Legislature(1997 - 1998)
02/09/1998 03:38 PM House L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 324 - MUNICIPAL LIEN FOR UTILITY IMPROVEMENTS Number 0595 CHAIRMAN ROKEBERG stated the committee's next item of business was HB 324, "An Act relating to liens for municipal assessments for certain utility improvements." He invited the bill sponsor to come forward. HB 324 read: * Section 1. AS 29.10.200 is amended by adding a new paragraph to read: (54) AS 29.46.080(d) (limitation on assessment liens). * Sec. 2. AS 29.46.080(c) is amended to read: (c) Except as provided in (d) of this section, assessments [ASSESSMENTS] are liens on the property assessed and are prior and paramount to all liens except municipal tax liens. They may be enforced as provided in AS 29.45.320 - 29.45.470 for enforcement of property tax liens. * Sec. 3. AS 29.46.080 is amended by adding a new subsection to read: (d) A municipality may not, under (c) of this section, place a lien on the property assessed for utility improvements unless the utility service is provided by a municipally owned utility or an organization, including a cooperative, that requires membership as a condition of obtaining utility service from the organization. This subsection applies to home rule and general law municipalities. Number 0621 REPRESENTATIVE SCOTT OGAN presented his sponsor statement for HB 324. He stated, "I've introduced House Bill 324 for two basic reasons. First, I heard from a number of constituents who stated they did not feel they could afford the borough assessment on their property as a result of ENSTAR [ENSTAR Natural Gas Company] running a gas line they neither wanted or needed across their land. And second, has to do with a private company directly benefitting from leverage by public government through a process of attaching liens to a property when the owner fail to pay assessments - fees established by the borough." Number 0664 REPRESENTATIVE OGAN cited Section 3, and stated he thought the Matanuska-Susitna (Mat-Su) Borough ordinance recording a non- response to a voting notice for inclusion in a local improvement district (LID) as a "yea" vote was inherently wrong. He compared this type of voting process to a non-response counting as a vote for the incumbent. Representative Ogan noted the ordinance had been recently changed in the Mat-Su Borough. He commented that this type of voting process was not addressed in statute, and there was no attempt to address it in this legislation. He stated he was concerned some of his constituents would lose their homes, describing one elderly lady on a fixed income who chopped firewood to heat her home, and who "has made enough of a ruckus that I believe that she would be in dire straits if - if, and quite possibly be out on the street, because she can't afford the assessment. She doesn't have any intention [of] hooking up to the gas. She didn't want the gas, she didn't vote for it, yet she has a - a major assessment on her property that she just simply doesn't have the money to pay for." Number 0815 REPRESENTATIVE OGAN indicating addressing this issue was the bill's intention. He stated he was more than willing to defer to the committee and work with interested parties "to try to hold harmless people that, either don't want the gas, or can't afford it." He commented, "I guess it can be argued that it's an improvement to their property. If they hook up, it's a major improvement. If it's - if it goes by their front yard, I suppose that the value of their property is increased somewhat by the fact that the - there is natural gas there. So, I guess it just gets down to the kinder, gentler side of Scott Ogan wants to help out little old ladies and keep them from being ... thrown out of their homes because they can't pay - pay for the assessment." Number 0885 REPRESENTATIVE JOHN COWDERY questioned HB 324's effect in his area, the Municipality of Anchorage. He stated when an area was being assessed for sewer, water, whatever, and there was a vote of the people, the majority vote ruled. He noted he owned a vacant lot in the Mat-Su Borough and has made five payments for an LID gas improvement. Representative Cowdery said he wanted to know, if HB 324 was put into law, how other neighborhood improvements, such as roads, et cetera, would be affected. Number 0964 REPRESENTATIVE OGAN replied HB 324 only affected LIDs which benefitted privately-owned companies. He said it did not affect municipal or publicly-owned utilities where people have a say, and a vote, in the by-laws; it only affected private entities on whose behalf a public entity collected. Number 1005 REPRESENTATIVE GENE KUBINA said he would like to have a better understanding. He commented it appeared the borough wanted the LID and sold bonds in order to do this, rather than doing it themselves, feeling it was better to go through a private company. He stated it seemed like the private company here was doing a service for the borough. Representative Kubina asked the amount of the assessment in question. He commented the question was valid: What if a borough decides not to put in water and sewer lines itself? He asked about the case of a private electric company and stated additional questions: "How else do we modernize our areas here in Alaska if you don't allow for these things to be paid for by all the people ... in that area, [does] it have to be 100 percent?" He questioned how the bond would be paid, wondering if it would be prorated back, and if the people next door would be charged twice as much because the others did not participate. Number 1082 REPRESENTATIVE OGAN responded that the Matanuska Electric Association, for example, running a line through property on an easement doesn't charge unless the property owner hooks up. He stated the people who hook up first are charged more, but he believed the original people received some kind of a rebate as more people bear the load. He noted if the borough financed the project itself, the borough could pick and choose those it put liens on. He commented he thought, however, because it ran through a private organization, the private financing company required everyone in the LID area to have a lien in order to secure the loan. He stated it was problematic and he was willing to work with people with ideas to make this a little more "user-friendly" for those at a financial disadvantage. He asked Representative Cowdery if he would be willing to share the amount of his assessment with the committee, noting it was public information. Representative Ogan commented each LID was assessed differently depending on the cost of the improvements. He stated, "We can't be deprived of our property without due process of law, and I suppose that, in principal, due process is met here because your voters -- your neighbors voted to impoverish you, but somehow I don't think that's very inherently fair." Number 1217 BOB JENSEN, Manager of Branch Operations, ENSTAR Natural Gas Company, a division of Seagull Energy Corporation, came forward to testify on HB 324. He stated he had worked a little bit with Representative Ogan on this, and he noted he somewhat "dropped the ball," and could been a little better about giving Representative Ogan some suggestions that might have been helpful. Mr. Jensen stated he was fairly familiar with the special assessment process and could briefly explain it to the committee. He said the process was one of the subsections of Title 29 (Municipal Government) and any kind of special assessment district - roads, natural gas, sewer, water - could be started either by an act of the assembly or by petition of the local residents. He stated the natural gas LIDs have, to the best of his knowledge, all been started by petition. He noted it's a "ground-roots" effort, people going door-to-door, talking to their neighbors, trying to get at least 50 percent. He added 70 percent is required on the Kenai Peninsula. Number 1293 MR. JENSEN said the petition comes forward to the borough from the property owners in a given area with a minimum of 50 percent of the property owners in an area participating. He stated, from there, the borough will contact ENSTAR, defining the area the borough wishes to have served, and ENSTAR will design a project to provide service to the specified lots, submitting the cost back to the borough. Once the borough has those costs, it mails out a letter to each property owner in the area telling the owner the expected cost and amount of assessment, broken down on an annual basis. He said the borough then holds public hearings on the LIDs, and the LIDs pass or fail based on the input in the public hearings. Mr. Jensen stated Representative Ogan was right, in the Mat-Su Borough, historically, a non-response has been counted as a "yes" vote. Realistically, he said he thinks that has been pretty close. Mr. Jensen commented, according to Don Moore, retired Matanuska-Susitna Borough manager, protests run about 10 percent in the Mat-Su Borough, which is pretty low. Mr. Jensen said the Mat-Su Borough turns down LIDs when the protest level exceeds 20 percent. Number 1343 CHAIRMAN ROKEBERG asked for a clarification of 10 percent protest. Number 1349 MR. JENSEN replied that protests on LIDs borough-wide in the Mat-Su have been somewhere just under 10 percent. Number 1358 REPRESENTATIVE KUBINA asked if that meant they did not vote at all. Number 1360 MR. JENSEN indicated that 10 percent of the total property owners sent back protest letters. Number 1369 CHAIRMAN ROKEBERG asked if that was before the election. Number 1372 MR. JENSEN replied that was using the protest mechanism. He noted the Mat-Su Borough has changed its procedure, and is now using the Municipality of Anchorage's procedure. He said he thinks the municipality has always mailed out a ballot, and a failure to respond is counted as a "no" vote. He stated he thinks ENSTAR has done 2 or 3 LIDs in the Municipality of Anchorage, 3 Kenai Peninsula Borough LIDs, 1 City of Soldotna LID, and probably somewhere over a 100 LIDs in the Mat-Su Borough. Number 1401 CHAIRMAN ROKEBERG asked if state statute allowed the local political subdivision to develop its own methodology. Number 1408 MR. JENSEN replied that was correct. He said Title 29 specifies that the assembly can start an LID if it chooses, but in the Mat-Su Borough at least and he believed in Kenai, the assembly does not start LIDs, it waits for a petition to come forward from the property owners. He noted he was not as familiar with the Municipality of Anchorage. Number 1422 REPRESENTATIVE JERRY SANDERS clarified the Municipality of Anchorage counted a non-response as a "no" vote and the "Valley" (Matanuska-Susitna Borough) formerly counted a non-response as a "yes" vote. Number 1433 MR. JENSEN responded that was correct. He said the reading of Title 29 says it is based on protests, and he said he thinks the interpretation may have been that protests had to be counted, there had to be protests, if Title 29 was followed strictly. He commented he was not sure where it came from, bond counsel perhaps, but he noted the Mat-Su Borough has recently changed their procedure. He said he thinks the change to the Municipality of Anchorage's procedure was made during the first or second assembly meeting in January. Mr. Jensen stated ballots will be mailed, only positive responses counted, and a minimum of 50 percent positive responses will have to be received for the LID to go forward. Number 1473 MR. JENSEN stated that the LID process is a municipal process. He said ENSTAR does not foreclose on anyone; it is effectively a contractor, noting, "They pay us and they usually sell special assessment bonds ...." He said the previously mentioned foreclosure mechanism is designed so that the municipality is able to collect the money to pay off its bonds and that process has nothing to do with ENSTAR. He said the company is like any other contractor doing a job, it gets paid when it does the job. Number 1503 CHAIRMAN ROKEBERG asked if the use of the municipal bonding authority, then, was intended to allow the issuance of tax-exempt bonds which lowered the cost of the project to the affected property owners. Number 1518 MR. JENSEN responded that was correct except the bonds are not tax- exempt because the utility does business in three "counties." He stated the Internal Revenue Code does not allow a municipality to issue a tax-exempt bond. He said the municipality can still get a much better interest rate than an individual homeowner, if the homeowner were to try finance the project through the bank. Number 1535 CHAIRMAN ROKEBERG asked, "Why doesn't ENSTAR finance 'em if you're gonna go (indisc.) taxable bond then vis- -vis going through the political subdivision on a taxable bond basis?" Number 1542 MR. JENSEN responded the reason LIDs come forward is because they are not economically feasible projects from ENSTAR's perspective. He asked, "What would happen if we were to go forward and do the projects -- you have to pay for this somehow, and the way you pay for it, is you raise your rates." He stated ENSTAR has approximately 97,000 customers who do not want ENSTAR to raise its rates. He said the company has somewhat taken the position the "cost-causer should be the cost-payer." He said this is true of any project, stating ENSTAR has done approximately 120 projects in the Mat-Su Borough and 25 were LIDs. He said what happens, is ENSTAR determines a project is not economically feasible for ENSTAR to do without raising rates, something the company does not want to do. He commented the Alaska Public Utilities Commission (APUC) would also frown if ENSTAR raised its rates, and it would be difficult for the company to raise its rates. He said he thought the "cost-causer, cost-payer acronym" came from the commission. Number 1596 MR. JENSEN said, on any project, ENSTAR contributes approximately $645, about 85 feet of the project. He stated, "For any given customer who wants to hook up, we pay the first 85 feet, if the front of their lot's a 100 feet, then they would pay the additional 15, or pay the cost of putting that in. We treat that money as a deposit. We pay that back, we pay back as ... -- let me get back into the LID perspective. When we -- when the borough contacts us to put in an LID and we give them a price, ... they pay us to do the job, and then we refund to them, every time somebody hooks up to - to the system, we refund them $645. And we do that all the way through, up to and including the tenth year. At the end of the tenth year, if there're monies left over, we give the whole kit and caboodle back to the borough. So, basically what's happening is the borough or any other customer ... whose property exceeds the 85 feet, is financing the project. And that is - is done so that we don't burden our existing customers." Number 1663 CHAIRMAN ROKEBERG questioned if the 85 feet referred to 85 linear feet and the trunk line that came in. MR. JENSEN responded that was the main line. CHAIRMAN ROKEBERG asked if it was 85 feet for the service connection. Number 1675 MR. JENSEN replied that the service connection was separate. ENSTAR, he said, paid the first 100 feet of a service connection, which was somewhere between $550 and $650 dollars. He commented, to keep in mind, for someone who lived a quarter mile from the existing main and was the only customer interested in hooking up, ENSTAR would pay the first 85 feet and the customer would be responsible for financing the balance. He stated, "If you came to us and asked us to run gas to your home, we would contact all your neighbors in trying to put together a - a package with your neighbors where everybody contributed a little bit and everybody would hook up." He said it was a cooperative procedure from ENSTAR's end; ENSTAR has its people out there trying to put together a package that works for the people involved. Number 1718 REPRESENTATIVE KUBINA commented one issue was already taken care of in the Mat-Su Borough since the rule had been changed so that a non-response counted as a "no" vote, noting the Municipality of Anchorage already did it that way. He referred to the "cost-causer pays" and stated, if his understanding was correct, that the bill said someone who does not hook up does not have to pay anything. He asked if that "would do away with these projects completely, unless a higher percentage said they were going to hook up .... What would be the effect of this?" Number 1754 MR. JENSEN responded HB 324 would effectively stop all natural gas related special assessment districts. He repeated that ENSTAR doesn't place liens on people's property; the borough does, and the borough places liens in response to a petition of the property owners. He said placing liens was the last thing that happened; there was a public hearing prior to setting the assessment roll so that any inequities could be fixed. He stated if the borough is not allowed to place a lien on the property, it would not be able to sell the special assessment bonds, and he commented that a special assessment bond is not like a general obligation bond. Mr. Jensen said a general obligation bond pledges the full faith and credit of the entire borough, but the special assessment bond only pledges the property of the people benefitted by the improvement - whether it be a road, natural gas, sewer and water - whatever that improvement might be. Number 1801 REPRESENTATIVE KUBINA noted ENSTAR had done more LIDs in the Mat-Su Borough than any place else in the state by far; yet, he said, if HB 324 had passed, virtually none of those would have happened. Number 1810 MR. JENSEN stated that was correct. He said if this bill had been in existence back in 1985, there would have been no natural gas special assessment districts in the Mat-Su Borough or anywhere else. He noted approximately 3,300 individual homeowners who have natural gas today have benefitted from this process. Number 1827 REPRESENTATIVE KUBINA asked if Mr. Jensen had a figure for the number of people out of that group who had to pay, and could have natural gas, but don't. He wondered if that number was very high. Number 1833 MR. JENSEN stated he was not sure. He said that for properties with homes, within five years approximately 97 percent of those people hook up. He noted this was an average number and varied from LID to LID. He stated he was not certain what the total lot count was; the ones who would be at risk would be the people with lots without homes on them. Number 1858 MR. JENSEN stated, personally, he did not see the difference between a special assessment placed for a private utility such as ENSTAR, one placed for a cooperative or one placed for a municipality. He said the property was still at risk if the assessment was not paid. The Municipality of Anchorage, in particular, he said, does a lot of sewer LIDs and those people who pay for the sewer LID have the same lien on their property, and he stated the benefit is similar. Mr. Jensen mentioned solving the problems Representative Ogan raised, and he referred to Title 29. He said the special assessment portion is somewhat liberal in one place, saying "the borough may set the methodology that they use, which is why Anchorage does it different than Kenai who does it different than - than the Mat-Su Borough, but it's very restrictive in - in other areas." Mr. Jensen said, for example, Title 29 says that every property which benefits from the LID must be assessed, and provides no exception. Number 1914 MR. JENSEN stated he had suggested to Representative Vic Kohring, but had not had an opportunity to talk in depth with Representative Ogan, that pehaps the answer would be to provide a senior citizen's exemption similar to the one in the tax portion of Title 29. Or, he suggested, possibly a section could be added that allowed a borough to set up some kind of a hardship committee. Mr. Jensen commented that could be done with the property owners in the area, suggesting possibly a peer review committee to find out who has a hardship, then allowing those properties exemption from assessment. He referred to the Falk Lake to Plumley Road LID (Falk Lake to Plumley Road LID 244) public hearing which he thought was the LID Representative Ogan was responding to. Mr. Jensen said, at that public hearing, the people who testified in favor said they really didn't want to do anything that would harm those other people but they really wanted the natural gas. He said,"The borough had no mechanism to - to say, okay, well how 'bout if we - we try this, they were pretty much stuck with the fact that, if you get a benefit, and you do, your property ... values go up ..." Number 1958 MR. JENSEN stated the borough cannot do anything for a property owner, the borough has no relief it can give to anybody. He said perhaps a better solution than taking the ability to do special assessment districts for natural gas away from the municipalities, would be to give them the tools to make the special assessment districts work a little better. He commented that the Kenai Keys Utility Special Assessment District (USED) has recently passed on the Kenai Peninsula, and he noted the term USED was used down there, but it was the same thing. He said they did that with an in excess of 70 percent approval rating on the petition before it ever got to the assembly. Mr. Jensen commented that they were responding to the flood down there a couple of years ago, which washed propane and oil tanks down the river and caused some environmental problems. The municipality, or the borough, wanted to bring in natural gas to eliminate those fuel tanks in that flood plain. Mr. Jensen said if that is taken away from them, they cannot respond to problems that are really municipal problems and need to be dealt with at that level. He stated he thought some changes to give the borough a little more latitude would be very helpful. Number 2013 CHAIRMAN ROKEBERG stated the committee would take testimony on HB 324 at this meeting, noting he had discussed this with the bill sponsor. Chairman Rokeberg commented it was not his intention to move the bill at this time because the committee thinks some improvements can be made, and, with its responsibility in utilities, will be taking a very hard look at this legislation. He noted it was clear from the previous testimony that there was need for legislation. Chairman Rokeberg commented he had allowed Mr. Jensen "a little liberality there because of his background (indisc.) explaining the systems ...." He asked further witnesses to limit their testimony to approximately three minutes. Number 2068 WILL JOSEY testified via teleconference from Kenai. He stated he was the originator of the Kenai Keys gas line (for the Kenai Keys subdivision) and had identified that need during the flood of 1995. He said he tried to get some emergency funding and was unsuccessful, so he went through the USED process. He said he agreed with Mr. Jensen on many points. Mr. Josey said HB 324, as written, would eliminate (indisc.) possible development in rural and unincorporated areas throughout the state, and would eliminate the possible improvement of environmental protection in high risk areas such as the Kenai River and, possibly, Kasilof River. He added HB 324 would "totally eliminate the possibility of a USED, of improvement, of development of private property." He suggested language be added, or current language deleted, and a provision inserted to provide payment of the assessment on sale of the property benefitted in hardship cases, citing the case Representative Ogan previously mentioned. Number 2130 MR. JOSEY continued that these properties and governmental agency properties should be excluded in voting to establish a USED. He noted in the Kenai Peninsula Borough, a non-returned vote is considered a "no" vote in the establishment of a USED, as in Anchorage. He also noted the Kenai Peninsula Borough requires 70 percent, which he said was difficult to get. He said he'd been working on this project since the 1995 flood "and now we're almost at the stage where this spring we will get it." He urged the committee to examine HB 324 closely because he said it was so detrimental to anyone trying to get a gas line into certain areas. Number 2187 CHAIRMAN ROKEBERG referred to Mr. Josey's statement that passing this bill as currently formed would eliminate the ability to provide environmental protection. He asked Mr. Josey to explain. Number 2195 MR. JOSEY replied that the Kenai Keys area is in a flood plain, and as Mr. Jensen said, the area needed all protection possible. He added, "And the protection of the environment there, is in the case of floods, moving the propane, gas tanks, oil drums, et cetera." Number 2208 CHAIRMAN ROKEBERG clarified, "Because of the - the substitution of a different type of fuel source, is what you're saying, this is a cleaner burning fuel, and therefore wouldn't have the environmental harm, particularly if there was a recurrence of that tragedy down on the Kenai River, is that correct?" Number 2219 MR. JOSEY agreed and added that since the gas line would be buried, it would not be affected 99 percent of the time. He said probably the worst it could do was break the line, and natural gas does not hurt the environment like "oil and so on." Number 2231 CHAIRMAN ROKEBERG mentioned the Kenai Peninsula Borough's 70 percent requirement, and asked Mr. Josey if he thought the legislature should address that percentage or if each borough should be able to establish its own. Number 2242 MR. JOSEY responded he believed the statute required 50 percent plus one. He stated, "The boroughs -- a lot of 'em have taken this type of ... hardships ... and said, 'Well, okay, if the people really want it, let's make sure that we have a majority,' so the Kenai Peninsula Borough established 70." Mr. Josey stated he thought 70 percent was too high, and recommended 60 percent, possibly 66 and 2/3 percent, or something similar. Number 2266 CHAIRMAN ROKEBERG commented that the legislature normally wants to give local governments "as much rope as they can to hang themselves." Number 2273 MR. JOSEY responded perhaps that one was a little too long. Number 2286 JAMES GARHART testified next via teleconference from the Matanuska- Susitna Borough. He stated he was a borough landowner who has been threatened with foreclosure. He stated he did not want, need, and was not using the services of ENSTAR. Therefore he did not consider himself a "cost-causer," but he was a "cost-payer" because he had to subsidize his neighbors' choice of doing business with a private corporation, which he stated he resented thoroughly. He said he had sat in that very room several years ago, right next to Don Moore, and requested help from Senator Rick Halford on this issue. Mr. Garhart related that Senator Halford had said it was not a state issue, and Mr. Garhart agreed. However, he said Mr. Moore maintained it was a state issue because of AS 29.46.060, assessment roll, which Mr. Garhart quoted, "At any time after approval of an improvement plan the governing body shall assess the authorized percentage of the cost against property in the district included in the plan in proportion to the benefit received." Mr. Garhart said he does not see why he should have to pay for a line ENSTAR has buried in an easement running next to some property on the other side of a road, not, he indicated, in the easement contiguous to his property. He stated he doesn't pay if he doesn't hook up to electrical lines, phone company, cable television, but ENSTAR put this through and he is forced to pay for it. Number 2351 MR. GARHART stated he has been fighting this for nine years. In his opinion, the key part of Title 29 is the language, "in proportion to the benefit received." He disagrees strongly with the belief that because there is a line there, whether someone is hooked up or not, whether there is a house on the property or not, someone benefits equally. He noted the ballot issue had been corrected. He stated he had made several suggestions, giving the example of an area with 100 houses, 95 whose owners want natural gas; he proposed drawing boundaries around the remaining 5 lots, and have the 95 in favor make up the LID. He said if the owners of the remaining 5 properties wanted natural gas later, or if the properties were sold, they could pay extra to become included just like with telephones and electric lines. Number 2392 MR. GARHART stated his opinion that the present system violated both the state and federal constitutions. In regards to the federal Constitution, he referred to "Article IV, protection against unreasonable searches and seizures," and maintained foreclosure is an unreasonable seizure. Referring to "Article V, nor shall private property be taken for public use without just compensation," he said he has asked many times what exactly just compensation he would receive for being made homeless because he did not subsidize the cost of his neighbors' utility choice; he said he has never received an answer. Referring to Article XIV of the Bill of Rights, he quoted in part, "Nor shall any state deprive any person of life, liberty or property without due process of law." Number 2426 MR. GARHART referred to the Constitution of the State of Alaska, Article I, stating the very first sentence included "we're entitled to the enjoyment of the rewards of our own industry," which he felt his property was. He said Section 15 of Article I said, "No conviction shall (indisc.) corruption of blood or forfeiture of estate." Mr. Garhart commented that it was "pretty bad" if his property could be taken but a killer's could not. He stated Section 18 said, "Private property shall not be taken or damaged for public use without just compensation." Mr. Garhart strongly insisted this was a state issue because the borough had flatly refused to address it for at least a decade. Referring to the concept of "the majority rules," he said, "If a few suffer for the benefit of the majority, that's acceptable. Well, you tell these same people that for the benefit of the majority, the majority has decided to put a halfway house in their neighborhood. Then see how their tune changes, that they want you to protect the individual, and I guess I'm out of time since I don't get my five minutes, but you will be hearing from me and I strongly endorse you all to support this bill. It's absolutely necessary because of the borough's abysmal failure to protect us." TAPE 98-10, SIDE B Number 0007 DEAN BEAULIEU testified next via teleconference from the Matanuska- Susitna Borough. He stated he was a real estate broker with Best in the Land Realty and Insurance, and he would like to commend Representative Ogan for his efforts to protect people like the previous speaker and the "little old lady in the (indisc.)." Mr. Beaulieu stated, however, he believed HB 324, as written, would do more harm than good. He stated the biggest problem is that it does not allow LIDs to be used to help the thousands of people LIDs were designed for. Mr. Beaulieu recommended, as a "minimum fix," to amend HB 324 so that a group of landowners 100 percent in favor would be able to have an LID. He stated that if there were ten people living on the Kenai River who wanted to form an LID to put in rock protection for flooding, they would not be allowed even if a 100 percent of them wanted it, as HB 324 is written. Number 0058 MR. BEAULIEU stated he agreed with most of Mr. Josey's comments and his suggestion of perhaps forming "some kind of a hardship thing" for the previous speaker or "the little old lady that we keep referring to," if it was set up so that the LID could be formed and perhaps the assessment was only paid off when the property was sold. He said that would possibly be a "compromising fix," and the "maximum fix" would be not to pass HB 324 and let things continue as they have been. He stated that he did not see that the LID process was much different than passing a school bond, where the majority of the voters vote to have a bond to build more schools, which causes higher taxes on the "little old lady in the butte," and raises her cost of living even if she doesn't have any kids. He said he does believe a small amount of the "majority rules" should happen. Number 0107 MR. BEAULIEU noted Mr. Garhart brought up a good point, perhaps the LID process could be allowed for those who wanted it on some kind of percentage basis, going by his property, and if he wanted to connect into later he would pay a higher cost or penalty for not paying in the beginning. Number 0146 PHIL LOCKWOOD, general contractor; President, Alaska State Homebuilders Association testified next via teleconference from Wasilla. He commented he was speaking partly as the President of the Alaska State Homebuilders Association and partly from his own viewpoint. He said he had received a number of calls recently in regard to HB 324 and thought a lot of them were "just simply cases of not understanding what - what this is all about, and they're not real sure that they agree with the bill as it is written." He stated, "Some of the previous speakers mentioned things such as natural gas, sewers, erosion and so on. Whereas, if I understand the bill the way it's written, that some of these projects in the future would be just more or less totally impossible just because you've eliminated the whole LID process." Number 0180 MR. LOCKWOOD asked, also, what would happen with future development in some areas, noting the example of an outlying area "off the beaten path." He said it was going to be very difficult to do some of these things because of the tremendous amount of cash that would be forced up front by either the developer or the personal property owners in the area. He also asked what would happen, in the case of the Municipality of Anchorage, if communication lines had to be run and something similar to a LID was required, but it could not be done because the municipality had sold ATU (Anchorage Telephone Utility d.b.a. ATU Telecommunications). Number 0206 MR. LOCKWOOD stated he understood Fairbanks had also sold a number of their utilities. He said, "So this is my concern, and I think all us that I've talked to in the last couple of days need to understand this better and do a little more research on it to find out just exactly what this is going to do to all of us economically and in our personal lifestyles." Number 0226 REPRESENTATIVE COWDERY mentioned the situation in the Municipality of Anchorage, where certain seniors were exempt from property taxes on their personal property if they lived there, and he asked Mr. Lockwood if anything like that could be worked out for seniors in Mr. Lockwood's area. Number 0238 MR. LOCKWOOD responded he would not have a problem with that. He stated he thought something needed to be done because many of those people are on extremely fixed incomes and any increase in their income was "out of their control." He said, "In other words, if they're on social security, it's up to the federal government as to whether they're going to get an increase or not. And then if somebody comes along and - and does something like this, it makes it real difficult for 'em. So I think there are certain groups of people, such as the senior citizens, that would need some help on some of this. To see the - the minority of people controlling what the majority of the people want." Number 0268 REPRESENTATIVE COWDERY stated some time back in the past, the state underwrote those exemptions, but presently, as he understands it, the local government would have to do that. He asked Mr. Lockwood if he thought that would be acceptable in his area. Number 0285 MR. LOCKWOOD responded, "Oh, I think so. I think to a limited degree some of that's already been done on the property taxes." Number 0289 CHAIRMAN ROKEBERG asked Mr. Lockwood if he had ever developed a subdivision in the Mat-Su area. Number 0296 MR. LOCKWOOD replied he did not do developments, he built the buildings on the developments. Number 0300 CHAIRMAN ROKEBERG noted Mr. Lockwood worked with developers. Referring to the nature of the Mat-Su, buyers' desires for larger lots than in an urban area like Anchorage, and the relatively lower price of land, compared to Anchorage, Chairman Rokeberg asked if most of the subdivisions developed Mr. Lockwood's area were of such lot sizes that it made sense for the developer to have the gas lines put in, or were they more rural in nature under the Mat-Su Borough's subdivision rules. Number 0327 MR. LOCKWOOD replied he could not answer that question, noting there was a real estate broker present. Mr. Lockwood referred to something Chairman Rokeberg had alluded to earlier, stating they had built a number of houses in the early 1980s in a subdivision near the gas line when it was put in. He said he thought they built approximately 20 houses in that subdivision and they put in heating systems which could easily be converted to natural gas "on the hopes that this would come through, and eventually they did. They formed an LID and put the gas in there. Had the LID process gone away, that subdivision to this day would probably sitting there without gas." Number 0365 REPRESENTATIVE OGAN stated he welcomed Mr. Lockwood's "help and input on possibly drafting an alternative that would -- [I] think there's a consensus of what the object of the bill is (indisc.) to help some of the people that can't pay for it." He stated it certainly was not his intention to end the LID process "as we know it." Number 0385 MR. LOCKWOOD noted they had talked back and forth quite often, and he said he was sure they would come up with some suggestions. Number 0405 CHAIRMAN ROKEBERG directed the question to Mr. Beaulieu, the real estate broker, "Given the large area of the Mat-Su Valley, do not most developers up there, when they create subdivisions, either provide for gas, number one, or are the lots so large that it's too costly, or I'm sure it depends on where it's located, too, as far as the main trunk lines and lines -- but do most new subdivision developments have gas in your area, and what problems do you envision because of the large lot size up there?" Number 0429 MR. BEAULIEU responded that he thought if the LID process was ended, it would definitely cause a hardship for the developer to try to pay for the gas up front, so development costs would probably be limited, or perhaps lot prices raised for the consumer. He said the trend currently appears to be one acre to five acre lots, noting as Chairman Rokeberg had mentioned, that these are bigger than 10,000 square foot or 20,000 square foot lots common to the Municipality of Anchorage or Eagle River. Mr. Beaulieu said if this bill passed he thinks it would cause a great hardship, and make it difficult for the developers. Number 0461 CHAIRMAN ROKEBERG asked, "Do you have any idea in terms of percentage dollar numbers, like (indisc.) MLS (ph) statistics about whether, or is there a way that you could break out the level of business between, like, recreationally-owned second homes in the Mat-Su vis- -vis the owner-occupied primary residence, do you have any idea what that is up there?" Number 0479 MR. BEAULIEU responded that they do not break them out that way. Number 0480 CHAIRMAN ROKEBERG asked Mr. Beaulieu about his personal experience. MR. BEAULIEU replied he would say that most of their sales are definitely owner-occupied. CHAIRMAN ROKEBERG stated historically there used to be a lot of folks with second homes and cabins up there. He indicated he thought that still existed in the Mat-Su Borough. Number 0490 MR. BEAULIEU stated, "It does exist, but really not in the natural gas LID areas that we're - we're speaking of. Those are farther north in the Willow-Talkeetna area." Number 0511 MARK SOLLENBERGER, Assessment District Coordinator, Department of Public Works, Municipality of Anchorage, testified next via teleconference, from Anchorage. He informed the committee he has been working in assessment districts for approximately 30 years. Mr. Sollenberger stated the Municipality of Anchorage has three staff members dedicated to assessment districts. He said he would like to address an overall issue which might cover some of the items previously mentioned. Number 0531 MR. SOLLENBERGER stated, first of all, an assessment district, as Mr. Jensen explained, is basically an area of land designated by law to pay for the cost of a public improvement. He said there are four basic items in an assessment district: land, improvement, cost and law. Law, he said, is established by local governments throughout the United States and in Alaska; it is not established by state or federal government, and special assessment district laws themselves are something that are the right, reserve and use of local governance. He said the special assessment itself is a pro-rated, limited-life tax lien against a piece of property. He stated, "Because the local governments are enacting it by laws similar to taxes, they say that a special assessment will be paid until the proportion of cost of the improvement is paid off, there will be no more charges after that. So it has a - a given life and it's ended." Number 0580 MR. SOLLENBERGER stated local governments can use special assessments to designate an area to pay for the improvements and then collect the cost for the improvements. This is an alternative to the local government building the improvements and then repaying them by general taxes. He said, "So you're taking these improvements and you're designating the land that's involved, (indisc.) benefitted; the taxpayers are not involved, it's only the property that's considered benefitted, who's getting the service or whose value is improving." Mr. Sollenberger referred to the history of special assessment districts, noting the first special assessment district of record was from the Earl of Essex in 1375 [stated on tape as "William of Essex," corrected in later testimony]. He said assessment districts were used in England after that time; he said they came to the United States on the Mayflower and have been used ever since. He stated the use of assessment districts in Alaska basically began in the Municipality of Anchorage in 1952 with formal assessment districts for street paving. He said that was adopted from an 1898 law established in Seattle. Mr. Sollenberger noted assessment districts have a great foundation in Western culture. Number 0647 MR. SOLLENBERGER stated, "Right now we are circulating a petition for gas lines in Eagle River," noting they have a minor assessment district program for gas lines. He said it is a small project, $1.2 million project, and there are 270 properties involved. He said, "The petition has currently passed." Mr. Sollenberger noted the Municipality of Anchorage requires the property owners (indisc.) represent over 50 percent of the costs, must petition and sign in favor of the project, and a "no" vote or a non-response does not count in favor of the project. He stated, "We need an affirmative action and it is limited to over 50 percent. Should the petition pass, we will borrow the money, pay ENSTAR out of it, and we will recollect the money that was basically used to finance it through assessment districts, and we will require everybody to pay an assessment." Number 0688 CHAIRMAN ROKEBERG asked how many homes were involved in the Eagle River project. Number 0695 MR. SOLLENBERGER replied, "There's 270 lots involved, and of the - the houses -- there's 123 homes that are valued over $10,000. I'm sorry, there's 108 homes. There's - there's more vacant property in that particular project than there is constructed property. CHAIRMAN ROKEBERG stated he had not intended to pursue this, but he clarified that Mr. Sollenberger had said 270 lots and 108 homes. MR. SOLLENBERGER stated, "There's 270 total lots and properties, some of 'em aren't lots, some of 'em are parcels of land. Of that, there are 123 structures in excess of $10,000 in value. Now, of those 133 [FROM TAPE], which is less than 50 percent that's constructed on, 83 have made statements in favor, and 50 have either not responded or not - or been opposed to it. On the other side of the coin, owners who represent 56 vacant lots out there have also signed in favor of it, with 82 - owners that owned 82 lots - opposed. So, total on a per lot basis, over 50 percent are in favor. Now, for your information the assessments are an average of approximately ... almost $3,500 a lot." Number 0782 CHAIRMAN ROKEBERG asked, "So Mr. Sollenberger, this legislation would restrict the ability of the municipality ..." MR. SOLLENBERGER responded, "The legislation would null and void this, and I don't know where it is along the line that if it's adopted after the project goes to where it would null and void -- if we're gonna encumber (indisc.) the property in the municipality at one point $2 million, and find out we can't collect for it, we'd be concerned." Number 0803 CHAIRMAN ROKEBERG asked Mr. Sollenberger, "Did you hear the testimony of Mr. Jensen where he was talking about the - the ..." MR. SOLLENBERGER said he had. CHAIRMAN ROKEBERG continued, "And is that consistent with what you do in Anchorage as far as the ..." MR. SOLLENBERGER said the Municipality of Anchorage was a little more restrictive in its petition procedures, noting the municipality's petition procedures and assessment districts were quite a large part of its infrastructure development. He said at this point gas lines are the only privately-owned utility the municipality operates with, stating it is a minor program. He stated the municipality is contemplating other private utilities in relationship to assessment districts. Number 0830 CHAIRMAN ROKEBERG asked what other types of utilities. Number 0833 MR. SOLLENBERGER responded that the question, again, is what happens to telecommunications when the municipality starts going to its more remote areas. He said, "The other thing is we have a program in which we can retire our overhead communications and power lines into underground, which there will be cost to those -- which is right now cable, and if there's any future telephone that's gonna ... come up, we'd have to pay them and we'd do it under assessment district process." Number 0875 CHAIRMAN ROKEBERG noted Mr. Garhart's earlier reference to AS 29.46.060, which Chairman Rokeberg quoted, "The government body shall assess the authorized percentage of the cost against the property in the district included in the plan in - in proportion to the benefit received." He noted Mr. Garhart's emphasis on "in proportion to the benefit received" and asked Mr. Sollenberger if he knew of any case law on "that type of language." Chairman Rokeberg asked if there had ever been one in Alaska or was that typical language in "assessment statutory construction" in the United States. Number 0918 MR. SOLLENBERGER responded that was pretty typical language. He stated, "Authorized cost, it gives the - the local government the option to share in the cost or to share in no cost. So, (indisc.) they deem is the authorized cost of a public improvement, they can have the balance taken out of local taxes; hopefully, they could receive money from the state under state grants and assess the rest .... But if they're constrained all the costs involved rather than use general taxes, that becomes the authorized cost. Number 0934 CHAIRMAN ROKEBERG asked about the idea of benefits received, "Just because you own property in ..." Number 0938 MR. SOLLENBERGER responded that the benefit (indisc.) under the utility concept is: "If you're served or if your land can be served, you're benefitted. If you're under a road or a park or things like that, it becomes a public question as to what area is particularly benefitted." He said it becomes the right of the local government to make that determination. He gave the example of a lot owner with three same-size lots, two vacant and one with a house. The lots are all the same size, the gas runs down the front, and the house and one of the vacant lots are for the gas. Mr. Sollenberger said it would be very difficult to justify whether the center is not equally benefitted. Number 0976 REPRESENTATIVE OGAN said it seems someone who is hooked up receives more benefit and he asked if the local government had the latitude to assess in accordance with the way the statute was written. Number 1000 MR. SOLLENBERGER said he assumed it was however the local government wanted to handle it. Number 1006 CHAIRMAN ROKEBERG questioned that the Municipality of Anchorage has assessed the "non-user but approximate property owner ... the property owner in proximity to the line." Number 1012 MR. SOLLENBERGER replied that if it is capable to serve a property owner with water, sanitary sewer, (indisc.) power, even if the property is vacant and they do not serve, the property owner is still benefitted. Number 1023 CHAIRMAN ROKEBERG confirmed that applied to all types of assessment districts, not just private utility LIDs. Number 1028 MR. SOLLENBERGER agreed, stating this is more common to utility districts. He said he would say that the local government could, at its option, defer any assessment until the owner actually uses it, however that becomes a taxpayers' expense and the Municipality of Anchorage has been declining to place that burden on the taxpayers. He said it is possible for other governments to have the taxpayers "front" that money. Number 1051 CHAIRMAN ROKEBERG asked again if Mr. Sollenberger knew if there was any case law on the benefit received issue. Number 1056 MR. SOLLENBERGER replied there was and gave the committee the name of the municipality's expert on assessment laws, William Greene (Assistant Municipal Attorney, Municipality of Anchorage), phone number: (907) 343-4545. Mr. Sollenberger said there have been challenges during his history concerning the application of water and sewer, and he said there have been some activities where it was overturned by the Alaska Public Utilities Commission. However, he said, it was in relationship to doing assessment districts in the Municipality of Anchorage, which does not have the authority of other local governments in Alaska. Mr. Sollenberger stated, "Bob Jensen did mention the practice how the Mat-Su Borough can go forward and initiate a district and not move unless they have over 50 percent of the protest. The Anchorage charter, when it was adopted by the public for the municipality, wrote out the ability for Anchorage to adopt any assessment district unless owners that (indisc.) would pay over 50 percent of the cost approved the petition, so there is -- we (indisc.) have to have an affirmative petition in Anchorage in order to approve the - in order to form an assessment district." Number 1123 REPRESENTATIVE COWDERY asked if situations had occurred during Mr. Sollenberger's long tenure, where people absolutely could not afford the assessment because of limited income or similar circumstances and what the alternative was in Anchorage. He asked if people appealed assessments through the assembly, or how it was addressed, if it was addressed. Number 1148 MR. SOLLENBERGER stated, in his experience, the assembly has tried to extend the payments "to as long as a reasonable period of time." He said there used to be a practice in which the state of Alaska, under the senior citizens' programs, would assist and pay for assessments similar to paying property taxes for senior citizens. He commented that the state has ceased doing that and, once again, the municipality has not picked up a practice of increasing its general taxes. Number 1182 CHAIRMAN ROKEBERG asked how the boundaries of a service area or LID were determined. Number 1189 MR. SOLLENBERGER responded it is important to understand an LID, under the definitions of local improvement district, covers 15 to 20 different types of assessment districts. He said, in the gas line assessment district or GID, the boundary is all the property that can be served. The lot is identified and the whole lot is considered benefitted property. In the cases of water and sewer lines, the land within 150 feet adjacent to the water and sewer line that can be served is considered benefitted, and he said that is usually all of the lot in urban areas. Number 1226 CHAIRMAN ROKEBERG commented that there had to be a defining boundary in any kind of a district. Number 1234 MR. SOLLENBERGER replied that the assessment district itself is land improvement cost in raw and the land is that which the local government considers benefitted for the improvement. He stated in the testimony he has heard from both Kenai and the Mat-Su Borough, there is a small difference in interpretation of which is benefitted, however that is the municipality's or the local government's right. He said, in the Municipality of Anchorage, the municipality designates by law on the special assessment ordinance which lots are benefitted. He said, "If you want draw (indisc.) piece of paper, then you just draw the line around the boundary of the land." Number 1275 CHAIRMAN ROKEBERG stated HB 324 only says the municipal government can't put a lien on property. He asked if that was the "death knell" of a special assessment district. Number 1290 MR. SOLLENBERGER responded that was one of the reasons the municipality used an ordinance, or a law, in order to form a special assessment district; it creates a (indisc.) tax lien that must be collected and that the municipality has the right to foreclose on. Mr. Sollenberger stated, "Now, we either go to the public for other types of public improvements, get general obligation bonds which would promise to be repaid by the benefitted owners. In the case of assessment districts we go and we sell assessment bonds with the understanding that the municipality will repay the bond from the benefitted owners." He said if the municipality does not have the right to collect, because an individual does not want to pay, then it cannot guarantee the bond or the note. Number 1330 CHAIRMAN ROKEBERG referred to the bonds and Mr. Jensen's comment that the Mat-Su Borough has gone on a taxable bond basis. Number 1339 MR. SOLLENBERGER responded that is "the nature of the beast for gas lines, and also for our revenue bonds for water and sewer -- they're taxable." Number 1375 REPRESENTATIVE COWDERY clarified that it had happened "that the assembly has deferred the taxes downstream but never forgiven, is that right?" Number 1387 MR. SOLLENBERGER answered in the affirmative, stating, "But that was over 15 to 20 years ago and they were assessments to repay general obligation bonds, which they just held in status, as far as utility-type bonds for water, sewer, and in this case, gas line, they have not." Number 1408 REPRESENTATIVE COWDERY asked what had happened during the downturn in the late 1980s. Number 1416 MR. SOLLENBERGER responded that the municipality had collected a lot of property through assessment and tax lien foreclosures. He noted, in the cases of property abandoned by owners during the downturn with assessments against it, the bank would pay the assessments so the municipality would not foreclose against the banks. Number 1437 CHAIRMAN ROKEBERG commented that that is on improved properties usually, when there is a mortgage. He asked, in the initial set-up of gas improvement districts or any type of assessment district, if the Municipality of Anchorage, or to Mr. Sollenberger's knowledge, anywhere else, have a hardship provision. Chairman Rokeberg noted Mr. Sollenberger had mentioned extending the pay-off period, but he was asking about waivers or delays. Number 1469 MR. SOLLENBERGER replied that, for all local governments under the assessment district procedure, the board of appeals is the governing body of the local government involved, and it has the right to make adjustments and charge those adjustments to the taxpayers. He said that is an inherent right of the local government (indisc.) the assessment district, and the answer was yes, they have done that. Number 1495 CHAIRMAN ROKEBERG said that, based on the particular request for hardship exemption, waiver, et cetera, the case law in the statutes would allow for that type of hardship. Number 1511 MR. SOLLENBERGER stated, "The municipal assembly, and all of 'em involved, can make that option, but there is nothing to require it." Number 1521 REPRESENTATIVE OGAN asked what would happen if the bill was amended to say a lien on a property could not be attached unless the assessed property was hooked up or somehow receiving benefits from the utility. Number 1536 MR. SOLLENBERGER responded the municipality couldn't put forth the assessment district under a basis like that. He said the municipality has to be able to guarantee to the banks that it is going to repay their loan. He added, "From our standpoint in Anchorage, we also have to assure the administration that the taxpayers aren't gonna have to do it, and that's the case of the GID. Now, the other thing, too, is (indisc.) I think it's the folks from Mat Valley [Matanuska-Susitna Borough] have noticed, is that these assessment districts that have gone to the Mat Valley, they have fallen out if the local government doesn't feel that what's being presented is reasonable. They have the right to reject it, there is no guarantee for the owners. And we're probably gonna have a very lively public hearing over the Eagle River one, too, so it - it is just a right of local government and any restriction on that is basically somewhat of a 'refringement' of what we can do." Number 1601 REPRESENTATIVE OGAN corrected, "It's not a right, it's - it's a privilege that the state grants the local government to do this," apologizing for the correction. He commented on previous testimony stating 97 percent of the people hooked up to the utility eventually and he asked, "Isn't 97 percent a pretty good risk for a bank that 97 percent of the - the people in the LID would be able to have liens and - and then if - you wouldn't have a lien on the property until somebody hooked up? As a banker, if I was an investment banker, I would think 97 percent ..." Number 1647 MR. SOLLENBERGER replied, "Under those circumstances we wouldn't be able to sell bonds." CHAIRMAN ROKEBERG added, "There'd be no surety of pay-off 'cause you wouldn't know when you'd collect." Number 1650 MR. SOLLENBERGER stated that was correct. Number 1670 TIM ROGERS, Legislative Program Coordinator, Municipal Manager's Office, Municipality of Anchorage, testified next via teleconference from Anchorage. He stated the Municipality of Anchorage believes the gas improvement districts are a very important vehicle for developing some of the municipality's areas that currently aren't being developed. He said that if HB 324 goes forward, the municipality would appreciate being exempted out of it. In his second comment, Mr. Rogers referred to Chairman Rokeberg's inquiry about case law on the benefit received from LIDs. He stated he would be happy to have the municipality's legal department look into that and transmit the results in the next day or two. Number 1713 CHAIRMAN ROKEBERG asked if the "MOA" (Municipality of Anchorage) wished to be exempted from HB 324 because it considered itself to be a non-rural, more urban area. Number 1724 MR. ROGERS replied, "Because we feel that it's a - a very important development tool, and, quite frankly, we don't see that there's a major problem that needs legislative correction." Number 1740 CHAIRMAN ROKEBERG suggested that was because of the nature of land development in the municipality and the subdivision requirements there. He stated the municipality does not have too much of a "scattered development type thing." Chairman Rokeberg added that the committee accepted Mr. Rogers' offer providing legal background. Chairman Rokeberg asked Mr. Jensen to provide a "wrap- up" from Mr. Jensen's perspective. Number 1791 MR. JENSEN stated he did not have much in the way of "wrap-up." He said he perceived the problem to be one that possibly some steps should be taken to fix and the municipalities given some remedies. He said he was not suggesting that the assessments for those experiencing hardships or senior citizens be paid for out of tax dollars; he was suggesting that perhaps language could be crafted which would allow those costs to be spread back to the other participants in the LIDs when true hardships exist. He said he has little expertise in this area, not being an attorney and not knowing "land law," but he said he sees that as a potential remedy, particularly for the problems in the Mat-Su Valley. Number 1836 CHAIRMAN ROKEBERG commented that clearly there have been instances in the Mat-Su Valley where this process has raised obvious problems, stating, "There's a problem, then we need to find a solution to remedy the problem." Chairman Rokeberg stated, in addition to senior citizens and people with hardships, he thinks there are other people in the Mat-Su area are who might need further consideration. He commented on the nature of land development in the Mat-Su Borough, noting a lot of the land in that area was developed for recreational sites and uses. He indicated people might want to maintain those (indisc.) sites and uses, but find themselves being urbanized by the installation of various utilities, including ENSTAR's gas lines, in areas they want to keep more rural. Chairman Rokeberg said that maybe they were trying to hold on to an old idea of what having a second home, cabin, or something, was. He stated he was not exactly sure what the answer was. Number 1917 MR. JENSEN responded he did not know the answer either. He did know as the natural gas LIDs came forward, they came forward on a petition requiring signatures by property owners owning 50 percent of the property by value. He said it starts at the "grassroots" (indisc.) and there is at least 50 percent of the group interested in going forward with the LID. Mr. Jensen noted that, historically, it has been up to the local government to determine the required percentage, commenting on Kenai's 70 percent and the Mat-Su Borough's 51 percent. He said he was hesitant to speak too much because he didn't want to speak for the Mat-Su Borough government, saying he's contractor, so to speak, ENSTAR. He said it would probably be worthwhile to consult with Michael Gatti, the borough attorney, or Desi Mayo, the acting borough manager. Mr. Jensen told the committee he did not know why the borough did not have a representative present to speak to the borough's interest, but he was certainly not qualified to do so. Number 1996 REPRESENTATIVE OGAN stated he stood ready and willing to work with interested parties in achieving the goal here. He recited from a favorite song by Rick Scaggs (ph), "A rich man writes the book of laws that a poor man must defend. The highest laws are written on the hearts of honest men," and said his heart told him that the highest value should be for the private property owner. He stated that was a more compelling interest to him than a government's interest in something, commenting, "When we have a government that is potentially violating ... a person's ability to fufill those - those dreams of owning a house or owning property and those kinds of things because maybe they aren't able to keep up with the circumstance around them -- I think we need to accomodate those whenever we can. And so, with that ... high, lofty goal stated I'd like to -- you know, I appreciate you holding this bill over, ... it needs some more work it's obvious, and again my intention is not to eliminate the LID process, but make it a little more user friendly." Number 2090 CHAIRMAN ROKEBERG referred a question to Mr. Jensen, "Don't you think that the size of the LIDs can be stacked to include just enough people who probably do not want the LID, but make it big enough to defray the cost of the LID? Is there a way to adjust that or is there ...?" Number 2129 MR. JENSEN responded that is really under the control of the borough. He gave as an example, the contentious Falk Lake to Plumley Road LID. He said it was his understanding that LID started out as two separate projects which were combined by the borough. Mr. Jensen stated he doesn't know why the two projects were put together, although he said it might have been done at the request of the people involved. Mr. Jensen said, once again, he thinks the borough has been responsive to the petitioners over the years, noting sometimes that works well and sometimes not. He stated that he thinks, had those two projects been separated, the people in the Plumley Road area would have had a greater voice from a protest perspective, and the people in Falk Lake, who were predominately in favor, would have been able to go forward without a lot of the problems involved. Mr. Jensen noted he attends the assembly meetings whenever there's an LID on the agenda to answer questions, and to tell people what is going on and how ENSTAR operates. He noted he thought the evening the Falk Lake to Plumley Road LID was up for public hearing, there were three other LIDs up for hearing as well. He said representatives of those LIDs, which were small, stood up and commented, "Gee, yeah, you shouldn't do anything that would harm those people, but by the way, everybody in my LID wants it, please pass it." He said these were smaller LIDs and he thinks sometimes size "gets away" and he doesn't know how to legislatively determine what the size should be. Number 2240 CHAIRMAN ROKEBERG referred to his previous question to Mr. Sollenberger about the way boundaries are set for LIDs. Chairman Rokeberg said that seems to be one of the problems here. Number 2250 MR. JENSEN explained the boundaries are set mainly by the people doing the petition. He said often, the person who starts the petition is person on the far end of what would be the project. Mr. Jensen said, "And he works backwards getting signatures back towards where the - the natural gas pipe lien currently is, and what happens that's how the boundary gets set -- it's the guy down here who started the petition is the tail end of the - the project and the boundaries are running up here and down these side streets 'cause these people signed on it. And I think the borough makes an effort to provide service or have service provided to all of the signers of the petitiions when they can." Number 2303 CHAIRMAN ROKEBERG asked Mr. Jensen if the legislature decided to raise the requirements to something like 60 plus 1 percent, if he thought ENSTAR could live with something like that. Number 2327 MR. JENSEN replied he thought ENSTAR could live with almost anything the legislature decided to do; he said his big concern is that the legislation somewhat singled ENSTAR out. Number 2340 CHAIRMAN ROKEBERG commented that testimony showed these situations were not limited to GIDs, particularly with the changes generated by the telecommunications Act of 1996, and the committee was very concerned about all utility issues. Chairman Rokeberg stated, "We're not picking on you, you guys have generated the publicity, though." Number 2375 MR. JENSEN replied he understood. He repeated his statement that he thought ENSTAR would live with whatever the legislature determined to be proper, and he said, as he told Representative Ogan, he was not there to tell them what to do, he was there to provide some input and possibly offer some workable suggestions. He said ENSTAR takes its ability to serve the public very seriously, and he thinks the LID process is a tool, from the municipal perspective, and it has worked as a tool for ENSTAR to get service out to people who want that service. He said ENSTAR would hate to see it go away, but ultimately the debate should be between the legislature and the local governments, and the procedures should work for those local governments and their citizens. He said that if ENSTAR can participate, it would certainly like to continue. Number 2451 REPRESENTATIVE COWDERY asked if it would be worth pursuing the concept that ENSTAR would possibly pick up or defer some of the costs in hardship cases "downstream." Number 2478 MR. JENSEN replied, "No, not really, sir. The - the problem you run into is when - when we pick up the costs those costs ..." [TESTIMONY INTERRUPTED BY TAPE CHANGE] TAPE 98-11, SIDE A Number 0001 MR. JENSEN continued, "... are pretty low, and at the same time go out and provide service to those people. And, generally speaking, my recommendation to a potential customer, whether it be LID or non-LID, is to evaluate the cost of the project, the cost of any conversion work we'll have to do in their home, and determine if they can pay it back in energy savings over the next five or six years. If they can do that, it's probably a worthwhile project. If it takes longer than that, then they should probably reconsider the project in its entirety, and perhaps continue using fuel oil or propane or whatever they're on now." Number 0056 CHAIRMAN ROKEBERG stated the problem, more so in the rural areas, is that people are going to have multiple lot ownerships that they may have taken up as personal investments, or they may have subdivided land, or they may have a larger parcel, and "when you're talking about 85 linear feet, ... you're talking about substantially more that they're going to be liable for." Number 0097 CHAIRMAN ROKEBERG stated the testimony has clearly indicated there are some problems which need to be addressed (indisc.) statewide. He said, "I think the testimony today also has given us the clue of which direction we can go. ... Number one, we need -- we could look at the hardship situation and the senior situations, but I would caution everybody that I recognize and - this committee would recognize - that when you go into these situations ... there's a financial cost and there's a bonding situation where you want to be bondable to make the project go -- so you have to be careful about, you know, allowing multiple hardship situations. I think you need to address that issue and how you do that could be a little ticklish." Number 0163 CHAIRMAN ROKEBERG noted, "However, I think the boundaries, and setting the boundaries in these types of things might be, also, a way -- something that needs to be looked at, and even raising that percentage up, perhaps, a little more. It seems to me that that's one of the problems here, there's too large an area that you - you throw the net out and get too many people in it, and then that's where you run into the problems, because I think that the hardship ability exists, as the testimony of Mr. Sollenberger pointed out, at the local level -- but whatever standards there have to be pretty, pretty high to be able to qualify for that because (indisc.) we can only do that initially because you wouldn't be able to finance the project unless you identify that cost, spread it back to the other people that signed up for it and then - and then collected it. Either particularly on the sale of the property or whatever, the further disposition of that property, then that - that lien ... would become activated, then perhaps or something. Like a sleeping lien - I don't know if there is such a thing. ... Those are the kind of things I think that could be worked on and this committee looks forward ... to seeing the bill that maybe touches on those without completely destroying everything else. And as long as you're at it, you might as well exempt the Municipality of Anchorage." Chairman Rokeberg previously indicated HB 324 would be held for further consideration.