Legislature(2019 - 2020)GRUENBERG 120
04/25/2019 10:00 AM House FISHERIES
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| Audio | Topic |
|---|---|
| Start | |
| HB116 | |
| HB65 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 116 | TELECONFERENCED | |
| += | HB 65 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
April 25, 2019
10:02 a.m.
MEMBERS PRESENT
Representative Louise Stutes, Chair
Representative Bryce Edgmon
Representative Chuck Kopp
Representative Jonathan Kreiss-Tomkins
Representative Geran Tarr
Representative Sarah Vance
Representative Mark Neuman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 116
"An Act relating to the renewal or extension of site leases for
aquatic farming and aquatic plant and shellfish hatchery
operations."
- MOVED SSHB 116 OUT OF COMMITTEE
HOUSE BILL NO. 65
"An Act repealing the fisheries business tax allocation to
municipalities; repealing the refunds to local governments of
fisheries business taxes; repealing revenue sharing for the
fishery resource landing tax; providing for an effective date by
amending the effective date of sec. 36, ch. 61, SLA 2014; and
providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 116
SHORT TITLE: AQUATIC FARM/HATCHERY SITE LEASES
SPONSOR(s): REPRESENTATIVE(s) STORY
03/27/19 (H) READ THE FIRST TIME - REFERRALS
03/27/19 (H) FSH, RES
04/12/19 (H) SPONSOR SUBSTITUTE INTRODUCED
04/12/19 (H) READ THE FIRST TIME - REFERRALS
04/12/19 (H) FSH, RES
04/16/19 (H) FSH AT 10:00 AM GRUENBERG 120
04/16/19 (H) -- MEETING CANCELED --
04/23/19 (H) FSH AT 10:00 AM GRUENBERG 120
04/23/19 (H) Heard & Held
04/23/19 (H) MINUTE(FSH)
04/25/19 (H) FSH AT 10:00 AM GRUENBERG 120
BILL: HB 65
SHORT TITLE: FISH TAX: REPEAL MUNI REFUNDS/REV. SHARE
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/20/19 (H) READ THE FIRST TIME - REFERRALS
02/20/19 (H) FSH, CRA, FIN
04/04/19 (H) FSH AT 10:00 AM GRUENBERG 120
04/04/19 (H) Heard & Held
04/04/19 (H) MINUTE(FSH)
04/25/19 (H) FSH AT 10:00 AM GRUENBERG 120
WITNESS REGISTER
REPRESENTATIVE ANDI STORY
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As the sponsor, provided remarks regarding
SSHB 116.
NILS ANDREASSEN, Executive Director
Alaska Municipal League (AML)
Juneau, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation titled
"Shared Fisheries Taxes and Coastal Alaska Communities"
regarding the effects that HB 65 would be cause.
PAT BRANSON, Mayor
City of Kodiak
Kodiak, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
GARY HENNIGH, City Administrator
City of King Cove
King Cove, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
FARHA KARIM, Assistant Administrator
City of Akutan
Akutan, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
CYNTHIA ROGERS, Planning Director
City of Dillingham
Dillingham, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
CLAY KOPLIN, Mayor
City of Cordova
Cordova, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
GARY PAXTON, Mayor
City and Borough of Sitka
Sitka, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
JON ERICKSON, EdD, City and Borough Manager
City and Borough of Yakutat
Yakutat, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
FRANK KELTY, Mayor
City of Unalaska
Unalaska, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
MARC CARREL
Cordova, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
ANNE BAILEY, Administrator
Aleutians East Borough
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
CHARLES MCKEE
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
JOHN MURRAY
Sitka, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
TANIA HARRISON
Cordova, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
MARY SWAIN, President
Bristol Bay Borough Assembly
King Salmon, Alaska
POSITION STATEMENT: Testified in opposition to HB 65.
ACTION NARRATIVE
10:02:06 AM
CHAIR LOUISE STUTES called the House Special Committee on
Fisheries meeting to order at 10:02 a.m. Representatives Vance,
Tarr, Kreiss-Tomkins, and Stutes were present at the call to
order. Representatives Neuman, Kopp, and Edgmon arrived as the
meeting was in progress.
HB 116-AQUATIC FARM/HATCHERY SITE LEASES
10:02:52 AM
CHAIR STUTES announced that the first order of business would be
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 116, "An Act relating to
the renewal or extension of site leases for aquatic farming and
aquatic plant and shellfish hatchery operations."
CHAIR STUTES noted that on 4/23/19 the committee heard public
testimony and discussed the bill. She said no amendments were
received and there was one letter of opposition. She invited
the bill sponsor to provide remarks.
10:03:20 AM
REPRESENTATIVE ANDI STORY, Alaska State Legislature, as the
sponsor, provided remarks regarding SSHB 116. She explained the
bill would simplify the Department of Natural Resources (DNR)
lease renewal process for aquatic farms. If enacted, the bill
would help Alaska based aquaculture businesses succeed by
reducing administrative burden, expediting the lease renewal
process, and reducing risk for businesses that make significant
capital investments. Further, the bill would reduce workload on
an overstretched state agency while still adequately protecting
the public interest.
10:04:25 AM
REPRESENTATIVE KREISS-TOMKINS stated his support for SSHB 116.
REPRESENTATIVE VANCE said she supports SSHB 116 because reducing
the regulatory and statutory burden on Alaska's small businesses
will help them be successful in the long run. Regarding the
concern expressed by one of her constituents about allowing for
public process in the [proposed] renewal process, she related
that DNR responded that, while it may be a condensed version of
the process, there is a time that [members of the public] can
appeal if they have concerns. So, she continued, the public's
voice will be heard, but it won't be the lengthy public process
as if [the farm owner] was applying for the first time. The
committee has considered that there is still public process
available in this [proposed] renewal process. Regarding the
concern about the size of aquatic farms, she said that aquatic
farms cannot be any larger than one-third of a bay. Any
concerns about larger corporations can be addressed in the
future. She supports SSHB 116 as it stands because it will
allow Alaska's small farms to continue and become profitable.
REPRESENTATIVE NEUMAN noted he talked to the sponsor about the
10-year look back and said he thinks that adds a bit of surety
into the system. Ten years provides a chance for the farm to
get going and determine whether it will work.
10:07:34 AM
REPRESENTATIVE KREISS-TOMKINS moved to report SSHB 116 out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, SSHB 116 was reported
from the House Special Committee on Fisheries.
10:07:58 AM
The committee took a brief at-ease.
HB 65-FISH TAX: REPEAL MUNI REFUNDS/REV. SHARE
10:08:10 AM
CHAIR STUTES announced that the next order of business would be
HOUSE BILL NO. 65, "An Act repealing the fisheries business tax
allocation to municipalities; repealing the refunds to local
governments of fisheries business taxes; repealing revenue
sharing for the fishery resource landing tax; providing for an
effective date by amending the effective date of sec. 36, ch.
61, SLA 2014; and providing for an effective date."
CHAIR STUTES noted the committee would take invited and public
testimony so that affected communities will have an opportunity
to have their voices heard on the issue. She said the committee
would then set the bill aside for further review.
CHAIR STUTES opened invited testimony. She said Mr. Nils
Andreassen has been invited to provide testimony on behalf of
all municipalities regarding what the repeal of the municipal
share of the Raw Fish Tax [also known as the Fisheries Business
Tax] would mean to coastal communities.
10:10:31 AM
NILS ANDREASSEN, Executive Director, Alaska Municipal League
(AML), provided a PowerPoint presentation titled "Shared
Fisheries Taxes and Coastal Alaska Communities" regarding the
effects that would be caused by HB 65. He turned to slide 2 and
pointed out that AML represents 165 cities and boroughs across
Alaska. He said 50 of the municipalities would be affected by
the loss of shared revenue from the Fisheries Business Tax and
the Fishery Resource Landing Tax. These 50 municipalities
represent one-third of all local governments in Alaska. Almost
every House district would be affected to varying degrees, so it
is a statewide issue that is relevant to all Alaska communities,
not just coastal communities. He displayed slide 3 depicting a
list of the communities that would be affected.
MR. ANDREASSEN moved to slide 4 and explained that revenue from
these shared fish taxes are used by local governments to:
maintain ports and harbors and keep them operational in support
of the fishing industry; support local school districts for
education; support public safety and municipal-owned hospitals;
maintain public entities, such as water, sewer, sanitation, and
solid waste; replace gaps in state capital investment; provide
grants to local nonprofits and youth activities; offer quality
of life programs that help give communities the sustainability
to keep residents and industry; and improve the credit ratings
of communities as they bond for debt related to school districts
and other capital projects.
10:13:03 AM
MR. ANDREASSEN explained slide 5 lists the top 20 municipalities
that would be hardest hit in terms of total dollars. For
example, he noted, the impact to the City of Unalaska would be a
total [of $8,162,129 as listed in the column titled "Fish
total"], which is an impact to the city's tax revenue [of 37.21
percent]. The loss of this shared revenue means quite a bit to
each municipality but is often a very small number for the state
in terms of percent of the state's deficit. It wouldn't be a
broad-based impact in terms of equitable or equal distribution
of how these impacts will be felt. Rather, each community will
feel the impact differently and each community's decision-making
will be impacted differently.
MR. ANDREASSEN explained slide 6 lists the municipalities in
terms of being hardest hit as a percentage of tax revenue. For
example, he pointed out, to make up for the loss of shared fish
taxes the City of Larsen Bay would have to increase its local
taxes three times over and the City of Chignik would have to
increase its local taxes by almost two times.
MR. ANDREASSEN turned to slide 7 and reported that the total
impact to the top 37 impacted municipalities is $27 million. He
noted those 37 communities, not including Anchorage, represent
25 percent of Alaska. The average impact for those communities
is $615,000. The average impact as a percentage of tax revenue,
or the amount that would have to be increased at the local level
to make up the state's budget deficit would be almost 30
percent. The characteristics of the top 10 communities impacted
by shared fish taxes include: a total population of almost
100,000; 100 percent of them participate in the state-managed
pension system, which limits their ability to respond to cuts of
this size; total employee base of almost 1,000 people; seven
have property taxes and six have sales taxes; many currently
have bond debt - $455 million plus $131 million in school bond
debt that a loss of $27 million each year would directly impact;
combined they contribute $72 million to school districts; and
three of the communities have hospitals and six have police
powers so they are directly responsible for law enforcement.
10:16:55 AM
MR. ANDREASSEN moved to slide 8 and reviewed the total impact by
Senate district. For example, he pointed out, Senate District S
would be impacted by $17 million.
REPRESENTATIVE EDGMON remarked that every Senate district could
be included if it was wanted to spread the overall force
multiplier impact of these budget cuts because a lot of commerce
that originates in coastal Alaska finds its way through
Anchorage, Fairbanks, Juneau, and all the urban centers of the
state. He said it is worthwhile to amplify the point that the
economic impact is throughout the entire state.
MR. ANDREASSEN displayed slide 9 and resumed his presentation.
He explained the scenarios that would develop if the fish taxes
weren't shared. One scenario would be an increase in taxes and
moorage fees. If seafood prices remained low or flat, the
increase in taxes would quickly result in small vessel and
business owners becoming unviable, which would result in a sell-
off of local small vessels to larger fleets that often belong to
outside owners. The benefits of fleet consolidation would then
accrue outside of Alaska. These scenarios have been talked
about by local governments and experienced historically. At the
same time, maintenance and support of ports and harbors would be
diminished. These are most often state-transferred assets that
came to municipalities in need of repair and the shared fish
taxes allow the municipalities to conduct that appropriately.
10:19:42 AM
REPRESENTATIVE NEUMAN asked what the effect would be on
community taxation to replace the lost share of fisheries taxes.
MR. ANDREASSEN referred to the previous slides and the column
that represents the impact as a percentage of tax revenue for
each community. He explained that this column would have to
increase by that amount, so local taxes would have to increase
by 23 percent or 57 percent to make up the difference.
REPRESENTATIVE NEUMAN observed from slide 5 that the impact to
tax revenue on the City and Borough of Yakutat would be 17.83
percent. He inquired whether Yakutat would have to increase its
taxes 17.83 percent to cover the difference of the lost share of
tax revenue from, say, the Fishery Resource Landing Tax.
MR. ANDREASSEN replied that HB 65 would preempt Yakutat's
collection of that tax. Because boroughs are mandated under
statute to tax, Yakutat would have to either use existing taxes
or find a new tax to make up the difference.
REPRESENTATIVE NEUMAN surmised that would only be in organized
areas. He asked whether unorganized areas can adjust their tax
rates on landing taxes and fish business taxes.
MR. ANDREASSEN responded that incorporated cities within
unorganized boroughs would have to increase their current tax
bases.
10:21:52 AM
REPRESENTATIVE VANCE surmised Alaska's fishing industry would
have to be double taxed because the state would maintain its tax
to capture that. The local communities would then have to
institute their own taxes to be able to maintain that portion of
infrastructure in the localized area and they would take on that
burden individually or by borough and therefore less money would
be in the state's economy. She asked whether her understanding
is correct.
MR. ANDREASSEN confirmed that that is accurate. He said the
reality is based on the variation between municipalities.
Industry would be driven to different locations. So, not only
would there be the necessary tax increase in one community, but
that tax increase in one community that is not felt in another
community would mean that industry could shift between
communities in ways to the detriment of where existing commerce
takes place.
10:23:09 AM
REPRESENTATIVE TARR observed slide 8 includes an item for Senate
district F-N. She inquired whether that means districts F-N as
a group [would have a total fish impact of $53,269] or whether
each individual district F through N [would have a total fish
impact of $53,269].
MR. ANDREASSEN answered it is the combined total of those
districts grouped together. He explained that when it comes to
sorting out municipalities and who represents who, there is a
lot of overlap in weird kinds of ways, especially between
boroughs and cities and therefore it isn't straightforward.
10:24:25 AM
MR. ANDREASSEN resumed his presentation. He turned to slide 10
and noted that AML asked communities around the state to submit
municipal impact statements. He said that while the communities
submitted municipal impact statements in response to the overall
budget, for the most part they apply specifically in relation to
the shared fish taxes. Kodiak would lose 14 jobs, programs
would be reduced or eliminated by 8 percent, and there would be
a tax increase. Jobs in Dillingham would be reduced by 25
percent, programs would be reduced across the board, and there
would be a tax increase. In Kenai the number of jobs lost was
not determined, quality of life programs would be eliminated,
and tax on property would be increased. Atka would lose 4 jobs,
public safety would be reduced by 100 percent and public works
would be reduced by 40 percent, and there would be no tax
possible. He explained that "no tax possible" is because in
some smaller communities the application or implementation of a
sales or property tax would not bring in enough to cover the
cost of the implementation of that tax. Therefore, it would not
make sense to add a tax at the local level because it wouldn't
pay for itself let alone make up the difference at the same.
MR. ANDREASSEN continued reviewing slide 10. He related that in
Petersburg moorage fees would increase, quality of life programs
would be reduced, and property tax would increase by 1.7 to 4.35
mills. St. Paul would lose 3-4 jobs, public safety would be
reduced by 7 percent, public works would be reduced by 19
percent, and there would be a tax increase of 90-95 percent.
Yakutat would lose 17 percent of its jobs, public safety and
public works would be reduced by 20 percent, and there would be
a total budgetary impact of 300 percent. Seldovia would lose 2
jobs, public safety and public works would be reduced by 13
percent, and quality of life programs would be reduced or
eliminated.
10:26:45 AM
MR. ANDREASSEN presented slide 11 and explained that what would
be seen at the local level would end up being a feedback loop.
All these choices combined, compounded by other proposals within
the fiscal year 2020 budget such as capital project
reimbursements for ports and harbors, harbor matching grants
gone away, and cuts to the Alaska Marine Highway System directly
impact these communities in a tangible way. If residents depart
then there will be fewer businesses, which results in fewer
jobs, which will result in fewer families staying in the
community. While it is known what this looks like at the local
[micro] level, it is very hard to do at a macro level.
MR. ANDREASSEN moved to slide 12 and closed his presentation by
stating that the outcome of HB 65 would be less sustainable
communities, less predictable economies, and less affordable
services.
10:28:04 AM
CHAIR STUTES [closed invited testimony] and opened public
testimony on HB 65.
PAT BRANSON, Mayor, City of Kodiak, testified in opposition to
HB 65. She stated that the City of Kodiak faces a dire threat
from the governor's proposal to grab the shared Fisheries
Business Tax and shared Fishery Resource Landing Tax. This tax
amounts to $859,000 to the City of Kodiak budget or 4.5 percent
of the city's general fund revenue. These funds are used to
maintain infrastructure which support the city's and the state's
economic engine - the seafood industry. Kodiak is the third in
pounds landed and fourth in product value in all U.S. ports.
MAYOR BRANSON pointed out that the state no longer owns this
infrastructure that supports this important industry. Without
these funds, municipalities will have to look at raising taxes,
cutting services, and, for some municipalities, continuing to
remain as viable government entities.
MAYOR BRANSON emphasized the definition of shared: distributed
between members of a group; used or enjoyed jointly. She said
she would take this definition further in that the state budget,
including this proposed state budget, affects every municipality
and Alaskan. An in-depth research and analysis should be done
before turning to a quick fix of making major cuts as the
solution to a long-term problem of the state budget deficit.
Local municipalities, and even household budgets, are not
approached in this manner without dangerous effects. This
budget approach lacks the understanding and awareness of the
realities of living in a resource economy in a geographically
remote location.
MAYOR BRANSON urged that all legislators, as the state budget
appropriators, carefully research, review, discuss with local
municipalities, and consider the effects of the governor's
budget. She cautioned that cost-shifting and revenue grabbing
is not budget solving.
10:30:35 AM
GARY HENNIGH, City Administrator, City of King Cove, testified
in opposition to HB 65. He said this is his 29th year and King
Cove's economy is all about fishing. During his time the city
has experienced almost nonstop changes in its fisheries, which
is the revenue cornerstone of its economy and its local
government operations. Unequivocally, the prospect of HB 65
becoming law is the most daunting of all these fishery related
revenue changes during his time.
MR. HENNIGH related that since at least the mid-1970s when King
Cove became a first-class city, state shared fish taxes have
been an important part of the city's general fund budget. In
1975 more than 21 percent of the city's general fund budget came
from shared fish taxes, 29 percent in 1992, and 20 percent in
2005. Currently, about 24 percent of the city's general fund
budget of $2.6 million is made up of about $616,000 in shared
fisheries taxes. At the same time the city has had a 2 percent
local fish tax since the late 1980s. The city has increased its
local sales and use tax from 2 percent to 4 percent and about 10
years ago to 6 percent. The city also implemented the Fisheries
Business Impact Tax about 15 years ago, a one-of-a-kind tax that
requires the local processor to pay $100,000 annually.
MR. HENNIGH stated King Cove has always been a responsible and
forward-thinking community. It was the second municipality in
Alaska to accept an ownership transfer of the state-built harbor
in King Cove in the mid-1990s. Later, the city agreed to accept
ownership of a state road connecting its airport to the harbor.
These ownership transfers have obviously obligated the city to
be responsible for maintaining these facilities. Over the last
20-25 years the city has taken on a significant debt of about $8
million for several community projects, including two hydro
facilities, a new water system, rebuilding of the old state
harbor, and soon a new landfill plus a sewer lift station
replacement. These projects have been essential and are in
response to the residential, commercial, and industrial growth
in King Cove. Some of these projects require significant
subsidy from the city's general fund, or the city's state and
local fish taxes are the primary source of revenue.
MR. HENNIGH noted the City of King Cove has also been increasing
user fees in its enterprise funds - 70 percent for water over
the last four years, 50 percent for the solid waste fund, and 10
percent recently in harbor and port fees. Now, the possibility
of needing to reduce the city's general fund budget is very
daunting; clearly major program and employee reductions would be
necessary. This would be a very challenging time for the City
of King Cove if the governor succeeds in getting HB 65 passed.
The City of King Cove does not support the bill and urges the
committee to not pass the bill.
10:34:22 AM
REPRESENTATIVE VANCE inquired whether the $100,000 from the
city's Fisheries Business Impact Tax goes directly to the
general fund or goes to specific projects.
MR. HENNIGH replied that the $100,000 in tax comes in annually
to the city's general fund to help pay for all the city's day-
to-day activities such as the police, fire, and public works
departments.
REPRESENTATIVE VANCE asked whether it is common for processors
to be taxed annually at this level. She further asked whether
the tax was met with ease or with great resistance.
MR. HENNIGH responded it is not common and was met with great
resistance. He explained that because there is no property tax
in King Cove it was one of the taxing measures available to the
city. It was very controversial but has now been in place for
at least 15 years and he doesn't see it changing.
10:36:30 AM
FARHA KARIM, Assistant Administrator, City of Akutan, testified
in opposition to HB 65. She stated that the Eastern Aleutian
community of Akutan is heavily dependent on fish tax. In 2018
the city's 1.5 percent raw fish tax from the sale of raw seafood
provided 52 percent of the city's total revenue and the shared
Fisheries Business Tax and Fishery Resource Landing Tax provided
36 percent of the city's revenue. Last year these added up to
88 percent of the city's total revenue.
MS. KARIM pointed out that while Akutan is a small community, it
is busy with a lot of projects. For example, the city built an
airport for easier public transportation, made improvements to
the city dock system, replaced and improved the city's drinking
water system and a hydro-electric facility. The harbor is not
yet fully functional, but the city is in the process of bringing
in lights and electricity to get the harbor up and running soon.
MS. KARIM related that these infrastructure projects provide
social and economic benefits to the community and that these
services are some of the most essential living needs for rural
Alaska. For these projects to become a reality the shared fish
tax revenue is indispensable for the City of Akutan and the city
would be hard hit by any cut in this program.
10:38:12 AM
CYNTHIA ROGERS, Planning Director, City of Dillingham, testified
in opposition to HB 65. She stated that repealing the shared
revenue would unfairly disadvantage small local municipalities
like Dillingham, a first-class city in Bristol Bay with a
population of nearly 2,400 residents. Dillingham's fishing
industry contributes a great deal of direct and indirect revenue
to the state given that over 40 percent of the permits
participating in the Bristol Bay fishery are owned by Alaska
residents who reside in other parts of the state. During fiscal
year 2019 the City of Dillingham received approximately $400,000
in fish tax revenue. As a municipality with a small tax base,
great hardship would be caused to the city if HB 65 was passed
and the tax allocation refund and revenue sharing were repealed.
MS. ROGERS pointed out that the City of Dillingham is already
under great fiscal strain with a reduction to business revenues
of over $8 million between fiscal years 2014 and 2018. The city
struggles to maintain basic city services after multiple years
of cutting service levels and employee positions. Now more than
ever, the city really relies on the fish tax revenue to keep the
city functioning at a basic level and to help support required
upgrades at city facilities, including the city dock and harbor.
MS. ROGERS noted Dillingham is already heavily taxed; it ranks
17th on the per capita taxable list in the state's Alaska
Taxable report. The city levies a real and personal property
tax of 13 mills, a 6 percent sales tax, a 10 percent bed and
alcohol tax, as well as tobacco and gaming taxes. In addition,
the city charges fees for all its basic services. As a first-
class city Dillingham contributes annually $1.3 million to its
schools. Dillingham does not have the tax base to support
increases to property taxes to make up the difference if it were
to lose the fish tax revenue. She urged the committee to not
support HB 65.
10:40:48 AM
CLAY KOPLIN, Mayor, City of Cordova, testified in opposition to
HB 65. He said Cordova's story is very much like Dillingham's.
He noted Cordova is a city, not a borough. The city's fish tax
revenues last year were just over $1.4 million, which made up 15
percent of the city's general fund revenues. Cordova funds its
schools at about $1.5 million, a figure that is down sharply
over the last two or three years of budget cuts from nearly the
maximum allowable levels from the state. There is no way that
Cordova can cut beyond the $2 million that it has already cut
from its budget over the last two years and continue to keep its
hospital, which is hanging on by a thread, and its schools,
which have consumed all of their reserves over the last two
years to try to maintain a quality education program without
severe taxes of the city's own that would cripple the local
economy. Also affected would be Cordova's Chamber of Commerce,
its Resource and Crisis Center, public safety, library, and
museum.
MAYOR KOPLIN pointed out that very little would not be impacted
by the kind of budget cuts and/or taxes the City of Cordova
would have to put in place to keep afloat. The tragedy is
Cordova's position to grow into one of those top five seafood
ports in the country next to Kodiak and Dutch Harbor. To that
effect, Cordova has strategically passed bonds to renovate the
harbor that was formerly owned by the state, implemented a local
0.5 percent fish tax, and increased wharfage fees to help pay
for that so Cordova could position itself for growth. The
efforts Cordova put into doubling its raw fish tax revenues over
the last 10 years would be severely undermined by the state
robbing all the fruits of that effort. If the state elbowed
Cordova out the revenue picture as a partner, Cordova would have
to seek other business models and the full fish tax that the
state would continue to collect very likely would drop to lower
levels than the current 50 percent share. It has taken Cordova
10 years to double those revenues to the state and he would
think the state would want to keep Cordova as that partner.
MAYOR KOPLIN said there are many exciting ways to grow the
economies of communities and the state together rather than
cannibalizing revenues as adversaries. The only way to build a
strong Alaska is to build and maintain strong communities and HB
65 would move that backward instead of forward. At this time,
Alaska's largest sustainable industry should be invested in, not
gutted. He urged the committee to oppose HB 65.
10:43:44 AM
GARY PAXTON, Mayor, City and Borough of Sitka, testified in
opposition to HB 65. He stated that Sitka has been increasing
the rates for its port and harbor system by about 6 percent a
year because, like all communities, Sitka has an aging
infrastructure problem. Sitka has an aggressive program for
maintaining its harbor system, which has caused that rate
increase. Fishing is part Sitka's ethos and community.
MAYOR PAXTON said the uncertainty of the fishing industry,
especially in the chinook and pink salmon runs, also causes
uncertainty and stress for Sitka's fishermen. The budget for
Sitka's ports and harbors is just over $4 million, with $1.2
million of that budget coming from the shared fish tax, [the
loss of which] would require a one-third increase in rates.
Sitka is constrained in its bonding capacity because of the
wisdom and the cost of increasing the capacity of Sitka's Blue
Lake dam. Sitka has a bond indebtedness of $120 million that
affects its residents and causes significant impact on
continuing increases of other fees and rates.
MAYOR PAXTON stated that the City and Borough of Sitka is
categorically opposed to HB 65. He said cost shifting and
revenue grabbing is not the kind of state that Alaska is. He
urged the committee to provide support in Sitka's opposition.
REPRESENTATIVE KREISS-TOMKINS commented that Mayor Paxton has a
saying that "brevity is godliness." He offered his appreciation
for Mayor Paxton's testimony.
10:46:20 AM
JON ERICKSON, EdD, City and Borough Manager, City and Borough of
Yakutat, testified in opposition to HB 65. Dr. Erickson
explained that Yakutat is a small borough of about 540 people.
The city and borough receive about $260,000 or $270,000 in
revenue from the fish tax, about $300,000 from property tax, and
about $280,000 in revenue sharing, with $502,000 to be
contributed to the school this year. Taking away the fish tax
revenue would be a big burden given the city and borough's small
size. The seafood dock and facility are owned by the city and
borough. The money received from leasing them out is plowed
back in and comes to a net $0 because of repairs to the dock
which was built in the early 1900s. When revenue is taken from
a small community the community must make that up and it is
impossible to make up. Property tax cannot be doubled, and a 5
percent sales tax is already being charged. Dr. Erickson urged
that other ways be considered to balance the state's budget.
10:48:27 AM
FRANK KELTY, Mayor, City of Unalaska, testified in opposition to
HB 65. He said HB 65 is a terrible bill. He requested the bill
be held by the committee because it would have tremendous
negative impacts on revenues for every fishing community in
Alaska. He explained that the 3 percent Fisheries Business Tax
is paid to the state by the shore-based processors and shared
back to the communities at a 50 percent rate. This revenue in
many of the smaller fishery communities is their largest revenue
source. Unalaska's shared fish taxes of a little over $8
million annually makes up 26 percent of the city's $31 million
general fund budget. If Unalaska were to lose that amount of
revenue it would be devastating.
MAYOR KELTY noted the City of Unalaska is the nation's number
one commercial fishing port. The port is highly dependent on
shared and local fishery taxes that the city uses to support the
seafood industry, both onshore and offshore processors that work
in Unalaska. The fishing industry of the Bering Sea is
Unalaska's only industry and if the shared fish tax revenues are
impacted it will be felt in all sectors of the community.
Almost all fishery dependent communities have local sales taxes,
high mill rates, and local fisheries landing taxes. All these
taxes would have to be raised if the communities lost their
share of fisheries tax revenues.
MAYOR KELTY said HB 65 would just put a tax on communities
across the state and is a bad way to do business. Unalaska uses
tax revenues to pay its own way - the city funds port and harbor
upgrades, utility improvements, road maintenance, and the school
district is funded at the cap amount annually. Further, local
nonprofits are funded at over $1 million annually and the local
medical clinic is supported.
MAYOR KELTY pointed out that most city projects are done with
city dollars from bonding or using the city's reserves. For
example, the $40 million city dock extension was just completed
and was completely bonded by the city. This dock is used for
container shipping, seafood, support services such as fueling,
crew changes, and processing supplies. If the State of Alaska
takes all the state's shared fish tax revenues, who will step up
to assist fishery dependent communities on projects that are
needed to support the seafood industry that is the largest in
the nation?
MAYOR KELTY advised the committee members to remember that
fishery dependent communities across Alaska produce 56 percent
of the nation's seafood - over 5 billion pounds at a value over
$2 billion. Alaska's fishery dependent communities need to be
kept strong and not be hurt by taking away the state shared fish
tax dollars.
10:52:40 AM
MARC CARREL testified in opposition to HB 65. He said he is a
commercial fisherman for salmon and halibut and a year-round
resident of Cordova. Coastal municipalities provide the
essential infrastructure for the seafood industry to be able to
succeed. The commercial fishing industry needs good harbor
facilities and shipyards, as well as all the necessary
infrastructure for the canneries to be able to process and ship
the fish to market. The cost of this is mostly carried by the
municipalities and it is therefore crucial that revenue sharing
from the Fishery Resource Landing Tax continues. Rather than
being absorbed in the state's general fund, this tax money is
directly being invested in the projects that support the fishing
industry, thereby creating more jobs and more tax revenue in the
long run. If the revenue sharing is repealed, the resulting
increased local taxes and fees as well as poorer city
infrastructure, will directly hurt local small boat fishing
businesses such as his and decrease the money fishermen can
spend in their local community. He urged the committee to
oppose HB 65.
10:54:14 AM
ANNE BAILEY, Administrator, Aleutians East Borough, testified in
opposition to HB 65. She stated that the borough is responsible
for six communities - Akutan, Cold Bay, False Pass, King Cove,
Nelson Lagoon, and Sand Point, with a total population of 3,141
residents and a large transient fishing fleet. She said the
borough assembly recently passed a resolution opposing HB 65.
MS. BAILEY pointed out that the Shared Fisheries Business Tax
Program reflects a partnership between the state and
municipalities. Municipalities rely on significant general fund
revenues as part of their tax base to provide borough and
municipal services benefitting residents and the fishing
industry. Some of these services include education, boat
harbors, docks, road maintenance, fire protection, police,
emergency medical services, electricity, and water. The borough
has a strong record of taking the lead on many capital projects
and it provides funds to support the link between Akutan and the
airport on Akun Island and King Cove's Cold Bay Road, which are
necessary to transfer patients out of both communities.
MS. BAILEY related that the Shared Fisheries Business Tax
Program represents 28 percent of the borough's operating budget,
amounting to approximately $2.2 million, and is a tax base that
has allowed the borough to be economically viable. She said
that availability of these revenues was a critical consideration
by the local boundary commission when it approved the borough's
petition to incorporate. Cuts to the Shared Fisheries Business
Tax Program would also negatively impact the borough communities
of Akutan, Cold Bay, False Pass, King Cove, and Sand Point.
Cuts would range from 36 percent to 2.7 percent of their
operating budgets and the communities could not sustain
reductions like this. This bill would greatly shift more cost
for services on to boroughs and municipalities while at the same
time reducing the general tax revenue.
MS. BAILEY further noted that the package of reductions proposed
by the governor threatens the borough's viability. The borough
and the municipalities could not simply cut their way out of
this or raise taxes in a matter of a few months to compensate
for the impacts. She said the borough asks that committee
members take these severe impacts into consideration as the
legislature goes through its budget process.
10:56:40 AM
CHARLES MCKEE testified in opposition to HB 65. He stated that
the administration wants to become the beneficiary to the trust
that dispenses this tax. Responding to Chair Stutes, he
confirmed he is talking to the Raw Fish Tax and specifically
referenced page 6 of an 18-page document that he said he
submitted to the committee. Responding further to Chair Stutes,
he confirmed he is in opposition to the state taking the Raw
Fish Tax.
11:00:13 AM
JOHN MURRAY testified in opposition to HB 65. He stated he has
been a small-boat commercial fisherman out of Sitka since 1978.
He said Sitka has the largest small-boat harbor system in Alaska
for both commercial and recreational boats and would be hard
pressed to backfill the loss of the Raw Fish Tax, which in 2018
was at about $1.2 million. He noted his current moorage fees
are $740 and he foresees a doubling of that moorage rate if the
proposed repeal goes through. This would make it difficult for
him and other small-boat commercial fishermen to thrive and to
contribute to Sitka's local economy and the State of Alaska.
11:01:26 AM
TANIA HARRISON testified in opposition to HB 65. She noted she
is a commercial fisherman and pointed out that fishing is an
important industry for coastal communities as well as for the
economy of the whole state. She pointed out that the seafood
industry directly employs more workers than any other private
sector industry and is the third largest basic sector job
created in Alaska. It is in the best interest of the state to
support the fishing communities that make this industry
possible. Revenue sharing of the Fishery Resource Landing Tax
enables fishing towns to maintain infrastructure that supports
this industry and the community. This kind of investment has
helped fisheries flourish and the increased value of fish has
greatly increased the funds generated by fish taxes.
MS. HARRISON said HB 65 would severely hurt the economies of
fishing towns and burden residents with drastically higher local
taxes. A financially struggling community will not be able to
support the large landings and high fish values that are
currently enjoyed today. She urged committee members to oppose
the bill.
11:02:50 AM
CHAIR STUTES closed public testimony after ascertaining no one
else wished to testify.
CHAIR STUTES offered her appreciation to the witnesses who
testified and stated HB 65 would certainly have a very negative
impact on the communities she represents, along with fishing
communities across the state. Aside from there being no
justification for the bill, she continued, there is also no
upside to residents. The bill would simply shift state burdens
to local governments that would in turn be forced to tax
residents or reduce services. Fishing communities bring a lot
of money and economic activity to the state, both in the form of
large processing companies and mom-and-pop commercial fishing
operations. She sees no rationale as to why municipalities are
not entitled to a share of the tax revenue that they generate so
they can reinvest in the infrastructure that makes them viable
and attractive places to do business. This revenue sharing is a
part of what keeps coastal Alaska open for business.
REPRESENTATIVE TARR commented that the testimony reminds her
about how fragile Alaska's overall economy is, in that coastal
communities are so reliant on fisheries and what is created from
revenue for fisheries. Interior Alaska is probably a little
different, she noted, and the further north the more dependent
on resource development. Coastal communities are dependent on
this source of revenue and there aren't other options. Any
adjustments must be done in ways that won't have such adverse
impacts on those local communities. The legislature must make
it a priority to not just cost shift to local communities in a
way that hides the true finances of the situation.
CHAIR STUTES re-opened invited testimony.
11:06:20 AM
MARY SWAIN, President, Bristol Bay Borough Assembly, testified
in opposition to HB 65. She paraphrased from the following
written statement:
Thank you for this opportunity to speak on proposed
legislation that will greatly and negatively impact
the Bristol Bay Borough. On behalf of the Assembly,
the Borough does not support repealing the shared
fisheries business tax as proposed in HB65.
The Borough was formed in October 1962. We are
Alaska's first borough formed but 3 short years after
statehood. We are accessible only by air, commercial
boat or barge. We provide a full array of services to
our residents, the fish processing industry and the
thousands of commercial fishers that base operations
in the Borough. Indeed, the Borough is the heart of
the largest red salmon fishing industry in the world,
estimated to be valued at approximately $1 billion per
year. In that regard, [our] Naknek port is the number
three commercial fishing port in the US, based on
commercial fishery landings ranked by dollar value.
(NOAA 2017 most recent year for which data is
available).
In support of the fishing industry, we provide police
and fire services, water & sewer and landfill
operations as well as contributing for Emergency
Services and clinic operations.
This all comes at a cost greater than the residents of
the Borough can absorb. The Borough population spikes
from a winter population of 900 to an astounding
13,000+ during the five-month fishing season. Loss of
the shared fisheries tax would place an unbearable
burden on our local residents that could force the
Assembly to eliminate vital services to, or raise
taxes on, the fishing industry.
The Borough assesses a number of local taxes and
shares benefits from State-revenue sharing. By far,
the largest component of shared state taxes is the
fisheries business tax at issue here.
The value to the Borough of the state shared fisheries
tax is a function of the size of the salmon run and
the price of salmon. In FY18 it was $3.8 million,
about 26% of our annual operating budget.
Options the Borough would be forced to consider if
deprived of the shared fisheries tax, would certainly
include raising taxes on the processing industry.
Alternatively, the Borough could consider reducing
operations of some of the systems we currently
operate, including but not limited to sewer and
landfill, again, handing that cost back to the
processing industry.
Nevertheless, as we speak, the Borough is strenuously
working on a significant sewer capacity-expansion
project to favorably accommodate the growing fish
processing industry. Eliminating the shared fishery
tax could directly harm this capacity-building effort.
In closing, over the past 57 [years] the Borough and
the State have been longstanding partners in
supporting the Bristol Bay $1 billion per year fishing
industry. We pray the State works closely with us as a
durable, not disposable, partner. Thank you.
11:09:27 AM
CHAIR STUTES closed invited testimony.
REPRESENTATIVE VANCE commented that the sharing of the fish tax
is Alaska's fisheries resource development. Like oil and
mining, fisheries are a shared resource that is vital. The
fishing industry is the largest private sector employer in the
state. Making this shift would have very detrimental effects to
Alaska's economy and to the number of jobs that are generated by
this industry and the sharing of this resource. She is for
resource development in Alaska, she said, especially the wise
resource development of the fisheries in the coastal
communities, and therefore she will not support HB 65.
REPRESENTATIVE KOPP said he is an active participant in the
state fisheries and is in Bristol Bay every summer. He has seen
the cyclical swing of the population going from 1,000 to 13,000
and the load that that is on the borough. The borough's current
$10 million sewer system upgrade is for the processors, cannery
workers, and fishermen. Some of Alaska's small communities are
just holding on by a thread, which was clear in the testimony.
This type of cost shift to them could push many of them over the
brink. The state bears a duty to share the load in its
partnerships with these communities that provide the
infrastructure and support for fisheries.
REPRESENTATIVE KREISS-TOMKINS commented that HB 65 and the sum
of other policies from the administration feels like the public
policy form of violence towards coastal Alaska, and he takes
exception to that. The amount of uncertainty that this creates
has very real effects on people's lives and it is painful to see
and hear that in communities. Cities and school districts are
trying to pass budgets, people don't know whether they have
jobs, and families are moving out of state; and this makes him
angry. He advised that even if HB 65 ends in this committee, it
is not the end of the tunnel because it is a line item in the
budget and the commissioner in his testimony was unable to offer
any assurance to municipalities that that line item in the
budget would survive line item veto. This bill almost doesn't
matter, it is what the governor does with that veto pen and what
the legislature does to back up the interests of Alaskans in
potentially protecting that revenue. All this money is subject
to appropriation even though it is written in law and even if
that law isn't changed the governor can unilaterally nix all
that money, and this creates incredible uncertainty for
municipalities.
11:14:47 AM
CHAIR STUTES addressed Commissioner Bruce Tangeman, Department
of Revenue. She pointed out that not one person testified in
favor of HB 65 and offered her belief that this was the same
when the bill was heard in the other body. She requested
Commissioner Tangeman to carry this message back to the
governor. She said this unpopular bill would severely cripple
rural and coastal communities by taking those dollars that they
depend on for their infrastructure and to support the families
that live there.
CHAIR STUTES held over HB 65.
11:16:00 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at 11:16
p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| DOR Response to (H)Fisheries 3-21 Meeting.pdf |
HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB 116 - AFDF Letter of Support 2019-04-15.pdf |
HFSH 4/16/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM HRES 5/3/2019 1:00:00 PM HRES 5/6/2019 1:00:00 PM |
HB 116 |
| HB116 Aquatic Farm Application Review Flow Chart 4.15.19.pdf |
HFSH 4/16/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 116 |
| HB116 ASGA Letter of Support 04.15.19.pdf |
HFSH 4/16/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM HRES 5/3/2019 1:00:00 PM |
HB 116 |
| HB116 DNR Fiscal Note 4.15.19.pdf |
HFSH 4/16/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 116 |
| HB116 Explanation of Changes ver A to ver U 4.15.19.pdf |
HFSH 4/16/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 116 |
| HB116 Sponsor Statement 4.15.19.pdf |
HFSH 4/16/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM HRES 5/3/2019 1:00:00 PM HRES 5/10/2019 1:00:00 PM |
HB 116 |
| HB116 ver U 4.12.19.PDF |
HFSH 4/16/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 116 |
| HB116 Supporting Document- Mariculture Plan.pdf |
HFSH 4/16/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM HRES 5/3/2019 1:00:00 PM HRES 5/6/2019 1:00:00 PM HRES 5/10/2019 1:00:00 PM |
HB 116 |
| HB 116 - AFDF Letter of Support 2019-04-15.pdf |
HFSH 4/23/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM HRES 5/10/2019 1:00:00 PM |
HB 116 |
| HB116 Aquatic Farm Application Review Flow Chart 4.15.19.pdf |
HFSH 4/23/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 116 |
| HB116 ASGA Letter of Support 04.15.19.pdf |
HFSH 4/23/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM HRES 5/6/2019 1:00:00 PM HRES 5/10/2019 1:00:00 PM |
HB 116 |
| HB116 DNR Fiscal Note 4.15.19.pdf |
HFSH 4/23/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 116 |
| HB116 Sponsor Statement 4.15.19.pdf |
HFSH 4/23/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM HRES 5/6/2019 1:00:00 PM |
HB 116 |
| HB116 Supporting Document- Mariculture Plan.pdf |
HFSH 4/23/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 116 |
| HB 116 Letter of Opposition-Hillstrand.pdf |
HFSH 4/25/2019 10:00:00 AM HRES 5/3/2019 1:00:00 PM HRES 5/10/2019 1:00:00 PM |
HB 116 |
| HB 65- Emails of Opposition Lynch-Carmon.pdf |
HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB 65-Letter of Opposition CDFU.pdf |
HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB065 ver A 02.20.19.PDF |
HFSH 4/4/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB065 Transmittal Letter 02.15.19.pdf |
HFSH 4/4/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB065 Sectional Analysis 04.02.19.pdf |
HFSH 4/4/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB065 Opposition Letter-UFA 04.01.19.pdf |
HFSH 4/4/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB065 Opposition Letter-SEAS 04.01.19.pdf |
HFSH 4/4/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB065 Opposition Letter-City of Unalaska 04.01.19.pdf |
HFSH 4/4/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB065 Opposition Letter-Bristol Bay Borough 03.31.19.pdf |
HFSH 4/4/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB065 Opposition Emails 04.02.19.pdf |
HFSH 4/4/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB065 Fiscal Note-REV 02.20.19.PDF |
HFSH 4/4/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB065 Fiscal Note-CED 02.20.19.PDF |
HFSH 4/4/2019 10:00:00 AM HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB 65 AML Fisheries Tax Presentation HFSH.pdf |
HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB 65 Bristol Bay Assem Pres Testimony.pdf |
HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB65 Letter of Opposition PVOA.pdf |
HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB65 Opposition Testimony-Mayor Clay Koplin.Cordova.pdf |
HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB 65 Emails of Opposition Cordova Combined.pdf |
HFSH 4/25/2019 10:00:00 AM |
HB 65 |
| HB65 Opposition Testimony-Mayor Pat Branson.Kodiak.pdf |
HFSH 4/25/2019 10:00:00 AM |
HB 65 |