HB 185-MUNICIPAL ROAD SERVICE AREAS 1:34:18 PM CHAIR JOHANSEN announced that the first order of business would be HOUSE BILL NO. 185, "An Act relating to certain municipal service areas that provide road services." [Before the committee is CSHB 185(CRA)]. 1:34:36 PM CAROL BEECHER, Intern to Representative John Coghill, Alaska State Legislature, provided the following testimony: The bill, HB 185, ... deals with alteration of road service area boundaries to ensure taxpayer fairness. Under existing law, the borough lacks any effective means to alter existing road service area boundaries, even when necessary to ensure taxpayer fairness. Because only those properties within the service area boundaries can be required to contribute to the cost of the service area. The borough's inability to adjust boundaries creates two taxpayer fairness issues that the proposed legislation attempts to resolve. Currently, resolution of both problems depends upon taxpayers' willingness to vote against their own financial interest. Presently, state law permits borough residents living outside a road service area to use road service area roads for their sole or legally required access. These residents derive a direct benefit equal to residents within the service area, yet they can refuse to contribute to the cost of construction or maintenance of these roads by voting down any annexation attempt. This problem usually arises because of subsequent development near a service area which utilizes existing service area roads for access. While the borough demands, through its subdivision laws, that the owner, subdividers, consent to annexation into the service area as part of the subdivision application, state law still requires an election if anyone resides in the area, including the subdivider. These annexation votes typically fail as individuals are reluctant to join a service area when they can instead use these maintained roads for free. The proposed change to state law would fix this problem by allowing a service area to annex property that uses its roads for their sole or legally required access without a separate vote of the property to be annexed. The second problem is the direct opposite. Here, people find themselves, either because of the way the original boundaries were drawn or due to subsequent road development, paying into a road service area even though they do not utilize the service area roads for access on to their property. Service areas, however, are often reluctant to vote to remove property from the service area because that effectively raises taxes on the remaining property owners. The proposed change to state law would fix this problem by allowing the assembly to exercise its judgment to alter, by ordinance, the service area boundary to exclude that property or properties that do not use service area roads. 1:37:26 PM REPRESENTATIVE KOHRING related his understanding that if there were to be an annex, the monies collected from taxes would go directly to the road used. MS. BEECHER clarified that [a taxpayer] who lives in the borough would continue to pay his/her property taxes. The portion taken for the road service area would be taken out for that purpose. REPRESENTATIVE KOHRING said that he wants to be sure that a resident who is forcibly annexed has his/her taxes resulting from the annexation go directly to the roads being used to access the property. MS. BEECHER indicated her agreement. 1:38:56 PM REPRESENTATIVE FAIRCLOUGH, drawing upon her knowledge from representing a district with road service areas, shared her understanding that road service areas only function to maintain the roads in that service area. She mentioned that there may be an administrative charge, through local government, if someone else is managing the road service area's money. 1:40:02 PM CATHY WASSERMAN, Alaska Municipal League (AML), related AML's support for HB 185. She informed the committee that in the last year AML's membership has discussed this issue and has included the following statement in its FY 2007 Policy Statement: The League supports legislative changes that would enable local government to regain control and management of its service areas. By regaining this authority, local governments can ensure that service areas are established, operated, and altered in a manner consistent with the constitutional purpose of service areas and the overall public good. As the law now reads, boroughs have no way to address the needs of service area residents when the solution might [result in the] alteration of boundaries. Especially in situations of taxpayer fairness, borough hands are tied. If residents of a newly developed area must use service area roads for their only or legally required access and they live outside the service area, the boroughs only option for solving this issue is to hope like heck that these people will positively jump at the chance to increase their taxes. To date, that has not been a popular stance. This bill would allow for annexation of the newly developed property without a separate vote of the property to be annexed. Another problem that has arisen due to boroughs lacking the authority to alter their own service areas is that if a road is no longer used by residents of the service area, either due to new roads, changes of population patter, and so forth, they will still be required to pay into that road service area. However, again, the current law would require a vote by service area residents to willingly raise taxes on the remaining residents. If that particular unused road area was removed, HB 185 would allow borough assemblies to exercise their own judgment to alter service area boundaries in situations where property should be excluded due to lack of use. Again, our position is that local governments should be allowed to control and manage service areas within their borough boundaries, and to that end we support House Bill 185. 1:42:29 PM RENE BROKER, Borough Attorney, Fairbanks North Star Borough (FNSB), related that FNSB is in support of HB 185, which both the FSNB's road service committee and assembly have unanimously supported. She explained that the aforementioned support is achieved because HB 185 allows boroughs to address inequities in the system and restore some basic fairness principles to the service area taxation system. After all, the borough's name is on the tax bill received by the taxpayers, and therefore the borough has an interest in ensuring that the tax bill is fair and equitable. This legislation provides boroughs a manner in which they can ensure that the tax burden resulting from the cost of a service provided by a road service area is fairly borne by all property owners using the roads constructed by the road service area for their sole or legal access to their property. However, the legislation still preserves the right of the service area to vote on whether it wants property added to its service area. Therefore, it's ultimately still the service area's call, through a vote, to determine whether the increased revenue is worth the increased obligation or potential problems. Ms. Broker emphasized that this legislation doesn't force property on service areas. 1:44:23 PM TAMMIE WILSON informed the committee that last October she was involved in a vote for a road service area. Although her section of the road wouldn't be maintained, she would still have to pay the same amount of taxes and maintain the private section of the road because the access to her road would be via the public road service area. She expressed concern that if there's another vote, the boundary lines could be drawn such that she would be excluded so that the vote could pass and then use HB 185 to annex her road. She related that when she approached the borough to determine what would happen, she received a letter specifying that since she has a private road, that road couldn't be annexed because it wouldn't be maintained. However, this legislation doesn't specify what a public road is versus a private road. Additionally, she expressed concern with regard to fairness. She explained that currently residents pay taxes in a road service area based on property taxes. In order to be fair, everyone would pay the same amount, no matter the property value. Ms. Wilson emphasized that her largest concern is that the legislation removes the right to vote. 1:46:26 PM REPRESENTATIVE FAIRCLOUGH asked whether Ms. Wilson's family pays road taxes into a service area. MS. WILSON replied no, adding that everyone contributes and the [family] clears the roads. In further response to Representative Fairclough, Ms. Wilson confirmed that she drives on other roads besides her driveway and for which she doesn't pay. She explained that currently no one pays for those roads because that road service area was voted down last year. She mentioned that the road service area will likely be voted on again this next October. REPRESENTATIVE FAIRCLOUGH stated that one of the issues is that service areas only pay for roads inside the service area while commuters travel on a road network to which they don't contribute. Although Representative Fairclough noted her agreement with Ms. Wilson's thought process regarding fairness, she said it's difficult to assess all the traffic and which roads an individual uses in order to determine a specific charge. She related that in the district she represents, there is a dual charge in which constituents are charged, at the borough level, for all the roads outside their driveways and for maintenance of the roads inside the service area. Representative Fairclough highlighted, "The issue is a bit larger than just individual driveways in that there are other roads that are maintained throughout the system and the network that people drive on." MS. WILSON informed the committee that she was told that she would be exempt because her driveway came to the private road where it would then meet the public accessible road. The aforementioned calls into question whether only that property connecting to a road service area can be annexed or can an entire section of property be connected, she pointed out. 1:48:26 PM STUART DAVIES began by informing the committee that although he is a member of the 23-mile service area, he is speaking as a concerned citizen. He related his understanding that the language change proposed in HB 185 would only impact those residents of a subdivision who can't access their property any other way than traveling through a road service area. CHAIR JOHANSEN relayed that the sponsor of HB 185 is nodding in agreement. MR. DAVIES surmised then that HB 185 isn't annexing any property owners, which he said he understood to be a separate process. REPRESENTATIVE FAIRCLOUGH noted her disagreement. MR. DAVIES explained that he lives within the 23-mile road service area. He estimated that at least 14 parcels use 90 percent of the service area roads as their only access to their property. Those individuals aren't currently included in the 23-mile road service area. He related his understanding that in order to become part of the road service area, both the taxpayer and the service area taxpayers have to vote in the affirmative. This legislation, he opined, amends the language such that those outside of the road service area wouldn't have an ability to vote. Mr. Davies characterized HB 185 as a way of streamlining the annexation process, but doesn't mean that those individuals living on parcels within a road service area would automatically be annexed. In conclusion, Mr. Davies encouraged the committee to vote in favor of HB 185 and pass it this year. 1:52:14 PM LUKE HOPKINS, Member, Fairbanks North Star Borough Assembly, related his support for passage of HB 185. He noted that he is available for questions. 1:52:45 PM RANDY FRANK, Member, Fairbanks North Star Borough Assembly; Chair, Road Service Area Committee, stressed that the idea for this bill originated from some road service area commissioners who saw a problem and wanted to fix it. He went on to say that if HB 185 passes, the assembly will still have to go through a public process for an annexation or for a property to withdraw from a service area. 1:54:20 PM ED MAHONEY, Chair, Service District 1, related that within Service District 1 there are state-maintained roads and borough ordinance specifies that those properties using the state- maintained roads are exempt from paying the taxes to the service area. Mr. Mahoney opined that everyone within [the road service area] should pay the taxes otherwise it places an undue burden on those that do pay the taxes. He characterized paragraph (4) on page 2, which allows the exclusion of a parcel, as an inequity. 1:56:00 PM LORI DAVEY, South Golden View Rural Road Service Area, explained that the South Golden View area in Anchorage has been the recipient of much growth over the last seven years. In fact, the area has accommodated over 50 percent of the growth for the Hillside area in Anchorage. The growth has resulted in an additional burden on the roads since many of the new developments aren't annexing into the rural road service area, although they predominantly use the rural road service area roads to access their property. Furthermore, the roads face the devastation created by the equipment used to build the new housing. The road service area bears the burden of maintaining the roads, she pointed out. In the last several years, the limited road service area hasn't been able to keep up with maintenance and thus it has changed to a rural road service area in order to obtain the ability to improve the roads. This legislation would help correct the inequities that the area has experienced with the unmaintained roads and new developments that are paying for the roads or the service area that the residents are using. Ms. Davey noted that it may not be financially feasible to bring in all the additional roads outside of the service area because they would have to be brought to a standard in which they could be maintained. Therefore, the road service area may choose to maintain some of the roads, although it may not choose to annex those roads because of the associated expense. 1:58:22 PM SANDRA WILSON began by informing the committee that although she is an intern for Representative Carl Gatto, she is testifying on her own behalf today. Ms. Wilson testified in opposition to HB 185. In regard to fairness, she reminded the committee that the [taxes in a road service area] are based on the resident's assessed property value. She pointed out that an individual with the highest assessed value home in a road service area could have only one vehicle while an individual with the lowest assessed property value might have multiple vehicles. In such a scenario, the individual with the highest assessed property value and one vehicle is paying more whereas the individual with the lowest assessed property value and multiple vehicles is paying less. She shared her belief that the aforementioned is unfair. She questioned what would occur in a situation in which a subdivision is constructed in front of an established road service area and the road service area residents have to use the subdivision's roads to access their property. In such a situation it doesn't seem fair that the subdivision could force the road service area into the subdivision's road service area, she opined. Ms. Wilson then pointed out that HB 185 doesn't address a situation in which there are two established road service areas. Therefore, one established road service area may use the road service area roads of another and not be charged for that. 2:00:07 PM Chair JOHANSEN, upon determining there was no one else who wished to testify, closed public testimony. REPRESENTATIVE FAIRCLOUGH informed the committee that she has contacted the Municipality of Anchorage and the presidents of local road service areas from whom she received general support for HB 185. She then inquired as to why paragraph (4) of the legislation is important. MS. BEECHER explained that paragraph (4) addresses a situation in which there is a parcel for a subdivision that is attached to a road service area that isn't using that road service area for its legally required access to that parcel. That provision would allow that subdivision to petition the assembly to request removal from the road service area so that the property owner doesn't have to pay for service that he/she isn't using. Ms. Beecher specified that the provision is included so that the property owner doesn't have to obtain a vote from the other subdivision because they don't want to relinquish the properties that are paying into the road service area, even if the property owners aren't using those roads. She directed the committee's attention to the map labeled "Cordes Drive Road Service Area" as an example. REPRESENTATIVE FAIRCLOUGH commented that she is in support of HB 185. She said, "As local governments try to have development encroach on those who have been long-time residents of communities, it is extremely difficult to provide adequate safety access and payment for that access in a roadway system that does not allow some judicious consideration by local authorities." She acknowledged that it's painful for those property owners who don't want to be annexed, and this legislation provides due process for that annexation and inability to vote since the grievance can be taken to the local governing body. However, she pointed out that in some instances there is an over-arching need for a community to make modifications to service areas. 2:04:24 PM REPRESENTATIVE NEUMAN related that he spoke with folks in the Mat-Su Valley about this legislation, and they expressed concern in regard to paragraph (4) on page 2. The concern was that although one may not use the [road service area roads] to access his/her property, the roads are used to travel through the community. However, he opined that both sides of the matter have been considered in the legislation. 2:06:36 PM REPRESENTATIVE NEUMAN moved to report CSHB 185(CRA) out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 185(CRA) was reported from the House Transportation Standing Committee. The committee took an at-ease from 2:07 PM to 2:09 PM.