HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE February 13, 1996 1:16 p.m. MEMBERS PRESENT Representative Alan Austerman, Co-Chair Representative Ivan Ivan, Co-Chair Representative Kim Elton Representative Al Vezey Representative Pete Kott Representative Irene Nicholia MEMBERS ABSENT Representative Jerry Mackie COMMITTEE CALENDAR HOUSE BILL NO. 409 "An Act combining parts of the Department of Commerce and Economic Development and parts of the Department of Community and Regional Affairs by transferring some of their duties to a new Department of Community and Economic Development; transferring some of the duties of the Department of Commerce and Economic Development and the Department of Community and Regional Affairs to other existing agencies; eliminating the Department of Commerce and Economic Development and the Department of Community and Regional Affairs; adjusting the membership of certain multi-member bodies to reflect the transfer of duties among departments and the elimination of departments; and providing for an effective date." - HEARD AND HELD BRIEFING BY LOCAL BOUNDARY COMMISSION TO INCLUDE LAKE LOUISE DETACHMENT FROM MAT-SU BOROUGH PREVIOUS ACTION BILL: HB 409 SHORT TITLE: DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT SPONSOR(S): REPRESENTATIVE(S) KELLY, Therriault, James, Kohring JRN-DATE JRN-DATE ACTION 01/11/96 2409 (H) READ THE FIRST TIME - REFERRAL(S) 01/11/96 2409 (H) CRA, FINANCE 01/16/96 2456 (H) COSPONSOR(S): KOHRING 02/01/96 (H) CRA AT 01:00 PM CAPITOL 124 02/01/96 (H) MINUTE(CRA) 02/03/96 (H) CRA AT 01:00 PM CAPITOL 124 02/03/96 (H) MINUTE(CRA) 02/06/96 (H) CRA AT 01:00 PM CAPITOL 124 02/06/96 (H) MINUTE(CRA) 02/13/96 (H) CRA AT 01:00 PM CAPITOL 124 WITNESS REGISTER KEITH GERKEN, Architect Central Office Division of General Services Department of Administration P.O. Box 110210 Juneau, Alaska 99811-0210 Telephone: (907) 465-5683 POSITION STATEMENT: Presented department's position and answered questions on HB 409. JEFFREY W. BUSH, Deputy Commissioner Office of the Commissioner Department of Commerce and Economic Development P.O. Box 110800 Juneau, Alaska 99811-2100 Telephone: (907) 465-2500 POSITION STATEMENT: Presented department's position and answered questions on HB 409. DARROLL R. HARGRAVES, Chairperson Local Boundary Commission P.O. Box 226 Tok, Alaska 99780 Telephone: (907) 883-5151 POSITION STATEMENT: Presented Local Boundary Commission briefing. PATRICK K. POLAND, Director Central Office Division of Municipal and Regional Assistance Department of Community and Regional Affairs 333 West Fourth Avenue, Suite 319 Anchorage, Alaska 99501 Telephone: (907) 269-4578 POSITION STATEMENT: Presented department's position and answered questions on Local Boundary Commission issues. DAVID GILILA, Administrator City of Akiak P.O. Box 187 Akiak, Alaska 99552 Telephone: (907) 765-7936 POSITION STATEMENT: Testified regarding dissolution of City of Akiak. OWEN IVAN, Member Akiak IRA Council General Delivery Akiak, Alaska 99552 Telephone: (907) 765-7112 POSITION STATEMENT: Testified regarding dissolution of City of Akiak. MARJORIE VANDOR, Assistant Attorney General Civil Division (Juneau) Governmental Affairs Section Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 Telephone: (907) 465-3600 POSITION STATEMENT: Answered questions regarding dissolution of City of Akiak. DAN BILLMAN HC01, Box 1706 Glennallen, Alaska 99588 Telephone: (907) 822-5566 POSITION STATEMENT: Supported Local Boundary Commission decision on Lake Louise. ROBERT WELLS, Assembly Member Matanuska-Susitna Borough 350 East Dahlia Avenue Palmer, Alaska 99645-6488 Telephone: (907) 745-4801 POSITION STATEMENT: Opposed Local Boundary Commission decision on Lake Louise. ART GRISWOLD North Pole Borough Planning Commission 873 Runamuck North Pole, Alaska 99705 Telephone: (907) 488-7805 POSITION STATEMENT: Testified about Local Boundary Commission. DONALD MOORE, Manager Matanuska-Susitna Borough 350 East Dahlia Avenue Palmer, Alaska 99645-6488 Telephone: (907) 745-9689 POSITION STATEMENT: Opposed Local Boundary Commission decision on Lake Louise. JACK HANSEN, Owner Evergreen Lodge HC01, Box 1709 Glennallen, Alaska 99588 Telephone: (907) 822-3250 POSITION STATEMENT: Testified on Local Boundary Commission decision on Lake Louise. MICHAEL GATTI, Attorney Matanuska-Susitna Borough 350 East Dahlia Avenue Palmer, Alaska 99645-6488 Telephone: (907) 745-4801 POSITION STATEMENT: Testified on Local Boundary Commission decision on Lake Louise. ACTION NARRATIVE TAPE 96-12, SIDE A Number 0001 CO-CHAIR ALAN AUSTERMAN called the House Community and Regional Affairs Committee meeting to order at 1:16 p.m. Members present at the call to order were Representatives Austerman, Elton and Kott. Members absent were Representatives Ivan, Mackie, Vezey and Nicholia. Co-Chair Austerman noted that a quorum was not yet present. HB 409 - DEPT OF COMMUNITY & ECONOMIC DEVELOPMENT CO-CHAIR AUSTERMAN told the committee that the Department of Administration had come up with estimated moving costs associated with HB 409, for which the department would provide an explanation. Number 0063 KEITH GERKEN, Architect, Central Office, Division of General Services, Department of Administration, referred to a hand-out entitled "HB 409 Estimated Moving Costs" and said the costs were based on actual expenditures for several moves within the last year or two. The hand-out portrayed how the department had arrived at the unit cost of $5,000 per position. Mr. Gerken explained that actual costs varied tremendously, depending on the changes necessary. However, the amounts averaged $5,060, which had been rounded to $5,000. Number 0240 MR. GERKEN pointed out the estimate did not include significant building changes; building code improvements that might be required; Adults with Disabilities Act (ADA) accessibility improvements that might be required; or purchasing of new computer equipment or furniture. He said it should be viewed as rule-of- thumb, with different costs for smaller or larger moves. It was as accurate as the department could come up with, given the level of information on what moves might be made. Number 0298 REPRESENTATIVE PETE KOTT asked if the estimate included any administrative-type supplies. MR. GERKEN replied the moves were made with agencies absorbing administrative costs of doing the work. For example, there was no overhead for a department to do design work or for construction administration. Mr. Gerken said the positions were in fairly small increments of 10 - 30 people. Essentially, there was no overhead; the amounts were contractual costs. Number 0355 REPRESENTATIVE KOTT asked if the estimate included items like changes in stationery, letterhead and so forth. MR. GERKEN replied no. The Department of Administration had looked at it purely as a moving cost. For other programmatic impacts of moving, each agency would have to identify those. Number 0387 REPRESENTATIVE KOTT wondered, if the move were to occur, whether it would be administered by taking the low bid or would the state, within the confines of its operations, make the move. MR. GERKEN responded that essentially, all the items were contractually acquired, based upon proposals. Whether the bids were formal or informal would depend on their size, with bids over $25,000 apiece being formal. The amounts, he said, were determined by at least getting informal proposals from movers and contractors. For phones and computers, he added, for the most part, there was an existing, standing contract through Information Services. For example, to move a phone anywhere in Juneau, whether across the room or across town, there was a unit price that had been bid on a multi-year contract. Basically, all the costs were competitively acquired and done through contractors. Number 0492 REPRESENTATIVE KIM ELTON referred to the proposed combination of departments and said he had assumed, using Juneau as an example, that one of two things would probably happen. First, the likely scenario would be that few positions would move from one building to another. A second, less likely scenario, would be needing to find a building where the entire new department could be accommodated, for reasons of efficiency. He asked Mr. Gerken to address that. Number 0558 MR. GERKEN replied that Representative Elton was trying to envision the exact scenario in both Juneau and Anchorage, where most of the estimated 160 positions were. That, he said, was why the Department of Administration had included the amount of $25,000 in each location, to actually prepare a space plan prior to a move. There were a lot of questions, he said, in terms of the best fit, where people logically should ultimately reside. Mr. Gerken suggested that the agencies did not know who would actually go where. He thought there had been an effort in the agency analysis, where they had come up with 160 positions to move, to try to place next to each other those functions which needed to be adjacent. However, they did not yet have a picture of that. He did not know how to answer that question. Number 0626 MR. GERKEN acknowledged that there would need to be, in the new department, some sort of identity as to where they were. He said the department wanted to avoid leasing new space, preferring to make use of what they already owned. However, at least in Juneau, that was probably not going to happen entirely. One of the concerns was lack of an elevator in the existing DCRA building. It was an old building and could not be significantly remodeled without some higher expense than that already being considered. It would take a practical approach to make a shift that did not escalate the cost beyond current estimates. However, Mr. Gerken said, he did not yet have enough information to make that leap. Number 0727 JEFFREY W. BUSH, Deputy Commissioner, Office of the Commissioner, Department of Commerce and Economic Development (DCED), discussed the department's estimate of 160 people who would tentatively be moved under HB 409. It was a very rough number, Mr. Bush stated. He explained that DCED had taken the premise that the sponsor's intent was to create a cohesive economic development department. Those people would be put in one place, with everything else shaking out from there. Number 0764 MR. BUSH explained that the minimum amount of moves possible was proposed, moving people to create space for the new department. The intent was that the existing space, both in Anchorage and Juneau, would be utilized. There would not be new space. For example, the DCRA building would either be used for the new department or for a unit from another department that could stand alone, such as the Division of Occupational Licensing. Number 0818 REPRESENTATIVE ELTON expressed that for private people, a change in a building would trigger new requirements such as adequate parking. He asked if that applied when the state changed the use of one of its existing buildings. MR. BUSH replied that was a question probably better asked of Mr. Gerken. He said, for example, there were ADA concerns with the existing DCRA building. They could not, in essence, move walls or perform structural changes without running into ADA problems. They therefore had assumed they would not do that. Number 0871 CO-CHAIR AUSTERMAN asked if there were questions; there were none. He informed the committee that no further testimony would be taken that day on HB 409. On Thursday, February 22, the committee planned to take amendments and then vote on the bill. BRIEFING BY LOCAL BOUNDARY COMMISSION TO INCLUDE LAKE LOUISE DETACHMENT FROM MAT-SU BOROUGH Number 0906 CO-CHAIR AUSTERMAN noted that the second order of business was a presentation by the Local Boundary Commission, including discussion of the Lake Louise detachment and the Akiak dissolution. Number 0947 DARROLL R. HARGRAVES, Chairperson, Local Boundary Commission (LBC), said he resided in Tok. He mentioned that one member of the commission, Vice-Chairperson Kathleen Wasserman, had not yet made it in from Sitka. He introduced members Nancy Cannington from Unalakleet, Toni Salmeier from Anchorage and William Walters from Fairbanks. Other staff present were Pat Poland, Kim Metcalfe- Helmar and Lamar Cotten from DCRA, as well as Marjorie Vandor from the Department of Law, who provided legal counsel to the commission. Number 1026 MR. HARGRAVES explained the Local Boundary Commission was presenting the annual report required of them each year. The report had been filed with the legislature on January 17, 1996, with copies subsequently provided to all members of the House and Senate. Number 1066 MR. HARGRAVES stated that the roles and duties of the LBC were established in the Alaska constitution to ensure that proposals to create or alter cities, boroughs and unified municipalities would be considered objectively and from a broad perspective. Of the 130 or so state boards and commissions, the LBC and four others were established in the Alaska constitution. The kinds of matters they dealt with the previous year, and which typically came before the LBC, included matters of incorporation, annexation, detachment and dissolution of municipalities. The LBC could also consider petitions for mergers, consolidation and reclassification of cities. Number 1128 MR. HARGRAVES pointed out that the Local Boundary Commission consisted of five members, one from each of Alaska's four judicial districts plus a fifth, appointed at large, who served as the chairperson. The members served at the pleasure of the Governor and were appointed for overlapping five-year terms. The commission members volunteered their services and received no compensation. However, they had staff support provided by DCRA. Number 1160 MR. HARGRAVES explained that the Local Boundary Commission met 17 times the past year. During that time, they resolved a six-year- long dispute over the northwest boundaries of the Lake and Peninsula Borough; finalized action approving incorporation of the City of Egegik; approved a petition for dissolution of the City of Akiak; approved a petition for annexation to the City of Wasilla; approved a petition for detachment of Lake Louise from the Matanuska-Susitna Borough; and considered revisions to the LBC's regulations, which was an ongoing process. Two of these actions, the Wasilla annexation and the detachment of Lake Louise from the Matanuska-Susitna Borough, were subject to review by the legislature, he noted. Number 1226 MR. HARGRAVES explained that Article X, Section 12, of Alaska's constitution provided the legislature 45 days in which to review the actions taken by the Local Boundary Commission. This 45-day review period, which began with the filing of the LBC's report with the legislature on January 17, 1996, would run until March 2, 1996. Under the constitution, legislative approval was automatic unless the House and Senate adopted a joint resolution rejecting the commission's actions. MR. HARGRAVES noted that Kathleen Wasserman had arrived at the meeting. Number 1286 MR. HARGRAVES briefly mentioned the Wasilla annexation. The proposal was relatively straight-forward, involving the annexation of 83.71 acres to the city. He stated that unless the House Community and Regional Affairs Committee had questions, he did not expect to discuss that action further. Number 1320 MR. HARGRAVES noted that in contrast, the Lake Louise detachment was complex, involving a number of fundamental public policy matters. He explained that Lake Louise was located on the eastern edge of the Matanuska-Susitna Borough ("Mat-Su Borough"), approximately 45 miles from Glennallen and three times that distance from Palmer. The boundaries of the borough were initially set under the 1963 Mandatory Borough Act; in the case of the Mat-Su Borough, the boundaries were the same as for the state election district. In April, 1995, residents of Lake Louise petitioned the LBC for detachment of 648 square miles from the Mat-Su Borough. Chief among their concerns was the belief that they had much greater social, cultural and economic ties with the adjacent Copper River Basin than with the Mat-Su Borough, as well as the belief the Mat-Su Borough could not serve them efficiently and effectively. For example, Lake Louise students attended school in the adjacent Copper River School District. Lake Louise voters were disenfranchised with respect to school matters since they could neither serve on the school board for the district attended by their children nor vote for members of that board. Number 1390 MR. HARGRAVES discussed Mat-Su's primary emergency medical services, which ended at milepost 23 of the Glenn Highway, 54 miles from Lake Louise. The nearest Mat-Su Borough public library was a 230-mile round trip. Yet, taxes levied were not commensurate with the levels of service provided. Lake Louise property owners paid the same areawide and non-areawide borough taxes as residents who lived, for example, in the core Wasilla-Palmer area. Number 1421 MR. HARGRAVES noted that throughout the Lake Louise proceedings, the Mat-Su Borough vigorously opposed the detachment proposal. In its capacity as staff to the LBC, the DCRA had recommended approval of the detachment of only 252 square miles, with that approval subject to certain stipulations. Those stipulations included that the Mat-Su Borough be held harmless by Lake Louise with regard to impacts on state education foundation aid and with regard to bonded indebtedness. There also had to be provisions made for the septic tank dump facility in that area. Number 1455 MR. HARGRAVES said the Local Boundary Commission held two lengthy hearings on the matter, one at Lake Louise and the other at Wasilla. Following the final hearing, the LBC granted the detachment of 252 square miles, with the stipulation that Lake Louise become part of another organized borough, presumably a Copper River Basin borough, by March, 1998. Subsequent to that action, the LBC was asked to reconsider, which they did. Mr. Hargraves said the stipulations imposed reflected the importance the LBC placed on the principle in Article X, Section 1, of Alaska's constitution, which called for maximum local self- government. The LBC's initial review, allowing Lake Louise to be part of the unorganized borough, would have resulted in an abdication of local self-government. Number 1500 MR. HARGRAVES said in addition to the constitutional principle involved, there were fundamental needs for municipal government at Lake Louise. Paramount among these were the need for municipal regulation of planning, platting, land use and water quality. No stipulations were made with respect to specific services needed at Lake Louise. The LBC also deferred action on the matter of holding the Mat-Su Borough financially harmless. Mr. Hargraves said the LBC planned to take those matters up in the context of any future Copper River Basin borough proposal. Number 1534 MR. HARGRAVES noted that both the Lake Louise petitioners and the Mat-Su Borough filed requests for reconsideration. Lake Louise wanted the Local Boundary Commission to add an option which would allow detachment if the area formed a second-class city. The Mat- Su Borough wanted the LBC to specify measures to hold it financially harmless if Lake Louise detached. Upon reconsideration, the LBC modified its decision to allow detachment if Lake Louise formed a second-class city. From a public policy standpoint, the commission had expressed a strong preference for the inclusion of Lake Louise in a Copper River Basin borough. However, the circumstances in this particular case had compelled the LBC to reconsider and allow the option of forming a second- class city, Mr. Hargraves explained. Number 1586 MR. HARGRAVES said the LBC had also imposed the following conditions. First, the future city of Lake Louise or future Copper River borough must pay $160,000 to the Mat-Su Borough within two years of incorporation. The payment was to offset impacts to the Mat-Su Borough for the debt service and local contributions to education. Mr. Hargraves explained that $93,000 of that $160,000 stipulated payment was the result of an interpretation by the Department of Education that the value of taxable property at Lake Louise must be included, for two years after the detachment occurred, in the calculation of the Mat-Su Borough's required local contribution in support of education. Mr. Hargraves noted that the LBC had provided, in their decision, that if the law were amended or if the interpretation changed so that the borough was not required to make that contribution, then the payment required by Lake Louise would be adjusted accordingly. Number 1637 MR. HARGRAVES noted that the successor city or borough also had to assume responsibility for the following: the Lake Louise sewage management site; solid waste collection and disposal; and planning, platting, land use regulations and emergency medical services. He said, "To ensure financial viability and cooperation of a city was also a condition upon the passage of a proposition authorizing the city to levy a property tax at a rate that would guarantee sufficient revenue to carry out the duties and reasonable anticipated functions of the city."  Number 1666 MR. HARGRAVES explained that the foregoing were his major remarks regarding the actions taken by LBC in the previous year. He directed the committee's attention to page 63 of the written report dated January 17, 1996. There were several matters of policy and other concerns, he said, which the commission really could do nothing about except to point out to the legislature that these were areas developing rapidly across the state as a matter of concern. One of the conclusions he had come to in the last couple of years, especially, was that there was great discontentment across the state and thinking that the grass was greener on the other side. Organized cities wanted to become unorganized. Cities in a borough wanted to break off. These detachments were of concern, he said, and should be considered by the legislature for appropriate action. Number 1734 MR. HARGRAVES spoke about the promotion of maximum common interest within boroughs. The LBC was finding people "just can't get satisfied or happy with the situation that they're in." The requirement for local contribution for education, libraries or the operation of local government concerned people who were in organized municipalities. "They look across the way and see somebody else that isn't paying anything," he said. He reiterated that issues of equity and requirements of local contributions were causing discontent. Sometimes, he said, that lead to an interest in dissolution and reentering the unorganized borough with no local governments at all. Number 1778 MR. HARGRAVES referred to page 67, which discussed the lack of limitations on authority of municipalities to levy certain taxes. The taxing structures in place were becoming a concern, he said. There were situations where people could call upon taxation on a local natural resource, for example, and generate tremendous revenue. However, another community close at hand might have no such natural resource to raise local monies. Number 1813 CO-CHAIR AUSTERMAN said the first three questions that had jumped into his mind were the exact three things Mr. Hargraves had discussed last. He referred to the interest in detachments, common interests and lack of limitations on certain taxes. He asked Mr. Hargraves if there were recommendations in the written report of what the LBC thought the legislature ought to be doing. Number 1834 MR. HARGRAVES replied that as a commission, the LBC did not generally offer recommendations. Instead, it pointed out the problems in the hope that the legislature would come up with solutions. The commission itself had never taken any specific positions on those problems. They simply recognized them. Number 1854 CO-CHAIR AUSTERMAN asked if, in the past, the Local Boundary Commission had been requested to give recommendations but not felt it was the commission's duty. MR. HARGRAVES responded he did not know that the commission had been requested to do that. If so, he said, the commission would probably refer it to the DCRA staff, who were probably the appropriate ones to pinpoint recommendations. He added that if the committee wished to discuss any one of the issues, they could ask staff to join them at the table for discussion. CO-CHAIR AUSTERMAN replied that was a good idea. Number 1891 PATRICK K. POLAND, Director, Central Office, Division of Municipal and Regional Assistance, Department of Community and Regional Affairs, pointed out that while there were no specific recommendations in the Local Boundary Commission's report, there were a number of options laid out addressing each of those problems. There were potential solutions, although the commission had chosen not to select any. CO-CHAIR AUSTERMAN responded that he would read those three areas of the report. He suggested that the committee wanted to digest the ideas that had been presented. Number 1938 MR. HARGRAVES emphasized that the Local Boundary Commission certainly had staff available to discuss it, including Mr. Poland and Dan Bockhorst, who worked directly with them out of the DCRA. CO-CHAIR IVAN said he had yet looked at the report completely. He wished to digest it first and then bring up questions at a later time, if it pleased the chair. Number 1966 REPRESENTATIVE KOTT suggested that since the LBC members were present, he wished to have them briefly elaborate on compensation for the commission. MR. HARGRAVES responded they made a big point out of being a volunteer lay group that contributed a public service. As far as he went back, and as far as he had looked at the record, the recommendation for compensation had always been in there, he said. He noted that compensation would cost approximately $15,000 per year. He said the concern came from the fact that the LBC was doing work as important as that done by paid commissions. Number 2036 REPRESENTATIVE ELTON agreed with Co-Chair Ivan that at some point this year, the committee should have a work session on some of the suggestions made. He remembered some of the same suggestions from the previous year. If the LBC thought they were important enough to recommend to the legislature, Representative Elton thought it was important enough to review. Number 2053 CO-CHAIR AUSTERMAN expressed that the committee did not plan on any action that day on the report or regarding Wasilla or Lake Louise, for which they had 45 days to act from the day of the report. CO-CHAIR IVAN brought up the topic of dissolution and explained that the community of Akiak had petitioned for dissolution two years ago and gone through all the commission and statutory requirements. However, when the election was held, it was via a mail ballot. When the first ballot was found to be incorrect, a second ballot was sent out. Although, technically, the election was done by the book, there was still confusion. The City of Akiak wanted the LBC to look at the situation and provide the community with a course of action. Number 2230 DAVID GILILA, Administrator, City of Akiak, noted that he was also a member of the IRA Council. Although the city had gone through the necessary procedures, it was the first time an election had been conducted by mail. Mr. Gilila indicated that one registered voter had approached him about not receiving a ballot. He had also heard of other people not receiving ballots, but none of those others had approached him. He understood that the LBC was the only entity that could decide to hold another election within the 24- month period. He added that he had not felt the voter participation was as high as it should have been. Number 2335 MR. GILILA referred to a regulation requiring the election to be challenged within a 10-day period and said he personally never received the results following the election. He did not know who phoned for the election results, but it happened after the 10-day period had elapsed. He was asking the LBC to consider whether the City of Akiak might hold another election before the 24-month period elapsed. Number 2382 MR. GILILA explained that most of the voters had been confused because they had never received a ballot in the mail before. Most of them either had not opened it or had just left it there, he said. Mr. Gilila referred to another option that had been discussed; he did not specify what that option was but expressed that he personally did not feel that was the way to go. He said he preferred to see the community decide whether to dissolve the city or not. Number 2422 OWEN IVAN, Member, Akiak IRA Council, testified that he had received two different ballots by mail, which was confusing. He expressed that it was not right to be voting by mail in the village. He said that some registered voters in Akiak had not received ballots. TAPE 96-12, SIDE B Number 0001 MR. O. IVAN said the "very last chance of getting rid of the City of Akiak would be through complete resignation" by the voters and council members. He said he knew that had been done before in other villages. He said he himself was not worried about the 24- month delay. "Nobody's going to decide for us in Akiak," he said, "because we'd like to control our own destiny." Number 0059 CO-CHAIR IVAN commented that the community, the Lieutenant Governor's office and the Department of Law had discussed the issue; all the concerns were answered by the Division of Elections. However, with the statutory time line and requirements, the division could not call for another meeting. The community of Akiak would have an opportunity to address the Local Boundary Commission, he explained, but he had wanted to let the Akiak residents bring the committee up to speed on some of the dissolution questions and actions happening in Western Alaska. Number 0108 REPRESENTATIVE ELTON asked how common it was for dissolution elections to be held by mail. CO-CHAIR AUSTERMAN asked if the department conducted the election. REPRESENTATIVE ELTON responded he thought the Division of Elections did. Number 0130 REPRESENTATIVE AL VEZEY commented that although he had never been involved in a dissolution election, every annexation election he had been involved in had been done by mail. REPRESENTATIVE ELTON asked whether a mail ballot for dissolution was, then, not unusual. Number 0146 MARJORIE VANDOR, Assistant Attorney General, Civil Division (Juneau), Governmental Affairs Section, Department of Law, noted that she had been at the meeting at the Lieutenant Governor's office where staff from the Division of Elections was present. As to the dissolution election, she said, this was probably the first one to be held where it was a petition by the community asking to dissolve. The other elections held the previous October, on a general election date, had been advisory elections. In fact, that was why they had been held on the day of the normal election and had been in person. Number 0168 MS. VANDOR explained there had been a timing problem as to when the dissolution petition was approved by the LBC. When enough time had passed so that an election could be held, it was November, past the normal date in October for an in-person election. Due to financial problems, about which Ms. Vandor said the Division of Elections was very honest, elections could not always be held in rural villages in person. There had been, however, an Division of Election official in Akiak to answer questions. Ms. Vandor explained that there had been a problem with one of the ballots. The printer had made a mistake and printed the name of another city on the second question referring to the transfer of assets. When that error was discovered, since there was still plenty of time for the mail ballot, a second ballot was printed and mailed out with an explanation. The election official in town had been informed that the second ballot was coming. If either ballot was voted, Ms. Vandor said, it was counted; if both were voted, only one was counted. Number 0230 MS. VANDOR concluded that she could not say it was common, as the Akiak election had been one of the first ones held. Mail-in elections did not always work for all people at all times. However, they were certainly common for Rural Education Attendance Area (REAA) elections, annexations and many other elections in the state. CO-CHAIR AUSTERMAN asked about the 24-month rule. Number 0246 MS. VANDOR replied that was a regulation of the Local Boundary Commission. CO-CHAIR AUSTERMAN asked if the LBC could override that rule. MS. VANDOR affirmed that was correct. Although she had no copy of the regulation with her, she said it would be for extenuating circumstances, for good cause shown. Number 0257 CO-CHAIR AUSTERMAN asked Mr. Hargraves about the LBC's position on doing another ballot. MR. HARGRAVES responded that he wished to have Patrick Poland address that. He explained that the LBC had not discussed the matter as a commission. He wanted to ask Mr. Poland what the LBC's options were. Number 0280 MR. POLAND said it was DCRA's intention to present this to the Local Boundary Commission with their options. He explained the LBC was meeting that afternoon and the following day. Mr. Poland noted that there had been a scheduled meeting the previous day with the representatives of Akiak; however, neither he nor Mr. Bockhorst had made it in because of bad weather. Mr. Poland said they were intending to pursue that. He expressed sensitivity to the problem that had been created and said they were looking for a solution, which they believed existed. They did need to sit down with the LBC and have them make a decision, he added. Number 0300 CO-CHAIR AUSTERMAN requested that once the discussions had taken place and the decision had been made, the committee be given something in writing. MR. POLAND agreed. Number 0308 MR. HARGRAVES said that "the thing you could find comfort in is that we did approve it the first time." He noted that the Local Boundary Commission was fully in concurrence with the action previously taken. He thought it had become clear that it was not the LBC that did the election, he added. If the LBC needed to do something to remedy the problem, Mr. Hargraves felt confident they would. Number 0342 DAN BILLMAN testified via teleconference from Glennallen regarding the Lake Louise detachment. He noted that he was president of the Copper Valley Chamber of Commerce. He spoke in support of the LBC's decision and commended the thorough report prepared by DCRA. He felt Lake Louise's situation was unique because they were so connected to the Copper River Basin in all economic and social ways. As part of their petition, Lake Louise had suggested that there be changes in the future to equalize the school tax. Mr. Billman expressed that Lake Louise was willing to be responsible for their school tax, as well as their share of the bonded indebtedness. Number 0429 ROBERT WELLS, Assembly Member, Matanuska-Susitna Borough, testified via teleconference, saying he represented District 6. He explained that the Local Boundary Commission, after reconsidering its original decision authorizing detachment of Lake Louise if the area became part of an organized borough, amended that decision to allow detachment if the area became a city in the organized borough. He expressed extreme dismay at that decision and disappointment with the legislature's failure to consider a joint resolution rejecting that decision. Mr. Wells said the LBC's decision undermined the existing boundaries and tax base of the Mat-Su Borough, which was an integrated local government that provided services to the Lake Louise area. Number 0471 MR. WELLS predicted the Lake Louise decision would become a precedent for the detachment of other areas that disliked paying taxes. He also believed the LBC's decision violated Article X of Alaska's constitution, because it undermined the principles that boroughs were the preferred form of local government and that local government powers should be exercised with a minimum of local government units, without duplication of tax-levying jurisdictions. Boroughs were specifically designed to provide services to sparsely populated areas, Mr. Wells said. In this case, the LBC's decision did not promote any of these ideas. He said it was also difficult to understand the DCRA's policy recommending detachment. Mr. Wells believed DCRA's decision was contrary to Alaska's constitution and the facts of this case. He explained that DCRA had conducted a study of model borough boundaries sometime around 1991 or 1992. That study did not state that the 1964 legislature erred in establishing the Mat-Su Borough boundaries, he pointed out, nor that Lake Louise should detach. In fact, he said, the model borough boundary study addressed the viability of the formation of a borough in the Copper River Basin area. Number 0528 MR. WELLS stated, "This study concluded that a hypothetical borough exercising the minimum powers required by law in education and planning is quite viable. In fact, it was projected that the potential borough could operate on state and federal funding alone, due largely to the way in which one particular state funding program operated. Not only could it operate without local taxes, but generous state and federal aid would permit it to accumulate a surplus of funds estimated at more than $5 million at the end of the first four years of operation. In the event that taxes ever did become necessary, the region was found to have the capacity to generate significant revenues with minimal rates of taxation. This should come as no surprise, since 94 percent of the taxable value of the region stems from the 150 miles of the Trans-Alaska Pipeline system within the REAA." Number 0566 MR. WELLS continued, "DCRA and the boundary study concluded that there is more than enough assessed valuation to warrant the establishment of a borough in the Copper River Basin. Now, even though nothing has changed, they have advocated detachment of the lands from an integrated borough rather than borough formation. Because a borough in the Copper River Basin is feasible, the legislature should require formation of one prior to the detachment of the Lake Louise area from the Matanuska-Susitna Borough. Please remember that local governments are incorporated to provide local services which cost money. In fact, local governments are required to contribute a local contribution to education, while unorganized areas receive 100 percent of state funding. "This inequity cannot continue, particularly in an era where state funding of local governments is substantially reduced. Every year, there is a reduction in municipal assistance and revenue sharing, which must be borne by local taxpayers. The unorganized area does not suffer the same penalty. In the Matanuska-Susitna Borough, an area with one of the lowest abilities to pay for local services, a property tax levy is the primary method to raise local revenues for local services. When the state advocates the elimination of approximately $11 million in assessed valuation of recreational property with absentee land owners, it compounds the fiscal deficit problem with the local government again being responsible to fill in the gaps. "Because the legislature continues to ratchet down more fiscal responsibility without additional revenue upon local government, and because you apparently intend to tacitly approve this detachment, I conclude the legislature has no political will to consider a joint resolution rejecting the Local Boundary Commission's ill-advised decision or simply does not care about local government. Some legislators, however, have stated they support a mandatory borough act. I hope the support of a mandatory act is not simply political lip service because at the moment it is convenient as a political answer to a serious problem. If you are serious about passing another mandatory borough act, it should not be referred to a number of committees. Instead, it should be promptly and honestly debated and then adopted by the legislature for the Governor's signature. Only when other areas of the state that are currently receiving 100 percent state funding contribution to local services will the serious inequities currently existing be remedied. "Alternatively, other tools are available to the legislature to remedy this problem. The legislature is the assembly for the unorganized areas and could levy a property tax and require local contribution from the unorganized areas. It's time for you to exercise your legislature duty to plug this financial vacuum on the unorganized borough. I strongly urge you to exercise one of these options. Let me assure you that the Matanuska-Susitna Borough will be watching this issue very carefully to see how its delegation and the remainder of the legislature tackle these issues." Number 0734 MR. WELLS concluded, "In summary, while it is too late for you to act responsibly on Lake Louise, it is not too late for you to adopt a mandatory borough act or tax the unorganized areas and require those areas of the unorganized borough to provide funding for local services." He thanked the committee and noted that borough attorney Mike Gatti was available to answer any technical questions. Number 0762 REPRESENTATIVE ELTON asked whether Mr. Wells had worked with his local legislative delegation and what their response had been to the borough's request. Specifically, he wondered if it had been an official borough request and whether they had adopted a resolution and sent it to the legislature. Representative Elton expressed hesitation to "jump into the middle of something that's going on far, far away" because of lack of local knowledge. Number 0790 MR. WELLS responded that the resolution Representative Elton had spoken about had been adopted by the borough assembly and forwarded to their delegation in Juneau. The borough manager was in Juneau, he said, and was pursuing the issue with their delegation. CO-CHAIR AUSTERMAN noted for the record that Representatives Ivan, Nicholia and Vezey were present. Number 0834 REPRESENTATIVE VEZEY asked Mr. Wells if it was his position that the members of the boundary commission were not reasonable people. MR. WELLS replied of course not. He said he just did not agree with the decision they had made, which he felt had broad implications for the state. He felt the legislature should address those considerations. Number 0851 REPRESENTATIVE VEZEY pointed out that this was the second or third time since he had been a legislator that a decision of the LBC had come before them. In those cases, the legislature had decided to accept the LBC's report in every case of which he was aware. Number 0868 MR. WELLS responded that may be; however, he asked that the legislature look at the broad implications of this issue. The Mat- Su Borough did not have the tax base of many other areas, he said. If these kinds of decisions continued, legislators would have to face funding 100 percent of a lot larger school districts, he said. Number 0895 REPRESENTATIVE VEZEY replied that he did not know why Mr. Wells was saying that; the last time he had looked, the Mat-Su Borough had a tax base of $197,000 per capita, whereas the Fairbanks North Star Borough had a tax base of $201,000 per capita. He asked why Mr. Wells felt his borough was discriminated against. Number 0905 MR. WELLS said he would defer to Don Moore, manager for the borough, to address those figures. Number 0934 ART GRISWOLD, North Pole Borough Planning Commission, testified via teleconference, saying he had been listening and was concerned about the discussion of DCRA's recommendations. He complimented Mr. Poland and his staff and said before any changes were made, he hoped DCRA would consider public hearings to allow people to voice opinions on changes in the regulations or procedures. Number 1037 DONALD MOORE, Manager, Matanuska-Susitna Borough, testified in person that he appreciated the work of the Local Boundary Commission and found them to be reasonable people in every sense of the word. These were major public policy questions the LBC was wrestling with, he said. He asked for confirmation that the LBC had made a decision which was overturned by the legislature in 1988 or 1989, concerning the Fairbanks North Star Borough. He recalled that the recommendation had been to annex an area to the north, which the legislature reversed. Number 1108 CO-CHAIR AUSTERMAN responded that according to DCRA, Mr. Moore was correct about that. MR. MOORE explained that like many issues driving decisions in the legislature, this one concerned money and taxation. Things needing to be taken into account were money, taxes and fundamental fairness. He noted that the Matanuska-Susitna Borough, which was created by the legislature rather than by public vote, was formed to be, first and foremost, a school district. In accordance with state law, the borough now taxed themselves more than twice what the state required of a second-class borough in order to support its schools. The LBC decision would begin to erode this local tax base, he said, by allowing approximately $11 million in resort and recreation property to be removed from the borough. Mr. Moore pointed out that these were not indigent rural residents trying to get out from under an oppressive government. The property was resort and recreation property primarily owned by people living in Anchorage, Palmer, Wasilla and Fairbanks. Number 1192 MR. MOORE addressed the borough's tax base, saying the Mat-Su Borough's assessed value per capita was approximately $40,000 per person. The Lake Louise area's assessed value was approximately $200,000 per person, whereas the Copper River Basin REAA's was approximately $220,000. Looking at the fundamental reason of forming the borough in the first place, which was to support a school system, he suggested it might be more valuable to look at the assessed value per student, which in the Mat-Su Borough was $175,000 per student. In the Copper River REAA, where Lake Louise was going, the assessed value per student was $1,084,000 dollars. They were far more capable of supporting their school system with their local tax base, which was available to them but that they did not tax, than the Mat-Su Borough was with their tax base that they did tax, and heavily. Mr. Moore noted that the state required residents of a borough to tax themselves both to build schools and operate them, while the REAA's expenses were paid for by the state. Number 1277 MR. MOORE commented that the previous week, the local newspaper reported the Mat-Su Borough might have to pink-slip 125 teachers the next year. He asked how many the Copper River REAA was laying off. MR. MOORE said the original decision of the LBC was very wise to allow the detachment so long as the area attached to an organized borough. This would meet everyone's need, he said, by allowing the petitioners to join with an area geographically dear to them, yet protecting the financial integrity and best interests of the detached area, the borough and the state. The decision before the committee really did none of those things, Mr. Moore said. It simply removed a large, valuable recreation area from the obligation of taxation and made it a part of the "vacuum of the unorganized borough." The decision started to unravel the borders of a borough that had existed 33 years, he said. He noted that the questions of detachment had been asked and answered more than 13 years ago, at which time it had been left as it was. Number 1351 MR. MOORE asserted that the LBC's decision would be detrimental to the Mat-Su Borough and contrary to Alaska's constitution, its statutes and even common sense. "We would ask that you please do not do this," he concluded. Number 1368 REPRESENTATIVE ELTON responded that he shared the concern about narrowing the tax base. However, he said, from the testimony received and information presented, he wondered how many of the pink-slipped teachers were serving Lake Louise. He said it sounded to him as if all those students, as well as their families that the Mat-Su Borough was taxing, would be going somewhere else, with the Mat-Su Borough no longer responsible for them or providing public transportation for them. Number 1406 MR. MOORE replied that the borough had, in the past, provided public transportation there. The students were going somewhere else, he said, because their parents chose to send them somewhere else. The same educational services and facilities were available to those students, he said, as to any other rural student in the borough. Number 1430 REPRESENTATIVE ELTON asked how far those students were traveling to school at present. MR. MOORE replied they attended school in Glennallen, for which he did not know the exact mileage. He suggested someone present would know the mileage. REPRESENTATIVE ELTON asked if that school was much closer than the nearest borough school. MR. MOORE replied yes. Number 1461 REPRESENTATIVE ELTON said to him, it seemed somewhat unfair to characterize it as "parents choosing to send their kids elsewhere," when the schools for which they were being taxed were a lot farther away. MR. MOORE said there were other choices. The school district offered correspondence courses for situations with few students, for example. Where there was a concentration of students large enough to merit a school, the borough provided one. Furthermore, there had been planning to provide a school at the Lake Louise area, but those plans had not materialized. Frankly, he said, the student population went away. There were very few students in that area right now. Number 1500 REPRESENTATIVE ELTON said he had understood there would be a requirement that Lake Louise reorganize into a second-class city or affiliate with an adjacent borough. However, upon hearing Mr. Moore's and Mr. Wells's testimony, it sounded as if they believed there was no intent to do either. Number 1540 MR. MOORE responded that the original Local Boundary Commission decision was that the area attach to another borough. To that, he said, the borough had no objection. Upon reconsideration, however, the LBC allowed Lake Louise to form a second-class city, which by law could not provide education, among other things. They would become another second-class city inside the Copper River REAA. REPRESENTATIVE ELTON noted that was where they were now receiving most of their services. MR. MOORE replied yes. Number 1592 REPRESENTATIVE IRENE NICHOLIA pointed out that the decision permitting the detachment of Lake Louise from the Mat-Su Borough was conditioned upon formation of a second-class city in the next two years. She said she found it ludicrous that the borough would rather have the students go to the Mat-Su Borough school, more than 70 miles away from Lake Louise. She suggested that would be like sending students from Nenana to school in Fairbanks. Furthermore, while correspondence might be fine for some, she understood that the residents of Lake Louise did not want to do that. Instead, they chose to send their students to the Copper River Basin schools in the REAA system. Number 1667 MR. MOORE responded that he did not prefer that parents send their children to any school or another. Rather, he preferred that the parents have a choice. He said if he lived in the area, most certainly his children would go to the Glennallen schools. There were provisions in the borough to allow for that. Number 1693 REPRESENTATIVE NICHOLIA agreed with the people from Lake Louise that it was their choice as to which government they wanted to be in. They chose not to be in the Mat-Su Borough, she stated. Instead, they chose to become a second-class city and to be part of the REAA. Number 1779 REPRESENTATIVE VEZEY said they had been looking at tax base figures a number of years ago and he did not remember if they had been looking at per capita or per person taxation. He had thought it was per capita. He asked Mr. Moore if the borough tax base was $40,000 per capita. MR. MOORE replied yes. Number 1770 REPRESENTATIVE VEZEY responded that sounded awfully low. He said he remembered looking at the tables, which had been comparing apples to apples. He noted that had been just a couple of percent below the Fairbanks North Star Borough. Number 1779 MR. MOORE replied that he believed the assessed value per student in the Fairbanks North Star Borough and the Mat-Su Borough were similar. For that matter, the Kenai Peninsula Borough was only slightly below both of those. He hoped he had pointed out in his testimony that the Mat-Su Borough also agreed with choice. However, they had been given no choice in the formation of a borough in the first place. If the window was now open where they could remove themselves from the borough and join the REAA, resulting in the state picking up 100 percent of the cost, Mr. Moore felt certain that would prevail if it were put to a vote in his borough. Number 1857 JACK HANSEN, Owner, Evergreen Lodge, testified that he was the petitioners' representative for the Lake Louise detachment petition. He said Lake Louise had no objections to becoming part of the borough in the Copper River Basin area, if and when that should happen. Clearly, he said, they belonged to the Copper River Basin in every way, shape and form. They were willing to become a second-class city and take on responsibilities for garbage disposal and sewage, as well as the financial requirements of a second-class city. In fact, he said, they were probably already in the process of doing that. He referred to the DCRA's report and said it was clearly not harmful to the borough for Lake Louise to exit. In some ways, Mr. Hansen thought it was beneficial to them. He foresaw Lake Louise becoming a financial liability to the Mat-Su Borough if it stayed in the borough and received the services for which it was taxed. Number 2067 CO-CHAIR AUSTERMAN noted that concluded the schedule for the day and thanked the Local Boundary Commission members. He reminded the committee that any legislator could put together a concurrent resolution to disallow the LBC's actions, if they so chose, regarding the Wasilla annexation and Lake Louise detachment issues. He informed the committee that the boundary commission's report would be addressed at a future time. He noted that Thursday's meeting would include a briefing by DCRA on the Service Block Plan State Plan, as well as a briefing by the Alaska Native Health Board. Number 2181 MICHAEL GATTI, Attorney, Matanuska-Susitna Borough, testified via teleconference. He referred to a question to Mr. Wells pertaining to whether the borough assembly had passed a resolution requesting the legislature to adopt a joint resolution opposing the Lake Louise detachment. Indeed they did, he said. As he understood it, that resolution had been forwarded to each legislator. Number 2237 MR. GATTI also noted that Senator John Torgerson was currently reviewing the constitutionality of conditions placed by the LBC on the detachment decision. Specifically, Senator Torgerson had questioned whether the commission had authority to impose some of the conditions. Mr. Gatti said his borough had similar concerns, particularly about the continuing jurisdiction to arbitrate disputes between the petitioners and the borough, as well as some other stipulations. Mr. Gatti concluded by saying the other borough representatives had adequately and eloquently expressed the position of the borough. Number 2323 CO-CHAIR AUSTERMAN noted that the committee had copies of the resolution in question. ADJOURNMENT There being no further business to conduct, CO-CHAIR AUSTERMAN adjourned the House Community and Regional Affairs Committee at 2:46 p.m.