Legislature(2003 - 2004)
05/07/2003 01:38 PM Senate CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SCR 12-BOROUGH INCORPORATION: UNORG AREAS
CHAIR THOMAS WAGONER announced the sponsor would introduce the
bill then Darroll Hargraves the LBC Chair would give a statement
and answer questions. Finally the committee would take public
testimony.
SENATOR GARY WILKEN, bill sponsor, read the sponsor statement
into the record:
Senate Concurrent Resolution 12 requests the Local
Boundary Commission (LBC) to consider borough
incorporation for four areas of the state: Upper
Tanana Basin Model Borough, Copper River Basin Model
Borough, Glacier Bay Model Borough, and Chatham Region
Model Borough, These four areas of the state were
recently identified in a February 2003 report by the
LBC, Unorganized Areas of Alaska that Meet Borough
Incorporation Standards, as meeting the existing
standards for borough incorporation.
Although the aforementioned model boroughs are named
in the recent LBC report as having the fiscal and
administrative capacity to operate borough
governments, the majority of the residents do not live
in home rule and first class cities. As residents of
the unorganized borough, these Alaskans are not
required to financially support their local school
system. This resolution recognizes this fact and
establishes a procedure to determine if the residents
of the four areas have the ability to contribute to
their local school districts.
SCR 12 requests the LBC to review these areas in depth
and make a recommendation for borough incorporation
for each of the model boroughs that is determined to
have met the applicable borough incorporation
standards. The exact details regarding the
establishment of each particular recommended borough
would be included in each legislative review proposal
as submitted by the LBC. Each proposed borough
incorporation would be adopted unless the legislature
disapproved the recommendation within 45 legislative
days.
SENATOR WILKEN advised the report prepared by the LBC is the
basis upon which SCR 12 is founded. It identifies seven areas
that would have the capacity to support local government. All
seven are within the Unorganized Borough. SCR 12 identifies four
of those seven that have support of local schools as a common
thread. The three that aren't addressed are first class or home
rule cities that currently support their local schools.
He noted the handout titled "Profile of the Unorganized Borough"
and reviewed four of the 14 points.
· Created in 1961 as an instrumentality of the State of
Alaska
· Encompasses 11 census areas
· Residents total 13 percent of Alaska's population -
82,809 residents
· Includes 37 of Alaska's 53 school districts (70 percent
of all school districts)
Often the LBC efforts are viewed as arbitrary and punitive. He
pointed to the table that identifies the 11 different standards
for borough incorporation. Included are the citations that
provide the authority on behalf of the state. [See bill packet.]
SENATOR WILKEN noted organized Alaska would contribute $254
million before they get any state aid. Of that $120,500 million
will be distributed to local REAAs that don't contribute
anything to local schools. He suggested there are areas of the
state that could be asked to support some level of local
government and support their local schools. Wage statistics in
the REAA indicate 16,541 people earned an average wage of
$25,934 per person.
Every year the LBC asks the Legislature for relief to remove
some of the disincentives associated with becoming organized. He
said,
The best government is the government closest to the
people and there are areas of our state that are being
called upon to contribute to help with education....
Those areas of the state that are able to support
their schools to a level that the state mandates, the
four mil limit...When people sit down to write a check
every month or every year for their schools, they
start to care a little more about what happens in the
little red school house. I think that's almost as
important an issue, maybe even more so than the money
issue itself.
SENATOR GARY STEVENS referred to the REAA Wage spreadsheet and
asked what A through Q represented.
SENATOR WILKEN replied those were the REAAs and they're grouped
by census areas.
SENATOR GARY STEVENS asked if there was some way to identify the
four areas.
SENATOR WILKEN said he was sure they were on the list, but he
hadn't identified them. He noted section three in the LBC report
speaks to the earned wages as an economic capacity to support
government.
SENATOR GARY STEVENS commented it would take some research to
identify any one of the four model boroughs to determine the
average wage per employee.
SENATOR WILKEN admitted he had another table to cross-reference
the names.
SENATOR ELTON referred to the REAA wage spreadsheet and asked if
it included resident workers or all workers.
SENATOR WILKEN replied it included all workers. The check
follows the person, so the check is reported where the
employment takes place.
SENATOR ELTON referred to the third resolve on page 3, line 23.
He asked how the LBC would work with area residents on issues
regarding boundaries, assembly composition and different taxes.
He questioned whether the LBC would make recommendations to the
Legislature or would that information come from the communities
through the LBC and on to the Legislature.
SENATOR WILKEN said,
The LBC would bring the recommendation to the
Legislature and the Legislature would deny or
disapprove the recommendation. What I envision what
will happen is that the LBC, I would hope, would say,
'Well, I think area X should have review.' So they'll
go through the review process and....they would look
at the 11 standards and....it's going to be a six or a
12 month period that they would work with the people
to identify per those 11 standards the proper form and
funding and organization of that proposed government.
So it would be in concert and then it would come to
the Legislature.
There are ways to pick and choose the different powers that are
desired as a government. The powers could be minimal or "full
blown borough powers." He added his only request would be that
there would be some component for education funding.
SENATOR ELTON acknowledged his question might not have been
precise. He suggested using assembly composition and
apportionment as an example. In his community there are some at
large seats and others that are apportioned by different parts
of the borough. He asked if the LBC would go to the Legislature
with recommendations for assembly composition and apportionment
and the Legislature would then decide whether to follow the
recommendations or not. He opined it would be better to leave
those decisions to the people who would be representing
themselves rather than to the LBC and the Legislature.
SENATOR WILKEN said he wasn't sure he knew those details. He
didn't know what the LBC would recommend but it would certainly
include the qualifications of how the 11 standards would be met.
SENATOR GARY STEVENS asked if consolidation into an established
borough was a possibility for any of the four.
SENATOR WILKEN didn't believe so.
SENATOR ROBIN TAYLOR said the spreadsheets don't reflect PL874
money. [Federal impact aid payments made to school districts in
lieu of local property taxes lost because students live on non-
taxable federal property or parents work on non-taxable federal
land.] If the state assessor hasn't done assessments in the
unorganized area, it's difficult to determine what the tax
values might be and therefore, it's not known how much the PL874
money would contribute to fulfilling the 4 mil standard. For the
larger communities with large military installations it is
likely to amount to a mil or two. Using the Glacier Bay model
borough he said he'd like to know how much PL874 money comes in
because of Glacier Bay National Park.
He said Juneau took Greens Creek mine and he doesn't know that
they have a specific representative on the Assembly, but they
probably should. He could agree with the Glacier Bay model
borough if they could take Greens Creek back. The point is that
PL874 money should be addressed.
SENATOR WILKEN said PL874 money isn't counted as local
contributions. The Federal Director of the Impact Aid Program
announced on 3/29/00 that,
.... A state may consider all local resources funds
received under this title...Only in proportion to the
share that local tax revenues covered under a state
equalization program are of total local tax revenues.
All but a ten percent paperwork payment flows right on by the
Unorganized Borough into the general fund. It then goes down
through the foundation formula and everyone gets a bit that way.
SENATOR TAYLOR said that's what he meant. Whether organized or
unorganized, there is a funding mechanism and if they organize
they benefit because they pick up 10 percent they don't have to
account for under the formula. Whether they form a borough or
not, the area [federal land] is still the one that is
contributing toward education because the money flows to the
state from the federal government in lieu of local property
taxes.
CHAIR WAGONER asked if he had population statistics for the
areas as well.
SENATOR WILKEN replied the information was in section three of
the LBC report.
SENATOR TAYLOR reported the 2000 census indicated Chatham had
1,354 people and Glacier Bay had 1,739.
SENATOR WILKEN added each area would have to have at least two
communities and a population of at least 1,000.
SENATOR GEORGIANNA LINCOLN advised she wouldn't ask all the
questions she had because she knew there were many people
waiting to testify, but she wanted to note the reports discussed
had old data. Even the wage information is misleading because it
doesn't separate money that stays in the proposed boroughs.
There's a lot of seasonal work in the fishing and timber
industries and that isn't reflected. Some of the villages in the
model borough areas don't report their unemployment and they
don't have unemployment benefits so that's not shown as an
accurate number. Additionally, it clearly states that PL874
impact aid provides funds to school districts for children of
parents living and/or working on federal land in lieu of local
tax revenues. Ninety percent of those eligible funds are used in
the calculation of state aid.
SENATOR WILKEN said she was taking the information out of
context. The report uses the date of the information to show two
things: First, it shows that there's a basis for the discussion
and it's been around for some time. The conclusions are drawn
from data from the late 1990s and early 2000. It's not meant to
be completely accurate; it's just to support the suggestion that
perhaps these areas should go under investigation, with the help
of the people that live there, to come up with the best
government. He said the report is based on the best information
available.
SENATOR ELTON wanted everyone to be clear that Greens Creek
proposed they become part of the Juneau Borough.
DARROLL HARGRAVES, Chair of the LBC, briefly stated the
Legislature enacted a law last session that directed the LBC to
determine which areas of the Unorganized Borough qualified for
incorporation. The report, Unorganized areas of Alaska that Meet
Borough Incorporation Standards, dated February 2003 is
available in the committee file.
SENATOR ELTON repeated his question regarding the role of the
LBC in determining assembly composition, apportionment, the
proposed operating budget and the type of taxes levied for the
model boroughs. He asked how the LBC would make the decisions
that would lead to recommendations particularly in light of the
process in which the commission makes a presentation to the
Legislature and it's up to them to reject. If there is no
rejection, the recommendation moves forward.
MR. HARGRAVES replied LBC staff might be available to respond,
but there is precedent for organization to take place under
certain stipulations.
SENATOR ELTON said he would have a follow up conversation with
staff on those issues.
SENATOR LINCOLN asked if the LBC was following just the four
model boroughs or all seven.
MR. HARGRAVES advised they take no part regarding prioritizing
the seven areas for organization.
There were no further questions.
KATHIE WASSERMAN from Pelican spoke from the perspective of a
former LBC member and pointed to the flaws in the current
process for borough formation. See the STATEMENT OF VIEWS ON
BOUNDARY FORMATION IN ALASKA in the committee file from the
4/9/03 hearing.
She noted anyone of the four areas might have difficulty
financially supporting a borough, which raises the question of
whether the LBC would be in the position to deny a petition from
one of those four areas thus making the entire system look more
flawed than it does currently.
CHAIR WAGONER asked Ms. Wasserman to send her testimony to his
office because the first part of didn't come through.
MS. WASSERMAN agreed to do so and said the first part pointed
out that government was higher in the four highlighted model
boroughs due to large expanses of water and land. [See bill file
for full testimony.]
BOB WARD from Skagway testified both the Model Borough
Boundaries Act and Standards are in need of complete revision to
reflect changes that have occurred since the act was adopted.
KEITH BETTRIDGE from the Hoonah City Administrator's office
testified the City of Hoonah is investing a lot of resources
with reference to the borough formation and study. At this point
they asked the state to hold off on mandatory formation until
they complete the process.
CARL CROSMAN from Kenny Lake [Copper River Basin] noted the
report on the last legislative conference came from a survey
that was mailed and all that proves is that the people who
answered the survey have mailboxes; it doesn't prove they live
there. He can't imagine anyone inviting someone from the borough
into their home and showing them how much their house should be
worth and bragging about how much money they make. He asked if
residents came up with a plan to fund their school, whether that
would address the legislative concern.
SIDE B
2:30 pm
TERRY KENNEDY from Tenakee reported she had lots to say, but she
would be brief and state she wasn't in favor of mandatory
borough formation. It would create a financial hardship for the
residents. The state receives 90 percent of the PL874 federal
impact aid for schools and the Chatham School District that she
is in received just ten percent. From her perspective, she
couldn't see where the state would get more money from taxing
the model boroughs than they're already getting from the federal
impact aid.
She noted the community only received 24 hours notice this bill
would be heard and public testimony taken. There would probably
be more people testifying that day if they had more notice.
CHAIR WAGONER advised the meeting was noticed on Saturday, which
is far more than 24 hours. He asked her to send additional
testimony to his office.
ROGER LEWIS from Tenakee stated the community has had a borough
formation committee for several years and the consensus is clear
that they see nothing to be gained by forming a borough in their
area and, in fact, something may be lost. They are not convinced
the areas under consideration have anything in common; they have
no transportation links, little communication between
communities, and are separated by great distances. It's
difficult to see how Tenakee would fit into any of the criteria
for a model borough at any time. If they were mandated to form a
borough, they would like to form a third class borough so they
could maintain control over their own planning and zoning.
SENATOR TAYLOR said the amount of PL874 money was probably
equivalent to one mil for that area and all other school
districts except Barrow are required to put up a minimum of four
mils. He asked how many children were currently enrolled in the
school.
MS. KENNEDY informed him there were 11 children currently
enrolled in the Tenakee school.
SENATOR TAYLOR remarked that was close to the minimum to keep
the school open.
GALEN ATWATER from Meyers Lake Roadhouse, 170 Richardson
Highway, reported he was involved when Eagle River tried to
secede from the Anchorage Borough. He moved away from that area
to get away from a borough and is faced with being in one again.
There's no need to hurry the process until they get some type of
tax base.
DANIEL BOONE from Chitina spoke in opposition to SCR 12. In his
view, the entire Copper Basin could not support a borough.
Unemployment in this area is higher than reported and the
figures used in the report are incorrect.
SENATOR LINCOLN questioned the figures used in the February 2003
Alaska Local Boundary Commission report. According to the
report, Chitina had a population of 42 in 1980 and 49 in 1990
and 123 people in 2000. She asked if the data was accurate.
MR. BOONE thought the 2000 population figure probably included
everyone from Strelna to Lower Tonsina and the unemployment is
around 95 percent.
SENATOR LINCOLN wasn't sure how many of the unemployed residents
apply for unemployment benefits and asked if that was being
reported.
MR. BOONE replied it was not.
ALLEN MINISH from Chitina testified in opposition to SCR 12. He
has been a property owner in the area for many years and just
recently became a full time resident. He spoke against formation
of this model borough because it would be just another form of
government created for educational purposes. He was also against
all property owners not being treated the same way if in fact
non-natives were taxed and natives were not taxed.
CHAIR WAGONER advised native land would be taxed if it was
subdivided or developed.
MR. MINISH thought the number of individuals supporting the tax
base would be disproportionate compared to those benefiting from
the tax base.
That legislative information office didn't receive copies of the
bill and he asked that the information be sent.
CHAIR WAGONER said they would get them the material as quickly
as possible and the LBC report was available online.
PETER JACK SR. from Angoon testified in opposition to SCR 12.
Several years ago the community investigated forming a borough
and determined they had little to gain. The unemployment rate is
very high in the Angoon area. Most of the employment comes from
fishing and that industry is seasonal and no longer robust.
He stated he heard about this meeting just today.
SENATOR GARY STEVENS asked how he suggests paying for education
in Angoon.
MR. JACK SR. replied that was a good question and if they could
think of a good way they would already be doing it themselves.
SENATOR TAYLOR remarked Angoon looked at forming a borough with
Greens Creek in the tax base. He thought that review was the
catalyst for Greens Creek to ask Juneau to annex them in the
hope that the tax rate would be lower. That's why he brought up
the point earlier regarding who should be taxing the facility.
FLOYD JIM from Angoon testified in opposition to SCR 12. Angoon
is the only community in the Admiralty Island National Monument
and employment opportunities are few. To reach the 1,000 person
minimum for borough formation it would be necessary to include a
number of small communities that are separated by large expanses
of water, which is ridiculous.
SENATOR LINCOLN asked Angoon and others testifying to be aware
that not everyone feels that the rural areas aren't paying their
way. In Angoon a raw fish tax is paid and although it may not go
directly to education, any employment in the villages
contributes to help pay the way for the state. She is one who
feels the rural areas are paying every bit they can.
DENNY K WEATHERS from Prince William Sound said the meeting was
originally noticed as testimony by invitation only and they
learned differently just the day before. She read a statement in
opposition to SCR 12. During the last published LBC hearing she
testified that the information on Cordova was incorrect. She
requested that the information be corrected and it was not. The
Cordova data comes from a time when the economy was doing well,
which is definitely not the case any longer. [See bill file for
full testimony.
LAMAR COTTEN from the City of Delta Junction testified he is
currently working on a regional government option study for the
Delta/Greely REAA, which is half of the Upper Tanana model
boundary. He hopes it is understood the LBC could change the
boundaries of a model borough. They would like the LBC to look
at the Delta/Fort Greely REAA as a separate area from the
Gateway REAA.
ROBERT LEE a Delta Junction resident spoke in opposition to SCR
12. He would like to see less government rather than more.
PATRICK DALTON from Delta Junction spoke in opposition to SCR
12. He pointed out this is mostly a group of Senators from
organized boroughs imposing a borough on an unorganized area.
Areas will organize when they are ready, which would be a more
just form of government.
SENATOR LINCOLN asked Mr. Cotton if the regional study he
referred to included Big Delta, Delta Junction, Deltana and Fort
Greely.
MR. COTTEN said it did.
SENATOR LINCOLN observed the population base for the four
accounted for a bit over half of the 6,300 proposed for the
Upper Tanana Basin.
MR. COTTEN replied that's his understanding.
GLEN MARUNDE from Tok testified in opposition to SCR 12. He made
the point that city government is the most proper choice for
government in small communities in unorganized Alaska. There are
145 cities in Alaska and 96 of them are in the unorganized
borough. These are organized communities with city charters.
Starting government at the city level is logical and that is the
way it has been done across the nation since the beginning.
Traditionally, the LBC has operated from the local community up
to meet the needs of those ready and willing to govern
themselves. He emphasized the LBC is not under the control of
the Legislature; it is specifically under the control of the
Executive Branch. He asked Mr. Hargraves whether the LBC
actually was independent.
ROSLYN ISAAC from Tanacross represented a number of small
villages in the area and spoke in opposition to SCR 12.
Unemployment is high in this area and supporting a borough
government is economically unfeasible at this time. They, too,
took issue with the validity of the data used in the report.
SY NEELEY from Glennallen spoke as a member of the LBC from the
1960s. According to his calculations, the state is receiving
more PL874 money than it would from taxes if a borough were
formed. If borough formation does move forward, he would like a
spreadsheet to be published to show the income, where it comes
from and what the expenditures would be to operate a borough.
The valley residents could then evaluate whether or not they
could afford to support a borough.
SENATOR LINCOLN asked whether the LBC intent in the 1960s was
for boroughs to be formed in all areas of the state.
MR. NEELEY said yes, then outlined the process for drawing
boundaries.
SENATOR LINCOLN questioned whether they anticipated mandatory
borough formation or were communities expected to step forward
on their own.
MR. NEELEY remembered it was to be left up to the communities
and originally there were 13 or 14 boroughs in the entire state.
TAPE 03-15 SIDE A
CHAIR WAGONER announced SCR 12 would not move from committee
that day. There would be one more chance for testimony and
discussion on Friday. He acknowledged the notice was
misunderstood and a few more people might want to testify.
ALBERT SHAW from Juneau testified he was part of the Juneau City
Council and helped draw the Juneau boundaries. He said he was
under the impression the rest of the state would be organized.
He said he would have taken more area if he'd been given the
opportunity.
He said, "If, because of the resolution and new boroughs are
formed, it appears an area should be added to an existing
borough, the LBC is encouraged to do so."
SENATOR TAYLOR asked if he agreed with Mr. Cotten that the LBC
should be able to consider taking in parts of existing boroughs
if necessary.
MR. SHAW replied borough lines should be logical.
JON BOLLING, Craig City Administrator and Chair of the Prince of
Wales Community Advisory Council (POWCAC), said he didn't come
to speak for or against the resolution. He came to ask that a
specific analysis be done as part of the LBC work. Prince of
Wales communities have followed this matter closely since the
Legislature tasked the LBC with preparing the report.
He pointed out there is an important analysis missing from the
February 2003 report and he would like it to be included in any
subsequent work authorized by the resolution. That is that the
Timber Receipts Program and PILT (Payment in Lieu of Taxes)
payments to municipalities in the Unorganized Borough were based
on the amount of acreage in the Unorganized Borough. If the
Chatham and Glacier Bay Boroughs were formed, Craig and other
communities in the Unorganized Borough in Southeast that have no
school districts would see significant reductions in those
payments. For example, the timber receipt funds paid to Craig
for education amounted to $800,000, which is twice the formula
equivalent. If any other borough were formed in Southeast, they
would all be negatively impacted financially by the change. He
said he would like to see that analysis accounted for in any
subsequent report issued by the LBC.
SENATOR TAYLOR asked if the timber receipt payments alone were
twice the required 4-mil local effort for Craig.
MR. BOLLING replied the timber receipts Craig received last year
were approximately twice the formula equivalent.
SENATOR TAYLOR remarked that would be equivalent to
approximately 8 mils. He asked if that money was put toward
education.
MR. BOLLING said the law requires the entire amount to go to
education.
SENATOR TAYLOR pointed out the money could also be used for
roads.
MR. BOLLING said there's a second fund for roads and Craig
received between $30,000 and $40,000 as the roads component for
the timber receipts money.
SENATOR TAYLOR asked what the PILT payments were.
MR. BOLLING replied they were approximately $170,000.
SENATOR TAYLOR said that's roughly $1 million that went to
education.
MR. BOLLING clarified the PILT payments went into general fund
operations. Just the $800,000 in timber receipts to Craig that
were directly earmarked for education was delivered to the
school.
SENATOR TAYLOR asked if he was referring to PL874 money.
MR. BOLLING replied it was a different program.
SENATOR TAYLOR remarked Craig got PL874 money too.
MR. BOLLING said that was correct, that money goes straight to
the district.
SENATOR TAYLOR stated the total contribution from Craig in the
form of PILT or Timber Receipts taxes was probably twice the
amount they would be paying if they organized and formed a
borough.
MR. BOLLING agreed the community now supports their local school
in excess of the required 4 mils.
SENATOR TAYLOR said that was his point. If a borough were
formed, they might find themselves restricted to contributing
only $400,000 to $500,000 for education.
MR. BOLLING acknowledged he hadn't calculated what the Timber
Receipts payments to the Prince of Wales borough would be. He
did know that if areas in Southeast Alaska that are currently in
the Unorganized Borough became organized, that would have a
significant financial impact on the remaining incorporated
communities that have school districts.
SENATOR TAYLOR stated:
There is a fixed amount of money coming in that's
currently divided up on acreage so if somebody takes
some of the acreage you're currently relying upon they
get a bigger piece out of that fixed pool of money...I
believe there are areas of the state where when you
combine PL874 monies, timber receipt monies and PILT
monies that land base that would become the new
borough is actually, today, generating more in the
form of receipts toward education than if it were to
go out and tax all of the homeowners say in Craig at 4
mils.
And then I don't know what happens - I'm going to have
to talk with Eddy Jeans - at that point with the state
cap that we have placed on organized communities for
the amount of money they can contribute toward
education. I believe you would be up against the cap
if not in excess of it and once you go in excess of
the cap, you then have to pay back to the state, more
money than you've actually received or paid above the
cap...You're receiving monies based on a federal
formula, because it's not for cutting trees, it's a
formula for not cutting trees. I don't know what
happens to those funds if you cannot dedicate them to
education as the federal law requires...What's the
penalty going to be on your school district for paying
too much toward education?
MR. BOLLING advised that the City of Craig contributes closer to
the cap than the floor now.
CHAIR WAGONER held the bill in committee.
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