Legislature(2005 - 2006)BELTZ 211

05/06/2005 01:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Moved HB 217(title am) Out of Committee
Moved HB 293 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
                          May 6, 2005                                                                                           
                           1:37 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Gary Stevens, Chair                                                                                                     
Senator Bert Stedman                                                                                                            
Senator Thomas Wagoner                                                                                                          
MEMBERS ABSENT                                                                                                                
Senator Johnny Ellis                                                                                                            
Senator Albert Kookesh                                                                                                          
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 293                                                                                                              
"An Act  relating to a  borough sales tax  exemption for  a source                                                              
that is taxed by a city in that borough."                                                                                       
     MOVED HB 293 OUT OF COMMITTEE                                                                                              
CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 133(JUD) am                                                                        
"An Act  relating to incorporation  of boroughs, to  annexation by                                                              
local  action,   and  to   regulations  of   the  Local   Boundary                                                              
Commission  to  provide  standards and  procedures  for  municipal                                                              
incorporation,   reclassification,    dissolution,   and   certain                                                              
municipal  boundary  changes;  and   providing  for  an  effective                                                              
     HEARD AND HELD                                                                                                             
HOUSE BILL NO. 217(title am)                                                                                                    
"An Act relating  to the determination  of full and true  value of                                                              
taxable  municipal property  for  purposes  of providing  planning                                                              
assistance to  the Department of  Education and Early  Development                                                              
and   the   legislature,  calculating   funding   for   education,                                                              
calculating  school  district  participating   shares  for  school                                                              
construction  grants, and  calculating  tax resource  equalization                                                              
payments  and  excluding  from that  determination  the  value  of                                                              
property in  certain areas  detached from  a municipality  and the                                                              
value of  certain property involved with  oil and gas that  is not                                                              
taxed by a municipality."                                                                                                       
     MOVED HB 217 (title am) OUT OF COMMITTEE                                                                                   
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 293                                                                                                                  
SHORT TITLE: BOROUGH SALES TAX EXEMPTIONS                                                                                       
SPONSOR(s): COMMUNITY & REGIONAL AFFAIRS                                                                                        
04/29/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/29/05       (H)       CRA, FIN                                                                                               
05/03/05       (H)       CRA RPT 3DP 2NR                                                                                        
05/03/05       (H)       DP: KOTT, LEDOUX, OLSON;                                                                               
05/03/05       (H)       NR: NEUMAN, SALMON                                                                                     
05/03/05       (H)       FIN REFERRAL REMOVED                                                                                   
05/03/05       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
05/03/05       (H)       Moved Out of Committee                                                                                 
05/03/05       (H)       MINUTE(CRA)                                                                                            
05/04/05       (H)       TRANSMITTED TO (S)                                                                                     
05/04/05       (H)       VERSION: HB 293                                                                                        
05/05/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
05/05/05       (S)       CRA                                                                                                    
05/06/05       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
BILL: HB 133                                                                                                                  
SHORT TITLE: MUNICIPAL BOUNDARY CHANGES/ COMMISSION                                                                             
SPONSOR(s): REPRESENTATIVE(s) COGHILL                                                                                           
02/09/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/09/05       (H)       CRA, STA                                                                                               
02/16/05       (H)       SPONSOR SUBSTITUTE INTRODUCED                                                                          
02/16/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/05       (H)       CRA, STA                                                                                               
02/24/05       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
02/24/05       (H)       Heard & Held                                                                                           
02/24/05       (H)       MINUTE(CRA)                                                                                            
03/03/05       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
03/03/05       (H)       Moved CSSSHB 133(CRA) Out of Committee                                                                 
03/03/05       (H)       MINUTE(CRA)                                                                                            
03/04/05       (H)       CRA RPT CS(CRA) 5DP 2NR                                                                                
03/04/05       (H)       DP: SALMON, NEUMAN, KOTT, THOMAS,                                                                      
03/04/05       (H)       NR: LEDOUX, CISSNA                                                                                     
04/02/05       (H)       STA AT 10:00 AM CAPITOL 106                                                                            
04/02/05       (H)       Moved CSSSHB 133(STA) Out of Committee                                                                 
04/02/05       (H)       MINUTE(STA)                                                                                            
04/04/05       (H)       STA RPT CS(STA) NT 3DP 2NR                                                                             
04/04/05       (H)       DP: LYNN, ELKINS, SEATON;                                                                              
04/04/05       (H)       NR: GARDNER, GRUENBERG                                                                                 
04/04/05       (H)       JUD REFERRAL ADDED AFTER STA                                                                           
04/04/05       (H)       JUD RPT CS(JUD) NT 2DP 3NR                                                                             
04/13/05       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
04/13/05       (H)       <Bill Hearing Postponed to 4/18>                                                                       
04/18/05       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
04/18/05       (H)       Moved CSSSHB 133(JUD) Out of Committee                                                                 
04/18/05       (H)       MINUTE(JUD)                                                                                            
04/19/05       (H)       DP: COGHILL, MCGUIRE;                                                                                  
04/19/05       (H)       NR: GRUENBERG, DAHLSTROM, GARA                                                                         
04/25/05       (H)       TRANSMITTED TO (S)                                                                                     
04/25/05       (H)       VERSION: CSSSHB 133(JUD) AM                                                                            
04/26/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/26/05       (S)       CRA, STA                                                                                               
05/02/05       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
05/02/05       (S)       Heard & Held                                                                                           
05/02/05       (S)       MINUTE(CRA)                                                                                            
05/06/05       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
BILL: HB 217                                                                                                                  
SHORT TITLE: FULL & TRUE VALUE OF TAXABLE MUNI PROP.                                                                            
SPONSOR(s): REPRESENTATIVE(s) HARRIS                                                                                            
03/14/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/14/05       (H)       CRA, FIN                                                                                               
04/14/05       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
04/14/05       (H)       -- Meeting Canceled --                                                                                 
04/26/05       (H)       CRA RPT 1DP 6NR                                                                                        
04/26/05       (H)       DP: THOMAS;                                                                                            
04/26/05       (H)       NR: LEDOUX, SALMON, CISSNA, NEUMAN,                                                                    
                         KOTT, OLSON                                                                                            
04/26/05       (H)       CRA AT 8:00 AM CAPITOL 124                                                                             
04/26/05       (H)       Moved Out of Committee                                                                                 
04/26/05       (H)       MINUTE(CRA)                                                                                            
04/28/05       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
04/28/05       (H)       Scheduled But Not Heard                                                                                
04/29/05       (H)       FIN AT 8:30 AM HOUSE FINANCE 519                                                                       
04/29/05       (H)       Scheduled But Not Heard                                                                                
04/29/05       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
04/29/05       (H)       Moved Out of Committee                                                                                 
04/29/05       (H)       MINUTE(FIN)                                                                                            
04/30/05       (H)       FIN RPT 4DP 5NR                                                                                        
04/30/05       (H)       DP: HAWKER, MOSES, FOSTER, CHENAULT;                                                                   
04/30/05       (H)       NR: HOLM, JOULE, WEYHRAUCH, KELLY,                                                                     
05/02/05       (H)       TRANSMITTED TO (S)                                                                                     
05/02/05       (H)       VERSION: HB 217(TITLE AM)                                                                              
05/03/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
05/03/05       (S)       CRA, FIN                                                                                               
05/04/05       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
05/04/05       (S)       -- Meeting Canceled --                                                                                 
05/06/05       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
WITNESS REGISTER                                                                                                              
Kaci Schroeder,                                                                                                                 
Aide to Representative Bill Thomas, Jr.                                                                                         
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced HB 293                                                                                        
Rynnieva Moss                                                                                                                   
Aide to Representative Coghill                                                                                                  
Alaska Capitol Building                                                                                                         
Juneau, AK 99801                                                                                                                
POSITION STATEMENT:  Testified on HB 133                                                                                      
Steve Thompson, Mayor                                                                                                           
800 Cushman Street                                                                                                              
Fairbanks, AK 99701                                                                                                             
Pete Roberts                                                                                                                    
Citizens Concerned About Annexation                                                                                             
Homer, AK                                                                                                                       
POSITION STATEMENT:  Supported HB 133                                                                                         
Mike Black, Director                                                                                                            
Division of Community Advocacy                                                                                                  
Department of Commerce, Community & Economic Development                                                                        
550 W. 7th Avenue Suite 1640                                                                                                    
Anchorage, AK 99501                                                                                                             
POSITION STATEMENT:  Outlined DCCED interpretation of HB 133                                                                  
Alan Lemaster                                                                                                                   
P.O. Box 222                                                                                                                    
Gakona,AK 99586                                                                                                                 
POSITION STATEMENT:  Opposed HB 133                                                                                           
Tom Wright                                                                                                                      
Staff to Speaker John Harris                                                                                                    
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Available for questions on HB 217                                                                        
Pete Fellman                                                                                                                    
Staff to Speaker John Harris                                                                                                    
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Introduced HB 217                                                                                        
Steve Van Sant, State Assessor                                                                                                  
Department of Commerce, Community & Economic Development (DCCED)                                                                
550 W. 7th Street, Suite 1770                                                                                                   
Anchorage, AK 99501-3510                                                                                                        
POSITION STATEMENT:  Testified on HB 217                                                                                      
ACTION NARRATIVE                                                                                                              
CHAIR  GARY  STEVENS  called the  Senate  Community  and  Regional                                                            
Affairs  Standing  Committee  meeting  to  order  at  1:37:28  PM.                                                            
Present were Senators Wagoner, Stedman, and Chair Gary Stevens.                                                                 
              HB 293-BOROUGH SALES TAX EXEMPTIONS                                                                           
CHAIR GARY STEVENS  announced the first order of  business to come                                                              
before the committee to be HB 293.                                                                                              
1:37:53 PM                                                                                                                    
KACI SCHROEDER,  Aide to  Representative  Bill Thomas, Jr.,  noted                                                              
that the  committee heard the bill  previously. She said  that she                                                              
was available for questions.                                                                                                    
CHAIR GARY  STEVENS asked  for the  reasoning behind not  stacking                                                              
MS.  SCHROEDER responded  the  bill clarifies  statutory  language                                                              
that allows  a borough to avoid  stacking taxes in areas  that are                                                              
already taxing themselves.                                                                                                      
CHAIR GARY STEVENS asked for a motion.                                                                                          
1:38:59 PM                                                                                                                    
SENATOR  THOMAS WAGONER  motioned to  report HB  293 and  attached                                                              
fiscal  notes  from  committee  with  individual  recommendations.                                                              
There being no objection, it was so ordered.                                                                                    
  CSSSHB 133(JUD) AM - MUNICIPAL BOUNDARY CHANGES/ COMMISSION                                                               
CHAIR GARY STEVENS  announced the next order of business  to be HB
1:39:34 PM                                                                                                                    
RYNNIEVA  MOSS, Aide to  Representative Coghill,  stated  that she                                                              
had an  amendment, which would  accommodate the petition  that the                                                              
City  of  Petersburg  has  been  working on  for  some  time.  She                                                              
explained that  the Petersburg petition  is by aggregate  vote and                                                              
without the  proposed amendment  this legislation would  stop that                                                              
particular petition process.                                                                                                    
CHAIR GARY STEVENS called a brief at ease at 1:40:58 PM.                                                                      
[Due to  technical difficulties no  recording occurred for  HB 133                                                              
between 1:40:58 PM  and 2:02:00 PM. The full,  uninterrupted audio                                                              
for  HB 133  may be  found at  the  end of  the recording  between                                                              
5:56:40 PM and 6:21:37 PM.]                                                                                             
SENATOR STEDMAN motioned to adopt amendment 1.                                                                                  
                      A M E N D M E N T 1                                                                                   
OFFERED IN THE SENATE                                                                                                           
     TO:  CSSSHB 133(JUD) am                                                                                                    
Page 3, lines 15 - 20:                                                                                                          
     Delete all material.                                                                                                       
     Insert "the effective date of this Act and that has been                                                                   
initiated  before the  effective date  of this  Act remains  valid                                                              
and     subject      to     AS 29.05.100(a),      AS 29.06.040(c),                                                              
AS 44.33.812(a), and  regulations adopted under  those provisions,                                                              
as those  provisions and  regulations read on  the day  before the                                                              
effective date of this Act."                                                                                                    
There being no objection, Amendment 1 was adopted.                                                                              
MS. MOSS  explained that  the amendment deals  with a  pending but                                                              
not  completed  petition.   If  a  petition  is   pending  on  the                                                              
effective date the old rules would apply.                                                                                       
CHAIR GARY STEVENS called on Fairbanks Mayor Thompson.                                                                          
STEVE THOMPSON, Fairbanks  Mayor, said he had  three concerns with                                                              
the bill and he had stated them during the previous hearing.                                                                    
   1. History: Some of the earliest lawsuits in Fairbanks were                                                                  
     over  annexations  and  the   same  probably  holds  true  in                                                              
     Anchorage.  Nonetheless,  local  adjacent annexations  do  in                                                              
     fact work out to be the best for the communities.                                                                          
   2.  Fairbanks has run out of property and is looking at                                                                      
     adjacent areas  amounting to between 500 and  1,000 acres for                                                              
     community expansion.  The borough  would like to  improve the                                                              
     area  to  the  point  that   it  could  be  developed  as  an                                                              
     industrial   area  or  a   housing  subdivision.   Under  the                                                              
     proposed  legislation, if just  one person  lived in  an area                                                              
     and he or she  voted no that would effectively  put an end to                                                              
     the expansion.                                                                                                             
   3. Services: In Fairbanks 30,000 people live inside the city                                                                 
     limits, but  80,000 people live  in the immediate  area. Jobs                                                              
     are  inside the  city limits  so about  50,000 people  travel                                                              
     into the  community where  they work  every day.  They expect                                                              
     to have police,  fire and ambulance protection  and they want                                                              
     the  roads  plowed  and  maintained.  However,  those  50,000                                                              
     people provide  none of the funding that it  takes to provide                                                              
     the services.  Many people  coming into  town to work  in the                                                              
     community  work  for employers  in  buildings  that are  tax-                                                              
     exempt.   The  Fairbanks  Memorial   Hospital,  the   federal                                                              
     building,  state  court  house,   borough  buildings,  school                                                              
     district headquarters,  and schools are all big  employers of                                                              
     people that live  outside the city and the city  is left with                                                              
     no way  to recover  any costs.  Annexing the immediate  areas                                                              
     around the town  that really are part of  the community would                                                              
     help solve the problem.                                                                                                    
MAYOR THOMPSON referenced  testimony from the previous  hearing in                                                              
which Ms.  Moss said  that people living  outside the  city limits                                                              
contribute  by  buying  drivers   licenses  and  such  things.  He                                                              
asserted  that the  city sees none  of that  money. People  living                                                              
outside  the city  pay nothing  toward general  city operation  or                                                              
for police,  fire or  public safety  officials. Those  things must                                                              
be  considered when  trying to  restrict  sensible annexation  and                                                              
In conclusion  he said  that annexation  can  take place in  about                                                              
five different ways and border annexation simply makes sense.                                                                   
CHAIR GARY STEVENS called on Mr. Roberts from Homer.                                                                            
PETE  ROBERTS,  President, Citizens  Concerned  About  Annexation,                                                              
said  Mayor Thompson  has some  good  points but  he misses  major                                                              
points in  the American  system. In  particular, he's  missing the                                                              
importance of the citizen, he said.                                                                                             
He  related what  happened in  Homer when  politicians decided  to                                                              
triple  the size of  the original  city. Neither  the citizens  of                                                              
Homer nor  the people in  the area to  be annexed were  adequately                                                              
informed or  included in  the process, which  resulted in  a major                                                              
and costly  fight. He opined  that the  people living in  the area                                                              
to  be annexed  need to  be a  part of  the process  and the  city                                                              
needs  to offer  those  people something  other  than  just a  tax                                                              
In  Homer  sales  taxes account  for  two-thirds  of  the  general                                                              
revenue  budget so  anybody who  says  the "out-of-towners"  don't                                                              
shoulder a  burden and  provide for the  cost of running  services                                                              
in the area is sorely mistaken, he said.                                                                                        
MR. ROBERTS urged passage of SB 133.                                                                                            
CHAIR GARY STEVENS asked Mike Black if he had testimony.                                                                        
MIKE BLACK, Director,  Division of Community  Advocacy, Department                                                              
of Commerce,  Community &  Economic Development  (DCCED),  said he                                                              
would summarize the  May 6, 2005 letter he sent  to Chair Stevens.                                                              
[Copy in file.]                                                                                                                 
MR.   BLACK  advised   that  DCCED   has   a  somewhat   different                                                              
interpretation of  the bill than the sponsor.  DCCED characterizes                                                              
HB  133 as  providing  the Local  Boundary  Commission (LBC)  with                                                              
another option for  conducting local action elections  in relation                                                              
to municipal annexations.                                                                                                       
The provisions described  in Section 3 of AS  29.06.040(c) provide                                                              
a list  of methods  for conducting local  action elections  and HB
133  adds the  provision  that a  majority of  the  votes cast  by                                                              
voters residing in  the annexing municipality may  be required for                                                              
approval. The  department views  all the  provisions set  forth in                                                              
AS 29.06.040(c)  as  being independent  of one  another and  it is                                                              
confident of the  interpretation based upon the  historical record                                                              
of the use of Section 3 provisions related to LBC actions.                                                                      
Referencing  Section  5  he  said  there was  an  issue  with  the                                                              
Petersburg  petition, but  it was  addressed  with the  amendment.                                                              
[24-LS0512\IA.2]  However,  under   the  DCCED  interpretation  it                                                              
wouldn't  have  affected  Petersburg  because  the  proposal  only                                                              
provides another option.                                                                                                        
Based  upon DCCED's  interpretation  of the  bill, the  department                                                              
has no objection, he said.                                                                                                      
CHAIR  GARY STEVENS  asked for  his response  to Mayor  Thompson's                                                              
concern  that one  person could  stop economic  development in  an                                                              
MR. BLACK  replied he would  have some  of those same  concerns if                                                              
the  department   had  interpreted  the   bill  to  mean   that  a                                                              
municipality  could not annex  an area  based on  the vote  of the                                                              
people in  the area  to be  annexed. "Certainly  that would  put a                                                              
severe  restriction  upon  the  ability  of  the  municipality  to                                                              
provide services  to areas  and still  get some reimbursement  for                                                              
the use  of those  services. However,  I don't  believe that  this                                                              
bill will present that problem," he concluded.                                                                                  
CHAIR GARY STEVENS called on Mr. Lemaster.                                                                                      
ALAN LEMASTER,  Gakona resident,  explained that Copper  Valley is                                                              
surrounded by  Valdez, Delta, and  Mat-Su all of which  are either                                                              
a borough  or looking  at becoming  a borough.  He stated  concern                                                              
with the  bill for  reasons that are  different than  the previous                                                              
testimony. The  local REAA is large  and if the bill were  to pass                                                              
it's conceivable  that the area  could be "cherry-picked  to death                                                              
up here."  It would be extremely  problematic if the  pipeline and                                                              
pump station  were picked up  by another  borough and the  rest of                                                              
the area were left to become something on its own.                                                                              
He said he  has discussed the concern  with the LBC and  they have                                                              
said he's not too far off the mark.                                                                                             
MS. MOSS  said she'd  like to respond  to several statements.  She                                                              
suggested  that  the  situation  in  the  Copper  Valley  wouldn't                                                              
change with passage  of HB 133. Under existing  law Mr. Lemaster's                                                              
concerns could be realized.                                                                                                     
Referencing  the LBC  interpretation  of Section  3, she  directed                                                              
attention to  page 2,  line 22. Following  the third  provision at                                                              
the end  of line 22  is the word  "and". The legislative  drafting                                                              
manual says  that "and"  or "or" should  be included  only between                                                              
the  last  two  items  in  a  list  and  not  between  each  item.                                                              
Therefore, each  item should be read  as though it is  a comma and                                                              
the word "and" that is just before the last item is inclusive.                                                                  
Most  of the  roads in  Fairbanks are  maintained by  DOT and  the                                                              
people who live  40 to 50 miles from Fairbanks have,  for the most                                                              
part, built  their own homes  over a period  of time. A  good many                                                              
of those  people also live on  fixed incomes. If the  borough were                                                              
allowed  to annex  property all  the way  to the  Yukon River  and                                                              
begin  charging property  tax,  many of  those  people would  lose                                                              
their homes.                                                                                                                    
She concluded, "  Mayor Thompson - I understand  his concerns, but                                                              
what this  bill is  dealing with is  an aggregate vote  regulation                                                              
that  is  not covered  statutorily.  In  fact  it is  contrary  to                                                              
CHAIR GARY STEVENS called a brief at ease.                                                                                      
MS.  MOSS  asked that  the  bill  be  moved  to the  Senate  State                                                              
Affairs  Committee.  Senator Therriault  had  similar  legislation                                                              
moving  through  the  process  and  she wanted  him  to  have  the                                                              
opportunity to review the legislation.                                                                                          
CHAIR GARY  STEVENS said  he appreciated her  comments and  he was                                                              
sure  that  the  State Affairs  Committee  would  have  legitimate                                                              
concerns. However,  the Community  and Regional Affairs  Committee                                                              
also has responsibility in what happens to communities.                                                                         
CHAIR GARY STEVENS held CSSSHB 133(JUD) AM in committee.                                                                        
    HB 217-FULL & TRUE VALUE OF TAXABLE MUNI PROP (TITLE AM)                                                                
2:05:27 PM                                                                                                                    
CHAIR GARY  STEVENS announced  HB 217 to  be up for  consideration                                                              
and asked Mr. Wright to come forward.                                                                                           
TOM WRIGHT,  Staff to Speaker John  Harris, advised that  he would                                                              
defer testimony  to Mr. Fellman  who works out of  Speaker Harris'                                                              
Delta office.                                                                                                                   
2:06:56 PM                                                                                                                    
PETE   FELLMAN,  Staff   to  Speaker   John   Harris,  spoke   via                                                              
teleconference  to  explain  that  communities  that  are  forming                                                              
boroughs  with   oil  and  gas  properties  within   the  proposed                                                              
boundaries might  not want to tax  property as a means  of raising                                                              
revenue. Under  HB 217, such  communities could exclude  the value                                                              
of oil  and gas  properties from  the total  value of the  borough                                                              
property.  This would  allow those  communities  to explore  other                                                              
forms of taxation  to raise revenue needed to  operate the borough                                                              
and to pay the required 4 -mills to fund schools.                                                                               
HB 217  would provide opportunity  and choice to  communities that                                                              
want to  form local  government.  The opportunity  is to form  and                                                              
fund affordable  boroughs and  the choice is  to raise  revenue in                                                              
new and creative ways, he said.                                                                                                 
2:08:32 PM                                                                                                                    
CHAIR GARY STEVENS called on Mr. Van Sant.                                                                                      
STEVE   VAN  SANT,   State  Assessor,   Department  of   Commerce,                                                              
Community   &   Economic  Development   (DCCED),   testified   via                                                              
teleconference to  concur with the  previous statement. If  HB 217                                                              
were  to pass,  the  value  of oil  and  gas properties  would  be                                                              
excluded  from a  municipality's  full value  if the  municipality                                                              
elected not to levy a property tax.                                                                                             
In  the  proposed  Deltana Borough  there  is  approximately  $200                                                              
million in  oil and  gas properties for  which the state  receives                                                              
20-mills or  about $4 million. If  that property were  included in                                                              
the borough's  full valuation, 4-mills  or $800,000 would  have to                                                              
be raised  for the  required education  contribution. It  wouldn't                                                              
be easy to raise  that amount of money with just  sales tax so the                                                              
borough would almost be forced into levying a property tax.                                                                     
He pointed  out that it's more  than likely that the  property tax                                                              
levy would be more  than just 4-mills. If the levy  were 10-mills,                                                              
then the  borough would  take almost  $2 million  in revenue  that                                                              
the state is already receiving.                                                                                                 
In the instance  of a detachment from a borough,  the bill directs                                                              
DCCED to place the  valuation at the level it was  two years prior                                                              
to  the detachment.  The reason  for  this is  that the  education                                                              
formula uses the prior two years for funding.                                                                                   
2:10:45 PM                                                                                                                    
CHAIR  GARY  STEVENS  asked  if  he sees  this  bill  as  being  a                                                              
detriment to borough formation.                                                                                                 
MR. VAN SANT replied  not at all. In fact DCCED  believes it would                                                              
assist in borough  formation. Most people in the  Deltana area are                                                              
very  clear that  they don't  want a  property tax.  HB 217  would                                                              
allow a  borough to  form without  forcing a  property tax  on the                                                              
residents. "To me it's an incentive," he said.                                                                                  
2:11:31 PM                                                                                                                    
CHAIR GARY STEVENS called on Mr. Hallgren.                                                                                      
PETE HALLGREN, City  Administer, City of Delta  Junction, reported                                                              
that  the   city  has  sponsored   the  Deltana   Borough  Charter                                                              
Commission and  it is nearly ready  to submit a  borough formation                                                              
petition to  the LBC for review  and permission to  circulate. The                                                              
hope is  that this  will lead to  a public  election in  which all                                                              
citizens in the area participate.                                                                                               
As previously stated,  the Trans Alaska Pipeline  System (TAPS) is                                                              
valued  at $200  million in  the proposed  borough. The  statutory                                                              
tax level  is 20-mills so  the state receives  about $4  million a                                                              
year  from  the pipeline.  Upon  borough  formation, the  City  of                                                              
Delta Junction  would like  to dissolve and  turn its  assets over                                                              
to the new borough to avoid redundant local government.                                                                         
Local  governments craft  services  and a  tax  structure to  meet                                                              
local conditions.  Currently four  boroughs have no  property tax,                                                              
two  boroughs have  a  raw  fish tax,  the  Denali  Borough has  a                                                              
mineral  severance tax  and a bed  tax, and  the Northwest  Arctic                                                              
Borough  has a goldmine  PILT agreement,  which  pays over  95% of                                                              
the borough's tax income.                                                                                                       
State statute  requires a 4-mill  education contribution  based on                                                              
the value  of all  taxable property  in a  borough. He  reiterated                                                              
Mr. Van  Sant's testimony saying  that the proposed  borough would                                                              
be forced to levy  a property tax if it is  required to contribute                                                              
4-mills or $800,000 on the value of TAPS.                                                                                       
Instead   of  a  property   tax,  the   Deltana  Borough   Charter                                                              
Commission  would like to  propose to  the local  voters a  mix of                                                              
funding sources.  That would include a  fuel and energy  tax and a                                                              
goldmine PILT agreement with the POGO Mine.                                                                                     
We  view this  bill as  an enhancement  to  potential new  borough                                                              
formation  throughout  the  unorganized borough,  he  said.  Local                                                              
areas would  be free to craft  measures that would fit  the people                                                              
and  businesses  that  are  being taxed  better  than  a  straight                                                              
property  tax. "In the  proposed Deltana  Borough, non-passage  of                                                              
this bill would  cost the state  at least $800,000 a year  in lost                                                              
revenue  when  we  were  forced  to  enact  a  property  tax,"  he                                                              
CHAIR GARY STEVENS noted there was no further testimony.                                                                        
2:16:13 PM                                                                                                                    
SENATOR  WAGONER  motioned  to   report  HB  217  (title  am)  and                                                              
attached   fiscal    notes   from   committee    with   individual                                                              
recommendations. There being no objection, it was so ordered.                                                                   
There  being no  further business  to come  before the  committee,                                                              
Chair Gary Stevens adjourned the meeting at 2:16:24 PM.                                                                       

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