Legislature(2001 - 2002)
04/29/2002 04:22 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 359 "An Act relating to organization grants for mergers, consolidations, or unifications involving third class boroughs." This was the first hearing for this bill in the Senate Finance Committee. MARY JACKSON, Staff to Senator John Torgerson, Chair of the Senate Community and Regional Affairs Committee, which sponsored this bill, testified. She spoke of two communities contemplating a consolidation and informed that a review of statute revealed that the proposed consolidation is not eligible to receive organizational grants. Ms. Jackson stated this legislation would permit the receipt of the organizational grants, with $200,000 provided in the first fiscal year and an additional $200,000 in the second year. She compared this to the amounts granted to other entities under existing statute of $300,000 the first fiscal year, $200,000 the second fiscal year and $100,000 the third fiscal year. Senator Leman commented that he supported the efforts of the City of Haines and the Haines Borough to consolidate, however, he was unclear why the State of Alaska should pay $400,000 for this process. He asked what activities must be funded, and whether these expenditures were incurred by the State when other local governments were consolidated, such as the City and Borough of Juneau, the Anchorage Municipality, and the City and Borough of Sitka, etc. He understood the need for the State to cover certain expenses for areas that were not previously organized to encourage them to organize. Ms. Jackson answered this legislation is specific for third-class boroughs and that Haines is the only area of the State with this form of government. Ms. Jackson read from existing statute as follows. Sec. 29.05.190. Organization grants to boroughs and unified municipalities. (a) For the purpose of defraying the cost of transition to borough government and to provide for interim governmental operations, each borough or unified municipality incorporated after December 31, 1985, is entitled to organization grants as follows: … Senator Leman asserted there is no information included in the backup information for this legislation indicating the necessity for these expenditures in the Haines situation. Ms. Jackson stated that the Senate Community and Regional Affairs Committee determined it is important that the organizational grants be offered to third-class boroughs, although in a lesser amount than awarded to unorganized areas. Senator Leman asked if this question arose in the Senate Community and Regional Affairs Committee. Ms. Jackson affirmed the question was posed and it was determined that some amount should be provided. She expressed that budget constraints are the "business" of the Senate Finance Committee. Senator Leman supported efforts to encourage the organizing of unorganized communities. Senator Leman reiterated the need to understand the reason for expending the State funds. He qualified the expenditure could be justifiable and necessary, but he had no information to prove this. MARCO PIGNALBERI, City Manager, City of Haines, referenced a handout titled "Outline Estimate of Costs for Consolidation" that details the anticipated costs involved in coordination [copy on file]. He spoke to expenditures made to date for such services as a consultant and legal fees to address litigation on the issue. He noted that the local governments have covered these expenses to date. Mr. Pignalberi asked and answered why the State must pay $400,000 for these expenses, asserting the question instead should be why the State does not appropriate $600,000 for these efforts because that is the amount currently authorized for newly formed boroughs. He stated that the Local Boundary Commission is unsure why the consolidation is excluded from existing statute. He surmised that in 1985, when third class boroughs were deleted from this portion of statute and the $600,000 grant provision was added, it was not anticipated that the Haines governments would consolidate. Mr. Pignalberi stated the $600,000 grant program is for the purpose of establishing first class city and borough governments. He stressed this process is "part of the constitutional fulfillment" that requires the State to work toward obtaining the least number of governmental entities and the fewest number of tax assessing entities. He asserted this has been the goal of the Haines community since 1998. He spoke of an upcoming election to determine whether the city and borough governments should be consolidated. Mr. Pignalberi noted a cost benefit to the State from this consolidation in that of one less applicant would be requesting state grant funds in the future. Mr. Pignalberi also stressed the new city and borough would provide a stronger local government. Mr. Pignalberi also pointed out a stipulation in the Alaska Administrative Code requiring that consolidations must be completed within two years. He asserted this could not be accomplished within the deadline without the services of a contracted consultant. Senator Ward asked the consequence if the State does not provide the requested $400,000 in grant funding. DAVID BLACK, Mayor, City of Haines, surmised the city would continue its efforts for consolidation. However, he cautioned that the anticipation that borough residents would incur increased costs could provide the incentive for those voters to not support consolidation. He informed of a recent election in which the question to consolidate failed by two votes. He surmised the proponents of the consolidation "are working in a very narrow margin." Senator Ward asked if the election included both city and borough residents. Mr. Black affirmed. LUCY HARRELL, Member, Haines Borough Assembly and Haines School Board testified to comments she has heard indicating that receiving funding for this transition could be the "crucial" influence to convince voters to approve the consolidation. Ms. Harrell reminded that the current Haines Borough is a third class borough and therefore its authority is limited to taxation and school operation. She stated that current activities are being conducted by the Borough assembly "in gray areas" of its authorization. As a result, she stressed, it is difficult to convince residents to run for public office, given the questionable legalities of their actions as a government. She told of the few people holding multiple offices. She asserted the intent to create a government that "represents all people in the area." Ms. Harrell spoke to the unfairness of providing grant funding for other organizational efforts while excluding the Haines government. She asserted the Haines consolidation would require both the formation of a new government and the dissolution of the existing system. Amendment #1: This amendment inserts language into the title of the bill, following "boroughs", to read as follows. An Act relating to organization grants for mergers, consolidations, or unifications involving third class boroughs; and relating to identification by the Local Boundary Commission of areas that meet the standards for borough incorporation. This amendment also adds a new bill section on page 2, following line 2, to read as follows. Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to read: REVIEW OF UNORGANIZED BOROUGH. The Local Boundary Commission shall review conditions in the unorganized borough. th By the 10 day of the First Regular Session of the Twenty- Third Alaska State Legislature, the commission shall report to the legislature the areas it has identified that meet the standards for borough incorporation and the basis for its determination, and make recommendations for legislative consideration. Senator Wilken moved for adoption. Senator Austerman objected for an explanation. Senator Wilken stated this amendment instructs the Local Boundary Commission to identify those areas where organization into a local government is feasible. He recalled past unsuccessful efforts in this matter and assured this amendment was drafted with the assistance of the chair of the Local Boundary Commission. He emphasized it is not his intent to slow the process of passage of this legislation. However, he stressed the matter requires "serious consideration" and that he did not anticipate any member of the legislature opposing the identification of "those areas that are able to help themselves." Senator Austerman commented he also did not want to hamper efforts in passage of this bill, although he wanted input from the sponsor. Senator Wilken assured that if the sponsor indicated opposition to this amendment, he would remove it at a later date. Ms. Jackson agreed Senator Torgerson has supported these efforts in the past. She qualified he could have concerns if a fiscal note were generated. Senator Hoffman commented that it is "highly probable" this amendment "drastically slow down and possibly kill this legislation." Senator Austerman asked if legislation has been introduced in the House of Representatives that addresses grant funding for the Haines government as well. Co-Chair Kelly replied such a bill does exist. Senator Austerman removed his objection to adoption of the amendment. The amendment was ADOPTED without objection. Senator Ward asked for clarification of the outline of estimated costs handout. He questioned the amount that must be spent during the first year of consolidation rather than deferred to the second year. Mr. Pignalberi stressed the need to undertake the process as quickly as possible. He stated all expenditures would not be known until the process is underway. He expressed intent to accomplish the consolidation in one year, and noted statute requires completion in two years. Senator Ward asked for an explanation of the "litigation contingency." Mr. Pignalberi told of the previous attempt for consolidation undertaken in 1998 and a subsequent lawsuit involving a utility operating within the city. He informed he has been told that those parties opposing consolidation would attempt to identify issues whereby a lawsuit could be brought to stop the efforts. He noted an on-going legal dispute relating to consolidation regarding a service area has incurred $25,000 in expenses. Senator Ward asked what would occur if this bill passed into law yet the Haines voters rejected the consolidation proposal. Mr. Pignalberi noted the Haines government would not receive the funds. However, he indicated that the efforts to consolidate would be repeated. Senator Ward questioned the manner in which the grants would be appropriated. Mr. Pignalberi explained that the funds would be appropriated for the fiscal year in which they would be expended. Mr. Pignalberi spoke to past grant appropriations for other newly incorporated boroughs and surmised that the Haines consolidation process could be completed in one year if the funds were provided immediately. He detailed the timeline of conducting the elections to consolidate and choose new assembly members. Senator Leman referenced the aforementioned handout, which he totaled at a maximum of $420,000 in grant funding. However, he pointed out the language of the legislation states "for the purposes of defraying the cost of transition." He remarked this appropriation would cover the entire identified cost, rather than just defray the cost. Mr. Pignalberi disagreed and listed expenditures the city has paid to date including consulting fees and litigation settlement costs. He stated the handout identifies "broad categories of costs here that are not meant to be detailed because we have no one available to us who has gone through this before." He noted the city's auditors have provided the estimates listed in the handout. Senator Leman stated the legislature as recently as 1994 has stated, "these grants don't apply to a borough incorporated by consolidation or to a unified municipality." He stressed the intent is for local governments to consolidate to form boroughs, and expressed the situation in the community of Haines is different. Mr. Pignalberi reiterated the purpose of the Haines effort is to fulfill the Alaska constitutional requirement to create the least number of government units and taxation jurisdictions and the most effective local government. He again referred to the Local Boundary Commission's assertion that this effort should be funded. He remarked, "It's hard to make a template" to fit "every situation around the State and fit it fairly." He pointed to efforts in the City of Skagway to form a borough government and stressed that community would be eligible to receive $600,000 in grant funding for the effort. Senator Leman agreed the grant funds would be available if the areas considered for consolidation into a borough if the Local Boundary Commission determined the efforts to be feasible. He suggested Haines, Skagway, Gustavus and Tenakee Springs could be consolidated into one borough. He did not support funding a change of the City of Skagway to become the Borough of Skagway. Mr. Pignalberi expressed he could only comment on the issue of the Haines governments. Mr. Pignalberi again spoke of the $1 to $2 million State funds that would be saved within ten years as a result of a Haines consolidation because the City of Haines would no longer exist and therefore be eligible to receive capital improvement project (CIP) grants. Ms. Harrell, commented that a third class borough is not "a borough as you understand it" but is rather a "sick dinosaur" with the intention of avoiding forming a borough government and therefore must be "put to rest". Senator Leman did not oppose this argument, but stressed that based on the information provided to the Committee, the State would provide all the transitional costs as opposed to sharing the cost with the local government. Ms. Harrell responded $400,000 would not pay all the transitional costs. She noted the borough is responsible for school operations and stressed that a third class borough is prohibited from deferring funds from school expenses to use for consolidation efforts. She listed political activities and economic development as activities the third class borough is prohibited from participation. She stated this appropriation would not pay the entire cost of consolidation, but only "a chunk". Senator Wilken moved "to report SB 359 as amended from Committee with individual recommendations and attached fiscal note." There was no objection and CS SB 359 (FIN) MOVED from Committee with a $250,000 forthcoming fiscal note from the Department of Community and Economic Development.
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