Legislature(2001 - 2002)

04/08/2002 01:40 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                                                                       
                          April 8, 2002                                                                                         
                            1:40 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. 351                                                                                                             
"An  Act relating  to conveyance  of  tide and  submerged land  to                                                              
     HEARD AND HELD                                                                                                             
SENATE BILL NO. 352                                                                                                             
"An Act  relating to the assessment  of farm or  agricultural land                                                              
for  purposes   of  municipal  taxation;  and  providing   for  an                                                              
effective date."                                                                                                                
     HEARD AND HELD                                                                                                             
CS FOR HOUSE BILL NO. 355(CRA)                                                                                                  
"An  Act relating  to the  taxation  of mobile  telecommunications                                                              
services by municipalities; and providing  for an effective date."                                                              
     MOVED CSHB 355(CRA) OUT OF COMMITTEE                                                                                       
CS FOR HOUSE BILL NO. 358(CRA)                                                                                                  
"An Act relating to an optional exemption  from municipal property                                                              
taxes for  certain land  from which  timber is  harvested and  for                                                              
certain  improvements  used in  or  necessary  to the  harvest  of                                                              
timber; and providing for an effective date."                                                                                   
     MOVED CSHB 358(CRA) OUT OF COMMITTEE                                                                                       
PREVIOUS COMMITTEE ACTION                                                                                                     
SB 351 - No previous action to record.                                                                                          
SB 352 - No previous action to record.                                                                                          
HB 355 - No previous action to record.                                                                                          
HB 358 - No previous action to record.                                                                                          
WITNESS REGISTER                                                                                                              
Wilda Rodman                                                                                                                    
Aide to Senate Therriault                                                                                                       
Alaska State Capitol, Room 427                                                                                                  
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Introduced SB 352                                                                                         
Steve Van Sant                                                                                                                  
State Assessor                                                                                                                  
Department of Community & Economic Development                                                                                  
550 W. 7 Ave Suite 1770                                                                                                         
Anchorage, AK 99501-3510                                                                                                        
POSITION STATEMENT: Testified on SB 352 and HB 358                                                                            
Rob Wells                                                                                                                       
Director, Division of Agriculture                                                                                               
1800 Glen Highway Suite 12                                                                                                      
Palmer, AK 99615                                                                                                                
POSITION STATEMENT: Testified on SB 352                                                                                       
John Tobin                                                                                                                      
3390 Duncan Road                                                                                                                
North Pole, AK 99705                                                                                                            
POSITION STATEMENT: Testified on SB 352                                                                                       
Stewart Davies                                                                                                                  
1606 Roosevelt Drive                                                                                                            
Fairbanks, AK 99708                                                                                                             
POSITION STATEMENT: Testified on SB 352                                                                                       
Ed Arobio                                                                                                                       
Division of Agriculture                                                                                                         
P.O. Box 81482                                                                                                                  
Fairbanks, AK 00708                                                                                                             
POSITION STATEMENT: Testified on SB 352                                                                                       
Amy Erickson                                                                                                                    
Aide to Representative Lisa Murkowski                                                                                           
Alaska State Capitol, Room 408                                                                                                  
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced HB 355                                                                                        
Darrell Bell                                                                                                                    
No address provided                                                                                                             
POSITION STATEMENT: Answered questions on HB 355                                                                              
Chuck Harlamert                                                                                                                 
Juneau Section Chief                                                                                                            
Department of Revenue                                                                                                           
P.O. Box 110420                                                                                                                 
Juneau, AK 99811-0420                                                                                                           
POSITION STATEMENT: Testified on HB 355                                                                                       
Carol Carroll                                                                                                                   
Department of Natural Resources                                                                                                 
400 Willoughby Ave.                                                                                                             
Juneau, AK  99801-1724                                                                                                          
POSITION STATEMENT: Testified on SB 351                                                                                       
Ron Schonenback                                                                                                                 
Department of Natural Resources                                                                                                 
400 Willoughby Suite 400                                                                                                        
Juneau, AK 99801                                                                                                                
POSITION STATEMENT:  Testified on SB 351                                                                                      
Representative Mike Chenault                                                                                                    
Alaska State Capitol, Room 432                                                                                                  
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Sponsor of HB 358                                                                                        
Jeff Jahnke                                                                                                                     
Department of Natural Resources                                                                                                 
550 W. 7 Ave Suite 1770                                                                                                         
Anchorage 99501                                                                                                                 
POSITION STATEMENT:  Testified on HB 358                                                                                      
Marvin Ross                                                                                                                     
Kenai Mapping Director                                                                                                          
POSITION STATEMENT:  Testified on HB 358                                                                                      
Tim Navarre                                                                                                                     
Kenai Peninsula Borough Assembly                                                                                                
144 North Binkley St                                                                                                            
Soldotna, AK 99669                                                                                                              
POSITION STATEMENT:  Testified on HB 358                                                                                      
ACTION NARRATIVE                                                                                                              
TAPE 02-7, SIDE A                                                                                                             
CHAIRMAN JOHN TORGERSON called the Senate Community & Regional                                                                
Affairs Committee meeting to order at 1:40 p.m. Present were                                                                    
Senators Austerman, Phillips and Chairman Torgerson.                                                                            
         SB 352-MUNICIPAL TAXATION OF AGRICULTURAL LAND                                                                     
WILDA RODMAN, aide to Senator Gene Therriault, read the following                                                               
sponsor statement into the record:                                                                                              
     The State of  Alaska has been careful to  recognize that                                                                   
     there  is a  public purpose  served when  land used  for                                                                   
     farming and other agricultural  activities is classified                                                                   
     and restricted for agricultural  use. One key element of                                                                   
     restricting land  for agricultural use is that,  so long                                                                   
     as it is  so classified and restricted, the  land should                                                                   
     be assessed  and taxed at a  rate that is based  on farm                                                                   
     value, rather  than on land sales that are  often higher                                                                   
     than farm value.                                                                                                           
     The state  recognized the need for assessing  fee simple                                                                   
     land,  used  for  agriculture,  on its  farm  value  and                                                                   
     provided  a  farm  exemption  under  AS  29.45.060.  The                                                                   
     statute  did not specifically  include state  restricted                                                                   
     agricultural   use   lands,   since  these   lands,   by                                                                   
     definition,   could  only  be   used  for   agriculture.                                                                   
     Unfortunately,   the  assessment  of  state   restricted                                                                   
     agricultural lands  is subject to rising taxes  as local                                                                   
     assessors  increasingly use  comparable sales to  assess                                                                   
     these  lands while  ignoring the  agricultural value  of                                                                   
     these restricted use lands.                                                                                                
     Often  state  restricted agricultural  use  land  cannot                                                                   
     meet the  requirements of AS  29.45.060. Yet,  land sold                                                                   
     by  the state  and restricted  to  agricultural use  can                                                                   
     only  be  used  for  agricultural   purposes,  therefore                                                                   
     precluding  other uses  of the  land. Thus,  assessments                                                                   
     should be  based on the value  of the crops that  can be                                                                   
     produced, not on other perceived values or land sales.                                                                     
     SB  352 re-affirms  the public purposes  of the  state's                                                                   
     designation of  certain lands for agricultural  purposes                                                                   
     only.  It   removes  the  requirement  that   owners  of                                                                   
     agricultural land apply for  and receive a determination                                                                   
     of agricultural use before receiving  the farm exemption                                                                   
     assessment provided by AS 29.45.060.                                                                                       
MS. RODMAN said SB 352 is a companion bill to HB 455, which was                                                                 
amended in a House committee. She provided members with copies of                                                               
the amendment.                                                                                                                  
SENATOR TORGERSON called for teleconferenced testimony.                                                                         
STEVE VAN SANT, state assessor, said he was available to answer                                                                 
CHAIRMAN TORGERSON asked  him if he supported the  bill as amended                                                              
in the House.                                                                                                                   
STEVE VAN SANT replied they didn't oppose it.                                                                                   
SENATOR PHILLIPS asked for the definition of "certain."                                                                         
MR.  VAN SANT  replied the  amendment applied  to page  2, line  5                                                              
where "for  farm use in accordance  with this section"  is deleted                                                              
and "based upon  that restricted use" is inserted.  The intent was                                                              
that land restricted  to agricultural use would  be assessed based                                                              
on that use. That  doesn't mean that it would be  based on farm us                                                              
because  the  land isn't  required  to  be  farmed. Some  land  is                                                              
required  to be  cleared but  not farmed  so the  intent was  that                                                              
those  lands would  be  assessed  based on  what  those lands  are                                                              
selling for.                                                                                                                    
SENATOR PHILLIPS said he was referring  to the title change in the                                                              
proposed amendment  \A.1 in which "certain" replaces  "farm or" on                                                              
page 1 line 1. He asked if this was defined by page 2, line 5.                                                                  
MR. VAN SANT  said the legal department changed the  title, but it                                                              
was referring to the agricultural restricted lands.                                                                             
CHAIRMAN TORGERSON asked for the status of HB 455.                                                                              
MS.  RODMAN replied  it  came  over to  the  Senate  that day  and                                                              
received  referrals  to the  Community  and Regional  Affairs  and                                                              
Resources Committees.                                                                                                           
CHAIRMAN TORGERSON announced  they would take action  on HB 455 at                                                              
a later meeting. They would take  testimony on SB 352, but take no                                                              
SENATOR  AUSTERMAN  said he  didn't  find  reference to  the  last                                                              
sentence of the sponsor statement in the bill.                                                                                  
MS. RODMAN  replied, "They  receive that  determination…  where it                                                              
says,  'This  subsection  does  not  apply to  a  person  with  an                                                              
interest in land that is classified…."                                                                                          
SENATOR AUSTERMAN  said he wasn't familiar with  agricultural land                                                              
and was having difficulty reading  that out of the bill itself. He                                                              
then asked whether  it referred to the new language  at the bottom                                                              
of  page  1 and  top  of  page 2  and  that  is what  removes  the                                                              
MS. RODMAN  said that is her  understanding, but Ed Arobio  was on                                                              
line and could address the question more specifically.                                                                          
CHAIRMAN TORGERSON replied they would hear from him later.                                                                      
ROB WELLS,  Director of the  Division of Agriculture  testified in                                                              
support  of the  bill and  said they  have been  working with  the                                                              
assessor's office  on this version  of the bill. Their  support is                                                              
based  on  interest from  farmers  who  feel  they should  not  be                                                              
required to fill out the application  for farm use land since they                                                              
are restricted  to agricultural  use as conveyed  by the  state at                                                              
JOHN TOBIN testified via teleconference  from Fairbanks in support                                                              
of SB 352. He testified on HB 455  previously. His land assessment                                                              
has increased  almost 500  percent in the  last two years  and the                                                              
added tax burden makes it difficult to make ends meet.                                                                          
STEWART  DAVIES   testified  via  testified   teleconference  from                                                              
Fairbanks  in support of  SB 352.  He purchased  his land  in 2000                                                              
knowing it  had a restrictive  agricultural covenant.  His current                                                              
assessment  is at  $400.00 per  acre  and is  based on  comparable                                                              
sales in the borough. They don't  acknowledge inherent differences                                                              
between  fee simple  title  property and  agricultural  restricted                                                              
land. Filing  yearly for the farm  use exemption to get  a reduced                                                              
assessment   is  redundant   since   the  land   already  has   an                                                              
agricultural restriction placed on it by the State of Alaska.                                                                   
SENATOR AUSTERMAN  asked why subsection  (b) from page  1 couldn't                                                              
be deleted altogether.                                                                                                          
ED AROBIO from  the Division of Agriculture explained  the statute                                                              
was originally  set  up for completely  fee simple  land that  was                                                              
being  used for  farming  so  that is  the  reason  for the  other                                                              
sections of the bill.                                                                                                           
SENATOR AUSTERMAN  asked again whether subsection  (b) couldn't be                                                              
MR. AROBIO didn't believe they would  support that and the borough                                                              
probably wouldn't either because  it applies to other land that is                                                              
being used  for farming as well  as the restricted  land discussed                                                              
CHAIRMAN  TORGERSON  asked  Mr.  Van  Sant  for  his  thoughts  on                                                              
eliminating subsection (b).                                                                                                     
MR. VAN  SANT said,  "First  I nearly  had a heart  attack."   The                                                              
subsection was included  to take the pressure off  farmers to sell                                                              
their fee simple  farmland to developers by lowering  the property                                                              
taxes. It is quite important.                                                                                                   
CHAIRMAN TORGERSON asked  him what the assessed value  would be on                                                              
state agricultural land if the bill passed.                                                                                     
MR. VAN  SANT replied it  would be helpful  to give  a theoretical                                                              
explanation.  A piece  of fee  simple  land might  be assessed  at                                                              
$300.00  per acre  based on  farm use,  but have  a full value  of                                                              
$1,000.00   to  $3,000.00   per   acre.  Then   there  are   state                                                              
agricultural restricted  lands that are  selling for $400  to $600                                                              
per acre that the assessor is assessing  at that rate. Some people                                                              
are under the impression that the  assessor is assessing that land                                                              
at  values other  than agricultural  restricted  land. You  aren't                                                              
going to find  land that you can  buy in large chunks  for $400.00                                                              
per  acre   in  this  state.  That   is  the  assessed   value  of                                                              
agricultural  restricted  land. This  is  a reiteration  that  the                                                              
assessor  will   assess  this  land  based  on   the  agricultural                                                              
restricted value of $400-$600 per acre or whatever it may be.                                                                   
CHAIRMAN  TORGERSON said  his reading  is that  Section 1  exempts                                                              
them from  subsection  (b) then Section  2 subsection  (f)  is the                                                              
mechanism for assessing.                                                                                                        
MR. VAN SANT agreed, based on the restricted use.                                                                               
CHAIRMAN TORGERSON said  the bill would be held  and the committee                                                              
would act on the companion bill the following week.                                                                             
              HB 355-MOBILE TELECOMMUNICATIONS TAX                                                                          
AMY  ERICKSON, staff  to Representative  Murkowski  and the  House                                                              
Labor and Commerce Committee, read  the following into the record:                                                              
     HB 355 is  the mobile telecommunications tax.  State and                                                                   
     local governments tax mobile  telecommunication services                                                                   
     in  a  variety  of  ways. Because  of  the  mobility  of                                                                   
     wireless  equipment determining  which  state and  local                                                                   
     taxes  apply  to a  wireless  call is  complicated.  The                                                                   
     process  of  determining wire  transaction  is  commonly                                                                   
     referred  to as  sourcing.  In order  to  create a  more                                                                   
     uniform  system  for  taxing  wireless  calls,  Congress                                                                   
     passed the  Mobile Communication  Sourcing Act  in 2000.                                                                   
     States  have until  August  1, 2002  to  conform to  the                                                                   
     federal  act  and  those  failing  to  conform  will  be                                                                   
     preempted  from  imposing  taxes   on  most  calls  made                                                                   
     outside of where the customer's  primary use occurs, so-                                                                   
     called roaming calls.                                                                                                      
     This bill conforms  state law to federal  law to clarify                                                                   
     that mobile  telecommunications services are  subject to                                                                   
     taxation in the users place  of primary use. That is the                                                                   
     residential  or business  address  where the  customer's                                                                   
     use of the  mobile service primarily occurs.  Passage of                                                                   
     this  bill  prevents  multiply   taxation  of  services,                                                                   
     allows  the state  to appropriately  tax wireless  calls                                                                   
     and  eliminates  confusion   as  to  where  to  tax  the                                                                   
     wireless  calls. The bill  does not  impact the rate  of                                                                   
     taxes  or  fees that  state's  or localities  impose  on                                                                   
     wireless calls  or the types of calls subject  to taxes.                                                                   
     Each jurisdiction  with taxing  authority will  continue                                                                   
     to determine whether to tax a call and at what rate.                                                                       
     The Mobile  Telecommunication  Sourcing Act was  crafted                                                                   
     by  industry,  state, local  and  tax officials  and  is                                                                   
     endorsed  by such  entities  as the  National  Governors                                                                   
     Association,  League  of  Cities, and  the  Federal  Tax                                                                   
SENATOR PHILLIPS asked  Ms. Erickson if she knew  why the Governor                                                              
from Montana vetoed the legislation.                                                                                            
MS.  ERICKSON  replied  she  didn't know  the  reason  but  either                                                              
Darrell Bell or Dan Youmans from AT&T Wireless probably would.                                                                  
DARRELL  BELL responded  via teleconference  and said the  Montana                                                              
Governor ran  for election on a  strict no new taxes  campaign and                                                              
she believed  some might view  her as supporting  additional taxes                                                              
if she signed the bill.                                                                                                         
SENATOR PHILLIPS asked how the law  is currently being enforced in                                                              
Alaska or any other state.                                                                                                      
MR. BELL explained  that the service carrier that  is handling the                                                              
roaming activity is  applying the taxes where they  have roamed to                                                              
and remitting  them to  the local  governments. Those charges  are                                                              
then passed  on to  the home  carrier who  collects them  from the                                                              
customer. States applying the federal  law will forgo revenue from                                                              
taxes on calls made within their  state by visitors, but will gain                                                              
authority to tax calls made by residents  while out-of-state. This                                                              
makes administration of the taxes  much simpler and on a state-by-                                                              
state basis should be revenue neutral.                                                                                          
He added  about 30  states have passes  conforming language  bills                                                              
and Montana is the only state that has had a problem.                                                                           
CHAIRMAN TORGERSON  asked where his  charges would be taxed  if he                                                              
traveled to Washington and made roaming calls.                                                                                  
MR. BELL explained if he went to  Seattle, Washington and placed a                                                              
call today, the  State of Washington would impose  a sales tax and                                                              
the city of  Seattle would impose  both a sales tax and  a utility                                                              
tax. The  serving carrier would remit  the taxes locally  and then                                                              
pass them on  to the home carrier  who would then apply  the taxes                                                              
to his bill.  The charges might  be buried in the  roaming charges                                                              
but they  would likely be  there. Under  this bill, all  the calls                                                              
would be taxed  to the primary-use taxing jurisdiction.  No longer                                                              
would they be taxing people that roam into the state.                                                                           
CHAIRMAN TORGERSON asked how it could be revenue neutral.                                                                       
MR.  BELL said  the  same amount  of revenue  would  be lost  from                                                              
customers  roaming into  Alaska as  would be  gained by  customers                                                              
from Alaska  roaming outside the  state. Another part of  the bill                                                              
is that either  the state provides a database or  the carrier uses                                                              
a  nine digit  zip code  identification  to enter  users into  the                                                              
correct jurisdiction.  Additionally, if  a customer  believes they                                                              
are being  taxed to  the incorrect  jurisdiction the home  carrier                                                              
must  respond to  the  complaint  within 60  days  to correct  the                                                              
States that don't  pass this type of legislation  before August 1,                                                              
2002 will lose  money because they  will no longer be able  to tax                                                              
individuals that roam into the state  but have primary use outside                                                              
the state.                                                                                                                      
CHAIRMAN TORGERSON  asked for confirmation that the  bill would be                                                              
revenue neutral.                                                                                                                
CHUCK  HARLAMERT, Department  of Revenue  representative, said  at                                                              
present only  local governments impose  taxes on the  revenues and                                                              
the bill  should be revenue  neutral in  Alaska. It's a  good bill                                                              
and  the  state  should  take every  opportunity  allowed  by  the                                                              
federal government.                                                                                                             
SENATOR PHILLIPS made a motion to  move CSHB 355(CRA) and attached                                                              
fiscal note from committee with individual recommendations.                                                                     
There being no objection, it was so ordered.                                                                                    
        SB 351-CONVEYANCE OF TIDELANDS TO MUNICIPALITIES                                                                    
SENATOR ROBIN TAYLOR read the following into the record:                                                                        
     For too  long, coastal  municipalities have been  denied                                                                   
     control of  the land within  its own boundaries.  SB 351                                                                   
     will   correct   problems  in   existing   law,   giving                                                                   
     communities more control over  some of its more valuable                                                                   
     SB 351  makes the transfer  of tide and submerged  lands                                                                   
     to municipalities  much easier  than is in current  law.                                                                   
     It requires  the commissioner to identify  specific land                                                                   
     the state may  reserve in the public interest  or access                                                                   
     and  transfer  the  balance to  the  municipality.  From                                                                   
     there,  local  government  and   the  local  public  can                                                                   
     determine how  that land is  of the most value.  In some                                                                   
     cases,  it will  remain wild  for its  scenic value;  in                                                                   
     others, it may  be developed. In either case,  the final                                                                   
     decision will be made at the  local level. Residents who                                                                   
     actually have  to live with  the results will  have easy                                                                   
     access and input in the decision making process.                                                                           
     SB 351 also  allows the municipality to  make selections                                                                   
     and  receive an  answer within  an acceptable  timeline.                                                                   
     For  many communities,  the selection  process has  been                                                                   
     brought  to a  "hurry up  and wait"  status because  the                                                                   
     department has not made a determination.  Often, that is                                                                   
     because   of  the  department's   workload.  This   bill                                                                   
     corrects  that   problem  by  providing  for   a  90-day                                                                   
     timeline  for  response.  This   time  frame  gives  the                                                                   
     department 90  days to review  the request. If  there is                                                                   
     no objection  based on the reasons stated  in Section 1,                                                                   
     the land is conveyed to the municipality.                                                                                  
     Making  decisions  for  local communities  on  how  they                                                                   
     conduct  their  business  should  not  be  up  to  state                                                                   
     government.  Communities  make  the best  decisions  for                                                                   
     their community.  The public  process always works  best                                                                   
     on a  local level.  SB 351 will  give local  governments                                                                   
     the  ability  to  best determine  how  land  within  its                                                                   
     boundaries can and will be used for its residents.                                                                         
SENATOR  TAYLOR said  he just received  the fiscal  note from  the                                                              
Department of Natural Resources and  they indicate they are unable                                                              
to calculate  the fiscal  impact for  the bill.  He was  sure they                                                              
would comment further.  He said that if a 90-day  objection period                                                              
is  not sufficient  the  department  should suggest  a  timeframe.                                                              
There are  many communities  that have  never received  their land                                                              
transfers,  particularly  the  tideland  transfers.  As  a  policy                                                              
matter,  this  situation  should  be  resolved  and  this  is  one                                                              
CHAIRMAN TORGERSON said  he wasn't sure 90 days  would be workable                                                              
either,  but  for  different  reasons   such  as  clouded  titles.                                                              
Extending the 90-day timeframe to  180 days and giving reasons for                                                              
which the commissioner could extend might be workable.                                                                          
SENATOR PHILLIPS asked Senator Taylor  for a specific example from                                                              
Wrangell or Petersburg and how this could help them.                                                                            
SENATOR TAYLOR replied one of the  biggest problems in his area is                                                              
the cost  of surveying.  They were  looking for  a solution  so an                                                              
industrial  complex  or processing  plant  that  wanted to  locate                                                              
along the beach  would be able to  do so. The property  might have                                                              
been transferred  in essence, but  it has never been  surveyed and                                                              
conveyed  so  it  is  still  literally  held  within  the  state's                                                              
ownership. Additionally, the Legislature  has required that recent                                                              
conveyances  can only  be made through  a lease  while in  earlier                                                              
conveyances the  communities could actually sell  their tidelands.                                                              
If someone wants to develop tidelands  now, the state requires the                                                              
proposed developer to survey much  more land than they need so the                                                              
cost is so huge it stops the entire process from moving forward.                                                                
SENATOR PHILLIPS  asked whether that  is internal policy  or state                                                              
law that is driving the state to require the block surveys.                                                                     
SENATOR TAYLOR  thought the  reason was  that the Legislature  had                                                              
never  appropriated  enough money  for  the  state to  survey  the                                                              
lands. The state put off surveying  and is now telling communities                                                              
they  must  survey.  The  new  text  states  that,  "Any  property                                                              
conveyed without prior  survey must be surveyed  and if necessary,                                                              
resubdivided before its lease, development,  or sale." The cost of                                                              
any required  survey and subdivision  requirements would  be borne                                                              
by the  municipality. He included  this language so parcels  for a                                                              
particular  project  or  development  could  be  surveyed  without                                                              
including large  tracts that weren't  relevant to the  project. He                                                              
thought this would  be a way of expediting the process  but he too                                                              
was concerned about the 90 day limit.                                                                                           
CHAIRMAN  TORGERSON asked  whether this  came under the  municipal                                                              
entitlement section.                                                                                                            
SENATOR TAYLOR  didn't know  whether this would  be part  of their                                                              
entitlement acre-for-acre.                                                                                                      
CHAIRMAN TORGERSON noted that 230  million acres was more than was                                                              
transferred to local governments in total.                                                                                      
SENATOR AUSTERMAN  said municipalities  are specifically  referred                                                              
to, but he couldn't tell whether  boroughs would also be affected.                                                              
SENATOR TAYLOR replied they would  be affected if they owned land.                                                              
He didn't  think associations  or villages  would qualify  if they                                                              
weren't incorporated.                                                                                                           
SENATOR AUSTERMAN was concerned about  scope because areas without                                                              
municipalities  such   as  Prince  of  Wales  Island   with  their                                                              
mariculture  issues   could  be  affected.  He   wondered  whether                                                              
municipalities could take over the  sub leases and deal with those                                                              
mariculture issues.                                                                                                             
SENATOR  TAYLOR said  Wrangell received  most  of their  tidelands                                                              
through a conveyance by the state  and, at the same time, received                                                              
all the existing  leases that were on those tidelands.  There were                                                              
leases for  storage facilities and  log storage on  tidelands that                                                              
never  went dry.  Although there's  probably  opportunity for  the                                                              
community to  modify those leases  there hasn't been a  pattern to                                                              
do that  because it  would affect  business stability  as much  as                                                              
anything. Leases have  been transferred and he's not  aware of any                                                              
problems that  have occurred  at renewal.  However, he  agreed the                                                              
question  was valid  because it  is possible  that a  municipality                                                              
could dramatically change a lease upon renewal.                                                                                 
SENATOR  AUSTERMAN then  questioned  how "municipality"  would  be                                                              
defined because  on Kodiak Island  the uplands are refuge  and the                                                              
lower lands  are state waters  that are  leased from the  state to                                                              
set netters.                                                                                                                    
CHAIRMAN  TORGERSON said  the city  and borough  limits are  quite                                                              
well defined. Borough limits might  not be completely surveyed but                                                              
they follow section lines fairly  well and city governments follow                                                              
their  own survey  lines. He  then  read, "This  section does  not                                                              
enlarge  or  diminish the  general  grant  land entitlement  of  a                                                              
municipality nor is the conveyance  of the section counted against                                                              
the municipalities general land grant."                                                                                         
CAROL  CARROLL, Department  of Natural  Resources  representative,                                                              
read the following statement into the record:                                                                                   
     Existing state  law (AS 38.05.825) allows DNR  to convey                                                                   
     state-owned   tidelands    and   submerged    lands   to                                                                   
     municipalities  if  they  are   needed  for  a  specific                                                                   
     development project or use.    The existing law protects                                                                   
     the public's  right to use and have access  across these                                                                   
     tidelands  for  navigation,  recreation and  other  uses                                                                   
     (referred  to  as  the  public   trust  doctrine)  after                                                                   
     The existing  law has enabled municipalities  to acquire                                                                   
     tidelands  and  submerged  lands  that  are  needed  for                                                                   
     development.   Lands have been transferred  to Wrangell,                                                                   
     Whittier,   Anchorage,  Lake   and  Peninsula   Borough,                                                                   
     Dillingham, Cordova, Valdez,  and many other communities                                                                   
     under  this existing  law.    DNR is  not  aware of  any                                                                   
     particular problem  with the existing law and  is unsure                                                                   
     why the changes are proposed.                                                                                              
     This legislation  modifies AS 38.05.825 by  removing the                                                                   
     requirements  for a demonstrated  need and  specifically                                                                   
     would  allow   municipalities  to  sell   tidelands  and                                                                   
     submerged lands.   It also requires the  commissioner to                                                                   
     either approve  or disapprove  an application within  90                                                                   
     days or it  automatically would be approved  without any                                                                   
     public notice or decision by DNR.                                                                                          
     DNR  strongly   opposes  this   bill  as  it   makes  AS                                                                   
     38.05.825, the law allowing  conveyances of tidelands to                                                                   
     municipalities, unconstitutional and unmanageable.                                                                         
     Section 1 of  the bill deletes most of the  criteria for                                                                   
     approval of conveyances in the  existing law, including:                                                                   
     that  the  land  must be  suitable  for  occupation  and                                                                   
     development, that  the land be appropriately  classified                                                                   
     by either a  state or municipal land use  plan, and that                                                                   
     there  be a need  for the  transfer for  an existing  or                                                                   
     proposed project.                                                                                                          
     Section 1  also adds a  provision that the  commissioner                                                                   
     can  only disapprove  a municipal  application when  the                                                                   
     state  can identify  a specific state  use or  statutory                                                                   
     reservation  of the land.     The  only lands  with such                                                                   
     reservations  would be  legislatively established  areas                                                                   
     such as Kachemak Bay State Park,  State Game Refuges and                                                                   
     Critical Habitat Areas, state  ferry terminals and state                                                                   
     boat harbors,  and a  few other  sites.  This  provision                                                                   
     would likely  result in the conveyance of  virtually all                                                                   
     tideland and  submerged lands within municipalities,  an                                                                   
     area DNR estimates to be 20 to 30 MILLION acres.                                                                           
     The  consequences of  such conveyances  are  staggering.                                                                   
     For  example,  the  North Slope  Borough  could  receive                                                                   
     title to  the surface of  all offshore lands  in Prudhoe                                                                   
     Bay,  thereby  controlling  where  and  how  development                                                                   
     occurs  on state oil  and gas  leases that underlay  the                                                                   
     offshore  waters.    Many log  transfer  facilities  and                                                                   
     aquatic farm sites in Southeast  would be under borough,                                                                   
     not  state,  control,  with   multiple  different  rules                                                                   
     depending  on municipal,  not  state, laws.   These  are                                                                   
     only a few examples.                                                                                                       
     In addition, such massive conveyances  to municipalities                                                                   
     in Southeast Alaska would jeopardize  the existing Quiet                                                                   
     Title Action that the State  has filed in the US Supreme                                                                   
     Court  against  the  federal  government  that  includes                                                                   
     tidelands  and submerged  land in  the Tongass  National                                                                   
     Section  2  requires  DNR to  approve  or  disapprove  a                                                                   
     conveyance  within  90  days,  or  it  is  automatically                                                                   
     approved.  Because this provision  allows conveyances to                                                                   
     be approved  automatically after 90 days  without public                                                                   
     notice  as required  by the  Constitution, DNR  believes                                                                   
     this  section of  the bill  is  unconstitutional.   This                                                                   
     section also specifically allows  municipalities to sell                                                                   
     the  tidelands.    Under  federal  law  and  the  Alaska                                                                   
     Constitution,   tidelands   and  submerged   lands   are                                                                   
     considered Public Trust resources  held by the state for                                                                   
     the use and enjoyment of all  citizens, and Public Trust                                                                   
     resources  generally cannot  be sold.   By  specifically                                                                   
     allowing for the sale of tidelands  and submerged lands,                                                                   
     this  section  of  the law  violates  the  public  trust                                                                   
     Because  the bill  allows  virtually  all tidelands  and                                                                   
     submerged  lands  within  municipal   boundaries  to  be                                                                   
     conveyed  under  this  bill,   shortly  after  the  bill                                                                   
     passes,  DNR will  likely be  flooded with  applications                                                                   
     that  it will  be unable  to process  within the  90-day                                                                   
     In  conclusion,  DNR  believes   that  existing  law  AS                                                                   
     38.05.825  allows  the state  to transfer  tideland  and                                                                   
     submerged  lands   to  municipalities  for   a  specific                                                                   
     development  project or  use.  This  authority works  as                                                                   
     presently defined.                                                                                                         
SENATOR AUSTERMAN  asked whether  the department would  be willing                                                              
to negotiate on the 90 day limit if the bill were to become law.                                                                
MS. CARROLL replied  she doesn't know what the  timeframe would be                                                              
but  it certainly  would  depend  on  how many  applications  were                                                              
received. She would  ask the department what timeframe  they could                                                              
give the committee.                                                                                                             
CHAIRMAN TORGERSON  suggested she talk  with the sponsor  since he                                                              
just  received  the  fiscal  note  and  realized  there  might  be                                                              
SIDE B                                                                                                                          
2:45 pm                                                                                                                         
SENATOR PHILLIPS asked whether DNR  would need additional staff if                                                              
the bill were to become law.                                                                                                    
MS. CARROLL said she could provide  him with information regarding                                                              
the  current  staff  levels.  The  fiscal  note  is  indeterminate                                                              
because they don't know what kind  of response they would get from                                                              
municipalities.  "Twenty  to thirty  million  acres  is  a lot  of                                                              
SENATOR PHILLIPS asked how many conveyances  are currently done in                                                              
a year.                                                                                                                         
RON SCHONENBACH with the Department  of Natural Resources Division                                                              
of Mining Land  and Water said in Southeast they  have entertained                                                              
applications from eight municipalities  since the current bill was                                                              
passed  in  1995.  All the  municipalities  have  full  management                                                              
authority  for those tidelands.  They have  a pending  application                                                              
from the  Haines Borough and  another from the  Ketchikan Borough.                                                              
All others from Southeast have been processed.                                                                                  
SENATOR  PHILLIPS   asked  him  to  provide  the   committee  with                                                              
information regarding the rest of the state.                                                                                    
MR SCHONONBACH said he would get  that information. The staff that                                                              
deals with the leases for the rest  of the state is covered in the                                                              
resource  allocation development  section  and are  also the  ones                                                              
doing  the AS  29  conveyances to  municipalities  along with  the                                                              
tideland conveyances to municipalities.                                                                                         
SENATOR PHILLIPS commented some community must have complained.                                                                 
CHAIRMAN TORGERSON  announced to  bill would be  set aside  so Ms.                                                              
Carroll could provide the requested information.                                                                                
           HB 358-EXEMPTION FROM PROPERTY TAX: TIMBER                                                                       
 REPRESENTATIVE MIKE  CHENAULT, bill sponsor, introduced  the bill                                                              
via teleconference.  This would give municipalities  an additional                                                              
tool to  lower the  threat of  fire on  spruce bark beetle  killed                                                              
forestland  by allowing  the  option to  waive  property taxes  on                                                              
roads or other  property improvements that facilitate  the removal                                                              
of the timber.                                                                                                                  
The Kenai  Peninsula Borough has  approximately 2.2  million acres                                                              
of spruce forest  and 1.1 million of it is affected  by the spruce                                                              
bark  beetle  infestation.  In  an effort  to  mitigate  the  fire                                                              
threat, the Kenai Peninsula Borough  tried to enact a property tax                                                              
waiver program but the plan was blocked  because state law doesn't                                                              
allow for  such breaks. This bill  makes the necessary  changes in                                                              
state  law  to   allow  the  Kenai  Peninsula   Borough  or  other                                                              
municipalities in  a similar situation to help  protect themselves                                                              
without  having to  take on  additional tax  liabilities. The  tax                                                              
breaks aren't mandated rather they are an option.                                                                               
Included  in  member's  packets  were  copies  of  the  supporting                                                              
resolution  from the  Kenai Peninsula  Borough and  photos of  the                                                              
beetle infestation on the peninsula.                                                                                            
SENATOR PHILLIPS  asked whether  there was  any opposition  to the                                                              
REPRESENTATIVE   CHENAULT   replied  he   wasn't   aware  of   any                                                              
CHAIRMAN TORGERSON asked whether  they anticipated that this would                                                              
affect smaller parcels of land and individual owners.                                                                           
REPRESENTATIVE CHENAULT  thought this  would give the  borough the                                                              
opportunity  to look  at  each parcel  then  make a  determination                                                              
about which lands would be included.                                                                                            
CHAIRMAN TORGERSON  wanted it  a matter of  record what  was being                                                              
exempted  from taxation.  He wanted examples  of "improvements  to                                                              
real  property,   including  personal  property  affixed   to  the                                                              
REPRESENTATIVE  CHENAULT  replied the  improvements  would be  any                                                              
roads that  were built into parcels  to make access to  the timber                                                              
CHAIRMAN TORGERSON asked whether  they would have to apply for the                                                              
exemption every year.                                                                                                           
REPRESENTATIVE CHENAULT thought that  would be a borough decision.                                                              
CHAIRMAN TORGERSON asked the state  assessor whether the exemption                                                              
would need  to be renewed  annually and  whether he supported  the                                                              
STEVE VAN  SANT, State Assessor,  said this was well  deserved and                                                              
he did  support the  bill. An  assembly grants  the exemption  and                                                              
they could set  it up with any timeframe they  wanted. There would                                                              
be no requirement from the state  to set any particular timeframe.                                                              
CHAIRMAN TORGERSON replied  it was written that way  but he wanted                                                              
his opinion whether a timeframe was needed.                                                                                     
STEVE VAN  SANT said  this seems  to be an  issue where  you never                                                              
know  whether  the issue  will  arise  again. He  rarely  supports                                                              
exemptions, but feels this has merit.  It gives municipalities the                                                              
ability to deal with a dangerous situation.                                                                                     
JEFF  JAHNKE,  Director of  the  Division  of Forestry  and  State                                                              
Forester, testified in support of  the bill. Although the value of                                                              
the affected  spruce has  declined substantially  there are  still                                                              
three important reasons why the harvest should continue.                                                                        
   1. It reduces the hazard caused by dead and dying trees                                                                      
   2. It encourages reforestation                                                                                               
   3. It continues to recover the value that still remains                                                                      
MARVIN  RUSE, Mapping  Director  of the  Spruce  Bark Beetle  Task                                                              
Force, testified in support of the  bill. The tax incentives might                                                              
encourage some vacant  landowners to become more  active in moving                                                              
the hazard on their land. Two thirds  of the Kenai Peninsula is in                                                              
federal or state ownership so the  only opportunity is on private,                                                              
Native and  borough land.  They want to  encourage the  removal of                                                              
any and all of the hazard.                                                                                                      
MR. VAN SANT  questioned including "or at risk  of being infested"                                                              
because a  municipality that  was oil  rich could  use that  as an                                                              
excuse to exempt  lands which could cost the state  money from oil                                                              
and gas revenues. He wanted his concern a matter of record.                                                                     
CHAIRMAN TORGERSON  said he noticed  that as well. The  bill ought                                                              
to do what the  testimony says it's supposed to,  which is to spur                                                              
the removal  of the infested trees  or enhance the  probability of                                                              
reforestation.  Unfortunately,  the bill  is  silent  on that.  He                                                              
encouraged  local governments  to  take this  a  step further  and                                                              
develop a  plan for removal of  the risk otherwise there  would be                                                              
no exemption.                                                                                                                   
MR. VAN SANT said he understood that  but unfortunately it doesn't                                                              
always work that way.                                                                                                           
TIM NAVARRE from  the Kenai Borough Assembly assured  members they                                                              
would act quickly once the bill is  passed and would probably work                                                              
with Mr. Van Sant. There is much  work to be done before they pass                                                              
an ordinance that covers their intent.                                                                                          
CHAIRMAN  TORGERSON  said he  appreciates  that.  He likes  intent                                                              
placed in  the bill, but  this bill just  gives authority  for tax                                                              
relief  and  doesn't accomplish  the  goals  as expressed  in  the                                                              
testimony. He didn't  intend to amend the bill;  local governments                                                              
would have  to do that  on their own.  If the state  assessor sees                                                              
it's being abused  he expects him to bring the  matter back before                                                              
the Legislature and they would repeal the law.                                                                                  
MR. NAVARRE said they would be working  diligently to come up with                                                              
a good ordinance.                                                                                                               
There was no further testimony.                                                                                                 
CHAIRMAN TORGERSON asked for the will of the committee.                                                                         
SENATOR PHILLIPS made a motion to move CSHB 358(CRA) and attached                                                               
fiscal note from committee with individual recommendations.                                                                     
There being no objection, it was so ordered.                                                                                    
There being no further business before the committee, the Senate                                                                
Community and Regional Affairs Committee meeting was adjourned at                                                               
2:40 p.m.                                                                                                                       

Document Name Date/Time Subjects