Legislature(2005 - 2006)SENATE FINANCE 532


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01:35:15 PM Start
01:36:39 PM Local Boundary Commission - Overview of Annual Report
03:12:42 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Local Boundary Commission Report
Overview of Annual Report
<Listen Only>
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
    HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                   
                        January 24, 2005                                                                                        
                           1:35 p.m.                                                                                            
SENATE COMMUNITY AND REGIONAL AFFAIRS                                                                                         
Senator Gary Stevens, Chair                                                                                                     
Senator Bert Stedman                                                                                                            
Senator Thomas Wagoner                                                                                                          
Senator Johnny Ellis                                                                                                            
Senator Albert Kookesh                                                                                                          
HOUSE COMMUNITY AND REGIONAL AFFAIRS                                                                                          
Representative Bill Thomas, Co-Chair                                                                                            
Representative Kurt Olson, Co-Chair                                                                                             
Representative Gabrielle LeDoux                                                                                                 
Representative Mark Neuman                                                                                                      
Representative Woodie Salmon                                                                                                  
Representative Sharon Cissna                                                                                                  
HOUSE MEMBERS ABSENT                                                                                                          
Representative Pete Kott                                                                                                        
OTHER LEGISLATORS PRESENT                                                                                                     
Senator Fred Dyson                                                                                                              
Senator Donny Olson                                                                                                             
Senator Lyman Hoffman                                                                                                           
Representative Hawker                                                                                                           
COMMITTEE CALENDAR                                                                                                            
Local Boundary Commission - Overview of Annual Report                                                                           
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record.                                                                                                   
WITNESS REGISTER                                                                                                              
Commissioner Edgar Blatchford                                                                                                 
Department of Community & Economic Development                                                                                  
PO Box 110800                                                                                                                   
Juneau, AK 99811-0800                                                                                                           
POSITION  STATEMENT:  Gave   borough  background  and  introduced                                                             
Arliss Sturgulewski                                                                                                             
Arliss Sturgulewski, former Alaska State Senator                                                                                
No address provided                                                                                                             
POSITION STATEMENT: Discussed advantages of boroughs                                                                          
Darroll Hargraves, Chair                                                                                                        
Local Boundary Commission (LBC)                                                                                                 
Department of Community & Economic Development                                                                                  
550 West Seventh Avenue, Suite                                                                                                  
Anchorage, Alaska 99501-3510                                                                                                    
POSITION STATEMENT:   Presented  LBC annual report  and responded                                                             
to questions                                                                                                                    
Dan Bockhorst                                                                                                                   
Local Boundary Commission                                                                                                       
Department of Community & Economic Development                                                                                  
550 West Seventh Avenue, Suite                                                                                                  
Anchorage, Alaska 99501-3510                                                                                                    
POSITION STATEMENT:   Responded to  questions related to  the LBC                                                             
annual report                                                                                                                   
ACTION NARRATIVE                                                                                                              
     ^Local Boundary Commission - Overview of Annual Report                                                                 
CHAIR GARY  STEVENS called  the joint meeting  of the  Senate and                                                             
House  Community  and  Regional Affairs  Standing  Committees  to                                                               
order at 1:35:15  PM. Present were Senators  Bert Stedman, Thomas                                                             
Wagoner, Johnny Ellis, Albert Kookesh, and Chair Gary Stevens                                                                   
CO-CHAIR BILL THOMAS recognized  that House CRA committee members                                                             
Representative  Kurt  Olson,  Co-Chair,  Gabrielle  LeDoux,  Mark                                                               
Neuman,  and Woodie  Salmon were  present. Representative  Sharon                                                               
Cissna arrived during the course of the meeting.                                                                              
1:36:39 PM                                                                                                                    
COMMISSIONER EDGAR BLATCHFORD  introduced Arliss Sturgulewski and                                                               
Darroll Hargraves.                                                                                                              
1:38:04 PM                                                                                                                    
He  gave a  short  biography and  outlined  the local  government                                                               
principles in the Alaska State Constitution                                                                                     
1:38:45 PM                                                                                                                    
COMMISSIONER BLATCHFORD  reported that  Vic Fischer  thought that                                                               
organized boroughs would exist throughout  Alaska within 10 years                                                               
of statehood. However,  less than 43 percent of  Alaska is within                                                               
an  organized  borough.  The   perception  that  boroughs  aren't                                                               
suitable  for parts  of  Alaska  is not  correct.  More than  two                                                               
thirds of  Alaska's organized boroughs  encompass areas  that are                                                               
totally or largely rural.                                                                                                       
1:39:48 PM                                                                                                                    
Those rural  boroughs include the  Bristol Bay, the  North Slope,                                                               
Northwest Arctic,  Aleutians East,  Lake and  Peninsula, Yakutat,                                                               
Kodiak  Island  and  Haines.  Some   of  those  large  areas  are                                                               
predominantly rural and Alaska Native.                                                                                          
1:40:13 PM                                                                                                                    
The Native population of the  Northwest Arctic Borough is greater                                                               
than  85  percent.  Native leader,  legislator  and  mayor,  Eben                                                               
Hopson  viewed borough  government as  the means  to advance  the                                                               
social and economic well being of rural residents.                                                                              
He asked the committees to  give careful consideration to the LBC                                                               
1:41:40 PM                                                                                                                    
CHAIR GARY STEVENS  noted that Senators Fred  Dyson, Donny Olson,                                                               
Lyman Hoffman  and Representatives  Mike Hawker and  Peggy Wilson                                                               
were present.                                                                                                                   
1:42:04 PM                                                                                                                    
ARLYSS  STURGULEWSKI, former  Alaska State  Senator, stated  that                                                               
developments are  underway that should be  seen as a call  to the                                                               
Legislature   and   Administration   to  create   model   borough                                                               
boundaries in the unorganized borough.  She said it's a good time                                                               
to explore the constitutional intent of local government.                                                                       
Article  X  calls for  maximum  local  government, which  is  the                                                               
opposite  of what  we're doing,  she  said. The  state should  be                                                               
organized into organized and unorganized  boroughs so each region                                                               
has social, cultural, economic, and geographic considerations.                                                                  
1:44:14 PM                                                                                                                    
Unorganized areas grew after statehood  and the Legislature needs                                                               
to address this  issue. There are 16  organized boroughs covering                                                               
about 40 percent  of the state. Half of the  boroughs were formed                                                               
voluntarily and half by legislative mandate.                                                                                    
Seven of  eight Alaskans  live in organized  boroughs as  do two-                                                               
thirds of Alaska Natives.                                                                                                       
1:45:24 PM                                                                                                                    
Why is it important to  establish model boundaries to address the                                                               
boundaries   of   the   unorganized   borough?   Major   economic                                                               
developments are  taking place or  are proposed and most  of this                                                               
activity  is in  the unorganized  borough. This  includes: Donlin                                                               
Creek, the Pogo  Mine, and Pebble Beach. There's  also talk about                                                               
oil and  gas in the Doyon  area, which is northwest  of Fairbanks                                                               
as well as the large port authority in the Donlin Creek area.                                                                   
1:46:54 PM                                                                                                                    
MS.  STURGULEWSKI urged  members  to look  at  the Alaska  Native                                                               
Policy  Center and  review  the  work done  by  the Institute  of                                                               
Social  and Economic  Research and  the  First Alaskan  Institute                                                               
[First  Alaskan's  Report].  They   concluded  that  there  isn't                                                               
sufficient  economic,  social, school  and  other  data from  the                                                               
1:47:33 PM                                                                                                                    
MS. STURGULEWSKI said this is a  wise first step to meet the call                                                               
of  the  Constitutional  Convention   and  begin  to  divide  the                                                               
unorganized area  into rational  unorganized borough  units based                                                               
on the LBC work.                                                                                                                
1:49:36 PM                                                                                                                    
She   stressed  offering   incentives   and   working  with   the                                                               
1:50:04 PM                                                                                                                    
She suggested  working with the  Administration to see  that data                                                               
collection  and service  delivery could  be coordinated  with the                                                               
model boundaries.                                                                                                               
CHAIR  GARY STEVENS  asked  Ms. Sturgulewski  to  comment on  the                                                               
incentives she referred to and what they might be.                                                                              
1:51:06 PM                                                                                                                    
MS. STURGULEWSKI  stated that  a positive first  step is  to help                                                               
people understand how to move ahead.                                                                                            
Boroughs are to  receive 10 percent of the land  in the organized                                                               
area when  new boroughs are  formed. That hasn't happened  in all                                                               
cases and she  suggested looking at the idea of  money in lieu of                                                               
land to provide needed capital.                                                                                                 
REPRESENTATIVE WOODY SALMON asked  why Native organizations go to                                                               
Washington D.C. to communicate rather than to Juneau.                                                                           
MS. STURGULEWSKI  replied she  asked the  same question  when she                                                               
was  on  the  Rural  Governments  Commission.  Unfortunately  the                                                               
perception is that, "They don't like  us down here and they don't                                                               
listen." It  points to  an urban  rural split  and the  fact that                                                               
some people simply don't want any more government.                                                                              
CO-CHAIR  THOMAS commented  that he  fears that  forming boroughs                                                               
without financial incentives is a recipe for failure.                                                                           
CHAIR   GARY   STEVENS  asked   Mr.   Hargraves   to  begin   his                                                               
1:57:38 PM                                                                                                                    
DARROLL  HARGRAVES,  Chair  of  the  Local  Boundary  Commission,                                                               
introduced himself and said the  PowerPoint presentation would be                                                               
a little different and a bit  longer this year. He recognized the                                                               
pro bono work  Ms. Sturgulewski and Mr. Fischer had  done for the                                                               
LBC and said that their institutional knowledge was invaluable.                                                                 
He  suggested  using  the  report   as  a  resource  whether  the                                                               
proposals were accepted or not.                                                                                                 
MR.  HARGRAVES  stated  that  the  LBC  is  one  of  five  boards                                                               
established by  the constitution. In  addition to the  LBC, there                                                               
is the Judicial Council, the  Commission on Judicial Conduct, the                                                               
University Board  of Regents,  and the  Legislative Redistricting                                                               
MR. HARGRAVES  emphasized that  the constitution  framers clearly                                                               
wanted   boundaries  of   cities  and   boroughs  and   political                                                               
subdivisions to be determined at the state level.                                                                               
2:01:56 PM                                                                                                                    
The LBC  is comprised  of five members.  The Governor  appoints a                                                               
member from  each of the judicial  districts to a five  year term                                                               
for which they receive no compensation.                                                                                         
The   LBC   is   to    review   petitions   for   incorporations,                                                               
reclassifications,   annexations,    dissolutions,   attachments,                                                               
mergers, or  consolidations of cities  and boroughs.  In addition                                                               
they  adopt standards  and procedures  for making  determinations                                                               
and then they give recommendations to the Legislature.                                                                          
2:03:30 PM                                                                                                                    
The  commission  serves in  a  quasi  judicial role  on  boundary                                                               
2:05:04 PM                                                                                                                    
MR. HARGRAVES outlined the three chapters in the report:                                                                        
   · Chapter 1 - Gives background on the LBC and the procedures                                                                 
     they follow                                                                                                                
   · Chapter 2 - Details LBC activities and developments during                                                                 
   · Chapter 3 - The LBC brings public policy issues before the                                                                 
     Legislature - borough government in particular                                                                             
2:06:21 PM.                                                                                                                   
Article X, Section 3 of the  constitution calls for all of Alaska                                                               
to be organized into organized and unorganized boroughs.                                                                        
Delegate Barrie  White asked, "Haven't  we here inducement  to an                                                               
area to  remain an unorganized  borough and  to get the  state to                                                               
provide all the necessary functions?"                                                                                           
Local Government Committee member,  Victor Fischer stated, "...we                                                               
don't actually  visualize that the  state will force  boroughs to                                                               
organize, since  we feel  that they  should be set  up on  such a                                                               
basis  that there  will  be  enough inducement  for  each one  to                                                               
2:14:19 PM                                                                                                                    
John  Rader,  Alaska's  first  Attorney   General  and  House  of                                                               
Representatives  member  in  1963  led  an  effort  to  institute                                                               
borough government.                                                                                                             
The  1963   Legislature  mandated  boroughs  in   eight  regions,                                                               
encompassing 84 percent of the population. They were:                                                                           
   · Fairbanks                                                                                                                  
   · Matanuska-Susitna Valleys                                                                                                  
   · Greater Anchorage area                                                                                                     
   · Kenai Peninsula                                                                                                            
   · Kodiak Island                                                                                                              
   · Juneau                                                                                                                     
   · Sitka                                                                                                                      
   · Ketchikan                                                                                                                  
2:17:35 PM                                                                                                                    
Organizing into boroughs provides  greater control over education                                                               
and ability to supplement state school funding.                                                                                 
2:20:40 PM                                                                                                                    
Many  ask why  they have  to pay  for schools  while others  have                                                               
their schools paid for by the state.                                                                                            
2:22:47 PM                                                                                                                    
Statistics  show  that  Alaska  has failed  to  provide  adequate                                                               
incentives to form boroughs.                                                                                                    
   · Less than four percent of Alaskans live in voluntarily                                                                     
     formed boroughs                                                                                                            
   · Nearly 84 percent of Alaskans live in mandatory boroughs                                                                   
   · More than 57 percent of the geographic area of Alaska is                                                                   
   · It's been more than 12 years since a new borough has formed                                                                
2:23:43 PM                                                                                                                    
The LBC suggests six incentives for borough formation:                                                                          
   · Tax the unorganized borough                                                                                                
   · Provide financial aid to existing boroughs                                                                                 
   · Increase grants for borough incorporation                                                                                  
   · Eliminate requirement for property taxes in "pipeline                                                                      
   · Speed transfers                                                                                                            
   · Restrict national forest receipts and shared fisheries fees                                                                
     and taxes to boroughs and cities within boroughs.                                                                          
2:30:34 PM                                                                                                                    
MR. HARGRAVES discussed national forest receipts and fisheries                                                                  
taxes from the 1991 task force.                                                                                                 
2:32:09 PM                                                                                                                    
The key conclusion of the 1979 study was to divide the                                                                          
unorganized borough in accordance with the state constitution.                                                                  
2:33:51 PM                                                                                                                    
Unorganized borough encompasses 368,187 square miles and the                                                                    
area has few similarities.                                                                                                      
2:35:13 PM                                                                                                                    
The LBC recommends:                                                                                                             
   · Create incentives to form boroughs                                                                                         
   · Establish standards for                                                                                                    
   · Fund feasibility studies for new boroughs                                                                                  
  · Refine 2001 amendment for local contributions for schools                                                                   
   · Consider 2004 school consolidation study                                                                                   
   · Increase LBC staff by one.                                                                                                 
2:36:43 PM                                                                                                                    
MR. HARGRAVES concluded his remarks.                                                                                            
CHAIR GARY STEVENS thanked Mr. Hargraves and asked for                                                                          
questions. He noted that Representative Cissna had joined the                                                                   
2:37:51 PM                                                                                                                    
CO-CHAIR  THOMAS  asked  how   restricting  national  forest  and                                                               
fisheries receipts might  be viewed as an  incentive because he's                                                               
always  viewed them  as impact  fees.  He then  asked what  would                                                               
happen  to communities  that  don't want  to  organize. Some  are                                                               
bound to  fail because there  are no  incentives, no land  and no                                                               
money  for the  process. Finally  he  remarked that  it seems  as                                                               
though  areas   that  do   become  economically   successful  are                                                               
penalized for that success.                                                                                                     
He reported that  his district has unemployment  that ranges from                                                               
a low  of 30 percent to  a high of  86 percent. How can  you make                                                               
these people pay more, he  questioned. "Ten percent of nothing is                                                               
truly  nothing. I  live in  one of  those 10  percent of  nothing                                                               
2:40:54 PM                                                                                                                    
CO-CHAIR  THOMAS questioned  who has  the authority  to get  land                                                               
back to the borough. It wouldn't  make much sense to work to form                                                               
a borough if the area didn't  receive title to the land they were                                                               
promised. "I have  to protect the people who will  be impacted in                                                               
my district," he emphasized.                                                                                                    
CHAIR GARY STEVENS stated that the  issue is large and complex to                                                               
consider all at  once when nothing has happened for  12 years. He                                                               
asked whether  the LBC had incremental  steps toward organization                                                               
to recommend.                                                                                                                   
MR. HARGRAVES said the model  borough boundaries are in place and                                                               
the next  step would  be to form  unorganized boroughs  for those                                                               
areas. Forming  unorganized boroughs  in these model  areas would                                                               
keep  predatory boroughs  from annexing  the wealth  base in  the                                                               
He assured  members the LBC  isn't suggesting that all  the areas                                                               
be mandated  to organized into  boroughs immediately.  But, "With                                                               
enough carrots in place, enough  incentives, there could be a few                                                               
step forward and become boroughs on their own."                                                                                 
2:43:38 PM                                                                                                                    
SENATOR DONNY OLSON asked which  commission member represents the                                                               
people in the unorganized borough.                                                                                              
MR  HARGRAVES replied  the  point is  well  taken. No  commission                                                               
member lives inside the unorganized area.                                                                                       
2:44:50 PM                                                                                                                    
SENATOR  ALBERT KOOKESH  commented,  "As a  legislator, I  really                                                               
want to see the whole picture  and I would really appreciate next                                                               
time you come  before this committee... to give  us the rationale                                                               
why we shouldn't" organize into boroughs.                                                                                       
MR.  HARGRAVES replied  it's  hard  to see  the  reasons for  not                                                               
2:45:58 PM                                                                                                                    
REPRESENTATIVE SALMON said he agrees  with the need for the whole                                                               
picture. He  suggested looking at  the economic factor  that some                                                               
people in his district aren't able to pay their electric bill.                                                                  
CHAIR  GARY STEVENS  asked whether  he wouldn't  agree that  some                                                               
areas  in the  unorganized  borough  have a  tax  base and  could                                                               
contribute to their schools.                                                                                                    
2:47:23 PM                                                                                                                    
REPRESENTATIVE SALMON agreed that's the case in some areas.                                                                     
2:47:37 PM                                                                                                                    
SENATOR   BERT  STEDMAN   commented  that   some  areas   in  the                                                               
unorganized borough have a tax base  and they do pay for schools,                                                               
but for the areas at the  other extreme, it might be years before                                                               
they  could afford  to organize.  "I've got  several areas  in my                                                               
district that do pay their 4-mil share," he said.                                                                               
MR.  HARGRAVES added  that's because  they're first  class cities                                                               
and  that  the  LBC  has  concerns  about  them  because  of  the                                                               
inequity. First class  cities are paying the  required 4-mils for                                                               
education  while  the community  next  door  has a  fully  funded                                                               
school district  and they don't  pay anything. "Sooner  or later,                                                               
you may have that as a major thing to deal with," he warned.                                                                    
2:50:12 PM                                                                                                                    
SENATOR THOMAS  WAGONER observed that  there's been lots  of talk                                                               
and  not  much  has  happened. He  suggested  reviewing  previous                                                               
testimony both for and against organizing into boroughs.                                                                        
SENATOR LYMAN  HOFFMAN reported  that he  has both  organized and                                                               
unorganized areas  in his  district and  adding another  layer of                                                               
government  is  the  wrong  way to  go.  He  suggested  reviewing                                                               
existing governments before adding more.                                                                                        
2:52:32 PM                                                                                                                    
SENATOR HOFFMAN pointed out that  the Yukon Kuskokwim Delta is 95                                                               
percent federal land  so there's no tax base.  The state receives                                                               
PILT [Payment  in Lieu of Taxes]  monies and most of  those funds                                                               
are siphoned  off and  the local  governments that  exist receive                                                               
just an allocation of the formula.                                                                                              
The state  saves millions of  dollars in health care  because the                                                               
federal government is picking up  the tab and that's why Alaskans                                                               
go  to Washington  D.C.  to ask  for help  rather  than going  to                                                               
Juneau. Housing  and the  VPSO program are  other areas  in which                                                               
the State of Alaska isn't providing much help.                                                                                  
2:54:38 PM                                                                                                                    
REPRESENTATIVE  SALMON said  in some  areas in  his district  the                                                               
federal  government   provides  more  services  than   the  state                                                               
REPRESENTATIVE PEGGY  WILSON pointed  out that  the LBC  is doing                                                               
what they are constitutionally mandated to do.                                                                                  
2:56:49 PM                                                                                                                    
She  said  it's a  fairness  issue  for legislators.  Why  should                                                               
communities  continue to  pay their  fair share  when others  are                                                               
able to pay for schools but don't?   The state will end up paying                                                               
more if there is no resolution.                                                                                                 
CO-CHAIR THOMAS questioned  the activity in the Tok  area and how                                                               
it might affect the model boundaries for the area.                                                                              
MR.  HARGRAVE said  existing boroughs  typically annex  lucrative                                                               
SENATOR  WAGONER reported  that  the Kenai  Peninsula Borough  is                                                               
about 85  percent federal land,  but that doesn't stop  them from                                                               
funding  their  schools.  He agreed  with  Senator  Hoffman  that                                                               
adding  another layer  of government  isn't desirable,  but areas                                                               
that can pay their own way should do so.                                                                                        
3:00:52 PM                                                                                                                    
MR. HARGRAVES emphasized  that the LBC doesn't  intend that every                                                               
area be organized immediately.                                                                                                  
REPRESENTATIVE MARC  NEUMAN asked which areas  might be organized                                                               
3:01:48 PM                                                                                                                    
MR.  HARGRAVES replied  the commission  wouldn't enter  into that                                                               
discussion because they respond to petitions.                                                                                   
REPRESENTATIVE   GABRIELLE  LeDOUX   asked  if   a  first   class                                                               
municipality  might  pay  higher  property  taxes  if  they  were                                                               
incorporated into a lower income area.                                                                                          
3:03:50 PM                                                                                                                    
DAN BOCKHORST, LBC  staff member, said the  state funding formula                                                               
for  local  education requirements  reflects  the  capacity of  a                                                               
region to support its schools.                                                                                                  
He suggested a comparison of  home-rule and first class cities in                                                               
unorganized  areas. St.  Mary's  is  a first  class  city in  the                                                               
unorganized  borough and  they contribute  $125  per student  per                                                               
year.  Comparatively,  the North  Slope  Borough  is required  to                                                               
contribute nearly $5,000 per student.                                                                                           
"If you had  a relatively prosperous first  class city surrounded                                                               
by very  poor, unincorporated communities,  the burden  placed on                                                               
the regional  government would  not be  disproportionately higher                                                               
as  a result  of that.  It  would reflect  the tax  base in  that                                                               
entire region."                                                                                                                 
REPRESENTATIVE LeDOUX questioned whether  the people of St Mary's                                                               
would be required to pay $125  per student for the entire area if                                                               
they were incorporated into an organized borough.                                                                               
MR. BOCKHORST said  they wouldn't and used  Metlakatla, which has                                                               
taxable  land value  of  next  to nothing,  as  an example.  "The                                                               
burden that  is placed  on a  municipal school  district reflects                                                               
the tax base  within the borough. If there  is theoretically zero                                                               
tax  base in  that region,  the local  contribution is  4-mils of                                                               
3:07:02 PM                                                                                                                    
CO-CHAIR THOMAS asked  if the LBC has the authority  to look into                                                               
school consolidation.                                                                                                           
MR. BOCKHORST  said the Legislature  in 2003 directed the  LBC to                                                               
look  into that  issue  with the  Department  of Education.  They                                                               
filed a report with the Legislature in 2004.                                                                                    
CHAIR  GARY  STEVENS  asked about  the  supposition  that  school                                                               
consolidation is an incentive to become a borough.                                                                              
MR. BOCKHORST replied it's viewed both ways.                                                                                    
3:10:31 PM                                                                                                                    
CO-CHAIR  THOMAS  asked  for  a  copy of  the  report  on  school                                                               
CHAIR GARY STEVENS  thanked the commission and  asked for closing                                                               
3:12:07 PM                                                                                                                    
MR. HARGRAVES  said the  staff is  capable and  readily available                                                               
and they hope the report is useful.                                                                                             
CHAIR GARY STEVENS adjourned the meeting at 3:12:42 PM                                                                        

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