HOUSE BILL NO. 13 An Act relating to municipal service areas and providing for voter approval of the formation, alteration, or abolishment of certain service areas. REPRESENTATIVE CON BUNDE noted that Alaska's Constitution provides for maximum local self-government and for the creation, alteration, or abolishment of service areas subject to the provisions of law. AS 29.35.450 codifies those Constitutional provisions and establishes the mechanism by which service areas are created, altered and abolished. Vice-Chair Bunde pointed out that Alaska has approximately 200 service areas; in these areas the local residents use private contractors for necessary services and assess themselves to pay for a desired level of service. HB 13 amends, AS 29.35.450, to support local control by clearly identifying who should vote on the abolishment and alternation of a service area under three scenarios: * Abolishment of a service area, which would be subject to approval by the majority of the voters residing in that service area. * Abolishment and replacement of a service area, which would be approved separately by a majority of voters inside an existing service area and by a majority of the voters residing in the proposed service area but outside the existing service area. * Alternation of service area or combining it with another service area, which could be approved, separately, by a majority of the voters who vote on the question and who reside in each of the service areas or in a proposed service area affected by the proposal. Vice-Chair Bunde commented that the proposed legislation would settle a long time debate about who is entitled to vote during the creation, alternation or abolishment of a service area. Representative Harris asked about the input received from the Municipalities of Anchorage and Fairbanks assemblies and those mayors. Vice-Chair Bunde noted that the Anchorage Assembly had passed a resolution supporting the bill. The two previous Anchorage mayors and the current one oppose the bill. Representative Harris inquired regarding the opposition voiced from Fairbanks. Vice-Chair Bunde explained that message has been mixed. The previous mayor did support the bill, however, the current one is in opposition to it. Representative Whitaker referenced Page 2, Lines 19 - 22, as that language relates to fire service areas. He asked if the effect of that wording could eliminate a fire service area. Vice-Chair Bunde responded that the 6% had been placed into the body of the bill for the benefit of those that live in fire service areas. He noted that because there are so many small fire service areas that the bill writers thought it would be burdensome to have a new election every time a couple of houses wanted to enter into a service area. Representative Croft asked if Section 3 covered only fire and roads. He understood that the origin of the dispute was in the covering of police services. Vice-Chair Bunde explained that was "past" history and that the police protection issue was one of the issues under consideration six years ago. That concern passed through the Alaska Supreme Court. The Courts decided that even though there was a charter between the borough residents and the Municipality of Anchorage, the greater concern rested with public safety. The charter did not prevail. Representative Croft asked if the legislation would solve the Hillside area concerns since it did not cover police. Vice-Chair Bunde reiterated that the police protection was not included in the proposed legislation. Representative Croft asked why the legislation was limited to road and fire service. Vice-Chair Bunde stated that those areas basically pay for their own services. Representative Davies argued that there are sewer and lighting service areas that pay for their own power in the Fairbanks area. Representative Croft pointed out that the original bill indicated that the legislation would only apply to the 2nd Class Boroughs with a population under 60,000. Vice-Chair Bunde explained that most of these are small service areas and there was concern that it would affect the constitutionality of the bill. He chose to remove that language. Co-Chair Williams inquired if the Governor's veto concerns had been addressed in the proposed legislation. Vice-Chair Bunde advised that the constitutionality issues have been discussed at length. He interjected that he believed that the legislation was constitutional and that the specifics had been addressed in the House Judiciary Committee. Co-Chair Williams understood that Ketchikan would be affected by the bill. He pointed out that there are some residents that do not want consolidation. He believed that the legislation would help that portion of the community. Vice-Chair Bunde emphasized that the bill could encourage consolidation and that it would not impact the boundary issues. He noted that all residents would have the right to vote. He pointed out that half the residents of the State live in Anchorage. Vice-Chair Bunde questioned why residents in Juneau should want to vote on issues relative to Anchorage. He suggested that would indicate that your interests were not protected. Representative Hudson referenced the Alaska Municipal League's (AML) response, that the legislation could increase the costs to local areas. He inquired if the sponsor anticipated those costs to increase. Vice-Chair Bunde responded that there would not be a cost change. The elections are scheduled to be held at the time of any regular scheduled election with not much extra work expected. OCIE ADAMS, (TESTIFIED VIA TELECONFERENCE), REPRESENTING- ROAD SERVICE #17, MATSU, testified that the legislation was important to the voters. He commented that people feel powerless over what government does and that the proposed legislation would address those concerns. He emphasized that consolidation is important to the Mat-Su Borough. The people should be able to decide how much of their money should be placed into projects that need to be completed in their service area. He voiced support for the changes made to the legislation, which he believed would help it pass with the public's support. JEFF BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT, testified that the Administration opposes the legislation. He noted that the Governor continues to maintain all his previous objections to the legislation from last year's veto. Mr. Bush pointed out that Administration particularly opposes Section 3; however, they do not oppose Section 4. Section 4, which would allow for differential tax rates within a service area. Mr. Bush emphasized that there is a legal question as indicated by the Department of Law. Counsel for the City of Anchorage has noted that they assume that the legislation would prove to be unconstitutional. The Attorney General's office has commented that the legislation raises serious constitutional questions. The bill purports to have the State impose upon boroughs, a limitation of their powers, which would not necessarily protect the State's interest. Alaska currently has a system of government, which is suppose to create a central power at the local level. The value of the Constitution determines where the power is suppose to reside. From a policy perspective that is currently appropriate placement and given that, the power should reside within boroughs at the local level. The bill would provide a "sub-division" of the borough. He maintained that a service area should not have a governmental function. The Administration does not believe that it would be appropriate to give service areas that authority. Mr. Bush stressed that in order to pass the bill, there must exist an overriding "State" interest. He reiterated the serious problems with constitutionality of the legislation. A borough can limit itself and restrict itself through its charter from changes in service areas. The question is if it is appropriate for the State to impose that requirement upon those entities. Mr. Bush stated that up in the Senate for consideration, there are bills relating to boroughs and the formation of such an entity. Those considerations are based upon the premise that it is appropriate for small communities to be organized into boroughs. The central government and power at the local level should reside at the borough level. He stated that the Administration concurs with that position. Representative Davies asked if there was a Constitutional provision contained indicating that no new service area can be created if that service area does not want it to happen. Vice-Chair Bunde responded that the legislation only addresses existing service areas and does not permit the formation of new ones. MARJORIE VANDOR, ASSISTANT ATTORNEY GENERAL, GOVERNMENTAL AFFAIRS SECTION, DEPARTMENT OF LAW, advised that there exists a provision within the Constitution, which addresses the limitation of when to create a new service area. She acknowledged that this bill would not have an affect on that provision. Representative Davies commented that in the Fairbanks Borough, there are situations that come up regarding the road service areas. There exist served and unserved areas. The intent is that they organize and have a general service area in order to get away from "passing the hat". The question that arises most often is if a new service area could be formed or should they be annexed into an existing service area. He stated that was the most common circumstance. Representative J. Davies continued noting the concerns voiced by the people in the Fairbanks district. He acknowledged that Section 4 was important to those residents. The Fairbanks Assembly has stipulated that if residents are opposed, then it should not be undertaken. There exist 136 fire service areas in the Fairbanks Borough. Ms. Vandor explained that that service areas are set up when there are different types of services needed for specific communities. She did not know if there was a different service existing between all the various service areas. She assumed that the Assembly would maintain the authority to form the necessary service areas. Ms. Vandor acknowledged that she was not familiar with the Fairbanks ordinances; however, within a borough, the service areas do not have a separate legal right to challenge the borough. They are not a legal entity separate from the borough. The service area is a part of the borough. Representative Davies stated that the Assembly does have the authority to "direct" service areas at this time. He asked if this legislation was adopted, would the Assembly lose that right. Ms. Vandor acknowledged that they would lose the right since Fairbanks is a Second Class Borough. Representative Davies spoke to the level of taxation. He asked if the tax level would continue to be determined by local assemblies. Ms. Vandor stated that it would. She noted that the assemblies would also continue to establish the mil rate. Representative Whitaker asked the Administration's opposition to Section 3. Ms. Vandor advised that home-built communities are not to set themselves up as little sovernities from the State. When there is a matter of local concern and when dealing with a charter provision, which predates legislation, it is important to look to the "organic" law of the home rule. In a concurring opinion from the Jefferson Case, it has been indicated that the Legislature cannot disregard that a charter establishes items at the local level. Representative Whitaker questioned at which point would local control be final. Ms. Vandor replied that local control will determine how to deal with each individual service area. TAPE HFC 01 - 33, Side B  Ms. Vandor commented that cases, which have come before the Supreme Court, question whether a statewide law can tell a charter community how they have to alter their home rule service areas. That question has not yet been answered and has not yet been addressed directly by the State Supreme Court. The State Supreme Court tends to be very specific when looking at charter provisions versus local law. Those decisions are fact oriented. She suggested that service areas by their nature, should be local concerns. Representative Croft advised that Article 10, Section 11, is the provision which creates the constitutional concern. The question arises regarding the scope of local issues that cannot be touched by law. Representative Croft suggested that perhaps the Legislature could be precluded by the Constitution from exercising State power in certain areas of local concern. Co-Chair Williams asked if the Legislature could provide the power to abolish the service area if that were the will of the people. Ms. Vandor replied that the Legislature could for a general municipality. The concern exists when dealing with a home rule chartered community because in their charter they deal with those particular matters and how to handle their service areas. She reiterated that was the area where the constitutional conflict exists. Ms. Vandor indicated that it is doubtful to know how the Supreme Court would rule on that. Representative Hudson asked about the applicable portion of the constitution, which could be in doubt for the proposed legislation. Ms. Vandor explained that would be Article 10, Section 11. Representative Hudson asked if the Governor's previous veto had been placed on that base. Ms. Vandor stated that was part of the concern. She added that last year, there existed the issue of "special legislation", which only affected and applied to all boroughs except one. She stressed that causes legislation concerns. KEVIN RITCHIE, ALASKA MUNICIPAL LEAGUE (AML), ALASKA COUNCIL OF MAYORS, JUNEAU, referenced the AML hand out contained in the member's packets. [Copy on File]. He stated that AML is in opposition to Section 3 of HB 13. Section 3 replaces local control over local service area decisions as envisioned by the framers of the Alaska Constriction, with a statewide legislative mandate. The 2001 AML Policy Statement adopted by the entire membership of the AML opposes that section. Mr. Ritchie stated that local government powers should enhance local autonomy and all the State mandated vote on service area consolidation and alternation. He suggested that assemblies are respectful of service powers and how the community wants those services delivered. He pointed out that Fairbanks had more service areas than any other place within the State. Mr. Ritchie advised that there are many issues, which need to be taken into consideration and that the service area issue is a "broad" concern. Mr. Ritchie summarized that AML policy does not oppose Section 4 which gives an optional tool to each assembly to set variable rates in service areas. He reiterated that AML does oppose Section 3 of the proposed legislation. Representative Croft asked if there were a charter, that specified an established free reign to abolish service areas, would the legislation nullify that decision. He believed that a charter could not be created which would allow a borough or municipality to have a "different" take. Mr. Ritchie agreed on that. Representative Foster MOVED to report CS HB 13 (JUD) out of Committee with individual recommendations and with the accompanying fiscal note. Representative Davies OBJECTED. He MOVED to AMEND by removing Section 3. Vice-Chair Bunde OBJECTED. Vice-Chair Bunde stated that both portions of the bill are needed by some service areas to have the protection that they want. Representative Davies maintained that the vast majority of concerns with the legislation were contained in Section 3. He noted that many people are opposed to that section, however, would continue to support Section 4. Representative Davies noted that the Fairbanks Assembly has never forced a consolidation in service areas. The current Mayor of Fairbanks opposes the bill. The general situation in Fairbanks voice concern about the move. He pointed out that there are pockets that benefit and continue to vote "no" on consolidation of service areas. Some people are benefiting from services and others are not paying for their services. They do benefit from road maintenance that others are paying for. That is why it should be left to the local assemblies to make those decisions. He added that Section 4 is important because it allows the assemblies to address efficiency concerns. Representative J. Davies reiterated his support of Section 4, and opposition to Section 3. Vice-Chair Bunde maintained his opposition on the amendment. A roll call vote was taken on the motion. IN FAVOR: Croft, Davies, Lancaster, Moses OPPOSED: Whitaker, Bunde, Foster, Harris, Hudson, Williams Co-Chair Mulder was not present for the vote. The MOTION FAILED (4-6).He Representative Foster MOVED to report CS HB 13 (JUD) out of Committee with individual recommendations and with the accompanying fiscal note. Representative Whitaker OBJECTED for the purpose of a comment. He advised that there is a "transcending" argument relating to the premise of Article 10, Section 11, of the Constitution. That section relates to the power of the borough to exercise the power of the people. It could relate to Article 1, Section 2, which relates specifically to the power of the people. He commented that the question is where that power is exercised. He agreed that the power should be exercised with the rural district and that it should be the power of the people to determine that decision. Representative Whitaker advised that the Legislature should consider the argument inherent to Article 1, Section 2. He noted that was the base of his argument. Representative Whitaker WITHDREW his OBJECTION. There being NO further OBJECTION, the bill was reported out of Committee. CS HB 13 (JUD) was reported out of Committee with a "do pass" recommendation and with a fiscal note by the Department of Community & Economic Development dated 1/31/01.