Legislature(2003 - 2004)

05/09/2003 01:55 PM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
           SCR 12-BOROUGH INCORPORATION: UNORG AREAS                                                                        
SENATOR  GARY  WILKEN,  bill   sponsor,  supplied  the  committee                                                               
members  with  the  information that  was  requested  during  the                                                               
5/7/03   hearing.  Mary   Jackson  distributed   REAA  wage   and                                                               
employment  information  and  a  chart  outlining  PL874  Federal                                                               
Impact  Aid Dollars.  He noted  the  letter from  the Impact  Aid                                                               
Program Director that agreed with  his assertion that PL874 money                                                               
in the unorganized area is not local contribution.                                                                              
CHAIR WAGONER opened public testimony.                                                                                          
JONEAL HICKS from Gakona testified  on behalf of the Christochina                                                               
Tribal Council  and its  membership in opposition  to SCR  12. He                                                               
noted  98 percent  of  those who  testified  during the  previous                                                               
hearing  were opposed  to  formation  of a  borough  in the  four                                                               
proposed  areas. They  took  exception  to the  data  in the  LBC                                                               
report.  They  realize they  will  eventually  become part  of  a                                                               
borough, but they would like  to choose their government when the                                                               
time comes.                                                                                                                     
SENATOR  GEORGIANNA LINCOLN  asked  him  to send  a  copy of  his                                                               
testimony to the  committee. She asked how he  responds to people                                                               
that said they would never make the decision to form a borough.                                                                 
MR.  HICKS replied  they have  been discussing  borough formation                                                               
for at  least two years and  have been working with  the economic                                                               
development  council  in  the  Copper  River  area.  They  aren't                                                               
avoiding borough formation, they're simply moving deliberately.                                                                 
SENATOR  GARY  STEVENS   asked  if  he  believes   they  have  an                                                               
obligation  to support  the local  school district  and how  they                                                               
might do that.                                                                                                                  
MR. HICKS said at some point  there would be a borough government                                                               
in the area and it would fund the school.                                                                                       
WAYNE  MacMURRAY testified  Slana residents  were opposed  to the                                                               
ALAN LeMASTER from Gakona thought  the report data was inaccurate                                                               
and asked how  the LBC determines an area could  afford to become                                                               
a borough.                                                                                                                      
SENATOR LINCOLN asked  him how this bill would  affect tourism in                                                               
his area.                                                                                                                       
MR. LeMASTER  said it would depend  on what happened as  a result                                                               
of  being a  borough. He  noted tourism,  in general,  is against                                                               
targeted taxes.                                                                                                                 
CHARLIE  BROKER  from  Tok  said  he  agreed  with  the  previous                                                               
testimony. Boroughs would  come in due time;  the residents would                                                               
figure it out. He expressed a  preference for Valdez as a borough                                                               
headquarters for Tok.                                                                                                           
CHRIS MARSHAL  from Tok testified  there isn't  steady employment                                                               
in  the area  and therefore,  there is  no ability  to support  a                                                               
borough   government   at   this  time.   Senator   Lincoln   and                                                               
Representative  Morgan represent  the area  well and  a different                                                               
organization isn't  desired. There is  no need for  another level                                                               
of bureaucracy.                                                                                                                 
SENATOR GARY STEVENS  asked if he felt he didn't  need to support                                                               
the local school system.                                                                                                        
MR. MARSHAL replied  he does support the school  system by living                                                               
in the community and running a  small business that caters to the                                                               
tourist trade.  Area residents are  resource developers  and they                                                               
support the  state to a  greater degree than urban  residents. He                                                               
said t's  true the  residents don't have  dollars to  support the                                                               
school, but they  support the state and take  exception to anyone                                                               
that says they don't.                                                                                                           
SENATOR GARY STEVENS clarified his  question was how do residents                                                               
support the school system.                                                                                                      
MR.   MARSHAL  said   residents  support   tourism  and   mineral                                                               
extraction, but they don't have dollars to contribute.                                                                          
SENATOR  LINCOLN  explained  support   to  tourism  and  resource                                                               
development all helps  to support the general  fund. In addition,                                                               
they  pay  through the  federal  dollars  that are  allocated  to                                                               
assist the areas  that have federal land and  that money supports                                                               
Naidine Johnson said  she owns a business on  the Denali Highway.                                                               
Residents receive  no help  in maintaining  services or  even the                                                               
road, the economy has suffered since  September 11 and it's a bad                                                               
time to impose a borough on area residents.                                                                                     
KAREN  ELDRIDGE from  Paxson said  they  don't have  a school  so                                                               
there isn't one  to support. Few people live in  the area and she                                                               
can't understand  why anyone would consider  organizing them into                                                               
a borough. More  money would be generated if the  state sold land                                                               
in the area than if a borough was formed and taxes collected.                                                                   
MARVIN  RASSMUSSEN from  Delta Junction  expressed opposition  to                                                               
SJR 12.  The decision  to form  a borough should  be left  to the                                                               
people.  They contribute  to area  schools with  PL874 money  and                                                               
PILT  funds.  He said  the  state  is responsible  for  education                                                               
anyway. The  pipeline is already  taxed and adding  another layer                                                               
of bureaucracy  wouldn't help anyone.  If he wanted to  pay taxes                                                               
and live  with an  enormous bureaucracy, he  could move  to North                                                               
Pole or Fairbanks.                                                                                                              
DENNY KAY  WEATHERS from Prince  William Sound  testified against                                                               
the legislation at  the previous hearing. She  pointed out Alaska                                                               
is  a diverse  state  and nothing  is equal  other  than what  is                                                               
specified in the  constitution. She made the point  that the data                                                               
used in the LBC report is inaccurate and misleading.                                                                            
FRED HEINZ  from Gakona spoke in  opposition to SJR 12.  He noted                                                               
the LBC  report excluded  the oil  and gas  receipts and  if they                                                               
were to  form a  borough that  data would  be important.  For the                                                               
proposed  borough in  the Copper  River Basin  he heard  they get                                                               
$6.1  million from  the pipeline  and the  school district  costs                                                               
just $5.1  million to run so  there's plenty of money  to run the                                                               
school system. The constitution framers  knew it would take a lot                                                               
of people  to support a borough  and they simply don't  have that                                                               
population in the Copper River Basin.                                                                                           
JANE  BROWN  from  Gakona said  borough  incorporation  would  be                                                               
adopted  unless the  Legislature  disapproved the  recommendation                                                               
within  45 days.    The  issue of  boroughs,  both organized  and                                                               
unorganized,  is a  state constitutional  right.  If the  sponsor                                                               
wants to force the issue, then  he should do it through the legal                                                               
process of a  bill. She took issue with the  accuracy of the data                                                               
the LBC used.                                                                                                                   
BETTY BOZNAK from  Gakona said it's not  economically feasible to                                                               
the affected  communities. Concerned residents  address education                                                               
needs  by volunteering  their  time  and expertise.  Organization                                                               
will  come,  but forcing  the  issue  deprives residents  of  the                                                               
stepping stone process of developing government.                                                                                
MARK HEINZ  from Gakona  spoke in opposition  to SJR  12 pointing                                                               
out that the state or  federal government typically supports most                                                               
of the educational needs in any  area. The Copper River Basin has                                                               
just 3,100 residents  and they couldn't possibly  support a local                                                               
government.  There  is  need for  additional  industry  not  more                                                               
There was no further public testimony.                                                                                          
SENATOR LINCOLN  remarked she  was trying  to understand  how the                                                               
sponsor  selected  the  four  areas   for  closer  scrutiny.  She                                                               
reviewed the data  used in the report and noted  those four areas                                                               
have high poverty rates, high  unemployment, and large numbers of                                                               
adults that  are not  working. Her  constituents always  tell her                                                               
they  want  quality  education,   an  improved  economy  and  the                                                               
opportunity to work.                                                                                                            
With regard  to taxing the  pipeline more to fund  education, she                                                               
asked  how long  it  would  be before  that  burden would  become                                                               
problematic. Federal money does come  into those areas to pay for                                                               
education, but there  will never be the equality  of payment that                                                               
the sponsor  is trying to  achieve until the residents  feel they                                                               
can form and support a borough.                                                                                                 
SENATOR  WILKEN suggested  the  state is  better  off because  83                                                               
percent of the state was  placed into mandatory boroughs in 1961.                                                               
He pointed to the 11 standards  that a borough must meet and said                                                               
the  LBC would  go to  those  four areas  and do  an analysis  to                                                               
determine  whether or  not they  could support  local government.                                                               
One  size   certainly  doesn't  fill   all.  For   instance,  the                                                               
Delta/Greeley  area  has a  mine,  a  missile defense  system,  a                                                               
pipeline, and  tourism. That  is four tax  bases and  that wealth                                                               
should be  spread to the  Canadian border. Without a  borough the                                                               
people of  Delta would hoard  that wealth to their  benefit. This                                                               
effort  isn't about  imposing government  on anybody;  it's about                                                               
figuring out  how to  help people  develop their  area so  that a                                                               
generation from now, they could  support government and pay their                                                               
fair share.  People will  pay attention to  what is  happening in                                                               
local schools when they support them with their checkbooks.                                                                     
SIDE B                                                                                                                        
2:45 pm                                                                                                                         
SENATOR LINCOLN  remarked Skagway  wants to  form a  borough, but                                                               
their application  was denied.  She pointed  to Denali  and North                                                               
Slope  as  examples of  areas  that  successfully formed  borough                                                               
government when  they were ready. The  mine at Delta is  still in                                                               
the development  stage and this resolution  discourages that type                                                               
of  new  economic development  rather  than  encouraging it.  She                                                               
asked again why the four areas were selected.                                                                                   
SENATOR WILKEN  replied the common  thread is they  don't support                                                               
their local schools.  The other three in  the Unorganized Borough                                                               
have  first class  cities that  are  supporting local  education.                                                               
Eighty  four  percent of  the  people  in  Alaska were  put  into                                                               
boroughs  in 1961  and three  percent  organized voluntarily.  He                                                               
suggested the mine  at Delta will bring the same  benefits to the                                                               
area  as Fort  Knox  has to  Fairbanks and  Greens  Creek has  to                                                               
Juneau. Certainly, the  mine in Delta couldn't  expect to develop                                                               
those resources and  not pay for the services they  use and share                                                               
that wealth  with the people of  Delta. If that project  hangs by                                                               
the  thread  that  they  can't  pay their  fair  share,  then  it                                                               
shouldn't go forward.                                                                                                           
SENATOR  ELTON  asked  if  the  LBC needed  a  request  from  the                                                               
Legislature or  the communities to  go forward with this  kind of                                                               
SENATOR  WILKEN  said they  don't  need  a  request. The  LBC  is                                                               
established in  the constitution and  stands at arms  length from                                                               
the Legislature. No one, including  the Legislature, can tell the                                                               
LBC  to do  anything and  that's why  this is  in the  form of  a                                                               
resolution rather than statute.                                                                                                 
SENATOR ELTON asked  and received confirmation that  this is only                                                               
a suggestion  rather than a mandate  and the LBC doesn't  have to                                                               
do anything as a result of SJR 12.                                                                                              
He  asked if  he remembered  correctly that  the sponsor  brought                                                               
this issue before  the Senate previously, but it  didn't pass the                                                               
SENATOR WILKEN  said that was  correct, previously the  issue was                                                               
held up in a House committee.                                                                                                   
SENATOR ELTON  asked if there  were things the  Legislature could                                                               
do  to get  to the  issues identified  by the  LBC to  talk about                                                               
incentives, which  would be the  carrot approach rather  than the                                                               
SENATOR  WILKEN replied  the LBC  addresses the  disincentives to                                                               
borough formation in  their annual report to  the Legislature and                                                               
they have asked the Legislature to help.                                                                                        
SENATOR  ELTON  asked  if  anyone  had looked  to  see  what  the                                                               
pipeline  offset might  be  for the  state  as those  communities                                                               
begin to tax pipeline property.                                                                                                 
SENATOR  WILKEN   said  there  were  rough   estimates  and  it's                                                               
currently taxed at  $240 million a year. The  North Slope Borough                                                               
takes  about $190  million and  Anchorage,  Valdez and  Fairbanks                                                               
pick up  the rest. The $30  million and $35 million  that is left                                                               
over goes  into the  general fund. These  aren't huge  amounts of                                                               
money and  it may be  that other areas of  the tax base  could be                                                               
used  so  as  to  not  touch the  pipeline.  If  they  touch  the                                                               
pipeline, they must tax themselves at the same rate.                                                                            
In  1996  the  LBC  conducted a  Delta/Greeley  analysis  and  he                                                               
thought  it was  3  or  $4 million.  Standard  number three  asks                                                               
whether it  is in the best  interest of the state  to organize so                                                               
it would be a Legislative decision  as to whether that $3 million                                                               
should be forfeited  from the general fund to  provide benefit to                                                               
that area under the LBC plan.                                                                                                   
CHAIR  WAGONER  remarked  the  overwhelming  testimony  has  been                                                               
against paying any  taxes. Although he hesitates  to say everyone                                                               
should  pay  equal taxes,  fair  is  fair,  and the  question  is                                                               
whether  residents  can,  in  some   way,  support  the  schools.                                                               
Currently,  schools  in those  areas  are  receiving 100  percent                                                               
support and contributing nothing.                                                                                               
SENATOR  WILKEN  replied everyone  in  the  room pays  plenty  of                                                               
taxes, but they receive services  in return. The common thread is                                                               
that all the  areas have school systems and  everyone wants those                                                               
school systems to  be funded equally. That's the  goal. The state                                                               
requires  a  4  mil  payment  before  they  pay  anything  toward                                                               
education  and  those with  the  ability  to  pay the  4-mils  to                                                               
support the schools should do so.                                                                                               
CHAIR WAGONER said that's based on property value.                                                                              
SENATOR WILKEN agreed.                                                                                                          
SENATOR ELTON referred to the  wages spreadsheet and asked if the                                                               
data was available to determine how  many of the jobs are held by                                                               
residents. That data would be  necessary to assess how much stays                                                               
in a particular region. For  example, Juneau benefits from nearby                                                               
unorganized areas and certainly takes some of the jobs.                                                                         
SENATOR WILKEN  was sure  the information  was available,  but he                                                               
didn't break  it down that way.  He used the information  to show                                                               
there was some wealth creation  opportunity in some of the areas.                                                               
Each  person in  organized  areas paid,  on  average, $1,090  for                                                               
education last year.  If everyone in the  Unorganized Borough was                                                               
assessed a  4.5 percent  income tax, that  would amount  to about                                                               
the  same,  but  that  ignores  the  question  and  isn't  really                                                               
SENATOR   GARY  STEVENS   asked  whether   a  borough   could  be                                                               
established with only education powers if that was desired.                                                                     
SENATOR  WILKEN   replied  the  lowest  class   borough  requires                                                               
education, planning, and zoning powers.                                                                                         
SENATOR  GARY  STEVENS asked  him  to  go through  the  procedure                                                               
that's expected with regard to the study.                                                                                       
SENATOR WILKEN  said the LBC  would identify  an area, go  to the                                                               
area and  refine the  data that  was begun  in the  February 2003                                                               
report. An area  would have to qualify in each  one of the eleven                                                               
standards and if an area failed,  it wouldn't become a borough at                                                               
that time. The state might then look  to see how it could help an                                                               
area  address  the  areas  of  failure  so  government  would  be                                                               
possible at some time in the future.                                                                                            
SENATOR ELTON  thought the  easiest way  to do  this would  be to                                                               
call the LBC and ask them to  do it rather than going through the                                                               
Legislature. He  asked if  the LBC was  reluctant to  act without                                                               
instruction from the Legislature.                                                                                               
SENATOR WILKEN  said if  he were  a member of  the LBC,  he would                                                               
want to  know, beforehand, whether  or not the final  arbiter was                                                               
going to reject the work.                                                                                                       
SENATOR GARY STEVENS  asked if the Mandatory Borough  Act of 1961                                                               
didn't  specified  which areas  would  become  boroughs and  that                                                               
there isn't a current mandate.                                                                                                  
SENATOR WILKEN outlined borough history.                                                                                        
SENATOR GARY  STEVENS restated his  question: Is there  a borough                                                               
act in effect now?                                                                                                              
SENATOR WILKEN said there was  not; the Mandatory Borough Act was                                                               
a single piece of legislation.                                                                                                  
There were no further questions.                                                                                                
CHAIR WAGONER asked for the pleasure of the committee.                                                                          
SENATOR GARY STEVENS made a motion  to move SCR 12 from committee                                                               
with individual recommendations.                                                                                                
SENATOR LINCOLN objected.                                                                                                       
CHAIR WAGONER  asked for  a roll call.  Senator Gary  Stevens and                                                               
Chair  Wagoner voted  yea and  Senators Lincoln  and Elton  voted                                                               
nay. The bill failed to move from committee.                                                                                    

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