Legislature(2001 - 2002)

04/23/2002 08:06 AM House CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE COMMUNITY AND REGIONAL AFFAIRS                                                                            
                       STANDING COMMITTEE                                                                                     
                         April 23, 2002                                                                                         
                           8:06 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Carl Morgan, Co-Chair                                                                                            
Representative Andrew Halcro                                                                                                    
Representative Drew Scalzi                                                                                                      
Representative Lisa Murkowski                                                                                                   
Representative Beth Kerttula                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Gretchen Guess                                                                                                   
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 500                                                                                                              
"An Act relating to the advance acquisition of real property for                                                                
public purposes."                                                                                                               
     - MOVED CSHB 500(CRA) OUT OF COMMITTEE                                                                                     
HOUSE BILL NO. 518                                                                                                              
"An Act relating to organization grants for mergers,                                                                            
consolidations, or unifications involving third class boroughs."                                                                
     - MOVED HB 518 OUT OF COMMITTEE                                                                                            
HOUSE BILL NO. 521                                                                                                              
"An Act relating to municipal improvement areas."                                                                               
     - MOVED CSHB 521(CRA) OUT OF COMMITTEE                                                                                     
PREVIOUS ACTION                                                                                                               
BILL: HB 500                                                                                                                  
SHORT TITLE:ADVANCE ACQUISITION OF REAL PROPERTY                                                                                
SPONSOR(S): TRANSPORTATION                                                                                                      
Jrn-Date   Jrn-Page                     Action                                                                                  
02/27/02     2407       (H)        READ THE FIRST TIME -                                                                        
02/27/02     2407       (H)        CRA, TRA                                                                                     
04/04/02                (H)        CRA AT 8:00 AM CAPITOL 124                                                                   
04/04/02                (H)        -- Meeting Canceled --                                                                       
04/11/02                (H)        CRA AT 8:00 AM CAPITOL 124                                                                   
04/11/02                (H)        Heard & Held                                                                                 
04/11/02                (H)        MINUTE(CRA)                                                                                  
04/16/02                (H)        CRA AT 8:00 AM CAPITOL 124                                                                   
04/16/02                (H)        <Bill Postponed to 4/23/02>                                                                  
04/16/02                (H)        TRA AT 1:00 PM CAPITOL 17                                                                    
04/16/02                (H)        <Bill Canceled>                                                                              
04/23/02                (H)        CRA AT 8:00 AM CAPITOL 124                                                                   
BILL: HB 518                                                                                                                  
SHORT TITLE:MUNICIPAL ORGANIZATION GRANTS                                                                                       
SPONSOR(S): COMMUNITY & REGIONAL AFFAIRS                                                                                        
Jrn-Date   Jrn-Page                     Action                                                                                  
04/12/02     2907       (H)        READ THE FIRST TIME -                                                                        
04/12/02     2907       (H)        CRA, FIN                                                                                     
04/23/02                (H)        CRA AT 8:00 AM CAPITOL 124                                                                   
BILL: HB 521                                                                                                                  
SHORT TITLE:MUNICIPAL IMPROVEMENT AREAS                                                                                         
SPONSOR(S): LABOR & COMMERCE                                                                                                    
Jrn-Date   Jrn-Page                     Action                                                                                  
04/17/02     2973       (H)        READ THE FIRST TIME -                                                                        
04/17/02     2973       (H)        CRA                                                                                          
04/23/02                (H)        CRA AT 8:00 AM CAPITOL 124                                                                   
WITNESS REGISTER                                                                                                              
DANA OLSON                                                                                                                      
HC 30 Box 5438                                                                                                                  
Wasilla, Alaska 99654                                                                                                           
POSITION STATEMENT:  Expressed concerns with HB 500.                                                                            
BILL LAWRENCE, Staff                                                                                                            
to Representative Morgan                                                                                                        
House Community and Regional Affairs Standing Committee                                                                         
Alaska State Legislature                                                                                                        
Capitol Building, Room 434                                                                                                      
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:  Testified on behalf of the sponsor of HB
518, the House Community and Regional Affairs Standing                                                                          
BERT VENABLES                                                                                                                   
City of Haines                                                                                                                  
PO Box 1049                                                                                                                     
Haines, Alaska 99827                                                                                                            
POSITION STATEMENT:  Testified on HB 518.                                                                                       
STEVE VAN SANT, State Assessor                                                                                                  
Division of Community and Business Development                                                                                  
Department of Community & Economic Development                                                                                  
550 W 7th Avenue, Suite 1770                                                                                                    
Anchorage, Alaska 99501-3510                                                                                                    
POSITION STATEMENT:  Answered questions related to HB 521.                                                                      
GEORGE CANELAS, Director                                                                                                        
Real Estate Services                                                                                                            
Heritage Land Bank                                                                                                              
Municipality of Anchorage                                                                                                       
PO Box 196680                                                                                                                   
Anchorage, Alaska 99519                                                                                                       
POSITION STATEMENT:  Characterized HB 521 as good legislation.                                                                  
MARK PFEFFER                                                                                                                    
Koonce, Pfeffer, Bettis Architects;                                                                                             
Venture Development Group                                                                                                       
425 G Street Number 800                                                                                                         
Anchorage, Alaska 99501                                                                                                         
POSITION STATEMENT:  Testified in support of HB 521.                                                                            
TIM ROGERS, Legislative Program Coordinator                                                                                     
Municipality of Anchorage                                                                                                       
PO Box 196680                                                                                                                   
Anchorage, Alaska 99519                                                                                                         
POSITION STATEMENT:  Answered questions related to HB 521.                                                                      
DEVEN MITCHELL, Debt Manager                                                                                                    
Treasury Division                                                                                                               
Department of Revenue                                                                                                           
PO Box 110405                                                                                                                   
Juneau, Alaska 99811-0405                                                                                                       
POSITION STATEMENT:  Testified on HB 521.                                                                                       
ACTION NARRATIVE                                                                                                              
TAPE 02-24, SIDE A                                                                                                              
Number 0001                                                                                                                     
CO-CHAIR  KEVIN MEYER  called the  House  Community and  Regional                                                               
Affairs  Standing  Committee  meeting   to  order  at  8:06  a.m.                                                               
Representatives Morgan, Meyer, Scalzi,  and Kerttula were present                                                               
at  the call  to  order.   Representatives  Halcro and  Murkowski                                                               
arrived as the meeting was in progress.                                                                                         
HB 500-ADVANCE ACQUISITION OF REAL PROPERTY                                                                                   
CO-CHAIR MEYER announced  that the first order  of business would                                                               
be  HOUSE  BILL  NO.  500,   "An  Act  relating  to  the  advance                                                               
acquisition of real property for public purposes."                                                                              
Number 0097                                                                                                                     
MIKE  KRIEBER,   Staff  to  Representative  Vic   Kohring,  House                                                               
Transportation  Standing  Committee,  Alaska  State  Legislature,                                                               
noted that he met with  Representative Kerttula and discussed the                                                               
issues  brought  up at  the  last  House Community  and  Regional                                                               
Affairs Standing  Committee hearing.   Ultimately, Version  F was                                                               
developed.  The committee packet  should include a summary of the                                                               
changes incorporated in  Version F.  Although there  are many new                                                               
sections in Version F, many of them are redundant.                                                                              
MR. KRIEBER  pointed out that  Section 2  had referred to  a time                                                               
period  not greater  than five  years  for advanced  acquisition.                                                               
That was  changed in Version  F to refer to  advanced acquisition                                                               
"that will occur in the future."   Version F added Sections 5, 7,                                                               
9,  11, and  13,  which  are essentially  identical.   These  new                                                               
sections  address the  fairness  issue.   In  other  words, if  a                                                               
public  entity that  acquired a  property through  eminent domain                                                               
doesn't use the property for  the stated purpose within 20 years,                                                               
the property  owner from  which the  state acquired  the property                                                               
would have the first right to  purchase the property for the same                                                               
price  it was  acquired through  eminent domain.   Therefore,  it                                                               
prevents public sector speculation.                                                                                             
Number 0390                                                                                                                     
CO-CHAIR  MEYER posed  a situation  in which  the state,  through                                                               
eminent domain, pays  $500 per acre for land.   However, 20 years                                                               
from  the acquisition  the  state realizes  it  doesn't need  the                                                               
land.   Co-Chair  Meyer understood  that then  the land  would be                                                               
returned  to  the owner  for  the  same  price  at which  it  was                                                               
acquired.   Therefore, he questioned whether  returning that land                                                               
back at  the price of acquisition  would be fair to  the state or                                                               
public entity.                                                                                                                  
MR. KRIEBER  explained that  if the  land [was]  acquired through                                                               
eminent  domain,  then  the  property   owner  would  still  have                                                               
interest   in  the   property   through   the  following   years.                                                               
Therefore,  the  property  owner  would have  the  value  of  the                                                               
property later  and thus the  benefit of the  [possible increase]                                                               
in the  price of  the land  should accrue  to the  property owner                                                               
rather than the  state.  However, allowing the  state the ability                                                               
to purchase  land and sell  it later  seems in opposition  to the                                                               
"Fairness Doctrine."                                                                                                            
CO-CHAIR  MEYER remarked  that it  is probably  a good  method of                                                               
acquiring  land,   especially  in  order  to   avoid  speculation                                                               
Number 0568                                                                                                                     
REPRESENTATIVE MURKOWSKI pointed out that  Sections 3 and 4 refer                                                               
to "reasonably  foreseeable future use", but  that language isn't                                                               
maintained in Sections 6, 8, and 12.   She inquired as to why the                                                               
language in  Sections 6, 8,  and 12  don't conform to  Sections 3                                                               
and 4.                                                                                                                          
MR. KRIEBER  said that was  an oversight and thus  announced that                                                               
he  would   be  amenable   to  changing   the  language   [to  be                                                               
Number 0726                                                                                                                     
REPRESENTATIVE  MURKOWSKI moved  that  the  committee adopt  CSHB
500,  Version 22-LS0610\F,  Utermohle,  4/22/02,  as the  working                                                               
document.   There being  no objection, Version  F was  before the                                                               
REPRESENTATIVE  MURKOWSKI  moved  that the  committee  adopt  the                                                               
following conceptual Amendment 1:                                                                                               
     Page 4, line 24;                                                                                                           
     Page 5, line 19;                                                                                                           
     Page 6, line 12;                                                                                                           
     Page 6, line 31;                                                                                                           
          Before "future",                                                                                                  
          Insert "reasonably foreseeable"                                                                                       
There being no objection, Amendment 1 was adopted.                                                                              
Number 0891                                                                                                                     
CO-CHAIR  MORGAN referred  to page  4, line  10, which  specifies                                                               
"The  corporation shall  offer the  land  to the  person, or  the                                                               
person's successor in  interest, from whom the  land was acquired                                                               
at the same  price that the corporation paid the  person when the                                                               
land was  acquired."  Therefore,  could the siblings of  an owner                                                               
who had died purchase the acquired  land for the same price as it                                                               
was sold.                                                                                                                       
MR.  KRIEBER  replied  yes.   In  further  response  to  Co-Chair                                                               
Morgan, Mr. Krieber clarified that  the provision provides a one-                                                               
time opportunity when the [state] decides  to sell it back to the                                                               
person  who  owns  the  property  or who  would  have  owned  the                                                               
property once the  owner is deceased.  He  further clarified that                                                               
the property  would be [sold to  the owner or the  owner's heirs]                                                               
at the original value.                                                                                                          
REPRESENTATIVE KERTTULA  remarked that  Mr. Krieber has  went far                                                               
in attempting to  make this section of HB 500  fair.  She pointed                                                               
out  that the  right to  hold  property and  property rights  are                                                               
really  fundamental constitutional  rights.    She expressed  her                                                               
desire  not  to  allow  any corporation  to  land  speculate,  in                                                               
particular  against   the  individual   property  holder.     She                                                               
emphasized that  the 20-year  limit is a  long time  during which                                                               
people will have  died, and therefore the first  right of refusal                                                               
to the individual [is important].                                                                                               
Number 1132                                                                                                                     
REPRESENTATIVE SCALZI commented  that in a situation  in which an                                                               
individual had  the first  right of refusal  after 20  years, the                                                               
speculator  would   remain  in   a  good  position   because  the                                                               
speculator  would purchase  the land  at the  price for  which he                                                               
sold it for 20 years prior.                                                                                                     
REPRESENTATIVE KERTTULA  highlighted that this  [provision] would                                                               
only  be used  in cases  of  eminent domain  when the  government                                                               
takes the land.  Although the land  may have been owned by a land                                                               
speculator, it  was still  their land.   She suggested  that this                                                               
will  impact  those with  rights-of-way  and  such.   In  further                                                               
response  to   Representative  Scalzi,   Representative  Kerttula                                                               
acknowledged  that a  speculator could  purchase land  subject to                                                               
eminent  domain, which  can happen  now.   Once someone  owns the                                                               
land, that  individual has  property rights.   This  provision of                                                               
selling the land back to the  owner only comes into effect if the                                                               
state doesn't  use the  land after  20 years.   She  reminded the                                                               
committee that this is all  in reference to advanced acquisition.                                                               
Representative Kerttula echoed earlier  testimony that only those                                                               
with  the original  interest  in  the land  are  protected.   She                                                               
related  her  belief that  it  would  probably be  unlikely  that                                                               
someone would  save their  money to purchase  the land  back from                                                               
the state.                                                                                                                      
Number 1351                                                                                                                     
DANA  OLSON testified  via teleconference.   Ms.  Olson expressed                                                               
concern with  public utilities and corporations  having the right                                                               
to  eminent domain.   She  didn't believe  [public utilities  and                                                               
corporations]  have   a  legal  authority  [to   utilize  eminent                                                               
domain].    With  regard  to   the  20-year  limitation  and  the                                                               
"foreseeable future" language, Ms.  Olson characterized it as too                                                               
broad.  She pointed out that  under the "Federal Aid Highway Act"                                                               
[the state]  can't take  more property  than is  necessary, which                                                               
means  that  [the  state]  would have  to  demonstrate  that  the                                                               
property wasn't taken  unnecessarily.  Since many  of the state's                                                               
projects  are federally  funded,  Ms. Olson  didn't believe  this                                                               
bill would  work with the  federal provision.   Furthermore, this                                                               
bill fails  to consider  mineral entry;  that is  mineral entries                                                               
could be acquired for public purposes.   She pointed out that the                                                               
14th Amendment of the U.S.  Constitution prohibits the government                                                               
from  rationalizing what  property is,  which is  what this  bill                                                               
seems to be doing.                                                                                                              
MR. OLSON returned to the  "foreseeable future" language that she                                                               
believes  is   too  broad.     She  suggested  that   a  regional                                                               
transportation  plan  must be  in  place  before any  acquisition                                                               
occurs.  She clarified that the  burden to show a compelling need                                                               
to  condemn or  acquire property  falls on  the government.   She                                                               
didn't believe the  burden [would be met]  under the "foreseeable                                                               
future" language.                                                                                                               
Number 1619                                                                                                                     
MR.  KRIEBER pointed  out  that currently  no  entities have  the                                                               
authority  for advanced  acquisition of  right-of-way.   Property                                                               
can  be  acquired   through  a  federal  funding   process.    He                                                               
emphasized that  public utilities  and corporations  already have                                                               
state authority for  eminent domain.  This  bill merely addresses                                                               
advanced acquisition.   In regard the charge  of the "foreseeable                                                               
future" language  being too broad,  Mr. Krieber pointed  out that                                                               
Section 3 specifies  the prerequisites for taking  property.  The                                                               
new prerequisite,  paragraph (4),  specifies that  the reasonably                                                               
foreseeable use  be identified  in a development  plan.   A judge                                                               
would   make   the   decision  as   to   whether   the   regional                                                               
transportation plan met the criteria.                                                                                           
Number 1774                                                                                                                     
REPRESENTATIVE  SCALZI  moved to  report  CSHB  500, Version  22-                                                               
LS0610\F, Utermohle,  4/22/02, as  amended out of  committee with                                                               
individual  recommendations and  the  accompanying fiscal  notes.                                                               
There being  no objection,  CSHB 500(CRA)  was reported  from the                                                               
House Community and Regional Affairs Standing Committee.                                                                        
HB 518-MUNICIPAL ORGANIZATION GRANTS                                                                                          
CO-CHAIR MEYER  announced that the  next order of  business would                                                               
be HOUSE  BILL NO. 518,  "An Act relating to  organization grants                                                               
for  mergers,  consolidations,  or unifications  involving  third                                                               
class boroughs."                                                                                                                
CO-CHAIR MEYER turned the gavel over to Co-Chair Morgan.                                                                        
Number 1843                                                                                                                     
BILL LAWRENCE,  Staff to  Representative Morgan,  House Community                                                               
and   Regional   Affairs   Standing   Committee,   Alaska   State                                                               
Legislature,  explained that  HB  518 amends  AS 29.05.190  which                                                               
currently  prohibits an  organizational  grant being  given to  a                                                               
borough incorporated  by consolidation or a  unified municipality                                                               
that  occupies the  area formerly  occupied by  a borough.   This                                                               
bill provides  for a $200,000  organizational grant for  a merger                                                               
or consolidation.                                                                                                               
REPRESENTATIVE SCALZI inquired as to the impetus for HB 518.                                                                    
Number 1937                                                                                                                     
ROBERT VENABLES,  City of Haines,  explained that HB  518 intends                                                               
to assist  with organizational grants from  third class boroughs,                                                               
which were  originally prohibited [from obtaining  these grants].                                                               
That was  viewed as an  oversight.  This legislation  attempts to                                                               
remedy  that oversight  at a  reduced level.   Therefore,  HB 518                                                               
allows  organizational   grants  of  $200,000  [to   third  class                                                               
boroughs]  rather than  the $600,000  grants  that are  currently                                                               
allowed for boroughs that qualify.                                                                                              
REPRESENTATIVE  SCALZI related  his understanding  that currently                                                               
the statute provides  grants for all other  classes [of boroughs]                                                               
that merge  or move from second  class to first class  except for                                                               
third class boroughs.                                                                                                           
MR.  VENABLES  replied,  "Not necessarily."    He  explained  his                                                               
understanding that  the more sophisticated boroughs  have already                                                               
evolved the systems  of government such that this  level of state                                                               
assistance  isn't necessary.   Certain  criteria must  be met  in                                                               
order  to receive  organizational grants,  which are  intended to                                                               
create sound  local governmental  units.   He specified  that the                                                               
unorganized areas and third class  boroughs are those that [don't                                                               
have sound  local governmental  units].   In further  response to                                                               
Representative Scalzi,  Mr. Venables  pointed out that  Haines is                                                               
the only third class borough in existence.                                                                                      
Number 2049                                                                                                                     
REPRESENTATIVE  MURKOWSKI  asked  if  organizational  grants  are                                                               
already available  at some level  and HB 518 is  merely expanding                                                               
this to  third class boroughs.   Or, would third  class boroughs,                                                               
specifically Haines, be the only  borough that could avail itself                                                               
of these organizational grants.                                                                                                 
MR. VENABLES clarified that the  grants available in AS 29.05.190                                                               
allow for  three years of  assistance, totaling $600,000,  to new                                                               
boroughs.   House  Bill 518  is  currently aimed  at third  class                                                               
boroughs  and has  a reduced  level of  assistance because  third                                                               
class  boroughs  do  have  some  level  of  functionality.    Mr.                                                               
Venables said, "There is a level  of assistance that we'd like to                                                               
work out  in order to  allow governmental units  to go to  a home                                                               
rule government from a third class borough."                                                                                    
REPRESENTATIVE  MURKOWSKI surmised  then that  [HB 518]  provides                                                               
for a $400,000 grant rather than a $200,000 grant.                                                                              
MR. VENABLES replied yes.                                                                                                       
REPRESENTATIVE  KERTTULA asked  if  the reason  [Haines, a  third                                                               
class borough] wasn't  able to get the $600,000 when  it became a                                                               
borough  was because  it wasn't  the type  of borough  that could                                                               
utilize the grant.                                                                                                              
MR.   VENABLES  explained   that   third   class  boroughs   were                                                               
established  as  a  compromise   in  order  to  [address]  school                                                               
funding.  He informed the  committee that the Haines community is                                                               
looking  to consolidate  and obtain  assistance in  allowing that                                                               
consolidation.   In further response to  Representative Kerttula,                                                               
Mr. Venables  reiterated that  the $600,000  is available  to new                                                               
boroughs  that  have  unified  under   certain  criteria.    [The                                                               
$600,000 grant]  wouldn't apply to consolidated  boroughs, which,                                                               
per statute,  refers to  first or second  class boroughs.   Third                                                               
class boroughs are  abolished.  Therefore, the desire  is to find                                                               
a place  in statute for  third class boroughs to  be consolidated                                                               
with a level of assistance that allows it to properly function.                                                                 
REPRESENTATIVE  KERTTULA directed  attention to  Section 2  of HB
518, which  refers to a  third class borough.   She asked  if the                                                               
third class borough was previously  in existence and thus doesn't                                                               
really exist now.                                                                                                               
MR.  VENABLES  reiterated that  there  is  only one  third  class                                                               
borough, Haines,  in existence  now.   However, there  is pending                                                               
legislation that may enable third class boroughs to form.                                                                       
Number 2269                                                                                                                     
REPRESENTATIVE  SCALZI noted  his belief  that it's  in the  best                                                               
interest of  the state  to have incentives  for boroughs  to form                                                               
and consolidate.   However, he inquired as to how  the $200,000 a                                                               
year was determined.                                                                                                            
MR. VENABLES informed  the committee of the  situation in Haines.                                                               
Haines, a  small community  with a population  of 2,400,  has two                                                               
legislative  bodies,   two  mayors,  two   planning  commissions,                                                               
separate  comprehensive [health]  plans, two  legal systems,  two                                                               
financial systems, two personnel  systems, and two very different                                                               
computer  systems.    Therefore,  the   intent  is  to  bring  in                                                               
expertise to merge these two  different [governments] while [both                                                               
are]  functioning.   Marco Pignalberi,  City  Manager of  Haines,                                                               
recommended that  $200,000 would  be necessary  to merge  the two                                                               
REPRESENTATIVE  SCALZI   expressed  the   need  to   justify  the                                                               
Number 2356                                                                                                                     
REPRESENTATIVE  MURKOWSKI posed  a  situation in  which a  [third                                                               
class borough] would obtain $200,000  in December and then in the                                                               
following month,  January, could obtain  another $200,000.    She                                                               
said  that   $400,000  would   seem  to   be  a   large,  perhaps                                                               
unjustifiable, incentive.   Although  she agreed with  the notion                                                               
of  encouraging  consolidation  and unification,  $400,000  seems                                                               
like a large incentive in the current fiscal climate.                                                                           
MR. VENABLES  said that he  would be happy to  supply information                                                               
regarding how the  $200,000 figure was chosen.  In  regard to the                                                               
timing  of  receiving  the  grant,   Mr.  Venables  informed  the                                                               
committee that the vote for  consolidation won't occur until June                                                               
25th  and   will  be  certified   after  the  new   fiscal  year.                                                               
Therefore,   Representative  Murkowski's   concern  wouldn't   be                                                               
realized in this case.                                                                                                          
Number 2467                                                                                                                     
REPRESENTATIVE  KERTTULA inquired  as to  how much  Homer had  to                                                               
spend on its recent [annexation].                                                                                               
REPRESENTATIVE SCALZI said he didn't  know, although he estimated                                                               
that it cost  about $150,000 for the preliminary  portion [of the                                                               
annexation].   He projected  that the  transition period  will be                                                               
quite a  bit more.  Comparing  Haines to Homer is  like comparing                                                               
apples and oranges, he said.                                                                                                    
REPRESENTATIVE SCALZI  reiterated his support  of consolidations.                                                               
Representative Scalzi said that he  didn't mind moving HB 518 out                                                               
of committee, but  he recommended that the  justification for the                                                               
$200,000 be forward to the House Finance Committee.                                                                             
Number 2547                                                                                                                     
REPRESENTATIVE MURKOWSKI moved to report  HB 518 out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
note.   There being no  objection, HB  518 was reported  from the                                                               
House Community and Regional Affairs Standing Committee.                                                                        
The committee took an at-ease from 8:45 a.m. to 8:49 a.m.                                                                       
HB 521-MUNICIPAL IMPROVEMENT AREAS                                                                                            
CO-CHAIR MEYER  announced that the  next order of  business would                                                               
be HOUSE BILL NO. 521,  "An Act relating to municipal improvement                                                               
Number 2592                                                                                                                     
REPRESENTATIVE MURKOWSKI, Alaska  State Legislature, testified as                                                               
chair of  the House  Labor and  Commerce Standing  Committee, the                                                               
sponsor  of HB  521.   She stated  that HB  521 is  essentially a                                                               
follow up of  legislation from last year dealing with  the use of                                                               
tax increment financing.  Essentially,  HB 521 clarifies that tax                                                               
increment  financing  (TIF)  can  be  used  with  either  general                                                               
obligation  (GO) bonds  or  revenue bonds,  or  a combination  of                                                               
both.  Currently, the statute is  silent in regard to what can be                                                               
used for  TIF.  This legislation  also allows TIF to  be used for                                                               
private  and   public  projects  in  order   to  provide  greater                                                               
flexibility  to the  municipalities  that want  to utilize  these                                                               
improvement areas.   Furthermore,  the definition  of improvement                                                               
area  has been  broadened to  go  just beyond  the definition  of                                                               
blighted  area.    For  example,   Anchorage  is  discussing  the                                                               
development  of  town  centers throughout  the  community.    The                                                               
current   definition  of   improvement  area   would  pose   some                                                               
restrictions.  Representative Murkowski  concluded by saying that                                                               
HB 521 uses  TIF in order to enhance urban  renewal and encourage                                                               
property improvement.                                                                                                           
REPRESENTATIVE SCALZI inquired as  to the difference between this                                                               
and the current structure for local improvement districts (LID).                                                                
Number 2792                                                                                                                     
STEVE  VAN  SANT,  State  Assessor,  Division  of  Community  and                                                               
Business   Development,  Department   of  Community   &  Economic                                                               
Development, explained  that LIDs  are under  special assessments                                                               
in  the statutes.   That  is,  LIDs are  improvements to  private                                                               
property  that  is  paid  for   by  the  local  municipality  and                                                               
subsequently rolled  into the  tax bill  of each  individual, and                                                               
therefore  those are  paid back.   However,  the TIF  is entirely                                                               
different  in that  it's of  a public  nature.   He informed  the                                                               
committee that Anchorage has had  a TIF, the Fifth Avenue parking                                                               
REPRESENTATIVE  SCALZI related  his understanding  that LIDs  are                                                               
capable  of  enhancing  roads  and   public  rights-of-way.    He                                                               
remarked that [the TIF] seems to meet the same criteria.                                                                        
MR. VAN SANT agreed with  Representative Scalzi in that these are                                                               
improvements that  are made  in the  municipality.   The statutes                                                               
recognize  special assessments,  which are  improvements made  to                                                               
private property and paid for  with private funds.  However, [the                                                               
TIF] refers  to the difference between  the old tax base  and the                                                               
new  tax base  after  the  project begins.    That difference  is                                                               
pledged  to  pay for  improvements  that  benefit the  public  at                                                               
REPRESENTATIVE SCALZI  asked if  a city-owned road  and right-of-                                                               
way would be a public utility.   Thus if an LID fit the criteria,                                                               
would the revenue from the  property owners adjacent to that road                                                               
be incorporated, he  asked.  Still, the road is  a city road that                                                               
everyone uses.                                                                                                                  
MR. VAN  SANT explained that  currently LIDs are  typically liens                                                               
against  certain properties,  while [TIF]  projects would  pledge                                                               
the entire  faith and  credit of the  municipality for  a project                                                               
rather than a specific area.                                                                                                    
Number 2957                                                                                                                     
REPRESENTATIVE HALCRO  surmised then  that the revenue  stream to                                                               
pay for  the bonds comes  from the  increase in the  property tax                                                               
assessment that's accomplished by the improvements.                                                                             
MR.  VAN   SANT  pointed  out   that  there  are   two  different                                                               
methodologies with  HB 521.   One methodology  is a GO  bond that                                                               
pledges  the  faith  and  credit  of  all  the  property  in  the                                                               
jurisdiction.  However,  the TIF takes the difference  in the tax                                                               
that ...                                                                                                                        
TAPE 02-24, SIDE B                                                                                                              
MR.  VAN SANT  turned to  the  construction of  the Fifth  Avenue                                                               
parking  garage in  Anchorage.   He estimated  that the  property                                                               
value in  the area was  worth $5 million before  the construction                                                               
of  the parking  garage.   After the  garage's construction,  the                                                               
value of the  [property] increased to say $7 million.   The taxes                                                               
on the  difference in value, $2  million, was pledged to  pay for                                                               
the financing on the garage.                                                                                                    
Number 2948                                                                                                                     
REPRESENTATIVE HALCRO remarked that  it seems fairly speculative.                                                               
He questioned what  would happen if property  values decrease and                                                               
the revenue  stream to pay  off the indebtedness doesn't  come to                                                               
MR. VAN  SANT pointed  out that  such was  the case  in Anchorage                                                               
during the  recession in  the late  1980s when  [property] values                                                               
dropped  approximately  50 percent.    During  such a  time,  the                                                               
minimum [payment]  has to  be made.   Again,  the full  faith and                                                               
credit  of  the  municipality  has  been  pledged  and  thus  the                                                               
municipality has  to make  the payment.   The difference  is that                                                               
the [payment] would come out of  the general fund rather than the                                                               
REPRESENTATIVE HALCRO  surmised then that the  community could be                                                               
put  at  a substantial  risk,  depending  upon  the size  of  the                                                               
MR. VAN SANT  highlighted that HB 521 includes  the following two                                                               
different  methodologies:   revenue  bonds  and  GO bonds.    The                                                               
choice is  up to the  municipality.   Revenue bonds refer  to the                                                               
revenue  generated by  the project,  which  is pledged.   The  GO                                                               
bonds  actually  pledge   the  full  faith  and   credit  of  the                                                               
municipality.   He explained  that the  TIF specifies  that those                                                               
taxes above and  beyond what was there prior  to development will                                                               
be pledged  to pay  [for the  bond].  In  the case  of decreasing                                                               
values, the municipality would be left to take it out of the GF.                                                                
REPRESENTATIVE  HALCRO  reiterated  that   such  could  expose  a                                                               
community to a tax risk.                                                                                                        
CO-CHAIR MEYER pointed  out that this is a local  option and thus                                                               
the mayor  and the local assembly  would have to approve  such by                                                               
ordinance.   He recalled [Anchorage]  taking a similar  risk when                                                               
it purchased  a one-third  share of the  Beluga gas  field, which                                                               
was done through a revenue bond.                                                                                                
Number 2832                                                                                                                     
GEORGE  CANELAS, Director,  Real Estate  Services, Heritage  Land                                                               
Bank,  Municipality of  Anchorage, testified  via teleconference.                                                               
Mr.  Canelas announced  that [the  municipality]  is thinking  of                                                               
using  the  TIF  process  to   promote  economic  development  in                                                               
selected areas of  town.  As mentioned earlier, it  is a strategy                                                               
in  [the Municipality  of Anchorage's]  2020 Comprehensive  Plan.                                                               
The  first area  of focus  is the  proposed Muldoon  Town Center,                                                               
which would  seem to be an  excellent test case because  it has a                                                               
private  sector sponsor  who has  site control  over most  of the                                                               
proposed  area.     [The  municipality]   is  seeking   the  most                                                               
appropriate  methods  for the  municipality  to  respond to  this                                                               
private  sector initiative.    [The  municipality] believes  that                                                               
overall  HB  521  is  an  excellent step  to  provide  the  broad                                                               
flexibility necessary to find the best model.                                                                                   
MR. CANELAS informed the committee  that the municipality doesn't                                                               
anticipate  needing TIF  proceeds  to finance  or  loan funds  to                                                               
private development of improvement  districts as provided on page                                                               
1, line 6.   Overall, the municipality doesn't  believe that it's                                                               
good public policy to use local  property tax proceeds to pay for                                                               
private development.   Although some communities  do this through                                                               
enabling  statutes, [the  Municipality of  Anchorage] intends  to                                                               
focus the TIF efforts on  funding public sector improvements such                                                               
as   infrastructure,  which   would  compliment   private  sector                                                               
initiatives.   Therefore,  [the municipality]  would prefer  that                                                               
the language  "or private" on  page 1, line  6, be deleted.   Mr.                                                               
Canelas informed  the committee of the  municipality's support of                                                               
the expanded  definition of improvement areas,  which goes beyond                                                               
the traditional  notion of using  TIFs for blighted areas.   This                                                               
expanded  definition of  improvement  areas  follows the  pattern                                                               
around the country.  In  conclusion, Mr. Canelas characterized HB
521 as good legislation.                                                                                                        
Number 2728                                                                                                                     
MARK  PFEFFER,   Koonce,  Pfeffer,  Bettis   Architects;  Venture                                                               
Development  Group, testified  via teleconference.   Mr.  Pfeffer                                                               
informed the committee that "we"  are involved with redevelopment                                                               
efforts for the Muldoon Town Center  area.  "We are in support of                                                               
HB  521," he  stated.   He  noted the  belief that  HB 521  would                                                               
enhance the  existing laws for  redevelopment of  blighted areas.                                                               
From  Mr. Pfeffer's  personal and  private sector  experience, he                                                               
said  that redevelopment  of blight[ed  areas] is  problematic in                                                               
numerous  ways in  relation to  planning,  social, and  financial                                                               
issues.   Anchorage has  dealt with  the planning  issues through                                                               
the adoption  of the Anchorage 2020  plan.  In the  Muldoon area,                                                               
Mr. Pfeffer  pointed out that  his firm has  worked cooperatively                                                               
with the  municipality and social  service providers in  order to                                                               
work  through the  social issues  involved with  redevelopment of                                                               
the blighted areas.   In regard to  financial issues, substantial                                                               
challenges remain.   He related the belief  that redevelopment in                                                               
the  [Muldoon]  area will  generally  involve  a balance  between                                                               
private  and  public investment.    The  existing TIF  recognizes                                                               
this; however,  the current law  contains ambiguities  that would                                                               
be  clarified  by the  proposed  new  language  of  HB 521.    As                                                               
mentioned  earlier, HB  521 clarifies  that both  GO and  revenue                                                               
bonds are appropriate bonding methods  for the TIF.  Furthermore,                                                               
HB 521 redefines "blight."   Mr. Pfeffer concluded by reiterating                                                               
support for HB 521.                                                                                                             
REPRESENTATIVE  MURKOWSKI  recalled  Mr. Canela's  suggestion  to                                                               
delete  the   reference  to  private  improvements   because  the                                                               
municipality  doesn't  anticipate  using any  funds  for  private                                                               
development.  She requested that Mr. Pfeffer comment.                                                                           
MR. PFEFFER related the belief  that there are instances where it                                                               
would  be  appropriate  for private  development.    However,  he                                                               
acknowledged  that   this  would  be  treading   on  new  ground.                                                               
Therefore, until  there is  a specific use,  Mr. Pfeffer  said he                                                               
would be  amenable to the  proposed deletion because most  of the                                                               
application will  be for public  infrastructure.  If  a situation                                                               
arises  in which  it would  be  appropriate to  use for  [private                                                               
development], it  would be coordinated with  local government and                                                               
return to the legislature for clarification [in statute].                                                                       
REPRESENTATIVE MURKOWSKI surmised then  that Mr. Pfeffer would be                                                               
able to move forward with  the Muldoon Town Center without having                                                               
a provision  in HB 521  that would allow for  the funds to  go to                                                               
the private development.                                                                                                        
MR. PFEFFER replied yes.                                                                                                        
Number 2498                                                                                                                     
REPRESENTATIVE SCALZI referred to page  2, lines 5-7, and related                                                               
his understanding  that there would  be no level of  support from                                                               
the  individuals in  the area.   The  municipality will  make the                                                               
distinction and  pledge these bonds  on behalf of  the residents,                                                               
and the  residents will  pay through  a property  tax assessment.                                                               
He asked if that was correct.                                                                                                   
MR.   PFEFFER   pointed    out   that   Representative   Scalzi's                                                               
understanding assumes  that there would  be an assessment  in the                                                               
area  for  the improvements.    However,  the mill  rate  applied                                                               
against the  assessed value in  the area  stays the same  in that                                                               
area as throughout the rest of  the municipality.  The only thing                                                               
generating the additional tax revenue  is increased value because                                                               
of  private  sector  development.   Mr.  Pfeffer  clarified  that                                                               
Representative Scalzi was correct in  regard to the properties in                                                               
the area paying  for the improvement.   However, those properties                                                               
aren't assessed an  additional tax.  "It's the  increase in value                                                               
that occurs  because of the  new improvements added to  the area,                                                               
because public infrastructure has been added," he explained.                                                                    
Number 2381                                                                                                                     
REPRESENTATIVE HALCRO recalled testimony  that one of the reasons                                                               
the Muldoon  project is such  a good  project is because  much of                                                               
the area is  controlled by private hands.   Representative Halcro                                                               
asked if Mr. Pfeffer's suggestion  is to leave in private because                                                               
that  seems  appropriate  if  the  Muldoon  project  is  to  move                                                               
forward.   Otherwise,  Representative  Halcro  surmised that  the                                                               
money couldn't be spent on the property.                                                                                        
MR. PFEFFER related his understanding  that the city doesn't want                                                               
to  see the  proceeds used  to  help pay  for private  commercial                                                               
development.   These  proceeds could  be used  to pay  for public                                                               
improvements such  as sewer,  water, trails,  or even  to acquire                                                               
property  for public  use.   The private  sector wants  to see  a                                                               
commitment  from  the  local  government  in  order  make  public                                                               
improvements in  the area.   Because  [the private  entity] knows                                                               
those  public  improvements  are  going to  occur,  the  [private                                                               
entity]  is  willing  to  make  private  investments  on  private                                                               
property.  Mr.  Pfeffer said that there may be  some instances in                                                               
which it would be appropriate for  the TIF to be used for private                                                               
improvements.      However,   those  [instances]   haven't   been                                                               
distinguished yet and  thus we're willing to [go  along] with the                                                               
suggested deletion for now.                                                                                                     
Number 2226                                                                                                                     
REPRESENTATIVE SCALZI  referred to page  2, lines 8-12,  which he                                                               
read  to  say  that  the municipality  isn't  obligated  to  make                                                               
payments to  those bonds issued  for a special  assessment, while                                                               
there  is no  prohibition against  the municipality  collecting a                                                               
different  tax rate  for  that particular  area.   Therefore,  he                                                               
asked if,  under current  statute, [the  private entity]  has the                                                               
ability   to  have   differential   tax  mill   rates  within   a                                                               
MR. VAN SANT replied yes.                                                                                                       
REPRESENTATIVE  SCALZI  inquired  as   to  why  that  section  is                                                               
included.   He  reiterated his  earlier question  as to  why this                                                               
legislation is even necessary.                                                                                                  
MR. VAN SANT  answered that he didn't know why  [the section] was                                                               
REPRESENTATIVE SCALZI  related his  impression that  this ability                                                               
is already available [under current statutes].                                                                                  
Number 2057                                                                                                                     
TIM  ROGERS,  Legislative  Program Coordinator,  Municipality  of                                                               
Anchorage, testified  via teleconference.   Mr.  Rogers explained                                                               
that  under the  TIF  the  mill rate  isn't  being increased  but                                                               
rather the proceeds of the  increased assessed valuation is being                                                               
pledged in order to pay for  the improvements.  Although this may                                                               
be a fine  differentiation, it is a significant one  in regard to                                                               
the purposes of redevelopment of blighted areas.                                                                                
REPRESENTATIVE MURKOWSKI, in  regard to why HB  521 is necessary,                                                               
explained  that  HB 521  was  advanced  in  order to  expand  the                                                               
definition  of  improvement area  so  that  the undeveloped  area                                                               
around   the  blighted   area  could   be  incorporated   in  the                                                               
definition.   Furthermore, the  legislation clarifies  that there                                                               
is an  option to  choose between  revenue bonds,  GO bonds,  or a                                                               
combination of the two.                                                                                                         
REPRESENTATIVE  HALCRO related  his  belief  that the  difference                                                               
[between current  statute and HB  521] would be in  the repayment                                                               
mechanism.  Currently, the system  operates under the notion that                                                               
the  mill rate  will stay  the  same.   However, the  development                                                               
through the bond  process will result in an  increase in property                                                               
tax values, which will be pledged  to repay the debt service.  On                                                               
the other hand,  with special improvement districts  a tax credit                                                               
is given  for a  couple of years  and then it  has to  be repaid.                                                               
Again,  if the  property values  decrease, Representative  Halcro                                                               
questioned  from where  the revenue  would come  to pay  the debt                                                               
REPRESENTATIVE SCALZI asked  if more money is  being budgeted for                                                               
Board of Equalization hearings.                                                                                                 
MR. ROGERS  replied no.  Mr.  Rogers turned to revenue  bonds and                                                               
clarified that  the bond holders,  not the city, would  be taking                                                               
the risk in  regard to whether the property values  rise or fall.                                                               
For  example,  in  a  situation  in  which  the  property  values                                                               
decreased and  there were no  incremental taxes to fund  the debt                                                               
repayment, the bond  holders would face the risk.   The taxpayers                                                               
wouldn't be sought to [pay] the difference.                                                                                     
Number 1751                                                                                                                     
DEVEN MITCHELL,  Debt Manager,  Treasury Division,  Department of                                                               
Revenue,  provided the  following clarifications.   In  regard to                                                               
the  ramifications  for a  community  utilizing  a GO  bond,  Mr.                                                               
Mitchell pointed  out that a community  must vote to pass  the GO                                                               
bond.  Therefore, the input in  regard to the willingness to take                                                               
the  risk  that the  TIF  would  be  insufficient would  be  done                                                               
upfront.   In regard to the  comment that an investor  would take                                                               
all the risk  when using a revenue bond,  Mr. Mitchell disagreed.                                                               
He  pointed  out that  assemblies  and  city councils  will  have                                                               
flexibility  when  structuring  revenue   bonds.    In  order  to                                                               
[obtain]  investment grade  revenue bonds,  probably more  than a                                                               
tax  increment  as security  to  bond  holders will  be  required                                                               
because otherwise  it would become  speculative and  require more                                                               
paid in  interest.  Again, that  would be a decision  made at the                                                               
local level.                                                                                                                    
MR. MITCHELL turned  to the difference between an LID  and a TIF.                                                               
He  identified  a  potential  difference   with  an  LID  as  the                                                               
increment on the taxes.   Furthermore, the taxes increase because                                                               
of  the improvements.    Therefore,  one would  be  taxed at  the                                                               
increased rate on  the increased value.  However,  with the [TIF]                                                               
there  is no  increased rate  but rather  the difference  in what                                                               
would otherwise would be paid.                                                                                                  
MR. MITCHELL  pointed out that the  private improvements included                                                               
in  HB 521  allows  the  use of  tax  exempt  financing within  a                                                               
municipality for essentially private  projects.  He characterized                                                               
this as  perhaps an  unintended consequence.   He  explained that                                                               
under the  tax code  revisions of  1986 each  state is  allowed a                                                               
private activity cap allocation,  which is currently $225 million                                                               
for Alaska.   This money  is available for certain  mortgage loan                                                               
programs,  student  loan  programs, redevelopment  projects,  and                                                               
industrial development  projects.  With the  current language [in                                                               
HB 521]  if a  developer convinced  a municipality  to ask  for a                                                               
private activity  cap, then part  of the $225 million  tax exempt                                                               
financing would be used to fund the private project.                                                                            
CO-CHAIR  MEYER  inquired  as  to  whether  [the  department]  is                                                               
supportive of the bill.                                                                                                         
MR. MITCHELL answered  that [the department] is  indifferent.  He                                                               
commented that  HB 521  allows development in  areas where  it is                                                               
probably needed.  How [the  legislature] wants to use the state's                                                               
limited ability  to finance  things on  a tax  exempt basis  is a                                                               
state decision.                                                                                                                 
REPRESENTATIVE  KERTTULA  related   her  understanding  that  the                                                               
federal law  allows the  state the  ability to  grant up  to $225                                                               
million.  She surmised that there isn't a fund somewhere.                                                                       
MR. MITCHELL further explained that  since the federal government                                                               
took away  the ability to finance  things on a tax  exempt basis,                                                               
the federal  government provided  the aforementioned  annual cap.                                                               
Therefore, each  state has  to decide  how to  use this.   Alaska                                                               
primarily  uses   this  cap  for   the  Alaska   Housing  Finance                                                               
Corporation's  (AHFC)  First-Time  Homebuyer's  program  and  the                                                               
student loan program.   He noted that it has  been used for power                                                               
projects  that  the  Alaska  Industrial  Development  and  Export                                                               
Authority (AIDEA) has developed.   Alaska has the minimum cap and                                                               
[has about the same number of requests as the cap can fill].                                                                    
Number 1425                                                                                                                     
REPRESENTATIVE KERTTULA  inquired as  to how much  of the  cap is                                                               
utilized for  student loans  and First-Time  Homebuyer's program.                                                               
She asked if the cap is currently being met.                                                                                    
MR. MITCHELL  replied yes, the  cap is  fully utilized.   The cap                                                               
was  increased in  2001 and  2002  to its  current $225  million.                                                               
However,  the  First-Time  Homebuyer's   program  has  been  very                                                               
successful and takes whatever it can from the cap.                                                                              
REPRESENTATIVE KERTTULA  surmised then  that [passage of  HB 521]                                                               
would place  more pressure  on the  private activity  cap because                                                               
more applicants will want to use that [financing].                                                                              
MR.  MITCHELL answered  that such  would  be a  potential if  the                                                               
private improvement  [language is left in  HB 521].  If  the bill                                                               
merely refers to public improvements,  then the pressure wouldn't                                                               
be there because  it would be limited to what  could otherwise be                                                               
financed with tax exempt financing.                                                                                             
CO-CHAIR MORGAN asked if any other organizations use this cap.                                                                  
MR. MITCHELL specified that AIDEA  does utilize the cap. However,                                                               
AIDEA is project  driven and thus hasn't made a  request for some                                                               
time.   He noted that last  year, the North Slope  Borough made a                                                               
request for  a clean water  project at a  BP facility.   Over the                                                               
last couple  of years,  the primary  users of  the cap  have been                                                               
AHFC  and the  student loan  program.   The student  loan program                                                               
uses about $30 million a year.                                                                                                  
Number 1288                                                                                                                     
REPRESENTATIVE   MURKOWSKI  moved   that   the  committee   adopt                                                               
Amendment 1:                                                                                                                    
     Page 1, line 6,                                                                                                            
          Delete "or private"                                                                                                   
There being no objection, Amendment 1 was adopted.                                                                              
Number 1195                                                                                                                     
REPRESENTATIVE HALCRO  moved to report  HB 521 as amended  out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
zero fiscal  note.  There  being no objection, CSHB  521(CRA) was                                                               
reported from  the House Community and  Regional Affairs Standing                                                               
There being no further business before the committee, the House                                                                 
Community and Regional Affairs Standing Committee meeting was                                                                   
adjourned at 9:31 a.m.                                                                                                          

Document Name Date/Time Subjects