  services would                                                            
be paid for."                                                                                                                   
                                                                                                                                
MR.  WARING  said the  applicable  standards  regarding  the  fiscal                                                            
issues are that  the LBC must find that the combined  area possesses                                                            
the financial,  economic  and human  resources to  fund and  provide                                                            
services. They  don't measure whether  the new revenue will  exactly                                                            
match  up with  the  cost of  the  services  to be  provided;  their                                                            
decision is more general.  They looked at Homer and determined that,                                                            
by Alaskan standards,  it is a sophisticated, financially  sound and                                                            
economically healthy  community. They had no problem  reaching their                                                            
conclusion.                                                                                                                     
                                                                                                                                
REPRESENTATIVE  SCALZI said he agrees  and has no problem  with that                                                            
either.  If the services  have  already been  provided, even  though                                                            
there would  be some new ones, those  people outside the  city would                                                            
be  taxed,  which would  bring  $1.6  million  in new  revenue.  The                                                            
commission  must also consider the  position of those being  annexed                                                            
as well  as that of  the city. He  would think  there would  be some                                                            
scrutiny as to where those  new funds are going to go, not just that                                                            
they are enough to pay for the services.                                                                                        
                                                                                                                                
MR. WARING  said this is a nuance  area. There is no requirement  in                                                            
law that there  is any one-to-one  parity between revenues  paid and                                                            
services  gotten. There are  also pro and  con arguments. One  party                                                            
might  argue they  are just  catching up  and finally  able to  bill                                                            
those people  who have been  using the services  in years past.  The                                                            
counter argument  is that  nothing of significance  is being  gotten                                                            
for the  new taxes  and therefore  they are  unfair. The  commission                                                            
decided,   based  on  the   Constitutional   standard  referred   to                                                            
originally,  it makes more  sense to put  within one government  the                                                            
people  that share  interest  in the  provision  of  and paying  for                                                            
governmental services.                                                                                                          
                                                                                                                                
REPRESENTATIVE  SCALZI asked  if the formation  of the fire  service                                                            
district  played  a big  part in  the LBC  decision  regarding  what                                                            
services are now being paid for that were not before.                                                                           
                                                                                                                                
MR. WARING  replied the formation  of the new fire service  area was                                                            
formed after the annexation petition was filed.                                                                                 
                                                                                                                                
REPRESENTATIVE SCALZI reminded  Mr. Waring the question was how much                                                            
of a factor did that play  because obviously it was formed and there                                                            
was  a mill  rate of  1.75  that was  going  to be  collected.  What                                                            
percentage  of that played  into the decision  to either reduce  the                                                            
boundaries or alleviate  the city's burden of services that were not                                                            
being paid for?                                                                                                                 
                                                                                                                                
MR. WARING  said their  decision as  to where  to draw the  boundary                                                            
lines  was not  affected. However,  a section  in Article  X of  the                                                            
Constitution  clearly specifies  that  service areas  are not  to be                                                            
formed  where there  is  an existing  local  government  or city  or                                                            
service area  that is capable  of providing  the services.  The city                                                            
was already  providing the services.  Clearly the city did  have the                                                            
capability,  it  had provided  services  and  it was  continuing  to                                                            
provide services.                                                                                                               
                                                                                                                                
REPRESENTATIVE SCALZI asked  if they know there is argument that the                                                            
city should  not have  provided  those services  without a  contract                                                            
outside their  jurisdiction. There is a necessity  of a relationship                                                            
between the entities  outside and those inside to  have some type of                                                            
contractual  agreement  so  the fire  service  area was  actually  a                                                            
benefit to the city in that sense.                                                                                              
                                                                                                                                
MR. TESCHE  wanted to revisit  the question,  "How much of  a factor                                                            
did that fire service area  pose?" Speaking for himself he said, the                                                            
formation of the  fire service area suggested to him  that there was                                                            
a  recognition  that  services  were  being   provided  outside  the                                                            
jurisdiction.  A local decision was  being made that they  should be                                                            
paid for it  in some fashion through  a service area. Without  going                                                            
into all the  mechanics of that service  area formation and  all the                                                            
ramifications  in terms of contracts,  it did provide him  assurance                                                            
that services were being  provided that people were going to pay for                                                            
through that service area as proposed.                                                                                          
                                                                                                                                
On the  other issues raised  earlier about  how you ensure  the city                                                            
will provide equal  value for the taxes collected  in a new area, he                                                            
said he  has two  comments. First,  the record  did not suggest  any                                                            
history  within the  city of  Homer of  unequal  treatment of  local                                                            
citizens in  terms of delivery of  services. It did not suggest  the                                                            
kind of history  that would give him concern that  if the annexation                                                            
were approved;  the people in the newly annexed area  would be given                                                            
"short shrift"  in terms of the taxes they pay. The  other assurance                                                            
is that the 800  or 900 residents in the newly annexed  area are all                                                            
voters that  can participate in a  political process to assure  they                                                            
will be treated fairly.                                                                                                         
                                                                                                                                
CO-CHAIRMAN TORGERSON made  the dry remark, "I'm glad you think that                                                            
way."                                                                                                                           
                                                                                                                                
REPRESENTATIVE  SCALZI asked how well  they scrutinized the  figures                                                            
provided by the  city regarding the collection of  the funds and did                                                            
they feel confident that those figures were valid.                                                                              
                                                                                                                                
MR.  WARING  said  they  felt  confident  there  was  the  financial                                                            
capacity to fund city services  and to raise revenues to provide the                                                            
level of service that local  voters would choose. This is a decision                                                            
to be made at the local political level.                                                                                        
                                                                                                                                
REPRESENTATIVE  SCALZI  asked which  essential  services were  being                                                            
provided to  the residents outside  the city that they will  have to                                                            
catch up paying for.                                                                                                            
                                                                                                                                
MR. WARING said  there were some services available  to and paid for                                                            
by residents outside the  city such as library, recreation and water                                                            
supply. Services that would  become available would be city planning                                                            
and zoning,  public safety  and the contract  services such  as fire                                                            
and  EMS  services.  An  area  that  is  steadily  growing  but  not                                                            
necessarily in  an even way presents the task of deciding  where the                                                            
line should be drawn.                                                                                                           
                                                                                                                                
REPRESENTATIVE  SCALZI said he understood he just  wanted to clarify                                                            
for the record.  The question was  about the services. He  asked him                                                            
if he would concede  that the borough is providing  the planning and                                                            
zoning services.  Perhaps not to the extent that the  city provides,                                                            
but the  water and sewer  are paid for through  enterprise  funds or                                                            
the sale of water  outside the city. The fire and  EMS are now taken                                                            
care of with the  fire service area so the ones they  are not paying                                                            
for now  are the  library, parks  and recreation  and public  safety                                                            
when there is not a trooper available.                                                                                          
                                                                                                                                
MR. TESCHE offered that  he prioritized the services. Number one was                                                            
police protection,  second  was the harbor,  the library and  museum                                                            
services ranked  third and public works was four.  This included the                                                            
parks and  an improved method  for water  and sewer. Animal  control                                                            
was last on the list.                                                                                                           
                                                                                                                                
REPRESENTATIVE  SCALZI  said he would  add the  airport. The  things                                                            
that come into  play in a city obviously  benefit those outside  and                                                            
there is  lots of argument  in favor. However,  he wanted to  get to                                                            
the specifics and take out the subjective.                                                                                      
                                                                                                                                
Representation  was one of his concerns. During a  contentious phase                                                            
such  as  this, the  representation  has  to  be  addressed  whether                                                            
annexation  is approved  or not. He  then asked  whether the  LBC is                                                            
also aware  that there  is a  thirty day requirement  for  residency                                                            
before you can vote and  a one year residency requirement before you                                                            
can run  for office. If  the annexation goes  through, those  in the                                                            
affected area  will not be able run  for office out of that  annexed                                                            
area in the upcoming general election.                                                                                          
                                                                                                                                
MR. WARING said he was not aware of that particular requirement.                                                                
                                                                                                                                
REPRESENTATIVE   SCALZI   asked   if  he   would  agree   that   the                                                            
representation  issue is  of concern  when about  23 percent  of the                                                            
comparative  mass of the  population is going  to change. The  Kenai                                                            
Peninsula  Borough  code  calls for  a  new election  any  time  the                                                            
population changes  by more than ten percent in any  one given area.                                                            
                                                                                                                                
MR. WARING  thought that  might be representation  by districts  and                                                            
this discussion is about  at large seats so different considerations                                                            
might  apply to  districts  with shifting  populations.  During  the                                                            
proceedings they heard  no legal arguments or legal support that led                                                            
them to  believe they  could truncate  terms. They  did have  common                                                            
sense arguments  that there will be many new residents  and it's not                                                            
fair, but the commission  was given no reason in law. Alternatively,                                                            
they were  given the analysis  and advice  of the Department  of Law                                                            
and subsequently  the advice  of the Legislators  counsel that  this                                                            
was probably going beyond the commission's power.                                                                               
                                                                                                                                
REPRESENTATIVE SCALZI said  they recognize that for the considerably                                                            
larger original  territory  for annexation,  that issue would  be of                                                            
greater  concern, but  for the smaller  area, it  was of concern  as                                                            
well. From  his perspective  it was a judgment  call. The impact  in                                                            
terms  of the  people  coming  in had  to  be balanced  against  the                                                            
representation of the people  in the City of Homer that placed those                                                            
council members and mayor in office.                                                                                            
                                                                                                                                
TAPE 02-2, SIDE A                                                                                                             
9:50 a.m.                                                                                                                       
                                                                                                                                
MR. TESCHE said  it was of concern and they made a  judgment call by                                                            
balancing the competing interests.                                                                                              
                                                                                                                                
REPRESENTATIVE  SCALZI said, "But  you were unaware of the  one year                                                            
residency clause."                                                                                                              
                                                                                                                                
MR. BOCKHORST  explained the DCED was aware of the  residency clause                                                            
and did address  it in its reports  and recommendations to  the LBC.                                                            
They conferred  with the City of Homer on the issue  and reported to                                                            
the LBC  that they both  had the same interpretation;  the  one year                                                            
residency  requirement  takes affect  in terms  of  when the  person                                                            
became a  resident of the  area. They don't  have to be annexed  and                                                            
included within  the city boundaries  for one year. As long  as they                                                            
lived in that  annexed area for one year prior to  the election they                                                            
would qualify as a candidate for that office.                                                                                   
                                                                                                                                
CO-CHAIRMAN  TORGERSON  asked if the  commission  put that in  their                                                            
report to the legislature.                                                                                                      
                                                                                                                                
MR. BOCKHORST  replied it was their  report to the LBC and  does not                                                            
appear in the decisional statement.                                                                                             
                                                                                                                                
CO-CHAIRMAN  TORGERSON asked if they  agreed they had the  authority                                                            
to truncate terms.                                                                                                              
                                                                                                                                
MR. WARING admitted they  discussed that in their decisional session                                                            
but did not find  the facts compelling enough for  the commission to                                                            
take an unprecedented action of that sort.                                                                                      
                                                                                                                                
CO-CHAIRMAN  TORGERSON repeated  the question,  "Do you believe  you                                                            
have the authority to truncate terms?"                                                                                          
                                                                                                                                
MR. WARING admitted he didn't know.                                                                                             
                                                                                                                                
REPRESENTATIVE  MEYER said  his comment relates  to HB 13.  The bill                                                            
pertains to voter approval  of formation, alternation or abolishment                                                            
of certain service areas.  In the commission opinion, this bill does                                                            
not  apply   to  this  annexation   but  it  does  apply   in  other                                                            
annexations. He asked why  it doesn't apply in the Homer annexation.                                                            
                                                                                                                                
MR. WARING said the LBC  does not think it applies to annexations at                                                            
all  but it  does condition  the  authority  of a  borough to  alter                                                            
service area boundaries  that are established within  the borough. A                                                            
borough may not alter those service areas without a local vote.                                                                 
                                                                                                                                
They were aware  of HB 13 from last session and the  DCED might have                                                            
taken a position  on the bill but  the LBC did not because,  as they                                                            
interpreted   the   bill,   it  did   not   intersect   with   their                                                            
responsibilities. It was  about a requirement that local governments                                                            
would have to meet in order  to alter service area boundaries within                                                            
their jurisdictions.  It is in the part of Title 29  that deals with                                                            
local governmental  powers and is  not in the part of Title  29 that                                                            
deals with the commission or its responsibilities.                                                                              
                                                                                                                                
REPRESENTATIVE  MEYER said  he must  have misheard.  He thought  Mr.                                                            
Waring  said it does  apply to some  annexations,  which led  to his                                                            
confusion.                                                                                                                      
                                                                                                                                
REPRESENTATIVE MURKOWSKI  referred to the conclusion of the Balanced                                                            
Best Interests portion of the Statement of Decision.                                                                            
                                                                                                                                
   The  commission  concludes  that the  balanced  best interest                                                                
   standard  is satisfied  in the most favorable  manner at  this                                                               
   time  by  limiting  the  expansion  of  the  City  of  Homer's                                                               
   boundaries  to the 4.58 square  miles approved for annexation                                                                
   by the commission.                                                                                                           
                                                                                                                                
She asked why "at this time" is italicized.                                                                                     
                                                                                                                                
MR. WARING  replied  it is simply  an acknowledgement  of a  dynamic                                                            
situation.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  MURKOWSKI didn't  want to  make the assumption  they                                                            
would change  their decision  next year. She  was curious about  the                                                            
factors  the commission  would  consider that  might  cause them  to                                                            
revisit the issue and start over.                                                                                               
                                                                                                                                
MR.  WARING  stated  it  was  not  meant   to  say  there  might  be                                                            
circumstances  under  which  they  would  undo  their  decision.  He                                                            
reminded members  there is a regulation  that says a petitioner  may                                                            
not submit a similar petition to the commission for two years.                                                                  
                                                                                                                                
REPRESENTATIVE HALCRO asked  what the public process notification is                                                            
for those  people in the  reduced area because  their potential  tax                                                            
burden is changed with the amended petition.                                                                                    
                                                                                                                                
MR. WARING  replied it  is the process  they went  through.  All the                                                            
parties that  were in the  original petition  area were noticed  and                                                            
this was a  decision made within the  boundaries of an area  already                                                            
noticed.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  HALCRO  pointed  out  there  was  no answer  to  his                                                            
question. When the annexed  area was changed from 25 square miles to                                                            
4.58 square  miles, the property taxes  of those inside the  reduced                                                            
area were  obviously affected.  There is a  formula of personal  tax                                                            
liability that  will have changed  since there is a change  in total                                                            
area.  Did  the people  inside  the  area of  the  amended  petition                                                            
receive notice about how this would affect their tax liability?                                                                 
                                                                                                                                
MR.  WARING said  they had  the opportunity  throughout  the  entire                                                            
proceeding to know they  were candidates for annexation and he's not                                                            
sure the commission ordinarily  notices a second time if the annexed                                                            
area changes.                                                                                                                   
                                                                                                                                
MR. TESCHE  informed members  the preliminary  staff report  had the                                                            
original recommendation  to reduce  the scope of the annexation  and                                                            
contained the rationale.                                                                                                        
                                                                                                                                
REPRESENTATIVE HALCRO asked  Mr. Bockhorst to explain how the public                                                            
had  the  opportunity  to  know  of  and  comment  on  the  proposed                                                            
reduction of the area and its affect on taxes.                                                                                  
                                                                                                                                
MR. BOCKHORST  explained that in the  course of filing the  original                                                            
petition,  the city  sent out  estimates  of the  revenues it  would                                                            
receive and  expenditures it would  incur as a result of  annexation                                                            
of the  entire 25.64 square  mile area with  about 2200 people.  LBC                                                            
staff  took into  consideration the  financial  consequences of  the                                                            
smaller  annexation  and included  detailed  information  about  the                                                            
effects the smaller area  would have on revenues and expenditures of                                                            
the  city.  They  did this  in  both  their  preliminary  and  final                                                            
reports. The property tax  rates used in their calculations were the                                                            
same rates that  were in effect in the City of Homer.  In particular                                                            
they recognized  their recommendation  was conservative and  focused                                                            
on the  more populated and  fully developed  areas of the  territory                                                            
proposed for annexation.                                                                                                        
                                                                                                                                
REPRESENTATIVE  HALCRO  asked how  the revised  information is  made                                                            
available to the public.                                                                                                        
                                                                                                                                
MR.  BOCKHORST  replied  they  are  required  by law  to  prepare  a                                                            
preliminary report and  make it available for public review at least                                                            
four weeks before  the hearing. The information in  the final report                                                            
must be public  at least three weeks  prior to the LBC hearing.  The                                                            
reports were widely circulated  at the public library, city hall, on                                                            
the Internet and to interested parties.                                                                                         
                                                                                                                                
REPRESENTATIVE  SCALZI said the city took public comments  on the 25                                                            
mile annexation  during  the initial  phase and  there were four  or                                                            
five  alternative  plans for  reducing  the boundaries.  There  were                                                            
suggestions of differential  tax mill rates and discussions of phase                                                            
ins. Mr. Bockhorst let  the community know what was available to the                                                            
City of Homer  but they maintained  the 25 square miles for  the two                                                            
years of  the review.  There was a  very short  time to analyze  the                                                            
smaller area yet  there was no incentive during the  process for the                                                            
City  of Homer  to reduce  those boundaries.  The  argument  against                                                            
resubmitting  the petition  with the reduced  area is that  it would                                                            
take another year or so before the petition would be considered.                                                                
                                                                                                                                
Viewed on a statewide  basis, the Legislature has  to view what will                                                            
happen next time  this same thing happens and in doing  so they want                                                            
to send the  correct message. Does  this encourage cities  to go out                                                            
for land  grabs  that are  larger than  they think  is palatable  to                                                            
their area  when they  know the end  result will  be left up  to the                                                            
LBC? This process creates hostility in the community affected.                                                                  
                                                                                                                                
MR. WARING  agreed the  city did  have an opportunity  to amend  its                                                            
petition.  Because  the commission  does not  pass  judgment on  the                                                            
petition, whatever  the city initiates or maintains  is the petition                                                            
that  comes to  the LBC  at the  public  hearing.  The LBC  decision                                                            
reflects their judgment  that the city failed to substantiate a good                                                            
part of their  petition. The lesson  to be learned is that  there is                                                            
no  gain from  submitting  a petition  that  is not  well  grounded,                                                            
argued and  justified. The LBC is  mandated to accept a petition  as                                                            
submitted and  has no latitude to  alter it until the end  stage. He                                                            
said he thinks they need  to speak by its actions rather than making                                                            
pronouncements  about  how  local governments  should  handle  these                                                            
issues that are essentially political.                                                                                          
                                                                                                                                
MR. TESCHE  added there is  a concern that  local governments  could                                                            
engage  in a  bargaining  process  and ask  for a  lot  in hopes  of                                                            
getting something  more reasonable.  As a  means of moderating  that                                                            
type of activity, he is  pleased with the addition of the regulation                                                            
requiring a public hearing in the area.                                                                                         
                                                                                                                                
CO-CHAIRMAN TORGERSON  referred to the following new  regulation and                                                            
proposed changes:                                                                                                               
                                                                                                                                
   In  accordance   with  AS  29.05.021,  a  community   may  not                                                               
   incorporate  as  a city  if  essential  city services  can  be                                                               
   provided more efficiently and  effectively by annexation to an                                                               
   existing  city   or  can  be  provided  more  effectively   or                                                               
   efficiently  by existing  organized  borough on  an area  wide                                                             
   basis, a non  area wide basis, or through an existing  borough                                                             
   service area.                                                                                                              
                                                                                                                              
His stated his interpretation  of the addition to the new regulation                                                            
is contrary  to their  decision on  HB 13 application  in the  Homer                                                            
area and asked for an explanation.                                                                                              
                                                                                                                                
MR.  WARING  respectfully  disagreed.  In  that case,  there  was  a                                                            
service area  created after the petition  was filed and legislative                                                             
counsel  volunteered  the  opinion  that  may  be  unconstitutional                                                             
because it is in conflict  with a provision in the constitution that                                                            
defines  when  and  under  what  circumstances   service  areas  are                                                            
preferred.  He shares the  view that it may  be an unconstitutional                                                             
service area.                                                                                                                   
                                                                                                                                
CO-CHAIRMAN TORGERSON  said that's not his point;  it's that the LBC                                                            
is changing  their  own regulations  to  say you  now must  consider                                                            
existing borough  service area boundaries with respect  to essential                                                            
services that  are being applied to  the area. "That is 180  degrees                                                            
out of your  decision as  it applies to HB  13, except for  the vote                                                            
part."                                                                                                                          
                                                                                                                                
MR. WARING  responded that is about  incorporations not annexations                                                             
and it is a limitation  on incorporating a new city government in an                                                            
area where there is already a mechanism in place.                                                                               
                                                                                                                                
CO-CHAIRMAN TORGERSON  remarked the same standards  should apply. He                                                            
called for  additional questions and  advised he would like  to hear                                                            
from the legislative  legal counsel as soon as he  put forth his own                                                            
opinion on the matter.  (Representative Scalzi agreed with him.)                                                                
                                                                                                                                
He said both the City of Homer and the LBC have acted legally but                                                               
he isn't so sure with regard to the moral standard. He continued:                                                               
     Your  decisions  have sent  a chill  through  people  that                                                                 
     reside close  to a city about how the application  of this                                                                 
     decision  as it reflects  from the process  that, in  this                                                                 
     case,  could have  been  done a  lot better.  This pitted                                                                  
     neighbor  against neighbor, community  against community,                                                                  
     which  a lot of  times annexations  do but  this was  even                                                                 
     more so.                                                                                                                   
                                                                                                                                
     The  application  of HB  13 may  be  not direct  on  point                                                                 
     because  we didn't amend the  right part of the statutes,                                                                  
     which  may   be  our  fault  but  clearly  there   was  an                                                                 
     expectation  among people that HB 13 would have  an effect                                                                 
     on when people  have gotten together and formed  their own                                                                 
     service areas  on what the power would be and  you're part                                                                 
     of government.  I understand  it's the part of government                                                                  
     that's  in our  constitution so  maybe you  have a little                                                                  
     higher burden than a regular  government but you also have                                                                 
     that burden for people in  annexed areas and I believe you                                                                 
     missed that in this case.                                                                                                  
                                                                                                                                
     Truncation of terms, I can't  believe we're not asking for                                                                 
     that  to  happen.   Eighteen  months  before  anybody   is                                                                 
     eligible  for running for council,  now we've heard  maybe                                                                 
     the city will be okay with  doing that but its not part of                                                                 
     the  record. And then  they say that  here's a little  bit                                                                 
     but  that's not  part of your  record, it  wasn't part  of                                                                 
     your  deliberations.  You  basically  said you'll  have  a                                                                 
     chance  to influence the next  election by throwing  money                                                                 
     at it  or however you want to  influence the election  but                                                                 
     you are  not part of that. You  can vote people in or  out                                                                 
     but you're  not part, you can't run to represent  your own                                                                 
     area. Your legal opinion was wrong in that case.                                                                           
                                                                                                                                
     More so, what  we don't have is a direct link  of services                                                                 
     to dollars.  This now gives the message the money  grab is                                                                 
     on.  It could  happen anywhere  in  the state.  As I  said                                                                 
     earlier,  you sent a  chill through  the people of Alaska                                                                  
     because of  not handling some of these decisions  that now                                                                 
     I think  will be handled legislatively.  If you give  more                                                                 
     credence  to my constitutional  amendment that I have  in,                                                                 
     then  I'm probably  going to  broaden it a  little bit.  I                                                                 
     hate to do that but if that's  what it takes then maybe we                                                                 
     can get  the bill and get enough  votes to get it passed.                                                                  
     It's not  an easy job but I think  you missed the mark  on                                                                 
     some of this as it applies to this annexation.                                                                             
                                                                                                                                
CO-CHAIRMAN  TORGERSON called  Tam Cook forward  to place her  legal                                                            
comments on the record.  He advised members he wrote her a letter on                                                            
January  2, 2002  and  asked  clarification  on the  following  four                                                            
issues:                                                                                                                         
                                                                                                                                
   1. Does the newly adopted language in HB 13 (passed in 2001)                                                                 
     apply to this "detachment"?                                                                                                
   2. When will the city be required to hold elections to provide                                                               
     representation for the newly annexed population?                                                                           
   3. Is the LBC able to make a determination that will result in a                                                             
     city's receiving more tax funds than it will expend for                                                                    
     services in the new area?                                                                                                  
   4. Who is responsible for ensuring that the City of Homer                                                                    
     complies with the service expansions and funding they have                                                                 
     proposed to the LBC?                                                                                                       
                                                                                                                                
TAM COOK, Director  of Legislative Legal Services,  stated she would                                                            
agree with  the Department  of Law  and with the  conclusion  of the                                                            
LBC; HB 13 doesn't  apply in the case of annexations.  She expressed                                                            
surprise that  anyone would think  it would apply. The Constitution                                                             
is clear that  the LBC has the right  to present any proposed  local                                                            
boundary  change and  to consider  any  local boundary  change.  The                                                            
statute  with   respect  to  service   areas  can't  restrict   that                                                            
constitutional authority of the LBC.                                                                                            
                                                                                                                                
C0-CHAIRMAN  TORGERSON  asked if  she would  say it  was within  the                                                            
authority  of  the  LBC  to hold  an  election  if  they  deemed  it                                                            
necessary.                                                                                                                      
                                                                                                                                
TAM COOK replied  she didn't know  the answer to that and  clarified                                                            
he was referring to truncation  of terms and allowing a new election                                                            
for those who  would be in office longest after the  annexation. She                                                            
thought the LBC  might have discovered it had some  sympathy if that                                                            
had been its  decision in court. The  court could have said  this is                                                            
an implied  LBC power in  order to carry  out its responsibility  to                                                            
handle  changes   to  local  boundaries.  If  they   felt  this  was                                                            
necessary,  perhaps the court  would have  given the LBC  deference.                                                            
She also  agrees the LBC  didn't have to do  that to accomplish  the                                                            
change as a matter  of law. She knows of no law that  says there was                                                            
an obligation  to truncate  terms.  She's in sympathy  that the  LBC                                                            
feels  it  doesn't  choose  to  go  beyond   what  is  necessary  to                                                            
accomplish its prime purpose of adjusting boundaries.                                                                           
                                                                                                                                
REPRESENTATIVE  HALCRO raised the  question of the existing  service                                                            
area that was  created after the petition was filed  and asked about                                                            
the statutory  prohibition against that sort of action.  He asked if                                                            
she is familiar with this.                                                                                                      
                                                                                                                                
TAM COOK replied  there is something  in the Constitution  that says                                                            
you can't create  a service area if  the service can be provided  by                                                            
an existing  city. This  is limitation  on the  creation of  service                                                            
areas.                                                                                                                          
                                                                                                                                
RREPRESENTATIVE  HALCRO asked for  a practical application  to HB 13                                                            
in addition  to Ms. Cook's  legal opinion.  He recalled reading  one                                                            
argument  against HB  13 was  there was  a particular  service  area                                                            
created after the petition  was filed and therefore the decision was                                                            
made that the  service area was made  to avoid being encompassed  in                                                            
the city.                                                                                                                       
                                                                                                                                
MR.  WARING said  he is  familiar  with that  case  and whether  the                                                            
service area  had preexisted or was  created after the petition  was                                                            
filed wouldn't matter for the reasons Ms. Cook mentioned.                                                                       
                                                                                                                                
REPRESENTATIVE SCALZI asked  Ms. Cook to give an example so everyone                                                            
is very  clear on  what would  happen if  a vote  was required  on a                                                            
borough wide  service area,  and how it would  affect an  annexation                                                            
and why that should not apply.                                                                                                  
                                                                                                                                
TAM COOK replied  the problem with  any kind of statutory  structure                                                            
that attempts  to  impose a  vote of the  people on  a service  area                                                            
basis or  other basis, that  would have the  effect of preventing  a                                                            
boundary  change  is not  allowed  in the  Constitution  because  it                                                            
allows the  LBC to present  any proposed  boundary change.  It vests                                                            
that  power  in  the  LBC  and  it  also  vests  the  power  of  the                                                            
legislature  to disapprove  any proposal  it  chooses to  disapprove                                                            
even if that  proposal is overwhelmingly  approved by a vote  of the                                                            
people.                                                                                                                         
                                                                                                                                
                                                                                                                                
REPRESENTATIVE  SCALZI  asked if in  layman's terms  this means  the                                                            
Constitution trumps statutory authority.                                                                                        
                                                                                                                                
TAM COOK  said, "In  this case."  There's only  a limited degree  to                                                            
which the Legislature  can, by statute,  curtail the constitutional                                                             
right of the LBC in the area of local boundary adjustments.                                                                     
                                                                                                                                
C0-CHAIRMAN TORGERSON asked  if the legislative action is subject to                                                            
judicial review if they turn down the annexation.                                                                               
                                                                                                                                
TAM COOK  replied, if  the Legislature  were to  adopt a  resolution                                                            
disapproving a  proposal, she can't conceive of a  set of facts that                                                            
would get  that heard before  a court in an  effective way.  That is                                                            
not to  say that  suit couldn't  be brought.  However, assuming  the                                                            
resolution  is properly  passed  it's hard  for her  to believe  the                                                            
legal action on that point would be successful.                                                                                 
                                                                                                                                
REPRESENTATIVE  HALCRO referred to her January 9,  2002, response to                                                            
the Chairman  discussing when  the next elections  could happen  and                                                            
when the  new people  embraced by  the city limits  could expect  to                                                            
vote. Mr.  Brockhorst indicated  residents  in the new annexed  area                                                            
would be  eligible to run  for office in October  2002 but  Ms. Cook                                                            
didn't address that in her opinion.                                                                                             
                                                                                                                                
TAM  COOK  replied  she  never  considered  a durational   residency                                                            
requirement. That is different  than the right to vote issue but the                                                            
statute does  allow municipalities  to establish a reasonably  short                                                            
durational  residency  requirement  in order  to run  for  municipal                                                            
office. Such a  requirement cannot be imposed on the  right to vote;                                                            
that is established as  a matter on Constitutional law and is a much                                                            
shorter duration.                                                                                                               
                                                                                                                                
CO-CHAIRMAN  TORGERSON  announced  the City  of Homer  would give  a                                                            
presentation.                                                                                                                   
                                                                                                                                
10:26 a.m.                                                                                                                      
                                                                                                                                
MAYOR  JACK CUSHING  stated  Homer  has traditionally   been a  very                                                            
generous  service provider  to the greater  area but with  declining                                                            
revenue sharing it is becoming  more difficult to be generous to the                                                            
greater community.                                                                                                              
                                                                                                                                
He is in his fifth  term as mayor and favors the petition  as do the                                                            
majority of  council members. Voters  have been electing  people who                                                            
support the petition, which makes their views clear.                                                                            
                                                                                                                                
The city  originally  asked the  LBC about  the process  in the  mid                                                            
1990's and they  started the public process at the  local level. The                                                            
original area was even greater than 25 square miles.                                                                            
                                                                                                                                
He asked members to read the four page letter he submitted.                                                                     
                                                                                                                                
JOHN FENSKE, Homer City  Council member, testified in support of the                                                            
annexation.                                                                                                                     
                                                                                                                                
KURT  MARQUARDT, Homer  Mayor  Pro-Temp, is  a second  term  council                                                            
member and is in favor of the annexation.                                                                                       
                                                                                                                                
RAY KRANICH,  Homer City Council member,  testified in favor  of the                                                            
annexation.                                                                                                                     
                                                                                                                                
MICHAEL YOURKOWSKI,  Homer City Council  member, testified  in favor                                                            
of the annexation.                                                                                                              
                                                                                                                                
TAPE 02-2, SIDE B                                                                                                             
10:37 a.m.                                                                                                                      
                                                                                                                                
RICK LADD,  Homer City  Council member,  testified  in favor  of the                                                            
annexation.  He stated he would stand  down this fall if  annexation                                                            
is approved allowing voters  the opportunity to reelect him or a new                                                            
council member.                                                                                                                 
                                                                                                                                
GORDON  TANS,  attorney   for  the  City  of  Homer,   declared  the                                                            
Constitution of  the State of Alaska was written with  the principle                                                            
of statesmanship  in mind. The LBC was conceived to  relieve some of                                                            
the controversy  generated by local boundary changes.  He encouraged                                                            
members to make  their decision in the spirit of statesmanship  that                                                            
the  Constitution  framers  had in  mind  when they  entrusted  this                                                            
decision to Legislators.                                                                                                        
                                                                                                                                
MAYOR CUSHING  explained they decided  not to adjust their  original                                                            
boundary size petition,  preferring to hear what the LBC determined.                                                            
                                                                                                                                
CO-CHAIRMAN TORGERSON called for committee questions.                                                                           
                                                                                                                                
REPRESENTATIVE  MEYER asked why the City of Homer  chose to annex by                                                            
going directly to the LBC  rather that with a vote of the people. He                                                            
noted this  is much the same as the  Hillside police issue  and that                                                            
it seems as  though this route was  chosen because there  are people                                                            
receiving  services who  are not paying  for them.  For example,  25                                                            
percent of  the water use  is not paid for.  He then asked  if these                                                            
services couldn't simply be terminated.                                                                                         
                                                                                                                                
MAYOR CUSHING pointed out  this is not an unusual choice. They chose                                                            
to annex using  a direct petition  to the LBC just as 95  percent of                                                            
the incorporated areas  in Alaska have done in the past. In response                                                            
to the  second  question, he  said they  have never  maintained  the                                                            
folks receiving water haven't  paid for that service. The contention                                                            
is this  has  allowed those  properties  outside  the boundaries  to                                                            
unfairly compete with in-town properties.                                                                                       
                                                                                                                                
REPRESENTATIVE MURKOWSKI  commended Council Member Ladd for offering                                                            
to  resign  his  seat  to  deal  with  the  truncation   issue.  She                                                            
referenced  Mr. Tans'  legal  opinion of  1/31/02  that a  voluntary                                                            
resignation would  not work because a vacancy would  be filled by an                                                            
appointment  rather  than triggering  an  election.  A new  election                                                            
would only  be possible if everyone  on the council resigned  at the                                                            
same time.  She then asked what would  happen if Mayor Cushing  gave                                                            
up his seat.                                                                                                                    
                                                                                                                                
MR. TANS  explained that  a different situation  is being  presented                                                            
than  he  had  in  mind  when  he  wrote   the  letter.  It  is  his                                                            
understanding  that Councilman Ladd  intends to resign effective  as                                                            
of October  when the  next election  occurs and  his replacement  is                                                            
sworn  in. The  effective date  of his  resignation  is not now  but                                                            
rather then, which would allow an election to occur.                                                                            
                                                                                                                                
CO-CHAIRMAN TORGERSON  asked Mr. Ladd how much longer  he has on his                                                            
term.                                                                                                                           
                                                                                                                                
MR. LADD said he has one  year beyond this coming October and, after                                                            
his resignation,  he would  submit his name  as a candidate  in that                                                            
new election.                                                                                                                   
                                                                                                                                
CO-CHAIRMAN  TORGERSON   asked  Mr.  Tans  when  someone   would  be                                                            
appointed and when would there be a new election.                                                                               
                                                                                                                                
MR.  TANS said  someone  would  be  appointed  only until  the  next                                                            
election. Because  Mr. Ladd's resignation  is effective on  the date                                                            
of the next election,  there is no opportunity or  a need to appoint                                                            
someone in the interim.                                                                                                         
                                                                                                                                
CO-CHAIRMAN  TORGERSON  asked what would  happen  if he changes  his                                                            
mind about resigning and the ballots have been printed.                                                                         
                                                                                                                                
MR. TANS said once the  council accepted his resignation it would be                                                            
too late to change his mind.                                                                                                    
                                                                                                                                
CO-CHAIRMAN  TORGERSON agreed with  Representative Murkowski  that a                                                            
decision  to resign is  commendable  adding it is  an issue  in this                                                            
case and  it's also  an issue that  no one in  the annexed area  can                                                            
run. He then asked the  mayor for confirmation that he is working on                                                            
an ordinance  to change  that. The residency  requirements  would be                                                            
changed so individuals  in the affected area may run for the October                                                            
election.                                                                                                                       
                                                                                                                                
MAYOR CUSHING  agreed and added they  are trying to be proactive  by                                                            
ordinance so it  is not up to interpretation of existing  ordinance.                                                            
                                                                                                                                
MR.  TANS expressed  surprise  at  that  interpretation  saying  the                                                            
proper  interpretation   of  the   current  code  is  probably   the                                                            
following:                                                                                                                      
                                                                                                                                
     If you are a resident of  a particular piece of land for a                                                                 
     year and that land now becomes  part of the city, you have                                                                 
     effectively satisfied the  residency requirement of living                                                                 
     within the boundaries of the city for a year.                                                                              
                                                                                                                                
He said  he's never heard  it suggested that  individuals living  in                                                            
the annexed area  could not run for elective office  in October. The                                                            
ordinance that is being introduced has already been prepared and is                                                             
intended to clarify and remove any doubt.                                                                                       
                                                                                                                                
CO-CHAIRMAN TORGERSON said he appreciates the ordinance because the                                                             
issue has been raised.                                                                                                          
                                                                                                                                
REPRESENTATIVE HALCRO asked why the Kenai Peninsula Borough opposed                                                             
the annexation petition and how the city's relationship is with                                                                 
them.                                                                                                                           
                                                                                                                                
MR. TANS said:                                                                                                                  
                                                                                                                                
     The borough  assembly did not take a position  against the                                                                 
     annexation.  The mayor  and some of  the assembly members                                                                  
     did vote for  a resolution opposing the annexation  but it                                                                 
     did  not pass.  We don't understand  quite  why the  mayor                                                                 
     reversed  position so late in  the game, indeed after  the                                                                 
     Boundary   Commission   made   its  recommendation,    but                                                                 
     nevertheless  he did. I don't  think it's going to affect                                                                  
     the relationship  that the city and the borough  must work                                                                 
     out to transfer the responsibilities  of the service area.                                                                 
     It's not going to be that difficult.                                                                                       
                                                                                                                                
REPRESENTATIVE HALCRO asked why they opposed  the annexation at                                                                 
the eleventh hour.                                                                                                              
                                                                                                                                
MR. TANS  replied he wouldn't  dare to speak  for Mayor Bagley                                                                  
but he did write  a short letter of memorandum to his  assembly                                                                 
and one  of his points  was that he was  disappointed that  the                                                                 
procedure didn't allow a vote of the residents in the area.                                                                     
                                                                                                                                
REPRESENTATIVE  SCALZI agreed  with Mayor  Cushing's statement                                                                  
that the  City of  Homer has  been very generous  in providing                                                                  
services  and he understands  the need to  receive revenue  for                                                                 
services  provided. However,  the process has  been a point  of                                                                 
contention.  He asked  the  mayor why  they didn't  reduce  the                                                                 
boundaries.                                                                                                                     
                                                                                                                                
MAYOR CUSHING  explained he broke  the 25 square mile boundary                                                                  
into 14 separate  units and examined the tax base and  revenues                                                                 
that would be generated  from the units. The units were  broken                                                                 
into areas  of similar geography and  character so the council                                                                  
and the  public could identify  the areas.  His impression  was                                                                 
that the majority of the council wanted  to keep the boundaries                                                                 
large. Each  of the council members  had their own reasons  and                                                                 
much of  that was from  the public input  they were receiving.                                                                  
Also, they  didn't change  their petition  because they didn't                                                                  
want to start the process over and lose a year.                                                                                 
                                                                                                                                
REPRESENTATIVE  SCALZI   then directed   the  question  to  Mr.                                                                 
Yourkowski,   asking  why  he  didn't   support  reducing   the                                                                 
boundaries.                                                                                                                     
                                                                                                                                
MR.  YOURKOWSKE   replied  his  concerns  were  land   use  and                                                                 
planning. Individuals  outside the  city wanted issues such  as                                                                 
the asphalt batch  plant that is outside the limits addressed.                                                                  
The  input he  received  was that  the  entire 25  square  mile                                                                 
annexation was justified.                                                                                                       
                                                                                                                                
REPRESENTATIVE SCALZI  then asked Mr. Ladd why he didn't  favor                                                                 
shrinking the boundaries of the annexation petition.                                                                            
                                                                                                                                
MR. LADD replied he wasn't on the council at that time.                                                                         
                                                                                                                                
REPRESENTATIVE  SCALZI asked which  council members planned  to                                                                 
resign if the annexation is approved.                                                                                           
                                                                                                                                
Mayor Cushing and Council Members Ladd,  Kranich and Yourkowski                                                                 
stated  their intentions  to  resign  their seats  then become                                                                  
candidates  for the October  election. Mr.  Tans said he is  up                                                                 
for election this fall and looks forward to the election.                                                                       
                                                                                                                                
REPRESENTATIVE  SCALZI  asked  whether the  other  two council                                                                  
members wanted to comment on the resignation issue.                                                                             
                                                                                                                                
MR. MARQUARDT said he is up for election this fall.                                                                             
                                                                                                                                
CO-CHAIRMAN  TORGERSON  announced  the next  meeting  would  be                                                                 
2/09/02 at  9:00 a.m. Those  opposing annexation  would give  a                                                                 
15-minute overview  followed by public testimony that  would be                                                                 
limited to three minutes.                                                                                                       
                                                                                                                                
There  being no  further business,  the  joint meeting  of  the                                                                 
House and Senate Community and Regional  Affairs Committees was                                                                 
adjourned at 10:50 a.m.                                                                                                         

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