HOUSE FINANCE COMMITTEE March 20, 2000 1:45 P.M. TAPE HFC 00 - 73, Side 1 CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:45 p.m. PRESENT Co-Chair Mulder Representative Foster Co-Chair Therriault Representative Grussendorf Vice Chair Bunde Representative Moses Representative Austerman Representative Phillips Representative J. Davies Representative Williams Representative G. Davis was absent from the meeting. ALSO PRESENT Peter Torkelson, Staff, Representative Dyson; John Pearson, Economic Development Planner, Hyder. TESTIFIED VIA TELECONFERENCE Pat Poland, Director, Division of Municipal and Regional Assistance, Department of Community and Economic Development; Dan Bockhurst, Local Boundary Commission, Department of Community and Economic Development. SUMMARY HB 255 "An Act relating to villages; and providing for an effective date." CSHB 255 (CRA) was REPORTED out of Committee with a "do pass" recommendation and with fiscal impact note by the Department of Law, dated 2/25/00. HB 361 "An Act relating to charges for state services; requiring that fees levied by resource agencies for designated regulatory services be based on the actual and reasonable direct cost of providing the services, except in the case of certain negotiated or fixed fees; relating to negotiated or fixed fees of resource agencies; relating to invoices for designated regulatory services; establishing a petition process regarding fees charged by resource agencies for regulatory services; and providing for an effective date." HB 361 was postponed until 1:30 p.m., 3/21/00. CSSB 7(FIN) am "An Act relating to the University of Alaska and university land, and authorizing the University of Alaska to select additional state land." SB 7 was held over to 8:30 a.m., 3/21/00. HOUSE BILL NO. 255 "An Act relating to villages; and providing for an effective date." REPRESENTATIVE FRED DYSON, SPONSOR explained that the intent of HB 255 is to make it easier for small communities to organize and stay organized. He observed that there is a constitutional mandate to encourage communities to organize under state law. He explained that the legislation extends second class cities the privilege of writing their own charter. Under existing law, a first class city can write their charter or constitution and do anything that is not precluded by state law. A second class city can only do that which is allowed by state law. The legislation gives a "home rule community" the ability to form their kind of government and define their scope of responsibilities. He observed that five communities have disorganized, while only 3 have organized in the last few years. Vice Chair Bunde questioned what the downside of the legislation would be. Representative Dyson responded that some communities might have a false hope that they can organize before they are able. PETER TORKELSON, STAFF, REPRESENTATIVE DYSON noted that there are some critical distinctions between first class cities, second class cities and home rule communities, which might facilitate a small community to organize. All home rule cities are school districts. Second class cities are not school districts. Home rule cities are currently required to zone and plat their land as part of their formation. The legislation would make it permissive but not required for home rule communities. Financial reporting requirements also differ. Home rule municipalities are required to do a full financial audit each year. Second class cities are required to file a statement of accounts. Home rule communities would only be required to file a statement of accounts. Representative Grussendorf noted that there is a third class city that organized for the purpose of providing education. Mr. Torkelson reiterated that home rule communities would not have educational standing or responsibilities. Representative J. Davies asked if home rule communities would be eligible for municipal assistance and revenue sharing. Mr. Torkelson responded that they would be eligible. Vice Chair Bunde noted they would be included in municipal assistance and revenue sharing, but would not be required to have a local tax base. Mr. Torkelson noted that they would be able to tax and acknowledged that they would not have a requirement to tax. Representative Foster observed that there are seven villages in the Bethel area that dissolved their governments in favor of organizing as tribal governments under the Indian Reorganization Act (IRA). Representative Dyson observed that culturally based entities cannot be recognized as a state governmental entity. Mr. Torkelson stressed that nothing would prohibit a group of people living in an area from forming a home rule community. They would have to follow state guidelines. Co-Chair Therriault observed that there is an upper limit of a 2 percent tax: Levy of an ad valorem tax by a home rule community or second class city may not exceed two percent of the assessed value of the property taxed". Representative Dyson clarified that this conforms to existing law and is consistent with current second class cities. Representative Foster referred to an email from Richard Burton (copy on file.) He questioned if a village could form its own court. Mr. Torkelson explained that a home rule community would not have judicial power. Representative J. Davies questioned if there is a limit on sales taxes. Co-Chair Therriault did not think that there is a limit on sales taxes. PAT POLAND, DIRECTOR, DIVISION OF MUNICIPAL AND REGIONAL ASSISTANCE, DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT testified via teleconference in support of the legislation. The legislation gives communities the maximum amount of flexibility to arrive at solutions to their problems. It also continues the second class city concept by extending flexibility. Mr. Poland reiterated that all of the provisions, including tax limitations are consistent with existing law for second class cities. Municipalities can exceed the tax cap to pay off bonds. There is no limitation on sales tax. Co-Chair Therriault asked what criticisms remain. Mr. Poland felt that the legislation had dealt with the majority of concerns. He noted that there are still some concerns in regards to education powers. The legislation clarifies that home rule communities and home rule cities are different entities. In response to a question by Representative J. Davies, Mr. Poland explained that there was a strong desire to identify home rule communities as a separate entity. Any local government, particularly one that wants to have taxing authority has to be a municipal government. Municipal governments can only be called city or boroughs. The legislation conforms to existing law. In response to a question by Representative Foster, Mr. Poland observed that the legislation does not change the taxing authority. Co-Chair Therriault questioned if there were a fiscal note from the Department of Community and Economic Development. Mr. Poland observed that the Department of Community and Economic Development did not feel that a fiscal note was necessary. He reiterated support by the Department of Community and Economic Development. JOHN PEARSON, ECONOMIC DEVELOPMENT PLANNER, HYDER spoke in support of the legislation. Hyder is an unincorporated community of about 130 residents, located on the Alaska/British Columbia Border. Hyder shares the border with the Canadian community of Stewart British Columbia, population 700. He maintained that Hyder is Alaska's only real international border community and should be considered as Alaska's Front Door. The shortest distance between any point in Alaska and the Lower 48 is at Hyder. Mr. Pearson observed that Hyder views HB 255 as a major step forward for the community and other small unincorporated communities around Alaska that want to expand their role and responsibility for services to local residents without having to "go broke". Hyder is not a school district. Students travel daily to Canada for school. Mr. Pearson emphasized that the Hyder Community Association has a good management record. The Community Association oversees: *The fire department and emergency services; *Operation of a community library that is open five days per week; *Operation of a summer operated community museum; *Provides snow removal on the side streets of the community; *Operates a summer visitor center; *Oversees a community weatherization program; *Oversees a community solid waste program; *Oversees the State of Alaska small boat harbor and float plane facilities; *Contracts with the Department of Transportation and Public Facilities to maintain the state; and *Handles the application process and administration of grant opportunities. Mr. Pearson highlighted one of Hyder's accomplishments in stimulating economic growth. The past two years the community had an opportunity to get involved in the bottled water business. At the moment Hyder is building a bottled water plant in the community that will employ 41 year around positions. He emphasized that HB 255 would have helped Hyder provide the financial package. The project has the ability to bring Hyder's unemployment to zero in one year. He concluded that the legislation would help small communities. Vice Chair Bunde observed that the legislation would allow the community to be eligible for municipal revenue sharing. Mr. Pearson emphasized that the legislation would give Hyder the ability to secure loans and to bond. The ability to secure loans and bond would allow Hyder to work with other communities to develop ferry service. A number of programs are not available to Hyder as a Community Association. Representative Phillips questioned if the state of Alaska reimburses Canada for attendance of Hyder students in Canadian schools. Mr. Pearson stated that the state does reimburse Canada. The program has been in existence for a long time. Mr. Pearson provided further information regarding the water-bottling project. Additional economic benefit would be derived through the local production of pallets used in shipping the water. Bottle production will also occur in Hyder and provide an additional 15 jobs. In response to a question by Co-Chair Mulder, Mr. Pearson noted that the product would be called Alaska Chill. Co-Chair Mulder questioned if the bill's title should be narrowed. Representative J. Davies questioned if there had been discussions regarding an upper limit on the number of persons in a home rule community. He expressed concern that areas with good economic opportunity to support local schools could forego those opportunities. Mr. Torkelson observed that there have been discussions regarding population thresholds on the upper and lower levels. He noted that communities would not be able to have their own school districts until they step into the next level of responsibility by upgrading to a home rule first class city. Co-Chair Therriault asked if Representative J. Davies' was concern that there may be some communities that would never take the step forward. Representative J. Davies agreed and pointed out that Delta Junction would be the second richest school district in the state if it chose to organize. Co-Chair Therriault stressed that the legislation would at least bring communities part way toward contributing to local government. Representative J. Davies noted that the Local Boundary Commission might have recommendations on ways to address the issue. He stressed that he supports the legislation. Representative Dyson stated that he would support a solution if one were found. Representative Foster read from the sponsor statement: A new charter-base home rule community may be the best option for unincorporated areas that would not be viable under the second class city model. He questioned if there were villages in western Alaska that were not already second class cities. Mr. Poland observed that there are 50 - 60 communities that have not incorporated (around the state). He gave examples of communities that have not incorporated. He thought that there was at least one village in Representative Foster's district that had not incorporated. Co-Chair Therriault observed that there is a small fiscal impact note from the Department of Law. Representative Foster MOVED to report CSHB (CRA) out of Committee with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 255 (CRA) was REPORTED out of Committee with a "do pass" recommendation and with fiscal impact note by the Department of Law, dated 2/25/00. RECESSED The meeting was recessed at 2:25 p.m. The meeting was scheduled to resume at 8:30 a.m. House Finance Committee 6 3/20/00