02/01/1994 01:00 PM House CRA

  Number 120                                                                   
                                                                               
  HB 397 - TAXING POWER OF SECOND CLASS CITIES                                 
                                                                               
  GARY WILLIAMS, CITY MANAGER, CITY OF WHITTIER, testified in                  
  support of HB 397 and the sponsor substitute draft before                    
  the committee.  He stated, "There are 117 second class                       
  cities in Alaska, all of whom depend on various forms of                     
  state assistance which include municipal assistance and                      
  revenue sharing and grants to supplement revenue derived                     
  from their local tax structures.  We depend on these outside                 
  sources, not only because we've become accustomed to the                     
  revenues stream, but because small communities like Whittier                 
  have few sources from which to raise the revenues to provide                 
  the local public services that we need.  As you know,                        
  economies of scale work against small communities that have                  
  most of the same needs as their larger counterparts but have                 
  much less in taxable base.  It's an added burden for a small                 
  community to be saddled with a statutory limitation on a                     
  rate that it may establish as a levy for the provision of                    
  local services.  And this is the matter that HB 397                          
  addresses and does it very well."                                            
                                                                               
  MR. WILLIAMS continued, "...as you know the Alaska Railroad                  
  is the largest landowner in the Whittier area with some 60                   
  percent ownership of Whittier proper.  Some quick math will                  
  show that the property tax that can be raised on $8.3                        
  million in taxable property at five mill is $40,000.  For                    
  perspective, that's about half the amount necessary to                       
  employ our nurse practitioner.  The city also levies the                     
  five mill tax on personal property including boats,                          
  machinery and recreational equipment.  This raises it                        
  another $60,000, an amount equal to about one third of our                   
  public safety budget.  Given the past and proposed                           
  reductions in state assistance and a policy which places                     
  more fiscal responsibility on local government, what's                       
  missing in this picture is the transfer of authority to                      
  local governments to tax themselves in order to survive.  It                 
  just seems inappropriate to tie a knot in the shared revenue                 
  stream and yet expect second class cities to not only                        
  survive but to be actively involved in developing local                      
  economies..."                                                                
                                                                               
  Number 202                                                                   
                                                                               
  REPRESENTATIVE JOHN DAVIES asked, "...the conditions under                   
  which the city was incorporated and whether or not this                      
  limitation on property tax was in effect at the time the                     
  voters voted to incorporate.  Do you know if that's the                      
  case?"                                                                       
                                                                               
  MR. WILLIAMS said yes.                                                       
                                                                               
  REPRESENTATIVE DAVIES continued, "I think that the idea here                 
  is fine and to do it prospective basis, I have absolutely no                 
  problem with agreeing 100 percent with the Chair of this                     
  committee that we should maximize self determination.  But I                 
  do have a problem with removing retrospectively that without                 
  a vote of the folks that voted to incorporate in the first                   
  place."                                                                      
                                                                               
  Number 225                                                                   
                                                                               
  MR. WILLIAMS responded saying, "City Councils are still                      
  subject to the will of the people and none of those folks                    
  who voted for incorporation at the time are still with us.                   
  I'm quite sure of that fact.  Additionally, if people don't                  
  like to see the mill levy that the council says is necessary                 
  in order to provide the services that they deem are                          
  appropriate and important, they can voice their opinion at                   
  public hearings when the budget comes before the people and                  
  it must.  They can also vote those councilmen out if they                    
  think the mill levy was raised inappropriately."                             
                                                                               
  REPRESENTATIVE DAVIES asked if the City of Whittier receives                 
  any revenues from the Alaska Railroad Corporation.                           
                                                                               
  MR. WILLIAMS indicated that the City of Whittier is unable                   
  to levy any taxes on the Alaska Railroad Corporation.                        
                                                                               
  Number 249                                                                   
                                                                               
  REPRESENTATIVE CYNTHIA TOOHEY asked, "Does the railroad                      
  furnish any help to the City of Whittier?"                                   
                                                                               
  MR. WILLIAMS indicated not and added, "We are in the process                 
  of forming a new relationship (with the railroad)."                          
                                                                               
  Number 271                                                                   
                                                                               
  REPRESENTATIVE CON BUNDE asked if there was any opposition                   
  to HB 397.                                                                   
                                                                               
  CHRYSTAL SMITH, DIRECTOR OF MEMBER SERVICES, ALASKA                          
  MUNICIPAL LEAGUE, indicated that AML supported HB 397 but                    
  "it was not one of the Municipal League's priorities for the                 
  year...  Our members did pass a resolution in support of                     
  this concept at the November conference and it was discussed                 
  by the members at that time and as far as I know there was                   
  no opposition to it..."                                                      
                                                                               
  CHAIRMAN OLBERG pointed out that the sponsor substitute                      
  needs to be read across the floor or adopted as a committee                  
  substitute before it can be moved out of committee.                          
                                                                               
  REPRESENTATIVE ED WILLIS asked, "What is the difference with                 
  regard to the taxing policy between a second class city and                  
  a first class city?"                                                         
                                                                               
  Number 330                                                                   
                                                                               
  CHAIRMAN OLBERG referred to the copies of the 93-94 Alaska                   
  Blue Book page 170-171 and AS 29.45.590 included in the                      
  committee's folders.  (A copy of the information provided to                 
  committee members is on file.)                                               
                                                                               
  BRUCE GERAGHTY, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY                 
  AND REGIONAL AFFAIRS, indicated that he was uncertain as to                  
  these specifics.                                                             
                                                                               
  MS. SMITH indicated that, "Basically, first class cities can                 
  tax up to three percent and second class cities, a half of                   
  percent on property tax."                                                    
                                                                               
  REPRESENTATIVE WILLIS continued, "And the second class city                  
  as it now stands, must have voter approval..."                               
                                                                               
  REPRESENTATIVE DAVIES asked, "Can second class cities impose                 
  sales taxes?"                                                                
                                                                               
  MS. SMITH indicated said, "As far as I know they can, yes.                   
  Many of the second class cities do have sales tax..."                        
                                                                               
  Number 361                                                                   
                                                                               
  REPRESENTATIVE DAVIES asked, "Was this limitation on                         
  property tax in place when the original legislation creating                 
  the distinctions between first class and second class cities                 
  was enacted?  How long has this been on the books?"                          
                                                                               
  MS. SMITH said she wasn't sure.                                              
                                                                               
  REPRESENTATIVE DAVIES said, "This gets to my original                        
  question...how many of them incorporated under that five                     
  mill limitation."                                                            
                                                                               
  CHAIRMAN OLBERG offered to have committee staff compile a                    
  comparison to address his concerns for the next hearing on                   
  HB 397 and brought forth HB 398.