Legislature(2001 - 2002)
02/06/2001 08:08 AM House CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 16-HOME RULE COMMUNITIES CO-CHAIR MORGAN announced that first order of business would be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 16, "An Act relating to cities incorporated under state law that are home rule communities; and providing for an effective date." Number 0072 REPRESENTATIVE FRED DYSON, Alaska State Legislature, sponsor, informed the committee that the constitution includes a directive to the legislature to promulgate legislation that would encourage communities to organize under state law. That process was never really completed. He noted that the Local Boundary Commission's reports illustrate the "spotty" record in this area. Furthermore, more communities have disorganized themselves in recent years. He pointed out that the current law contains many disincentives to organization. For example, if a community organizes as a first class borough, that borough has to perform education financing and planning functions. REPRESENTATIVE DYSON explained that SSHB 16 would allow second class cities to organize as second class communities and such communities would be able to write its own charter. The goal is to allow communities to organize in, virtually, any way desired and to assume the responsibilities the community desired. Therefore, Representative Dyson indicated his hope that communities would choose innovative ways of organizing. REPRESENTATIVE DYSON informed the committee that the sponsor substitute is a more comprehensive piece of legislation [than what was offered last year] because SSHB 16 does a better job of identifying all the statutes that speak to communities this size. He also informed the committee that last year's legislation passed the House 37-0, but was stalled in the Senate during the last days of the session. Representative Dyson noted that in Senate Finance last year, someone objected to the legislation because it didn't force these communities to have a tax base. However, Representative Dyson didn't share that objection. He noted that the Alaska Municipal League and the Southeast Conference have endorsed SSHB 16. Number 0597 REPRESENTATIVE GUESS inquired as to how SSHB 16 related to Senator Wilken's bill that deals with the Local Boundary Commission. REPRESENTATIVE DYSON said, "In one sense, it only relates in that it provides ... another, and I think, a very attractive, option for smaller communities to organize under." CO-CHAIR MEYER inquired as to the difference between home rule communities, home rule cities, and home rule boroughs. REPRESENTATIVE DYSON answered that currently, second class cities cannot write their own charter, which SSHB 16 would allow. This legislation would extend most of the privileges and options of a first class borough or city to a small community. However, he deferred to Ms. Cook for the specifics. Number 0755 TAM COOK, Director, Legislative Legal and Research Services, Legislative Affairs Agency, Alaska State Legislature, explained that the home rule community proposed in SSHB 16 would be a type of city distinct from a borough. Currently, there are the following city classifications: home rule city, first class city, and second class city. The first and the second class cities are referred to as general law cities as they can exercise "the powers that are specifically conferred by statute upon them." The home rule city, by charter, is able to decide what authority it will assume. With respect to home rule municipalities, there are fewer statutes that are mandatory. Under SSHB 16, the home rule option is, essentially, extended to the smaller community that would not have to meet the population requirements. She explained that currently, the home rule community has been held as a more sophisticated municipality in Alaska in that Alaska's home rule communities tend to be larger with a more complex form of government. Ms. Cook said, "The notion behind this bill, as I understand it, is that there is no inherent reason why you couldn't have a charter that ... provided for a simpler, more fundamental form of government rather than a more complex form of government. So, the notion is that we extend the right to individuals to largely form the sorts of government functions that they want to see performed through the charter option." She presumed that [the home rule community's] charter would be much more limited than a charter of an area such as Anchorage. REPRESENTATIVE DYSON added that SSHB 16 does not require the same auditing requirements as those required of first class cities and boroughs. This legislation only requires an annual statement of accounts, which significantly reduces the burden on the community. Number 0983 CO-CHAIR MEYER asked Representative Dyson how important he believes the [requirement to have a] tax base is. REPRESENTATIVE DYSON related his belief that mandatory taxes and mandatory responsibilities are a major disincentive [to organization], which is in opposition to the constitution's [directive]. CO-CHAIR MEYER asked if these communities without a tax base would be financially dependent on federal and state funding. REPRESENTATIVE DYSON replied, "By and large." Under the existing law, a couple of different classifications of organizing would lose some of the state and federal funding. However, he believed those disincentives had been eliminated. REPRESENTATIVE SCALZI turned to the issue of pass through grants. He asked if the [home rule community] would be the entity that would accept grants or would the grant go to the borough that the community was inside. Number 1130 MS. COOK specified that it depends upon the program. Once there is a municipal form of government it becomes easier for the state, in some ways, to make specific grants to that area because they have a formal structure. There are a number of grants that go to municipalities that are outside of programs. There are also programs that provide an ongoing source of revenue and aid to the various classes of municipalities. Furthermore, there are statutes that address grants to incorporated entities. She explained that [home rule communities] would be incorporated under state law and would qualify for special grants. As an aside, Ms. Cook pointed out that a second class city may or may not be located within a borough. Currently, there are a fair number of second class cities that are outside of boroughs, which would be the only government that would exist in that area. She noted that some accommodations have been made so that other groups can participate in state aid, although that can become awkward. MS. COOK turned to the programs of state aid that exist. Many of these programs are formula programs, such that the borough receives the money and distributes it, per its prerogative, to the cities. She indicated that the aforementioned process may be how it would work if a home rule community existed within a borough. However, not every program is like that. For instance, some programs offer [funding] to each individual city. In such programs, the aid going to the borough is based upon the population of the borough minus the residents of the cities. Ms. Cook noted that currently, there is revenue sharing, municipal assistance, and the capitol project program. The capitol project program is also available to unincorporated communities. She noted that there are several programs that provide aid to unincorporated communities. Therefore, those areas that would seek home rule community status would forfeit some aid in exchange for qualifying for a slightly different program. Ms. Cook presumed that all these matters would have to be considered as part of a local decision as to whether or not to incorporate. REPRESENTATIVE SCALZI clarified that he was primarily referring to federal pass through grants. He assumed that if a borough still has to handle pass through grants, the borough would assume any liability from such. He said, "I was curious to the follow through if this home rule community, with no tax base presumably, was going to pick up these grants and have this work performed, who would hold the liability on some of those things." Representative Scalzi related his understanding that Ms. Cook's answer was that [the liability] would be specific to the type of grant. MS. COOK indicated that with regard to federal programs, her comments are largely speculative. Currently, the municipal code is organized such that the powers assumed on an areawide basis by a borough [cannot be exercised] by the city. She acknowledged that there is always that question as to how the powers and the jurisdictional obligation will be split between two types of local government that share territory. She said, "This bill doesn't particularly address that relationship nor does it create the tension that exists now, with respect to borough and any type of class of city that it has within its boundaries." Ms. Cook informed the committee that there are mechanisms by which the borough can shift responsibility to a city, if it so chooses and vice versa. Generally, if a city is located within a borough that is exercising a type of areawide power, then the city doesn't have the authority to exercise that power. Therefore, the grants dealing with such power would [probably] have to go to the municipality that has the power to perform the function. In summary, Ms. Cook stated that it wouldn't be any different than the current relationship that boroughs have with the cities within their jurisdiction. Number 1490 REPRESENTATIVE DYSON informed the committee that there are 75 communities that are not incorporated and are receiving aid. He expressed his hope that many of these [unincorporated communities] would choose to organize under state law. Representative Dyson noted that he has been intrigued by the innovation of some communities around the state. He used Quinhagak as an example. CO-CHAIR MORGAN pointed out that SSHB 16 has an effective date of July 1, 2002, and that the bill necessitates conforming legislation if this bill passes. He asked if the conforming legislation would be cumbersome or is it a housekeeping matter. MS. COOK said she didn't believe that [the conforming legislation] would be cumbersome nor did she believe that the conforming legislation would be voluminous. Ms. Cook explained that Sections 1 and 2 of SSHB 16 include the two definitions that she felt had to be dealt with in this bill. However, the bill does not address the numerous areas, outside of Title 29, where there are references to municipalities, their relationship with cities, and, in some cases, their participation in various programs. She said that she needed to review those statutes [outside of Title 29] and determine how this new type of municipality can participate in those programs. She informed the committee that due to the sponsor's desire to keep the bill focused, the additional sections [outside of Title 29] would be technical in nature. Therefore, if SSHB 16 were to pass, the effective date would be delayed in order to allow time for a conforming bill to amend all the relevant sections outside of Title 29. She pointed out that Section 24 of SSHB 16 does not give Legal Services any discretion regarding how to amend those sections because the language specifies that [these home rule communities] will be treated like second class cities. The conforming legislation will be submitted to the House and Senate Rules Committees for introduction and the legislature will review those technical amendments. The legislature may elect to make some policy choices and request changes. Therefore, this approach allows the legislature to debate SSHB 16 on the basis of its merits, without the weight of how these municipalities will be impacted by the other provisions. Then the legislature could review the conforming legislation next session. Ms. Cook indicated her belief that these communities, because of their small size and limited resources, probably ought to be treated as second class cities rather than first class cities or home rule cities. Thus, she guessed that the legislature would not want to change 90 percent of the bill. Number 1946 REPRESENTATIVE KERTTULA asked what would happen if there is conflicting legislation. MS. COOK explained that the statutes provide the Revisor of Statutes with a considerable amount of discretion in rewriting the law. The revisor is not supposed to rewrite the law in a manner that changes the effect. However, when there are conflicting statutes [the revisor rewrites them to the extent they can be resolved]. In the case of an absolute conflict, the revisor creates a revisor's bill and offers the legislature the opportunity to make a resolution, which is done by enactment of law. She noted that [the revisor] cannot fix legislation that is seriously in conflict. MS. COOK turned to SSHB 16 and the possibility that SSHB 16 would pass without subsequent passage of conforming legislation. In such a case, Ms. Cook said she believes that the home rule communities would qualify as home rule municipalities for purposes of most of the other statutes [outside of Title 29]. Although that may not be the desired result, it may not be a conflict either. Ms. Cook remarked that it would be unfortunate to have this classification of municipality treated in ways that would have policy effects that no one had thought of, which would be the worst [result] of not having a piece of conforming legislation. She related her belief that some of the other statutes that apply to home rule cities, in particular, ought to be extended to these sorts of small communities that might not have the taxing ability to carry out the function. Therefore, she felt that there is a need for a second piece of legislation in this case and hopefully, conflict will be avoided. If the second piece of legislation [the conforming legislation] doesn't pass, then the solution would be to delay the effective date of SSHB 16 one additional year. Therefore, SSHB 16 would be law and the effective date could be amended if the conforming legislation was problematic. Ms. Cook informed the committee that SSHB 16 doesn't conflict, in any way that she is aware of, with Senator Wilken's bill. Number 2138 JOHN PEARSON, Hyder Economic Development Planner, Hyder Community Association (HCA), testified that the Hyder Community Association supports SSHB 16. He mentioned that in Southeast Alaska there would, from his count, be about 13 communities that would qualify to [organize as prescribed] under the bill, although he indicated that maybe only two or three communities other than Hyder that would take advantage of this legislation. Mr. Pearson informed the committee that Hyder, the most eastern point in Alaska, is a small community of 131 residents. Hyder, a true boarder town, shares the border with Stewart, British Columbia, Canada. MR. PEARSON informed the committee that Hyder has no form of government and the responsibilities for the general welfare of the community is under the oversight of the Hyder Community Association, which is an extremely active group. The Hyder Community Association, a nonprofit 501-3C, provides fire services, emergency services, a library, and maintenance of about 12 miles of road per a contract with the Department of Transportation & Public Facilities (DOT&PF). Furthermore, the community takes care of plowing the snow on side streets. The Hyder community also operates a visitor's center and a small museum in the summer months. The community also oversees a small harbor [with] float plane facilities. He noted that the community fully participates with the Community Overall Economic Development Process. The [community] also applies and seeks funds from various sources. Number 2416 MR. PEARSON indicated that he would use Hyder as an example of the potential of small communities in Alaska. He informed the committee that in the past three years Hyder has aggressively attempted to create year round jobs. During this time, the Hyder Bottled Waterworks was developed and is now in the process of employing the first of 41 new jobs in the community. He explained that Hyder Bottled Waterworks will manufacture the bottles, fill the bottles, and build the pallets [that the bottles will be shipped on]. This has been done with community funds and some help from the Economic Development Administration; there has been no help from the state. MR. PEARSON said he felt that SSHB 16 would provide Hyder with the opportunity to organize and take on new responsibilities as well as take on major responsibilities, such as the creation of facilities to receive small cruise ships, barges, and perhaps marine ferries. However, there is one problem [with SSHB 16], which is the reference to schools. This year Hyder started a one room schoolhouse that has 12 students. Mr. Pearson reiterated that SSHB 16 provides an excellent opportunity for small communities, such as Hyder, to improve life. He offered to work with Representative Dyson on SSHB 16 and urged the committee's support of the bill. Number 2639 CO-CHAIR MEYER inquired as to the source of funds that Hyder receives. MR. PEARSON explained that Hyder would apply to state programs that are available to nonprofits. There are many programs, such as the block grant program, that Hyder would like to participate in, but cannot at this time. He noted that Hyder has participated in [DCED's] mini grant program as well as the U.S. Forest Service's occasional funding. Furthermore, the Hyder community building, which was built by the community, has space that is leased to the U.S. Forest Service and thus revenue is generated for Hyder. He informed the committee that the Hyder Bottled Waterworks plant revenue will be directed to improvements to Hyder, such as restoring some of the historical buildings in the community. He also noted Hyder's desire to match all of its federal dollars (indisc.). CO-CHAIR MEYER inquired as to how the Hyder Bottled Waterworks facility was funded. He asked if people gave what they could or did the funding came from taxation. MR. PEARSON replied that there was no taxation. He explained that every time that Hyder had extra money, it put it in the bank. That savings amounted to about $300,000. Then Hyder approached the Economic Development Association, who [offered assistance]. The community pitched in and actually dug a 600 foot trench for the water line to the Hyder Bottled Waterworks facility last Thanksgiving. Mr. Pearson noted the incredible amount of volunteerism, even from the Canadians. Number 2899 CO-CHAIR MEYER related his understanding that SSHB 13 would help Hyder create jobs. MR. PEARSON replied yes. Mr. Pearson informed the committee that Hyder has had discussions with Prince of Wales Island regarding an inter-island ferry, which could be possible with the passage of SSHB 16 as it would allow Hyder to organize and thus seek funding [bonding]. CO-CHAIR MEYER inquired as to who would be liable if a volunteer gets hurt. MR. PEARSON answered that HCA would be liable. He noted that HCA is well-insured. In further response to Co-Chair Meyer, Mr. Pearson said that there is no sewer system in Hyder and thus outhouses and septic tanks are still in use, which is still the case with water. CO-CHAIR MEYER expressed concern with bottling water and selling it nationwide. MR. PEARSON remarked that [the water industry] is closely controlled and regulated. TAPE 01-8, SIDE B Number 3004 KEVIN RITCHIE, President, Alaska Municipal League, came forward to testify. Alaska is a diverse place and there is not necessarily a lack of governments in the unorganized borough; however, the coordination between those governments is often very important. This bill provides an option or tool that communities can utilize to increase the ability to govern themselves in a way that is appropriate for them, which AML believes is important. In reference [to the notion that] a tax base [is an important] condition for being a municipality, many communities don't really have what is considered a tax base. A community gets a tax base by becoming coordinated in the efforts to develop one and thus increasing the ability to govern oneself is important. From a purely economic standpoint, the legislature is, under the constitution, the governing body, the assembly, for the unorganized borough. Therefore, this is a responsibility of the legislature. He said, "To the extent you can promote local self government of any kind, you're [the legislature] going to be ultimately assisting the state in being able to most efficiently make sure those services are provided." He pointed out that the economy of Alaska is so intertwined that most of the urban areas are the center of commerce because they provide services and goods to areas throughout the state. Therefore, the extent to which those areas thrive, commerce increases and everyone benefits. MR. RITCHIE noted that most of the bill is placing the words "home rule community" into various parts of Title 29. He referred to page 3, where two sentences are inserted: "a first class city may adopt a charter and become a home rule city; a second class city may adopt a charter and become a home rule city." He explained that for some reason, which [AML] could not ever determine, if a second class city wanted to be a home rule city, that second class city first had to become a first class city and then become a home rule city. This [SSHB 16] simply removes an impediment to a community deciding to come a home rule city, which is a good thing. MR. RITCHIE pointed out that there hasn't been much municipal evolution, in his view. In 1963 the legislature dealt with a controversial bill, a mandatory borough bill, by which Anchorage, Juneau, Fairbanks, and Kenai, were "[dragged] to the borough table" and probably at that time somebody said "well, we've got the rest of the state to worry about with local government, what [when] do you want to deal with that ... and I think somebody said, ... about the year 2000." Therefore, there really hasn't been much thought towards the evolution of local government in these types of issues and thus he is glad these issues are being addressed. Mr. Ritchie indicated agreement with earlier comments regarding [the belief] that the incentives for small communities that are considering becoming a municipality or a home rule community, in order to better work with the tribal council and the other governing bodies, are going away quickly. It almost doesn't pay to form as a municipality and it certainly doesn't pay to form as a borough. As the disincentives are growing, the incentives, like revenue sharing, are to the point where they don't provide much support. For example, a small community could potentially receive under $20,000 per year in revenue sharing, which is a minimal amount of money to actually conduct any kind of business at all. Mr. Ritchie informed the committee that although this information hasn't been released yet, there is a study of how many communities in Alaska are facing insolvency or the inability to pay their bills; the number is very substantial. He indicated that [the study says that] as many as 20 percent of the municipalities in the state, largely the small ones, are having a tough time just paying the bills. Number 2723 REPRESENTATIVE MURKOWSKI referred to the debate on HB 13, specifically the debate on the constitutionality of some of the issues. That debate prompted Representative Murkowski to review the constitution regarding the purpose of local government and make sure SSHB 16 is okay, which she believes to be the case. [The constitution] provides for maximum local self government with a minimum of local government units. Obviously, this [bill] is providing for a maximum of local self government. However, she wondered if the problem of "the minimum of local government units" would result by extending this to home rule communities. MR. RITCHIE responded that his opinion is no. He pointed out that Vic Fischer, Secretary to the Local Government Committee, has described the concept that boroughs fulfill a regional role, at some point in the evolution of municipal governments, which is a way of minimizing the number of local government units. He noted that in the Northwest Arctic Borough, the North Slope Borough, and the Lake and Peninsula Borough, the regional government supports the organized cities and the communities or villages, which is a good way of coordinating services in a community. However, the constitution does provide for cities as well within boroughs and thus those cities may be in boroughs someday. However, "whether they're villages or potentially home rule communities or municipalities, they ... all fit into the structure ... in my opinion." Number 2590 SARA FELIX, Assistant Attorney General, Governmental Affairs Section, Civil Division(Juneau), Department of Law, informed the committee that she is present in place of Margie Vandor. Ms. Felix said that she would be discussing a technical problem, which was raised in reference to last year's bill, HB 255. She pointed out that Ms. Vandor testified at the February 12, 2000, House Community and Regional Affairs Standing Committee meeting and noted that the constitution says that the local government is to be in the form of cities and boroughs. Furthermore, the constitution specifies that a city is to be governed by a council and a borough is to be governed by an assembly. The constitution does not seem to speak to a home rule community. She informed the committee that Ms. Vandor's testimony from last year is available on BASIS or she could review that testimony. REPRESENTATIVE MURKOWSKI asked if Section 2 of SSHB 16, which defines "city" as including a home rule community, would come close to addressing Ms. Vandor's concern. MS. FELIX answered, "I think that's a good step." However, there is a remaining problem in Section 21, where "council" is defined. Number 2444 REPRESENTATIVE MURKOWSKI asked if the deletion of the language in Section 21, "regardless of the name of that governing body" would make [Ms. Vandor] more comfortable. MS. FELIX answered, "I'm not certain if that would be everything, but I think that would ... go along way toward alleviating the concern." REPRESENTATIVE DYSON deferred to Ms. Cook in regard to [DOL's] concern. REPRESENTATIVE DYSON, in response to Representative Murkowski, answered that he didn't know why the aforementioned language in Section 21 was included. Number 2300 The committee took an at-ease from 9:10 to 9:22 a.m. MS. COOK, in response to the concerns with Section 21, said that she agrees that the constitution requires governing bodies to be councils. However, SSHB 16 says that whatever name is used, that "governing body" will be a council and thus all of the laws referring to the council of a city refer to this group, regardless of the name. She specified, "As a legal matter it will be a council. So, I don't see that there's, particularly a legal problem." However, she acknowledged that there may be a semantic problem. Ms. Cook recalled the same type of testimony last year in reference to the use of "community." Further, Ms. Cook said, "I don't think, as a legal matter, calling something a community and stating that as a matter of law it is a city; it seems to me that that solves the legal issue." REPRESENTATIVE MURKOWSKI surmised then that if the governing body of this home rule community was called a "quorum," then that "quorum" - under Section 21 of SSHB 16 - would be considered a "council" for the purpose of the constitution as well as all the statutes. Representative Murkowski related her understanding that Ms. Cook considered [DOL's] concern as a matter of semantics. MS. COOK indicated agreement. CO-CHAIR MORGAN asked if SSHB 16 could be amended such that the failure to pass the conforming legislation would automatically trigger a delay in the effective for one year. MS. COOK replied yes. The effective date could be drafted such that SSHB 16, although it will be enacted, would not take effect until conforming legislation takes effect. CO-CHAIR MORGAN asked if the sponsor would be amenable to such a change. REPRESENTATIVE DYSON replied yes. MS. COOK informed the committee that it could do a committee substitute, [or a] conceptual amendment and direct that the legislation be prepared as previously stated. CO-CHAIR MORGAN indicated the preference for a committee substitute. He asked if the committee was amenable to that. There was no objection stated. Co-Chair Morgan closed public testimony. Number 2039 REPRESENTATIVE MURKOWSKI moved to report CSSSHB 16 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSSSHB 16(CRA) was reported out of the House Community and Regional Affairs Standing Committee.
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