Legislature(2001 - 2002)

02/07/2001 01:30 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                                                                      
                         February 7, 2001                                                                                       
                             1:30 p.m.                                                                                          
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator John Torgerson, Chair                                                                                                   
Senator Alan Austerman                                                                                                          
Senator Randy Phillips                                                                                                          
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Georgianna Lincoln                                                                                                      
Senator Pete Kelly                                                                                                              
                                                                                                                                
                                                                                                                              
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 4                                                                                                               
"An Act relating  to a mandatory exemption  from municipal  property                                                            
taxes  for certain  residences  and to  an optional  exemption  from                                                            
municipal  taxes  for residential  property;  and providing  for  an                                                            
effective date."                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
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 4 - No previous action recorded.                                                                                             
SB 48 - See minutes dated 1/31/01.                                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Senator Therriault                                                                                                              
State Capitol Building, Room 121                                                                                                
Juneau, AK 99801                                                                                                                
POSITION STATEMENT: sponsor SB 4                                                                                              
                                                                                                                                
                                                                                                                                
Kevin Ritchie                                                                                                                   
Alaska Municipal League                                                                                                         
217 2nd Street                                                                                                                  
Juneau, AK 99801                                                                                                                
POSITION STATEMENT: Supports SB 4                                                                                             
                                                                                                                                
Dan Dickinson, Director                                                                                                         
Dept. of Revenue                                                                                                                
550 W. 7th Ste 500                                                                                                              
Anchorage, AK 99501-3566                                                                                                        
POSITION STATEMENT: Explained impacts of SB 4                                                                                 
                                                                                                                                
Steve Van Sant                                                                                                                  
State Assessor                                                                                                                  
550 W. 7th Ste 1790                                                                                                             
Anchorage, AK 99510-3510                                                                                                        
POSITION STATEMENT: Explained impacts of SB 4                                                                                 
                                                                                                                                
Burt Cottle, Mayor                                                                                                              
P.O. Box 307                                                                                                                    
Valdez, AK 99686                                                                                                                
POSITION STATEMENT: Supports SB 4                                                                                             
                                                                                                                                
Nadine Hargesheimer                                                                                                             
Fairbanks North Star Borough                                                                                                    
Fairbanks, AK 99701                                                                                                             
POSITION STATEMENT: Supports SB 4                                                                                             
                                                                                                                                
Mr. Pat Poland, Director                                                                                                        
Community and Business Development                                                                                              
550 W. 7th Ste 1790                                                                                                             
Anchorage, AK 99510-3510                                                                                                        
POSITION STATEMENT: Explained revenue impacts of SB 48.                                                                       
                                                                                                                                
Wayne Schaffer                                                                                                                  
P.O. Box 538                                                                                                                    
Gakona, AK 99586                                                                                                                
POSITION STATEMENT: Against SB 48.                                                                                            
                                                                                                                                
Dianne Jenkins Achman                                                                                                           
P.O. Box 149                                                                                                                    
Tok, AK 99780                                                                                                                   
POSITION STATEMENT:  Asked questions about SB 48.                                                                             
                                                                                                                                
Mayor Ed Zeine                                                                                                                  
P.O. Box 34                                                                                                                     
Cordova, AK 99574                                                                                                               
POSITION STATEMENT: Supports SB 48.                                                                                           
                                                                                                                                
R.J. Kopchak                                                                                                                    
P.O. Box 1210                                                                                                                   
Cordova, AK 99574                                                                                                               
POSITION STATEMENT: Explained Cordova's economic position.                                                                    
                                                                                                                                
Michael Nelson                                                                                                                  
P.O. Box 375                                                                                                                    
Tok, AK 99870                                                                                                                   
POSITION STATEMENT: Against SB 48                                                                                             
                                                                                                                                
Dave Dengel                                                                                                                     
P.O. Box 307                                                                                                                    
Valdez, AK 99686                                                                                                                
POSITION STATEMENT: Opposed to Section 2 of SB 48.                                                                            
                                                                                                                                
MR. Joseph Riley                                                                                                                
Box 540                                                                                                                         
Gakona, AK 99586                                                                                                                
POSITION STATEMENT: Commented on SB 48 issues.                                                                                
                                                                                                                                
Ms. Debbie Muir                                                                                                                 
P.O. Box 333                                                                                                                    
Tok, AK 99780                                                                                                                   
POSITION STATEMENT: Opposed to SB 48.                                                                                         
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 01-3, SIDE A                                                                                                             
Number 001                                                                                                                      
                                                                                                                                
CHAIRMAN  JOHN TORGERSON  called  the  Senate Community  &  Regional                                                          
Affairs  Committee  meeting  to  order  at 1:30  P.M.  Present  were                                                            
Senators Austerman,  Phillips and Chairman Torgerson.  Senator Kelly                                                            
was expected to  arrive late and Senator Lincoln was  represented by                                                            
staff because she was ill.                                                                                                      
                                                                                                                                
The first order of business was SB 4.                                                                                           
                                                                                                                                
                                                                                                                                
              SB   4-MUNICIPAL PROPERTY TAX EXEMPTION                                                                       
                                                                                                                              
CHAIRMAN  TORGERSON called  Senator  Therriault forward  to give  an                                                          
overview of the bill.                                                                                                           
                                                                                                                                
SENATOR THERRIAULT said  the bill was introduced under his name as a                                                            
reaction  to  a  request  from  the  Fairbanks  North  Star  Borough                                                            
Assembly because  more local flexibility is desired  with respect to                                                            
the residential property tax exemption.                                                                                         
                                                                                                                                
The interest stems  from the proposed 10-mill cap  on property taxes                                                            
and the feeling  that property owners  bear an unreasonable  portion                                                            
of the government expenses.  SB 4 proposes to raise the ceiling from                                                            
$10,000  to  $50,000 on  the  amount  a municipality  may  offer  in                                                            
residential  property tax  exemptions. The  exemption is subject  to                                                            
local taxing  authority discretion,  as is  currently the case.  The                                                            
current cap has  been in effect since 1974 so it is  time to revisit                                                            
the issue.                                                                                                                      
                                                                                                                                
Number 47                                                                                                                       
                                                                                                                                
SENATOR THERRIAULT  said that it was  also brought to his  attention                                                            
that  the mandatory  exemption  for  senior  citizens  and  veterans                                                            
provides  no mechanism  for  local governments  to  assess  property                                                            
taxes mid year  if a property changes hands from an  exempt party to                                                            
a non-exempt  party.  SB 4 allows  municipalities  to prorate  taxes                                                            
after  such transfers  of  ownership  but there  is  no wording  for                                                            
prorating  in the  other direction,  from non-exempt  to exempt.  He                                                            
suggested  that  this  is something  the  committee  might  want  to                                                            
consider  and he welcomes  the discussion.  However,  it is time  to                                                            
address the issue of prorating taxes.                                                                                           
                                                                                                                                
Number 84                                                                                                                       
                                                                                                                                
SENATOR  THERRIAULT said  that the  state assessor  was on line  and                                                            
available  to answer  questions  about the  bill's  impact on  state                                                            
revenues.  Although it  was not his  intention to  impact the  state                                                            
treasury, a borough  raising the exemption  cap to  $50,000 and then                                                            
raising  the mill rate  to make  up the revenue  loss, would  impact                                                            
state revenues.  At the same  time, he wanted  committee members  to                                                            
realize  that the estimates  of the  revenue losses  are just  that,                                                            
estimates. Exact figures are very difficult to establish.                                                                       
                                                                                                                                
Members of  service areas in the Fairbanks  North Star Borough  have                                                            
contacted Senator Therriault  asking if adjusting their mill-rate up                                                            
is the only way  to capture lost revenue. He has been  in discussion                                                            
with his local  government and is  looking at ways to structure  the                                                            
bill  so that  service areas are not adversely affected.  This could                                                            
mean that the  exemption can be offered  on the portion of  the mill                                                            
rate that  covers  general government  services,  or things  offered                                                            
area wide.  Service areas  could be picked  out saying they  operate                                                            
outside that exemption.                                                                                                         
                                                                                                                                
SENATOR THERRIAULT  said he realizes that the provision  of the bill                                                            
that  allows  the  senior  citizen  property  tax  mechanism  to  be                                                            
modified for prorating  collection of property tax opens the bill to                                                            
include that  section of the statutes.  He said he would  understand                                                            
if the committee chose not to address that area of the statutes.                                                                
                                                                                                                                
CHAIRMAN  TORGERSON agreed  but said  it was  something that  needed                                                            
review. With small  governments, a floating date for  tax exemption,                                                            
rather than  a January 1  eligibility cut  off for the entire  year,                                                            
could have a large impact causing budget shortfalls.                                                                            
                                                                                                                                
CHAIRMAN TORGERSON  asked for anyone  else wanting to testify  on SB
4.                                                                                                                              
                                                                                                                                
MR. KEVIN RITCHIE  from the Alaska Municipal League  came forward to                                                            
state  his  endorsement  of  the bill.  He  said  this  bill  allows                                                            
municipalities an additional  tool for local control of property tax                                                            
equity.                                                                                                                         
                                                                                                                                
CHAIRMAN TORGERSON asked  his opinion on the impact on service areas                                                            
or small governments  if a floating date for property  tax exemption                                                            
was adopted.                                                                                                                    
                                                                                                                                
MR. RITCHIE said  he was not in the room during that  discussion and                                                            
couldn't comment.                                                                                                               
                                                                                                                                
SENATOR PHILLIPS had the same concern.                                                                                          
                                                                                                                                
Number 193                                                                                                                      
                                                                                                                                
CHAIRMAN  TORGERSON explained  that  the concern  was the impact  on                                                            
small governments  or service areas where a relatively  large number                                                            
of properties  may be exempted and  revenue would be lost.  The only                                                            
choice  to recover that  revenue would  be to  adjust the mill  rate                                                            
upward. With this  in mind, the committee would be  charged with the                                                            
task  of  trying  to  exempt  some  service   areas.  As  the  local                                                            
government  representative,  he  was  interested  in  Mr.  Ritchie's                                                            
thoughts on the matter.                                                                                                         
                                                                                                                                
MR. RITCHIE  said that Steve  Van Zant might  be a better person  to                                                            
answer  the question  but that  he didn't  feel that  the amount  of                                                            
money involved would be substantial.                                                                                            
                                                                                                                                
CHAIRMAN TORGERSON asked  whether Steve Van Zant was on line and had                                                            
he heard the question.                                                                                                          
                                                                                                                                
MR. STEVE VAN ZANT, state  assessor, said he had asked all assessors                                                            
for their input on the  exemption issue.  They didn't think that the                                                            
impact  would  be  substantial  but  service   areas  weren't  asked                                                            
specifically, just municipalities in general.                                                                                   
                                                                                                                                
SENATOR  PHILLIPS  asked  for  the Anchorage  figures.  He  had  the                                                            
figures for  Fairbanks, Kenai, North  Slope and Valdez and  wondered                                                            
if Anchorage might not be affected.                                                                                             
                                                                                                                                
MR. VAN ZANT referred the question to Dan Dickinson.                                                                            
                                                                                                                                
MR.  DAN DICKINSON,  Director  of the  Tax Division,  Department  of                                                            
Revenue,  said that Anchorage  plays a very  small roll in  terms of                                                            
the effect this legislation plays on state revenues.                                                                            
                                                                                                                                
CHAIRMAN  TORGERSON  thought   the  fiscal  note  was  fairly  self-                                                            
explanatory.                                                                                                                    
                                                                                                                                
SENATOR THERRIAULT addressed  Senator Phillips' question saying that                                                            
there  are just  five  municipalities  that currently  exercise  the                                                            
optional  exemption:  Bristol  Bay, Fairbanks  North  Star  Borough,                                                            
Kenai Peninsula  Borough,  North Slope Borough  and City of  Valdez.                                                            
Anchorage  doesn't  show  on the  spreadsheet  because  they  aren't                                                            
currently exercising the option.                                                                                                
                                                                                                                                
CHAIRMAN  TORGERSON asked "If  the state is  faced with another  10-                                                            
mill cap initiative and  that was to pass, that would, I'm assuming,                                                            
preclude the taxing jurisdictions  from increasing the mill rates so                                                            
this would,  actually, come right  off the bottom line. Is  that the                                                            
way to read this?"                                                                                                              
                                                                                                                                
MR. VAN SANT  said that this is very  different than a 10-mill  cap.                                                            
In fact,  in the situation  discussed here,  it is assumed  that the                                                            
municipalities affected  would try to make up the state revenue some                                                            
other way  such as  by increasing  the mill rate.  If a 10-mill  cap                                                            
were layered  over that the affect  would be different. The  revenue                                                            
shortfall  would have to  be made up with  alcohol taxes, bed  taxes                                                            
and others that are not property tax.                                                                                           
                                                                                                                                
CHAIRMAN  TORGERSON asked  that the record  show that Senator  Kelly                                                            
arrived during the previous discussion.                                                                                         
                                                                                                                                
SENATOR THERRIAULT wanted  to clarify for committee members that the                                                            
real concern for service  areas comes from the second portion of the                                                            
bill dealing with the cap  increase from $10,000 to $50,000. To make                                                            
up for budget  shortfalls, local government  would have to  increase                                                            
the mill  rate and therefore  shift more of  the local property  tax                                                            
burden to undeveloped  land and businesses and there  would be local                                                            
pressure not to do that.                                                                                                        
                                                                                                                                
SENATOR THERRIAULT wanted  to make clear that current wording in the                                                            
statute says that voters would have to ratify the ordinance.                                                                    
                                                                                                                                
CHAIRMAN  TORGERSON asked  if the laws outlining  the meeting  dates                                                            
for the Board of Equalization (BoE) would have to be changed.                                                                   
                                                                                                                                
MR. VAN SANT said he didn't  anticipate any problem because property                                                            
values would be set by the time the BoE meets in April.                                                                         
                                                                                                                                
CHAIRMAN TORGERSON called on Nadine Hargesheimer from Fairbanks.                                                                
                                                                                                                                
MS.  NADINE  HARGESHEIMER  with the  Fairbanks  North  Star  Borough                                                            
supports SB 4, particularly  the increase in the cap from $10,000 to                                                            
$50,000.  She said that  people are generally  comfortable  with the                                                            
level of service  received but perhaps not with the  funding source.                                                            
About 80 percent  of the Fairbanks  North Star Borough revenues  are                                                            
derived from property tax.  They have created an alternative revenue                                                            
task  force that  communicates  with  the  public to  determine  how                                                            
services will  be funded. Although  the increase in the residential                                                             
exemption may  or may not be used, they actually view  the exemption                                                            
as  a tool  in  the process.  If  there is  another  revenue  source                                                            
available,  they might not  increase the  residential exemption  but                                                            
they aren't ready to do  without the revenue. There would still need                                                            
to be passage by the assembly and public ratification.                                                                          
                                                                                                                                
She said there would be  an impact on service areas. They have every                                                            
intention  of keeping fire,  emergency and  road services whole.  If                                                            
more residential  land is exempted  then the mill rate will  have to                                                            
go up.  They have widely  varied population  densities in  different                                                            
service areas  and they don't know how business will  be affected in                                                            
each of these areas if  the residential exemptions are increased. It                                                            
could range  from onerous to a non-event  but they won't  know until                                                            
they begin looking at the specifics in each area.                                                                               
                                                                                                                                
CHAIRMAN  TORGERSON asked  if she  had the spreadsheet  prepared  by                                                            
Steve  Van Sant  titled "Estimated  Revenue  Loss  Due to  Increased                                                            
Allowance  for Residential  Exemption". He  said it looks as  though                                                            
the  state would  lose  money if  the borough  wide  mill rate  were                                                            
increased.                                                                                                                      
                                                                                                                                
MS HARGESHEIMER  agreed and said they  were looking at implementing                                                             
revenue sources  separate  from property tax  so that revenue  stays                                                            
the same and people  are paying less property tax.  They are looking                                                            
at alcohol, sales,  and personal property taxes, not  the mill rate.                                                            
They want to shift the burden from the property owners.                                                                         
                                                                                                                                
CHAIRMAN  TORGERSON  commended  those efforts,  but  said there  was                                                            
still the  possibility  that if the  mill rate  were increased,  the                                                            
state would lose $1.6 million in revenue.                                                                                       
                                                                                                                                
MAYOR BURT COTTLE of Valdez  testified that they too were in support                                                            
of SB  4. It  is their  belief that  they would  have greater  local                                                            
control and taxes would be stabilized with passage of SB 4.                                                                     
                                                                                                                                
CHAIRMAN  TORGERSON said  that  SB 4 would  be set  aside and  heard                                                            
again.                                                                                                                          
Number 326                                                                                                                      
                                                                                                                                
          SB  48-MUNICIPALITIES:INCORP/PROPERTY VALUATION                                                                   
                                                                                                                              
CHAIRMAN  TORGERSON read the  full title of  SB 48. He said  Senator                                                            
Wilken  had   given  the  sponsor's   statement  and  the   Boundary                                                            
Commission had given their  initial reaction in the 1/31/01 hearing.                                                            
                                                                                                                                
CHAIRMAN TORGERSON asked  Pat Pollen to come forward and address the                                                            
revenue impacts of SB 48 to municipalities.                                                                                     
                                                                                                                                
MR. PAT  POLAND,  Director of  Community and  Business Development,                                                             
said that in an effort  to explain the possible fiscal impacts of SB
48  he had  summarized  the  statewide programs  and  the  potential                                                            
impacts of each. There  are extreme variations by region, so to have                                                            
a meaningful discussion  about a particular region, calculations for                                                            
that region  would have to be addressed.  He said that Bill  Rolfzen                                                            
was  available  to  answer  technical  questions  on  the  following                                                            
programs.                                                                                                                       
                                                                                                                                
   · National Forest Receipts Program: Distributes federal funds                                                              
     for education and  roads only to organized boroughs, REAAs, and                                                            
     cities  within national  forests. If  both national forests  in                                                            
     Alaska were  wholly included in organized boroughs,  four REAAs                                                            
     and  16 cities located  within the unorganized  portion  of the                                                            
     Tongass  and Chugach National  Forests would become  ineligible                                                            
     for funding.                                                                                                               
                                                                                                                                
     Potential Impact: The $5,567,748 currently received each year                                                            
     by the four REAAs and 16 cities would be shifted to organized                                                              
     boroughs. The organized boroughs would assume responsibility                                                               
     for education in the areas previously served by the four REAAs                                                             
     and in 9 of the 16 cities that currently provide education                                                                 
     services. The revenue is redistributed, not lost.                                                                          
                                                                                                                                
   · Payment in Lieu of Taxes (PILT): This program provides                                                                 
     payments   to  local  governments   containing  federal   lands                                                            
     (national  forest,  national  parks, etc.).  Due  to a  special                                                            
     Alaska provision,  96 cities in the unorganized borough receive                                                            
     PILT funds amounting to $5.1 million annually.                                                                             
                                                                                                                                
     Potential Impact: If the unorganized borough became                                                                      
     incorporated as boroughs, the cities located within those                                                                  
     boroughs would become ineligible for PILT funds. Those funds                                                               
     would subsequently be distributed directly to the new                                                                      
     boroughs. Again, this is a shift in revenue, not a loss.                                                                   
                                                                                                                                
   · State Revenue Sharing: Unincorporated communities and                                                                    
     volunteer   fire   departments   (VFDs)  located   within   the                                                            
     unorganized   borough  qualify  for  funding  under  the  state                                                            
     revenue   sharing   program.   Currently,   65  unincorporated                                                             
     communities  receive a total  of $241,000 annually and  21 VFDs                                                            
     received a total of $12,000 annually.                                                                                      
                                                                                                                                
     Potential Impact: Upon incorporation of a borough, these                                                                 
     entities would no longer be eligible for funding. Their                                                                    
     allocations would be redistributed to all municipalities under                                                             
     the existing revenue sharing formulas. Monies would be                                                                     
     redistributed.                                                                                                             
                                                                                                                                
   · Unincorporated Capital Match Grant: There are currently two                                                              
     state  capital matching  grant programs.  One program  provides                                                            
     funding  for   municipalities  that  share  available   funding                                                            
     through a  formula-based allocation. A second  program provides                                                            
     fixed  $25,000  capital  matching  grants  for  unincorporated                                                             
     communities located  within the unorganized borough. Currently,                                                            
     74 unincorporated  communities participate and  receive a total                                                            
     of $1,850,000 annually.                                                                                                    
                                                                                                                                
     Potential Impact: If the unorganized borough were incorporated                                                           
     entirely as boroughs, the unincorporated communities would no                                                              
     longer be eligible for direct participation in the program.                                                                
     Funding for the unincorporated community program would be                                                                  
     rolled into the municipal capital match program in which the                                                               
     newly incorporated boroughs would participate.                                                                             
                                                                                                                                
   · Fisheries Business Tax: Under the Department of Revenue Shared                                                           
     Fisheries  Business  Tax  Program,  cities located  within  the                                                            
     unorganized  borough  retain  one-half of  the  state fish  tax                                                            
     collected  based on fish processing that occurred  within their                                                            
     respective  city boundaries.  Last year,  30 cities located  in                                                            
     the  unorganized borough  received  a combined  total of  about                                                            
     $7.7 million.                                                                                                              
                                                                                                                                
     Potential Impact: Cities located within a borough are required                                                           
     to split the local share with the borough. Consequently, after                                                             
     incorporation of a new borough, half of this locally shared                                                                
     amount would be distributed to the new borough in which the                                                                
     city is located. This change in distributing fish tax funds                                                                
     would occur over a five-year period.                                                                                       
                                                                                                                                
MR. POLAND stressed that  this was a quick review but that analyzing                                                            
a  particular  region  is  necessary   in  order  to  draw  accurate                                                            
conclusions about impacts.                                                                                                      
                                                                                                                                
CHAIRMAN TORGERSON  asked about needing  feasibility studies  before                                                            
boroughs are enacted.                                                                                                           
                                                                                                                                
MR. POLAND  said there is  no such requirement.  Rather, there  is a                                                            
provision  in statute allowing  regions to  request grants  of about                                                            
$100,000 to  do feasibility studies.  The fiscal note reflects  that                                                            
amount  being spent  for  an on  the ground  contractor  to  collect                                                            
feasibility  data such as  potential revenue  sources and  financial                                                            
impacts.                                                                                                                        
                                                                                                                                
CHAIRMAN   TORGERSON  asked   where  the   responsibility  lay   for                                                            
determining titles and boundaries.                                                                                              
                                                                                                                                
MR. POLAND  said  they anticipate  spending  up to  one-half of  the                                                            
$100,000 in  that area. They would  take a professional sampling  to                                                            
determine the  nature of the property in an area.  Their expectation                                                            
is that in  the majority of the cases,  property tax isn't  going to                                                            
be the mechanism  used to generate revenue to support  a borough. If                                                            
it were, it would come  from a principle source such as  oil and gas                                                            
properties.                                                                                                                     
                                                                                                                                
CHAIRMAN TORGERSON  asked, "If they  did oil and gas property  would                                                            
they  require  them to  levy  a tax  on  all  the residents  of  the                                                            
borough?"                                                                                                                       
                                                                                                                                
MR. POLAND said yes, they would.                                                                                                
                                                                                                                                
CHAIRMAN TORGERSON  asked whether  a title search would be  required                                                            
on all properties before the tax is levied.                                                                                     
                                                                                                                                
MR. VAN  SANT said that,  in most cases,  some title searches  would                                                            
have  to  be done  to  determine  ownership,  which  properties  are                                                            
taxable and where tax bills should be mailed.                                                                                   
                                                                                                                                
CHAIRMAN TORGERSON asked  for the fiscal note prepared several years                                                            
ago on this issue.  He was particularly interested  in the provision                                                            
for  oil  and  gas  property  valuations   if  property  taxes  were                                                            
instituted.                                                                                                                     
                                                                                                                                
He  also  wanted  information  on  land  grants  available  to  each                                                            
borough.                                                                                                                        
                                                                                                                                
MR.   POLAND   said  10   percent   of   the   vacant,  unreserved,                                                             
unappropriated  property is available  for land grants to  boroughs.                                                            
Any land that is resource  rich is already reserved by the state and                                                            
not selectable.                                                                                                                 
                                                                                                                                
SENATOR AUSTERMAN  asked Mr.  Poland about  cities around the  state                                                            
that have dropped their  classification because they couldn't afford                                                            
to keep the city or municipality going.                                                                                         
                                                                                                                                
MR. POLAND said there were  several communities that dissolved about                                                            
six  or  seven  years  ago.  Although  the  small  governments  were                                                            
struggling,  the primary motivation  in these cases was a  desire to                                                            
embrace tribal government.                                                                                                      
                                                                                                                                
SENATOR AUSTERMAN wanted  to know the impact this bill would have on                                                            
these types of communities.                                                                                                     
                                                                                                                                
MR. POLAND  said there  shouldn't  be direct  financial impacts.  He                                                            
pointed out  that one of the strengths  of a regional government  is                                                            
that  issues  that are  difficult  to  deal with  on  an  individual                                                            
community level are more easily addressed on a regional level.                                                                  
                                                                                                                                
SENATOR  KELLY  asked  why  there  were  no  longer  any  3rd  class                                                            
boroughs.                                                                                                                       
                                                                                                                                
MR. POLAND said that 3rd  class boroughs were basically incorporated                                                            
school  districts with  no planning  power. It was  thought that  if                                                            
there  was  going to  be  a regional  government  they  should  have                                                            
planning  power. Through  legal amendments,  the  2nd class  borough                                                            
became  more flexible  and the  3rd class  boroughs  were no  longer                                                            
needed.                                                                                                                         
                                                                                                                                
Number 593                                                                                                                      
                                                                                                                                
CHAIRMAN TORGERSON called for public testimony.                                                                                 
                                                                                                                                
Side B                                                                                                                          
                                                                                                                                
MR. WAYNE SCHAFFER from  Slana, outside Tok, said that people is his                                                            
area see no reason  for boroughs or taxation since  there was no tax                                                            
base in the area.                                                                                                               
                                                                                                                                
MS. DIANNE JENKINS  AKIN from Tok spoke for the chamber  of commerce                                                            
and herself.  She said there  is no tax base  and most lands  in the                                                            
area are either  federal or native. She said that  they want to know                                                            
where the  seat of  government would  be located  and what  benefits                                                            
they could expect to receive.                                                                                                   
                                                                                                                                
MAYOR ED ZEINE  of Cordova said the  Cordova City Council  has given                                                            
unanimous approval for  SB 48. Two years ago, they conducted a study                                                            
to  review  the economic  benefits  of  forming  a borough  and  how                                                            
Cordova and  Prince William  Sound would  be affected. The  Boundary                                                            
Commission has a copy of that study.                                                                                            
                                                                                                                                
MR.  R.J.  KOPCHAK  said Cordova  and  other  Prince  William  Sound                                                            
communities had studies  done beginning in the early 1970s. In 2000,                                                            
there  was  an  economic  profile  of  Prince   William  Sound  done                                                            
documenting  the economies  of the  region. It  was determined  that                                                            
there are sufficient resources to fund a borough government.                                                                    
                                                                                                                                
Cordova  favors  SB  48 due  to  frustration  relating  to  regional                                                            
government  over the last  several decades.  This bill removes  many                                                            
obstacles and  makes it possible for a motivated community  to bring                                                            
a  borough  government  to  regional  attention.  They  see  borough                                                            
government  as beneficial  to  education,  land use,  and  long-term                                                            
resource management.                                                                                                            
                                                                                                                                
Number 526                                                                                                                      
                                                                                                                                
CHAIRMAN  TORGERSON  asked why  Cordova didn't  petition  to form  a                                                            
borough without the bill.                                                                                                       
                                                                                                                                
MR.  KOPCHAK said  that  a regional  petition  relating  to  borough                                                            
government is  fairly complicated and drawn out and  that Cordova is                                                            
a very small  town without the human  resources to bring  a petition                                                            
to fruition.                                                                                                                    
                                                                                                                                
CHAIRMAN TORGERSON thought  that perhaps the petition process should                                                            
be studied if it presented such difficulties.                                                                                   
                                                                                                                                
MICHAEL NELSON  from Tok testified  that he couldn't see  that taxes                                                            
are  justified  in  areas  that  are  small  and  without  many  job                                                            
opportunities.                                                                                                                  
                                                                                                                                
DAVE DENGEL,  City Manager of Valdez,  said the city council  hasn't                                                            
taken an  official position  on SB  48 but that,  in the past,  they                                                            
have objected  to any legislation  requiring formation of  boroughs.                                                            
Section 2 of SB  48 causes the most concern because  Valdez wants to                                                            
be able to vote  on whether or not they form or join  a borough. The                                                            
city willingly  pays  a substantial  amount for  education and  they                                                            
will continue  to do so. However,  it is important to note  that the                                                            
tax base in  Valdez is declining from  five to ten percent  per year                                                            
due  to  devaluation  of  pipeline  properties.  Understanding   the                                                            
implications of  the decline in valuation is important  for not just                                                            
Valdez but the entire Prince  William Sound when considering borough                                                            
organization.                                                                                                                   
                                                                                                                                
                                                                                                                                
Number 466                                                                                                                      
                                                                                                                                
CHAIRMAN TORGERSON asked  whether Mr. Dengle anticipated the council                                                            
taking a vote for or against as a resolution.                                                                                   
                                                                                                                                
MR. DENGEL said they probably would.                                                                                            
                                                                                                                                
SENATOR PHILLIPS  asked Mr. Shafer  from Slana if he felt  he should                                                            
pay something toward the cost of education.                                                                                     
                                                                                                                                
MR. SHAFER  said  the revenue  base in his  area was  zero and  that                                                            
imposing taxes  on the residents would cause the businesses  in town                                                            
to fail and jobs to be lost.                                                                                                    
                                                                                                                                
SENATOR PHILLIPS  said that the unorganized areas  of the state were                                                            
going to  have to pay something  toward education  even if it  was a                                                            
reduced amount.                                                                                                                 
                                                                                                                                
MR. JOE  RILEY  of Gakona  asked if  the lands  belonging to  Native                                                            
corporations would be taxed.                                                                                                    
                                                                                                                                
CHAIRMAN  TORGERSON said  that Congress  exempts undeveloped  Native                                                            
lands from taxation.                                                                                                            
                                                                                                                                
MR. RILEY asked  if they would have  a say in the type of  tax to be                                                            
levied if this bill were to pass.                                                                                               
                                                                                                                                
CHAIRMAN TORGERSON said  that this bill lets the department nominate                                                            
areas to go  before the Boundary Commission.  There would  be plenty                                                            
of opportunity for public comment.                                                                                              
                                                                                                                                
MR. RILEY  said he  would like  to see  more than  the one  required                                                            
public hearing.                                                                                                                 
                                                                                                                                
CHAIRMAN  TORGERSON said  that was  a good point.  He then  reminded                                                            
everyone  that  the purpose  of  this  meeting  was to  take  public                                                            
testimony and not to debate the merits of the bill.                                                                             
                                                                                                                                
MS. DEBBIE MUIR from Tok  said that the community isn't ready to pay                                                            
taxes and they  are particularly unhappy  at the prospect  of having                                                            
the right to vote on annexation or borough formation taken away.                                                                
                                                                                                                                
CHAIRMAN  TORGERSON asked  for any other  public comment. There  was                                                            
none so he closed the public comment portion of the meeting.                                                                    
                                                                                                                                
Number 345                                                                                                                      
                                                                                                                                
CHAIRMAN TORGERSON  asked Mr. Poland whether the $300,000  grant for                                                            
incorporation  expenses  should be  adjusted upward.  He  referenced                                                            
Cordova's  comment that they  couldn't afford  the current  petition                                                            
application for borough formation.                                                                                              
                                                                                                                                
MR.  POLAND  said  some clarification   was  in order.  It  was  his                                                            
understanding  that the city  of Cordova  commented that with  their                                                            
existing  resources they don't  have the  capacity to fully  explore                                                            
and  develop   a  petition.   Separate  from   that,  there   is  an                                                            
organizational  grant providing  $300,000 the  first year,  $200,000                                                            
the second  year  and $100,000  the third  year that  would go  to a                                                            
region after it had formed a borough.                                                                                           
                                                                                                                                
He also said that  a law was put on the books a number  of years ago                                                            
allowing  a region to apply  for up to $100,000  in grant monies  to                                                            
explore  the  feasibility  of  establishing  a borough  but  to  his                                                            
knowledge, that program was never funded.                                                                                       
                                                                                                                                
CHAIRMAN  TORGERSON  asked if  they had  funded the  Prince  William                                                            
Sound study.                                                                                                                    
                                                                                                                                
MR.  POLAND didn't  believe  so; that  Coastal Zone  Management  was                                                            
involved there.                                                                                                                 
                                                                                                                                
SENATOR PHILLIPS  asked what "each  area having the opportunity  for                                                            
public comment" meant.                                                                                                          
                                                                                                                                
MR. POLAND said the general  practice is to go to population centers                                                            
but that  the department  and commission  makes  an effort to  allow                                                            
everyone to appear in person and be heard.                                                                                      
                                                                                                                                
CHAIRMAN  TORGERSON said  that issue had  been addressed  previously                                                            
but it  might warrant  revisiting.  He asked for  other comments  or                                                            
questions. There were none.                                                                                                     
                                                                                                                                
CHAIRMAN  TORGERSON  announced that  the bill  would  be held  over.                                                            
Public testimony  would be taken on Saturday February  10, 2001 from                                                            
1:30  to  3:30  p.m.   Senator  Phillips  would  be  available   via                                                            
teleconference.                                                                                                                 
                                                                                                                                
                                                                                                                                
There  being nothing  further  to  come before  the  committee,  the                                                            
meeting was adjourned at 2:45 p.m.                                                                                              
                                                                                                                                

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