Legislature(2001 - 2002)

01/31/2001 01:35 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     ALASKA STATE LEGISLATURE                                                                                   
           SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE                                                                      
                         January 31, 2001                                                                                       
                             1:35 p.m.                                                                                          
MEMBERS PRESENT                                                                                                               
Senator John Torgerson, Chair                                                                                                   
Senator Alan Austerman                                                                                                          
Senator Randy Phillips                                                                                                          
Senator Georgiana Lincoln                                                                                                       
Senator Pete Kelly                                                                                                              
MEMBERS ABSENT                                                                                                                
All Members Present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
ANNUAL REPORT OF THE LOCAL BOUNDARY COMMISSION                                                                                  
SENATE BILL NO. 48                                                                                                              
"An Act  relating to  the determination  of full  and true value  of                                                            
taxable municipal  property for purposes of calculating  funding for                                                            
education and certain other  programs; and relating to incorporation                                                            
of  second  class  boroughs  in  the  unorganized   borough  and  to                                                            
annexation  of portions of the unorganized  borough to boroughs  and                                                            
unified municipalities."                                                                                                        
     HEARD AND HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
SB 48 - No previous action                                                                                                      
WITNESS REGISTER                                                                                                              
Senator Gary Wilken                                                                                                             
State Capitol Building                                                                                                          
Juneau, AK 99801-1182                                                                                                           
POSITION STATEMENT: Sponsor                                                                                                   
Kevin Waring, Chair                                                                                                             
Local Boundary Commission                                                                                                       
550 W. 7th Ave STE 1790                                                                                                         
Anchorage, Ak 99501-3510                                                                                                        
POSITION STATEMENT: Gave briefing on Boundary Commission                                                                      
Allan Tesche                                                                                                                    
Local Boundary Commission                                                                                                       
550 W. 7th Ave STE 1790                                                                                                         
Anchorage, Ak 99501-3510                                                                                                        
POSITION STATEMENT:   Answered questions  about Boundary  Commission                                                          
Dan Bockhorst                                                                                                                   
Staff to the Local Boundary Commission                                                                                          
550 W. 7th Ave STE 1790                                                                                                         
Anchorage, Ak 99501-3510                                                                                                        
POSITION STATEMENT:   Answered questions  about Boundary  Commission                                                          
Vic Fischer                                                                                                                     
P.O. Box 201348                                                                                                                 
Anchorage, AK 99501                                                                                                             
POSITION STATEMENT: Commented on SB 48                                                                                        
ACTION NARRATIVE                                                                                                              
TAPE 01-1, SIDE A                                                                                                             
Number 001                                                                                                                      
CHAIRMAN  JOHN TORGERSON  called  the  Senate Community  &  Regional                                                          
Affairs  Committee meeting  to order  at 1:35  p.m. Members  present                                                            
were Senators Austerman,  Phillips, Lincoln, and Chairman Torgerson.                                                            
The first  order  of business  was the  annual report  of The  Local                                                            
Boundary Commission  (LBC). An overview  of SB 48 followed  and then                                                            
Mr. Vic Fischer gave his perspective on the conflicts of SB 48.                                                                 
CHAIRMAN  TORGERSON announced  to the teleconference  audience  that                                                            
this  was a  listen-only  meeting  but that  ample  opportunity  for                                                            
public testimony  will be provided at a later date,  including a day                                                            
on a Saturday.  He asked that any  written testimony be sent  to the                                                            
committee  beforehand at  FAX number 465-4779.  That testimony  will                                                            
become part of  the record.  He then invited the chair  of the Local                                                            
Boundary  Commission  forward  to  introduce  himself and  give  his                                                            
MR.  KEVIN  WARING,  Chairman  of  the  Local Boundary  Commission,                                                             
thanked the  committee for  the opportunity  to speak in person.  He                                                            
introduced Vice-Chairperson,  Kathleen Wasserman,  from Pelican, the                                                            
first  Judicial  District,  and  Commissioner   Allan  Tesche,  from                                                            
Anchorage, the Third Judicial  District. Dan Bockhorst, staff to the                                                            
commission, was also present.                                                                                                   
MR. WARING said  that Nancy Galstad, of Kotzebue,  and Ardith Lynch,                                                            
of Fairbanks, weren't able to attend the meeting in person.                                                                     
SENATOR KELLY arrived at 1:40 p.m.                                                                                              
MR. WARING  began his report  saying that  the commission had  filed                                                            
its annual  report with the  Legislature on  January 17, 2001.  Each                                                            
member  of the House  and Senate  were provided  a copy. The  report                                                            
addressed three principal areas.                                                                                                
   · Chapter 1 provides an overview of the Commission;                                                                          
   · Chapter 2 summarizes the Commission's activities last year                                                                 
     along with pending proposals; and                                                                                          
   · Chapter 3 discusses several important public policy issues                                                                 
     concerning local government in Alaska.                                                                                     
He said that he  would speak briefly about the first  two topics, in                                                            
order to more  fully address the public policy issues  in Chapter 3.                                                            
MR. WARING  said that  Alaska's Constitution  established the  Local                                                            
Boundary Commission  to ensure that  proposals to create  cities and                                                            
boroughs or alter  their boundaries would be dealt  with objectively                                                            
and from a statewide perspective.                                                                                               
The Commission's responsibilities include judging proposals for:                                                                
   · incorporation of cities and boroughs;                                                                                      
   · annexation to cities and boroughs;                                                                                         
   · detachment from cities and boroughs;                                                                                       
   · reclassification of cities;                                                                                                
   · dissolution of cities and boroughs; and                                                                                    
   · merger and consolidation of cities and boroughs.                                                                           
The Commission has other  powers and obligations established in law,                                                            
including  a duty  to  make  studies of  local  government  boundary                                                            
The Commission  consists of  five members who  are appointed  by and                                                            
serve at the pleasure of  the Governor. One member is appointed from                                                            
each  of Alaska's  four  judicial  districts.  The fifth  member  is                                                            
appointed at-large  and serves as  chair. Members are appointed  for                                                            
overlapping  five-year terms. Commission  members donate  their time                                                            
as a  public service.  They  receive no  compensation  for the  time                                                            
contributed  to Commission activities.  The Department of  Community                                                            
and Economic Development  provides staff support to  the Commission.                                                            
MR. WARING  went on  to say that  the Commission  met nine times  in                                                            
2000. To minimize  costs and maximize  efficiencies, the  Commission                                                            
attempts to deal  with multiple issues at each meeting  and conducts                                                            
meetings by teleconference whenever possible.                                                                                   
Collectively, the five  members of the Commission approved proposals                                                            
    · incorporation of the City of Adak as a second-class city;                                                                 
   · annexation to the City of Palmer; and                                                                                      
   · annexation to the City of Ketchikan.                                                                                       
MR. WARING  pointed out that  these petitions  require no action  by                                                            
the Legislature.  Adak residents  will vote  at a local election  on                                                            
April 3, 2001  to decide whether or  not to incorporate the  City of                                                            
Adak. The  City of  Palmer and  City of Ketchikan  annexations  were                                                            
local  action  petitions  that  were supported  by  all  voters  and                                                            
property  owners  in  the  annexed  areas,  and so  not  subject  to                                                            
legislative review.                                                                                                             
Additionally,  a  petition  to incorporate  a  Deltana  Borough  was                                                            
submitted in March  2000. However, staff review found  that petition                                                            
had several deficiencies  in form and content. With  the concurrence                                                            
of the Commission, that  petition was returned to the petitioner for                                                            
revision as provided by law.                                                                                                    
Several important  proposals are now pending before  the Commission.                                                            
These include petitions for:                                                                                                    
   · consolidation of the City of Ketchikan and the Ketchikan                                                                   
     Gateway Borough;                                                                                                           
   · consolidation of the City of Fairbanks and the Fairbanks North                                                             
     Star Borough;                                                                                                              
   · consolidation of the City of Haines and the Haines Borough                                                                 
   · annexation to the City of Homer;                                                                                           
   · incorporation of the City of Talkeetna; and                                                                                
   · dissolution of the City of Skagway and concurrent                                                                          
     incorporation of a Skagway Borough.                                                                                        
MR. WARING was  pleased to report that for the fourth  year in a row                                                            
there is no outstanding litigation of any Commission decision.                                                                  
MR.  WARING  next turned  to  five  public policy  issues  that  the                                                            
Commission  raised  in its  Report to  the Legislature.  In  raising                                                            
these  issues, the  Commission  is fulfilling  its  duty to  address                                                            
local government boundary problems.                                                                                             
These issues concern:                                                                                                           
   · disincentives for borough incorporation and annexation that                                                                
     are impeding the development of local government in Alaska;                                                                
   · several ambiguities in State law that affect municipal                                                                     
     incorporation,     boundary    changes,    dissolution,     and                                                            
   · the unintended adverse impact of AHFC's Small Communities                                                                  
     Housing Loan Program on some municipal boundary proposals;                                                                 
   · the lack of common interests within the unorganized borough,                                                               
     notwithstanding the constitutional requirement for such;                                                                   
   · and proposed changes to the Commission's administrative                                                                    
MR.  WARING  said   that  the  Commission  continues   to  urge  the                                                            
Legislature  to examine  and address the  substantial disincentives                                                             
for borough incorporation  and annexation and has  done so since the                                                            
1980s. The Legislature  and the Commission have complementary duties                                                            
relating  to  this issue.  Specifically,  the  Legislature  had  the                                                            
constitutional  duty  to  prescribe  procedures  and  standards  for                                                            
borough formation.  The Commission  has the  statutory duty  to make                                                            
studies of local government boundary problems.                                                                                  
MR. WARING  pointed  out that the  authors of  the local  government                                                            
article of Alaska's Constitution  envisioned that organized boroughs                                                            
would be established  whenever citizens  were ready for and  capable                                                            
of assuming the  responsibilities of local government.  The founders                                                            
recognized  that   the  Legislature  would  have  widely   divergent                                                            
alternatives  available to carry out  its duty to prescribe  methods                                                            
for borough formation.  Delegates preferred a voluntary, rather than                                                            
compulsory,  approach   to  borough  incorporation.   However,  they                                                            
recognized  that, to  be successful,  a voluntary  approach must  be                                                            
coupled with adequate inducements  to establish boroughs. This issue                                                            
is addressed  in detail on pages 38-40  of the annual report  to the                                                            
MR. WARING said that the Commission looks forward to discussing                                                                 
the disincentive issue during the hearing on SB 48.                                                                             
MR. WARING said that State  statutes are ambiguous on certain issues                                                            
common  to the broad  range of matters  that come  before the  Local                                                            
Boundary Commission. These concern:                                                                                             
   · municipal authority to levy property taxes during an initial                                                               
     period following incorporation, boundary change, dissolution,                                                              
     and reclassification; and                                                                                                  
   · the effects of incorporation, boundary change, and dissolution                                                             
     on service areas in organized boroughs and the unorganized                                                                 
Regarding the issue of  property taxes, there is ambiguity whether a                                                            
municipal  government that  incorporates or  changes its  boundaries                                                            
after  January   1  of  a  particular  year  is  prohibited   by  AS                                                            
29.45.10(a)  and   AS  29.45.120(a)  from  levying  and   collecting                                                            
property taxes in the area of change during that calendar year.                                                                 
This  matter  is   addressed  in  detail  on  pages   42-44  of  the                                                            
Commission's  annual report. There,  the Report also presents  draft                                                            
language for legislation to eliminate these ambiguities.                                                                        
MR.  WARING  moved  on  to  the  third  issue  saying  that  certain                                                            
eligibility provisions  in the Alaska Housing Finance  Corporation's                                                            
Small Communities  Housing  Assistance program  have influenced  the                                                            
outcome   of    important   municipal    boundary   determinations.                                                             
Incorporation,  annexation,  or consolidation  may  result in  local                                                            
loss of eligibility  for reduced-interest home loans.  This prospect                                                            
has generated  local opposition to  some proposed boundary  changes.                                                            
Last summer,  the Commission met in  a work session with  AHFC staff                                                            
regarding  possible  changes  to  the  Small  Communities   Mortgage                                                            
Program  to  address  concerns  of  the  Commission   regarding  the                                                            
unintended  effects of that program  on proposals for consolidation                                                             
of local governments in Ketchikan and Haines.                                                                                   
The Commission is aware  that Representative Williams has introduced                                                            
HB 78 to address  the concern. The Commission supports  that bill as                                                            
an interim administrative  means to resolve the concern permanently.                                                            
MR. WARING said  that the fourth issue is to promote  maximum common                                                            
interests within boroughs.  He said that, as it has done previously,                                                            
the Commission  brings to the attention of the Legislature  that the                                                            
unorganized borough is  configured in a manner that does not conform                                                            
to Alaska's  Constitution.  Article  X, sec. 3  of the Constitution                                                             
provides that:                                                                                                                  
     The  entire   state  shall  be   divided  into  boroughs,                                                                  
     organized  or unorganized. They shall be established  in a                                                                 
     manner  and according  to standards provided  by law.  The                                                                 
     standards  shall include population,  geography, economy,                                                                  
     transportation,  and  other factors.  Each  borough  shall                                                                 
     embrace  an area and population  with common interests  to                                                                 
     the maximum degree possible...                                                                                             
In an  effort to implement  that constitutional  mandate, the  Local                                                            
Boundary  Commission recommended  to the 1960  Legislature  that the                                                            
Commission  be directed  by  legislative  resolution  to divide  the                                                            
whole of Alaska  into boroughs, organized  or unorganized,  and that                                                            
its  proposed  division  be  presented   to the  next  legislature.                                                             
However,  that recommendation  was  disregarded.  Instead, the  1961                                                            
legislature  implemented art. X, sec.  3 by placing all unorganized                                                             
regions  of the state  into a  single unorganized  borough.  Greater                                                            
compliance with  this common interest clause of atr.  X, sec 3 could                                                            
be achieved with  respect to the unorganized borough  if AS 29.03.10                                                            
were amended to divide  the single unorganized borough into multiple                                                            
unorganized boroughs formed along natural regions.                                                                              
Greater compliance with  the Common Interests Clause of art. X, sec.                                                            
3 of Alaska's  Constitution  could be achieved  with respect  to the                                                            
unorganized borough  as AS 29.03.10 is amended to  divide the single                                                            
unorganized borough into  multiple unorganized boroughs formed along                                                            
natural regions.                                                                                                                
Alternatively,  authorization of a  new process to initiate  borough                                                            
incorporation  petitions, as proposed  by SB 48, would also  promote                                                            
incremental  progress over  time toward the  constitutional  goal of                                                            
boroughs that "embrace  an area and population with common interests                                                            
to the  maximum degree possible."  This topic,  too, can be  further                                                            
addressed during the hearing on SB 48.                                                                                          
MR. WARING said that the  final policy issue is the proposed changes                                                            
to the  regulations. During  the past year,  the Commission  devoted                                                            
considerable  effort to  revise its  regulations in  Title 3  of the                                                            
Alaska Administrative  Code. The revisions were warranted  since the                                                            
last comprehensive  review of the Commission's regulations  occurred                                                            
more  than ten  years  ago. Since  then,  there have  been  numerous                                                            
changes in  state statutes on matters  that involve the Commission.                                                             
The changes proposed  by the Commission also address  ambiguities in                                                            
current regulations and  streamline procedures for non-controversial                                                            
proposals. The  Commission has also proposed a new  requirement that                                                            
local  governments  must hold  a local  public hearing  on  proposed                                                            
annexations  before  submitting  a petition  to the  Local  Boundary                                                            
Work sessions  to  address the  proposed changes  were conducted  in                                                            
April, May,  and June, and October  2000. This year, the  Commission                                                            
will publish  notice of  the proposed revisions  to the regulations                                                             
and will  conduct  one or  more public  hearings  to solicit  public                                                            
comment regarding the revisions.                                                                                                
MR. WARING  thanked the committee  for hearing his report  and asked                                                            
for any questions.                                                                                                              
Number 240                                                                                                                      
SENATOR  AUSTERMAN asked  what population  base was  needed for  the                                                            
Adak  petition  to  be  compliant  and  if  that  was  part  of  the                                                            
MR.  WARING   said  that   was  one  of   the  standards  for   city                                                            
incorporation.  He  thought  that  a  minimum  of  25  residents  is                                                            
specified in  the regulations. He  said that there were between  100                                                            
and 120 residents in Adak  and a substantial portion did come to the                                                            
hearing. Adak does meet that commission standard.                                                                               
SENATOR AUSTERMAN thought  the Adak situation was unique since there                                                            
was  an  existing  structure,  but that  the  population  base  that                                                            
supported that structure  had changed markedly. He asked if that had                                                            
been a consideration.                                                                                                           
MR. WARING said  that was a major consideration in  the commission's                                                            
evaluation of  that petition. There has never been  a petition quite                                                            
like that at Adak  where it was incorporation of a  new community at                                                            
a decommissioned   and very  large federal  military  facility.  The                                                            
commission  and the petitioners spent  a great deal of time  looking                                                            
at how they would handle  and finance and administratively deal with                                                            
the transition  from the infrastructure  that is there and  downsize                                                            
it to something  that a city, of that sort, with the  resources that                                                            
they have, could manage.                                                                                                        
He said that  after the first hearing  at Adak they deferred  action                                                            
and  allowed the  petitioner  an additional  3  months  to answer  a                                                            
series  of questions  that the  commission had.  The questions  were                                                            
answered to the commission's  satisfaction and it later approved the                                                            
Number 273                                                                                                                      
SENATOR LINCOLN had a number  of questions about the report and some                                                            
that overlapped  to SB  48. First  she asked about  the petition  to                                                            
incorporate a  Deltana Borough that was submitted  10 months ago and                                                            
that had been  sent back for deficiencies within that  petition. She                                                            
wondered what  happened after the 10-month period.  She asked if the                                                            
petitioner  is told that  they have  a certain  number of months  to                                                            
respond and then the process is started over again?                                                                             
MR. WARING  said that petition  never got  to the commission.  There                                                            
had been  consultations  between the  commission  and staff but  the                                                            
petition itself never went  before the commission. At this point, he                                                            
asked Mr. Dan Bockhurst to help with the explanation.                                                                           
Number 296                                                                                                                      
MR. DAN  BOCKHURST,  staff to the  Local Boundary  Commission,  said                                                            
that the commission  and staff did confer but that,  with respect to                                                            
the  technical sufficiency  of  the  proposal, there  were  concerns                                                            
about the charter,  the adequacy of the transition  plan, the budget                                                            
and other areas.  He has a detailed  letter outlining the  nature of                                                            
the  concerns.  The  petitioners   were  invited  to  address  those                                                            
concerns. Staff  support was offered,  and had been provided  in the                                                            
several  months leading  up to that  petition effort,  to work  with                                                            
them and  develop a credible,  thorough and  adequate petition.  The                                                            
petitioners haven't availed  themselves of that help and there is no                                                            
active  petition pending  at this  time. It  is up  to them to  take                                                            
further  action  but he  has  no indication  that  they  are in  the                                                            
process of refining that petition.                                                                                              
SENATOR LINCOLN  next wanted  to know about  the disincentives  from                                                            
pages 40 &  41 in the annual report.  She asked Mr. Waring  to speak                                                            
to disincentives and how they work.                                                                                             
MR.  WARING  summarized   in  saying  that,  over   the  years,  the                                                            
legislature has passed  a number of bills that provide financial and                                                            
other assistance  under various  programs  to local communities.  In                                                            
the unorganized  areas there  is the unintended  consequence  of the                                                            
loss of  benefits if  the community  were to  incorporate. So  while                                                            
they are meritorious,  on their own account, there  is reluctance to                                                            
incorporate  as boroughs. It is the  unintended side effect  that is                                                            
of concern  to the commission. He  told members, "We have  no desire                                                            
to withdraw  these benefits;  that is not  the point. We would  wish                                                            
for  a way  to  deliver  these  benefits  that  wouldn't  disincline                                                            
communities to incorporate."                                                                                                    
SENATOR  LINCOLN'S  second  question  dealt  with  communities  that                                                            
wanted to form a borough  or enjoin with an existing borough or have                                                            
the city  and borough join  together.  She  asked if, in each  case,                                                            
the citizens would always  have the opportunity to vote on the issue                                                            
of whether they wanted a borough or not.                                                                                        
MR.   WARING   said   that   is   presently   the   law.   Municipal                                                            
incorporations,  city or borough, now require a local  election. The                                                            
exception  to this is historic  and it is  those boroughs that  were                                                            
incorporated under  the Mandatory Borough Act. Under  present law, a                                                            
local  election  is  required  to  incorporate.  When  it  comes  to                                                            
annexations, some may be  effected without local elections, in fact,                                                            
most are. They  are approved by decision  of the commission  if they                                                            
meet  the  standards  set  out  in  statutes  and  regulations.  The                                                            
commission's actions  are subject to veto by the legislature  if the                                                            
legislature  feels   that  the  commission  has  overstepped.   Most                                                            
significant  annexations  occur  without  an  election  because  the                                                            
significant ones tend to be controversial.                                                                                      
SENATOR LINCOLN gave a  hypothetical example of Fairbanks wanting to                                                            
annex Delta and asked how that would occur.                                                                                     
MR. WARING said that the  City and Borough of Fairbanks would submit                                                            
a petition that  would prompt a local meeting by staff.  Staff would                                                            
prepare  a  preliminary  report  assessing  the  information  as  to                                                            
whether it met  the standards. Public comment would  be gathered and                                                            
a  recommendation   to  the  commission   would  be  prepared.   The                                                            
commission  would  then hold  one  or more  public hearings  in  the                                                            
affected  areas,  take  testimony,  review the  information  in  the                                                            
records, seek information  it needed and, based on the facts set out                                                            
in  the   case,  and  the   standards  set   out  in  law,   make  a                                                            
determination.  At this  point, the  annexation  could be  approved,                                                            
without  local  vote  but  subject  to  legislative  veto.  This  is                                                            
actually the process that has been in place since statehood.                                                                    
SENATOR  LINCOLN asked,  "How  much credence  do you  put into  that                                                            
public testimony?"                                                                                                              
MR. WARING said  that public testimony was given great  weight. From                                                            
his  own case,  he has  learned  things  from public  testimony  and                                                            
hearings that  have caused him to  change his mind after  he arrived                                                            
at the meeting.  He said  that they have high  regard for staff  but                                                            
the commission  is independent of the staff recommendations.  Public                                                            
testimony is important.                                                                                                         
Number 395                                                                                                                      
CHAIRMAN TORGERSON  asked if that was a good policy,  to not require                                                            
a vote in cases  such as the example given, or whether  some changes                                                            
should be made and a vote required.                                                                                             
MR. WARING  said that is  very much the topic  of SB 48. It  is very                                                            
much  rooted  in the  Constitutional  Convention  and  reflects  the                                                            
temper   of   those   times.    Incorporations   and   annexations,                                                             
particularly,  are controversial and  often the parochial  interests                                                            
involved are  not able to resolve  issues in a manner to  the area's                                                            
or state's best  interest. The LBC is able to be more  objective and                                                            
can decide,  in  an administrative  fashion,  what is  best for  the                                                            
state. Since the  legislature is checking this authority,  it is not                                                            
unchecked power.                                                                                                                
CHAIRMAN TORGERSON  asked about local action petitions:  What is the                                                            
difference between  Ketchikan and Palmer, where a  local vote wasn't                                                            
required, and the example given?                                                                                                
MR. WARING said that local  action petitions are usually small. They                                                            
are sometimes  a result of  land abutting  a city and the  landowner                                                            
wants access  to city  services. There  have been  many of these  in                                                            
Palmer and  Wasilla, as those towns  have grown. They are  typically                                                            
uncontroversial and supported by the residents being annexed.                                                                   
CHAIRMAN TORGERSON  asked if there  were any terms other  than local                                                            
action petitions that might be of interest.                                                                                     
MR.  WARING  said   that  there  are  local  action  petitions   and                                                            
legislative  review petitions.  The latter  are the ones upon  which                                                            
the LBC is empowered  to make a decision. He wanted  to mention that                                                            
there  have been  about 100  legislative review  annexations,  since                                                            
statehood,  and, to this  point, there is  only one the legislature                                                             
has not approved. He thinks that this is a method that works.                                                                   
Number 433                                                                                                                      
SENATOR  AUSTERMAN  said  that the  AHFC'S  loan  classification  is                                                            
already set but  he wanted to clarify that the commission  is really                                                            
not taking a stance  of getting rid of the program  but to highlight                                                            
the problem that has been created.                                                                                              
MR. WARING said  that an artificial line with people  living on both                                                            
sides  and having  different interest  rates had  been created.  The                                                            
folks with the lower interest  rate don't want to lose that. The LBC                                                            
is not against the program,  but there needs to be an elimination of                                                            
the inequity.  The incentive  to be on one  side of the boundary  or                                                            
the other needs to be removed.                                                                                                  
SENATOR  LINCOLN asked how  many legislative  review petitions  have                                                            
been submitted  to the boundary commission  that would have  gone to                                                            
the legislature  if  it weren't  for the commission  not  forwarding                                                            
MR. WARING wanted Mr. Bockhorst to answer the question.                                                                         
MR. BOCKHORST estimated that a rough guess would be 120.                                                                        
Number 456                                                                                                                      
MR. WARING  added that,  in some  cases, and the  Adak petition  was                                                            
such  an example,  the  commission  may approve  the  petition  with                                                            
lesser boundaries than sought by the petitioner.                                                                                
Number 460                                                                                                                      
SENATOR LINCOLN asked if  legislative majority didn't play a role in                                                            
determining  whether a petition would  be successful once  it got to                                                            
the legislature.                                                                                                                
MR. WARING  said that he had limited  history, but that legislative                                                             
majority  plays less a role  than the support  given or withheld  by                                                            
the legislators in the area affected.                                                                                           
CHAIRMAN TORGERSON asked  if he was correct that they had 45 days to                                                            
turn down  a commission  ruling and  that there would  need to  be a                                                            
positive  resolution for a  negative result  and that someone  would                                                            
have to  introduce the resolution  to deny  the action taken  by the                                                            
LBC or it becomes law.                                                                                                          
MR.  WARING said  that  was correct,  that  it was  like  a veto.  A                                                            
concurrent resolution of each house is needed.                                                                                  
Number 481                                                                                                                      
          SB  48-MUNICIPALITIES:INCORP/PROPERTY VALUATION                                                                   
CHAIRMAN TORGERSON  closed that portion of the meeting  and moved to                                                            
SB 48.  He asked Senator  Wilken, bill sponsor,  to come forward  to                                                            
give  an  overview.   He  acknowledged  that  the   meeting  was  on                                                            
teleconference for listen only.                                                                                                 
SENATOR WILKEN said that  SB 48 tries to answer two broad questions:                                                            
   1. Why is Alaska the only state in the nation that has an                                                                    
     unorganized borough?                                                                                                       
   2. What is the validity of the $125 million that has gone into                                                               
     the educational operations of the unorganized borough in the                                                               
     last six years?                                                                                                            
Number 509                                                                                                                      
SENATOR WILKEN  then delivered the  following sponsor statement  for                                                            
SB 48.                                                                                                                          
     Last   year  the  Department   of   Education  and   Early                                                                 
     Development  distributed over $21 million in General  Fund                                                                 
     money  to fund K-12  educational programs  in 19 Regional                                                                  
     Educational  Attendance Area (REAA) school districts  from                                                                 
     which no local match dollars  were required from its local                                                                 
     residents  to help  support their  children's educational                                                                  
     needs. Meanwhile, citizens  residing in Alaska's organized                                                                 
     municipal  school districts were required by state  law to                                                                 
     contribute  $144 million  local dollars  to support  their                                                                 
     local education.                                                                                                           
     The  reason for this  apparent unfair  disparity in  state                                                                 
     law is simple;  residents of an REAA school district  live                                                                 
     within  a community  or area  of our state  that does  not                                                                 
     have  the  authority   to  levy  or  collect  taxes   and,                                                                 
     therefore,  cannot be mandated by the State to  contribute                                                                 
     any  local  dollars  towards  education.  Senate  Bill  48                                                                 
     recognizes  this unequal level of personal responsibility                                                                  
     and establishes  a procedure  to analyze the readiness  of                                                                 
     the people in unorganized  Alaska to establish a system of                                                                 
     local government  with the powers of taxation  and thereby                                                                 
     the capability of assisting  in funding the K-12 education                                                                 
     of their children.                                                                                                         
     This legislation acknowledges  that, while all communities                                                                 
     of Alaska  are perhaps not financially  able to sustain  a                                                                 
     borough government, some  areas of the state may very well                                                                 
     have  developed the  capacity to operate  boroughs or  may                                                                 
     meet  applicable  standards   for annexation   to current                                                                  
     boroughs.  Senate   Bill 48  directs   the Department   of                                                                 
     Community and Economic Development  to annually present to                                                                 
     the  Local Boundary  Commission  a list  of  areas in  the                                                                 
     unorganized  borough  that reasonably  appear  to satisfy                                                                  
     existing   standards   for   borough   incorporation    or                                                                 
     The  Local  Boundary Commission  will  consider  and  then                                                                 
     select   from   this   list   areas   that   may  warrant                                                                  
     incorporation  or annexation. The Department of  Community                                                                 
     and Economic Development  will then draft an incorporation                                                                 
     or annexation  petition for the selected area,  hold local                                                                 
     public meetings, and finalize  and file the petition. Upon                                                                 
     receipt   of  the  final  petition,  the  Local  Boundary                                                                  
     Commission will hold additional  local public meetings and                                                                 
     either accept or reject  the petition as conforming or not                                                                 
     conforming    to   existing    applicable   incorporation                                                                  
     If,   after  a  thorough   review,   the  Local  Boundary                                                                  
     Commission   accepts  the  incorporation   or  annexation                                                                  
     petition,   the  decision   will  be   submitted  to   the                                                                 
     Legislature  for an additional legislative review.  If the                                                                 
     Legislature  does not reject  the recommendation within  a                                                                 
     prescribed  period of time, the new borough or  annexation                                                                 
     is approved.                                                                                                               
     It is  important to note that  SB 48 merely creates  a new                                                                 
     option  in which a petition for  borough incorporation  or                                                                 
     annexation  is originated.  After the  petition is filed,                                                                  
     the Local  Boundary Commission  will follow a process  for                                                                 
     legislative   review   that  has  been   in  place   since                                                                 
     statehood.   That   is,   the   current   standards    for                                                                 
     incorporation  will  be followed  as well  as the current                                                                  
     procedural  requirements   currently  in  state  law.  The                                                                 
     selected   area  population   must  be   suitably  large,                                                                  
     homogenous,  and  demonstrate  the  stability  to support                                                                  
     borough   government   before   it   is   considered   for                                                                 
     incorporation or annexation.                                                                                               
     Delegates  to the Alaska State  Constitutional Convention                                                                  
     clearly  envisioned  in  art. X  that  organized boroughs                                                                  
     would be established wherever  citizens were ready for and                                                                 
     capable   of  assuming  the   responsibilities  of   local                                                                 
     government.  Senate Bill  48 assists  in the formation  of                                                                 
     these  boroughs.   With  the  creation  of  an  organized                                                                  
     borough,  its citizens  will  be empowered  to contribute                                                                  
     local  dollars   to  supplement  State  funding   for  the                                                                 
     operation  of their  schools, assist  in the financing  of                                                                 
     new  schools, and through  cost efficiencies,  be able  to                                                                 
     direct  more local  funds toward student  instruction.  In                                                                 
     other  words,  the  new borough  residents  will  have  an                                                                 
     opportunity  to  improve their  local  educational system                                                                  
     with their own local dollars.                                                                                              
     Senate  Bill 48  continues a  process that  began some  40                                                                 
     years ago  with the passage of the Borough Act  of 1961. A                                                                 
     stronger, financially sound  educational system throughout                                                                 
     all  areas  of  the  State  will   be  one  of  the  major                                                                 
     benefactors of this legislation.                                                                                           
     I respectfully  request your consideration and  support of                                                                 
     SB 48.                                                                                                                     
Number 539                                                                                                                      
SENATOR  WILKEN briefly  addressed  materials  in the  bill  sponsor                                                            
packet. The first page is a two-section memo from Legal Services                                                                
outlining what  the bill would do.  The next two pages show  a chart                                                            
titled "The Structure of  Local Governments in Alaska." It shows the                                                            
options  for  organization   for  both  organized  and  unorganized                                                             
boroughs  such as  home rule  cities,  first-third  class cities  or                                                            
boroughs and unified  municipalities. It is good reference  material                                                            
as  the bill  works  its  way through  the  legislature.  The  third                                                            
section is  a two-part chart titled  "Legislative Review  Annexation                                                            
Process     and     Proposed     New     Option      for     Borough                                                            
Incorporations/Annexations."   This was  included to  make it  clear                                                            
that  there is  a process  by  which an  area  of the  state can  be                                                            
considered for incorporation.  Areas under consideration must pass a                                                            
test   in  order   to  be  successfully   incorporated.   There   is                                                            
constitutional  encouragement  for an organized  Alaska and  Senator                                                            
Wilken believes local governments are most satisfactory.                                                                        
SENATOR   WILKEN  quoted   from  state   statute  saying,   "Borough                                                            
incorporation  must be  in the best  interest of  the state."  It is                                                            
state law that  "Borough residents must be socially,  culturally and                                                            
economically interrelated  and integrated. Population  must be large                                                            
and stable enough  to support a borough government.  Boundaries must                                                            
conform to  natural geography  and include  all areas necessary  for                                                            
development.  There must be adequate  human and financial  recourses                                                            
to provide  services.  There must  be adequate  facilities to  allow                                                            
communities to develop  an integrated rural government." This is the                                                            
checklist to  determine whether or  not an area should be  nominated                                                            
and presented for organization.                                                                                                 
The next page is titled "Profile of the Unorganized Borough" and                                                                
shows a map of the state with unorganized areas highlighted and                                                                 
lists information on unorganized areas.                                                                                         
Number 574                                                                                                                      
SENATOR  WILKEN  said  that  a  frequently  used  argument   against                                                            
organization  is that there  is no  tax base, no  way for people  in                                                            
unorganized  Alaska to provide some  sort of help for education.  He                                                            
said that  he had three sheets  in the packet  to show that  perhaps                                                            
there  is a  way. The  first is  a bar  chart titled  "General  Fund                                                            
Contribution Regional Educational  Attendance Areas FY 97-FY 02." It                                                            
shows what the  unorganized areas cost in terms of  contributions of                                                            
general fund  money over  the last six years.  The chart shows  that                                                            
roughly,  $125 million  in  general  fund money  has  been spent  to                                                            
operate schools  in the REAAs. This  represents about 21  percent of                                                            
the budget.                                                                                                                     
SENATOR WILKEN  then showed  a 10-year REAA  School Capital  Funding                                                            
History chart.  It shows about $200 million for capital  spending in                                                            
unorganized  Alaska.  He noted  that there  has been  minimal or  no                                                            
local  contribution  on  behalf of  the  residents  of the  REAA  in                                                            
unorganized Alaska.                                                                                                             
SENATOR  WILKEN   believes  there  is  an  asset  base   to  support                                                            
educational   funding.  He   produced  a   November  16   classified                                                            
advertisement from an unorganized  area showing that there are homes                                                            
in that area  that are offered for  sale for more than $200,000.  He                                                            
said that this isn't an amorphous area that has no commerce.                                                                    
The next two  sheets titled "REAA  Wages and Average Employment  (FY                                                            
1999)  & (FY 2000)"  show  that $388,546,000  was  earned by  15,848                                                            
workers  in 1999  in  certain REAA  census  areas. These  are  wages                                                            
reported  under  law to  the Department  of  Labor.  These are  only                                                            
earned wages,  not barter, trade, or dividend earnings.  In 2000 the                                                            
figures were  similar. Although the  workers may not always  live in                                                            
the unorganized area, the paycheck is earned in that area.                                                                      
Number 535                                                                                                                      
SENATOR  WILKEN summarized  the positive  aspects  of the Equity  in                                                            
Education Funding Act as:                                                                                                       
       1. Alaskans who are able to fund education should do so.                                                                 
       2. Existing state law regarding borough incorporation remains                                                            
         in place as an option.                                                                                                 
       3. Local citizen participation in education is increased.                                                                
       4. More money is available statewide to increase the                                                                     
         Education Funding Formula.                                                                                             
       5. Proactive steps are taken to fulfill the intent of art. X                                                             
         of the state constitution.                                                                                             
He considers the upfront costs to be the only drawback. However,                                                                
it is his hope that the long-term costs are carefully considered                                                                
and the short-term costs accepted.                                                                                              
SENATOR WILKEN thanked the committee for hearing the bill and                                                                   
said that he was available for questions.                                                                                       
SENATOR PHILLIPS  asked what percent  of total state enrollment  was                                                            
represented by the REAA group.                                                                                                  
SENATOR WILKEN said it was about eight percent and that several                                                                 
years ago 21 percent of the general fund budget went to eight                                                                   
percent of the students.                                                                                                        
SENATOR  LINCOLN   said  that  the  majority  of  her   district  is                                                            
unorganized.  There  is  concern  in  her  district  because  larger                                                            
communities  are looking at extending  into her district  by pulling                                                            
those areas into their  borough. Of major concern to her is the fact                                                            
that the  people won't have  the opportunity  to vote on the  issue,                                                            
other than to testify.  A few people will make the decision for many                                                            
and she  is uncomfortable  with this  option. She  wondered why  the                                                            
bill wasn't written so that the issue could go to a vote.                                                                       
SENATOR WILKEN  responded  that he wasn't  any fonder of  government                                                            
than  the next  individual. He  suggested  that if you  went to  any                                                            
organized area  and asked if you like government or  not, the answer                                                            
would most  likely be no. With this  in mind, it's not practical  to                                                            
think that individuals  would vote to bring in government when there                                                            
has been  none. However,  83 percent  of the people  of Alaska  live                                                            
under boroughs  that were imposed on them. Just four  percent of the                                                            
people in  Alaska living  in organized Alaska  live under  voluntary                                                            
local government. He takes  great faith in the fact that the LBC has                                                            
shown sensitivity to local  control, that there are five people from                                                            
across the state from each  judicial district that have no political                                                            
agenda  and  are  working  for  the  betterment  of  the  state.  He                                                            
recognizes that it is sometimes  difficult for individuals to accept                                                            
personal responsibilities that government brings.                                                                               
SENATOR WILKEN went on  to say that if the constitutional suggestion                                                            
to organize continues to  be disregarded, the option remains to take                                                            
the process,  as it is today,  with a vote.  However, if that  isn't                                                            
done, there  has to be a process by  which it is accomplished.  That                                                            
is SB 48, which provides another way to choose government.                                                                      
Number 45                                                                                                                       
SENATOR LINCOLN said she  was certain that would be debated further.                                                            
She then asked  if there has been consideration given  to the amount                                                            
of federal monies brought  in by the REAAs that would be lost to the                                                            
state if they  were in a borough. She referenced payment  in lieu of                                                            
taxes (PILT)  money  in particular.  She said there  was also  money                                                            
coming  in  that wouldn't  necessarily   be lost,  such  as  revenue                                                            
sharing,  the  national  forest  receipts,  fisheries  business  tax                                                            
program and landing tax  monies. However, the PILT monies brought in                                                            
by  the REAAs  would  no  longer be  available  if  they  were in  a                                                            
SENATOR WILKEN  was not aware  of any monies  that would be  lost by                                                            
choosing local  government. He asked Senator Lincoln  to provide her                                                            
list and  he would address  it. He wanted  to know if PILT  money is                                                            
874 money.                                                                                                                      
SENATOR LINCOLN  said PILT money is payment in lieu  of taxes. Delta                                                            
Junction,  for example, has  $235,433 contributed  that wouldn't  be                                                            
there if they are forced into a borough.                                                                                        
SENATOR LINCOLN  said that there are areas such as  Deltana that did                                                            
petition  for consideration  in a  borough. They  apparently  didn't                                                            
meet  the guidelines  but the  commission  did review  and accept  a                                                            
number of communities  that wanted  annexation or consideration  for                                                            
borough status.  She doesn't believe  that communities are  choosing                                                            
to  not organize  because  someone else  is  paying the  tab; it  is                                                            
because they can't afford to do so.                                                                                             
SENATOR WILKEN  couldn't speak to  the Deltana situation  other than                                                            
that there were some provisions  in the petition that weren't in the                                                            
best interest  of the  state. He went  on to say  that SB 48  allows                                                            
people to help their schools with local governance.                                                                             
SENATOR  WILKEN told  members that  education  reform studied  about                                                            
three years ago used LBC  analysis of the worth of certain areas and                                                            
came  up with  a rough  estimate  of property  values,  given  other                                                            
assets available to that  particular area of the state. That area is                                                            
now a second-class city  and doesn't assume responsibility for their                                                            
education.  If you took  the assessed  value and  divided it  by the                                                            
number of students  you would have had the fifth richest  borough in                                                            
the state  in terms of asset  value per student.  That area  has the                                                            
ability to  fund education  but has chosen  not to do that.  He said                                                            
that those  that can't afford  shouldn't and  those that can  afford                                                            
SENATOR  LINCOLN asked  about improving  local  educational  systems                                                            
with local  dollars. She  thought that money  brought in by  borough                                                            
formation would go into  the general fund and then legislators would                                                            
determine how that money is distributed.                                                                                        
SENATOR WILKEN said that  was correct and that the educational lobby                                                            
is one of the  strongest. He would support every dollar  coming from                                                            
unorganized  Alaska to help  fund education  would be a dollar  that                                                            
goes to education.                                                                                                              
SENATOR  LINCOLN  asked  if educational  dollars  could  be  tracked                                                            
carefully  enough  to ensure  that  every  dollar collected  from  a                                                            
specific area would be returned to that area for education.                                                                     
SENATOR WILKEN  said it was difficult  to track the dollar  that way                                                            
but that the hypothetical  community would not lose  any educational                                                            
dollars because of the  legislation. Local communities will get more                                                            
money through 874 and through more money in the formula.                                                                        
SENATOR LINCOLN  said that  was more a question  of improving  their                                                            
quality of education  because of additional dollars  coming into the                                                            
Number 384                                                                                                                      
SENATOR  WILKEN  said there  were  two ways  to  improve  education.                                                            
First, more money is put  in and more accountability is expected and                                                            
capital  and operations  improvements  are expected.  Second is  the                                                            
link between  the parent's  checkbook  and the child  in school.  He                                                            
believes  that people care  more about their  schools when  they are                                                            
contributing to them financially.                                                                                               
SENATOR KELLY  was also interested  in loss of funds if unorganized                                                             
areas were to become organized.                                                                                                 
CHAIRMAN TORGERSON said  that "there is a potential reclassification                                                            
of an  allocation of  funds to an  unorganized area  to one  that is                                                            
organized, such  as the fish tax, may go to a larger  group versus a                                                            
smaller  focus  group  that  hasn't  organized,   depending  on  the                                                            
boundaries.  PILT payments  won't  be lost  but they  will lose  the                                                            
classification of having  PILT money come into the total unorganized                                                            
borough   and   then    being   hypothetically,   mechanically    or                                                            
mathematically  divided by the department.  It will be given  to the                                                            
organized   area  of  the  new  borough   based  upon  geographical                                                             
boundaries  and  how much  federal  land is  located  with in  those                                                            
boundaries."  There could  be a loss,  but not  directly related  to                                                            
this  but by  directly  relating  a  different  allocation  formula.                                                            
Communities are still eligible for the same thing.                                                                              
Number 365                                                                                                                      
SENATOR WILKEN  said that there is  a suggestion that the  874 money                                                            
is  a  local  contribution  and  that  is  the  unorganized   area's                                                            
contribution to education.  Understanding 874 money is a subject for                                                            
another day but he is ready to discuss it.                                                                                      
CHAIRMAN  TORGERSON  invited   Senator  Fischer,  a  member  of  the                                                            
Constitutional Convention, to come forward for testimony.                                                                       
MR. VIC  FISCHER, a former  Alaska Senator,  said that SB 48  was an                                                            
important step  toward implementing Local Government  Article of the                                                            
Alaska   Constitution.   He   gave   a  bit   of   background   from                                                            
Constitutional  Convention  days, 35  years ago next  week. At  that                                                            
time, Alaska  had no regional  structure  of governance. In  passing                                                            
the  Organic   Act  in   1912,  Congress   specifically  said   that                                                            
territories  could not establish counties.  The purpose of  this was                                                            
to avoid any possibility  of taxes being levied on mining properties                                                            
and fish plants.                                                                                                                
He said the Constitutional  Convention Committee on Local Government                                                            
essentially had  a blank slate. They looked at other  states, Canada                                                            
and Finland for guides.  They set certain parameters and the borough                                                            
concept was developed.                                                                                                          
The Constitutional  Convention  had  in mind  that, upon  statehood,                                                            
there  would be a  gradual evolution  of regional  governments.  The                                                            
state had a  major interest in effective  local government  in terms                                                            
of furthering  the purpose of maximum local government  with minimal                                                            
overlapping  and separate  taxing jurisdictions  and  as a means  of                                                            
regionalizing  and decentralizing  the state roll. The entire  state                                                            
was to be divided into separate regional borough units.                                                                         
There were  provisions for organized  and unorganized boroughs.  The                                                            
single unorganized  borough  is essentially  unconstitutional  under                                                            
the  state  constitution.  The  concept  was  that  there  would  be                                                            
unorganized  boroughs  all  over  the  state  that  would  gradually                                                            
organize, voluntarily,  by local initiative. The state would provide                                                            
incentives  and support for organization.  The expectation  was that                                                            
people would want this kind of regional self-government process.                                                                
Number 280                                                                                                                      
MR. FISCHER said  that the 1964 Mandatory Borough  Act provides that                                                            
only boroughs and cities  can exercise local government and taxation                                                            
powers  and that special  districts  will be  dissolved. This  meant                                                            
that  independent  school districts,  outside  of cities,  could  no                                                            
longer exist.  The State of Alaska told schools that  bonds could no                                                            
longer be sold because  the districts didn't exist constitutionally.                                                            
In  the  eight  situations  where  there  were  independent   school                                                            
districts,  the legislature  said  "Thou shalt  have boroughs."  and                                                            
that is how those original  boroughs were organized. It was by state                                                            
mandate.  Although it was  expected that  areas would organize,  the                                                            
state could exercise  its authority and mandate organization  of the                                                            
Number 249                                                                                                                      
MR. FISCHER  told members  that when  oil wealth  came to the  state                                                            
there were proposals  to do what was discussed in  the convention to                                                            
regionalize the  entire state and use the organized  and unorganized                                                            
areas  as a  means of  sharing  the expected  wealth  coming to  the                                                            
state. He said  the pipeline hadn't  been built yet and that,  for a                                                            
variety of reasons that he wouldn't go into, this didn't happen.                                                                
MR.  FISCHER commented  specifically  of  SB 48  saying  that he  is                                                            
concerned  about  the title  of  the  bill. Rather  than  Equity  in                                                            
Funding  Education,  he thought  it preferable  to call  it a  local                                                            
government  act. The  existence of  the eight  boroughs established                                                             
under  mandate is  not under question  today.  Something that  seems                                                            
controversial  now,  will be  part of  the Alaska  scene  in ten  to                                                            
twenty  years. Another  area  of concern  is that  the language  and                                                            
explanations of  this legislation must not give the  impression that                                                            
it is punitive in nature.                                                                                                       
MR. FISCHER said  that the legislature does have an  alternative. It                                                            
is the  assembly for the  unorganized borough,  for all the  service                                                            
areas and all  the REAAs and could  go out and establish  a property                                                            
tax in the unorganized areas.                                                                                                   
SENATOR LINCOLN  said she continues  to struggle with the  idea that                                                            
the 60 legislators  determine the  fate of the unorganized  area and                                                            
wondered what the framers had in mind.                                                                                          
MR.  FISCHER  said  that  they   did  not  have  in  mind  that  the                                                            
legislature  would  sit in  joint  session as  the assembly  of  the                                                            
unorganized  borough.  The evolution  was  seen as  the state  being                                                            
divided into  regions. Each region  would move toward maximum  self-                                                            
government  that it could  support and accommodate.  There  would be                                                            
local participation  in the provision of services  to the area. Each                                                            
region  would be looked  at separately  with much  local input.  The                                                            
assembly  was  written in  to  fill a  void  until there  was  local                                                            
participation organized.                                                                                                        
SENATOR  KELLY asked  about mining  properties  and fish  processing                                                            
MR. FISCHER said that Congress  imposed taxation restrictions on the                                                            
mining and fishing properties  in territories. Counties could not be                                                            
formed in  territories becoming  states making  it clear that  taxes                                                            
could not be collected from these areas.                                                                                        
CHAIRMAN  TORGERSON said  they would  return to  Mr. Waring for  his                                                            
comments of SB 48.                                                                                                              
Tape 01- 2 side A                                                                                                               
Number 72                                                                                                                       
MR. WARING opened by saying  that he would skip most of his prepared                                                            
remarks.  He then referred  members to the  two handouts. The  first                                                            
lays  out the  background  considerations  for  reform  of  existing                                                            
legislation.  The  second  is a  time  line showing  the  series  of                                                            
actions  involved  from  beginning   to  conclusion  of  a  petition                                                            
MR. WARING moved to page three of his prepared remarks expressing                                                               
the commission's view of its role in implementing SB 48.                                                                        
     First,  in the view  of the Commission,  SB 48 is not  the                                                                 
     second  coming of the 1963 Mandatory  Borough Act, or  any                                                                 
     similar legislation. Unlike  the Mandatory Borough Act, SB
     48  authorizes  a  measured,  case-by-case  evaluation  of                                                                 
     proposed incorporations.  Each petition will be  evaluated                                                                 
     on its  merits. Proposals that  do not meet the standards                                                                  
     will not be  approved. And, as under current law,  even if                                                                 
     a petition  meets statutory standards, the Commission  can                                                                 
     reject  the  petition if  there  are sound  public policy                                                                  
     grounds to do so.                                                                                                          
     I  want to assure  the  legislature and  other interested                                                                  
     parties  that the commission  does not  have a mission  to                                                                 
     foster  boroughs for  the sake of boroughs.  We don't  see                                                                 
     any purpose in worsening  the standing of local government                                                                 
     in   rural  Alaska   by   prematurely   creating  borough                                                                  
     governments  that are destined to fail. In this  regard, I                                                                 
     will point  to the commission's  record. The record  shows                                                                 
     that in recent  years the commission has rejected  several                                                                 
     petitions  to incorporate  boroughs or  annex unorganized                                                                  
     areas  to boroughs because  those petitions  did not  meet                                                                 
     applicable  standards. Commission  staff, with commission                                                                  
     concurrence,  also returned  two incorporation  petitions                                                                  
     that were deficient in content.                                                                                            
     The commission  recognizes that some rural regions  do not                                                                 
     have the economic  and financial resources needed  to fund                                                                 
     borough  governments.  The fiscal  note  that accompanies                                                                  
     this   bill  reflects   the  concern   that  any  borough                                                                  
     established  under SB 48 has  a solid chance for success.                                                                  
     The  only new cost  identified in the  fiscal note,  apart                                                                 
     from already mandated organization  grants, is the expense                                                                 
     of conducting  a thorough and independent analysis  of the                                                                 
     fiscal viability of each proposed borough.                                                                                 
     Establishment of borough  governments has been a matter of                                                                 
     conflict  for as  long as Alaska  has been  a state.  With                                                                 
     that contentious history,  it is easy to lose sight of the                                                                 
     fact that  borough governments  have played an enormously                                                                  
     positive role in Alaska's  development. Boroughs have been                                                                 
     our  main  tool  to influence  economic  development   for                                                                 
     community  benefit.  For example,  it is  hard to believe                                                                  
     that urban and rural communities  affected by oil pipeline                                                                 
     construction,   oil  and  gas   and  mining  development,                                                                  
     management  of  forestry and  fishing  resources, growing                                                                  
     energy demands, growth in  tourism, and rapid urbanization                                                                 
     would  have managed  better  without  borough government.                                                                  
     Likewise,  boroughs  have  been  the  means  to  fund  and                                                                 
     deliver  better  public  services,  accountable  to  local                                                                 
     residents.  In  most  matters,  local government  governs                                                                  
     Finally,  let me note that the  proposed legislation  does                                                                 
     remove  one  major  disincentive  to borough  government.                                                                  
     Section  1  (a)  excludes  locally  untaxed  oil  and  gas                                                                 
     property   from   calculation   of  the   required   local                                                                 
     contribution  to  education.  Otherwise,  SB 48  does  not                                                                 
     address other  significant disincentives that  have proven                                                                 
     difficult  to  reform.  The proposed  legislation  simply                                                                  
     accepts  those  disincentives  as a  matter of  fact,  and                                                                 
     leaves them to be addressed elsewhere.                                                                                     
     In closing,  the commission has done its best  to meet its                                                                 
     goal of an  approach that is uniformly fair, accountable,                                                                  
     and within  the framework of existing law. We  believe the                                                                 
     proposed approach:                                                                                                         
          uniformly implements the standards for borough                                                                        
          incorporation in existing law, but respects the                                                                       
          diverse circumstances in different rural regions;                                                                     
          provides checks and balances; and                                                                                     
          is modeled on existing law and minimally changes                                                                      
MR. WARING  said that  concluded his  remarks and  that he would  be                                                            
happy to answer any questions.                                                                                                  
SENATOR LINCOLN noted that  in the fiscal note there were provisions                                                            
for a financial  consultant for each petition. She  wondered whether                                                            
there would  be increased  commission activity  if the bill  were to                                                            
pass in current form.                                                                                                           
MR.  WARING did  not  presume that  there  would be  and  additional                                                            
workload  for  the commission  members  but  that was  difficult  to                                                            
predict  since they  have no control  over the  number of  petitions                                                            
submitted  each year.  Additionally,  if there  are  expenses it  is                                                            
because they are doing work they are supposed to be doing.                                                                      
SENATOR LINCOLN  asked that figures for reduction  of capital match,                                                            
50 percent  reduction of fisheries  tax and PILT monies be  provided                                                            
for the next meeting.                                                                                                           
MR. WARING said they could be provided.                                                                                         
CHAIRMAN  TORGERSON  asked  if there  were  any questions  or  other                                                            
ALLEN  TESCHE, Local  Boundary Commission  member,  came forward  to                                                            
address several  fundamental policy  issues that had been  raised in                                                            
the current legislation.                                                                                                        
The  first   fundamental   policy  issue   concerns  the  right   of                                                            
individuals to vote on  organization. When the Mandatory Borough Act                                                            
was adopted in  the mid 1960's, it was in response  to the fact that                                                            
the pace of forming local  governments was slow. The legislature had                                                            
to step  in and force the  organization and  incorporation  of local                                                            
governments.  Many times this  was against  the will of the  people.                                                            
Although  the right of  people to  vote is important  and should  be                                                            
guarded,  it  is important  to  have a  system  to bring  about  the                                                            
creation of new local governments  when people are unable to look at                                                            
the situation with a long  range time frame. What may be distasteful                                                            
today may be an accepted and desirable fact in 50 years.                                                                        
The second question  asks whether local government  should be forced                                                            
on people when it would  effect economic strain. He wanted committee                                                            
members to  refer to page  32 of the annual  report provided  by LBC                                                            
staff  to committee  members. This  outlines the  list of  standards                                                            
that are gone through to  determine whether or not a particular area                                                            
meets  the test for  incorporation.  Among the  standards, the  most                                                            
important  is  the  ability  of the  local  community,  through  its                                                            
economy,   its  people,   and  its  resources,   to  support   local                                                            
government.  It is not the desire  of the commission to bring  about                                                            
the  formation  of local  government,  which  ultimately  fails.  He                                                            
referred  to the Adak  petition discussed  earlier  and said  that a                                                            
primary  question  was  "Was there  enough  of  a local  economy  to                                                            
support  people who,  in  turn, would  support  local government?".                                                             
Ultimately, the decision  was yes, but not until much study had been                                                            
MR. TESCHE thanked the  committee for the opportunity to address the                                                            
questions raised by the committee.                                                                                              
CHAIRMAN  TORGERSON said that  the issue would  be brought  up again                                                            
and that there  would be a Saturday meeting providing  the public an                                                            
opportunity to testify.                                                                                                         
There being no further business before the committee, meeting was                                                               
adjourned at 3:35 p.m.                                                                                                          

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