SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE February 17, 1999 1:32 p.m. MEMBERS PRESENT Senator Tim Kelly, Chair Senator Jerry Mackie, Vice Chair Senator Randy Phillips Senator Lyman Hoffman MEMBERS ABSENT Senator Jerry Ward COMMITTEE CALENDAR OVERVIEW BY LOCAL BOUNDARY COMMISSION VICE-CHAIR KATHLEEN WASSERMAN. COMMISSIONERS NANCY CANNINGTON AND ALLAN TESCHE PARTICIPATED VIA TELECONFERENCE, AND DANIEL BOCKHORST FROM THE DEPARTMENT OF COMMUNITY AND REGIONAL AFFAIRS (DCRA) WAS PRESENT. ACTION NARRATIVE TAPE 99-2, SIDE A Number 001 CHAIRMAN TIM KELLY called the Senate Community & Regional Affairs Committee meeting to order at 1:32 p.m. Present were Senators Mackie, Hoffman, and Kelly, Chairman. The meeting was convened to hear an overview by members of the Local Boundary Commission (LBC). KATHY WASSERMAN, LBC Vice-Chair, noted Chairman Waring was unable to attend today's meeting, however Commissioners Cannington and Tesche were participating via teleconference. She discussed the four topics covered in the 1998 LBC annual report, filed on January 28, 1999. Those topics are: an overview of the LBC; prospective and 1998 issues before the LBC; a formal recommendation to the Legislature by the LBC to annex 6.5 miles to the City of Haines; and policy issues before the LBC. MS. WASSERMAN noted the LBC provides tools to Alaska's 145 city governments, 16 organized boroughs, and unorganized areas to govern their local affairs and cope with the financial challenge of providing local services. One of Alaska's larger cities is facing an annual loss of $2 million in local revenues because of commercial development shifting outside of its corporate limits. That city will petition the LBC next month to expand its boundaries. Such proposals have a great impact on the state and its finances. The LBC was established in Alaska's Constitution to ensure that proposals to create and alter cities and boroughs would be dealt with objectively, from a statewide perspective. The LBC is comprised of five members: one from each judicial district and a fifth member, the chair, appointed at large. It's functions include incorporation of, annexation to, detachment from, and dissolution of cities and boroughs; reclassification of cities; and mergers and consolidations of cities and boroughs. The LBC is also charged with studying local government boundary problems. DCRA provides staff assistance to the LBC. MS. WASSERMAN said in 1998 the LBC addressed proposals for annexation to the Ketchikan Gateway Borough, the City of Haines, the City of Thorne Bay, the City of Palmer, the City of Fairbanks, the City of Wasilla, and consolidation of the Haines Borough and the City of Haines. Other proposals, expected to be filed shortly, include petitions for consolidation of the Fairbanks North Star Borough and the City of Fairbanks, incorporation of Talkeetna as a home rule city, and annexation to the cities of Kodiak, Ketchikan, Palmer, Alegnagek, Wasilla, and Craig. City governments in Wrangell, Skagway, Nome, and Petersburg are reportedly developing petitions for borough incorporation. The LBC also spent considerable time improving its regulations and will continue that effort in 1999. Regarding the recommendation to the Legislature to annex 6.5 square miles to the City of Haines, MS. WASSERMAN explained Article 10, Section 12, of Alaska's Constitution provides that the LBC may present proposed local government boundary changes to the Legislature during the first 10 days of session. The change will become effective 45 days after presentation or upon adjournment, whichever is earliest, unless disapproved by a majority of the members of each house. An LBC proposal for Haines annexation was voted down by the Legislature in 1984. The LBC approved a similar Haines annexation proposal in 1997 but deferred filing a recommendation for that annexation with the Legislature last year at the urging of the City of Haines, Haines Borough, and others. Those parties requested, and were granted by the LBC, a one-year deferral to allow voters to consider consolidation of the two local governments as an alternative to annexation. All parties agreed, beforehand, that if the consolidation effort was unsuccessful, the Haines Borough and other opponents would discontinue their opposition to annexation. The LBC held a hearing in Haines in August of 1998 and subsequently granted the petition for consolidation, which was defeated by Haines voters by a vote of 545 to 542. In accordance with the previous agreement, the LBC has filed its formal recommendation for annexation. A clear need for city government in the 6.5 square mile area exists, and the City of Haines can best provide services to that area. The proposal meets all other applicable legal standards. MS. WASSERMAN discussed LBC policy issues and concerns. The LBC is asking the Legislature to amend laws which govern the manner in which the LBC acts on petitions. The proposed amendments (pages 55-57) have the sole purpose of eliminating ambiguities in the law to avoid future litigation. She urged committee members to introduce and support legislation to reduce the risk of litigation and decrease costs. MS. WASSERMAN raised the issue of disincentives to the extension of borough government in Alaska and said the LBC is not concerned about eliminating disincentives for the purpose of promoting more government for its own sake, but rather because it is critical to recognize the role of municipal and organized borough governments in carrying out the duties of the state at a local level. Organized boroughs share the financial burden of carrying out the state's constitutional duty to provide public schools. Over the years, boroughs have saved state government several billion dollars in educational funding. The founders of the Alaska Constitution hoped that state government would provide incentives to encourage incorporation of organized boroughs. Over the last 40 years, disincentives have grown substantially and only four percent of Alaskans live in boroughs that were voluntarily formed. The widespread assumption that the unorganized areas of Alaska lack the readiness and capability to operate as organized boroughs is false; many equal or exceed several of the regions organized under the 1963 Mandatory Borough Act. Those disincentives weigh heavily on the State in terms of addressing state and local fiscal problems. MS. WASSERMAN noted a second policy concern centers around borough boundary issues. The LBC believes that greater compliance with the Alaska Constitution could be achieved with respect to the unorganized borough if AS 29.03.010 were amended to divide the single unorganized borough into multiple unorganized boroughs. The foundation for such an effort already exists in the model borough boundaries established by the LBC over 10 years ago, however aspects of that model warrant further reflection. Another principle policy concern of the LBC is the possible "balkanization" of the unorganized borough, through the formation of numerous single community borough governments. Last, while the LBC is anxious to serve Alaska's local governments, it is also mindful of the need for efficiency and economy. For that reason, it has begun to place greater stress on more comprehensive approaches to annexation by local governments. One city in Alaska has undertaken 42 separate annexations since 1970. Numerous piecemeal annexations impose needless costs on the local government, LBC, and other state and federal agencies and private organizations. Number 295 SENATOR PHILLIPS asked if a hybrid borough could be created in which the unorganized areas are organized only for the purpose of granting school powers and collecting school taxes. He noted his constituents are tired of seeing the unorganized areas pay very little or nothing toward the costs of schools. The residents of unorganized areas seem to oppose another layer of government. He felt it is reasonable that the Legislature, as assembly members of unorganized boroughs, ask residents of those areas to pay something toward the cost of education. COMMISSIONER ALLAN TESCHE, LBC, responded that issue merits a lot of consideration by the Legislature at this time, particularly in light of the budget shortfall. He hoped any legislative proposals encourage the voluntary formation of new municipal governments, rather than the involuntary imposition of governments on the outlying areas of Alaska. SENATOR PHILLIPS stated he thinks the unorganized areas are going to have to "step up to the plate" and pay something toward the cost of education and that some sort of mandatory school borough status should be placed on the unorganized areas of the state. Number 345 SENATOR MACKIE noted that areas that are not part of a borough are not necessarily unorganized and not paying taxes. He pointed out residents of Craig and other communities pay property and sales taxes, and they contribute substantially to the local school districts via a separate one percent tax. He clarified that some areas, particularly REAAs, do not make a contribution toward education. SENATOR HOFFMAN referred to page 21 of the annual report, and asked why those areas are considering borough organization, and whether those areas will follow the proposed borough boundaries or the boundaries proposed under the Mandatory Borough Act. MR. DAN BOCKHORST, staff to the LBC, replied the primary interest behind borough organization is the prospect that they will be mandated to organize by the Legislature. Many of the listed communities are exploring borough government to seize the opportunity to create a borough government that the local community prefers. In regard to the proposed boundaries, Mr. Bockhorst said the boundaries being contemplated, with the exception of Delta- Greeley, are quite a bit smaller than the model borough boundaries defined by the LBC ten years ago. SENATOR HOFFMAN asked how the LBC would respond if residents of Unalaska Island and Prince of Wales Island wanted to incorporate, using their islands as boundaries. MR. BOCKHORST replied Prince of Wales Island conforms closely to the model borough boundaries, but very little interest in actively pursuing incorporation in that area exists. In the case of Unalaska, the LBC's model borough boundaries envision a government that would extend to the end of the Aleutian Islands. The LBC would have to wrestle with some policy questions over such a proposal. SENATOR MACKIE thanked the Commissioners and Mr. Bockhorst for their response to the dilemma in Haines and stated that he will not vote against annexation. He asked for an update on the status of the Ketchikan Gateway Borough's petition for annexation. MS. WASSERMAN replied it is in the process of amending and resubmitting its petition. SENATOR MACKIE asked if the amended petition will include Meyers Chuck and Hyder. MR. BOCKHORST informed committee members the LBC imposed a March 12 deadline for an amendment from the Ketchikan Gateway Borough and, to his knowledge; the amendment is to include Meyers Chuck and Hyder. SENATOR MACKIE asked what the LBC time line on the Ketchikan proposal will be. MS. WASSERMAN answered the hearings will most likely be scheduled in September. SENATOR MACKIE asked if hearings will be held in Hyder and Meyers Chuck. MS. WASSERMAN said the LBC will do as much as possible to hold hearings in those communities but she was unsure how state travel restrictions will affect the location of the hearings. MR. BOCKHORST added LBC Chairman Waring wishes to hold hearings in those two communities. The law provides that a hearing could be held if two LBC members are physically present at the location. Other members could participate via teleconference. SENATOR MACKIE asked what DCRA's official position is on that annexation. MR. BOCKHORST stated DCRA recommended that the original petition be denied; the exclusion of Hyder and Meyers Chuck being one reason. DCRA has not taken a position on the prospective amended petition. SENATOR HOFFMAN, in response to Senator Phillips' earlier comment, pointed out that many unorganized areas of the state pay property and sales taxes to support their communities. One of the major disincentives for unorganized areas is that many are surrounded by federal lands so no state lands are available for selection. There being no further questions or testimony, SENATOR KELLY announced committee staff will review the suggested legislation and get back to LBC members. He adjourned the meeting at 2:05 p.m.