Legislature(1993 - 1994)
02/01/1994 01:00 PM CRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE February 1, 1994 1:00 p.m. MEMBERS PRESENT Representative Harley Olberg, Chairman Representative Con Bunde Representative John Davies Representative Cynthia Toohey Representative Ed Willis MEMBERS ABSENT Representative Jerry Sanders, Vice Chairman Representative Bill Williams COMMITTEE CALENDAR *HB 397: "An Act relating to the power to levy property taxes in second class cities and to combining a property tax and incorporation question." HEARD AND HELD OVER *HB 398: "An Act relating to rights in certain tide and submerged land." HEARD AND HELD OVER *HB 70: "An Act relating to state impact aid for municipalities; and providing for an effective date." NOT HEARD (*First Public Hearing) WITNESS REGISTER GARY WILLIAMS, City Manager City of Whittier P.O. Box 608 Whittier, AK 99693 Phone: 422-2337 Position Statement: Supported HB 397 & HB 398 CHRYSTAL SMITH, Director of Member Services Alaska Municipal League 217 Second Street, Suite 200 Juneau, AK 99801 Phone: 586-1325 Position Statement: Supported HB 397 & 398 BRUCE GERAGHTY, Deputy Commissioner Department of Community and Regional Affairs P.O. Box 112100 Juneau, AK 99811-2100 Phone: 465-4700 Position Statement: Provided information to committee DAVE GRAY, Legislative Staff Representative Jerry Mackie Alaska State Legislature State Capitol Juneau, AK 99801-1182 Phone: 465-4925 Position Statement: Staff to Cosponsor of Proposed SSHB 398 TIM TROLL, City Administrator City of Sand Point 1600 A Street, #103 Anchorage, AK 99501 Phone: 274-7555 Position Statement: Supported HB 398 RON SWANSON, Director Division of Lands Department of Natural Resources 3601 C Street, Suite 814 Frontier Building Anchorage, AK 99510-7005 Phone: 762-2692 Position Statement: Proposed amendments to HB 398 JAMES FILIP, City Manager City of Skagway P.O. Box 415 Skagway, AK 99840 Phone: 983-2297 Position Statement: Supported HB 398 CHARLES MCKEE 1508 W. 43rd #7 Anchorage, AK 99504 Phone: none given Position Statement: Opposed HB 398 JIM BARNETT, Attorney City of Whittier 10500 Prospect Drive Anchorage, AK 99516 Phone: 346-2755 Position Statement: Supported HB 398 and all proposed amendments except one PREVIOUS ACTION BILL: HB 397 SHORT TITLE: TAXING POWER OF SECOND CLASS CITIES SPONSOR(S): REPRESENTATIVE(S) OLBERG 01/26/94 2153 (H) READ THE FIRST TIME/REFERRAL(S) 01/26/94 2153 (H) COMMUNITY & REGIONAL AFFAIRS, FINANCE 02/01/94 (H) CRA AT 01:00 PM CAPITOL 124 BILL: HB 398 SHORT TITLE: LAND CONVEYED TO & FROM MUNICIPALITIES SPONSOR(S): REPRESENTATIVE(S) OLBERG 01/26/94 2153 (H) READ THE FIRST TIME/REFERRAL(S) 01/26/94 2154 (H) COMMUNITY & REGIONAL AFFAIRS, RESOURCES 02/01/94 (H) CRA AT 01:00 PM CAPITOL 124 BILL: HB 70 SHORT TITLE: STATE IMPACT AID FOR MUNICIPALITIES SPONSOR(S): REPRESENTATIVE(S) MACLEAN JRN-DATE JRN-PG ACTION 01/18/93 101 (H) READ THE FIRST TIME/REFERRAL(S) 01/18/93 101 (H) CRA, JUDICIARY, FINANCE 03/25/93 (H) CRA AT 01:00 PM CAPITOL 124 04/01/93 (H) CRA AT 01:00 PM CAPITOL 124 04/06/93 (H) CRA AT 01:00 PM CAPITOL 124 04/13/93 (H) CRA AT 01:30 PM CAPITOL 124 02/01/94 (H) CRA AT 01:00 PM CAPITOL 124 ACTION NARRATIVE TAPE 94-4, SIDE A Number 001 CHAIRMAN HARLEY OLBERG called the meeting to order at 1:10 p.m. He noted for the record Representatives Toohey, Bunde and Davies were present and noted that a quorum was present. CHAIRMAN OLBERG, SPONSOR OF HB 397, then read the Sponsor Statement aloud. (A copy of the sponsor statement is on file.) He added, "The legislation is introduced at the request of the City of Whittier." REPRESENTATIVE ED WILLIS joined the committee at 1:12. 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. HB 398 - LAND CONVEYED TO & FROM MUNICIPALITIES CHAIRMAN OLBERG, PRIME SPONSOR OF HB 398, read his sponsor statement aloud for the record. (A copy of his sponsor statement is on file.) Number 420 DAVE GRAY, STAFF TO REPRESENTATIVE JERRY MACKIE, COSPONSOR OF PROPOSED SSHB 398, testified in support of HB 398 and the proposed sponsor substitute. He stated, "Over the last two or three years, Representative Mackie has been trying to help out the City of Skagway on a land problem. Basically the problem was that fifty years ago the Corps of Engineers came in and built a dike...which over the years has been filled in, subdivided, some lots sold, the streets put in and people have a deed to this land, but they don't have clear title to it because the city didn't have the land. Meanwhile we've become a state and all kinds of things have happened. There's been a big effort between the city and the Division of Lands to see if we could correct this problem...administratively it could be problematic, so let's just do it with legislation. That's what a good part of the sponsor substitute does. Section one addresses this problem and it allows the Division of Lands to administrator at his discretion to quitclaim land to the municipality where there's been mistakes to correct, any mistakes such as this. It's written in a general way to affect any municipality to get around the prohibition for special interest, the Skagway land fix. Also, you should know that section three has a sunset repealer legislation language that says this provision lasts for approximately three years, in which all these corrections can be made... And finally, any land that's quitclaimed to a municipality will be debited against the general land grant entitlement municipalities enjoy. In our particular case, Skagway has about 7000 acres of land that they may select..." REPRESENTATIVE DAVIES asked, "This land in Skagway was originally classified as tidelands?" MR. GRAY referred to the land as "an old river bed" and said, "working with the Department of Natural Resources and their people thought that the language put in here covered every eventuality." Number 479 REPRESENTATIVE DAVIES asked, "Is this the same circumstance as the previous bill: the sponsor substitute hasn't been read across yet." CHAIRMAN OLBERG said yes. REPRESENTATIVE CON BUNDE said, "I would expect that perhaps you'd want to speak to the fiscal note." CHAIRMAN OLBERG said, "DNR is saying that if we incorporate some changes that they would like in this legislation (HB 398) that the fiscal note might change." REPRESENTATIVE TOOHEY said, "Sounds like blackmail." Number 502 MR. WILLIAMS testified in support of HB 398 via teleconference by saying, "This is designed for economic development and again to help promote self-determination among communities." He then gave an example of how this would help the City of Whittier saying, "If we were permitted to obtain tidelands under state statute, it would mean we could, through the process of requesting in advance. The fact that we don't have the right to do that now means that we are at the whim, I hate to say that, but it seems very much like we are not at all involved in the process or at the table when it comes to our ability to develop tidelands... Last year at this time we had spent a great deal of time and energy in an attempt to provide a docking facility for five major day cruise operators to function out of Whittier...they asked what could we do and we said, `In the interest of economic development, we will do whatever we can to try to provide a docking facility for you, provided that you're able to pay for the cost of doing that' and they indeed were willing to do that. I spent a great deal of time planning the dock, getting the financing together, making arrangements with the railroad to lease a portion of their land and then we found that about 4000 square feet of this large docking facility hung over onto DNR (Department of Natural Resources) tidelands. Obviously, we had to go and get a permit, a lease, some instrument that allowed us to occupy a portion of those tidelands. Now realize that this is a very small part of the total area...Everything was in place...and they (DNR) determined that the fastest way to deal with bringing this together was to go for a permit process. We applied...it was only in the last moment, the month of May, that we learned from the Department of Natural Resources that they would need not only the annual fee that they charge for tidelands, but they wanted a piece of the action as well which started at 25 cents per passenger the first year and escalated in four year to a dollar. That killed the deal. Now I'm finding myself starting all over again...to find a piece of area that does not involve DNR tidelands. We are effectively resigning from development on our waterfront if it involves State of Alaska property and this is not as it should be." Number 567 REPRESENTATIVE BUNDE asked, "If the cities are picking up the property, why is there an expense to the state?" CHAIRMAN OLBERG said he hadn't been informed by DNR regarding the specifics of the fiscal note. REPRESENTATIVE DAVIES requested to have representatives from DNR present for future meetings on SSHB 298. Number 581 TIM TROLL, CITY ADMINISTRATOR, CITY OF SAND POINT, testified via teleconference in support of HB 298, saying, "We were incorporated as a first class city after the 1964 date, so we are ineligible to request tidelands from the state. We currently do lease three tideland tracks totalling about 55 acres in our harbor area. We operate a city dock and a small boat harbor accommodating about 133 fishing vessels and also provide a transient moorage. The City of Sand Point strongly encourages the adoption of this legislation. Although we do have tideland leases in place with the state, my observations since working with Sand Point...that we often enter into these leases and then hope that nobody ever reads them. One of the stipulations in our current lease that gives me some concern is the requirement that says the city may use the rents received from subleasing for expenditures related to management and improvement of the tideland lease area, and it goes on to say that over 50 percent of profit and excess of these expenditures must be returned to the state and the city is required to make an annual accounting. This paragraph leaves a lot open to interpretation. It would simply make things much easier for us in Sand Point to simply have ownership of those tidelands and be able to go ahead and improve and develop our harbor area because it is actually the vital economic center of our community. And I would also think that from the state's perspective because...I don't know of anybody from DNR who has ever been out there to monitor the stipulations under this lease. I would certainly think from the state's standpoint they would be happy to be relieved of any potential liability out there. It would really be a win-win situation for all parties." Number 635 RON SWANSON, DIRECTOR, DIVISION OF LANDS, DEPARTMENT OF NATURAL RESOURCES, testified via teleconference saying, "HB 398 we support in concept with a couple of amendments. From what I've heard of the testimony, I partially agree with. I do not have the legal authority to convey tidelands...to them. Many municipalities that are waterfront related...much of their local economy is generated from activities on those tidelands. I support the concept of being able to give those tidelands that are being used for developmental purposes to the local municipality for that purpose. We could lease them those tidelands. The correct (indiscernible) is to let for fair market value." Number 650 REPRESENTATIVE TOOHEY asked, "You said you had the ability to lease at fair market value, is that for all tidelands?" MR. SWANSON replied yes, and proposed the following amendments: "We are required by a long standing law to manage according to the Public Trust Doctrine. It is a constantly changing piece of law, it has been expanded in recent years to include more activities than people thought of a hundred years ago. The Public Trust Doctrine requires us to make sure that the land beneath water bodies are available for public use. That doesn't mean that we can't create some private rights in those, but even when the private rights are created, they are subject to the Public Trust Doctrine. In order to avoid a problem down the road, I would suggest an amendment that says any conveyance made under this particular Act is subject to the Public Trust Doctrine and if the Public Trust Doctrine has been broken, violated or whatever, title reverts back to the state. It would make it much easier for us and make it very clear to the municipalities of what responsibility they have. In the same line, if a municipality dissolves, normally (uplands would) come back to the state, that may have been conveyed to them. We would like to see the same requirement made for tidelands upon the dissolving of a municipality. Third, we would like to see any conveyance remain limited to the existing proposed public or development project. We have no problem with that. I do have a problem conveying a bunch of nonused tidelands. It would also be very, very expensive to survey and to manage and to convey. That is why the fiscal note in front of you right now is fairly high. It takes quite a bit of manpower to do what we expect them to do. But if we pare down to development projects (indiscernible) we can drop that fiscal note substantially. Last, we'd like to see an amendment stating that tide and submerged lands cannot be used to increase a municipal's land entitlement under AS 29.65. We also feel that any conveyances made under this particular piece of legislation could be charged against a municipality's land entitlement. If a municipality doesn't have land entitlements, that will not prevent us from conveying it to them. But for a lot of municipalities...they have a land entitlement, but what they really want are tidelands, not necessarily the uplands. I feel an obligation to fulfill those entitlements with land that could be best used by the municipality." Number 696 JAMES FILIP, CITY MANAGER, CITY OF SKAGWAY, testified via teleconference saying, "Our involvement is a little bit different than the other cities because ours involves some area that was letted and the dikes were constructed and the dried out land added to the land banks to the municipality without benefit of having title transfer from the state. So we don't fall under the characteristics of a tidelands situation as I see it, but more or less on the idea of securing correct title to land that has already been in the possession of private landholders for quite some time." TAPE 94-4, SIDE B Number 000 CHAIRMAN OLBERG asked if HB 398 would enable DNR to convey the "formerly submerged lands" to Skagway. MR. SWANSON replied, "That is correct. We were made aware of the Skagway problem last summer and tried to administratively find a way to solve the problem. It seems clear that we need a legislative solution and the solution that is here is one that we recommend strongly." CHARLES MCKEE, testified against HB 398 and the proposed sponsor substitute for reasons unspecified and referred to a brief he had written. He indicated he would send his brief to the committee. Number 078 JIM BARNETT, ATTORNEY, CITY OF WHITTIER, responded to Mr. Swanson's proposed amendments via teleconference. He said, "In large measure the City of Whittier would agree with his suggested amendments and I believe we could probably resolve much of his concerns. ...he had five proposed changes. The first being that the conveyance would be subject to the Public Trust Doctrine. I believe that that's the law whether or not it's actually stated or not. In fact, in the legislation as it exists today, there is an obligation to prevent unreasonable interference with navigation, which I think is one of the principle concerns that Mr. Swanson had. So I don't think we have any concern with that...as a concept. The issue of whether a municipality dissolves and the land returns to the state, I think that goes without saying. We would agree with that. The notion of limiting the tideland conveyance to the existing or proposed development project, in Whittier's case, that's appropriate. Whittier has an extensive coastline in western Prince William Sound... So I don't think we have any concern with that. I believe Ron's next comment was that this went to the fiscal note, having been a Deputy Commissioner of DNR for many years back in the 80's, I'm aware of the fiscal problems the department has always experienced in making municipal land conveyance. Since the last time the oil prices went down, DNR has not been in a position to make those conveyances without the municipalities producing the money to hire the employees to do the work and to do the surveying. In fact, Whittier itself has just conveyed $6500 to Mr. Swanson to do some final adjudication of the lands in Shotgun Cove so that those can be conveyed to the city. So I think we recognize the budgetary constraints that the department operates under, and would agree that the process that most municipalities recognize when they deal with these conveyances. That is if we want the land, we'd have to help the department adjudicate and survey it. The only concern I have to Mr. Swanson's proposal is that whatever title is conveyed would be charged against the municipal land entitlement. Particularly because we are now limiting it to development projects. Probably in the case of Whittier, the tidelands we'd be talking about that are related to development projects would be fifty acres, maybe a hundred. Not a significant quantity of land, but the City of Whittier right now is trying very desperately to develop it's economic future and, of course, the discussing that we really didn't get into too far about the railroad is very applicable in the situation of Whittier. The legislature ten years ago promised the City of Whittier 600 acres, upland acres, all of it leading out to Shotgun Cove. To the extent that we'd have to give some of it back, it would take away from our ability to either build a road or develop successfully. We would like to have these tidelands in addition to the 600 acre entitlement..." CHAIRMAN OLBERG said, "I suspect the subtraction from the municipal land entitlement is tied to Skagway where we're actually talking about land. And maybe in the process of drafting one of the future committee substitutes...we will be able to satisfy the Skagway problem and the other problem as well. REPRESENTATIVE DAVIES asked if the 600 acres was all Whittier was entitled to. MR. BARNETT confirmed this and gave some historical perspective. MR. GERAGHTY said, "There are provisions already existing in state statute, specifically AS 44.47.150 (f) which stipulates that land that was owned by a municipality on the date of its dissolution and received by the municipality under the state under a municipal land grant entitlement program is transferred to the Commissioner of Natural Resources. So there is a provision already in law to deal with dissolution. Further, we think that DNR's suggestion that a provision be put in the bill to protect public rights in the event of a conveyance so that the public trust is there and retained...that's an excellent idea. ...Now I think we're getting into where...further discussions with Mr. Swanson may clarify this because part of his response did so in my mind, where he was talking about the aspect of the conveyed tideland or submerged lands being charged against the municipal entitlement... because we have situations where some cities don't qualify for entitlement under AS 39.65 and the only thing they have available to them is the tidelands and submerged lands for conveyance. So, I'm not quite sure how that works with his programs. The other aspect is where the entitlement to the city, like in the case of Whittier, where it is restricted, that the conveyance of tidelands working against the overall entitlement is going to have detrimental effects. So I think a little bit of time, we should be able to work out that..." Number 291 REPRESENTATIVE DAVIES asked, "Ron, in your proposed amendment that says, `If conveyance does occur...public rights must be protected through divisionary interest retained by the state, if the public trust is breached,' is that meant to be fairly broad, I mean more broad than just simply the case of a municipality dissolving itself. Perhaps I read of this also including the case where subsequent release interest are given to a private developer, and in that case the public trust was breached, then there would be a hammer to get that to protect the public interest. Is that also included in your intent here?" MR. SWANSON replied, "That is correct." Number 320 CHAIRMAN OLBERG suggested HB 398 and its current draft of the sponsor substitute be discussed at a later date and adjourned the meeting at 2:20 p.m.