Legislature(2005 - 2006)BELTZ 211


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                    ALASKA STATE LEGISLATURE                                                                                  
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
                         March 6, 2006                                                                                          
                           1:32 p.m.                                                                                            
MEMBERS PRESENT                                                                                                              
Senator Bert Stedman, Chair                                                                                                     
Senator Gary Stevens, Vice Chair                                                                                                
Senator Thomas Wagoner                                                                                                          
Senator Johnny Ellis                                                                                                            
Senator Albert Kookesh                                                                                                          
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 193                                                                                                             
"An Act  relating to an  optional deferral of  municipal property                                                               
taxes  on  certain  primary  residences  owned  and  occupied  by                                                               
individuals with  incomes at or below  federal poverty guidelines                                                               
for the state."                                                                                                                 
     HEARD AND HELD                                                                                                             
SENATE BILL NO. 291                                                                                                             
"An Act relating to the  municipal harbor facility grant program;                                                               
and providing for an effective date."                                                                                           
     HEARD AND HELD                                                                                                             
SENATE BILL NO. 247                                                                                                             
"An Act  relating to the  revenue sharing program;  and providing                                                               
for an effective date."                                                                                                         
     HEARD AND HELD                                                                                                             
SENATE BILL NO. 246                                                                                                             
"An Act  making a special  appropriation from the  Alaska capital                                                               
income fund  to the  revenue sharing fund;  and providing  for an                                                               
effective date."                                                                                                                
     HEARD AND HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB 193                                                                                                                  
SHORT TITLE: DEFERRAL OF MUNICIPAL PROPERTY TAXES                                                                               
SPONSOR(s): SENATOR(s) BUNDE                                                                                                    
05/04/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
05/04/05       (S)       CRA, FIN                                                                                               
01/30/06       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
01/30/06       (S)       -- Rescheduled to 02/08/06 --                                                                          
02/08/06       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
02/08/06       (S)       Heard & Held                                                                                           
02/08/06       (S)       MINUTE(CRA)                                                                                            
02/15/06       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
02/15/06       (S)       Scheduled But Not Heard                                                                                
02/22/06       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
02/22/06       (S)       Heard & Held                                                                                           
02/22/06       (S)       MINUTE(CRA)                                                                                            
03/06/06       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
BILL: SB 291                                                                                                                  
SHORT TITLE: MUNICIPAL HARBOR FACILITY GRANTS                                                                                   
SPONSOR(s): SENATOR(s) STEDMAN                                                                                                  
02/14/06       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/14/06       (S)       CRA, FIN                                                                                               
03/06/06       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
BILL: SB 247                                                                                                                  
SHORT TITLE: REVENUE SHARING PROGRAM                                                                                            
SPONSOR(s): COMMUNITY & REGIONAL AFFAIRS BY REQUEST                                                                             
01/23/06       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/23/06       (S)       CRA, FIN                                                                                               
02/22/06       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
02/22/06       (S)       <Bill Hearing Postponed>                                                                               
03/06/06       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
BILL: SB 246                                                                                                                  
SHORT TITLE: APPROP TO REVENUE SHARING FUND                                                                                     
SPONSOR(s): COMMUNITY & REGIONAL AFFAIRS BY REQUEST                                                                             
01/23/06       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/23/06       (S)       CRA, FIN                                                                                               
02/22/06       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
02/22/06       (S)       <Bill Hearing Postponed>                                                                               
03/06/06       (S)       CRA AT 1:30 PM BELTZ 211                                                                               
WITNESS REGISTER                                                                                                              
SENATOR CON BUNDE                                                                                                               
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Sponsor of SB 193 registered opposition to                                                               
\F Version CS                                                                                                                   
Marty McGee, Assessor                                                                                                           
Municipality of Anchorage                                                                                                       
4501 South Bragaw                                                                                                               
Anchorage, Alaska 99508                                                                                                         
POSITION STATEMENT:  Testified on SB 193                                                                                      
Scott Brandt-Erichsen, Attorney                                                                                                 
Ketchikan Gateway Borough                                                                                                       
344 Front Street                                                                                                                
Ketchikan, Alaska 99901                                                                                                         
POSITION STATEMENT:  Testified on SB 193                                                                                      
Karl Short, Finance Director                                                                                                    
Kodiak Island Borough                                                                                                           
710 Mill Bay Road                                                                                                               
Kodiak, AK 99615                                                                                                                
POSITION STATEMENT:  Commented on SB 193 and supported SB 246                                                                 
and SB 247                                                                                                                      
John MacKinnon, Deputy Commissioner                                                                                             
Highways and Public Facilities                                                                                                  
Department of Transportation &                                                                                                  
  Public Facilities                                                                                                             
3132 Channel Dr.                                                                                                                
Juneau, AK  99801-7898                                                                                                          
POSITION STATEMENT:  Gave state perspective on SB 291                                                                         
Ray Majeski, Harbormaster                                                                                                       
City and Borough of Sitka                                                                                                       
Sitka, AK 99835                                                                                                                 
POSITION STATEMENT:  Supported SB 291                                                                                         
Marty Olum, Harbormaster                                                                                                        
City of Kodiak                                                                                                                  
710 Mill Bay Road                                                                                                               
Kodiak, Alaska 99615                                                                                                            
POSITION STATEMENT:  Supported SB 291                                                                                         
Allan Sorum, Harbormaster                                                                                                       
City of Valdez                                                                                                                  
P.O. Box 307                                                                                                                    
Valdez, AK 99686                                                                                                                
POSITION STATEMENT:  Supported SB 291                                                                                         
Gary Hennick, City Manager                                                                                                      
City of King Cove                                                                                                               
P.O. Box 37                                                                                                                     
King Cove, AK 99612                                                                                                             
POSITION STATEMENT:  Supported SB 291                                                                                         
John Stone, President                                                                                                           
Alaska Association of Harbormasters and Port Administrators                                                                     
Juneau, AK 99801                                                                                                                
POSITION STATEMENT:  Supported SB 291                                                                                         
Wayne Stevens, President                                                                                                        
Alaska State Chamber of Commerce                                                                                                
217 Second Street                                                                                                               
Juneau, AK 99801                                                                                                                
POSITION STATEMENT:  Supported SB 291                                                                                         
Kevin Richie, Executive Director                                                                                                
Alaska Municipal League (AML)                                                                                                   
217 2nd Street                                                                                                                  
Juneau, AK 99801                                                                                                                
POSITION STATEMENT:  Supported SB 246 and SB 247                                                                              
Tim Joyce, Mayor                                                                                                                
City of Cordova                                                                                                                 
P.O. Box 1210                                                                                                                   
Cordova, AK 99574                                                                                                               
POSITION STATEMENT:  Supported SB 246 and SB 247                                                                              
Elaine Price, Projects Manager                                                                                                  
City of Coffman Cove,                                                                                                           
P.O. Box 18135 Coffman Cove, AK 99918                                                                                           
POSITION STATEMENT:  Testified in support of SB 246 and SB 247                                                                
Doris Bailey, Assembly                                                                                                          
City and Borough of Sitka                                                                                                       
100 Lincoln Street                                                                                                              
Sitka, AK 99835                                                                                                                 
POSITION STATEMENT:  Testified in support of SB 246 and SB 247                                                                
Pat Porter, City Council                                                                                                        
City of Kenai                                                                                                                   
210 Fidalgo Ave., St. 200                                                                                                       
Kenai, AK 99611                                                                                                                 
POSITION STATEMENT:  Testified in support of SB 246 and SB 247                                                                
Dave Tranthan, Jr., Director                                                                                                    
Alaska Municipal League Region 9                                                                                                
Bethel, AK 99559                                                                                                                
POSITION STATEMENT:  Testified in support of SB 246 and SB 247                                                                
Leo Rasmussen                                                                                                                   
Nome, AK 99726                                                                                                                  
POSITION STATEMENT:  Testified in support of SB 246 and SB 247                                                                
John Combs, Mayor                                                                                                               
City of Palmer                                                                                                                  
231 W. Evergreen Ave.                                                                                                           
Palmer, AK 99645                                                                                                                
POSITION STATEMENT:  Testified in support of SB 246 and SB 247                                                                
Dave Talerico, Jr., Mayor                                                                                                       
Denali Borough                                                                                                                  
P.O. Box 480                                                                                                                    
Healy, AK 99743                                                                                                                 
POSITION STATEMENT:  Testified in support of SB 246 and SB 247                                                                
Jeff Currier                                                                                                                    
Lake and Peninsula Borough,                                                                                                     
P.O. Box 495                                                                                                                    
King Salmon, AK 99613                                                                                                           
POSITION STATEMENT:  Testified in support of SB 246 and SB 247                                                                
Mitch Chocknok, City Administrator                                                                                              
City of New Stuyahok                                                                                                            
P.O. Box 10                                                                                                                     
New Stuyahok, AK 99636                                                                                                          
POSITION STATEMENT:  Testified in support of SB 247                                                                           
ACTION NARRATIVE                                                                                                              
CHAIR  BERT  STEDMAN called  the  Senate  Community and  Regional                                                             
Affairs  Standing  Committee  meeting  to order  at  1:32:44  PM.                                                             
Present  were  Senators  Gary  Stevens,  Thomas  Wagoner,  Johnny                                                               
Ellis, Albert Kookesh, and Chair Bert Stedman.                                                                                  
          SB 193-DEFERRAL OF MUNICIPAL PROPERTY TAXES                                                                       
CHAIR BERT STEDMAN announced SB 193 to be up for consideration.                                                                 
He asked for a motion to adopt the \F Version committee                                                                         
substitute (CS).                                                                                                                
SENATOR GARY STEVENS moved \F Version CS for SB 193.                                                                            
CHAIR  STEDMAN objected  for explanation  purposes. He  asked the                                                               
sponsor, Senator Bunde, to come forward.                                                                                        
1:34:16 PM                                                                                                                    
SENATOR CON  BUNDE, Sponsor  of SB  193, registered  objection to                                                               
the \F  Version CS. He stated  that the original bill  focused on                                                               
deferral of property  taxes for people who  were having financial                                                               
emergencies. Version F provides an  expansion that neither he nor                                                               
the co-sponsors  expected. Certainly the added  subject is worthy                                                               
of a  separate bill, he said,  but in his view  the changes don't                                                               
fall within the purview of SB 193 as originally conceived.                                                                      
CHAIR  STEDMAN   clarified  that   the  amendment   excludes  the                                                               
residences of  an educator  in a  private religious  or parochial                                                               
school from  paying property tax  when the organization  owns the                                                               
SENATOR JOHNNY ELLIS  asked whose idea it was to  change the bill                                                               
contrary to the sponsor's wishes.                                                                                               
CHAIR STEDMAN replied he brought the amendment to the committee.                                                                
SENATOR  ELLIS asked  if he  had  discussed the  change with  the                                                               
CHAIR  STEDMAN responded  he  had discussed  the  change and  the                                                               
sponsor expressed his dissatisfaction.                                                                                          
SENATOR ELLIS  stated that the  committee could introduce  a bill                                                               
to accomplish  the goal of  the CS and  doing so would  avoid the                                                               
current awkward conflict among majority members.                                                                                
SENATOR BUNDE  responded it's within  the committee's  purview to                                                               
change bills and he took  no personal umbrage. However, he didn't                                                               
believe the  change falls within  the scope of the  original bill                                                               
and suggested it could inhibit passage.                                                                                         
SENATOR STEDMAN  noted that  the next  committee of  referral was                                                               
the Finance Committee.                                                                                                          
SENATOR BUNDE commented  the bill has a way to  go and bills have                                                               
a way of changing during the process.                                                                                           
SENATOR ELLIS asked about the fiscal note.                                                                                      
CHAIR STEDMAN replied the fiscal  note is zero because the fiscal                                                               
impact would be at the municipal level.                                                                                         
SENATOR  BUNDE pointed  out that  the original  bill was  a local                                                               
option  and  the  religious  exemption is  mandatory  in  the  \F                                                               
1:38:58 PM                                                                                                                    
MARTY  McGEE,   Assessor  for  the  Municipality   of  Anchorage,                                                               
reported  that  he hadn't  seen  the  amendments so  he  couldn't                                                               
comment on  them. His concern  with the original bill  relates to                                                               
the  potential cost  to other  taxpayers. He  suggested the  bill                                                               
should address the  issue of unrealized interest  on the deferred                                                               
taxes because the  impact could be very different  in the various                                                               
taxing jurisdictions.                                                                                                           
SENATOR THOMAS WAGONER noted that the  bill is a local option and                                                               
judging  from  the  previous  testimony,  he'd  assume  that  the                                                               
Municipality of Anchorage wouldn't adopt the ordinance.                                                                         
MR.  McGEE said  the assembly  would make  that decision,  but it                                                               
would  also have  to  address the  problems  associated with  the                                                               
current version.                                                                                                                
SENATOR ELLIS asked  if the CRA staff could fax  Mr. McGee a copy                                                               
of the CS.                                                                                                                      
CHAIR  STEDMAN  responded  a  copy should  be  available  in  the                                                               
Anchorage LIO,  but he would call  on Mr. McGee again  at the end                                                               
of the public testimony to get his comments on the CS.                                                                          
1:41:28 PM                                                                                                                    
SCOTT BRANDT-ERICHSEN,  Ketchikan Gateway Borough  Attorney, said                                                               
his  comments  related  to  the  work  he  does  as  the  borough                                                               
attorney, which is  to collect real property tax  for the borough                                                               
and the City of Ketchikan on  an annual basis. Although he hadn't                                                               
seen  a copy  of the  CS, his  comments would  probably apply  to                                                               
Points that need  clarification include: how the  tax liens would                                                               
be  recorded to  protect  the municipality;  whether a  surviving                                                               
spouse  would  immediately  be  subject  to  tax  repayment;  and                                                               
whether all  back taxes would be  due if an individual  no longer                                                               
qualified for the deferral.                                                                                                     
CHAIR  STEDMAN advised  that  the bill  had  two previous  public                                                               
hearings and the next referral is to the Finance Committee.                                                                     
1:45:58 PM                                                                                                                    
KARL  SHORT,  Finance  Director of  the  Kodiak  Island  Borough,                                                               
testified  that  his  conflict  with   the  bill  is  that  if  a                                                               
homeowners financial  situation changes,  the deferred  tax still                                                               
isn't collectable until  the property is sold.  He suggested that                                                               
it  would be  reasonable  to  have some  sort  of  trigger for  a                                                               
repayment  schedule  if the  person  is  no longer  in  financial                                                               
difficulty. He  agreed with previous testimony  regarding the tax                                                               
lien  so  it's  clear  that taxes  are  outstanding  against  the                                                               
1:46:44 PM                                                                                                                    
SENATOR STEDMAN removed  his objection to adopting  the F Version                                                               
CS for SB 193.                                                                                                                  
SENATOR ELLIS objected.                                                                                                         
CHAIR STEDMAN asked the clerk to call the roll.                                                                                 
Version F  CS for SB 193  was adopted with Senator  Gary Stevens,                                                               
Senator Wagoner  and Chair Stedman  voting yea and  Senator Ellis                                                               
and Senator Kookesh voting nay.                                                                                                 
CHAIR  STEDMAN  asked  for  a   motion  to  move  the  bill  from                                                               
1:47:50 PM                                                                                                                    
SENATOR  GARY  STEVENS  motioned  to  report  CSSB  193(CRA)  and                                                               
attached   fiscal   notes    from   committee   with   individual                                                               
1:48:04 PM                                                                                                                    
SENATOR ELLIS objected and asked  the Chair whether he though the                                                               
committee substitute  had gotten  an adequate hearing.  He wasn't                                                               
clear about  what happened, but this  big change came as  quite a                                                               
surprise  and it  isn't even  in alignment  with the  sponsor. In                                                               
conclusion he said this is an amazing way to conduct business.                                                                  
CHAIR STEDMAN responded he could  understand his concern, but the                                                               
bill had been  heard three times. The committee was  backed up in                                                               
its work  and he  was finding  it difficult to  get a  quorum for                                                               
meetings.  He recognized  that this  is  a change,  but the  bill                                                               
would have further hearing at the Finance Committee.                                                                            
SENATOR  ELLIS  responded  there  are lots  of  important  things                                                               
happening in the building.                                                                                                      
CHAIR STEDMAN asked if there was  objection to the motion to move                                                               
the bill.                                                                                                                       
SENATOR ELLIS maintained his objection and continued to say:                                                                    
     I  don't  think  the  Community  and  Regional  Affairs                                                                    
     Committee has done  an adequate job or done  its job on                                                                    
     your   latest   version   of  the   bill.   If   you're                                                                    
     representing to  us that what the  CRA Committee should                                                                    
     have done will happen in  the Finance Committee, I hope                                                                    
     that's the  case, but  this committee  ought to  do its                                                                    
     job is my opinion.                                                                                                         
SENATOR ELLIS added that he  would hope that the Alaska Municipal                                                               
League could comment on the new version.                                                                                        
1:49:52 PM                                                                                                                    
CHAIR STEDMAN called on Mr. McGee from Anchorage.                                                                               
MR. McGEE said the Legislative  Affairs Office (LIO) in Anchorage                                                               
hadn't received a copy of the new version.                                                                                      
At ease at 1:50:18 PM                                                                                                         
CHAIR STEDMAN announced  he would hold SB 193  in committee until                                                               
the following meeting.                                                                                                          
SENATOR ELLIS asked  the Chair to find out why  the Anchorage LIO                                                               
didn't receive a copy of the proposed CS.                                                                                       
CHAIR STEDMAN agreed to do so.                                                                                                  
            SB 291-MUNICIPAL HARBOR FACILITY GRANTS                                                                         
CHAIR BERT STEDMAN announced SB 291 to be up for consideration.                                                                 
1:51:48 PM                                                                                                                    
SENATOR GARY STEVENS moved CS for SB 291 [\Y Version].                                                                          
SENATOR JOHNNY ELLIS objected for explanation purposes.                                                                         
CHAIR STEDMAN  stated that this  was the first hearing  and there                                                               
was no intent to move the  bill that day. The proposed CS changes                                                               
the bill to align it with  the House companion bill. He asked for                                                               
latitude to present the bill.                                                                                                   
SENATOR ELLIS removed his objection.                                                                                            
CHAIR STEDMAN passed the gavel to Vice-Chair Gary Stevens.                                                                      
SENATOR  STEDMAN, Sponsor  of  SB 291,  explained  that the  bill                                                               
would create a  municipal matching grant for harbors  so it would                                                               
affect all of coastal Alaska.                                                                                                   
Starting  in  the 1930s  the  state  began  to build  harbors  in                                                               
coastal  areas  stretching  from  Ketchikan to  Sand  Point.  The                                                               
state's agreement with the municipalities  was that they would do                                                               
the  major  maintenance  and the  municipalities  would  run  the                                                               
harbors and do ongoing administration.                                                                                          
For whatever reason, the maintenance  wasn't done and the harbors                                                               
fell  into disrepair.  When  the state  moved  forward to  divest                                                               
itself of harbor ownership, it  assigned applicable dollar values                                                               
[for   deferred  maintenance]   to  the   various  harbors.   The                                                               
municipalities didn't  feel that the financial  consideration was                                                               
near enough  to deal with  the deferred maintenance and  that has                                                               
been an unresolved issue.                                                                                                       
Over the  last several  years his  office has  been working  on a                                                               
solution  to the  under  funded status.  After  meeting with  the                                                               
harbormasters  association and  the Department  of Transportation                                                               
and Public Facilities  ("DOT"), the solution they  decided on was                                                               
to establish a 50/50 capital  matching grant system. Harbors that                                                               
had been  transferred would receive  priority, but it  would also                                                               
include new harbors and harbor maintenance issues.                                                                              
To apply to  DOT for the match municipalities would  have to have                                                               
an enterprise fund established.  They would establish and collect                                                               
moorage  fees that  would be  at  a sufficient  level to  finance                                                               
ongoing administration  and major maintenance. Each  harbor would                                                               
be eligible  for just one  match grant.  The amount to  bring the                                                               
old harbors up to standard is  estimated to be about $100 million                                                               
so the state match would be $50 million.                                                                                        
The  bill contains  language to  allow  marine fuel  tax and  the                                                               
state portion  of the fisheries business  tax to be used  to fund                                                               
the program. The Legislature would  fund the program on an annual                                                               
Given the  funds available,  DOT would have  the ability  to rank                                                               
the  applicants.  He  reiterated   that  the  harbors  that  were                                                               
previously  transferred would  receive  priority.  He noted  that                                                               
pages 2 and 3 of the bill give the ranking process.                                                                             
He summarized  the idea is to  come up with a  compromise between                                                               
the state and coastal municipalities  so that old state owned and                                                               
operated  harbors  could  be  brought  up  to  standard  to  help                                                               
stimulate economic development.                                                                                                 
2:00:37 PM                                                                                                                    
SENATOR ALBERT  KOOKESH asked  if a harbor  project, such  as the                                                               
one done in Juneau, could be done in phases.                                                                                    
SENATOR STEDMAN explained that Juneau  has seven different harbor                                                               
entities in  its system and the  cost of the last  project was in                                                               
the neighborhood of $6 million.  Acknowledging that the cap is an                                                               
arbitrary number, he  said if a municipality matched  the cap for                                                               
one harbor  that would  amount to  $10 million.  That is  a large                                                               
harbor  when you  consider that  breakwaters and  dredging aren't                                                               
included  because  they can  be  built  with federal  help.  This                                                               
targets floats and electrical and water systems.                                                                                
SENATOR  ELLIS   asked  where  the  bill   talks  about  one-time                                                               
eligibility  and  how  phase funding  squares  with  the  sponsor                                                               
statement that talks about one-time eligibility for a harbor.                                                                   
SENATOR STEDMAN replied  the idea is that  the granting mechanism                                                               
isn't  for  municipalities to  use  for  catch-up maintenance  on                                                               
harbors  that previously  received a  capital improvement  grant.                                                               
This  is designed  to improve  or replace  an entire  harbor. The                                                               
cost of  the Juneau Harris  Harbor project was about  $6 million,                                                               
which  is well  under the  $10 million amount  allowed under  the                                                               
50/50 match.                                                                                                                    
As far  as phasing  is concerned, the  bill doesn't  address mega                                                               
harbors.  Most communities  have six  or fewer  harbors and  this                                                               
bill would allow  the upgrade of one or two  harbors per year. It                                                               
isn't  designed to  allow a  municipal entity  to split  a single                                                               
harbor upgrade into a two or more year project.                                                                                 
2:06:01 PM                                                                                                                    
SENATOR  ELLIS   asked  him  to  make   the  distinction  between                                                               
municipal ports  and municipal harbors because  the grant program                                                               
is to  benefit municipal  harbors. He also  asked if  any harbors                                                               
are an entity other than municipal harbors.                                                                                     
2:06:33 PM                                                                                                                    
SENATOR STEDMAN  responded to  the second  question and  said yes                                                               
there  are. The  goal is  to move  away from  capital improvement                                                               
projects  and  encourage   municipalities  to  create  enterprise                                                               
funds. The  bill doesn't apply  to the various harbors  the state                                                               
still owns where  the users don't pay moorage. At  some point the                                                               
state will  face a policy  call on how  to deal with  small docks                                                               
that service a dozen or fewer  people when no one wants to assume                                                               
financial  responsibility, but  this  bill  doesn't address  that                                                               
issue.  The  hope   is  that  when  the   proposed  mechanism  is                                                               
established the boroughs will absorb those harbors.                                                                             
VICE-CHAIR  GARY STEVENS  called an  at-ease from  2:10:02 PM  to                                                             
2:10:37 PM to return the gavel to Senator Stedman.                                                                            
CHAIR STEDMAN  asked Mr. MacKinnon  to come forward and  give the                                                               
state perspective.                                                                                                              
2:10:53 PM                                                                                                                    
JOHN  MACKINNON,   Deputy  Commissioner  of   Transportation  for                                                               
Highways and Public Facilities,  explained that harbors have been                                                               
transferred in  batches. The  most recent  was the  November 2002                                                               
bond  issue   that  included  26   or  27  boat  harbors   in  10                                                               
communities.   The  figures   DOT  used   to  estimate   deferred                                                               
maintenance were  based on a  statewide Corps of  Engineers study                                                               
done  in  1992  with  adjustments for  inflation  and  additional                                                               
deferred maintenance. The rule was to  bring the harbors up to "a                                                               
Chevrolet standard"  for a  boat harbor.  That standard  is below                                                               
what  most  communities want  and  doesn't  include power,  water                                                               
sewage dump stations and harbor lighting.                                                                                       
The department  had a  certain amount of  money available  and it                                                               
had no choice  but to make the transfers. With  that in mind, Mr.                                                               
MacKinnon said  he views SB 291  as a carrot rather  than a stick                                                               
in  terms of  harbor  transfer. Furthermore,  the funding  source                                                               
makes sense because there's a connection to harbor users.                                                                       
SENATOR  GARY STEVENS  asked if  the bill  seeks to  complete the                                                               
transfer process or to upgrade  harbors that had been transferred                                                               
to the various communities.                                                                                                     
MR. MACKINNON  responded this bill  would deal with  harbors that                                                               
have been transferred. This year's  capital budget has eight more                                                               
transfers and last year had  harbor transfers in two communities.                                                               
Some  harbors  aren't associated  with  a  municipality so  there                                                               
isn't an entity to transfer them to.                                                                                            
SENATOR GARY STEVENS recapped saying the  funds in SB 291 are for                                                               
communities  that   already  own   their  harbors  and   not  for                                                               
communities  that  have  harbors   that  are  still  under  state                                                               
MR. MACKINNON clarified  that his understanding is  that the bill                                                               
would apply  to any harbor that  has been transferred as  well as                                                               
future transfers for as long as the program is funded.                                                                          
SENATOR STEDMAN asked him to address the bond issue.                                                                            
MR. MACKINNON  advised that  was a  November 2002  statewide G.O.                                                               
[general  obligation]  bond  issue  for  a  variety  of  facility                                                               
projects. A  little over $100  million in G.O. bonds  were issued                                                               
and about $30 million went to harbor transfers.                                                                                 
CHAIR STEDMAN opened teleconference testimony.                                                                                  
2:17:40 PM                                                                                                                    
RAY MAJESKI, Harbormaster  in Sitka, said he wanted  to make sure                                                               
that  communities that  had already  accepted responsibility  for                                                               
the  harbors would  be at  the head  of the  line to  receive the                                                               
funds. He expressed the concern  that locals are being priced out                                                               
of the  harbor by  out of  state boaters  who find  Alaska harbor                                                               
rates comparatively reasonable.                                                                                                 
CHAIR STEDMAN asked  him to comment on the  challenge of bringing                                                               
harbors up to  an appropriate standard in relation  to the amount                                                               
of money that the state allocated for the transfer.                                                                             
MR. MAJESKI responded Sitka is  faced with borrowing $4.5 million                                                               
for  the $7  million Thompson  Harbor project.  The community  is                                                               
fortunate  in that  the assembly  sends the  lion's share  of the                                                               
fish tax to  the harbors, but even so moorage  rates are going up                                                               
at an alarming rate. Add to that  the fact that money must be set                                                               
aside  for future  construction because  everything currently  in                                                               
the water will need major  maintenance or complete replacement in                                                               
the  next 40  to 50  years.  Taking inflation  into account,  the                                                               
current harbor system  is valued at about $37  million and within                                                               
40 years that will be $121  million so it's imperative that money                                                               
be  set  aside.  SB  291  will  help  Sitka  move  in  the  right                                                               
2:22:32 PM                                                                                                                    
MARTY OLUM, Kodiak Harbormaster,  reasoned that it's important to                                                               
modernize  and maintain  harbors  because they  are the  economic                                                               
foundation upon which  other businesses in town  depend and grow.                                                               
He observed  that commercial fishermen upgraded  their vessels to                                                               
stay  competitive  in  the global  seafood  market,  but  harbors                                                               
haven't kept pace. Kodiak is  creating an enterprise fund and the                                                               
50/50 matching program  proposed in SB 291 will  be of tremendous                                                               
2:26:36 PM                                                                                                                    
ALLAN SORUM,  Harbormaster for  the City  of Valdez,  stated that                                                               
when he was president of  the Alaska Association of Harbormasters                                                               
and Port Administrators  he became very involved in  the issue of                                                               
deferred maintenance  and harbor transfers. He  expressed support                                                               
for SB 291.                                                                                                                     
2:28:39 PM                                                                                                                    
GARY HENNICK, City Manager of  King Cove, testified in support of                                                               
SB 291.  He explained  that the community  has a  modest economic                                                               
base due to its location adjacent  to the rich fishing grounds of                                                               
the Gulf  of Alaska and the  Bering Sea. King Cove  was the third                                                               
local government to  accept ownership of the state  harbor in the                                                               
early  1990s. At  that  time  it seemed  as  though the  $350,000                                                               
maintenance  allocation  was  a   reasonable  sum.  However,  the                                                               
current estimate for bringing the  harbor up to standard is about                                                               
$4.5 million and  the changes in fisheries  issues, taxation, and                                                               
government revenue  sharing in  the last ten  years have  made it                                                               
clear  that even  with an  enterprise fund,  the community  needs                                                               
help.  He  echoed  the testimony  from  other  harbormasters  and                                                               
encouraged the committee to pass SB 291.                                                                                        
In closing he brought up  two issues. First he questioned whether                                                               
in-kind  service  might   be  allowed  for  part   of  the  local                                                               
contribution so  that local labor  could be used to  every extent                                                               
possible.  Second he  suggested  that consideration  be given  to                                                               
facility size  and demand, the  percentage of watercraft  and raw                                                               
fish taxes that are generated  in a particular community, and the                                                               
inequity in the amount that  a community received when it assumed                                                               
ownership of its harbors ten years ago. .                                                                                       
CHAIR STEDMAN  acknowledged that  when the harbor  transfers were                                                               
analyzed, the King  Cove discrepancy stuck out  and that warrants                                                               
consideration. With regard to in-kind  contribution, he said it's                                                               
important to  avoid previous pitfalls. Experience  indicates that                                                               
when communities have  a 50 percent equity position  in a harbor,                                                               
it receives better maintenance.                                                                                                 
MR. HENNICK responded  the last ten years has shown  the issue to                                                               
be larger than anticipated.                                                                                                     
2:35:56 PM                                                                                                                    
CHAIR STEDMAN asked John Stone to come forward.                                                                                 
JOHN STONE, President of the  Alaska Association of Harbormasters                                                               
and Port  Administrators, stated that the  association has worked                                                               
on this issue for several  years. It strongly supports a matching                                                               
grant program and  believes it is a good approach  to address the                                                               
current dilemma.  Many harbors  were at the  end of  their useful                                                               
lives at the  time that the time of state  transfers and everyone                                                               
has been  scrambling to recapitalize the  infrastructure. Through                                                               
that  process  it's  become  clear  that  the  funding  that  was                                                               
provided is from one-third to  one-fourth short of what is needed                                                               
to replace the infrastructure.                                                                                                  
Communities  have been  working on  ways  to raise  revenue on  a                                                               
local level  and this  has often meant  large increases  in fees.                                                               
However,  the general  conclusion  is that  increased fees  alone                                                               
won't do the trick, which is why SB 193 is so welcome.                                                                          
He provided  the committee  with written  comments and  said it's                                                               
encouraging that DOT is supportive  of the bill. In conclusion he                                                               
mentioned that  the cap might  become problematic if  the program                                                               
lasts  a number  of years.  He described  the Corps  of Engineers                                                               
breakwater  program that  has  a $4  million  cap. Although  that                                                               
amount was adequate  when it was established, now  when the Corps                                                               
does a breakwater project  a specific Congressional authorization                                                               
must be  made. He  suggested that indexing  to the  Anchorage CPI                                                               
might be preferable.                                                                                                            
CHAIR   STEDMAN   agreed   that  the   last   suggestion   merits                                                               
2:40:53 PM                                                                                                                    
WAYNE  STEVENS,   President  of  the  Alaska   State  Chamber  of                                                               
Commerce, stated  support for making funding  available to repair                                                               
and   improve  existing   facilities  to   serviceable  standards                                                               
consistent  with  DOT  regulations  as a  part  of  the  mandated                                                               
transfer of harbors to various communities.                                                                                     
Noting that harbormasters have  identified more than $100 million                                                               
in  needed  repairs  he  said it's  important  to  maintain  this                                                               
important  infrastructure  for  the economies  of  these  coastal                                                               
CHAIR  STEDMAN closed  public testimony  and  announced he  would                                                               
hold SB 291 in committee.                                                                                                       
CHAIR STEDMAN called an at-ease from 2:43:19 PM to 2:43:29 PM.                                                              
             SB 246-APPROP TO REVENUE SHARING FUND                                                                          
2:45:04 PM                                                                                                                    
CHAIR BERT STEDMAN  announced SB 246 to be  up for consideration.                                                               
He  asked  Senator  Gary  Stevens  to  introduce  the  committee-                                                               
sponsored bill.                                                                                                                 
SENATOR  GARY  STEVENS explained  that  SB  246  and SB  247  are                                                               
related.  SB  246 makes  a  $28  million appropriation  from  the                                                               
Alaska Capital Income Fund ("Amerada  Hess") and places it in the                                                               
Revenue Sharing Fund. The bill is  the result of work done by the                                                               
Advisory  Commission on  Local Government  and would  only become                                                               
effective if  SB 247  is passed. SB  247 establishes  the Revenue                                                               
Sharing Fund and it will  provide a sustainable source of funding                                                               
to  be  shared   with  local  governments  on   a  long-term  and                                                               
predictable basis.                                                                                                              
CHAIR STEDMAN asked  if the Alaska Capital Income  Fund source is                                                               
loosely referred to as Amerada Hess.                                                                                            
SENATOR  GARY STEVENS  said  yes; income  from  the Amerada  Hess                                                               
would provide the annual $28 million appropriation.                                                                             
CHAIR STEDMAN clarified  that Amerada Hess funds  are held inside                                                               
the Alaska  Permanent Fund but  aren't figured into  the dividend                                                               
calculation. Last  year the Legislature used  income from Amerada                                                               
Hess  and this  proposal is  another use  for the  ongoing income                                                               
stream generated from those funds.                                                                                              
SENATOR  GARY  STEVENS  added  the  key is  that  the  funds  are                                                               
renewable  because communities  really won't  benefit if  revenue                                                               
sharing isn't available on an ongoing basis.                                                                                    
CHAIR STEDMAN opened public comment.                                                                                            
2:48:19 PM                                                                                                                    
KEVIN RICHIE, Executive Director,  Alaska Municipal League (AML),                                                               
thanked  the advisory  commission for  its hard  work and  stated                                                               
support for using  Amerada Hess funds as at least  one source for                                                               
sustainable revenue sharing.                                                                                                    
2:49:15 PM                                                                                                                    
TIM  JOYCE,  Mayor  of  Cordova, testified  in  support  of  some                                                               
mechanism to provide for sustainable  revenue sharing for Alaskan                                                               
communities  because many  have had  a tough  time since  revenue                                                               
sharing  was eliminated.  He opined  that it  would require  more                                                               
than  the Amerada  Hess appropriation  to  make the  contribution                                                               
CHAIR  STEDMAN asked  testifiers to  hold their  comments to  the                                                               
funding source.                                                                                                                 
2:51:11 PM                                                                                                                    
ELAINE  PRICE, Projects  Manager for  the City  of Coffman  Cove,                                                               
said she  wanted to  testify on  SB 247, but  she would  like the                                                               
funding  source to  be from  Amerada  Hess or  whatever means  is                                                               
necessary to provide revenue sharing to communities.                                                                            
2:51:40 PM                                                                                                                    
DORIS BAILEY, Assembly Member for  the City and Borough of Sitka,                                                               
offered official  support for both SB  246 and SB 247  and stated                                                               
that revenue sharing is an  exceptionally important issue for the                                                               
2:52:27 PM                                                                                                                    
PAT PORTER, Mayor  for the City of Kenai,  encouraged support for                                                               
both SB 246 and SB 247.  She advised that this isn't Kenai's real                                                               
choice for a bill, but it's a good beginning.                                                                                   
2:53:16 PM                                                                                                                    
DAVE TRANTHAM,  JR., Alaska Municipal League  Representative from                                                               
District  9 testified  from Bethel  in support  of using  Amerada                                                               
Hess funding for municipal revenue sharing.                                                                                     
2:54:42 PM                                                                                                                    
KARL  SHORT,  Finance Director  for  the  Kodiak Island  Borough,                                                               
testified in  support of  SB 246,  which establishes  funding for                                                               
revenue  sharing.  He  reported  that since  1986  costs  to  the                                                               
borough have skyrocketed.                                                                                                       
CHAIR STEDMAN announced he would hold SB 246 in committee.                                                                      
                 SB 247-REVENUE SHARING PROGRAM                                                                             
2:56:44 PM                                                                                                                    
CHAIR STEDMAN  announced SB  247 to be  up for  consideration. He                                                               
asked Senator Gary Stevens to provide introduction.                                                                             
SENATOR GARY STEVENS  explained that SB 247 stems  from work done                                                               
by  the Advisory  Commission  on Local  Government  and comes  in                                                               
response to local governments requesting  that revenue sharing be                                                               
reinstated. The bill creates the  Revenue Sharing Program to help                                                               
local  governments  and  unincorporated  communities  meet  their                                                               
financial   obligations.  It   authorizes   the  Legislature   to                                                               
appropriate money from the Alaska  Capital Fund [Amerada Hess] to                                                               
the Revenue Sharing Fund established by SB 246.                                                                                 
Revenue  sharing will  be appropriated  as follows:  $300,000 for                                                               
each unified municipality; $150,00  for each borough; $75,000 for                                                               
each  city;  and  $25,000  for  each  community.  If  the  amount                                                               
appropriated exceeds  that which  is needed, the  remaining funds                                                               
will be distributed to municipalities on a per capita basis.                                                                    
Revenue sharing in  Alaska began in 1969 and at  that time it was                                                               
a  larger  part  of  the state  budget  than  community  PERS/TRS                                                               
assistance  and community  energy  assistance was  last year.  In                                                               
1979 the municipal assistance program  was created to replace the                                                               
municipal share  of the Gross  Business Receipts Tax.  Until that                                                               
time the  state shared 20  percent of the business  tax generated                                                               
in each municipality. When the  state repealed the tax on January                                                               
1,  1979 there  was an  implied  obligation to  replace the  lost                                                               
revenue. Revenues  were distributed  with a  hold-harmless amount                                                               
based on the  amount each municipality had received  in 1978 plus                                                               
a  per  capita  distribution.  In 1980  the  per  capita  revenue                                                               
sharing program  was repealed and  replaced with  an equalization                                                               
revenue  sharing  program.  In   1997  the  municipal  assistance                                                               
program was changed to the  Safe Communities Program. In 2004 all                                                               
revenue  sharing programs  were  eliminated and  since then  many                                                               
communities  have  had  to  reduce  or  eliminate  key  municipal                                                               
services.  According to  the Alaska  Municipal League,  ten small                                                               
communities  closed their  doors  last year.  He  noted that  the                                                               
packets  held examples  of letters  of support  for some  sort of                                                               
revenue sharing.                                                                                                                
3:00:46 PM                                                                                                                    
CHAIR STEDMAN remarked he could  attest to the statewide interest                                                               
in revenue sharing.                                                                                                             
3:01:21 PM                                                                                                                    
KEVIN RITCHIE, Executive Director  of the Alaska Municipal League                                                               
(AML) testified in  support of SB 247. He said  he had two points                                                               
to make. First, the allocations  per city, community, and borough                                                               
are  critical if  small communities  are to  remain viable.  Many                                                               
have no property  tax base and sales tax does  little in terms of                                                               
generating  revenue.  Because  small communities  purchase  goods                                                               
from the  larger urban areas,  much of the economic  benefit they                                                               
generate  goes to  those large  communities. A  point in  fact is                                                               
that   the  Anchorage   Economic   Development  Corporation   has                                                               
indicated that  small communities fund  about one in  every eight                                                               
jobs in the urban areas.                                                                                                        
The second  point is  to suggest adding  to the  proposed funding                                                               
amount.  Although  $28 million  will  help  small communities  it                                                               
won't have  a significant impact  on tax relief or  helping large                                                               
communities with their particular issues.                                                                                       
3:03:39 PM                                                                                                                    
WAYNE STEVENS,  Alaska State Chamber of  Commerce, stated support                                                               
for the  legislative effort to implement  a sustainable community                                                               
dividend  program through  an  endowment  management scheme.  The                                                               
need is critical  statewide and if relief doesn't  come this year                                                               
it will be too late for some communities.                                                                                       
3:04:34 PM                                                                                                                    
LEO RASMUSSEN  testified as  a private  citizen from  Nome. After                                                               
reviewing  his long  and illustrious  public career  he suggested                                                               
looking back 50  years to when the Alaska  State Constitution was                                                               
created. A sort of partnership  growth between municipalities and                                                               
the  state  government  was  envisioned and  a  division  of  the                                                               
state's resource income  was mandated for the  purpose of running                                                               
municipal governments. That used to  be one of the most important                                                               
parts of government in our  state, Mr. Rasmussen emphasized. With                                                               
that  in  mind, he  suggested  the  committee seriously  consider                                                               
going back  to a simple  distribution of natural  resource income                                                               
to  municipal governments  rather than  the proposed  $75,000 per                                                               
Mr.  Rasmussen  endorsed  both  bills  and  concluded  that  this                                                               
program could turn the state around.                                                                                            
3:09:45 PM                                                                                                                    
JOHN COMBS,  Mayor for the  City of Palmer, testified  in support                                                               
of using  Amerada Hess funds  for municipal sharing.  He informed                                                               
members that  the City of  Palmer has  a population of  5,400 and                                                               
encompasses just 5.4  square miles, but it services  an area that                                                               
has  about 21,000  people  so some  sort  of sustained  municipal                                                               
[revenue] sharing would be most welcome.                                                                                        
3:11:10 PM                                                                                                                    
DAVE TALERICO, Mayor  of the Denali Borough and  President of the                                                               
Alaska Municipal League, testified in  support of both SB 246 and                                                               
SB 247. He thanked the advisory  commission for its work and said                                                               
he  particularly likes  the minimum  provision  to support  small                                                               
municipalities because their health and  welfare are vital to the                                                               
state.  He  described  the  bill as  a  confident  and  important                                                               
municipal investment.                                                                                                           
3:11:59 PM                                                                                                                    
JEFF  CURRIER, Lake  and Peninsula  Borough, testified  in strong                                                               
support of  SB 247. In  the last  several years people  have been                                                               
leaving the  area because of  the lack  of an economic  base. The                                                               
borough  shares  fish   and  bed  tax  revenue   with  its  small                                                               
communities, but  because of fuel  and other emergencies  some of                                                               
communities have  had to draw  down next year's  revenue sharing.                                                               
"Let's get this thing going," he said.                                                                                          
3:13:22 PM                                                                                                                    
MITCH CHOCKNOK, City Administrator for  the City of New Stuyahok,                                                               
testified  in support  of SB  247. The  city is  on the  verge of                                                               
shutting down  due to  high fuel, insurance,  and other  costs so                                                               
the money  would keep New Stuyahok  alive. This is vital  to this                                                               
community and others like it across the state, he said.                                                                         
3:14:38 PM                                                                                                                    
KARL  SHORT,  Finance  Director of  the  Kodiak  Island  Borough,                                                               
stated that he previously testified in  support of SB 246, but he                                                               
wanted to emphasize the importance  of having a way to distribute                                                               
state income to  the communities to keep them viable  so they can                                                               
continue to perform essential community services.                                                                               
Responding to  Chair Stedman, he  added that boroughs  around the                                                               
state are taking on a larger  share of school expenditures and at                                                               
the  same  time they  aren't  getting  state revenue  sharing  or                                                               
funding for  senior citizen  taxes. This is  to the  detriment of                                                               
other borough services such as health, planning, and assessing.                                                                 
3:16:09 PM                                                                                                                    
ELAINE  PRICE, Projects  Manager for  the City  of Coffman  Cove,                                                               
stated support  for the package to  keep city doors open  and the                                                               
community viable.                                                                                                               
3:16:37 PM                                                                                                                    
DAVE TRANTHAN,  JR., Alaska  Municipal League  Representative for                                                               
District 9, stated  support for SB 246 and SB  247. Anything that                                                               
can  be  done  to  reinstate revenue  sharing  would  be  greatly                                                               
appreciated by all communities.                                                                                                 
3:17:54 PM                                                                                                                    
DORIS BAILEY, Assembly Member for  the City and Borough of Sitka,                                                               
stated  unequivocal support  for  revenue  sharing and  therefore                                                               
both SB 246 and SB 247.  The assembly passed a resolution to that                                                               
3:18:36 PM                                                                                                                    
SENATOR  GARY STEVENS  advised that  there are  other bills  that                                                               
deal  with revenue  sharing that  draw from  other fund  sources.                                                               
Although he'd like  to see more money going  to communities, this                                                               
bill proposes  using funds from  the Amerada Hess account  and in                                                               
his view it's  a bottom line minimum amount.  It's more difficult                                                               
to  get money  from other  sources such  as the  Earnings Reserve                                                               
because  it affects  the dividend  and the  Constitutional Budget                                                               
Reserve  because of  the high  standards for  using those  funds.                                                               
Amerada Hess  is a  good beginning,  he said,  and I  hope people                                                               
support it.                                                                                                                     
CHAIR STEDMAN held  SB 247 in committee and  recessed the meeting                                                               
to the call of Chair at 3:19:43 PM.                                                                                           

Document Name Date/Time Subjects