Legislature(2005 - 2006)CAPITOL 124
01/24/2006 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| Local Boundary Commission | |
| Adjourn |
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+ teleconferenced
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ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
January 24, 2006
8:07 a.m.
MEMBERS PRESENT
Representative Kurt Olson, Co-Chair
Representative Bill Thomas, Co-Chair
Representative Gabrielle LeDoux
Representative Mark Neuman
Representative Sharon Cissna
Representative Woodie Salmon
MEMBERS ABSENT
Representative Pete Kott
OTHER LEGISLATORS PRESENT
Representative John Coghill
COMMITTEE CALENDAR
OVERVIEW: LOCAL BOUNDARY COMMISSION
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DARROLL HARGRAVES, Chair
Local Boundary Commission
Wasilla, Alaska
POSITION STATEMENT: Provided an overview of the Local Boundary
Commission.
DAN BOCKHORST, Local Boundary Commission
Division of Community Advocacy
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Offered additional information regarding
the department's interaction with the LBC, and answered
questions.
ACTION NARRATIVE
CO-CHAIR BILL THOMAS called the House Community and Regional
Affairs Standing Committee meeting to order at 8:07:17 AM.
Representatives Thomas, Olson, Neuman, and Cissna were present
at the call to order. Representatives Salmon and LeDoux arrived
as the meeting was in progress. Also in attendance was
Representative Coghill.
^LOCAL BOUNDARY COMMISSION
8:07:48 AM
CO-CHAIR THOMAS announced that the only order of business would
be the overview from the Local Boundary Commission (LBC).
8:08:00 AM
DARROLL HARGRAVES, Chair, Local Boundary Commission, recalled
the LBC's report last year, which was the 50th anniversary of
the constitutional convention. The intent of last year's report
was to provide a resource for years to come. The 2006 LBC
report has been provided to each member of this committee, and
it addresses the following areas: an overview of the LBC; a
summary of the LBC's activities last year as well as pending
proposals; and a discussion of public policy issues of interest
to the LBC. Mr. Hargraves reminded the committee that the
Alaska State Constitution established the LBC in order to
objectively deal with boundaries and organization proposals and
to do so with a statewide perspective. Furthermore, the LBC is
responsible for judging proposals in areas of incorporation,
annexation, detachment, reclassification, dissolution, mergers,
and consolidation of cities and boroughs. The LBC also is
responsible for the study of local boundary issues/changes. He
pointed out that the LBC consists of five members appointed by
the governor for overlapping five-year terms. One member is
appointed from each of Alaska's four judicial districts and the
fifth member is appointed at-large and serves as the chair. He
highlighted that commission members donate their time and
receive no compensation for their service. He then mentioned
that the Department of Commerce, Community, & Economic
Development (DCCED) provides support to the LBC.
8:13:51 AM
MR. HARGRAVES moved on to Chapter 2 of the report, which
outlines the activities of the LBC, including formal or
potential proposals. In the past year, there has been
annexation by 10 city governments, among which was a formal
proceeding that the LBC affirmed annexation of 4.5 square miles
to the City of Homer. There were also the incorporation of four
unincorporated communities, among which the LBC approved, with
amendments, a proposal to incorporate a second class city to
serve the community of Naukati. There was also the
reclassification of four existing cities and annexation by three
borough governments, although no formal petitions were
considered and none are pending. The LBC also saw the
consolidation of a borough and city government. He noted that
there is a pending petition for the consolidation of the City of
Ketchikan and the Ketchikan Gateway Borough. There was also the
detachment of four boroughs. The LBC saw borough incorporation
in 11 unorganized areas, which he surmised illustrates the
considerable interest in incorporation. Currently, there is a
pending petition for borough incorporation for the Deltana
Borough.
8:16:21 AM
MR. HARGRAVES continued with Chapter 3, which summarizes the
major policy issues and concerns of particular interest to the
LBC, including the lack of adequate inducement for organization;
the lack of standards providing for the establishment of
unorganized boroughs; and funding for borough feasibility
studies. Mr. Hargraves related the LBC's pleasure with the
consideration of various legislative incentives for the
formation of organized boroughs. However, the LBC, he opined,
believes that further investigation is necessary to determine
those incentives. Among the current possibilities are HB 217,
which excludes the value of oil and gas not taxed by a
municipality and the determination of the required local
contribution to schools. The aforementioned, he highlighted,
will be of vital concern for some of the future borough
requests.
8:17:59 AM
REPRESENTATIVE NEUMAN inquired as to what the concern is related
to HB 217. He further asked if the communities that are
concerned are in relation to whether the gas line proposals are
from Prudhoe Bay to Valdez or Prudhoe Bay through Canada.
MR. HARGRAVES replied yes, those communities with a portion of
the pipeline running through it are concerned. He explained
that if the high assessed evaluation was included in the
assessed valuation of the borough, the borough couldn't afford
to organize. However, when that [high assessed valuation] is
excluded from the determination in providing the local
contribution to schools, the borough would find it feasible to
organize. Therefore, the LBC supports HB 217, he related.
MR. HARGRAVES then turned the committee's attention to SB 112,
which imposes a tax on certain individuals employed in the
unorganized borough outside of home rule and first class cities.
He related that the LBC supports SB 112. He recalled the
positive testimony from those in unorganized areas, which he
interpreted as meaning that people in these areas are receptive
to some type of tax to participate in funding their schools. He
acknowledged that there would still need to be certain
protections for individuals at the poverty level or over the
Social Security age. Still, [SB 112] would be a manner in which
to provide local funding to the schools in the unorganized
boroughs. He noted that the LBC is aware of the recent work
done by the Alaska Advisory Commission on Local Governments and
offered that the LBC will respond to any questions/concerns of
it.
8:21:35 AM
MR. HARGRAVES concluded by highlighting that the LBC continues
to support greater incentives for borough incorporation.
Therefore, it urges the legislature to make funding available to
explore borough incorporation. He acknowledged that there would
have to be controls with the aforementioned.
8:23:05 AM
DAN BOCKHORST, Local Boundary Commission, Division of Community
Advocacy, Department of Commerce, Community, & Economic
Development (DCCED), in response to Representative Neuman,
confirmed that SB 112 is the approximately $470 annual head tax
that applies only to individuals 21-65 years of age who reside
or are employed in Rural Education Attendance Areas (REAAs)
outside of home rule and first class cities and whose income
doesn't fall below federal poverty guidelines. He noted that
under SB 112, disabled veterans and individuals who are property
taxpayers elsewhere would be exempt.
8:24:05 AM
REPRESENTATIVE NEUMAN recalled that last year this committee
determined that two meetings should be held in areas to be
annexed. He opined that often after meetings for annexation,
there is media coverage that alerts people to the annexation,
and therefore a second meeting could allow those with
information from the first meeting to participate. He asked if
that approach was utilized.
MR. HARGRAVES indicated that he didn't recall that
recommendation. He related that the public information hearings
[for annexation] include public information hearings early in
the process. In fact, staff often meet with various interest
groups. After all the written testimony is in the record, the
LBC meets [at the annexation site], after which the LBC makes a
decision. He asked if Representative Neuman was suggesting that
the LBC have a second hearing.
REPRESENTATIVE NEUMAN said that HB 133 was the legislation
relating to this, which unanimously passed in the House. He
recalled that HB 133 specified that when there is an annexation,
there should be at least two meetings to discuss issues. He
recalled that HB 133 also addressed the use of the aggregate
vote requirement and proposed that [in order for annexation to
proceed] both areas involved in an annexation should vote
separately in the affirmative. The notion behind the
aforementioned is that the most populous area in an annexation
would, in an aggregate vote situation, determine the fate of the
annexation.
MR. HARGRAVES said, "That is in regulation." He noted that the
last revision of those regulations was in the early 1990s, and
therefore it's probably time to have a major revision of those.
In fact, the department has assigned staff to work with the LBC
to develop a new set of regulations. The aforementioned input
is helpful in the development of regulations.
8:30:06 AM
CO-CHAIR OLSON recalled the Homer annexation, which he
characterized as a painful process for those in the community.
He inquired as to the point at which the annexation is today.
He also inquired as to what the LBC would do differently in a
similar hostile annexation.
MR. HARGRAVES noted that there are still pending suits in that
case, and therefore he said he couldn't discuss any specifics.
He commented that sometimes the hearing process becomes a
negotiation process. In fact, there were many positives that
resulted from the hearing process with the Homer annexation.
Mr. Hargraves recalled that when the LBC went to Homer after the
court decision, he was impressed with the positive testimony and
the number of people who supported the [court's] position.
However, he acknowledged that there were a couple of people
outside of the incorporated area who were opposed to the
[court's] position.
8:32:23 AM
CO-CHAIR OLSON recalled that the original annexation was for
approximately 25 square miles, but it was finally approved for
4.5 square miles.
MR. HARGRAVES replied yes, adding that many times the hearing
process itself is a type of arbitration.
8:33:35 AM
REPRESENTATIVE LEDOUX related her understanding that in some of
the unorganized boroughs REAAs receive federal funding, and
therefore she asked if such boroughs would lose the federal
funds if they organized.
MR. HARGRAVES specified that the REAAs do receive part of their
PL874 [federal funds]. Therefore, if the REAAs organized to
become a borough school district, then more of the PL874 funds
would go directly to the community thereby reducing the amount
going to the state. In further response to Representative
LeDoux, Mr. Hargraves said the net total amount of PL874 funding
would remain the same. He explained that the PL874 funding is
earned on the basis of the populous who live on or work on
federal lands. He mentioned that there is a classification of
nonrestricted deeds on which some people live for which the
federal government will pay the taxes on those properties.
8:36:10 AM
CO-CHAIR THOMAS highlighted that the LBC's report specifies that
the total taxable property value of the Yukon Flats REAA is $340
million of which $316 million is the Trans-Alaska Pipeline
System (TAPS). If Yukon Flats formed a borough, would the
state lose that $316 million and if so, would it go to the
borough instead, he asked.
MR. HARGRAVES answered that it could under current statute.
However, the rest of the 20 mills would be collected by the
state.
CO-CHAIR THOMAS recalled that recently local municipalities were
provided the ability to discount the first $50,000 of property
value. He then inquired as to how that would work on TAPS. He
surmised that the first discount would be on the $50,000
property value of [the homes in the Yukon Flats area] and the
pipeline would still be fully taxed at 20 mills.
MR. BOCKHORST replied yes, adding that this relates to HB 217.
He specified that the only way a Yukon Flats Borough government
could benefit from TAPS would be to levy a property tax. A
report prepared by the University of Alaska graduate students
specified that roughly 93 percent of the taxable value of
property within the Yukon Flats region related to TAPS. He
explained that HB 217 would remove the ability to levy the
property tax, if the community agreed, but the required local
contribution to schools would decrease because it wouldn't be
included in the calculation.
CO-CHAIR THOMAS, noting the possible construction of a gas line
[in the Yukon Flats area], pointed out that by encouraging Yukon
Flats to become a borough, the state could lose $500 million in
revenue.
MR. HARGRAVES agreed.
MR. BOCKHORST clarified that the $500 million isn't revenue but
rather is a property tax base, and therefore 20 mills would be 2
percent of $500 million.
8:40:05 AM
MR. HARGRAVES, in response to Co-Chair Olson, specified that
there is no formal petition for the Fairbanks North Star
Borough.
MR. BOCKHORST related that in early 2005 the Fairbanks North
Star Borough expressed serious interest in exploring the merits
and prospects of annexation. In fact, the Mayor of the
Fairbanks North Star Borough indicated in published reports that
he had reached a preliminary conclusion that annexation of
territory north to the Yukon River and south to the Good Pasture
River was economically viable. However, there has been no
formal annexation proposal by the Fairbanks North Star Borough.
8:41:07 AM
REPRESENTATIVE NEUMAN recalled that last year the legislature
passed legislation giving 250,000 acres to the university system
with the intent that another 250,000 would be received from the
[federal] government. Representative Neuman related that he
viewed this as a way to help areas organize boroughs. He asked
if Mr. Hargraves viewed it similarly.
MR. HARGRAVES agreed that the lands available in the areas being
petitioned is a good inducement for incorporation. However, the
inequity lays in the lack of lands or resource rich areas in one
area versus another. Therefore, anything placing more lands
available for selection would be an incentive, he opined.
REPRESENTATIVE NEUMAN related his belief that many of the lands
that will be given to the state will have the potential for
resource development opportunities. He expressed the hope that
the lands could be utilized by communities in order to organize.
8:44:00 AM
CO-CHAIR THOMAS asked if the language for administrative
boroughs has been reviewed [by the LBC], and also asked if it
generally agrees with the intent.
MR. HARGRAVES specified that the LBC knows it exists and has
read the early language. However, he said that he hasn't seen
any subsequent revisions.
MR. BOCKHORST said that the provisions in the draft legislation
that [DCCED] provide for a new grant program in the amount of
$15 million for areas with fewer than 15,000 acres of land that
incorporate and a grant of $12.5 million for areas with 15,000
acres or more of municipal land entitlement are large fiscal
incentives promoting incorporation. However, some areas in the
state view the loss of autonomy with regard to schools as a
disincentive. The legislation for administrative boroughs
doesn't impact the current structure of schools. Mr. Bockhorst
acknowledged that there has also been concern with the prospect
of property taxes under the formation of a borough. The
administrative borough concept doesn't empower them to levy
property taxes. Mr. Bockhorst highlighted that the LBC hasn't
taken a position on the legislation, although it has had
discussion on it.
8:47:35 AM
CO-CHAIR THOMAS highlighted that [under the administrative
borough concept] the incentive is only available for four years.
Therefore, the borough would have to form within four years to
receive the incentive. He noted that some mayors in Southeast
are excited, although there is also concern with regard to the
lack of available premium land.
8:48:39 AM
REPRESENTATIVE NEUMAN recalled that the state owns the rights
three-miles offshore, and asked if any of the income from the
fisheries could be taxed.
MR. BOCKHORST reminded the committee that borough governments
along the coast have similar jurisdictional boundaries. He
noted that there are a number of municipal governments that do
generate revenue from the commercial fishing industry in the
area. In fact, the Aleutians East Borough, the Lake & Peninsula
Borough, and the Bristol Bay Borough derive significant amounts
of money from municipal borough government taxes on commercial
fishing activities.
8:50:10 AM
REPRESENTATIVE SALMON inquired as to how the smaller satellite
villages included in the formation of a borough can obtain fair
representation.
MR. HARGRAVES confirmed that such difficulties exist all over
the state and it probably prohibits organization in some
instances. Mr. Hargraves said that he didn't believe the LBC
could solve that problem, which isn't unique to Alaska. With
regard to administrative boroughs, they will have to have a
borough seat somewhere, which he indicated would be located [in
the larger area of the incorporated area].
8:52:31 AM
REPRESENTATIVE SALMON turned attention to the Yukon Flats area,
which is located on a federal refuge and thus there is little
state land. If a borough was to form in that area, he
questioned what land areas would be used.
MR. HARGRAVES opined that the aforementioned is in the purview
of the legislature. "You know, $15 million is a pretty good
incentive; you could fix a few things with that," he remarked.
8:53:57 AM
CO-CHAIR THOMAS inquired as to information Mr. Hargraves could
provide regarding potential litigation.
MR. HARGRAVES related that there has been a court decision with
regard to Skagway, but the matter remains outstanding and can't
be discussed in any depth. Homer, he noted, continues to have
individuals who bring suit.
8:54:52 AM
CO-CHAIR OLSON recalled that a couple of years ago there was
interest in forming a proposed Prince William Sound Borough. He
asked if anything is happening with that.
MR. BOCKHORST informed the committee that at one point there was
a resolution adopted by the Whittier City Council to consider a
Prince William Sound Borough. However, shortly thereafter the
citizens of Whittier, through a referendum, rescinded that
resolution. The City of Cordova Council adopted a similar
resolution, which led to DCCED preparing some petition
materials. Mr. Bockhorst related that to his knowledge the
aforementioned effort has ceased and materials were made
available to those in the region in the event anyone wanted to
pursue the matter. However, at this point no petition has been
filed nor has there been an indication of such intention.
8:56:40 AM
REPRESENTATIVE NEUMAN highlighted that many communities are
developing comprehensive zoning plans. He asked if a small area
with such a plan was to be incorporated into a larger area,
would that smaller area's plan hold any weight in the eyes of
the LBC.
MR. BOCKHORST turned to the aggregate voter method, and said
that it's one of the many opportunities for annexation. In
terms of the impact of local views and published positions, the
LBC has an extensive opportunity during its proceedings to
gather public input and information. Therefore, views of
citizens would be available to the LBC and considered. The LBC
bases its decisions on published criteria, standards in the law
that are examined and applied to every annexation or
incorporation proceeding. To the extent a comprehensive zoning
plan addresses those, those would be considered. For example,
the City of Palmer is currently exploring the prospects of
annexation and may be doing so in terms of comprehensive plan
efforts.
9:00:59 AM
REPRESENTATIVE NEUMAN surmised then that the local comprehensive
zoning plans have no weight. In regard to the aggregate vote,
Representative Neuman asked if anything besides the aggregate
vote has ever been used.
MR. BOCKHORST, noting that he has been with the LBC for over 25
years, specified that annexations with any type of election are
very rare. Typically, there is either a legislative review
process or a process by which all adjoining property owners
petition for annexation. Mr. Bockhorst said that although the
option exists, there has never been an annexation with an
aggregate vote. However, a petition for an annexation with an
aggregate vote is pending.
MR. HARGRAVES interjected that one must consider that any
strategic planning or other community efforts might be brought
forth by DCCED's review. He related his assumption that
interested parties would bring forth such information to the
LBC's attention. Therefore, in that case such information would
carry weight during the review.
9:03:54 AM
CO-CHAIR THOMAS pointed out that Article 10, Section 14, of the
Alaska State Constitution specifies that an agency in the
executive branch of government shall advise and assist local
governments. However, when Naukati petitioned to incorporate as
a second class city, the proposal for 44 square miles was
reduced to 11 square miles. Co-Chair Thomas said the
aforementioned seemed to almost eliminate the success of such a
proposal, especially because [the 11 square miles] didn't
include a lodge that could've provided revenue to the community.
Therefore, he questioned how eliminating a revenue source from
an area petitioning for incorporation could assist the area in
its organization.
MR. HARGRAVES recalled that with the Naukati request there were
strenuous objections from those located on the periphery of the
area to be incorporated. By the time of the [LBC's] hearing,
the reduced boundary was recommended by DCCED and everyone
agreed. In fact, the attorney representing the area that was
eliminated from the proposal didn't even speak as he was
convinced that those in the core area of Naukati had settled on
the reduced boundary. Mr. Hargraves opined that the record
indicated that the reduced boundary was what the people wanted.
CO-CHAIR THOMAS related his understanding that the large lodge
owner faced a potential tax to the municipality in the amount of
$38,000 a year. Therefore, it would be good for the lodge owner
to hire [an attorney to help take the locale of the lodge out of
the proposed boundaries]. Still, that lodge owner will be
coming to town and utilizing [its services], which is alarming
in light of the fact that the original petition was rejected.
In the meantime, the university swept up some of the land in the
original proposal. Co-Chair Thomas indicated that he was
sympathetic to Naukati. He then asked if it is typical for the
LBC, when considering incorporation, to demand certain
conditions, such as the implementation of a 3.5 percent sales
tax, when the area is incorporated.
MR. HARGRAVES related his belief that the LBC has broad
authority to require conditions to help achieve success.
CO-CHAIR THOMAS expressed concern with the ability of the LBC to
reduce proposed boundaries. Therefore, he related that he is
considering introducing legislation that would allow a community
to opt-out of the administrative borough. Co-Chair Thomas
opined that some of the LBC's decisions seem to be disincentives
rather than incentives to form boroughs. He said that he hoped
that areas will form within the model borough boundaries.
MR. HARGRAVES pointed out that with the Naukati proposal, the
LBC didn't get to consider the [44 square mile] proposal because
all of the parties had already agreed [on the smaller boundary].
He opined that had the original proposal been approved, it
would've probably been challenged and went to a lawsuit because
those outside of Naukati proper were too far from it to feel as
if they gained anything by being included in the proposal for a
second class city.
9:12:17 AM
CO-CHAIR THOMAS inquired as to the difference between the
formation of a borough in Yakutat versus Skagway.
MR. BOCKHORST recalled that he made a hearty case for Yakutat
receiving what it requested because it's unique in the
development of boroughs. He said that he didn't view Yakutat as
equivalent to other areas or as setting a precedent. He
mentioned the lack of connections culturally, geological,
economically, and pointed out that it did meet all of the
standards.
9:16:13 AM
REPRESENTATIVE NEUMAN recalled earlier testimony that perhaps
some of the situations the LBC addresses may need an overhaul.
To that end, he suggested that the LBC review HB 133.
9:16:57 AM
REPRESENTATIVE SALMON recalled that Yukon Flats and Nenana have
expressed interest in organizing, and inquired as to where those
two stand at this point.
MR. HARGRAVES answered that there have been inquiries and maybe
even presentations, although the LBC has received no petitions.
9:17:48 AM
CO-CHAIR THOMAS announced that the administrative borough bill
was introduced yesterday in the Senate and the House hasn't
decided whether to introduce a companion bill.
9:18:30 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:18 a.m.
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