Legislature(2003 - 2004)
05/09/2003 01:55 PM Senate CRA
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SCR 12-BOROUGH INCORPORATION: UNORG AREAS
SENATOR GARY WILKEN, bill sponsor, supplied the committee
members with the information that was requested during the
5/7/03 hearing. Mary Jackson distributed REAA wage and
employment information and a chart outlining PL874 Federal
Impact Aid Dollars. He noted the letter from the Impact Aid
Program Director that agreed with his assertion that PL874 money
in the unorganized area is not local contribution.
CHAIR WAGONER opened public testimony.
JONEAL HICKS from Gakona testified on behalf of the Christochina
Tribal Council and its membership in opposition to SCR 12. He
noted 98 percent of those who testified during the previous
hearing were opposed to formation of a borough in the four
proposed areas. They took exception to the data in the LBC
report. They realize they will eventually become part of a
borough, but they would like to choose their government when the
time comes.
SENATOR GEORGIANNA LINCOLN asked him to send a copy of his
testimony to the committee. She asked how he responds to people
that said they would never make the decision to form a borough.
MR. HICKS replied they have been discussing borough formation
for at least two years and have been working with the economic
development council in the Copper River area. They aren't
avoiding borough formation, they're simply moving deliberately.
SENATOR GARY STEVENS asked if he believes they have an
obligation to support the local school district and how they
might do that.
MR. HICKS said at some point there would be a borough government
in the area and it would fund the school.
WAYNE MacMURRAY testified Slana residents were opposed to the
bill.
ALAN LeMASTER from Gakona thought the report data was inaccurate
and asked how the LBC determines an area could afford to become
a borough.
SENATOR LINCOLN asked him how this bill would affect tourism in
his area.
MR. LeMASTER said it would depend on what happened as a result
of being a borough. He noted tourism, in general, is against
targeted taxes.
CHARLIE BROKER from Tok said he agreed with the previous
testimony. Boroughs would come in due time; the residents would
figure it out. He expressed a preference for Valdez as a borough
headquarters for Tok.
CHRIS MARSHAL from Tok testified there isn't steady employment
in the area and therefore, there is no ability to support a
borough government at this time. Senator Lincoln and
Representative Morgan represent the area well and a different
organization isn't desired. There is no need for another level
of bureaucracy.
SENATOR GARY STEVENS asked if he felt he didn't need to support
the local school system.
MR. MARSHAL replied he does support the school system by living
in the community and running a small business that caters to the
tourist trade. Area residents are resource developers and they
support the state to a greater degree than urban residents. He
said t's true the residents don't have dollars to support the
school, but they support the state and take exception to anyone
that says they don't.
SENATOR GARY STEVENS clarified his question was how do residents
support the school system.
MR. MARSHAL said residents support tourism and mineral
extraction, but they don't have dollars to contribute.
SENATOR LINCOLN explained support to tourism and resource
development all helps to support the general fund. In addition,
they pay through the federal dollars that are allocated to
assist the areas that have federal land and that money supports
education.
Naidine Johnson said she owns a business on the Denali Highway.
Residents receive no help in maintaining services or even the
road, the economy has suffered since September 11 and it's a bad
time to impose a borough on area residents.
KAREN ELDRIDGE from Paxson said they don't have a school so
there isn't one to support. Few people live in the area and she
can't understand why anyone would consider organizing them into
a borough. More money would be generated if the state sold land
in the area than if a borough was formed and taxes collected.
MARVIN RASSMUSSEN from Delta Junction expressed opposition to
SJR 12. The decision to form a borough should be left to the
people. They contribute to area schools with PL874 money and
PILT funds. He said the state is responsible for education
anyway. The pipeline is already taxed and adding another layer
of bureaucracy wouldn't help anyone. If he wanted to pay taxes
and live with an enormous bureaucracy, he could move to North
Pole or Fairbanks.
DENNY KAY WEATHERS from Prince William Sound testified against
the legislation at the previous hearing. She pointed out Alaska
is a diverse state and nothing is equal other than what is
specified in the constitution. She made the point that the data
used in the LBC report is inaccurate and misleading.
FRED HEINZ from Gakona spoke in opposition to SJR 12. He noted
the LBC report excluded the oil and gas receipts and if they
were to form a borough that data would be important. For the
proposed borough in the Copper River Basin he heard they get
$6.1 million from the pipeline and the school district costs
just $5.1 million to run so there's plenty of money to run the
school system. The constitution framers knew it would take a lot
of people to support a borough and they simply don't have that
population in the Copper River Basin.
JANE BROWN from Gakona said borough incorporation would be
adopted unless the Legislature disapproved the recommendation
within 45 days. The issue of boroughs, both organized and
unorganized, is a state constitutional right. If the sponsor
wants to force the issue, then he should do it through the legal
process of a bill. She took issue with the accuracy of the data
the LBC used.
BETTY BOZNAK from Gakona said it's not economically feasible to
the affected communities. Concerned residents address education
needs by volunteering their time and expertise. Organization
will come, but forcing the issue deprives residents of the
stepping stone process of developing government.
MARK HEINZ from Gakona spoke in opposition to SJR 12 pointing
out that the state or federal government typically supports most
of the educational needs in any area. The Copper River Basin has
just 3,100 residents and they couldn't possibly support a local
government. There is need for additional industry not more
government.
There was no further public testimony.
SENATOR LINCOLN remarked she was trying to understand how the
sponsor selected the four areas for closer scrutiny. She
reviewed the data used in the report and noted those four areas
have high poverty rates, high unemployment, and large numbers of
adults that are not working. Her constituents always tell her
they want quality education, an improved economy and the
opportunity to work.
With regard to taxing the pipeline more to fund education, she
asked how long it would be before that burden would become
problematic. Federal money does come into those areas to pay for
education, but there will never be the equality of payment that
the sponsor is trying to achieve until the residents feel they
can form and support a borough.
SENATOR WILKEN suggested the state is better off because 83
percent of the state was placed into mandatory boroughs in 1961.
He pointed to the 11 standards that a borough must meet and said
the LBC would go to those four areas and do an analysis to
determine whether or not they could support local government.
One size certainly doesn't fill all. For instance, the
Delta/Greeley area has a mine, a missile defense system, a
pipeline, and tourism. That is four tax bases and that wealth
should be spread to the Canadian border. Without a borough the
people of Delta would hoard that wealth to their benefit. This
effort isn't about imposing government on anybody; it's about
figuring out how to help people develop their area so that a
generation from now, they could support government and pay their
fair share. People will pay attention to what is happening in
local schools when they support them with their checkbooks.
SIDE B
2:45 pm
SENATOR LINCOLN remarked Skagway wants to form a borough, but
their application was denied. She pointed to Denali and North
Slope as examples of areas that successfully formed borough
government when they were ready. The mine at Delta is still in
the development stage and this resolution discourages that type
of new economic development rather than encouraging it. She
asked again why the four areas were selected.
SENATOR WILKEN replied the common thread is they don't support
their local schools. The other three in the Unorganized Borough
have first class cities that are supporting local education.
Eighty four percent of the people in Alaska were put into
boroughs in 1961 and three percent organized voluntarily. He
suggested the mine at Delta will bring the same benefits to the
area as Fort Knox has to Fairbanks and Greens Creek has to
Juneau. Certainly, the mine in Delta couldn't expect to develop
those resources and not pay for the services they use and share
that wealth with the people of Delta. If that project hangs by
the thread that they can't pay their fair share, then it
shouldn't go forward.
SENATOR ELTON asked if the LBC needed a request from the
Legislature or the communities to go forward with this kind of
study.
SENATOR WILKEN said they don't need a request. The LBC is
established in the constitution and stands at arms length from
the Legislature. No one, including the Legislature, can tell the
LBC to do anything and that's why this is in the form of a
resolution rather than statute.
SENATOR ELTON asked and received confirmation that this is only
a suggestion rather than a mandate and the LBC doesn't have to
do anything as a result of SJR 12.
He asked if he remembered correctly that the sponsor brought
this issue before the Senate previously, but it didn't pass the
House.
SENATOR WILKEN said that was correct, previously the issue was
held up in a House committee.
SENATOR ELTON asked if there were things the Legislature could
do to get to the issues identified by the LBC to talk about
incentives, which would be the carrot approach rather than the
stick.
SENATOR WILKEN replied the LBC addresses the disincentives to
borough formation in their annual report to the Legislature and
they have asked the Legislature to help.
SENATOR ELTON asked if anyone had looked to see what the
pipeline offset might be for the state as those communities
begin to tax pipeline property.
SENATOR WILKEN said there were rough estimates and it's
currently taxed at $240 million a year. The North Slope Borough
takes about $190 million and Anchorage, Valdez and Fairbanks
pick up the rest. The $30 million and $35 million that is left
over goes into the general fund. These aren't huge amounts of
money and it may be that other areas of the tax base could be
used so as to not touch the pipeline. If they touch the
pipeline, they must tax themselves at the same rate.
In 1996 the LBC conducted a Delta/Greeley analysis and he
thought it was 3 or $4 million. Standard number three asks
whether it is in the best interest of the state to organize so
it would be a Legislative decision as to whether that $3 million
should be forfeited from the general fund to provide benefit to
that area under the LBC plan.
CHAIR WAGONER remarked the overwhelming testimony has been
against paying any taxes. Although he hesitates to say everyone
should pay equal taxes, fair is fair, and the question is
whether residents can, in some way, support the schools.
Currently, schools in those areas are receiving 100 percent
support and contributing nothing.
SENATOR WILKEN replied everyone in the room pays plenty of
taxes, but they receive services in return. The common thread is
that all the areas have school systems and everyone wants those
school systems to be funded equally. That's the goal. The state
requires a 4 mil payment before they pay anything toward
education and those with the ability to pay the 4-mils to
support the schools should do so.
CHAIR WAGONER said that's based on property value.
SENATOR WILKEN agreed.
SENATOR ELTON referred to the wages spreadsheet and asked if the
data was available to determine how many of the jobs are held by
residents. That data would be necessary to assess how much stays
in a particular region. For example, Juneau benefits from nearby
unorganized areas and certainly takes some of the jobs.
SENATOR WILKEN was sure the information was available, but he
didn't break it down that way. He used the information to show
there was some wealth creation opportunity in some of the areas.
Each person in organized areas paid, on average, $1,090 for
education last year. If everyone in the Unorganized Borough was
assessed a 4.5 percent income tax, that would amount to about
the same, but that ignores the question and isn't really
equitable.
SENATOR GARY STEVENS asked whether a borough could be
established with only education powers if that was desired.
SENATOR WILKEN replied the lowest class borough requires
education, planning, and zoning powers.
SENATOR GARY STEVENS asked him to go through the procedure
that's expected with regard to the study.
SENATOR WILKEN said the LBC would identify an area, go to the
area and refine the data that was begun in the February 2003
report. An area would have to qualify in each one of the eleven
standards and if an area failed, it wouldn't become a borough at
that time. The state might then look to see how it could help an
area address the areas of failure so government would be
possible at some time in the future.
SENATOR ELTON thought the easiest way to do this would be to
call the LBC and ask them to do it rather than going through the
Legislature. He asked if the LBC was reluctant to act without
instruction from the Legislature.
SENATOR WILKEN said if he were a member of the LBC, he would
want to know, beforehand, whether or not the final arbiter was
going to reject the work.
SENATOR GARY STEVENS asked if the Mandatory Borough Act of 1961
didn't specified which areas would become boroughs and that
there isn't a current mandate.
SENATOR WILKEN outlined borough history.
SENATOR GARY STEVENS restated his question: Is there a borough
act in effect now?
SENATOR WILKEN said there was not; the Mandatory Borough Act was
a single piece of legislation.
There were no further questions.
CHAIR WAGONER asked for the pleasure of the committee.
SENATOR GARY STEVENS made a motion to move SCR 12 from committee
with individual recommendations.
SENATOR LINCOLN objected.
CHAIR WAGONER asked for a roll call. Senator Gary Stevens and
Chair Wagoner voted yea and Senators Lincoln and Elton voted
nay. The bill failed to move from committee.
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