SB 264 - AID FOR MUNICIPAL ROAD MAINTENANCE SENATOR TORGERSON, sponsor of SB 264, gave the following overview of the legislation. SB 264 takes funds for road maintenance out of the revenue sharing program and creates a stand alone program. The funds would come from a portion of the 8 cent per gallon fuel tax. Over the years, the municipal road maintenance revenue sharing portion decreased from $2500 per mile to $700 per mile because this program was incorporated into the larger revenue sharing program that is subject to reductions and the road money was never identified. SB 264 will increase the total appropriation to this program: currently $2.6 million is being shared with local governments, the bill will increase the amount to $8 million. The intent of SB 264 is to increase the amount to local governments for road maintenance to $1,000 per mile, which constitutes a 40 percent increase. A $3.5 million surplus will be used for two purposes: to continue with paving and upgrade for the road transfer program; and to provide a pot of money to equalize the funding so that if a new road was taken over by a local government, the entire pot would not be reduced by that amount of road miles. In essence, it would keep the $1,000 per mile constant even though new roads would be added to the system. Any remaining balance will be used for road construction and transferred to local governments. SENATOR TORGERSON explained his proposed amendment to SB 264 as follows. "In the revenue sharing portion currently in statute, if municipal governments -- once they run through the formula for revenue sharing and the different formulas, if the amount that is to be paid to them is less than $40,000, then they would receive the $40,000 -- the minimum entitlement portion of this program. If we just leave that constant and not make this amendment then they'd be paid for roads under the one program, through the formula to get up to the $40,000, as well as being paid separately for the roads. So what this does is take the road portion out of that and reduce the minimum entitlement share by the amount equal to the amount that has come out for roads, so again, to these minimum entitlement communities it would still be an -- it would be an increase to them because they are getting more money for the road miles but it does separate the programs and keep them entirely separate. That's something we overlooked when we drafted the bill at first." MR. PAT POLAND, Director of the Municipal Assistance Division in the Department of Community and Regional Affairs (DCRA), gave the following testimony. He noted Mr. Bill Ralston, program manager for the Revenue Sharing Program, was present in the audience, and could respond to technical questions. DCRA supports the spirit in which this legislation is offered, that is to support local governments in service delivery. DCRA supports financial aid to local governments and believes they are a vital and key part of the public service delivery system. The Governor's FY 99 budget proposal contains no cuts to the revenue sharing program and the Administration supports transfer of state services to local governments, which SB 264 promotes. DCRA has two fundamental concerns with SB 264. The first is dealing with revenue sharing local government financial support on a piecemeal basis. Essentially, it peels off a pot of the money and places an isolated priority on it. The second concern is that when the formula for the formula entitlement program is changed, winners and losers are created. If the appropriation was at the full amount proposed, all participants would win; if the amount remains at the current level, the funds will shift from the smaller rural areas to the urban areas. DCRA would like to see a process that gives all of the impacted communities a chance to comment and look for alternatives. TIM ROGERS, Legislative Program Coordinator for the Municipality of Anchorage, spoke in his capacity as the Chairman of the Transportation, Utilities and Environment Subcommittee of the Alaska Municipal League (AML). AML supports passage of SB 264 for three reasons. SB 264 will stabilize road maintenance funding. Funding through the revenue sharing program was at a level of $2500 per mile 12 years ago, today the average is $734, and for some municipalities, less than that. AML believes it is important that the gasoline tax be identified as the funding source. AML also believes it is important to have a mechanism for a transfer of responsibility for some of the roads from the state to local governments providing that the transfer has a funding mechanism for continued maintenance and that the roads be brought up to a specific standard prior to the transfer. SENATOR HALFORD asked Mr. Rogers if he thought SB 264 will create an incentive to pass increases in gasoline taxes. MR. ROGERS thought it may. Number 556 SENATOR TORGERSON pointed out he had requested that 3 cents per gallon of the gasoline tax be used, but the legal drafters advised him to include a percentage. He would have preferred to have included a set amount but the 8 cents per gallon has other restraints on it from prior legislation. SENATOR HALFORD indicated if a percentage of the total is used, there is an incentive to increase the tax. SENATOR TORGERSON agreed. MR. TOM BODECKER commented that he agreed with Mr. Rogers' position on SB 264. MR. JIM SWING indicated that the Matanuska Borough Administration and its Department of Public Works support SB 264. They presented some graphs to the Deferred Maintenance Task Force that show the decrease in revenue sharing for road maintenance and the increase in taxes in their area. The Department of Public Works maintains over 1,000 miles of road in the municipality and sees the need for a stable funding source for road maintenance. The Borough has been negotiating with DOTPF for take over of secondary roads and supports any mechanism to upgrade those roads and allow the transfer. MR. OCIE ADAMS stated he is taking no position on either piece of legislation but is on a fact finding mission for the Road Advisory Committee for its meeting tonight. He commented that currently the Matanuska-Susitna Borough does not have road powers. The taxpayers have resisted granting the Borough road powers for consolidation of road service areas. He questioned whether SB 264 will force that consolidation since Section 2 requires recipients to have road powers to receive funds from the motor fuel tax. SENATOR TORGERSON said boroughs have to exercise certain powers now to get the money so he did not see how SB 264 would have any effect on the revenue sharing pot. He emphasized it is not his intent to force some kind of consolidation of road service districts and he would be willing to add clarifying language to that effect. MR. ADAMS said he would appreciate clarification because Section 2(a) says that municipalities who exercise road maintenance powers are entitled to receive funds. The Borough does not exercise road service area powers over the entire service area, only on individual service areas through the appropriation of funds from residential taxes. It makes sure that money goes directly back to that particular service area as it cannot use those funds in another service area. SENATOR TORGERSON explained the Borough has non-areawide powers. Cities have the road power so all boroughs, except unified boroughs, adopted non-areawide powers through the service districts. That applies to all except unified boroughs. He repeated if the Borough is currently receiving funds, it has some sort of power on the books. MR. ADAMS said the Borough is currently receiving money. He noted the general consensus of the members of the Mat-Su Road Advisory Board is that SB 264 will force consolidation which they do not support. TAPE 98-3, SIDE B Number 549 MR. POUCHARD provided the following testimony on SB 264. DOTPF unequivocally supports the objective of improving and transferring roads to local governments and currently has a program that has not proved to be very successful. The main stumbling block has been that local governments do not want to pick up the costs of road maintenance because the current level of revenue sharing they receive is not a great enough incentive. DOTPF wants to ensure that the issue of road maintenance is reviewed comprehensively, taking into account the state's needs for state roads, so that doors are not closed to future options regarding state maintenance. Mr. Pouchard indicated DOTPF has a few technical concerns with SB 264. SENATOR HALFORD asked if DOTPF supports the repeal of the existing dollars per mile provision. MR. POUCHARD asked Senator Halford if he was referring to the amendment. SENATOR HALFORD clarified he was referring to the repealer in Section 5. MR. POUCHARD said he would not feel comfortable saying DOTPF supports the repealer; but it does support the concept of transferring roads to local governments and seeing that local governments have adequate maintenance funds. KEVIN RITCHIE, Executive Director of the Alaska Municipal League, echoed Mr. Rogers' and Mr. Bodecker's testimony and thanked Senator Torgerson for his support. AML hopes legislative support for revenue sharing remains strong. SENATOR GREEN asked, if this money is designated for this particular function, who will receive less. SENATOR TORGERSON replied there is no way to track that because the 8 cent per gallon goes directly into the general fund. He added SB 264 will cost $4 million so that money will have to come from another program which has not been identified. CHAIRMAN WARD stated that Senator Torgerson's amendment was not adopted at this time. He asked Senator Green to work with Senator Torgerson to prepare a committee substitute to SB 264 also.