Legislature(1995 - 1996)

04/03/1996 09:25 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    SENATE FINANCE COMMITTEE                                   
                          3 April 1996                                         
                            9:25 A.M.                                          
  SFC-96, #65, Sides 1 & 2                                                     
  SFC-96, #66, Side 1                                                          
  CALL TO ORDER                                                                
  Senator Rick  Halford, Co-chairman, convened the  meeting at                 
  approximately 9:25 A.M.                                                      
  Co-chairman Halford  along with co-chairman  Frank, Senators                 
  Phillips, Donley, Rieger  and Zharoff were present  when the                 
  meeting convened.                                                            
  Also Attending: Senator Torgerson; Deb  Davidson, staff aide                 
  to  Senator  Torgerson; Lamar  Cotten,  Deputy Commissioner,                 
  Department  of Community and  Regional Affairs;  Eddy Jeans,                 
  School Foundation, Department of  Education; Carl F.N. Rose,                 
  Association  of  Alaska  School  Boards;  Virginia  Stonkus,                 
  Fiscal Analyst; and aides to committee members.                              
  Via teleconference:  Cordova; Eric Weathers, Denny Weathers,                 
  Marla  Adkins   and  one   unidentified  individual;   Delta                 
  Junction;   Patrick   Dalton,   P.R.  Miller   and   Patrick                 
  Schlichting; Glennallen; Dan Billman and John Kunik.                         
  SUMMARY INFORMATION                                                          
  CS FOR SENATE BILL NO. 199(FIN)                                              
  "An  Act  relating to  environmental  audits and  health and                 
  safety audits  to  determine compliance  with certain  laws,                 
  permits, and regulations."                                                   
  Co-chairman Halford reviewed the presented CSSB 199(FIN) and                 
  without objection it was transmitted to the Senate floor.                    
  CS FOR SENATE BILL NO. 280(CRA)                                              
  "An Act relating  to the mandatory incorporation  of certain                 
  boroughs in the unorganized borough."                                        
  Testimony  was given by  sponsor of  the bill,  Senator John                 
  Torgerson  and his  staff  aide  Deb  Davidson.   Mr.  Lamar                 
  Cotten, Community and Regional  Affairs testified on  behalf                 
  of  the  bill.   Mr.  Eddy  Jeans, Department  of  Education                 
  answered questions regarding funding  of education.  Several                 
  individuals as listed above testified via teleconference  in                 
  objection to this bill.  Mr.  Carl Rose, Alaska School Board                 
  shared  comments on the bill.   Senator Torgerson asked that                 
  conceptual amendment  be made to  the bill in  that "second"                 
  class borough be amended to read "third".   Senator Phillips                 
  moved this amendment and  it was adopted.  Amendment  #1 was                 
  moved by  Senator Phillips and with the objection of Senator                 
  Zharoff  it  was  adopted.    Senator Rieger  discussed  his                 
  amendment #2.   Co-chairman Halford asked  that he submit  a                 
  new draft of amendment #2 including his changes and said the                 
  committee would meet again at 1:45 P.M. today.                               
       CS FOR SENATE BILL NO. 199(FIN)                                         
       "An Act relating to environmental audits and health and                 
  safety    audits to determine compliance  with certain laws,                 
  permits, and   regulations."                                                 
  Co-chairman Halford  reviewed the  presented CSSB  199(FIN).                 
  He noted the intent was to exclude audit information related                 
  to  the pipeline  tariffs,  rates,  charges  or fees.    The                 
  amendment,  on  pages  2 and  4,  is  within  the conceptual                 
  amendment adopted by  the committee.  Without  objection the                 
  new CS was transmitted to the Senate floor.                                  
       CS FOR SENATE BILL NO. 280(CRA)                                         
       "An  Act relating  to  the  mandatory incorporation  of                 
  certain   boroughs in the unorganized borough."                              
  Senator John  Torgerson and  staff aide,  Deb Davidson  were                 
  invited to join the committee.   He presented a short review                 
  of the bill.  It encompassed  the equalization of rights and                 
  taxation especially concerning education in order to conform                 
  unorganized areas of the boroughs.   The initial legislation                 
  said proposed borough  boundaries were only for  setting the                 
  order  of  incorporation  and  were  based  upon  the  state                 
  assessor's estimation of  the evaluation of REAA's  in 1994.                 
  The local boundary commission must approve the incorporation                 
  proposals or requests.  Appropriate  revisions to them would                 
  be acceptable within six months of receipt and within thirty                 
  days after  approval of  the incorporation  proposal by  the                 
  local boundary commission the division  of elections must be                 
  notified and the division shall order an election to be held                 
  on proposed borough boundaries within  ninety days.  Senator                 
  Zharoff asked about  the public  vote and Senator  Torgerson                 
  said it is not a question of wanting to be a borough or not.                 
  Senator Zharoff said his concern that depending on where one                 
  is in the state  there is support to have  mandatory borough                 
  formation  and likewise  support  not to  have this  type of                 
  mandate imposed on regions because in some areas where there                 
  already  boroughs  formed   it  does  change  some   of  the                 
  boundaries and people  seem to like it the way it is.  There                 
  are current discussions going on either the formation of new                 
  boroughs  or  annexing into  an  existing borough.   Borough                 
  formations has to come  from the people.  The  argument that                 
  seems to come to the surface as the impetus for this  is for                 
  equity and education  funding.   Most of the  unincorporated                 
  areas of the state generate federal dollars that actually go                 
  into the general fund  and are then dispersed to  all school                 
  districts  throughout  the  state.   Those  districts,  in a                 
  sense,  are  paying  their  own   way.    Senator  Torgerson                 
  responded regarding  a fiscal  note from  the Department  of                 
  Education showing there  is no impact  on the PL 874  funds.                 
  As  far  as  annexation, this  bill  would  not  control any                 
  annexation or any particular existing petitions by a borough                 
  to incorporate other areas of the unorganized borough.  That                 
  decision is one  strictly for the local  boundary commission                 
  and the Legislature would not have authority for annexation.                 
  He said  he had  an  amendment #1  and reviewed  it for  the                 
  committee.   It would  change the  mandatory borough  to the                 
  formation  of  boroughs  and  unorganized  boroughs.    This                 
  amendment would direct that there would be an election  held                 
  on the same  time line  as presented earlier,  based on  the                 
  assessed value of the districts.  The first vote would be up                 
  or down as to  whether they wanted  to incorporate.  If  the                 
  incorporation  vote  was  upheld  then   there  would  be  a                 
  discussion as to   what powers  the new proposed area  would                 
  want to take on.  If the vote was not to incorporate then it                 
  sets a time line  for the state assessor to  start assessing                 
  the  area at  a mill  rate levy  of six  mills.    The money                 
  collected from the mill rate level would be deposited in the                 
  general fund.  This amendment  does recognized the testimony                 
  heard in C&RA.                                                               
  Senator  Phillips referred to the sales  tax and other forms                 
  of taxation to get to the equivalent of six mills.   Can the                 
  legislature   allow  for  this?     Senator  Torgerson  said                 
  currently it could  not be allowed for  without an effective                 
  vote of the  people in the  affected area.  Currently  there                 
  are  four  boroughs  and  their  education  dollars  are  on                 
  equivalency and they  do not have  property tax.  They  have                 
  fish  tax, sales tax or resource tax.  He said his amendment                 
  did not allow for  that.  It has  to be a mill rate  because                 
  they did  not  have  authority  to do  equivalencies.    Co-                 
  chairman  Halford   asked  if  that  was   a  constitutional                 
  provision or if  it was a Title  29 provision.  He  asked if                 
  Title  29  could be  amended  in  the way  Senator  Phillips                 
  suggested.    Senator  Torgerson  said  funds could  not  be                 
  collected and dedicated  to a  school without a  vote for  a                 
  dedicated fund which is a  constitutional amendment to allow                 
  that.     The   legislature  has   the  power   to  put   in                 
  equivalencies.  Senator  Rieger said  he would support  this                 
  bill if the sponsor supported allowing sales tax revenues on                 
  an equivalency basis to go up to six mills.  That would seem                 
  reasonable.   Senator  Torgerson said  the goal  here  is to                 
  collect an equivalency for education.  Senator Phillips said                 
  there should be some flexibility because in some areas there                 
  would not be much property to be taxed.  A tax burden should                 
  not be put on a few for the enjoyment of others around them.                 
  Senator  Torgerson  said  this  bill  sets up  second  class                 
  boroughs so an assembly would sit  as a second class borough                 
  and the  sales tax  provision would  require a  vote of  the                 
  people.   Co-chairman Halford said that when this is limited                 
  to property taxes  there are small local communities where a                 
  great deal of  the residential property is  federally exempt                 
  from taxation.  Sales tax would include non-residents paying                 
  part of the bill and it would be equally  allocated based on                 
  expenditures  of  residents.   That  might  be  an important                 
  feature  to  investigate.     Senator  Torgerson  concurred.                 
  Senator Zharoff suggested the assessor may be able to impose                 
  a sales tax on incorporated areas  as well.  Senator Zharoff                 
  noted that there would be some existing borough line changes                 
  and referred to pages 14 and 15, the Juneau borough would be                 
  extended and  also the  Ketchikan Gateway  borough would  be                 
  extended.  He did not think the communities would want to be                 
  mandated to expand their  borough boundaries to  incorporate                 
  areas that they would then have responsibility for.  Senator                 
  Torgerson said this bill did not address any annexation.  It                 
  is not under  the authority  of the  legislature to  mandate                 
  that  an  existing  borough  annex  lands  outside  of  its'                 
  Lamar Cotten, Department of  Community and Regional  Affairs                 
  was invited to join  the committee.  He said  the department                 
  supported the concept  of the bill  and that it would  bring                 
  positive  benefits  to  rural Alaska.    It  would encourage                 
  enhancement   of  school   funding   and  promote   economic                 
  development.    This  bill  would   provide  for  34  school                 
  districts instead of 54 and the department felt  there would                 
  be administrative savings  by this reduction.   Second class                 
  boroughs have three  powers, tax & assessment,  planning and                 
  education which are  positive benefits.  He  referred to the                 
  property tax  schedule  and said  there was  such a  checker                 
  board of who owns what property in rural Alaska and possibly                 
  a lot of resentment  would be fostered and therefore  from a                 
  practical  point  of  view  this   would  not  work.    Some                 
  consideration should be given two a  possible 2 mill levy or                 
  stretched out to six years.  Further consideration should be                 
  given to  allowing for third-class boroughs  which presently                 
  are not allowed with the exception of Haines.  A third class                 
  borough is able to provide for education.  There are no pots                 
  of gold outside of the pipeline in  the unorganized borough.                 
  The department felt  the net  effect of taxing  oil and  gas                 
  line properties needed to be recognized.                                     
  Eddy Jeans, Department of Education was  invited to join the                 
  committee.    He said  that  Senator Torgerson's  office was                 
  provided information  assuming all  the boroughs  were fully                 
  incorporated and up to  the minimum four mills and  that the                 
  boroughs  were  contributing over the four  mill requirement                 
  and what is seen is a shift in the amount of impact aid that                 
  the  state  would  consider.  The  foundation  formula would                 
  decrease approximately  $14 million while local  effort goes                 
  up approximately $14 million once the full implementation is                 
  taken over by  the borough.   The department was  continuing                 
  with further  analysis.       Senator  Zharoff  asked  about                 
  movements being  made by  the school districts.   Mr.  Jeans                 
  advised that curriculum services were provided as needed.                    
  Denny  Weathers,   Marla  Adkins,  Eric  Weathers   and  one                 
  unidentified individual testified briefly via teleconference                 
  from  Cordova  in  opposition to  this  bill.    All parties                 
  testified that they  did not want  to have a borough  forced                 
  upon them and  they felt  they would only  have to pay  more                 
  Senator Phillips said that the  possibility of a third-class                 
  borough as  an option would  be studied seriously.   Senator                 
  Torgerson said he had no objection to  a third-class borough                 
  either.    Senator Zharoff  asked  for  a map  of  the state                 
  showing  the large unincorporated  areas.  Senator Torgerson                 
  said the  map would  show currently  what was  available for                 
  taxation  in  1994.   He further  stated  that land  was not                 
  taxable  until  developed.    Co-chairman  Halford  said  he                 
  thought  the equity question in rural communities is not the                 
  corporate  lands  or  the  large  parcels,  but  rather  the                 
  allotments  that are  right  in town.    Everyone is  criss-                 
  crossed in land ownership.  Much of the land is  exempt from                 
  taxation right in  the middle  of the same  services.   Some                 
  communities  choose  a  sales  tax  to avoid  that  question                 
  otherwise recipients of the services are not necessarily the                 
  people who are paying for the service.                                       
  Deb Davidson related her conversation with Tam Cook and said                 
  the  legislature  has never  acted  as an  assembly  for the                 
  unorganized  borough.   The presumption  is the  legislature                 
  could enact a  statute that contained  a type of tax  scheme                 
  for the  unorganized borough and could include  sales or use                 
  tax in  that not requiring a vote  of the people.  Presently                 
  incorporated boroughs under current statute  may not enact a                 
  tax by  ordinance unless  it is ratified  by a vote.   Since                 
  different classes of boroughs are  treated differently it is                 
  not necessarily clear that the  unorganized borough could be                 
  treated as yet another matter.                                               
  Patrick   Dalton,  P.R.   Miller  and   Patrick  Schlichting                 
  testified briefly via teleconference from  Delta Junction in                 
  opposition to this bill.  They mirrored the same thoughts as                 
  the  previous individual that  testified from Cordova saying                 
  that this bill was bad legislation.                                          
  Dan   Billman  and   John   Kunik   testified  briefly   via                 
  teleconference from Glennallen in  opposition to this  bill.                 
  They said the  taxes should be  taken from the pipeline  and                 
  the necessary services be provided to the community.                         
  Co-chairman Halford  said the question that comes to mind is                 
  regarding education funding  and that  is something that  is                 
  unequally funded across the state.                                           
  Carl Rose,  Alaska  School Board  was  invited to  join  the                 
  committee and said the school  board association was opposed                 
  to  mandatory borough.    There were  a  number of  concerns                 
  specifically  in  an  unorganized borough,  the  ability  to                 
  identify, survey  and assess  the value  of the  land.   The                 
  issue is not  one of taxation.  Most people will pay the tax                 
  but do  not want an organized  borough.  The  concern is for                 
  those  forced to borough but do not  have the resources.  He                 
  referred to the Aleutian Region including the Sandpoint City                 
  School District  and King  Cove.  When  the three  districts                 
  were  consolidated, as could be  expected, when time came to                 
  negotiate which salary would be  adopted, the highest salary                 
  was chosen.  This is an issue when speaking of consolidation                 
  and he said this example reinforced why the association  was                 
  against mandatory borough.                                                   
  Co-chairman Halford referred to amendment #1 and said making                 
  an alternative tax  and third-class borough an  option would                 
  address  most problems.  Senator Torgerson said he could use                 
  his amendment with a few conceptual amendments and it should                 
  suffice  the  concerns  of  the  committee.    He  suggested                 
  deleting "second-class" borough and inserting "third-class".                 
  This would not  preclude organized areas from  adopting home                 
  rule charter or whatever they would  like.  On the amendment                 
  itself, page 2, line 11, the annual tax of "six mills" could                 
  be deleted and  "or equivalency"  be inserted.   Co-chairman                 
  Halford  wanted  this indicated  that it  was  to go  to the                 
  REAA's  or  a match  for  the  local shares  of  the REAA's.                 
  Senator Torgerson felt  that some  intent language could  be                 
  written up.                                                                  
  Senator Phillips moved the conceptual amendment to amendment                 
  objection of  Senator Zharoff  being noted  it was  adopted.                 
  Senator  Rieger  discussed  his  amendment  #2.    Following                 
  discussion  by the committee  co-chairman Halford asked that                 
  he  submit  a new  draft  of  this  amendment including  his                 
  proposed changes.                                                            
  Co-chairman Halford  adjourned the meeting  at approximately                 
  11:00 A.M. to reconvene again at 1:45 P.M. today.                            

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