Legislature(2001 - 2002)

04/29/2002 04:22 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ 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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