SENATOR RANDY PHILLIPS brought SB 291 (BOROUGH INCORPORATION & ANNEXATION) before the committee as the next order of business. Number 315 DAN BOCKHORST, Staff to the Local Boundary Commission, Department of Community & Regional Affairs, testified via teleconference from Anchorage. He referred to a letter from the department expressing any technical concerns it has regarding SB 291, and he said their comments are not intended to express either support or opposition to SB 291. Mr. Bockhorst referred to Section 2(b) and said it is presumed that other members of the committee [e.g., the chair of the Local Boundary Commission, who is not appointed under Sec (a)(3) - (7)] are also entitled to per diem and travel expenses. Also, Section 3 requires the Local Boundary Commission to conduct a boundary study, and he pointed out that the Local Boundary Commission completed a "model borough study" of the unorganized borough in 1992. Section 4(d) provides that if a borough incorporation is disapproved, the commission may submit the proposal for incorporation to the First Session of the Eighteenth Alaska State Legislature, and it is presumed it should read the First Session of the Twentieth Alaska State Legislature. Mr. Bockhorst noted that CSSB 164(JUD) would allow an unincorporated region to form a unified municipality, and he suggested that if that bill becomes law, it would be ideal to accommodate that option in SB 291. Number 400 SENATOR TAYLOR referred to Section 4(a) which speaks to an election in each region and area to determine whether the voters desire borough incorporation or annexation, and he asked who would vote in that election. DAN BOCKHORST responded that only the voters residing in the area proposed for annexation would vote on the issue. SENATOR TAYLOR then expressed his concern that if an annexation is disapproved by the voters, the commission can then submit the proposal for annexation to the Legislature. He is concerned that this is an encroachment of state and local government over a lot of people in the state who would probably just as soon not have that benefit available to them. Number 460 MIKE WALLERI, General Counsel, Tanana Chiefs Conference, said the issue of borough organization has been a contentious issue for some time. They have conducted several studies on it, with the last one be done in 1989. The policy within the region has generally been to oppose mandatory borough formation because they believe that local government is something that should come from the people. There is a dissolution movement of local governments as the viability with local governments, with the decline of transfer payments in particular, in rural Alaska is actually gaining a momentum. Mr. Walleri said the major concerns should be: is if the government is needed; and does it perform a useful function. Speaking to specific concerns with SB 291, Mr. Walleri suggested the deletion of Section 4(d), which relates to the proposal for incorporation being submitted to the Legislature. There is also concern with the representation on the committee on municipalities in that it opens it up to a constitutional challenge because only three of the seven members represent interests from the unorganized borough. He suggested it should be changed to reflect maximum participation by unorganized borough residents. Mr. Walleri said the exact boundaries of a borough are critical in determining the financial viability. The viability, in terms of long term and short term, vary depending upon the relative transfer of payments available to the borough. He suggested local government should be based upon the ability of an area to economically support a government rather than the State of Alaska providing transfer payments in order for them to exist. Number 565 SENATOR RANDY PHILLIPS inquired as to the status of the Yukon Flats Borough. MIKE WALLERI responded that the Tanana Chiefs report in 1989 recommended against the organization of the Yukon Flats Borough, primarily because it would represent a net loss of revenues. It would be totally supported by transfer payments from the State of Alaska. The organization of that particular borough is not financially viable, especially with the proposed reduction of transfer payments from the federal and state government. SENATOR PHILLIPS said he assumed then that the Tanana Chiefs wouldn't mind the North Star Borough annexing a portion of that pipeline. MIKE WALLERI answered that they would probably still be opposed to that. TAPE 94-18, SIDE B Number 001 SENATOR ZHAROFF suggested the following change to Section 4, subsection (d) on page 3: On line 18 change "may" to "shall" and change "disapproved" to "approved;" and on line 20 delete "not" and change "disapproved" to "approved." He explained that by making the change, rather than leaving it as a final decision of no action, the Legislature then has to take an action in order for this to go through. There would then be another step of "bureaucracy" to affirm that the borough formation should take place. Number 025 ALEXIS MILLER, staff to Senator Dave Donley, agreed with Senator Zharoff's suggestion. She added that this is a complex issue and there is a lot of tinkering that needs to be done with the legislation. Number 035 SENATOR RANDY PHILLIPS stated that conceptually, he is in favor of the legislation due to Article X, Section 3 of the Alaska State Constitution. He said the Legislature acts as an assembly for the unorganized areas and can make those decisions on behalf of those people. However, he said it can't be both ways, either get rid of the mandatory borough act and Article X, Section 3, or just implement one of the two, but not both. He believes it is about time that the Legislature starts addressing this issue. Number 055 SENATOR DONLEY said the most important question to him is if people in these areas can afford local government, and, if they can, they should. The Boundary Commission's studies analyzing the ability of people in those areas being able to pay for local government generally showed most regions of the unorganized borough were capable of providing at least the minimum services required by law. He said the legislation is a pretty reasoned approach in obtaining this goal, especially with the state's current fiscal problems. Number 085 SENATOR ZHAROFF pointed out that the fiscal note does not reflect the added staff and administrative assistance required of the department, nor is there a breakdown on how much state assistance a new borough would receive. SENATOR RANDY PHILLIPS asked if there was any reason why the unorganized areas cannot contribute to the state government for the services they receive. SENATOR DONLEY responded that it probably could be done with a state sales tax or a property tax for those unorganized areas that don't have their own sales tax or property tax. Number 195 SENATOR RANDY PHILLIPS stated a new fiscal note would be requested from DCRA on SB 291. He then adjourned the meeting at 10:10 a.m.