JOINT MEETING HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE February 24, 2000 8:10 a.m. COMMITTEE CALENDAR Local Boundary Commission Report TAPE(S) 00-11, SIDE A 00-12, SIDE A CALL TO ORDER Representative Harris, Co-Chairman, House Community & Regional Affairs Standing Committee, convened the joint meeting of the House and Senate Community and Regional Affairs Standing Committees at 8:10 a.m. PRESENT At the call to order, members present from the House committee were Representatives Harris, Morgan, Murkowski, Dyson, Joule and Kookesh; members present from the Senate committee were Senators Kelly and Hoffman. Representative Halcro and Senator Phillips arrived as the meeting was in progress. SUMMARY OF INFORMATION KEVIN WARING, Chairman, Local Boundary Commission (LBC), read from a document entitled "Remarks to the Joint House-Senate Community & Regional Affairs Committee of the Second Session of the 21st Alaska Legislature." The aforementioned document is available in the committee packet and is attached to this document. Mr. Waring informed the committee that the LBC filed its annual report with an addendum. The report provides the following information: an overview of the LBC; a summary of the LBC's activities last year along with pending proposals; the LBC's recommendations with regard to the annexation of territory to the City of Ketchikan and the City of Aleknagik; and a discussion of important public policy issues concerning local government in Alaska. MR. WARING reviewed the aforementioned issues and discussed in depth the need to eliminate certain ambiguities in the law involving boundary changes, the Alaska Housing Finance Corporation Rural Housing Loan Program, and the incentives and disincentives to borough government development. He encouraged the committees to consider a new concept, which creates a new process for borough incorporation, proposed by the City of Cordova. There was a question-and-answer session that addressed such topics as the difference between home-rule and first-class cities and why a community would choose one organization over another. There was also discussion with regard to specific areas such as Talkeetna, Adak, the City of Ketchikan and Cordova. COMMITTEE ACTION The committee took no action. ADJOURNMENT The meeting adjourned at 9:24 a.m. NOTE: The meeting was recorded and handwritten log notes were taken. A copy of the tape(s) and log notes may be obtained by contacting the House Records Office at 129 6th Street, Suite 229, Juneau, Alaska 99801, (907) 465-2214, and after adjournment of the second session of the Twenty-first Alaska State Legislature this information may be obtained by contacting the Legislative Reference Library at 129 6th Street, Suite 102, Juneau, Alaska 99801, (907) 465-3808. ATTACHMENT: Remarks to the Joint House-Senate Community & Regional Affairs  Committee  of the Second Session of the 21st Alaska Legislature  Kevin Waring, Chairman, Local Boundary Commission  February 24, 2000 B 8:00 a.m.  Capitol Room 124{tc "Capitol Room 124" \l 3} Introduction    Good morning. I am Kevin Waring, Chairman of the Local Boundary Commission. I appreciate the opportunity to address you in person at your joint meeting today. Other Commission members participating by teleconference are: Kathleen Wasserman, Vice- Chairman, of Pelican, appointed from the First Judicial District; and Nancy Galstad, of Kotzebue, from the Second Judicial District. Two members of the Commission were unable to participate by teleconference today. They are: Allan Tesche, of Anchorage, from the Third Judicial District; and Ardith Lynch, of Fairbanks, from the Fourth Judicial District. Annual Report Filed The Local Boundary Commission filed its annual report with the Legislature on January 19th of this year. A copy was provided to each member of the House and Senate. The Commission's report addresses four principal topics. Chapter 1 provides an overview of the Commission; Chapter 2 summarizes the Commission's activities last year along with pending proposals; Chapter 3 presents the Commission's recommendations to the Legislature for annexation of territory to the City of Ketchikan and the City of Aleknagik; and Chapter 4 discusses important public policy issues concerning local government in Alaska. I will speak briefly about the first three topics, in order to allow time to address three important public policy issues. Overview Alaska's Constitution established the Local Boundary Commission to ensure that proposals to create and boroughs or alter their boundaries would be dealt with objectively and from a statewide perspective. The Commission's responsibilities include judging proposals for: incorporation of cities and boroughs; annexation to cities and boroughs; detachment from cities and boroughs; reclassification of cities; dissolution of cities and boroughs; and merger and consolidation of cities and boroughs. The Commission has other powers and duties established in law, including a duty to make studies of local government boundary problems. The Commission consists of five members who are appointed by and serve at the pleasure of the Governor. One member is appointed from each of Alaska's four judicial districts. The fifth member is appointed at-large and serves as chair. Members are appointed for overlapping five-year terms. Commission members donate their time as a public service. They receive no compensation for the time they contribute to Commission activities. The Department of Community and Economic Development provides staff support to the Commission.   1999 and Prospective Activities of the Commission The Commission met eleven times in 1999. Eight of those meetings were by teleconference. Collectively, the five members of the Commission spent all or part of 85 days conducting the business of the Commission. In all, Commission members volunteered many hundreds of hours reviewing and analyzing documents filed in proceedings and on other Commission business. Specifically, during 1999 the Commission addressed proposals for: annexation of 5,524 square miles to the Ketchikan Gateway Borough; annexation of 19.5 square miles to the City of Kodiak; annexation of 24.29 square miles to the City of Aleknagik; and annexation of 1.2 square miles to the City of Ketchikan. Several proposals are now pending before the Commission or are expected to be filed shortly. These include petitions for: incorporation of the City of Adak as a second-class city; incorporation of Talkeetna as a home rule city; annexations to the cities of Palmer, Wrangell, Ketchikan, and Homer; consolidation of the City of Ketchikan and the Ketchikan Gateway Borough; consolidation of the City of Fairbanks and the Fairbanks North Star Borough; and dissolution of the City of Skagway and concurrent incorporation of a Skagway Borough. Recommendations Article 10, Section 12 of Alaska's constitution requires the Local Boundary Commission to present proposed local government boundary changes to the legislature during the first ten days of a regular session. The constitution further provides that the change shall become effective forty-five days after presentation or at the end of the session, whichever is earlier, unless disapproved by a resolution concurred in by a majority of the members of each house. This year, the LBC has approved and recommends two boundary changes for legislative review. The background for these recommendations is found on pages 27 through 64 of the Report and in the Commission's addendum of January 19, 2000 to Senate President Pearce and House Speaker Porter. On November 29, 1999, the Commission unanimously approved the City of Aleknagik's petition to annex 24.29 square miles. On December 4, 1999, the Commission unanimously approved the City of Ketchikan's petition to annex 1.2 square miles. Subsequently, on January 19, 2000, the day it filed its Report to the Legislature, the Commission amended its original decision to defer the effective date of the Ketchikan annexation to January 1, 2001. The Commission took this unusual action at the joint request of the City of Ketchikan, Ketchikan Gateway Borough, and the Shoreline Service Area, the area affected by the annexation, so they could have a window of time to consider city-borough consolidation before annexation was finalized. The Commission's action in this case warrants an aside. Two years ago, Senator Mackie and Representative Kookesh provided positive leadership to help resolve a controversial annexation in Haines. This year, Representative Bill Williams deserves credit for his peace-making efforts on a divisive annexation proposal involving his Ketchikan constituents. Representative Williams, assisted by City and Borough leaders, helped bridge the divisions and bring about a compromise, so Ketchikan residents could pursue a broad solution - city-borough consolidation - to deliver local government services more equitably and more efficiently. Representative Williams helped keep this controversy from escalating to the legislature and perhaps the courts, and saved both local and state governments a great deal of time and money. The Commission acted on two other annexation petitions this past year. On March 31, 1999, the Commission voted unanimously not to approve the Ketchikan Gateway Borough's petition to annex 5,524 square miles; and On August 28, 1999, the Commission determined that the City of Kodiak's annexation petition satisfied all the requirements in law and unanimously approved the petition. Local voters, however, rejected the proposed annexation at local election. No legislative action is called for on these two failed annexation petitions. I am pleased to report for the third year in a row that there is no outstanding litigation of any Commission decision. Introduction to policy issues Next, I would like to turn to three public policy issues that the Commission raised in its Report to the Legislature. In raising these issues, the Commission is fulfilling its duty to address local government boundary problems. These issues concern: Several ambiguities in state law that affect boundary changes; AHFC's Small Communities Housing Assistance Program; and Disincentives to borough incorporation, and an innovative proposal to create an additional process for borough incorporation. Need to Eliminate Certain Ambiguities in the Law Involving  Boundary Changes  This year, as last year, the Commission is asking for consideration of proposed legislation to clarify several statutory provisions that may affect boundary changes. Here, I would like to take a moment on behalf of the Commission to thank the Committee Chairs, Senator Kelly, Representative Harris, and then Co-Chair Representative Halcro, along with committee members, for their support last session for Senate Bill 156, which was recommended by the Commission and approved by unanimous vote of both houses and signed into law. This year, the Commission wishes to direct legislative attention to continuing uncertainty over the authority of municipalities to levy property taxes during the initial calendar year in an area that has been incorporated or annexed after January 1. State law is also ambiguous about the effect of incorporations and boundary changes upon service areas of organized boroughs and the unorganized borough. Lastly, the Commission believes that municipal governments should expressly be given limited extraterritorial power to levy taxes in an area that has been detached from a municipality. This would ensure that the detached area could be held accountable for its prorated share of municipal debts and other costs associated with detachment. These issues are addressed in pages 71-74 of the Commission's Report. These issues concern the Commission because they may cloud implementation of boundary changes. We have drafted conceptual legislation to resolve the issues, as outlined on pages 73-74 of the Report. We recognize, however, that these issues are of even greater interest to municipal governments. Therefore, we asked several parties with a fundamental interest in these matters to review the proposed legislation, and comment to the Legislature. These parties included the Alaska Municipal League, the Alaska Municipal Attorneys' Association, and the Alaska Association of Assessing Officers. The State Assessor reports that the conceptual legislation has the support of the Alaska Association of Assessing Officers. Kevin Ritchie, Executive Director of the Alaska Municipal League, is available this morning to offer his views on the matter. The Commission invites and welcomes legislative attention to this matter. AHFC Rural Housing Loan Program The Local Boundary Commission has become increasingly aware that certain eligibility provisions in the Alaska Housing Finance Corporation's Small Communities Housing Assistance program have influenced the outcome of important municipal boundary determinations. Briefly, incorporation, annexation, or consolidation may result in local loss of eligibility for reduced-interest home loans. This prospect has generated local opposition to some proposed boundary changes. Details of this issue are addressed on pages 74 and 75 of the Commission's report. The Commission encourages the Legislature to explore ways to maintain this worthwhile program, but eliminate the unintended adverse impacts that it has on legitimate municipal boundary proposals. Coincidentally, this is the same AHFC program that prompted the City of Kenai to adopt a resolution in support of legislation to equalize AHFC mortgage loan rates inside and outside cities, because the current program promoted growth outside city boundaries to the city's detriment. Borough Government Incorporation Finally, we come to the topic of incentives and disincentives to borough government development, and to an innovative concept advanced by the City of Cordova for legislation to create an additional route to borough incorporation and borough annexation. Incentives for incorporation have always been an element of the State's local governmental policy. Constitutional delegates preferred a voluntary approach to borough formation, coupled with adequate incentives to encourage residents to form boroughs. They intended that organized boroughs exist in every area of Alaska that met appropriate standards. Further, the founders took the position that if citizens failed to form boroughs where needed, the State should intervene and compel the creation of boroughs in those areas. Over time and with the best on intentions, we have stood the notion of incentives for borough development on its head. For many years, the Commission has stated its concern about the disincentives that inhibit the ongoing development of local government, especially borough government, in Alaska. Most often, these disincentives are good programs with unwelcome, unintended side-effects. State financial support for local education in the unorganized borough is the prime example of a good program that can work at cross-purposes with the constitutional goal of borough self-government. The Small Communities Housing Assistance program I just spoke of is another typical example. This year, the Commission would like to restate its concern about the inhibiting effect of disincentives. But we would also like to encourage the Legislature to consider a new concept proposed by the City of Cordova, itself a city in the unorganized borough, to create a new process for borough incorporation. The proposal outlines a case-by-case proactive approach to borough incorporation that side-steps the current impasse. The proposed concept has three features: Every year, the Local Boundary Commission shall identify areas of the unorganized borough that meet existing standards for second class borough incorporation or for annexation to a borough or unified municipality. The Commission shall prepare a written decision that explains the basis for any proposed borough incorporation or annexation, and sets out an incorporation plan. The decision shall be distributed to all affected communities and local governmental units for comment. Based on comments received, the Commission may reconsider and modify its original decision. The Commission shall submit any proposed incorporation or annexation for legislative review, a requirement that does not now apply to borough incorporations. To these three features, the Commission would add a fourth - that the Commission also hold public hearings in the affected areas before it prepares its written decision proposing incorporation or annexation. The appeal of this straightforward concept is that it takes a proactive approach to borough incorporation in a way that respects established standards and practice, and provides accountability for Commission decisions. In the view of the Commission, the concept: Fulfills the intent of Article X of the Constitution to "provide for maximum local self-government with a minimum of local governmental units" and to divide the State "into boroughs, organized or unorganized . . . [each of which] shall embrace an area and population with common interests to the maximum degree possible"; Maintains existing substantive standards, and with incorporation of the Commission's suggested public hearing provision, maintains essential procedural standards for borough incorporation or annexation; and Provides for legislative review and oversight for any borough incorporations and annexations proposed by the Commission. The concept is consistent with the Alaska Municipal League's policy statement on borough government. While expressing the same preference for voluntary borough formation held by the Constitutional convention delegates 45 years ago, Governor Knowles has acknowledged that the lack of incentives has stymied borough incorporation prospects. Consequently, Governor Knowles encouraged the City of Cordova to pursue its proposal for reform of current laws relating to this matter. In conclusion with respect to this issue, the Commission respectively urges the Legislature to give thoughtful consideration to any proposed legislation that incorporates the conceptual approach I have outlined. The Commission has no illusion that effective action to advance borough development in unorganized areas that meet borough incorporations standards will be easy or quick. Commission members have discussed at length the time and effort this proposal would require of them. We would anticipate a time- consuming, painstaking case-by-case process that will prove well worth the effort in the long run. Conclusion Thank you. That concludes my prepared remarks. If you have questions on any of these matters, I will do my best to respond.