SENATE COMMUNITY & REGIONAL AFFAIRS COMMITTEE March 6, 2000 1:37 p.m. MEMBERS PRESENT Senator Jerry Mackie, Vice Chair Senator Jerry Ward Senator Randy Phillips Senator Lyman Hoffman MEMBERS ABSENT Senator Tim Kelly, Chair COMMITTEE CALENDAR SENATE BILL NO. 227 "An Act relating to the limitation of levy of municipal ad valorem taxes in home rule and general law municipalities; and providing for an effective date." -MOVED SB 227 OUT OF COMMITTEE SENATE BILL NO. 240 "An Act relating to the establishment of and accounting for an administrative cost charge for the state's role in the community development quota program and to the appropriation of receipts from the charge; and providing for an effective date." -MOVED CSSB 240(CRA) OUT OF COMMITTEE SENATE BILL NO. 248 "An Act relating to the financing authority, payment in lieu of tax agreements, and tax exemption for assets and projects of the Alaska Industrial Development and Export Authority; relating to renaming and contingently repealing the rural development initiative fund within the Department of Community and Economic Development, and establishing the rural development initiative fund within the Alaska Industrial Development and Export Authority; and providing for an effective date." -MOVED SB 248 OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 227 - No previous Senate action. SB 240 - No previous Senate action. SB 248 - No previous Senate action. WITNESS REGISTER Mr. Dick Tremaine Central Bering Sea Fisherman's Association 16251 Chasewood Lane Anchorage, AK 99516 POSITION STATEMENT: Supports SB 240. Mr. Gene Dusek Director of Office of Management & Budget Municipality of Anchorage 632 W. 6th Ave. Anchorage, AK 99501 POSITION STATEMENT: Supports SB 227. Mr. Harold R. Samuelson, Jr. Chief Executive Officer Aleutian/Pribilof Island Community Development Association P.O. Box 412 Dillingham, AK 99576 POSITION STATEMENT: Commented on SB 240. Ms. Bonnie Williams Chair of Finance Committee Fairbanks/North Star Borough P.O. Box 82812 Fairbanks, AK 99708 POSITION STATEMENT: Supports SB 227. Mr. Ted Smith Mayor of City of Petersburg P.O. Box 841 Petersburg, AK 99833 POSITION STATEMENT: Supports SB 227. Mr. Jeff Bush Deputy Commissioner Department of Community & Economic Development P.O. Box 110800 Juneau, AK 99811 POSITION STATEMENT: Commented on SB 240. Senator Kim Elton Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Sponsor of SB 227. Mr. Keith Laufer Alaska Industrial Development & Export Authority 480 West Tudor Ave. Anchorage, AK 99502 POSITION STATEMENT: Supports SB 248. ACTION NARRATIVE TAPE 00-03, SIDE A Number 001 VICE-CHAIR JERRY MACKIE called the Senate Community & Regional Affairs Committee meeting to order at 1:37 p.m. Present were Senators Mackie, Phillips, Ward, and Hoffman. The first order of business to come before the committee was SB 227. SB 227-MUNICIPAL PROPERTY TAX LEVY LIMITATION SENATOR KIM ELTON, sponsor of SB 227, stated if the initiative passes it will accomplish three things. It will replace the current 30 mill or 3 percent limitation with a 10 mill or 1 percent levy, it will require payments on bonded indebtedness to be included within the tax cap, and it will prohibit local property assessments from rising more than 2 percent annually. SB 227 allows local voters the ability to set a tax cap of higher than 10 mills in a general election. SB 227 prohibits people in one municipality from setting the mill rate for another municipality. If the initiative passes municipalities have the ability to lower the mill rate, but can't raise the mill rate above 10. SB 227 also exempts school bond debt from the tax cap. SENATOR PHILLIPS asked if SB 227 would change the intent of initiative. SENATOR ELTON stated no. SB 227 loosens provisions of the initiative, and moves school bond debt out from under the tax cap. The Alaska Municipal League agrees that people in one part of the State should not govern the tax cap in individual communities in other parts of the State. Each community's voters should have the option to determine mill rates and taxes for that community. Financial pressure will be added to municipalities if the initiative passes, and the public doesn't have the option to vote. SENATOR ELTON gave examples of property values plummeting. SB 227 will not change the initiative, it gives alternative options if the initiative passes. The Alaska Constitution states Alaska should act within its powers to "provide for maximum local self government with a minimum of local government units, and to prevent duplication of tax levying jurisdictions." Without an opportunity for local governments to set appropriate tax rates, the initiative will discourage consolidation of local government units and local taxing authorities. Number 174 SENATOR PHILLIPS stated local governments should be educated on the impacts of the initiative and SB 227. SENATOR ELTON agreed and stated people in unorganized boroughs should not be allowed to dictate what happens in other municipalities in the State. The legislature should not focus on tactics against the initiative but should create a safety net for the people in municipalities. That is what SB 227 represents. SENATOR PHILLIPS stated SB 227 would be a mechanism to prepare for the initiative. VICE-CHAIR MACKIE stated SB 227 gives people more reason to vote for the initiative and fall back on SB 227, instead of trying to fight the initiative. SENATOR ELTON stated SB 227 won't make a difference in voter behavior. People will vote for the initiative or not, but SB 227 will go into effect if the initiative passes. VICE-CHAIR MACKIE asked, if the initiative gets voted down whether SB 227 will go into effect. SENATOR ELTON stated it will not. Some cities are contributing more than the 4 mill property tax for their local contribution to schools. A 10 mill tax limit with no safety net will pressure municipalities to lower the 4 mill local contribution to schools to still provide for other services. SENATOR PHILLIPS stated SB 227 isn't a safety net, it represents a transition. He asked how the votes were broken down to represent each region of Alaska. SENATOR ELTON stated most opinions came from Southcentral Alaska. Number 333 MS. BONNIE WILLIAMS, Chair of finance committee for Fairbanks/North Star Borough, stated support for SB 227. If the initiative passes it will negatively affect Fairbanks' current year budget. The schools, road service areas, and fire departments would suffer the most if the initiative passes. The Fairbanks North Star Borough has voted for a revenue cap which prohibits the borough from spending above the current year revenue; except for inflation, new construction, and new bonds that are voter approved. Ms. Williams referred to California's tax initiative that went into effect in 1978. From 1978 to 2000 California's population has grown from 22 million to 31 million with no new schools being built to accommodate those children. Number 420 MR. TED SMITH, Mayor of City of Petersburg, stated support for SB 227. SB 227 allows municipalities control over their taxation destiny. Petersburg already has a 10 mill rate limit that was set at the local level and can be changed by a vote of the people. MR. GENE DUSEK, Director, Office of Management & Budget for the Municipality of Anchorage, stated support for SB 227. Anchorage mill rates for 2000 are estimated to be 17.91 mills. The school board is asking the assembly for a mill rate of 8.09 mills. The mill rate for city services differs from area to area, the average mill rate is 9.82 mills. The total debt, excluding debt services, is 14.66 mills. That will need to be cut to 10 mills if the initiative passes. Mr. Dusek referred to charts given to the committee. SENATOR PHILLIPS moved SB 227 out of committee with individual recommendations. Without objection, the motion carried. SB 240-CHARGE FOR COMMUNITY DEVELOPMENT QUOTA MR. JEFF BUSH, Deputy Commissioner, Department of Community & Economic Development, stated the Community Development Quota (CDQ) program was developed in 1991 by the federal government. CDQ allocates a percentage of the ground fish fisheries to Western Alaska and Bering Sea communities that are located within 50 nautical miles of the coast. The communities are organized into six CDQ non-profit corporations. The State has been granted authority to oversee the CDQ program. The CDQ program generates royalties that are granted to the communities, approximately $20-30 million annually. The CDQ program has been funded with $250,000 annually of general funds. SB 240 proposes to stop using general funds and create a fee structure to make the CDQ self sufficient. SENATOR PHILLIPS asked where the northern border lies for the CDQ program. MR. BUSH replied at the northern end of Norton Sound. SENATOR HOFFMAN stated he had a proposed amendment. The amendment will give new communities coming into the CDQ program a two year grace period to develop and not pay taxes. TAPE 00-03, SIDE B Number 585 SENATOR HOFFMAN moved Amendment number 1. Without objection, Amendment number 1 was adopted. MR. DICK TREMAINE, Central Bering Sea Fisherman's Association(CBSFA), stated support for SB 240. CBSFA is the smallest CDQ group in the State, it has the least amount of communities and revenue strength. The State provides a service to the group that is mandated by the federal government. MR. HAROLD SAMUELSON, President of the Bristol Bay Economic Corporation, stated support for SB 240 without the amendment. Bristol Bay is just building its infra-structure and it has a multi-faceted program. Number 520 MR. LARRY COTTER, CEO of Aleutian/Pribilof Island Community Development Association (APICDA), stated support for SB 240. He commented that extending the borders beyond the Bering Sea is a complicated issue. SENATOR HOFFMAN moved CSSB 240 (CRA) from committee with individual recommendations. Without objection, the motion carried. SB 248-AIDEA: BONDS & RURAL DEVELOPMENT MR. KEITH LAUFER, Alaska Industrial Development & Export Authority (AIDEA), stated support for SB 248. SB 248 extends AIDEA's bonding authority and transfers the rural development initiative fund loan program from the Department of Community & Economic Development to AIDEA. SB 248 also makes technical changes to tax provisions concerning AIDEA's projects. AIDEA's general bonding authority is subject to a sunset that takes place July 1, 2000. The sunset would prevent AIDEA from issuing general obligation bonds under $10 million for projects AIDEA owns, and it will prevent AIDEA from issuing conduit revenue bonds. The sunset will have no effect on bonds over $10 million, those bonds require specific legislative authorization. The rural loan program is a small business loan program for rural Alaska, for communities with populations under 5000 people, and loans of $200,000 or less. In 1993 and 1996, the legislature authorized AIDEA to purchase several loan portfolios from the State. Transferring this program to AIDEA will eliminate the need for the periodic recapitalization. Mr. Laufer referred to changes of provisions if SB 248 passed. Number 436 SENATOR PHILLIPS asked what the public policy was. MR. LAUFER stated the loan program is an enterprise fund and there will be no general fund impact. VICE-CHAIR MACKIE asked if Mr. Laufer had heard of opposition on SB 248. MR. LAUFER stated no. SENATOR HOFFMAN moved SB 248 from committee with individual recommendations. Without objection, the motion carried. There being no further business to come before the committee VICE- CHAIR MACKIE adjourned the meeting at 2:56 p.m.