SSSB 136-MUNICIPAL ROAD SERVICE AREAS  CHAIR OLSON announced SSSB 136 to be up for consideration. SENATOR THOMAS read the following statement to the committee: Senate Bill 136 provides boroughs with a means of altering existing road service area boundaries to ensure taxpayer fairness among residents of service areas. A service area is a taxing jurisdiction within a borough that has been established to provide special services such as road maintenance or fire protection. These services are requested and approved by voters residing within a specific area. State law permits borough residents living outside a service area to use 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 costs of construction or maintenance of these roads by voting down any annexation attempt. These state-mandated annexation votes typically fail as individuals are reluctant to join a service area when they can use these maintained roads for free. SB 136 amends state law by allowing a service area to annex property that uses its roads for their sole or legally required access without a vote by the owners of property to be annexed. A second issue arises where residents of a service area pay into a service area even though they do not utilize the service area roads for access to their property. Service areas, however, are often reluctant to vote to remove property from the service area because it effectively raises taxes on the remaining property owners. SB 136 amends state law by allowing a borough assembly to exercise its judgment to alter, by ordinance, a service area boundary to exclude a property that does not use service area roads as its sole or legally required access. 4:01:10 PM CHAIR OLSON asked if there is a problem the bill seeks to solve. SENATOR THOMAS said there are areas where people have property that is serviced but they are not contributing to it. And others could not get out of a service area even if they were not using the roads. It allows the borough to remove or add those people to the service district. It is about fairness, he said. SENATOR WAGONER said his borough has no problem with the bill. SENATOR THOMAS said service districts are self sufficient, so it will have no impact on state money. SENATOR KOOKESH asked about the use of the word "annex," and if it could mean being annexed into a borough. SENATOR THOMAS said not a borough, just in or out of a service district. He believes all service districts are in boroughs. 4:03:57 PM RENEE BROKER, Attorney, Fairbanks North Star Borough, said SB 136 was unanimously supported by the borough. It allows local governments to address an inequity in the road taxation system. It is not just property owners using the roads for free. Businesses also use the roads. A gravel-hauling business, for example, can tear up roads but the businesses can refuse to contribute to maintenance. She noted that Anchorage is having similar problems. This bill establishes fair standards that local governments can use to determine whether property should be in or out of a road service area, she stated. If the government can put property into a service area, then fairness says property can also be excluded. The legislation doesn't require that any property ultimately be placed in or out of a service area. The decision will only be made by local governments after input from people. This bill preserves the right of the service area to vote on adding any property. It would be the service area, not the assembly, doing the cost- benefit analysis. It is a big step forward in fair taxation. 4:07:27 PM SENATOR WAGONER asked about gravel pits in road service areas. MS. BROKER said some gravel companies use the roads, but if the pit is not in the service area they don't pay anything. ED MAHONEY, Chair, Service District 1, Kodiak, said he has numerous issues with the bill. Kodiak now exempts property that doesn't rely on service district roads for access. He said it seems like this is an urban problem. In Kodiak everyone drives on the service district roads. By removing properties it would look like hitting the map with buckshot; "it would punch holes all through it." He said it isn't fair. The service area is an advisory to the assembly, and has no power to annex any parcel; it can only make a recommendation. He asked if the bill refers to new areas or individual lots. The language is not very clear, he stated. If a parcel has a back door access but the easy access is through the borough-maintained road, then the bill is not plugging any loopholes. He said to be cautious. He has been working to get everyone in the service district to pay, so it is ironic that this bill comes up now, he concluded. 4:10:58 PM SENATOR THOMAS asked about his concern regarding exemptions. MR. MAHONEY said Kodiak has an exemption for properties that are in the service district but are accessed from the state road. SENATOR THOMAS said the bill won't impact that. "If you have a primary access that is not from the service district road, then you are not affected by this." MR. MAHONEY said he doesn't think it will be affected, given what is on the books. The legality of right or wrong should be considered, he stated. SENATOR THOMAS said he is only talking about people whose primary or only access is in a service district. MR. MAHONEY said his problem is exempting parcels. A state road runs through his service district, and if properties are all of a sudden removed, it will have a huge impact. SENATOR THOMAS said his intent is for people who do not use those service district roads and cannot get out of that district. He would like to read Kodiak's policy. MR. MAHONEY, in response to Senator Olson, said he is speaking as chair of his service district. CHAIR OLSON asked what impact it would have to take those parcels out of his service district. MR. MAHONEY said the parcels are already exempted, and it amounts to $51,000 this year. It is roughly a third of what is collected. There is a lot of concern that that isn't right. 4:14:37 PM SENATOR WAGONER suggested seeing if his borough ordinance conflicts with state law. Senator Thomas is changing statute so that conflict won't occur in Fairbanks. MR. MAHONEY said Kodiak is probably the only borough with the exemption and is probably out of compliance with state law. The bill will bring Kodiak into compliance. The exemption allowance has been on the books since the late 1990s. It forces others to pay more. Everyone in Kodiak uses the service district roads, whether they are going shopping or cutting across town. He said he is confused on how to rectify it. 4:17:11 PM SENATOR THOMAS said that was the situation; people were using roads that they weren't paying for, and that's not fair. Kodiak's exemption seems to be the same as is in the bill for people who are not using such roads and could opt out of the district. Kodiak may have a different process, but it serves the same purpose, he surmised. The problem was that some people didn't want to let the non-users out of the service district because fees would go up for the remaining users. MR. MAHONEY said he concurs, but in Kodiak, it is not just access but daily runs to church and stores as a shortcut- sometimes six to eight times each day. The dump trucks are tough on the road, and it is unfair to those with the burden of paying for maintenance. Regarding the bill, he is "for number 3 and against number 4." 4:19:45 PM KATHIE WASSERMAN, Executive Director, Alaska Municipal League (AML), said AML is supportive. The bill gives boroughs the discretion. The AML supports the entire bill, she stated. CHAIR OLSON asked what the Department of Transportation and Public Facilities (DOTPF) has said. SENATOR THOMAS said there has been no comment from it. The bill is an issue of fairness. "If you're using the roads, you pay, if you're not using the roads, you have the opportunity to get out of the service district." SENATOR KOOKESH moved to report SSSB 136 from committee with individual recommendations and attached fiscal note(s). There were no objections and it was so ordered.