Legislature(2017 - 2018)BELTZ 105 (TSBldg)
03/21/2017 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB77 | |
| SB18 | |
| HB7 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 8 | TELECONFERENCED | |
| += | SB 77 | TELECONFERENCED | |
| *+ | SB 18 | TELECONFERENCED | |
| + | HB 7 | TELECONFERENCED | |
SB 18-NEW CLASS OF BOROUGH
3:39:24 PM
CHAIR BISHOP announced consideration of SB 18.
3:39:35 PM
SENATOR LYMAN HOFFMAN, sponsor of SB 18, said everyone in Alaska
is aware that energy costs continue to be a challenge. He said
he has worked extensively on weatherization and alternative
energy legislation and many other programs to try to address the
high cost of living in the State of Alaska, particularly rural
and northern Alaska. These programs have been quite successful
and have saved millions of dollars for thousands of Alaskans.
This particular piece of legislation is an option for areas to
consider in addressing the high costs of energy in their area.
It is in no way trying to deter anyone from considering other
forms of government.
3:42:14 PM
MARIDON BOARIO, staff to Senator Hoffman, Alaska State
Legislature, Juneau, Alaska, explained that SB 18 would allow
communities the option of creating a new class of borough,
called an energy borough. It would have limited powers to tax a
non-renewable resource within its boundaries, and use that tax
revenue to fund energy projects that would directly contribute
to lowering the cost of energy within the borough. It would be
allowed to levy a property tax and impose liens to enforce it on
property used to explore for, develop, or produce non-renewable
resources. It would be allowed to enter into PILT with the
taxpayer, have limited bonding capacity to fund energy
infrastructure projects in the borough, and only borrow money
for energy projects. SB 18 does not mandate borough formation;
it just adds another form of borough option in state statute.
SENATOR HOFFMAN asked her to go over what the taxing ability
would be limited to, because it is an integral part of this
legislation that is of great concern to many people.
3:44:13 PM
MS. BOARIO responded that this energy borough would only be able
to levy property taxes on a non-renewable resource within its
boundaries. It would not be allowed to levy a property tax on
individuals, recreational, or any other personal property.
SENATOR STEDMAN asked which version she was working from.
MS. BOARIO said she was using version \U, although it hadn't
been adopted yet.
SENATOR MACKINNON moved to adopt CSSB 18( ), version 30-
LS0252\U.
3:45:26 PM
CHAIR BISHOP said the committee would work off of this version
for the time being. He asked Ms. Boario to provide a sectional
analysis.
MS. BOARIO responded that sections 1 - 6 deal with Title 14, the
education statutes, and that is because SB 18 is not proposing
to change anything currently in the unorganized boroughs. The
first sections have to be put in so they can be taken out to
show that nothing changes in the education funding statutes.
Section 8 adds energy borough to the list of borough
classifications in Title 29, the borough statutes. Section 9
authorizes incorporation and adds the requirements.
Section 10 refers back to the education requirement that this
legislation is exempting.
Section 11 lists the powers that she mentioned, which are the
ability to impose a property tax on tangible personal
properties, to explore for, develop, or produce non-renewable
resources, to issue bonds to finance energy infrastructure
projects, and the power to create an assembly that would oversee
the borough government.
CHAIR BISHOP found no objections and said the CSSB 18 ( ),
version 30-LS0252\U, was adopted.
3:48:08 PM
SENATOR STEDMAN said normally a borough has property taxes
excluding exempt property or deed restricted property and such.
So, why would you want to exempt all of the property other than
just the mine?
MS. BOARIO answered the idea is not to impose another layer of
government on areas that maybe don't have it already or have an
individual city, or their own taxes. It specifically taxes an
energy infrastructure.
SENATOR STEDMAN said asked how the tax revenue coming from the
mine would build electrical generation plants within the borough
boundaries and if that energy would be dispensed just within the
borough and benefit nobody outside of it.
MS. BOARIO answered yes, the money from the tax on the resource
would be used to create an infrastructure that would then help
lower the costs of energy. If the infrastructure went outside of
the borough, that would be another question, but she thought
transmission lines going into another borough would follow
current procedures.
3:50:07 PM
SENATOR MACKINNON asked how the borough comes together as an
energy borough to establish its boundaries if it is not a
borough currently and multiple people are claiming subsurface
rights, as with mining.
MS. BOARIO answered the process is currently described in
statute. An area would have to decide it wants to use this
energy type of borough; it would have to vote on it and go
through the prescribed process.
SENATOR MACKINNON asked if the process would include coming back
before the legislature to establish the energy borough.
MS. BOARIO answered there are two types of processes - one is a
petition process and the other is initiated by the legislature -
and both have to come before the legislature for review.
SENATOR GARDNER asked if the sponsor intends to create a
specific borough someplace.
MS. BOARIO answered no.
SENATOR GARDNER asked if this bill passes, then nothing happens
unless the people who are on the ground in a particular area say
they want to do it.
MS. BOARIO said that was correct.
SENATOR GARDNER said some people came into her office for
something unrelated but started talking about SB 18, and they
had a lot of concerns and questions. She told them she would be
happy to ask the questions, but it's a new issue to her. She
didn't think this bill affected them, because it just creates
the possibility of somebody someday forming an energy borough.
MS. BOARIO said that is correct. Also, other borough petitions
are in the early processes of forming and nothing in this bill
precludes that process. This is just another option.
3:54:06 PM
SENATOR STEDMAN said a couple of areas are challenging in rural
Alaska: one is energy and the other is education. So, on the
energy side, how does power cost equalization (PCE) interact
with this idea and why would the sponsor want to exclude tax
dollars available from the mine being spent on education?
3:54:44 PM
MS. BOARIO answered if the cost of energy came down
significantly, fewer PCE dollars would be needed, which would
save the state money. And since education dollars come from the
state, if energy costs were lowered significantly, the state
would have more money to appropriate to education.
SENATOR HOFFMAN said that was correct and the state uses a
formula based primarily on an average of three areas as a
threshold for qualifying to participate in PCE. If they fall
below that threshold, they are not eligible for PCE. His
intention somewhere down the road is that maybe all areas of the
state will have affordable energy and PCE would not be needed.
He said that people in rural Alaska continue to spend the
highest percentage of disposable income on energy costs. Many
are spending north of 40 percent of their disposable income on
energy and he believes every opportunity should be looked at to
lower the cost of energy to make all areas of Alaska more
affordable to live in.
3:57:26 PM
CHAIR BISHOP opened public testimony on SB 18.
3:57:36 PM
LORRAINE EGNATY, representing herself, Wasilla, Alaska, opposed
SB 18. She was from Sleetmute, but had lived in Wasilla for six
years and her children go to school there. She didn't know if
this is about the Donlin mine, but she does know that people in
the villages are struggling, because there are no jobs out
there. Schools are shutting down. She is being told this energy
bill would help with heating, but she wasn't sure how the people
would benefit from it because they don't have an income.
However, if the mine comes in, everyone will have jobs for 15
years or so.
SENATOR HOFFMAN asked if she knew the price of gas for snow
machines and heating in Sleetmute.
MS. EGNATY answered it's almost $350/barrel and going up every
year. Gasoline is $7/gallon.
SENATOR HOFFMAN asked when she is living in Sleetmute how much
of her disposable income she spent on heating fuel, gasoline,
and electricity.
MS. EGNATY answered they use gas for snow machines.
SENATOR HOFFMAN said the intent of this legislation is to
address the same concerns she is talking about. It is very
difficult for people to live in rural Alaska, but she lives in
urban Alaska now and is enjoying much lower energy costs than
when she lived in Sleetmute. This legislation does not say
Sleetmute will become part of the energy borough; that is
something the people of Sleetmute would vote on if they wanted
it. The intent of this legislation is to address the hardships
they face today.
4:03:32 PM
MS. EGNATY said she was still concerned about how it would
affect peoples' lives.
SENATOR HOFFMAN said this measure just puts another tool in the
tool box, and the people of Sleetmute will decide for themselves
if they want to use it. It will be their decision.
JOANN BLACKBURN, representing herself, Anchorage, Alaska,
opposed SB 18. She said she wanted to know more about this bill,
but she believes when the state says it's trimming costs what
they really mean is they are enlarging the cost exponentially
for a private land owner, no matter where he or she may be. She
asked if this bill was written by international bankers, and if
not, why the people who are affected never get to know about it
until later.
CHAIR BISHOP said international bankers did not write the bill.
MS. BLACKBURN said the private property owners could be very
negatively impacted by receiving a large bill for taxes.
4:05:38 PM
CHAIR BISHOP said he appreciated her testimony, but it's obvious
that there are some misconceptions about what was originally
introduced and the current version of the bill, so he would keep
public testimony open.
SENATOR HOFFMAN said the answer to Ms. Blackburn's question
about international bankers is "no."
4:06:23 PM
LAMAR COTTEN, consultant, Kuskokwim Corporation, Juneau, Alaska,
said they had problems with SB 18. He related his background
experience as a borough manager in a number of boroughs around
Alaska, and said he truly appreciates the sponsor's concern
about energy. There is no question about the cost of energy, and
heating energy particularly, but the idea of taxing one industry
alone is unconstitutional. No city or borough in the state
allows that for recreation, fishing, lodges, or anything else.
In addition, the bill is silent as to who will own the assets
for the money spent and debt issued on a project. He realizes
there have been instances when a municipality may issue debt or
do conduit financing or industrial bonds, but even that is
tricky. When you add taxing only one industry to that, he just
thought that made the future of this bill uncertain.
If an area is going to have a large mine, it will require a
response to three things: the impacts related to increased
services and education costs. There are multiple school
districts within a third class borough, and the state continues
to be the sole source of income. If you have pressure internally
and the legislature cuts more or there is less money to spend,
they have no way to raise money to address those issues. They
have no way to address the needs for infrastructure unless they
go to the state, and that is counter intuitive when you have a
large project.
The other power that is disallowed is planning, but planning is
needed. It is not about zoning or taking away property, but it
is a tool that every borough, every first class or home rule
city, and in some instances second class cities in the state
have. So, why would they deny planning powers to an area that
has a large infrastructure project on the way? No disrespect to
the sponsor, Mr. Cotten said, but that approach opens the door
cherry picking what services to provide and what type of taxes a
taxpayer has to pay. That sets a bad precedent, not only in the
sense of mining, but why would the standard be different for
other areas?
4:11:49 PM
He realizes for instance, the Chulista area is not over-
abundantly wealthy on a per capita basis, and it would be hard
for them to come up with 2.65 mils without a larger project. The
law is set up for one school district, but right now there are
five school districts. That may be a difficult change for some
people.
MR. COTTEN urged them to consider expanding Port Authority
language in Title 29.35 as a better mechanism to help finance
energy projects.
He added that a borough is organized primarily through two
options: the local option, which means voting, and the other is
legislative review in which the commission authorizes a
petition, but he couldn't recall that option ever being used.
4:14:24 PM
SENATOR HOFFMAN responded as the prime sponsor, that this
legislation does not target mining, but any resource that is
non-renewable: oil or gas, for instance. Another issue is that
the area is vast, and trying to set up another layer of
government is daunting there. That is why this legislation
doesn't propose doing that.
SENATOR HOFFMAN said in many respects other services are
provided by the federal entities: health services by the Health
Corporation and a federal housing authority; and the Association
of Village Counsel Presidents (AVCP) provides numerous programs.
This is a proposal for the people to consider while leaving
those systems alone and not figure out how they would interface,
not try to dismantle them, not try to do anything regarding
those other services - just living the life they have without
forming another layer of government, because many of those
communities have three different forms of government already. He
is willing to listen to all other ideas from profit corporations
and non-profit corporations on how to lower energy costs.
4:18:13 PM
MAVER CAREY, President and CEO, Kuskokwim Corporation,
Anchorage, Alaska, respectfully opposed SB 18. She has a lot of
respect for Senator Hoffman and thanked him for all that he had
done for their region. She agreed that the cost of energy in
their region is a huge issue and wished she had a solution, but
she respectfully disagreed with having this option in this area.
She was concerned that it would form another layer of
government, which is what forming a new borough would do, and
looking down the road that looks like annexation to her.
She said the State of Alaska currently has 19 organized boroughs
that have to perform three mandatory functions. The first one is
to provide additional education dollars to the school district.
Right now the school districts in the boroughs receive
additional money, but the state still provides funding
assistance. The borough's main function is to provide additional
education resources to one school district, but her region has
10 villages - Upper and Lower Kalskag, Aniak, up to Stoney River
- that shares the same exact boundaries as the Kuspuk School
District, which consists of 10 villages.
The second mandatory function a borough must do is raise
revenue. In her area, that tax base would be the Donlin Mine,
because there are no other jobs in the region.
The third thing a borough must do is provide planning services
for the villages. Her main concern with this measure is that it
is doing one part of planning and not providing for the others,
all while not providing any additional revenue sources to the
school district, and there are five or seven school districts
within the Chulista region.
MS. CAREY said they hired Lamar Cotten two and a half years ago
and went out to the 10 villages two or three times, and started
educating themselves on what a borough is. At first, the
villages were adamant about not wanting another form of
government. Their response was if we don't do it, someone else
will do it for us and then we will have no say.
So today she brought copies of a model borough boundary report
that was done by the Department of Community and Regional
Affairs (DCRA) in the 1980s. It was put together, because larger
boroughs were trying to annex smaller boroughs. The report has
hundreds of testimonials and was put together so that the local
boundary commission could have some sort of study to use in the
future for the different types of model boroughs in the region.
Three borough were recommended In the Chulista region: the
Kuspuk Borough, Lower Kuskokwim Borough, and the Lower Yukon
Borough.
4:22:44 PM
MS. CAREY said a steering committee was formed with Mr. Cotten's
help and they actually wrote a draft charter for the Kuspuk
Borough. It was put on the shelf, because Donlin is in its
permitting stages and won't make a go/no go decision until the
year 2020, and Kuspuk was adamant that they didn't want to form
a borough unless it had that tax base.
They kept borough staff small for planning and funneled federal
dollars through the tribes and cities so that local people could
be hired. They would provide employment and know what projects
are needed in their region. In addition, they talked about
increasing cultural and recreational activities to the Kuspuk
School District, because funding had been cut heavily.
SENATOR HOFFMAN asked population of those 10 villages.
MS. CAREY answered about 1,500.
4:24:45 PM
KEJA WHITEMAN, Kuskokwim Corporation, Anchorage, Alaska, opposed
SB 18. She said she had about 20 years of public policy
experience with tribes and local governments, and while this
region is new, the idea of public infrastructure and policy is
not new.
Earlier, Senator Stedman referenced that the big issues in
Alaska are education and energy and she would provide a quick
synopsis today. Recognizing the noble intent of SB 18, she
thought it would have huge impacts on education instead of
lowering energy costs. It may not change the law, but it
certainly changes the precedent. Right now local education
contributions from boroughs excluding first class cities exceed
$450 million per year, and this provides an opportunity for
boroughs to opt out. She couldn't envision the worst case
scenario happening, but what if Anchorage decides to reclassify
and become an energy borough? The state would be on the hook for
an additional $200 million a year.
This measure cripples the local communities that want to become
self-sustainable and who want to give local contributions. It
doesn't require consolidation, but allows energy boroughs to
have multiple districts, or REAAs. So, potentially the six
Chulista districts could be expanded into one unmanageable
unrealistic school district, probably not a good thing for those
schools. On the opposite end of the spectrum it allows multiple
districts within one borough, changing the precedent. She
understands that change is not being required, but education
dollars and multiple districts within a borough issues are being
opened up.
MS. WHITEMAN said one of the underlying issues is that people
keep hearing about the potential to build a pipeline, and that
it's possible to take the gasline from Donlin Mine down to
Bethel and lower the cost of energy. It sounds good, but she
spent the last couple of months working with regional energy
plans, the Alaska Energy Authority, and local energy experts,
and the reality is that the numbers just don't make that
feasible. Another report commissioned by the state through the
Alaska Energy Authority in 2016 concluded the same thing. It
listed several places in rural Alaska that LNG and natural gas
do not work, and it specifically mentioned Bethel. In addition,
this pipeline would incur environmental issues, topographical
issues, subsistence concerns, and a $400 million price tag. It
would serve less than 10,000 people.
Running the numbers and working with energy experts again, they
evaluated usage, efficiency, amortization, construction costs
(not including offtakes or processing for gas), and the reality
is that even if the natural gas were free when it went into the
pipeline, it would not be cheaper than running diesel right now.
4:28:40 PM
SENATOR HOFFMAN commented that this legislation was not
introduced to decide what form of energy would be utilized, and
a board that would decide what the options are. This plan was
not put together in consultation with Nuvista. It's something to
put on the books to try to address the high costs of energy and
it in no way or measure was contemplated to consider any
specific project that has been discussed.
4:30:09 PM
ANDREA GUSTY, Vice President, Corporate Affairs, The Kuskokwim
Corporation (TKC), Anchorage, Alaska, opposed SB 18. She is
originally from Aniak on the middle Kuskokwim River within TKC
and Chulista regions. SB 18 is a statewide bill with statewide
implications, but from a Chulista standpoint it is about the
Donlin gold mine.
Essentially, they feel that SB 18 would tie TKC's hands. Its
population is 1,400-1,500 people on a good day when everybody is
in town, and when it comes to a vote for creating a new type of
government it loses to the Kuskokwim metropolitan area of Bethel
every time. This is one of the reasons they are so concerned. If
Donlin does decide to move into construction and operations, it
would arguable have the biggest impacts on their region in terms
of infrastructure needs and providing services for additional
people that the mine would bring in. However, the only thing
that would matter would be energy infrastructure and projects.
MS. WHITEMAN said the Chulista area is 56 villages large and the
model borough boundaries that the state looked at suggests it
would perhaps be best served by three distinct boroughs.
Combining them into a single energy borough would simply be
unmanageable and the local voices would be lost. The bigger a
government gets the less the individual voices matter. They want
to make sure that the middle Kuskokwim area that would be most
impacted by a major infrastructure project on the horizon would
not be able to address some of those needs and would be solely
reliant on dwindling state and federal money coming in.
SENATOR STEDMAN commented that Alaska is vast and Senator
Hoffman's district, the size of the State of Washington, has 90
communities, but he wondered if the timber industry in Southeast
qualify for this. Could Prince of Wales Island enact an energy
borough and tax whatever the developer is - a saw mill or mine -
and then not help with school financing and other issues that
cities and boroughs normally face? The island also has a mix of
restricted deed and trust property, but there is a lot of other
property, and he was struggling with how broad the concept
actually is.
SENATOR HOFFMAN said that timber is renewable, because you cut
it down and it grows back, but if you take gold out, it doesn't
grow back. If you take oil out, it may come back in billions of
years. And comparing Chulista Region to the State of Washington
is true, but that is only a portion of his Senate district,
which goes way beyond that, halfway to Japan with the Aleutian
Islands. He understands the concern about the concept of
broadening this to a larger area, but the fact is that it
doesn't expand government for all of those areas. It compresses
it to one issue: the issue is if nothing else happens with
energy in this region nothing is going to change. There will
never in the next 30 to 50 years be a vote to form a borough in
the lower part of this district. This is an opportunity to have
the option of forming a borough to help the people of all of the
region address the energy costs, and they should not be afraid
of it.
Further, Senator Hoffman added that this resource is owned by
the 15,000 people Chulista people who came to him and asked how
they can best utilize this resource to benefit all the people of
the region. This measure doesn't mandate anything, and it
doesn't tie the hands of people. It frees up an opportunity that
can be considered to address one of the largest concerns of all
of the people of that region.
4:40:26 PM
In the past when costs soared high, people from Marshall had to
decide whether or not to feed their children or heat their
homes. Maybe that is not the case today, Senator Hoffman said,
but there is still a high burden placed upon how individuals
with limited incomes spend their small portion of disposable
income.
CHAIR BISHOP closed public testimony and held SB 18 in committee
for a future hearing.