Legislature(2019 - 2020)Anch LIO Lg Conf Rm
04/30/2020 09:00 AM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Community Invited Testimony on Covid-19, Coronavirus Aid, Relief, and Economic Security Act (cares Act) Funding | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
ANCHORAGE LIO
April 30, 2020
9:02 a.m.
9:02:17 AM
[Note: meeting took place in the Anchorage LIO and was
recorded from Juneau.]
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 9:02 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Jennifer Johnston, Co-Chair
Representative Dan Ortiz, Vice-Chair (via teleconference)
Representative Andy Josephson (via teleconference)
Representative Bart LeBon (via teleconference)
Representative Kelly Merrick (via teleconference)
Representative Colleen Sullivan-Leonard(via teleconference)
Representative Cathy Tilton (via teleconference)
Representative Adam Wool (via teleconference)
Representative Gary Knopp (via teleconference)
MEMBERS ABSENT
Representative Ben Carpenter
ALSO PRESENT
None
PRESENT VIA TELECONFERENCE
Nils Andreassen, Executive Director, Alaska Municipal
League, Juneau; Paul Ostrander, Kenai City Manager, Kenai;
Lucy Nelson, Mayor, Northwest Arctic Borough, Kotzebue;
Bill Roberts, Mayor, Kodiak; Michael Powers, Manager,
Kodiak Island Borough, Kodiak; Jason Bockenstedt, Chief of
Staff to Ethan Berkowitz, Municipality of Anchorage,
Anchorage; Verne Halter, Mayor, Mat-Su Borough, Wasilla;
Bryce Ward, Mayor, Fairbanks North Star Borough, North
Pole; Gregg Brelsford, Manager, Bristol Bay Borough,
Naknek; Cynna Gubatayao, Finance Director, Ketchikan
Gateway Borough, Ketchikan; Speaker Bryce Edgmon;
Representative Matt Claman; Representative Ivy Spohnholz;
Representative Geran Tarr.
SUMMARY
COMMUNITY INVITED TESTIMONY ON COVID-19, CORONAVIRUS AID,
RELIEF, AND ECONOMIC SECURITY ACT (CARES ACT) FUNDING
Co-Chair Foster reviewed the meeting agenda. He indicated
the committee would be hearing from municipal governments
regarding the use of COVID-19 response funding.
^COMMUNITY INVITED TESTIMONY ON COVID-19, CORONAVIRUS AID,
RELIEF, AND ECONOMIC SECURITY ACT (CARES ACT) FUNDING
9:04:09 AM
NILS ANDREASSEN, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL
LEAGUE, JUNEAU, read a prepared statement:
Impact lost revenue and expenditures
Many actions occurring at the local level are in
response to CDC guidance or directives and State
mandates; essentially, local lost revenues and
expenditures are tied to State and Federal government
action. Local governments in Alaska share in direct
and indirect costs incurred in response to the public
health emergency. Local budgets are based on economic
activity that is restricted by State and Federal
decisions.
Alaska's local governments are dependent on a healthy
and active economy. Many local economies have single
drivers, which influence the revenues of local
governments. COVID-19 will negatively impact travel
and tourism, retail, fishing and seafood processing,
and may even slow mining, oil and gas. Local
governments may see reductions in tax revenue of as
much as 80-95%, with more likely scenarios of 50%.
This will deplete savings, reduce overall budgets,
escalate the need for increased local taxes, and
affect local ability to pay for essential public
services (including public safety and education) and
service debt. Again, this is occurring mainly as a
result of State and federal mitigation measures.
AML estimates that local government revenues will be
impacted in the short term March through June by
as much as $150 million, and longer-term impacts by
another $100 million. This includes loss of sales,
bed, rental car tax, downturn in the fishing industry
and related fisheries revenue, commercial passenger
vessel fees, utility fee and other tax waivers, public
facility, bingo and pull-tab closures, and non-payment
of property tax, or property tax devaluation. The
latter remains to be determined in terms of what that
impact will actually look like for property tax
dependent local governments.
In addition to these COVID-19 related budget impacts,
local governments are considerate of real and
potential expenditures during this public health
crisis. We have estimated potential expenses for a
variety of needs to be as much as $250 million or
more, which beyond the direct expenses of PPE and
emergency management, includes:
• Mitigation measures within public facilities
• Expanded leave requirements of the FFCRA
• Vulnerable population support
• Social distancing measures for councils,
assemblies and staff
• Reallocation of staff time to meet alternative
schedules or as staff are moved to response
• Administrative expenses, and overtime for staff
filling other roles
• Utility fee and connection waivers
• Workers comp claims/premiums
• FEMA or grant match requirements
• New contracts to replace vendors, transportation,
food, and housing needs
• Postponed project and re-permitting fees
As you can see, our initial estimates of local
government impact are nearly $500 million, with longer
term needs further adding to this. Local governments
will need support from the State through whichever
mechanisms result in efficient and effective
disbursement.
CARES Act restrictions Treasury guidance is helpful
When Congress passed the CARES Act, state and local
governments were very hopeful that the $150 billion
funding provided under the Coronavirus Relief Fund
would help address the challenges at hand. For
Alaska's cities and boroughs, this impact was
specifically felt in the form of unanticipated
expenses and lost revenues.
The CARES Act funding will help with those
unanticipated expenses, as they relate to the public
health emergency. But the restrictions at the federal
level mean that local budgets can't be made whole. In
fact, CARES Act funding will need to be used by local
governments on a wide range of new programs. This, in
many ways, is exciting local governments will be
able to provide additional support to their
community's most vulnerable residents, can work with
nonprofit partners on service delivery, and can direct
funds to individual and business support for those
struggling during the economic impacts of the COVID-19
crisis.
This funding will enable local governments to be
innovative as they work with the community to shore up
community needs, even as they struggle to figure out
how to meet their own.
Alaska's local governments are facing unprecedented
budgetary pressures not just the economic
contraction related to COVID-19 but vetoes of school
bond debt reimbursement and community assistance,
among others that end up not being able to be
backfilled with CARES Act funding. While CARES Act
funding will likely help with the costs that come with
responding to resident and business needs during a
public health and economic crisis, revenue losses that
might equal between 20 and 80% of total annual revenue
are to date not eligible for any relief funding. As
much as we were hopeful for flexibility in using these
funds to meet these budgetary needs, current federal
restrictions will limit the ability for local
governments to make up the difference.
Uncertainty questions but problem solving
Where does this leave us? Planning with a great deal
of uncertainty. Local governments have a proposed
distribution in front of them from the Governor, but
don't know what legislative action will occur. We have
guidance from Treasury that can be narrowly or broadly
construed, but will need federal OMB and additional
Treasury guidance to work through all the what ifs and
compliance issues. Finally, we're in the middle of a
budget process working under a current set of
assumptions, with very little clarity about what the
future holds when it comes to public health needs.
Finally, it is entirely possible that there is further
Congressional action. We just don't know what's
coming.
While local governments have questions about what
funds can and can't be spent on, there is still a lot
of time to work toward better answers. We have time to
work through reporting requirements, documentation,
etc. We can work toward a mechanism to move community
funds between communities, if there is any risk that
the allocation may be unspent or not spendable. We can
work toward a way that ensures recipients provide the
State with the justification for spent funds that it
needs.
Right now, when it comes to uncertainty, local
governments are most concerned with the risk involved.
That won't go away until we have some clear processes
in place, established by OMB. It won't go away until
we receive additional information from Treasury and
the federal OMB, which is going to determine
procurement and audit procedures, as well as further
elaborate on allowable expenditures.
AML has committed to supporting members during this
time, augmenting the capacity of members who need it
for reporting and compliance. We'll expand our member
services portfolio so that we can help manage that
risk in partnership with members.
Insurance two months into multi-year pandemic, and
still 8 months left to spend
Spending of CARES Act funds must occur by the end of
this calendar year, with a look back to March for
expenses already incurred. We're two months into a
potentially multi-year pandemic. We're at a place in
time where Alaska has flattened the curve. Most
importantly, we still have restrictions on interstate
travel that includes quarantine requirements. But we
have a fishing season that's coming very soon, with
tens of thousands of out of state workers coming into
very small communities. We hope to have some kind of
visitor season beginning in July, with in-state travel
already occurring.
While things look manageable right now and that
depends on where you sit CARES Act funding ensures
that local governments have the resources necessary to
respond to needs that are still to come.
It's important to keep in mind just how different
local governments are. Different powers mean different
types of responses. Everyone is practicing social
distancing in different ways. We've had stories of
city staff in small communities ensuring that elders
are safe and have their needs met. Bingo or pull-tab
receipts might seem small losses for one community,
but are similar as tax revenue to others, as a % of
overall budget. Closed facilities have meant layoffs
and furloughs, increased leave taken, and very limited
services in some communities.
Local governments will also experience risk management
and risk tolerance differently. Everyone wants to be
sure they comply with Treasury guidance, that's the
bottom line. No one wants to be responsible for
questionable expenses that need to be recouped at a
later date. So, we'll have to approach this carefully.
Recognizing that concern is important, even as we work
really hard to implement this in support of our
communities.
Making communities whole local control
I want to leave you with some of the good ideas that
have come out of conversations these last few weeks,
as ways to leverage the CARES Act funding in support
of our most vulnerable populations, businesses
impacted by State mandates, overcoming challenges that
residents might be experiencing, and to provide
incentives for employees to come back to work.
1. Purchasing or further developing homeless
shelters, senior centers and childcare
infrastructure
2. Healthcare or childcare assistance for those
returning to work
3. Mortgage, property tax or rental relief and
assistance
4. Grants to nonprofits focused on those with
essential service delivery or that contribute to
economic recovery and quality of life in the
community
5. Grants to businesses focused on small, locally-
owned, or year-round businesses
6. Grants to residents relief where economies have
been impacted by 15% or more decreases
7. Improved food distribution, food bank
investments, local food access, etc.
8. Support for schools, the university and hospitals
9. Marketing for health-informed visitor and retail
activity
10. Projects that improve community access to
safe water and sanitation
Beyond these broad support measures, we've heard ideas
about incentives for residents that wear face
coverings, or otherwise contribute to public health.
Local governments may need to transform how they
continue to provide services to residents. That means
they'll need to implement long-term social distancing,
hygiene, and sanitation measures. Community facilities
will need to be renovated to meet public health
concerns. We'll see enhancements to remote access of
municipal services, including a move toward more
online capabilities that don't exist in most
communities. Local governments will need to partner
with their school districts to enable continued or
enhanced distance learning, support mental health, and
accommodate social distancing measures in congregate
settings.
We know that each of these needs to be tied back to
the public health emergency, as required by the CARES
Act guidance, and each innovative approach that is
applied needs to be justified to the State and
ultimately federal government. We're confident that
these and dozens of other measures that have come
from local governments meet the intent of CARES.
What's most important, from our perspective, is that
local governments are in a position to support their
communities. That is a fundamental priority for local
governments. Together, they have the capacity to
manage these funds with their residents and businesses
in mind, in a way that can be tailored specific to the
needs of their communities. Local control of these
resources is critically important to making sure
Alaska's residents and businesses are supported
throughout the public health and economic crisis.
9:15:44 AM
Co-Chair Foster indicated Speaker Bryce Edgmon was online.
He provided the line-up of testifiers.
Representative Sullivan-Leonard thanked Mr. Andreassen for
his testimony. She, along with the Alaska delegation,
wanted to make sure that communities received funding as
quickly as possible. She asked what kind of conversations
he had had with the U.S. Department of Treasury and the
National Association of Counties (NACO) to access funds
quickly for communities in need.
Mr. Andreasen indicated he was on daily calls with NACO and
National League of Cities (NLC) partners in Washington D.C.
He was encouraged by a call he had had earlier in the week
with treasury officials that outlined and provided better
guidance that he expected to receive more formally in the
near future. They provided some latitude as he mentioned in
his remarks. While the federal government was very clear
that the funds could not be used for lost revenue, they
could be used to support community needs. He was also
hearing that needs were immediate, as many cities were on
the brink across the nation. Some Alaskan communities had
reported having to let go of personnel. It was critical to
disburse funds immediately.
Representative Sullivan-Leonard asked if a particular
route, the revised program legislative (RPL) process or the
direct grant process, was more conducive for local
governments. She wondered if getting the money out to where
it was most needed was more important than which process
was used.
Mr. Andreassen was not in a position to speak to the method
used to disburse the funding. Instead, he emphasized the
importance of getting the funding out to communities as
quickly as possible. Alaskan communities were hurting and
clearly had needs at a time of crisis.
9:19:31 AM
Representative Josephson took the committee back to June
28, 2019 and the governor's vetoes in the range of $440
million. In early July 2019 in a special session, the
legislature swiftly passed HB 2001 which restored about 85
percent of the $440 million in vetoes. He believed the
governor, under pressure, only vetoed about 55 percent of
the restored funds. He noted that AML's members saw a veto
of school bond debt reimbursement, K-12 monies, ferry
system monies, and community assistance funding. He asked
if the legislature should consider restoring the funds in
order to know unequivocally that any treasury guidance
would not hamstring the purpose of the appropriation.
Mr. Andreassen reported that AML was concerned with how to
shore up local government finances and would appreciate the
legislature's consideration in the matter beyond what the
Cares Act could provide. The Cares Act had significant
functionality when it came to how local governments could
support their communities. It would provide a significant
amount of funding for expenditures communities were not
planning on in the current or upcoming fiscal year.
Conversations would still need to take place about the
effects of the vetoes around school bond debt reimbursement
and community assistance for FY 21. He thought state and
local governments would have to work together to determine
what local governments would need in order to avoid taxes,
reductions to services, or additional unemployment at a
time when everyone was hurting.
Representative Josephson mentioned the ongoing discussion
at the federal level about additional funding for states
and cities. United States Senator McConnell seemed open to
the idea but wanted a provision included to preclude
liability for funds that had previously been appropriated
in the CARES ACT. He wondered if the legislature should
encourage the governor to join states wanting discretionary
money that Mr. Andreassen had outlined in his opening
remarks.
Mr. Andreassen responded affirmatively. His understanding
was that the restrictions of the CARES Act funding were
federal limitations. He was aware that the intent behind
getting the funds to local governments was to help local
government. At the federal level, the conditions placed on
the funds restricted the ability for local governments to
do the things they needed to. He encouraged every effort to
be made by local and state governments to apply pressure on
congress. He hoped Alaska's congressional delegation could
be local government champions in the coming weeks by either
fixing the CARES Act to allow for lost revenue or by
creating a new funding distribution with fewer restrictions
that went directly to local governments.
9:24:31 AM
Co-Chair Foster noted the committee had been joined by
Representative Matt Claman.
Vice-Chair Ortiz thought it was clear, through Mr.
Andreasen's testimony, that CARES Act money being provided
by the federal government could be spent to mitigate costs
related to dealing with COVID-19. However, the funding
could not be used to supplement revenue losses experienced
by communities around the state. He queried whether any
flexibility in the use of the funds was indicated in any of
the conversations Mr. Andreassen had had with federal
government officials. He wondered if he was still hopeful
about either a different appropriation from congress or a
change in the terms around the Cares Act funding being used
to supplement lost revenues by municipalities.
Mr. Andreassen reported that the U.S. Treasury had drawn a
hard line about a lost revenue replacement. He was less
confident in the ability to amend the CARES Act to include
lost revenue replacement. However, he was hopeful about the
work congress was doing to create new pathways for funds to
reach local governments with legislation in the works. He
indicated that the Cares Act funding was helpful for local
governments to use for their communities and, at the same
time, suggested that additional measures would be needed to
help shore up budgets at the local level.
Vice-Chair Ortiz suggested that much of the funding would
need to be returned if there were no changes made to the
terms of use for the existing Cares Act funding and with no
additional relief money in sight.
Mr. Andreassen was hearing from municipalities that they
would be able to use the funding. However, it would be
helpful if there was a mechanism in place to redistribute
the funds within a broader allocation. He indicated that if
a community was unable to spend its portion of the CARES
Act funding, it would be important for a provision to be in
place to ensure that the funding could be shared with
another community in need. He thought reallocation was
something to plan for in the near future.
Co-Chair Foster acknowledged Representative Ivy Spohnholz.
He reviewed the list of invited testifiers in the order
they would be heard.
9:29:48 AM
PAUL OSTRANDER, KENAI CITY MANAGER, KENAI thought Mr.
Andreassen had done an excellent job of capturing most of
the concerns of municipalities with his statement. He would
add some things from the perspective of the City of Kenai.
He suggested that the needs varied drastically between
municipalities across the state depending on sources of
revenue. However, every community in the state was hurting
from the current pandemic. He agreed with Mr. Andreassen
that revenue replacement was desperately needed by
municipalities, and the Cares Act did not allow for it.
Mr. Ostrander reported that for decades the City of Kenai
had been fiscally conservative and financially responsible.
He reported no tax increases in the previous 5 years. The
city had a fund policy in place requiring that expenditures
equaled revenues over a 3-year period. Essentially, the
city could not deficit spend. He relayed that the city did
not carry an excess fund balance, as a fund balance of the
municipal purse meant over-taxation. The preparation of the
current budget had been the most difficult of his career
because there were several uncertainties. The borough had
had plans to address deferred maintenance but as soon as
the pandemic hit, it had to restart its budget process. He
mentioned that during the process the city cut over $1
million in capital projects that had been planned for the
following year. He noted furloughing 4 positions and
identifying 3 additional positions that would need to be
eliminated in the following year. The city was also
increasing the amount that employers paid for healthcare
premiums. Even with the steps the city had already taken, a
huge general fund deficit of approximately $760,000 was
projected for the following fiscal year. The city's total
general fund budget was $16.5 million. He reported that in
the remainder of the current fiscal year (FY 20), the
borough anticipated a revenue loss of $600,000. He strongly
encouraged the House to approve the CARES Act request for
proposal (RPL) to the governor, specifically the portion
for direct municipal relief in the amount of
$562.5 million. He noted the importance of distributing the
funds to municipalities and boroughs across the state, as
local control was critical. Municipalities were aware of
the needs of their communities.
Mr. Ostrander expressed concerns about the current guidance
by the U.S. Treasury Department. He noted having talked
with several other municipalities around the state and
found that the interpretation of the guidelines varied
dramatically. The City of Kenai was struggling with
determining the appropriate use of the CARES Act funds. He
recommended guidance from the Office of Management and
Budget (OMB), as communities would likely utilize the funds
in a way that was not appropriate in the eyes of treasury.
It was possible that communities would be asked to return
funding to the federal government if misused. He asserted
that every community was struggling with how to best
utilize the funds. He strongly encouraged the legislature
to approve the request from the governor and to request
clear guidance as to how to spend the money appropriately.
Mr. Ostrander emphasized that the state needed to take the
critical step of encouraging Alaska's congressional
delegation and congress as a whole to pass legislation for
additional stimulus funding that would allow for revenue
replacement for municipalities. He concluded his comments
and made himself available for questions.
9:36:38 AM
Co-Chair Johnston asked if the City of Kenai had used its
bonding capacity. She asked if the city's fund balance
backed up its bonding.
Mr. Ostrander responded that the city had one bond, a
library bond, that was 10 years into a 20-year period.
Essentially, the city had used $2 million of its bonding
capability. It was likely that the city would be using
$5 million to $7 million more of its capacity in the
following several years. He elaborated that the city had
been working on a bluff stabilization project for about 40
years and had finally made progress to the point of
construction which will begin in FY 21 or FY 22. The
project would require significant additional bonding and a
match from the city.
Co-Chair Johnston asked if the fund balance was used to
back the city's bond. She wondered how the city calculated
the needed fund balance. Mr. Ostrander responded that the
city based its' fund balance on the Government Finance
Officers Association's (GFOA) best guidelines. He provided
an example. If the city were to bond for an additional $5
million to $7 million it would increase its' expenditures
in the general fund which would also increase the city's
fund balance range. The guideline was comprised of a
combination of expenditures and the minimum and maximum
fund balances necessary to support expenses in future
years. Co-Chair Johnston suggested that it was a
significant impact on the city's fund balance.
Co-Chair Foster noted the committee had been joined by
Representative Geran Tarr.
9:39:39 AM
LUCY NELSON, MAYOR, NORTHWEST ARCTIC BOROUGH, KOTZEBUE,
reported she had provided a position statement to the
governor and some of the legislative leaders previously.
She wanted to talk about how the federal Cares Act was
impacting the Northwest Arctic Borough. She thanked
legislators for their strong state leadership in addressing
COVID-19 and the transparent and frequent communication
about what was happening. She reported that the economic
impact to residents and communities from COVID-19 had been
sudden and severe. She thought it was important that
federal assistance was accurately targeted to meet the
needs faced by communities.
Mayor Nelson continued that, as explained in her written
position statement, she had concerns about the proposed
payments to communities across the state. She provided a
small history about the borough. The Northwest Arctic
Borough had a population of approximately 7,700 and was
comprised of eleven communities: Ambler, Buckland, Deering,
Kiana, Kivalina, Kobuk, Kotzebue, Noatak, Noorvik, Selawik,
and Shungnak. The borough was scattered across an area of
about 38,000 square miles with no road systems connecting
its communities. The lack of a connecting road system made
residents heavily dependent on expensive travel and
increased costs for the transportation of goods and
supplies. The large geographical size of the borough
hampered its ability to provide adequate emergency and
public safety services and other necessary public services.
Mayor Nelson also provided a general picture of the
borough's finances. The borough had done its due diligence
by being a good partner with the state, at the federal
level, and with local organizations. The borough had
leveraged huge projects with its excess funds including
projects such as the Kivalina evacuation road in the amount
of $4.9 million. The borough had additional bond debt in
the amount of $12.7 million for the Kivalina new school. It
had advanced funding for the Cape Lawson Road project to
facilitate the mobilization of gravel. The project would
begin in the coming spring.
Mayor Nelson reported that more than 50 percent of the
borough's annual budget paid for bond debt for school
construction and improvements. In addition, the borough
helped with local education contributions and scholarships.
The remainder of its operating budget went to public
services such as public safety, fire-fighting, and search
and rescue. The borough had over 140 volunteers that
assisted with emergency needs. The budget also paid for
administrative staffing. Every time the borough experienced
a funding reduction, it had a significant impact on its
ability to provide basic services.
Maynor Nelson indicated that when the borough received the
governor's plan for the distribution of $1.25 billion in
Alaska CARES Act funding to communities a former allocation
method was used to determine the funding amount for each
community. The proposed formula calculation significantly
reduced the funding the Northwest Arctic Borough usually
received for school bond debt reimbursement, community
assistance, Village Public Safety Officer (VPSO) funding.
The borough's VPSO funding was cut drastically by about
$800,000. The CARES Act funding allowed 45 percent of the
state's allocation to go directly to larger communities and
counties above 500,000 residents but did not direct states
to provide the same amount of funding for smaller
communities. She emphasized the large decrease in the
borough's funding. She recognized the importance of the
CARES Act funding it was critical for local governments
to continue to provide local prevention, mitigation, and
response to COVID-19.
Mayor Nelson indicated the borough had been working closely
with all of its communities. The borough had
representatives from all of its villages and
representatives from all of its local organizations on its
COVID-19 Task Force. The task force had met for over a week
to discuss how to slow and prevent the disease. The
Northwest Arctic Borough had not yet had a case in any of
its villages and would continue with the hunker down order
through May 19, 2020.
9:45:00 AM
Mayor Nelson reemphasized that the funding was critical for
maintaining and operating the Northwest Arctic Borough
during the current public health emergency and economic
crisis. The proposed funding of $1.2 million was
significantly less than what the borough usually received
in state aid for community assistance, bond debt
reimbursement, and other grants such as the one for the
VPSO Program. The issue posed a significant problem and had
to be fixed, as the borough could not impose additional
taxes on its residents who were already economically
distressed. Also, Native land was not taxable. Much of the
borough's revenue came from a long-term agreement with
Tech Incorporated and could not be modified or renegotiated
until 2026. Unfortunately, the borough had no other options
to increase revenue.
Mayor Nelson reported that previously the borough was
reimbursed for $4 million of the $6.9 million that it was
obligated to pay. The borough's total debt for 2020 was
$40 million. She had to look at the borough's budget
closely to supplant the previous funding committed by the
state for essential borough services which protected the
lives, health, and safety of residents. Without additional
funding, services would have to be reduced or eliminated.
She reiterated that the borough had done its due diligence
to improve the economic wellbeing of its residents. Any
change in the state's commitment on school bond debt
reimbursement and other grant programs posed a significant
burden on its local communities. For example, through the
Community Assistance Program the borough usually received
$300,000. It shared the funding with every municipality
including the Noatak Indian Reorganization Act (IRA)
Council (Noatak did not have a local municipality). She
furthered that whenever the Community Assistance Program
was reduced, funding to the borough's small local
governments was decreased or eliminated. She concluded that
all of the progress the borough made in improving basic
services like water, sewer, sanitation, fire protection,
search and rescue, and other public service programs over
the previous 20 years were negatively impacted. The
proposed CARES Act distribution of $1.2 million was 70
percent less than the amounts that the borough usually
received in funding from the State of Alaska. At the same
time, the borough's communities were facing increased
expenses responding to COVID-19 as a public health
emergency - a new type of disaster.
Mayor Nelson continued that there were other tangible
impacts resulting from the pandemic included increased
public safety, housing, homelessness, and mental health
issues which had to be addressed. Basic local governments
were being asked to do more with less money during a
national health emergency and economic crisis. The borough
strongly encouraged the state legislature and the House
Finance Committee to reconsider the allocation formula. She
suggested that, at minimum, the state legislature should
include full funding of school bond debt reimbursement and
community assistance through available funding mechanisms.
The Northwest Arctic Borough requested that the legislature
meet the needs of communities during the current
unprecedented times. She thanked members for hearing her
testimony and was available for questions.
9:48:56 AM
Representative Josephson commented that the Mayor's
testimony was very helpful. He thanked her.
Co-Chair Foster commented that the borough operated under a
PILT [Payment in lieu of taxation] system. He noted her
remarks that the borough could not increase revenue and
school bond debt reimbursement was vetoed. Normally, the
options would be that the borough could make up for the
money with increased revenue through increasing taxes such,
as property taxes, or reduce expenses. In the borough's
case, it could not increase taxes. The only option it had
was to make cuts. He asked if his assessment was accurate.
Mayor Nelson responded that the Northwest Arctic Borough
did not tax its residents with a property tax because 10
out of 11 communities were in economic distress.
Co-Chair Johnston asked if the borough had been working
with the tribal governments for additional funding. Mayor
Nelson responded that the borough had been contacted by
several of the tribal communities. She explained that
tribal communities had more power to get additional
funding. The borough had applied for funding through
federal and state programs and had not received any
responses. She explained that the borough was different
from a tribal entity.
Co-Chair Johnston commented, "I realize that does not help
you in your situation."
9:51:13 AM
Representative Wool asked if the health facility in
Kotzebue was under strain presently and whether it was
community owned.
Mayor Nelson responded that the health facility was owned
by Maniilaq Association who managed the clinics in all of
the village locations including Point Hope. She confirmed
that the health facilities were under strain. She
elaborated that there were about 50 participants in the
borough's COVID-19. They were able to get some rapid
testing. The borough had huge concerns since it had not had
a case to-date. She reported that the borough was trying to
prepare should a case arise. There had been high concern
regarding in-state travel. She had reached out to the
governor to have certain mandates in place and a means of
enforcing them, particularly at hub airports. She noted
that people were supporting each other. She mentioned the
Northwest Arctic Leadership Group which included NANA,
Northwest Arctic Borough, Northwest Arctic School District,
and Maniilaq. The group had contributed supplies.
Preparedness in the event of an outbreak would depend on
the resources the borough received.
Representative Wool asked if the borough expected a
seasonal influx like other communities. He queried about
the mine population and whether the mine was separate from
the communities.
Mayor Nelson responded that the mine was separate from
communities. The mine was flying its workers to Anchorage
and housing them there. Travel for essential services was
the only type that was being allowed. The borough had its
public health nurses conducting screening at the airport,
asking passengers about their reasons for travel. The
borough was taking every measure possible to conduct
screening.
9:54:09 AM
Representative Josephson wondered how the funding provided
to tribal entities would help villages as members of AML.
He wondered about a distinction. Mayor Nelson responded
that tribal entities received their funding separately from
the Northwest Arctic Borough. The tribes were responsible
for making their own budget plans and determining how they
spend the funds. The borough had been compiling its own
general fund sources from the 4 entities and local
organizations that were able to contribute such as cleaning
materials and masks. Unless they asked for technical
assistance, they decided how they would spend their money.
Representative LeBon asked about revenue. The mayor had
mentioned that the borough had no property tax. He wondered
about the PILT related to the Red Dog Mine. He asked her to
explain how the funding worked. Mayor Nelson responded that
because the borough's 10 of 11 communities were
economically distressed, the assembly and administration
decided not to impose a property tax. She further explained
that through PILT, a different arrangement and under the
borough's code, it had the authority to enforce a tax on
mining companies. The borough had been doing it for more
than 25 years. In the past the borough had negotiated
agreements in 3-year increments. Currently, there was a 10-
year PILT agreement (2016 2026) in place with an option
to extend it for an additional 5 years. It was based on the
mine's production volume after an annual audit. The
borough's annual budget for 2020 was $28 million, much of
which went towards education and public services.
Representative LeBon noted Mayor Nelson had mentioned that
the Village Public Safety Officer (VPSO) Program had been
cut. He asked if the borough had been unable to fill any
positions in which the borough had qualified applicants
ready to go to work. He also wondered whether the
Department of Public Safety assisted the borough when it
had asked for help in filling the positions with qualified
applicants.
Mayor Nelson responded that in 2019 the grant agreement was
for about $1.1 million which included approximately
7 positions. In 2020 the program had been cut to $353,000
which was equal to 2.5 positions. She had talked to the
Department of Public Safety and the governor. They stated
that if the borough was able to fill the positions, they
would supplant them. Currently, there was one graduate from
the VPSO academy. There were two others who returned home.
There were 2-3 applicants being screened. One other person
came onboard yesterday and another possible person will
come on in June.
Representative LeBon wanted to confirm that if the borough
had qualified applicants ready for the academy and ready to
fill positions, the borough had received support from DPS
to fill the positions. Mayor Nelson responded that
Representative LeBon was correct. The borough had to work
closely with them and provide a justification of increased
positions. The department had been willing to work with the
borough.
9:59:34 AM
BILL ROBERTS, MAYOR, KODIAK, was working with the
governor's office because he thought the appropriation of
Kodiak's CARES Act money was much lower than it should have
been. Even if Kodiak were to get additional CARES Act
money, the rules for spending it were very limited. He
indicated that the largest concern was around the monies
lost through the veto process for school bond debt
reimbursement and community assistance. The reduction of
both items would increase the tax burden of Kodiak's
property owners by about 50 percent. He explained that it
would be incredibly difficult for residents of Kodiak to
backfill bond reimbursement and community assistance
monies. The borough was currently working on the budget but
had delayed submitting it hoping for an answer to the
vetoes and to find out whether the CARES Act money could be
used to help with bond debt. Apparently, the funding could
not be used for bond debt.
Mayor Roberts indicated that one of the borough's largest
problems was timing. It had to have a budget by June 8,
2020. The borough was required to hold 2 public meetings to
pass the ordinance for the budget. The borough was planning
for the worst circumstance because of the foley of the
previous year's budgeting process anticipating a veto
override and incorporating it into the budget. Currently,
it appeared the borough would have to plan for a 50 percent
tax increase in order to fill the funding gap. He was
concerned with the effects a tax increase would have on the
community. He was looking to the legislature to move
quickly to cover some of the costs associated with bond
debt reimbursement and community assistance. He concluded
his testimony.
10:03:04 AM
MICHAEL POWERS, MANAGER, KODIAK ISLAND BOROUGH, KODIAK,
read a prepared statement:
The borough very much appreciates the House and Senate
approving the full school bond debt reimbursement and
community assistance funding this year. However, the
governor's veto, with his hollow promise to make up
the funds, left the borough facing over a $5.8 million
shortfall in debt service, and we are losing over
$300,000 from the community assistance program. This
will result in a nearly 50 percent increase in our
property taxes for every property owner on Kodiak.
While we appreciate the CARES funding and will put it
to use, it cannot replace the funds that were vetoed
by the governor. First of all, there are federal
restrictions that prohibit it. Second, it was
substantially less than what was provided by the
legislature's funding of school bond debt and
community assistance. The lack of flexibility in the
CARES Act funding, the uncertainty of what the rules
will be, and what the federal government may do all
leave Kodiak Island Borough in the lurch.
At the same time as we are addressing COVID-19 issues,
we are having to prepare for a potential second wave
that "experts" are telling us we are likely to face
this fall with unknown impacts at that time. Kodiak
Island Borough has been fiscally conservative for
years, and, like others, have kept our taxes as low as
possible, provide services that our residents demand
in an efficient manner, and keep our expenses in
check. In light of last year's vetoes, we left
positions unfilled, reduced positions, and will
continue to do so this year, as well as, reducing our
capital expenditures at a time when much of our
infrastructure is aging. I would urge you to consider
the impacts of the governor's vetoes and their
devastating impacts both on Kodiak and other
communities and strongly urge you to take action to
restore the funds vetoed by the governor.
Mayor Powers thanked the committee for taking the time to
listening to the borough's needs and the needs of fellow
communities. He was available for questions.
Co-Chair Johnston asked if the borough had a sales tax or
fish landing fees. Mayor Powers responded that the borough
did not have a sales tax measure although the City of
Kodiak did. He indicated that the borough collected
severance taxes for fish landing at the local level as well
as receiving pass-through monies from the state fish
business tax.
Co-Chair Johnston asked who was responsible for providing
public safety - the city or the borough. Mayor Powers
responded that the city provided public safety within the
city limits. The Alaska State Troopers provided public
safety and law enforcement within the borough. He reported
that the borough had 2 fire protection districts that
provided fire protection for the more urbanized areas that
were outside the city limits.
10:07:01 AM
Co-Chair Johnston asked if the borough had a health
authority. Mayor Powers responded affirmatively. He
explained that when the borough was founded it took health
powers. The borough operated a hospital that was leased to
Providence. A long-term lease was in place that provided
for the maintenance of the facility. Providence provided
the health care piece. The borough partnered with
Providence at various times on various issues including
mental health and COVID-19.
Co-Chair Johnston wondered if the city and borough had an
emergency response cooperative agreement. She was trying to
determine where the borough could spend the CARES Act
monies. Mayor Powers replied that by ordinance the city and
borough functioned as a joint unit for emergency
operations. A jointly manned emergency operations center
was in place. The emergency services council, made up of
borough, city, and U.S. Coast Guard personnel, set policy.
The emergency operations center and the emergency
management team operated jointly between city and borough
staff dealing with all emergencies in a joint manner.
Co-Chair Johnston wanted to confirm that the borough would
be able to spend the CARES Act funding on emergency units
and health related items, but it would not help with the
borough's overall budget. Mayor Powers responded, "That is
correct."
10:09:12 AM
Representative Wool gathered from multiple testimonies that
the school bond debt reimbursement seemed to reflect the
largest hole in the budget, and the CARES Act funding could
not be used to backfill the gap. He garnered from the chart
that the borough would receive $3.8 million in CARES Act
funding and the city would receive $11.9 million based on
lost tax revenue. He asked how much the borough was losing
from the removal of school bond debt reimbursement. He also
wondered if much of the borough funding issues would be
relieved if the funding for school bond debt reimbursement
was reinstated.
Mayor Powers replied that the 100 percent loss of school
bond debt reimbursement previously approved by the
legislature was $5.8 million. He concurred that it was a
significant amount of money that would be impacting
residents. He noted there was an additional amount of about
$300,000 lost for community assistance that would otherwise
be used for providing services.
Representative Wool commented that the City of Kodiak had
access to $12 million for COVID related expenses. He asked
if the situation would be similar for other communities
that were not currently experiencing a direct COVID impact.
To his knowledge, Kodiak only had a few cases of COVID. He
wondered if municipal funds could be used for the hospital.
Mayor Powers responded that he could not speak on behalf of
the city. However, the borough was surprised that the city
received a significant amount of money. He wondered how the
money would be used based on the response that had been
necessary to-date and based on the limitations on the use
of the funding.
Representative Merrick thought Mr. Powers had mentioned
that the distribution of the CARES Act funding throughout
the state was inequitable and that Kodiak received less
than it should have. She wondered how much in additional
funding the borough would need if it was used in the manner
in which it was currently designated. Mayor Powers thought
there was room in the CARES Act funding to offset some
direct losses in the community. If the federal government
agreed that such a path was appropriate, the amount of
$3 million to $4 million would be suitable for the borough.
10:13:52 AM
JASON BOCKENSTEDT, CHIEF OF STAFF TO ETHAN BERKOWITZ,
MUNICIPALITY OF ANCHORAGE, ANCHORAGE, read a prepared
statement:
As you can imagine, we did not foresee or account for
a global pandemic when the Municipality of Anchorage
developed our 2020 budget. The ramifications of the
COVID-19 pandemic are immediate, far-reaching, and
will continue to impact residents and communities
across our great state for many months to come. My
comments today will explain Anchorage's steps to
flatten the curve including unexpected expenses to
fight the virus and how we encourage CARES Act funding
to be allocated to local governments. In Anchorage,
we've experienced the majority of the confirmed COVID-
19 cases in our state. As the largest municipality in
land area and population, that's to be expected. The
decision to act early to hunker down and close
businesses and restrict gatherings was not easy,
especially because small businesses are the drivers of
our economy, but it helped us flatten the curve and
saved many lives.
This is an unprecedented health crisis, and protecting
our residents is the most important thing we can do.
All told, to-date we have spent or encumbered more
than $10 million in municipal funds. How have we spent
these funds? Here are just a few ways. We activated
our emergency operations center, reassigning almost
100 municipal personnel and contractors to perform a
wide range of critical needs including collecting and
distributing PPE and coordinating with the hospitals
to track PPE burn rates across the municipality while
also working with DHSS to fight the spread of the
virus by performing contact tracing on every known
case of COVID-19. We placed a significant order for
powered air purifying respirators for our first
responders, reserved hotel rooms for those needing
quarantine, contracted additional medical personnel to
perform screenings, created a system to transport
COVID positive individuals to medical appointments and
COVID-suspected individuals to testing sites, and
stood up temporary mass shelter space and quarantine
facilities.
Additionally, we have postponed certain non-life,
safety, and annual inspections for small businesses,
reduced building permit fees by 25 percent for the
remainder of 2020, and postponed our personal property
and business property tax collection date. We have
completed all of this and more to prevent our
hospitals from becoming overwhelmed and to protect our
most valuable residents. We did this knowing full well
that as the primary transportation and healthcare hub
in Alaska losing control of the virus in Anchorage
could devastate the entire state. We knew that
hunkering down would hurt the economy and our budget,
but it was the right thing to do. And we counted on
the federal government to have our back.
When congress passed the CARES Act to support local
governments like the Municipality of Anchorage for
doing the right thing we were encouraged. Now we are
concerned that the law is being interpreted
incorrectly and narrowly and in a way that will make
the relief less effective. We are here to discuss how
federal CARES Act funds should be allocated to local
governments.
Clearly, we all have a major stake in this decision.
We need these funds to provide needed flexibility for
all of our unknown issues yet to come. Instead of
getting into the political fray and jurisdictional
issues, I would simply encourage anyone concerned
about CARES Act interpretation to consult the letters
sent by both sides of the aisle in the U.S. Senate to
Secretary Mnuchin about how funding was intended to be
used. Excerpts particularly poignant from democratic
and republican letters from earlier this month include
these statements clarifying congress' intent: "In the
midst of an economic collapse, the intent of the
entire CARES Act is to provide flexible help to a wide
range of Americans. To prevent the flexible use of
these relief funds is a choice that is neither
required nor intended by law."
Also, in a letter led by Alaska senators Murkowski and
Sullivan, and signed by almost 20 members of their
caucus, their letter states, "The purpose of the
Coronavirus relief fund is to provide flexibility to
state and local governments including those under
500,000 to fill the gaps in economic response
inevitably left by the one-size-fits-all federal
programs." From these statements it's abundantly clear
the intent of congress is to allow for these funds to
replace lost revenue by local government. As
legislators, each of you know how important it is that
your intent be honored by the executive branch.
Congressional intent is clear here. This was not
partisan legislation. A $2.2 trillion stimulus bill
passed unanimously.
Furthermore, this intent is strengthened because many
of the direct expenditure incurred as we respond to
this pandemic are already eligible for reimbursement
by the Federal Emergency Management Agency (FEMA).
CARES Act funding received by local governments
supplements funds that local governments would receive
as FEMA reimbursements. It is incorrect to assume that
the CARES Act must be the source of all reimbursement
for the COVID response.
The most significant effect COVID-19 will have on our
budgets is through lost revenues. Not only is one of
our major industries, tourism, particularly hard hit
by cruise ship cancellations throughout the state, we
will also have fewer landings at the Ted Stevens
Anchorage International Airport, reduced group and
independent travelers coming to our area, and we
already know our hoteliers will experience a dramatic
drop in guests. This means a major loss in bed tax and
rental vehicle tax revenues. CARES Act funding to the
municipalities will be used immediately so we can
protect tax payers and recover the lost revenue from
these unpredictable downturns in expected revenue we
contemplated last year when planning our 2020 budget.
The purpose of the CARES Act is to infuse money into
our economy while helping local governments cover
costs related to the COVID-19 pandemic. I encourage
the legislature and the governor to contemplate this
as you work to allocate this major infusion of
recovery funds from the federal government. Each
community in our state has important needs. However,
it can't be ignored that Anchorage has the largest
population center with 3 major hospitals, the largest
airport, and the Port of Alaska that provides goods to
over three-quarters of the state bares the brunt of
the responsibility to help keep residents safe.
As you work with the governor to determine where the
funds should be allocated, the residents of the
Municipality of Anchorage and I hope you will keep
this in mind and help us build a stronger, more robust
future, with adequate and appropriate CARES Act funds.
I would be remiss if I didn't acknowledge the many
people who helped get us here today. To me it's
actually the silver lining of this entire situation
and a meaningful reminder of what it means to be
Alaskan. We take care of one another. I'd like to
close by saying I've been privileged to witness people
coming together to benefit the greater good.
On behalf of the mayor of Anchorage I'd like to thank
the first responders and medical personnel who
continue to protect our communities, the residents of
the municipality who hunkered down despite the
hardships, the business owners who adapted their
business models on the fly to keep serving patrons
during these unprecedented times, the municipal
employees who continue to go above and beyond to
provide critical services residents depend on,
Senators Murkowski and Sullivan and Congressman Young,
the Alaska Legislature, the governor, and all of the
people across the state who assist those in need even
though it may go unnoticed. Thank you. Thank you.
Thank you. You are what sets our state apart from all
the others. You are why we flattened the curve. You
are the reason why Alaska is still the best place to
call home.
Mr. Bockenstedt made himself available for questions.
10:22:17 AM
Representative LeBon noted the formula for allocating the
CARES Act funds. He asked if the he had an opinion about
the allocation. Mr. Bockenstedt responded that Anchorage
had significant expenses. If part of the intent was for the
city to cover school bond debt reimbursement, municipal
assistance, and other expenses, the allocation Anchorage
was scheduled to receive through the governor's proposal
would not be enough. The city would still need to rely on
the federal government to continue to step in with future
funding to help cover additional expenses.
Co-Chair Johnston asked how much the city expected to
receive from FEMA. Mr. Bockenstedt explained that his
understanding of the FEMA reimbursement and the process the
city would go through was that FEMA would reimburse the
city for close to 75 percent of some of the costs it had
incurred.
Co-Chair Johnston asked if expenses included the city's
emergency operations. Mr. Bockenstedt responded in the
affirmative.
Co-Chair Johnston asked if there were any other costs the
FEMA funding would cover. Mr. Bockenstedt explained that
one of the things the city did when the City of Anchorage
declared an emergency was to create different accounting
codes for all of the expenses it incurred and would
continue to incur. He indicated the city would attempt to
get reimbursed for all of the expenses it had incurred.
Anchorage would have to have a conversation with FEMA about
what qualified for reimbursement and a corresponding
amount.
Co-Chair Johnston mentioned $2.8 [million] in the state
budget. She clarified that FEMA would reimburse 75 percent
first, followed by CARES Act funding. She asked if she was
correct. Mr. Bockenstedt responded that Representative
Johnston was correct. He noted that the $2.8 million she
had referenced was part of the funding vetoed by the
governor.
10:26:44 AM
Representative Josephson thought Mr. Bockenstedt sounded
more bullish than other officials and that it might be
better to beg forgiveness than ask permission. He wondered
if he thought Secretary Mnuchin had not read or understood
the senate's intent and that the city should proceed to
aggressively use the funds in the hopes they would not have
to be restored. He asked if he was accurate. Mr.
Bockenstedt responded that it was exactly how the city saw
it. He explained that while the term "lost revenue" did not
specifically fall under the CARES Act, the city's
interpretation assumed that lost or delayed revenues were a
direct cost created by the virus, and they were never
accounted for in any budget.
Representative Wool thought it would be the responsibility
of the state to reimburse the federal government if CARES
Act monies were spent inappropriately. He queried Mr.
Bockenstedt's understanding. Mr. Bockenstedt concurred with
Representative Wool's understanding. He added that the
city's view was that the guidance was incorrect. The clear
intent, based on all of the letters he had seen sent to
Secretary Mnuchin from members of congress, was that lost
revenues should be an allowable expense which was what the
City of Anchorage was banking on.
Representative Wool hoped that lost revenue replacement
would be allowed. He was aware of congress contemplating
another bill that would specifically address lost revenues.
He concluded that because they were addressing a bill
specific to lost revenue implied that the intent of the
CARES Act funding was in question. He suggested that
Anchorage had some legitimate COVID-19 expenses
potentially more than other communities. He believed the
city would be receiving a large amount of funding from the
federal government according to the formula. He also asked
for the amount of school bond debt reimbursement Anchorage
was lacking. Mr. Bockenstedt thought the state's share was
about $42 million.
Representative Wool asked if the amount was Anchorage's
share or the full budget item. Mr. Bockenstedt clarified
that $42 million was the full portion of the state's share
of school bond debt reimbursement for Anchorage.
10:31:24 AM
VERNE HALTER, MAYOR, MAT-SU BOROUGH, WASILLA, thanked
members for allowing him to testify. He hoped that some of
things brought up by the City of Anchorage were accurate.
He would be researching some of the information from an
audit, finance, and legal stand point. He thanked the
governor and others for the way in which they had handled
the pandemic. He appreciated what had been done by the
State of Alaska. The Mat-Su Borough's case count as of the
previous day was 21. The borough had been able to keep the
numbers down.
Mayor Halter stated that budgeting was what it was all
about for the Mat-Su Borough. The borough's dilemma had to
do with the governor's veto of school bond debt
reimbursement and community assistance totaling about $18
million for the Mat-Su. The borough would have to impose a
2 mil increase on property taxes to compensate for the
loss. It did not want to have to tax its citizens based on
the impact of the pandemic. He opined that many people
would struggle with paying additional property taxes. The
economic devastation to the oil industry and tourism
affected the borough significantly. He also noted the
devastation to small family businesses. The borough was
beginning a survey about how small businesses had been
impacted by the pandemic. The borough had to close its
budget around June 1. He reiterated the huge imposition on
property owners if the borough had to raise property taxes
by 2 mils. If the borough were to keep the mil rate the
same, it would have to make substantial reductions. Those
reductions would lead to eliminating a large capital
project program. The loss of $18 million in state revenue
could virtually eliminate the program for FY 21.
Mayor Halter continued that in addition to eliminating
another $5.1 million in related staffing support items, the
reduction could eliminate 66 capital projects for a total
of $12.9 million. He explained that 25 of the 66 projects
were construction projects for $6.5 million, and 34
projects were non-construction projects for $6.4 million.
The total loss to businesses and the negative impact would
affect 245 local contractors, subcontractors, and
suppliers. If the borough did not receive the school bond
debt reimbursement money and did not raise its property
taxes, it would have to move in the direction of
significant capital budget cuts. He noted that the borough
was at 10.338 mils approaching its cap of 10.5 mils. He
argued that it was not the time to eliminate its capital
budget. He thought it was the perfect time to work on
capital projects.
Mayor Halter welcomed Anchorage's interpretation of the
CARES Act. He thanked the federal government and the state
for the CARES Act money. He indicated that the Mat-Su
Borough, the City of Palmer, the City of Wasilla, and the
City of Houston were allocated certain monies under the
CARES Act. He was concerned about the restrictions on the
use of the funding. He suggested that whether the CARES Act
money could be used to make up for the revenue in the
borough budget was debatable. He urged the legislature to
re-fund school bond reimbursement and community assistance
monies as soon as possible to allow for accurate budgeting
by municipalities with a budget deadline of June 1.
Mayor Halter mentioned the borough experiencing a streak of
disasters including the Sockeye Fire in 2015 which
destroyed 55 or 60 homes, a cyber-attack on the borough's
information technology system, and the earthquake. The
borough still had schools that had not been repaired from
the earthquake. He noted the McKinley Fire from 2019 which
burned 50 or 60 homes followed by the Willow-Creek Flood at
Christmastime 2019. The pandemic was the most recent
disaster experienced by the borough. He emphasized that it
had been stretched thin and had absorbed many of the costs
in its budget. However, the Mat-Su Borough was at a point
that it could no longer take on extra costs. He was aware
that other communities were experiencing many of the same
hardships associated with the pandemic. He suggested that
in the short-term the State of Alaska needed to fund the
school bonds which might allow the borough to meet some of
the challenges it faced.
Mayor Halter supported the second-tier uses of the CARES
Act funding to help businesses. The borough had several
businesses that had been negatively impacted and might not
survive into the future. He welcomed the opportunity to
help small businesses with some sort of program. He also
welcomed help from the State of Alaska to meet the school
bond debt of about $18 million the borough's portion was
just over $16 million. He recalled that at the time the
funding was vetoed the governor stated the money would be
backfilled. He hoped the governor thought similarly to the
City of Anchorage. He would be directing his staff to do
some research on the legislative history of the CARES Act
and supported more flexibility to any future CARES Act
funding.
Mayor Halter spoke of the borough's bed tax revenue
potentially declining 60 percent to 70 percent. At the same
time, if the borough were to have to absorb the school bond
debt and community assistance debt, it would have to
strengthen its emergency services and its ambulance
service. The growth of the Mat-Su Borough was the highest
in the state. The borough's population was growing by about
1000 people per year. The borough helped with ambulance
services and getting more personnel during the pandemic.
The borough would be thoroughly restricted from continuing
its help with emergency services if it had to absorb the
school bond debt and community assistance.
Mayor Halter reported being a believer in jobs. The capital
budget was needed to get jobs out on the street. If the
borough could not use the CARES Act money to backfill its
revenue, then the State of Alaska should refund it. He
hoped the governor would not veto it. He was unsure how
long the pandemic would last, but the Mat-Su Borough's
FY 21 budget was critical and capital projects would extend
into the future 4 or 5 years. He thanked the members and
fellow boroughs for participating. He hoped the CARES
allocation would reflect respect. He was available for
questions.
10:40:34 AM
Representative LeBon asked if the borough's revenue cap
allowed for expansion to cover the school bonds.
Mayor Halter responded that the tax code ordinance would
allow the borough to go beyond the 10.5 mil cap. However,
he anticipated a decline in property values in the Mat-Su
Borough. He also assumed there would be a decline in
housing starts. The borough was hesitant to raise property
tax considering the struggle for many people. He believed
if the state were to fund school bond debt, there would be
a good argument for the borough to reduce the mil rate by 1
mil to help people that were struggling.
Representative LeBon asked the mayor if he had an opinion
regarding the funding distribution formula for the CARES
Act monies. Mayor Halter was pleased with the allocation
the governor proposed for the Mat-Su Borough. He would not
compare the borough's funding with anyone else's. He
thought that if the borough used the money with the current
restrictions, it could put out programs to businesses to
assist them. The borough would like to add EMS personnel
and purchase at least 4 new ambulances. He also noted the
importance of propping up the Mat-Su's Convention and
Visitor's Bureau (CVB) because of the current decline in
revenue. He explained that the borough and the CVB shared
the bed tax funding. He also reiterated the importance of
supporting the borough's capital projects.
10:43:34 AM
Co-Chair Johnston asked if the Mat-Su Borough had Health
authority or public safety authority. Mayor Halter
responded that the borough did not, as it was a second-
class city. The borough did not have police powers or
health powers. However, the borough had EMS. He noted that
the Mat-Su Fire department had fought 2 fires in the prior
2 days.
Co-Chair Johnston noted the fires could be seen from
Anchorage.
Mayor Halter commented that, unfortunately, people in the
borough were almost specialists in disaster. The borough
was growing with rural areas and high concentration areas.
Roads, fire, EMS, and ambulances were extremely important
to the borough and needed to be improved.
Co-Chair Johnston asked if there was an emergency response
center in the borough. Mayor Halter responded affirmatively
that it was through the City of Wasilla. There was some
talk about changes being made. He deferred to the director
of EMS.
Co-Chair Johnston wondered if he thought CARES Act funding
could be spent on the emergency response center, EMS, or
small businesses in its communities. Mayor Halter thought
all would apply. He restated that he would have his staff
look into the matter. It was up to interpretation but would
relieve budgeting at a critical time.
10:46:34 AM
Representative Wool was referring to a document in front of
him regarding a list of legitimate expenses. It listed
emergency medical response expenses including emergency
medical transportation. However, he was under the
impression it had to be related to COVID-19. He wondered if
the expense had to be validated as a COVID-19 expense. He
asked if Mayor Halter's interpretation was similar. Mayor
Halter responded that it seemed like it was. He thought an
argument could be made for using the funding for ambulances
and increased staff due to COVID-19 rather than using it
for school bond debt. School bond debt was causing the
borough the most budgeting stress. He continued to argue
that municipalities should be able to use CARES Act funding
for lost revenue. The state should at least re-fund school
bond debt reimbursement and community assistance to help
municipalities meet current challenges.
Representative Wool appreciated the mayor's message. He
understood that additional information was coming from the
federal government. He queried the amount of the borough's
sales tax. Mayor Halter responded that the City of Palmer,
the City of Wasilla, and the City of Houston all had a
sales tax. The three cities also received sizable
allocations of CARES Act funds. The Mat-Su Borough did not
have a sales tax. However, it was estimated that 75 percent
of revenue produced by sales tax within the cities came
from residents outside of the cities borough residents. A
borough sales tax had been on the ballot twice and voted
down twice.
10:50:08 AM
BRYCE WARD, MAYOR, FAIRBANKS NORTHSTAR BOROUGH, NORTH POLE,
commented that as the legislature considered any changes to
the distribution formula, he thought it needed to be fair
and equitable. There were some challenges with the
methodology that was used. There was also a question about
the fairness of the allocation of resources based on
residential population or economic impact. He thought the
legislature should be committed as well as local
communities to using the funds to provide relief in
whichever way possible. The state should not be looking at
sending any money back to the federal government. He
advocated a timely distribution to communities even if it
meant that the distribution could not be changed. The money
needed to be put to good work for impacts communities were
facing. He also thought the legislature should begin
conversations with the governor regarding unexpended funds.
If communities were unable to allocate the available
funding, the redistribution of funds to other communities
needed to be decided on.
Mayor Ward reported that the Fairbanks North Star Borough
conducted a review of the CARES Act and concluded that
funding could only be used for non-budgeted expenses in
response to the public health emergency. He emphasized the
words response and expense. He thought it was very clear,
based on the U.S. Treasury's guidance, that the Cares Act
funding could not be used to supplant or replace lost
revenues that communities might be facing. The U.S.
Treasury provided guidance on 5 categories of allowable
expenses. The first category was medical related costs in
relation to the response to the public health emergency.
The second category was public health response. The third
category was payroll mitigation for public services
employees including police and fire related to the public
health emergency. The fourth category was compliance with
public health mandates and measures as provided by the
local community or the state government. The fifth category
was economic support. The U.S. treasury had provided many
examples of how the funding could be used. He thought with
additional guidance from the state, plans could be
developed for using the funds appropriately.
Mayor Ward continued that it was important that as the
legislature considered how the funds would be used by the
municipalities and local governments, it recognized there
were 2 different aspects to consider. The first aspect was
true municipal relief which was the intention of the
governor early on in his proposal. However, he did not
believe the funds could be used in the manner proposed by
the governor. The use of the funds had to be related to
expenses incurred due to the public health emergency. Some
of the expenses the borough thought would be applicable
were any costs (above and beyond budgeted expenses) related
to manning the emergency operations center, personal
protective equipment (PPE) for emergency response
contractors and technicians, and communication technology
and communication measures used for relaying information
about COVID response to the public. The funding also helped
with a unified command structure as part of response
efforts which the Fairbanks North Star Borough was a
partner. He noted that as the borough looked at the overall
funding allocation, it was estimated that 5 percent to 10
percent of the amount allocated to the Fairbanks North Star
Borough would be used to cover expenses related to COVID
impacts over the next year.
Mayor Ward continued that the other aspect the CARES Act
funding could be used for was local relief. He highlighted
item 5 in the U.S. Treasury guidelines which was economic
relief and economic support. He thought the majority of the
funding could be used in a positive way for local
communities. He thought it would involve standing up
programs such as the Paycheck Protection Program (PPP) and
other type of relief measures that fell under the economic
support category from the U.S. Treasury. In communications
with Alaska's congressional delegation, it was clear that
the intent of the CARES Act funding was to be more flexible
than the actual guidance from the U.S. Treasury Department.
However, in conversations with the delegation, the chances
of changing CARES Act funding requirements seemed highly
unlikely. He thought state and local municipalities should
prepare to use the treasury guidance and develop programs
that fell within that guidance. He added that timeliness
was critically important. The borough was working
diligently with its 2 cities to develop programs in which
the borough could first cover the costs incurred due to
COVID relief and to decide how to best leverage dollars to
provide local economic relief. He was available for
questions.
10:56:54 AM
Representative LeBon thought that neither the City of
Fairbanks nor the Fairbanks North Star Borough had health
powers. Mayor Ward had mentioned that medically related
expenses were eligible expenses in the CARES Act. He
wondered if CARES Act monies could be used to assist the
Fairbanks Memorial Hospital. Mayor Ward thought it was
possible for the borough to develop programs that included
a measure to provide relief to hospitals, clinics, or to
other medical support related to the COVID response.
Representative LeBon asked for input regarding the
allocation for the City of Fairbanks and the Fairbanks
North Star Borough. Mayor Ward responded that on a per-
capita basis and using the funding formula for community
revenue sharing, it was apparent that the allocation
provided to the Fairbanks North Star Borough and
surrounding communities was substantially less than would
have been provided under a different formula. Looking at
the formula the governor considered, there were certain
factors that might not be true indicators of economic
impact or relief. The borough definitely stood to benefit
from a change to the formula based on population.
Representative Josephson asked if he was looking at
expenses that were chargeable to the Cares Act and to the
benefit of the borough. He provided a hypothetical
scenario. He asked if the borough was conducting a detailed
look at allowable expenses. Mayor Ward responded that the
borough was taking a detailed look at all of the expenses
that could potentially be allocated back to the CARES Act
funding. The challenge the borough ran into was that many
of the expenses related to its employees were budgeted
expenses. The borough would have to incur costs above its
budgeted numbers in order to take full advantage of the
funding. He reconfirmed that the borough was looking at
every available option.
11:00:51 AM
Representative Wool appreciated Mayor Ward's
interpretation. He asked how much the borough had spent on
the COVID response to-date. Mayor Ward expected to end the
year at about $500,000.
Representative Wool commented that Fairbanks was looking at
the Carlton Center as a potential overflow location for the
hospital. He wondered if the hospital incurred the expense
of setting it up. It seemed like a public health expense
that would also be a valid COVID expense back-filled with
CARES Act funding. Mayor Ward responded that the Carlson
Center alternative care site for the hospital was resourced
through a state request. The borough was given a mandate
from the governor which meant that the cost incurred for
the facility was being paid for through the Emergency
Operations Center (EOC).
11:02:58 AM
Representative Wool referred to section 5 of the federal
guidelines which talked about economic support besides lost
revenue and businesses that had been interrupted because of
required closures. He wondered if the hospital would
qualify because of being privately owned. Mayor Ward
thought the borough would be able to include the hospital
as a small business potentially eligible for some of the
funding costs. The key would be expenses incurred. Loss of
revenue was not an expense. However, he thought expenses
related to additional PPE, additional staffing, or
additional care measures required by public health guidance
would be eligible. Representative Wool read again from the
federal guidelines. He thanked the mayor for his testimony.
Co-Chair Johnston asked the mayor if the borough
anticipated receiving any FEMA monies. Mayor Ward responded
that he was not aware of any specific FEMA funding coming
to the Borough.
Co-Chair Johnston asked Mayor Ward to restate who would be
carrying the cost for the Carlson Center. Mayor Ward
responded that using the Carlson Center as an alternative
care site was a mandate by the governor and was being paid
for through the state's EOC.
11:06:17 AM
GREGG BRELSFORD, MANAGER, BRISTOL BAY BOROUGH, NAKNEK,
indicated the chairman of the assembly and the borough
mayor were not available, as they were on a radio show
answering community questions about COVID.
Mr. Brelsford thanked Co-Chair Foster and Co-Chair
Johnston. He also thanked the governor, Commissioner Crum,
and Dr. Zink for the time they spent working with the
borough regarding COVID issues. The Bristol Bay Borough was
the first borough established in Alaska. It was formed in
1962 and encompassed 3 unincorporated cities - Naknek,
South Naknek, and King Salmon. It also included 3 Alaska
Native tribes the tribal governments of South Naknek,
Naknek, and King Salmon. The Bristol Bay Borough was the
center of the red salmon [Sockeye] fishing industry for the
world. In a normal year, it had been about a $1 billion
industry annually. Typically, the borough spiked in
population from a year-round population of about 850 to
about 13,000 to 15,000 for the summer fishing season. The
surge would be building in about 4 to 6 weeks.
Mr. Brelsford continued that processors brought in 13,000
to 15,000 workers that they recruited from all over the
world. Fishermen and their crews also came to the borough
for the season. He reported that the borough had a great
deal of good faith cooperation in working with processors,
and fishermen through the Bristol Bay Regional Seafood
Development Association on jointly developing a plan and
strategy for minimizing the harm or risk of COVID coming
into the borough during the season. The group had also
worked on a plan for intervening in any crisis that might
arise.
Mr. Brelsford continued that the other part of the borough
economy was tourism. Katmai National Park resided within
the borough and in a normal year attracted upwards of
40,000 people to Brooks Camp for bear viewing. It was his
understanding that the park did not intend to have a full
season in the coming summer. The park was currently
planning to open July 1, 2020 and expected approximately
10,000 tourists. The borough anticipated traffic through
its airport of 15,000 workers and fishermen and 10,000
tourists during an intense part of the summer.
Mr. Brelsford conveyed the profound need for the $2.5
million allocation in Cares Act funding. He wanted to let
members know how the borough would use the funding. The
borough did not have a hospital. Rather, it had a health
clinic: Camai Community Health Center. The clinic did not
have hospital beds. The Camai Community Health Center had
been in operation for over a decade and had been working
with processors throughout the years. The current
circumstance was very unique with the prospect of the
COVID-19. The borough would use a portion of the CARES Act
funding for the clinic to enhance its testing capability to
be able to test the people flooding into the borough
starting in the next 4 to 6 weeks. Funds would also be used
to stand up a quarantine facility and perhaps a field
hospital. The funds would also be used for staffing for
testing and the facility.
Mr. Brelsford reported that the borough, separate from
Camai Community Health Center, had stood up an emergency
operations command center. It started a mass messaging
system to facilitate being able to reach out to everyone in
the borough at a moment's notice. The borough was also
looking at major enforcement issues to ensure that
fishermen and processor employees complied with all of the
rules and regulations that were being designed to minimize
their contact with the community during the fishing season.
Mr. Brelsford indicated the borough would eventually look
at using a portion of the funding for economic relief and
support for businesses and individuals. The largest concern
for the borough was the potential for a mass infection
event and how it would be handled. The borough was
conducting pre-planning with the state in case of a mass
event in which an intense and rapid intervention was
necessary. He provided an overview of the borough's
planning. He admitted it was a work in progress. Other
communities in Alaska were starting to open up and focus on
the new normal. The borough was focused on preparing for
the coming fishing season and the surge in population. He
reiterated the need for the $2.5 million allocation in
CARES Act funding. He thanked the committee for hearing his
testimony.
11:14:03 AM
Representative Josephson mentioned shifting funding to
communities from some of those that could not use all of
their funding. He asked if he was correct that if the
fishing season was successful, salmon would be sold to
Pacific nations. Mr. Brelsford responded affirmatively.
Representative Josephson asked what the community knew
about the ability of those countries to receive the salmon.
Mr. Brelsford did not have an answer.
Representative Josephson asked if there would be universal
testing for the flood of workers entering the borough and
wondered who would be paying for the tests. Mr. Brelsford
reported that the processers were planning to do initial
screening. He was not sure that they had the materials and
equipment to conduct testing. The Bristol Bay Borough was
pressing the processors to conduct testing. The processors
would be expected to cover the costs of testing. However,
it was possible that the borough would assist.
Representative Josephson thought social distancing in the
processing world was almost impossible. He wondered if the
borough had concerns. Mr. Brelsford responded that the
borough certainly had concerns, but wanted to continue with
the fishing season. He did not deny there were concerns.
11:17:39 AM
Representative Wool asked, if there was a barge facility
that could provide testing, whether the expense would be
legitimate. Mr. Brelsford wondered if Representative Wool
realized he was addressing the Bristol Bay Borough rather
than the Ketchikan Borough.
Representative Wool addressed the same question applying it
to the Bristol Bay Borough. Mr. Brelsford responded that
testing was one of the highest priorities and was
identified in the funding formula.
Co-Chair Foster thanked Mr. Brelsford for joining the
hearing.
11:20:03 AM
CYNNA GUBATAYAO, FINANCE DIRECTOR, KETCHIKAN GATEWAY
BOROUGH, KETCHIKAN, thanked the committee for the
opportunity to speak and share the concerns of the
communities within the borough. She also thanked Governor
Dunleavy, Dr. Zink, the federal government, and all of its
agencies for everything being done to protect its citizens.
She thought that everyone recognized that the actions being
taken to flatten the curve, which had protected the state
and the country, were the very actions that impacted
Ketchikan's local governments the most in terms of lost
revenue. She thought her statement was probably true for
Southeast Alaska in general. She indicated that things like
shutting down local businesses, limiting travel, the no-
sail orders for the cruise industry, had all impacted the
borough.
Ms. Gubatayao reported that borough's FY 21 budget had to
be finalized by the end of the current day in order for it
to be introduced to the assembly on the following Monday.
She concurred with a previous testifier that it had been
the most difficult budget for her to prepare. On March 3,
2020 she had a balanced budget. Approximately 4 weeks later
she was looking at a deficit of $2.4 million in general
funds after cutting everything she could except people. She
also reduced capital funding by about $1 million. Most of
the funds were underwritten largely by sales tax. She
reported that to make up the difference she would have to
eliminate roughly 25 percent of the borough's general fund
budget and shut down major programs such as the transit
program and the recreation department which provided
daycare and children's activities. She indicated that her
estimates on the sales tax decline, 100 percent due to
COVID pandemic, were just guesstimates presently. The
decline could be much worse.
Ms. Gubatayao continued that the greatest fiscal impact of
the current pandemic for the Ketchikan Gateway Borough had
just started. The first 2 cruise ships had not arrived and
a couple more ships would not be arriving in the coming
weekend. The borough had hesitated to furlough employees,
as it did not want to add to the economic fear and pain in
the community. One of the roles of government in such a
time was to offer some measure of stability. She thought
that the CARES Act funding was supposed to be part of that
stability. Unfortunately, based on her reading, the CARES
Act funding did not go far enough. She opined that the
current guidance from the U.S. Treasury was too restrictive
and prevented her from using it to replace lost revenue due
to COVID economic impacts.
Ms. Gubatayao also had capital projects that could generate
jobs locally, but she did not see how she could proceed
with them under the current restrictions. By the same
token, there might be ways she could use the funding to
help local businesses and residents survive the loss of
approximately $200 million in sales activity in the local
economy that was disappearing overnight. She suggested that
opening up the restrictions on the use of the CARES Act
funding and making it more widely useful was a critical
piece. She thanked the committee.
11:23:58 AM
Co-Chair Johnston asked if the borough had an emergency
response center. Ms. Gubatayao responded in the
affirmative. She reported that the borough was currently
operating a virtual EOC. Most borough employees were
working out of their homes. The emergency operations center
was staffed with members from the Ketchikan Gateway
Borough, the City of Ketchikan, the City of Saxman, a
couple of local private businesses including a local
clinic, and some support from Public Health and the U.S.
Coast Guard.
Co-Chair Johnston asked if the borough had public health
authority or public safety authority. Ms. Gubatayao
responded that the borough did not with the exception of
fire and EMS in a couple of service areas. The city had
public health authority.
Co-Chair Johnston suggested the borough was limited as far
as COVID related expenses were concerned under the current
U.S. Treasury guidelines. Ms. Gubatayao responded in the
affirmative but noted that the borough had been working
closely with the state EOC and the Department of Military
and Veterans Affairs who was coordinating with FEMA. The
borough was doing more than it would, based on the
governor's mandates.
Co-Chair Johnston asked if the borough had been working
with FEMA. Ms. Gubatayao responded, "Yes, through the
Department of Military and Veterans' Affairs."
Vice-Chair Ortiz thanked Ms. Gubatayao for her testimony.
He asked about her interpretation of the federal
guidelines. He wondered how much of the funding could be
used and how much would have to be returned. Ms. Gubatayao
indicated that to-date the borough had under $200,000 of
expenses that could be reimbursed between FEMA and CARES
Act funding. There was an additional $300,000 - $400,000
that did not appear to be reimbursable under either
program. The borough had upwards of $2.5 million in lost
revenue. If she could figure out a way to expand the
programs to get funding into the hands of local businesses
and residents, the money would not go very far to make up
for the total lost revenue.
11:27:34 AM
Vice-Chair Ortiz asked if more than 75 percent of the
funding would not be expendable. Ms. Gubatayao responded,
"Potentially." She hesitated to provide a hard and fast
"no." Presently, the borough was waiting for additional
information clarifying the guidelines. The information was
expected in the following week. If the guidelines opened
up, it would change things. Based on what was currently
known, the borough would have difficulty spending the full
sum.
Co-Chair Foster thanked Ms. Gubatayao for her testimony and
asked for any final comments or comments from finance
members.
Representative Josephson commented that the committee had
heard strong arguments for full funding for school bond
debt reimbursement and community assistance. He thought it
was unclear about the efficacy of using CARES Act money in
a broad versus narrow way. He thought erroring on the side
of caution and to help local governments, the
administration's comments seemed amenable to signing off on
the allocations.
Representative LeBon thanked all of the testifiers. He
thought he had heard the need exceeded the funding level
proposed under the CARES Act for the state. He agreed that
the common theme was the need funding for school bond debt
reimbursement and community assistance. He also heard the
need for the guidelines to be expanded to allow CARES Act
funding to be used for the replacement of lost revenue. He
argued that the distribution of community assistance
funding should be based on population numbers rather than
on economic factors which were subjective. He thought the
gap between Mat-Su, Anchorage, and Fairbanks could be
narrowed in a more balanced manner. He suggested it was
something that should be considered by the House Finance
Committee.
11:31:41 AM
Representative Wool thought he had heard several comments
about reinstating school bond debt reimbursement. He hoped
to receive additional guidance from the federal government,
as more clarification was needed. He noted rental relief
and mortgage payments. He spoke of the disparity in funding
allocations. He wanted to see the CARES Act funding spent
by communities that needed it. He hoped the federal
government would lessen the restrictions associated with
the CARES Act monies.
Co-Chair Foster asked Co-Chair Johnston to close the
meeting and review the agenda for the following day.
Co-Chair Johnston thanked the presenters. She thought it
was imperative to get funds out to communities as quickly
as possible. She understood that the federal funds had come
with multiple restrictions. She hoped the limitations would
be clarified by the U.S. Department of Treasury. She
thanked everyone that testified.
ADJOURNMENT
11:36:39 AM
The meeting was adjourned at 11:36 a.m.
| Document Name | Date/Time | Subjects |
|---|