Legislature(2003 - 2004)

10/03/2003 10:00 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
           SCR 12-BOROUGH INCORPORATION: UNORG AREAS                                                                        
                                                                                                                              
                                                                                                                                
CHAIR GARY STEVENS announced this was a work session for SCR 12                                                                 
and testimony was by invitation. SCR 12 requests the Local                                                                      
Boundary   Commission   (LBC)   to   consider   certain   borough                                                               
incorporations. He asked the sponsor to come forward.                                                                           
                                                                                                                                
SENATOR   GARY  WILKEN,   sponsor  of   SCR  12,   described  the                                                               
legislation as a  step toward better government  and parity among                                                               
Alaskans. It's  an issue of personal  responsibility and fairness                                                               
and although  some call  it a mandatory  borough bill,  it's only                                                               
mandatory "if able."                                                                                                            
                                                                                                                                
He highlighted the following:                                                                                                   
                                                                                                                                
   · The slide presentation                                                                                                     
   · Tri-fold brochure his staff prepared outlining the                                                                         
     reasoning associated with SCR 12                                                                                           
   · A letter from Commissioner Blatchford                                                                                      
   · The sponsor statement for SCR 12                                                                                           
   · The first chapter of the report the LBC gave to the 23rd                                                                   
     Legislature [Unorganized Areas of Alaska that Meet Borough                                                                 
     Incorporation Standards dated February 2003]                                                                               
                                                                                                                                
He pointed out that the  slide presentation would give historical                                                               
background and  answer why legislators  should be  thinking about                                                               
borough incorporation and what SCR 12  does to help the effort. A                                                               
copy of the CD may be found in the bill packet.                                                                                 
                                                                                                                                
Part I                                                                                                                          
                     Historical Perspective                                                                                     
                     Historical Perspective                                                                                     
                                                                                                                                
Regional   government   was   a   central   topic   at   Alaska's                                                               
Constitutional Convention.                                                                                                      
                                                                                                                                
The  Committee  on Local  Government  often  focused on  regional                                                               
The Committee on Local Government often focused on regional                                                                     
government  during  the  44  meetings held  to  draft  the  Local                                                               
government during the 44 meetings held to draft the Local                                                                       
Government Article.                                                                                                             
Government Article.                                                                                                             
                                                                                                                                
The Local  Government Committee  called for all  of Alaska  to be                                                               
The Local Government Committee called for all of Alaska to be                                                                   
divided into boroughs - organized or unorganized.                                                                               
divided into boroughs - organized or unorganized.                                                                               
                                                                                                                                
Alaska  Constitution Convention  Proceedings, Alaska  Legislative                                                               
Council, page 2612                                                                                                              
John  Rosswog, Chair,  Committee on  Local Government  [said they                                                               
would allow  boroughs to remain  unorganized until they  are able                                                               
to take on local government functions.]                                                                                         
                                                                                                                                
Alaska  Constitution Convention  Proceedings, Alaska  Legislative                                                               
Council, page 2673                                                                                                              
Delegate  James  Hurley   [asked  if  it  was   correct  that  no                                                               
unorganized borough  would become  effectuated without  the voice                                                               
of the people in the area.]                                                                                                     
                                                                                                                                
Alaska  Constitution Convention  Proceedings, Alaska  Legislative                                                               
Council, page 2673                                                                                                              
Vic  Fischer, Secretary,  Local  Government  Committee [said  no.                                                               
When a certain  area can support certain services and  act in its                                                               
own  behalf   it  should  take   on  the  burden  of   its  local                                                               
government.]                                                                                                                    
                                                                                                                                
It  provided that  all of  Alaska must  be divided  into boroughs                                                               
(organized or unorganized).                                                                                                     
                                                                                                                                
It encourages the creation of organized boroughs.                                                                               
                                                                                                                                
It provides  that there  must be a  rational basis  for disparate                                                               
It provides  that there  must be a  rational basis  for disparate                                                               
treatment of Alaskans (e.g., organized vs. unorganized areas).                                                                  
treatment of Alaskans (e.g., organized vs. unorganized areas).                                                                  
                                                                                                                                
                                                                                                                                
Local   responsibility  is   also  called   for  under   Alaska's                                                               
Local   responsibility  is   also  called   for   under  Alaska's                                                               
constitution.                                                                                                                   
constitution.                                                                                                                   
                                                                                                                                
It  imposes  a  duty  on  the legislature  to  set  state  policy                                                               
It  imposes  a  duty  on  the legislature  to  set  state  policy                                                               
regarding establishment of boroughs.                                                                                            
regarding establishment of boroughs.                                                                                            
                                                                                                                                
The  First  Alaska State  Legislature  (1959  - 1960)  considered                                                               
The  First  Alaska State  Legislature  (1959  - 1960)  considered                                                               
several  proposals  for  establishment   of  boroughs.  None  was                                                               
several  proposals  for   establishment  of  boroughs.  None  was                                                               
adopted.                                                                                                                        
adopted.                                                                                                                        
                                                                                                                                
The Second  Alaska State Legislature  adopted the Borough  Act of                                                               
The Second  Alaska State Legislature  adopted the Borough  Act of                                                               
1961.                                                                                                                           
1961.                                                                                                                           
                                                                                                                                
                                                                                                                                
At the  time, state  policy makers  anticipated that  the Borough                                                               
Act of 1961  would be generally ineffective  in promoting borough                                                               
formation.                                                                                                                      
                                                                                                                                
                                                                                                                                
Arguments against  boroughs in  the early 1960s  are the  same as                                                               
those voiced today.                                                                                                             
                                                                                                                                
                                                                                                                                
Representative  Rader's  solution   to  the  greatest  unresolved                                                               
Representative  Rader's  solution   to  the  greatest  unresolved                                                               
political problem facing the State:                                                                                             
political problem facing the State:                                                                                             
                                                                                                                                
   · Grant each borough 10 percent of state lands to give them a                                                                
   · Grant each borough 10 percent of state lands to give them a                                                                
     meaningful responsibility and interest in natural resource                                                                 
     meaningful responsibility and interest in natural resource                                                                 
     development;                                                                                                               
   · Encourage formation of large boroughs;                                                                                     
   · Provide a reasonable period before mandatory incorporation                                                                 
   · Provide a reasonable period before mandatory incorporation                                                                 
     for local initiative efforts.                                                                                              
     for local initiative efforts.                                                                                              
                                                                                                                                
With  a  few  compromises, Representative  Rader's  proposal  was                                                               
With  a  few  compromises, Representative  Rader's  proposal  was                                                               
adopted by the Legislature as the 1963 Mandatory Borough Act.                                                                   
adopted by the Legislature as the 1963 Mandatory Borough Act.                                                                   
                                                                                                                                
Chapter 52,                                                                                                                     
Session Laws of Alaska, 1963                                                                                                    
Section 1.  Declaration of Intent.                                                                                              
                                                                                                                                
In 44  years of statehood,  boroughs have formed under  the local                                                               
In 44  years of statehood,  boroughs have formed under  the local                                                               
option process in areas encompassing just 4 percent of Alaskans.                                                                
option process in areas encompassing just 4 percent of Alaskans.                                                                
                                                                                                                                
Incentives to  incorporate boroughs were generally  inadequate in                                                               
Incentives to  incorporate boroughs were generally  inadequate in                                                               
the early 1960s.                                                                                                                
the early 1960s.                                                                                                                
                                                                                                                                
"Shortcomings  in the  manner in  which the  borough concept  has                                                               
"Shortcomings  in the  manner in  which the  borough  concept has                                                               
been implemented"  were studied by the  Local Boundary Commission                                                               
been implemented"  were studied by the  Local Boundary Commission                                                               
in 2001.                                                                                                                        
in 2001.                                                                                                                        
                                                                                                                                
"The  Commission considers  the  lack of  a  strong state  policy                                                               
"The  Commission considers  the  lack of  a  strong state  policy                                                               
promoting  the extension  of borough  government to  be the  most                                                               
promoting  the extension  of borough  government to  be  the most                                                               
pressing 'local government boundary problem' facing Alaska."                                                                    
pressing 'local government boundary problem' facing Alaska."                                                                    
                                                                                                                                
CHAPTER 53,                                                                                                                     
CHAPTER 53,                                                                                                                     
SESSION LAWS OF ALASKA, 2002                                                                                                    
SESSION LAWS OF ALASKA, 2002                                                                                                    
"The  Local Boundary  Commission shall  review conditions  in the                                                               
"The  Local Boundary  Commission shall  review conditions  in the                                                               
unorganized  borough.   …  the  commission  shall report  to  the                                                               
unorganized  borough.   …  the  commission  shall  report to  the                                                               
Legislature the areas  it has identified that  meet the standards                                                               
Legislature the  areas it has identified that  meet the standards                                                               
for incorporation."                                                                                                             
for incorporation."                                                                                                             
                                                                                                                                
                                                                                                                                
Seven Areas Meet Standards                                                                                                      
   · Aleutians West                                                                                                             
   · Upper Tanana Basin                                                                                                         
   · Copper River Basin                                                                                                         
   · Prince William Sound                                                                                                       
   · Glacier Bay                                                                                                                
   · Chatham Area                                                                                                               
   · Wrangell/Petersburg                                                                                                        
                                                                                                                                
SENATOR LYMAN HOFFMAN asked what  population percentage the seven                                                               
areas would represent.                                                                                                          
                                                                                                                                
SENATOR WILKEN said  he wasn't sure, but he  estimated there were                                                               
10,000 people.                                                                                                                  
                                                                                                                                
Part II                                                                                                                         
                                                                                                                                
Public Policy Perspective                                                                                                       
Public Policy Perspective                                                                                                       
                                                                                                                                
                                                                                                                                
Why should state government be concerned with local government?                                                                 
Why should state government be concerned with local government?                                                                 
                                                                                                                                
BOROUGHS ARE UNITS OF STATE GOVERNMENT                                                                                          
                                                                                                                                
Boroughs carry out  essential services on behalf of  the State of                                                               
Boroughs carry out essential services on behalf of the State of                                                                 
Alaska  (e.g., state's  duty  under Article  VII,  Section 1,  AK                                                               
Alaska (e.g., state's duty under Article VII, Section 1, AK                                                                     
Const., to establish  and maintain a system of  public schools is                                                               
Const., to establish and maintain a system of public schools is                                                                 
delegated to boroughs).                                                                                                         
delegated to boroughs).                                                                                                         
                                                                                                                                
                                                                                                                                
BOROUGHS PROMOTE ECONOMIC DEVELOPMENT                                                                                           
                                                                                                                                
   · All boroughs commonly engage in economic development                                                                       
     activities.                                                                                                                
   · Borough governments in rural Alaska "serve as the economic                                                                 
     engine for the area."                                                                                                      
   · The Aleutians East Borough has used its bonding capacity in                                                                
     the past to assist the regional fisheries, thereby                                                                         
     promoting economic development.                                                                                            
   · The Aleutians East Borough represents local residents                                                                      
     before fisheries advisory and management bodies.                                                                           
   · The Northwest Arctic Borough was instrumental in the                                                                       
     development of the world-class Red Dog Mine.                                                                               
   · The Lake and Peninsula Borough provides a variety of                                                                       
     economic development planning functions to a number of                                                                     
     small communities within the Borough.                                                                                      
                                                                                                                                
BOROUGHS PROMOTE EQUITY AMONG ALASKANS                                                                                          
                                                                                                                                
Art.  I, Sec.  1 requires  equal  responsibility among  Alaskans.                                                               
Yet, statutory law  singles out organized boroughs  and home rule                                                               
&  first class  cities in  the unorganized  borough by  requiring                                                               
them  to provide  significant  support  for fundamental  services                                                               
such as public education.                                                                                                       
                                                                                                                                
Local contributions required of  municipal school districts under                                                               
AS  14.17.410  reduce  education foundation  funding  that  would                                                               
otherwise be paid by the state  to boroughs and home rule & first                                                               
class cities in the unorganized borough.                                                                                        
                                                                                                                                
Reduction of  funding conflicts  with the  express intent  of the                                                               
1963 Mandatory Borough Act.                                                                                                     
                                                                                                                                
                                                                                                                                
The  requirement  for  local contributions  for  schools  is,  in                                                               
effect, a $165 million annual  state tax levied only on organized                                                               
boroughs and  home rule &  first class cities in  the unorganized                                                               
borough.                                                                                                                        
                                                                                                                                
In the absence  of standards and procedures  to determine whether                                                               
unorganized  areas have  the capacity  to take  on responsibility                                                               
for  their own  government,  the current  disparate treatment  of                                                               
Alaskans lacks a rational basis.                                                                                                
                                                                                                                                
SENATOR  COWDERY  asked who  decides  which  area can  afford  to                                                               
provide government.                                                                                                             
                                                                                                                                
SENATOR WILKEN said  it's ultimately the Legislature,  but SCR 12                                                               
asks the LBC  to go through the borough standards  to see whether                                                               
areas have the capacity for government.                                                                                         
                                                                                                                                
SENATOR GRETCHEN GUESS asked about Talkeetna.                                                                                   
                                                                                                                                
SENATOR  WILKEN replied  he wasn't  there yet,  but "If  you were                                                               
able  to organize  those and  have  them start  to contribute  to                                                               
education,  the top  of the  [indec] number  is about  $4 million                                                               
plus or minus. Lots of things  go into that calculation, but it's                                                               
in the millions."                                                                                                               
                                                                                                                                
SENATOR FRED DYSON asked if that was $4 million each.                                                                           
                                                                                                                                
SENATOR WILKEN clarified that it was a total figure.                                                                            
                                                                                                                                
SENATOR  GARY STEVENS  said some  communities in  the unorganized                                                               
borough, such  as Dutch  Harbor, do  contribute to  education. He                                                               
asked how that works and whether it's a 4-mil requirement.                                                                      
                                                                                                                                
SENATOR WILKEN said,  "From my point it is.  Dutch Harbor doesn't                                                               
because they  operate under the  45 percent rule." Home  rule and                                                               
first class cities within the  Unorganized Borough do contribute.                                                               
Pelican is in  the Unorganized Borough and they  contribute a bit                                                               
to their education.                                                                                                             
                                                                                                                                
He  clarified;  everyone  has  the  4-mil  requirement  with  the                                                               
exception of the North Slope, the Aleutians, Valdez and Skagway.                                                                
                                                                                                                                
SENATOR COWDERY asked if Anchorage  is at 4-mils because they pay                                                               
an 18-mil tax.                                                                                                                  
                                                                                                                                
SENATOR WILKEN explained  state law requires giving  a minimum of                                                               
4-mils  then each  assembly decides  what  to do  from there.  In                                                               
Fairbanks they're at 8.6-mils for education.                                                                                    
                                                                                                                                
SENATOR  GUESS  advised  that  Anchorage  contributes  8-mils  to                                                               
education. The minimum is 4-mils and there is also a cap.                                                                       
                                                                                                                                
SENATOR  WILKEN said  the cap  relates to  the federal  disparity                                                               
test.                                                                                                                           
                                                                                                                                
SENATOR COWDERY  said he knew all  that he was simply  asking the                                                               
question for the benefit of the listening public.                                                                               
                                                                                                                                
SENATOR WILKEN  said 4-mils  applies to  organized Alaska  and he                                                               
would  suggest  that there  are  areas  of  the state  that  have                                                               
perfect capacity  to contribute  that 4-mils. A  taxing mechanism                                                               
needs to be in place and a borough provides that mechanism.                                                                     
                                                                                                                                
SENATOR WILKEN continued the slide presentation:                                                                                
                                                                                                                                
BOROUGHS PROMOTE MAXIMUM LOCAL SELF-GOVERNMENT                                                                                  
                                                                                                                                
Practical  examples  of  the manner  in  which  boroughs  promote                                                               
maximum local self-government include:                                                                                          
Boroughs can supplement state funding                                                                                           
   · An REAA can not bond but organized areas can                                                                               
   · Boroughs are the only regional government that can tax                                                                     
                                                                                                                                
SENATOR HOFFMAN asked how the  other functions of government such                                                               
as public  health and safety might  be affected and how  it might                                                               
compare with what exists in the unorganized areas currently.                                                                    
                                                                                                                                
SENATOR WILKEN said boroughs are  required to do three things and                                                               
anything else is local option.                                                                                                  
   · Set in place the mechanism to tax                                                                                          
   · Take care of education                                                                                                     
   · Take on planning responsibilities                                                                                          
                                                                                                                                
SENATOR HOFFMAN  pointed out that  many state services  are being                                                               
reduced so  many areas are  moving toward  consolidating services                                                               
and looking  to the federal  government for relief.  Some second-                                                               
class cities are  discussing dissolution. He asked  for a comment                                                               
on the  fact that Article  X touches  on the issue  of dissolving                                                               
boroughs  and  there  are provisions  for  local  governments  to                                                               
dissolve with a vote of the  people. He questioned whether SCR 12                                                               
would provide provisions for borough dissolution.                                                                               
                                                                                                                                
SENATOR WILKEN replied,                                                                                                         
     I'm  not sure,  Senator,  how that  tribal thing  works                                                                    
     into this.  And I think it  works in to the  benefit of                                                                    
     the efforts. We're looking at  that. The thing you talk                                                                    
     about is that  the withdrawal of the  state and perhaps                                                                    
     when Ted Stevens leaves us,  we know it's going to have                                                                    
     an impact  on our  state. Shouldn't  we then  have that                                                                    
     group, that area of the  state, have a common voice and                                                                    
     a strong common  voice to promote their  needs. So it's                                                                    
     not just this city or  this village or this area coming                                                                    
     to the  feds or coming  to us  they band together  in a                                                                    
     political  voice or  certainly in  a common  need voice                                                                    
     for the very  reason that you state.  Because the money                                                                    
     is going  away, and  it seems  to me  that they  have a                                                                    
     stronger voice  if they're banded together  with common                                                                    
     values.  I think  that's....'if able.'  If they  can't,                                                                    
     and I think this is  an important part that you brought                                                                    
     up, if  you go out  and you  look at these  four areas,                                                                    
     and  let's just  say  that one  of  them can't  support                                                                    
     government.  You go  down the  checklist  and you  say,                                                                    
     nope, nope, nope they don't fit.  What we do is we find                                                                    
     the strong  and we  ask them  to incorporate  through a                                                                    
     plan,  which  you'll  see a  timeline  here,  and  when                                                                    
     that's finished then you look  to see what's left. What                                                                    
     areas  of the  state need  the  efforts of  all of  the                                                                    
     state to  bring them,  so the  next generation  to come                                                                    
     along,  they're  able  to incorporate.  They  have  the                                                                    
     wealth;   they  have   the  economic   value  to   help                                                                    
     themselves  through a  common voice.  So, we  separate,                                                                    
     with  SCR 12,  the strong  from the  weak. We  have the                                                                    
     strong help,  as they should,  because they can  and we                                                                    
     start to look at the weak.  What do we do over the next                                                                    
     couple of  generations to  get the  areas of  the state                                                                    
     that can't today help themselves?  What do we do to get                                                                    
     them  to  help  themselves?  It's  a  concentration  of                                                                    
     efforts. It's a  rising tide that lifts  all boats. And                                                                    
     I  think that's  what we're  trying to  do here.  And I                                                                    
     think  that's  what  you're talking  about.  There  are                                                                    
     areas of the  state that are poor, but  let's not waste                                                                    
     our  money  on  areas  that aren't  helping  when  they                                                                    
     should.  Let's focus  that money  on  areas that  truly                                                                    
     need the help  of the state so that  someday they'll be                                                                    
     able to pay their fair share.                                                                                              
                                                                                                                                
He acknowledged he was not well versed in the area of                                                                           
dissolutions.                                                                                                                   
                                                                                                                                
SENATOR  HOFFMAN  asked  if  he  would  be  averse  to  including                                                               
provisions  for  dissolution of  boroughs  since  that's part  of                                                               
Article X.                                                                                                                      
                                                                                                                                
SENATOR WILKEN  replied he didn't  believe he had  objection, but                                                               
he thought  "those pieces are  already in our  law, on how  to do                                                               
that."                                                                                                                          
                                                                                                                                
SENATOR  HOFFMAN  said  that's   correct  with  regard  to  local                                                               
government, but he wasn't aware  of any provisions in statute for                                                               
dissolution of boroughs.                                                                                                        
                                                                                                                                
SENATOR WILKEN said  he would look at the  issue and acknowledged                                                               
that the tribe issue is already on the table.                                                                                   
                                                                                                                                
SENATOR WILKEN continued the presentation:                                                                                      
                                                                                                                                
Part III                                                                                                                        
                                                                                                                                
Legislative Perspective                                                                                                         
Legislative Perspective                                                                                                         
                                                                                                                                
SCR 12 is sponsored by Senator Gary Wilken of Fairbanks.                                                                        
                                                                                                                                
Eight other  senators co-sponsored the resolution  (45 percent of                                                               
the total State Senate).                                                                                                        
                                                                                                                                
Contribution to Education:                                                                                                      
                                                                                                                                
As  you recall,  statutory law  requires only  organized boroughs                                                               
and home rule  and first class cities in  the Unorganized Borough                                                               
to operate and help fund their local public school system.                                                                      
                                                                                                                                
In  FY04, Alaskans  in  borough and  city  school districts  paid                                                               
$165.1 million to help support their local schools.                                                                             
                                                                                                                                
The required contribution has increased 34 percent since 1997.                                                                  
                                                                                                                                
SENATOR  WILKEN   said  organized   areas  have   contributed  an                                                               
additional $42 million over the last eight years.                                                                               
                                                                                                                                
SENATOR  HOFFMAN  asked how  many  additional  millions might  be                                                               
expected  from the  four proposed  areas  and how  much from  the                                                               
seven identified areas.                                                                                                         
                                                                                                                                
SENATOR WILKEN  replied they estimate  that the four  areas would                                                               
bring in  $4 million  in total and  they haven't  calculated what                                                               
the other three areas might bring.                                                                                              
                                                                                                                                
SENATOR HOFFMAN requested follow up  on the amounts that might be                                                               
expected from the other three  model borough areas. He then asked                                                               
why just four  of the seven model boroughs were  addressed in SCR                                                               
12.                                                                                                                             
                                                                                                                                
SENATOR WILKEN  replied the other  three [Aleutians  West, Prince                                                               
William  Sound,  Wrangell/Petersburg]  contribute  to  education,                                                               
they're just  not in a  borough. He  opined it is  too difficult,                                                               
politically, to address all seven at  once. The focus on the four                                                               
models  is  because  they  pay  nothing  or  very  little  toward                                                               
education.                                                                                                                      
                                                                                                                                
SENATOR  HOFFMAN said  that if  three  of the  models are  paying                                                               
their fair  share then it  would be easier  to "slip them  in the                                                               
door"  than the  ones that  aren't  paying their  share and  they                                                               
should be the first targeted.                                                                                                   
                                                                                                                                
SENATOR WILKEN  said, "that except  in regard to  education, they                                                               
are far and above paying what  these four are not." For instance,                                                               
Cordova and  Valdez would ask why  if they were told  they had to                                                               
form a borough.                                                                                                                 
                                                                                                                                
SENATOR  HOFFMAN replied  it's because  the constitution  framers                                                               
said boroughs would be formed, that's why.                                                                                      
                                                                                                                                
SENATOR WILKEN said  those areas are paying their  fair share and                                                               
the other four are not.                                                                                                         
                                                                                                                                
SENATOR HOFFMAN  asked whether the  four areas could  anti-up [4-                                                               
mils for education] and avoid becoming boroughs.                                                                                
                                                                                                                                
SENATOR WILKEN said, "Anti-up? In what respect?"                                                                                
                                                                                                                                
SENATOR HOFFMAN  said for  the same  reason and  in the  same way                                                               
that the  three model  boroughs aren't included  in SCR  12. It's                                                               
because they're paying their fair share.                                                                                        
                                                                                                                                
SENATOR WILKEN replied  the Legislature could sit  as an assembly                                                               
and  tax people  in  those  areas. He  said,  "We  could do  that                                                               
tomorrow if we had the political will to do it."                                                                                
                                                                                                                                
SENATOR HOFFMAN  said SCR  12 is sending  the message  that areas                                                               
don't have to form boroughs if they pay for education.                                                                          
                                                                                                                                
SENATOR WILKEN  replied that was  probably the idea 20  years ago                                                               
when third class boroughs existed.                                                                                              
                                                                                                                                
He pointed  to a chart  that shows  Anchorage is worth  about $17                                                               
billion  and contributes  $67  million in  local  taxes to  their                                                               
school district. The  North Slope school district  is worth about                                                               
$10.5  billion  and  contributes  $9  million.  Fairbanks  school                                                               
district is assessed at about  $4.8 billion and contributes about                                                               
$19 million.                                                                                                                    
                                                                                                                                
SIDE B 10:45 am                                                                                                               
                                                                                                                                
He continued the presentation.                                                                                                  
                                                                                                                                
Two of  the four areas listed  in SCR 12 have  very high property                                                               
value.                                                                                                                          
                                                                                                                                
All  four  areas  have  property  value  greater  than  9  school                                                               
districts that currently support their schools.                                                                                 
                                                                                                                                
Model Borough Summary                                                                                                           
                                                                                                                                
Upper Tanana Basin                                                                                                              
Upper Tanana Basin                                                                                                              
19 communities                                                                                                                  
6,316 residents                                                                                                                 
Delta/Greely REAA                                                                                                               
Alaska Gateway REAA                                                                                                             
Value - $469,045,724                                                                                                            
Avg. Home - $144,044                                                                                                            
Avg. Income - $47,472                                                                                                           
                                                                                                                                
Copper River Basin                                                                                                              
Copper River Basin                                                                                                              
18 communities                                                                                                                  
3,089 residents                                                                                                                 
Copper River REAA                                                                                                               
Value - $502,729,199                                                                                                            
Avg. Home - $128,800                                                                                                            
Avg. Income - $43,990                                                                                                           
                                                                                                                                
Glacier Bay                                                                                                                     
Glacier Bay                                                                                                                     
7 communities                                                                                                                   
1,739 residents                                                                                                                 
Pelican Schools                                                                                                                 
Hoonah Schools                                                                                                                  
Chatham REAA                                                                                                                    
Value - $73,526,489                                                                                                             
Avg. Home - $136,738                                                                                                            
Avg. Income - $46,563                                                                                                           
                                                                                                                                
Chatham Region                                                                                                                  
Chatham Region                                                                                                                  
3 communities                                                                                                                   
1,354 residents                                                                                                                 
Kake Schools                                                                                                                    
Chatham REAA                                                                                                                    
Value - $35,908,397                                                                                                             
Avg. Home - $132,854                                                                                                            
Avg. Income - $47,516                                                                                                           
                                                                                                                                
Economic  Wealth [REAA  Wages and  Average  Employment (FY  2002)                                                               
chart slide 62]                                                                                                                 
                                                                                                                                
As  you recall,  the LBC  reviewed and  analyzed the  Unorganized                                                               
Borough in 2003.                                                                                                                
The four regions listed in SCR 12 met borough standards.                                                                        
                                                                                                                                
Including  the fiscal  and administrative  capacity to  operate a                                                               
               fiscal and administrative capacity to operate a                                                                  
borough                                                                                                                         
borough                                                                                                                         
Timeline for Incorporation                                                                                                      
                                                                                                                                
Senate Concurrent Resolution 12                                                                                                 
                                                                                                                                
Acknowledges that some Alaskans are  required to operate and fund                                                               
local schools and some Alaskans are not.                                                                                        
Recognizes and addresses this inherent inequality.                                                                              
Requires an  arms-length review of  4 areas to  determine ability                                                               
to support their local schools.                                                                                                 
                                                                                                                                
Senate  Concurrent  Resolution  12  [Timeline  for  Incorporation                                                               
chart, slide 67]                                                                                                                
                                                                                                                                
Provides a lengthy, public review process.                                                                                      
Allows for gradual change.                                                                                                      
Answers the  fundamental questions:  [Can you  help? Can  you pay                                                               
your fair share?]                                                                                                               
                                                                                                                                
SENATOR WILKEN concluded the presentation.                                                                                      
                                                                                                                                
CHAIR  GARY STEVENS  asked  why the  State  Affairs Committee  is                                                               
addressing an  issue that  is the purview  of the  Local Boundary                                                               
Commission. He  asked whether they  had the power to  act without                                                               
receiving legislative direction.                                                                                                
                                                                                                                                
SENATOR WILKEN said they have the  power to act then outlined the                                                               
composition and  history of the  LBC. He then explained  that the                                                               
LBC  has asked  for  legislative help.  SCR 12  is  an effort  to                                                               
measure support.                                                                                                                
                                                                                                                                
CHAIR GARY STEVENS  recognized Senator Con Bunde  and thanked him                                                               
for attending the meeting.                                                                                                      
                                                                                                                                
SENATOR   BUNDE   asked   whether  any   of   existing   boroughs                                                               
incorporated willingly.                                                                                                         
                                                                                                                                
SENATOR WILKEN said between four  and eight boroughs incorporated                                                               
voluntarily.                                                                                                                    
                                                                                                                                
DAN BOCKHORST, Department of  Community and Economic Development,                                                               
clarified  that   the  North   Slope  Borough,   Denali  Borough,                                                               
Northwest Arctic  Borough, Lake & Peninsula  Borough, Bristol Bay                                                               
Borough,  Aleutians East  Borough,  Yakutat  Borough, and  Haines                                                               
Borough incorporated voluntarily.                                                                                               
                                                                                                                                
CHAIR  GARY   STEVENS  announced   that  Eddie  Jeans   with  the                                                               
Department  of Education,  John  Walsh, Kate  Tesar, Senator  Ben                                                               
Steven's  staff and  Representative  Mike  Chenault's staff  were                                                               
listening from off-net sites.                                                                                                   
                                                                                                                                
SENATOR  BUNDE  expressed surprise  at  the  number of  voluntary                                                               
incorporations.                                                                                                                 
                                                                                                                                
SENATOR WILKEN  acknowledged there has been  stiff opposition and                                                               
even Fairbanks voted against incorporation.                                                                                     
                                                                                                                                
SENATOR GUESS asked about the  reference to three ways to resolve                                                               
the issue. One is SCR 12,  another is that the current incentives                                                               
are  working   as  disincentives  and   the  third  is   for  the                                                               
Legislature to be the overseeing  body. She asked why he selected                                                               
the resolution approach and did he  have any insight on using the                                                               
other two approaches.                                                                                                           
                                                                                                                                
SENATOR  WILKEN said  this is  the  most difficult  way, but  the                                                               
"more surgical." He  stated there are pockets of  both wealth and                                                               
poverty  in  unorganized  Alaska  and  it's  incumbent  upon  the                                                               
Legislature  not to  take the  easy way  out and  penalize people                                                               
that are struggling in areas of the state that need help.                                                                       
                                                                                                                                
SENATOR  GUESS   asked  about   his  thought   process  regarding                                                               
reworking  the   incentives  so   that  they  aren't   viewed  as                                                               
disincentives.                                                                                                                  
                                                                                                                                
SENATOR WILKEN  said there are incentives  and disincentives. The                                                               
incentive is for  the Legislature to identify what  would make an                                                               
area  more  viable and  the  hammer  is  for the  Legislature  to                                                               
require everyone  to pay. That's  the easy  way out and  it's not                                                               
fair.                                                                                                                           
                                                                                                                                
SENATOR GUESS agreed with Senator  Hoffman's logic with regard to                                                               
the other  three areas.  Seven areas were  identified and  SCR 12                                                               
looks at  just four. She thought  it somewhat odd that  the areas                                                               
that can and do contribute to  education were not included in the                                                               
resolution while the questionable areas were included.                                                                          
                                                                                                                                
SENATOR  WILKEN  used Prince  William  Sound  [model borough]  to                                                               
explain that Cordova and Valdez pay  their fair share. "You go in                                                               
and try to  bring those people together. It's  a rat's nest...You                                                               
won't  get through."  They're  paying their  fair  share so  that                                                               
discussion is for another day and another effort.                                                                               
                                                                                                                                
SENATOR GUESS  questioned it's "if  able" and they are  able, but                                                               
it would be too difficult.                                                                                                      
                                                                                                                                
SENATOR WILKEN disagreed; they are able and participating.                                                                      
                                                                                                                                
SENATOR GUESS  said they're  participating in  one area,  but not                                                               
necessarily in others.                                                                                                          
                                                                                                                                
SENATOR WILKEN agreed.                                                                                                          
                                                                                                                                
CHAIR GARY STEVENS  said the larger communities in  a borough are                                                               
taxed at the cap and frequently  the money is spent in areas with                                                               
no tax  base. He  used his  community of  Kodiak and  the smaller                                                               
community of Karluk as examples. He  said he was not unhappy that                                                               
his  tax money  was helping  support the  schools in  the smaller                                                               
community. He  questioned whether there were  smaller communities                                                               
that might  benefit from the tax  base in Cordova and  Valdez. He                                                               
then pointed to  Dutch Harbor. It has a large  tax base and isn't                                                               
funding smaller villages  in the area, but they  would under this                                                               
system. Simply saying Cordova pays its  own way may not be enough                                                               
if they aren't  helping the less advantaged  communities that are                                                               
unable to fund education.                                                                                                       
                                                                                                                                
SENATOR  WILKEN  replied  that  if  all  the  areas  were  rolled                                                               
together  then all  the money  that flows  into separate  pockets                                                               
would  flow into  a common  government  to be  distributed as  an                                                               
assembly saw fit.                                                                                                               
                                                                                                                                
SENATOR DYSON  said that in  Prince William Sound there  are also                                                               
ethnic differences to be considered.                                                                                            
                                                                                                                                
He asked what  happens after the LBC does what  it is directed to                                                               
do in SCR 12.                                                                                                                   
                                                                                                                                
SENATOR  WILKEN said  it comes  before the  Legislature and  they                                                               
would have 45  days to turn it  down. If they don't  turn it down                                                               
in that timeframe then the areas would become a borough.                                                                        
                                                                                                                                
SENATOR DYSON  said the  Legislature has  formed boroughs  in the                                                               
past and asked whether he had any sense of the history for that.                                                                
                                                                                                                                
SENATOR  WILKEN  stated he  wasn't  familiar  with any  mandatory                                                               
boroughs beyond the original ones.                                                                                              
                                                                                                                                
MR. BOCKHORST advised it was  legislative action that created the                                                               
Eagle River-  Chugiak Borough in  1974, but it was  determined to                                                               
be an unconstitutional act.                                                                                                     
                                                                                                                                
SENATOR  DYSON  asked  if  it   might  be  advantageous  for  the                                                               
legislation to be addressed early in the session.                                                                               
                                                                                                                                
SENATOR WILKEN  said there  is a  time line,  but he  didn't know                                                               
what it is.                                                                                                                     
                                                                                                                                
MR. BOCKHORST said  the constitution prescribes that  the LBC may                                                               
present its recommendations  only during the first ten  days of a                                                               
regular session.                                                                                                                
                                                                                                                                
SENATOR HOFFMAN said a major  problem in the unorganized areas is                                                               
that  much of  the land  is  federal or  corporation land.  Those                                                               
lands  are  exempt  so  there   is  limited  land  available  for                                                               
taxation. He  asked what suggestions  Senator Wilken had  to help                                                               
those areas come up with the needed money.                                                                                      
                                                                                                                                
SENATOR WILKEN  said there  are many facets  to the  question. He                                                               
concentrated on education  and used Tok as an  example because it                                                               
has considerable federal  land in the area.  When calculating the                                                               
4-mil requirement, the federal land  isn't calculated so their 4-                                                               
mil requirement  would be  small. He  suggested they  could raise                                                               
the money through an income tax, or  a gas tax. The point is that                                                               
the areas  of the state that  have the capacity to  support local                                                               
government may be  surprised to find how little it  takes to fund                                                               
local  government.  Local  government  can  fund  itself  through                                                               
property  taxes, sales  taxes, bed  taxes, fish  taxes, severance                                                               
taxes, timber taxes and others.                                                                                                 
                                                                                                                                
SENATOR HOFFMAN said he was  thinking about payroll deduction tax                                                               
because a  homesteader's ability  to pay  the necessary  value of                                                               
his of  her 160 acres  of land might  be limited. The  taxes just                                                               
mentioned are small  in comparison to property tax  on a 160-acre                                                               
homestead.                                                                                                                      
                                                                                                                                
SENATOR WILKEN  replied "We shouldn't  just assume that  this new                                                               
government will  fund itself  by property  taxes." In  fact there                                                               
are a number of boroughs that have no property tax at all.                                                                      
                                                                                                                                
SENATOR JOHN  COWDERY commented that  the taxes on his  five acre                                                               
homestead property in  the Mat-Su Borough have  increased a great                                                               
deal since  1951 when he acquired  the land. He then  pointed out                                                               
that  someone with  160 acres  would receive  the same  education                                                               
benefits as someone with five acres.                                                                                            
                                                                                                                                
SENATOR WILKEN said, "On a bigger  scale, if we did this over the                                                               
next  few generations,  exactly  right. Then  that property  that                                                               
those  people  hold and  we  protect  through  a system  that  we                                                               
develop, that property  increases in value so  it doesn't detract                                                               
from their  lifestyle, it indeed through  economic development it                                                               
increases  the assessed  value, which  is  money to  them in  the                                                               
bank."                                                                                                                          
                                                                                                                                
He thanked  Dan Bockhorst and  Sheila Peterson for  preparing the                                                               
presentation.                                                                                                                   
                                                                                                                                
CHAIR  GARY  STEVENS  thanked  Senator  Cowdery's  staff  member,                                                               
Annette  Skibinski,  for  taking  notes  and  his  staff  member,                                                               
Katrina Matheny, for organizing the meeting.                                                                                    
                                                                                                                                
He announced public testimony would begin.                                                                                      
                                                                                                                                
ETHAN SCHUTT,  general counsel for  the Tanana  Chiefs Conference                                                               
in  Fairbanks, stated  the resolution  has  inconsistencies on  a                                                               
policy basis. He  has seldom heard and  doesn't necessarily agree                                                               
with  the  proposition  that  more  government  creates  economic                                                               
development.                                                                                                                    
                                                                                                                                
While local  government can  enhance economic  development, there                                                               
must be  something there  first. For instance,  the Red  Dog Mine                                                               
was discovered and developed before  the Northwest Arctic Borough                                                               
began to  capture that  economic development.  Similarly, putting                                                               
local  government into  the  Tok Delta  area  without some  great                                                               
resource base won't necessarily create any economic development.                                                                
                                                                                                                                
He assumed that the assessed  valuation numbers for the Tok Delta                                                               
region were  drawn from the  fact that the pipeline  runs through                                                               
the  area.  As far  as  state  funds  are concerned,  that  would                                                               
approach a  wash because that  would reduce the amount  the state                                                               
is  paid  at the  wellhead  by  the  way  the tax  system  works.                                                               
Similarly,  federal  properties  that  aren't  taxable  have  the                                                               
payment in lieu  of taxes (PILT) system and  currently 90 percent                                                               
of that payment  is rolled into the state's  general fund whereas                                                               
only 10 percent  goes to the REAAs in that  area. That 90 percent                                                               
federal payment  would be  rolled back into  the borough  in that                                                               
area. The same  two points would apply in the  Copper River Basin                                                               
Borough.                                                                                                                        
                                                                                                                                
It's not correct to say that  those areas aren't paying their own                                                               
way because there are economic  generators that are putting money                                                               
in  the state  general fund  that  may or  may not  come back  in                                                               
proportion to those areas.                                                                                                      
                                                                                                                                
If  the state  government rearranges  the school  funding formula                                                               
there would  be no  way for those  communities to  recapture that                                                               
money.  If they  lose funding  and must  cut a  teacher from  the                                                               
local school, they cannot raise  revenue to re-fund that position                                                               
so they  are making  a local choice  to sacrifice  that position.                                                               
Whether it  makes sense to cut  education is debatable and  he is                                                               
not in favor of  that, but this is a government  by the people of                                                               
the  people and  for  the  people and  if  that local  population                                                               
chooses to go  without, to the detriment of  themselves and their                                                               
own children, that  is a principle of government  that is adhered                                                               
to and it is their choice.                                                                                                      
                                                                                                                                
He  questioned the  point that  there would  be better  political                                                               
representation through the unified  political voice of a borough.                                                               
It wouldn't  change the political  calculus of the  south central                                                               
caucus  from  Anchorage, Mat-Su,  and  Kenai.  That area  has  an                                                               
overwhelming majority  of the  state's population  and it  is not                                                               
going to  be undone by  the fact that  Tok Delta or  Copper River                                                               
Basin  has  an organized  borough.  The  proposed boroughs  would                                                               
still have  to approach the  Legislature to ask for  projects and                                                               
funding for their programs.                                                                                                     
                                                                                                                                
It's  important  to  acknowledge  that the  primary  purpose  and                                                               
likely  the sole  purpose of  the proposed  boroughs would  be to                                                               
fund schools at  the statutory minimum limit.  It's doubtful that                                                               
there would  be excess  revenue to fund  any services  other than                                                               
the necessary  and statutorily required  government. It  would be                                                               
necessary to  develop the  mechanism and  physical infrastructure                                                               
to assess and  collect taxes, which would result  in carrying and                                                               
operational  costs. It's  likely  that  those required  functions                                                               
would  be the  only thing  funded other  than education  with the                                                               
small boroughs.                                                                                                                 
                                                                                                                                
There  are  6,300  people  in the  proposed  Upper  Tanana  Basin                                                               
borough and  they are spread over  a geographic area the  size of                                                               
New  York. Delta  and  Tok are  the  predominant communities  and                                                               
would  displace  the  political  voice  of  the  other  17  small                                                               
isolated  villages. He  asked what  services  they might  receive                                                               
other than a little money  into the school and questioned whether                                                               
it made good policy sense.                                                                                                      
                                                                                                                                
SENATOR COWDERY  said that all  areas require the  same mechanism                                                               
and infrastructure for government.                                                                                              
                                                                                                                                
MR. SCHUTT  agreed then pointed  out that the economies  of scale                                                               
must be  considered. The  smaller an  organization is  the higher                                                               
the cost per employee.                                                                                                          
                                                                                                                                
SENATOR BUNDE assumed it would be  good for the state if everyone                                                               
reached  into their  own pocket  to help  fund schools.  He asked                                                               
whether the  people in the  Upper Tanana Basin would  support the                                                               
Legislature sitting as their borough  assembly to impose taxes to                                                               
avoid the cost of local government.                                                                                             
                                                                                                                                
MR.  SCHUTT said  that if  the Legislature  decided to  sit as  a                                                               
local assembly, it would have  political ramifications that might                                                               
provide incentive  to form a  borough, but there are  better ways                                                               
to  capture  the  economies  of  scale.  One  way  might  be  the                                                               
imposition of a  broad-based statewide tax with an  offset to the                                                               
boroughs that already pay property taxes.                                                                                       
                                                                                                                                
SENATOR DYSON informed members he  was unsuccessful in his effort                                                               
to institute  a new category  for small communities to  give them                                                               
freedom to  write their own  charter and organize  themselves. He                                                               
asked Mr. Schutt if he could  see a way for communities that want                                                               
to organize  along tribal lines  to do  so under state  law while                                                               
enhancing their relationship with  the federal government and its                                                               
funding sources in particular.                                                                                                  
                                                                                                                                
MR.  SCHUTT replied  that is  a complicated  topic, but  he could                                                               
imagine  scenarios  that would  work  for  the state,  for  local                                                               
communities  and for  Native  and  tribal governments.  Certainly                                                               
there is increased fiscal reality  in rural communities and there                                                               
is interest in working cooperatively.                                                                                           
                                                                                                                                
SENATOR  DYSON  said he  worked  in  communities that  had  three                                                               
governments and they  struggled to work together.  He has dreamed                                                               
of  creating state  law so  that  the federal  entities could  be                                                               
integrated in a way that makes sense to individual communities.                                                                 
                                                                                                                                
MR.  SCHUTT   agreed  that  duplicative  local   governments  are                                                               
problematic.                                                                                                                    
                                                                                                                                
SENATOR  COWDERY  asked  Mr.  Schutt  what  the  future  economic                                                               
potential might entail.                                                                                                         
                                                                                                                                
MR. SCHUTT said he would hate  to say mining because it sometimes                                                               
works well for  jobs, but it doesn't work well  for local revenue                                                               
because mines  don't always generate  income on the  books. There                                                               
are potential oil  and gas projects in rural  Alaska that haven't                                                               
been developed  and they pay  their way,  but beyond that  he was                                                               
unsure.                                                                                                                         
                                                                                                                                
SENATOR COWDERY asked if the  missile defense project in his area                                                               
might spur the economy and did he think they should contribute.                                                                 
                                                                                                                                
MR. SCHUTT  said the project  would provide economic  benefits to                                                               
the  community  of   Delta  Greely,  but  the   majority  of  the                                                               
infrastructure is  on a federal reserve  so that would be  a PILT                                                               
program where  90 percent currently  goes into the  state general                                                               
fund as far as the value of that land.                                                                                          
                                                                                                                                
SENATOR  COWDERY  asked  whether  there  would  be  a  population                                                               
increase  with  new  homes  built  as a  result  of  the  missile                                                               
project.                                                                                                                        
                                                                                                                                
MR. SCHUTT understood  the project was in  the construction phase                                                               
and many  of the workers  are coming  from the Fairbanks  area so                                                               
that tax  base is  already capturing most  of those  benefits. Of                                                               
course some is probably going to the Delta area as well.                                                                        
                                                                                                                                
SENATOR  COWDERY  asked  if  he thought  the  local  area  should                                                               
contribute to education if the economy is up.                                                                                   
                                                                                                                                
MR.  SCHUTT replied  that his  point on  the Payment  in Lieu  of                                                               
Taxes System  is that because that  is in the geographic  area in                                                               
which they  live, they are indirectly  contributing significantly                                                               
already.                                                                                                                        
                                                                                                                                
SENATOR GUESS  asked whether he  considered Delta Greely  part of                                                               
his area.                                                                                                                       
                                                                                                                                
MR.  SCHUTT said  he does  because it  is in  the proposed  Upper                                                               
Tanana Basin model borough.                                                                                                     
                                                                                                                                
SENATOR COWDERY  said the tax  base would come  from improvements                                                               
on private land.                                                                                                                
                                                                                                                                
MR.  SCHUTT replied  there are  some significant  improvements on                                                               
private land,  but when the  construction phase is  complete they                                                               
may be less significant than they are now.                                                                                      
                                                                                                                                
TAPE 03-34 SIDE A, 11:30 am                                                                                                   
                                                                                                                                
DARROL  HARGRAVES,  Chair of  the  LBC,  reported that  the  22nd                                                               
Legislature  passed  SB  359  directing the  LBC  to  review  the                                                               
Unorganized   Borough  in   terms   of   standards  for   borough                                                               
incorporation.  The report  was  filed in  February  2003 and  he                                                               
believes the  new commission concurs  with the  past commission's                                                               
work.                                                                                                                           
                                                                                                                                
SCR 12  is a  natural result  of the review  and if  adopted, the                                                               
commission will  proceed with formal  consideration of  the areas                                                               
listed  in  the  resolution.  The commission  could  act  without                                                               
legislative directive, but he can't  conceive of acting without a                                                               
prompt  and in  the absence  of a  local petition  coming from  a                                                               
group of people asking for organization.                                                                                        
                                                                                                                                
The   commission   recognizes   that   organized   boroughs   are                                                               
fundamental  to  promoting  maximum  local  self  government  for                                                               
Alaskans.  They  promote  local   responsibility  and  provide  a                                                               
structure  for  efficiency  and   effective  delivery  of  public                                                               
services.                                                                                                                       
                                                                                                                                
SENATOR HOFFMAN said many of  the people he represents are asking                                                               
about  the  promises  of   statehood.  Municipal  assistance  and                                                               
revenue sharing are  gone, the VPSO system has been  cut and many                                                               
of the communities  that were promised education  are still using                                                               
substandard  BIA facilities.  They're asking  how they  benefited                                                               
from  becoming a  state and  saying  that perhaps  they made  the                                                               
wrong  decision.  Some believe  moving  back  toward the  federal                                                               
government might  not be a  bad idea.  This is a  bigger question                                                               
than borough formation  and he would like to know  what he should                                                               
say to those people.                                                                                                            
                                                                                                                                
MR.  HARGRAVES  acknowledged that  was  a  good question  and  he                                                               
wasn't prepared to offer an answer.                                                                                             
                                                                                                                                
SENATOR GUESS asked  why there were just four  areas included and                                                               
not all seven.                                                                                                                  
                                                                                                                                
MR. HARGRAVES  said he didn't  know why just four  were included.                                                               
The LBC  wasn't looking at  education funding, they  were looking                                                               
at what  would constitute  a unit  and meet  the standards  for a                                                               
borough.                                                                                                                        
                                                                                                                                
KEVIN WARING advised he was the  chair of the LBC when the report                                                               
was  prepared and  he was  prepared to  answer questions  in that                                                               
regard.                                                                                                                         
                                                                                                                                
SENATOR HOFFMAN  asked him to  respond to his  previous question.                                                               
Senator Wilken  has said that  SCR 12 is  an effort to  get these                                                               
areas  to  pay for  education.  The  villages he  represents  are                                                               
asking about  the promises  that were made  when Alaska  became a                                                               
state. What benefits would these  largely Native villages receive                                                               
from a borough?                                                                                                                 
                                                                                                                                
MR.  WARING said  the LBC  isn't powerful  enough to  answer that                                                               
question; the answer lies with  the Legislature. The report deals                                                               
with the question  of which areas of the state  have the capacity                                                               
to  support borough  government. He  said, "  All seven  of those                                                               
areas  have more  substantial tax  bases,  higher incomes,  often                                                               
lower  unemployment rates  than  several of  the  areas that  now                                                               
support borough government."                                                                                                    
                                                                                                                                
SENATOR HOFFMAN  asked whether the  Legislature is  moving toward                                                               
fulfilling the promises  made at statehood in passage  of SCR 12.                                                               
It seems  as though many of  the people he represents  are saying                                                               
no, this will not fulfill the promises.                                                                                         
                                                                                                                                
MR. WARING said the report sets  out to fulfill part of Article X                                                               
of the  Alaska State Constitution  and the broader question  is a                                                               
policy question for legislators.                                                                                                
                                                                                                                                
GENE KANE,  Director, Division of Community  Advocacy, Department                                                               
of Community & Economic Development,  reported they provide staff                                                               
support  and administrative  support to  the LBC.  In matters  of                                                               
policy, the LBC is independent  of the department. The commission                                                               
members  are  appointed by  and  serve  at  the pleasure  of  the                                                               
Governor.                                                                                                                       
                                                                                                                                
He  reiterated   Commissioner  Blatchford's  letter   saying  the                                                               
department recognizes  that the  Legislature has the  duty, under                                                               
Article X,  Sec. 3, to  set state policy  regarding establishment                                                               
of  boroughs,  both  organized and  unorganized,  throughout  the                                                               
state.  It  encourages  organized  boroughs  encompassing  large,                                                               
natural  regions  that  have  the   fiscal  capacity  to  support                                                               
regional  government.  "Organized  boroughs  are  fundamental  to                                                               
promoting  maximum local  self government,  local responsibility,                                                               
more  efficient and  effective delivery  of public  services, and                                                               
economic development."                                                                                                          
                                                                                                                                
SENATOR GUESS asked whether the administration supports SCR 12.                                                                 
                                                                                                                                
MR. KANE replied  his statement was that  his department supports                                                               
the Legislature  in its  efforts to  address SCR  12. He  was not                                                               
speaking on  behalf of the  Governor. He couldn't respond  to the                                                               
question of mandating borough formation.                                                                                        
                                                                                                                                
SENATOR   GUESS  said   she  would   like  to   know  where   the                                                               
administration stands  when the  committee hears the  bill during                                                               
the  next  regular session.  She  would  also  like to  know  the                                                               
administration's position  with regard  to considering  just four                                                               
of the seven model boroughs in SCR 12.                                                                                          
                                                                                                                                
MR. KANE said they would get some clarification.                                                                                
                                                                                                                                
DAN  BOCKHORST,   local  government  specialist,   Department  of                                                               
Community  & Economic  Development, stated  he is  candid in  his                                                               
remarks  and he  believes  the  state is  better  served by  such                                                               
discussions.                                                                                                                    
                                                                                                                                
SCR 12 deals  with the fundamental question of the  policy of how                                                               
borough government  will be established. He  considers the policy                                                               
of  the   last  four  decades  to   be  incomplete,  ineffective,                                                               
inequitable and inconsistent with  the vision of the constitution                                                               
framers.                                                                                                                        
                                                                                                                                
The   1963  Legislature   mandated  borough   incorporation,  but                                                               
inexplicably returned  to the local  option policy  following the                                                               
implementation   of  the   Mandatory   Borough   Act.  With   few                                                               
exceptions,  the   incentives  have  never  been   sufficient  to                                                               
voluntarily incorporate  borough government  on a  broad spectrum                                                               
in  the state.  In fact,  the  level of  incentives has  declined                                                               
since the 1960s.                                                                                                                
                                                                                                                                
The  existing  policy  is incomplete  from  the  standpoint  that                                                               
Alaska's Constitution  requires that  the Legislature  enact laws                                                               
to  provide standards  and procedures  for  the establishment  of                                                               
both  organized and  unorganized  boroughs.  The Legislature  has                                                               
provided standards  and procedures for the  creation of organized                                                               
boroughs, but  it has never established  standards and procedures                                                               
for the establishment  of unorganized boroughs and  this has been                                                               
a large part of the problem.                                                                                                    
                                                                                                                                
The Alaska Constitution  compels the state to  treat its citizens                                                               
equally and  he contends that  the failure to adopt  standards to                                                               
make  distinctions  between  organized boroughs  and  unorganized                                                               
boroughs   fosters  inequitable   treatment.  There   are  strong                                                               
parallels between the promises that  were forsaken by the federal                                                               
government at  statehood and the  promises that were  forsaken to                                                               
boroughs by  the State of  Alaska. Senator Wilken touched  on the                                                               
foremost one  in which  the 1963  State Legislature  picked eight                                                               
areas and said they must  organize borough government and take on                                                               
the  responsibility  for  schools,  for  planning,  for  land-use                                                               
regulation, and  for tax assessment  and collection.  In addition                                                               
they have paid significant amounts  of money that the state would                                                               
otherwise have paid, to support those services.                                                                                 
                                                                                                                                
The  policy is  inconsistent in  that Article  X, Section  3 says                                                               
that  each borough  would  embrace an  area  and population  with                                                               
common interests  to the  maximum degree  possible yet  the first                                                               
borough that was established was  the Unorganized Borough. Rather                                                               
that defining  how unorganized boroughs would  be established and                                                               
providing standards,  it simply divided  the entire state  into a                                                               
single  Unorganized Borough.  He  opined it  creates a  situation                                                               
where there  is no review  or consideration  of how to  move from                                                               
unorganized  to organized  status.  The  Unorganized Borough  has                                                               
always encompassed an area of great diversity.                                                                                  
                                                                                                                                
The framers  envisioned the creation  of incentives  to organize,                                                               
but  dis-incentives  to  organize borough  government  have  been                                                               
created instead. The basic tenet  of the local government article                                                               
in the  constitution is that  there would  be a maximum  of local                                                               
self government  with a  minimum number  of government  units and                                                               
that occurs in organized boroughs.                                                                                              
                                                                                                                                
When  organized boroughs  were first  established, 50  percent of                                                               
the  people  that  lived within  organized  boroughs  also  lived                                                               
within  a  city government.  Over  the  last four  decades,  that                                                               
number has  declined substantially.  With regard to  economies of                                                               
scale,  borough  governments  have the  capability  of  providing                                                               
services on a  regional level and a community  level. People have                                                               
taken advantage of  that capacity to make  their local government                                                               
more  efficient.  The continued  evolution  of  the structure  is                                                               
evidenced  by the  consolidation of  the Haines  Borough and  the                                                               
City of Haines  where 75 percent of the people  that lived in the                                                               
Haines  Borough also  lived in  the City  of Haines.  He reported                                                               
that the voters in Ketchikan would  soon vote on a proposition to                                                               
develop a petition  to consolidate the City of  Ketchikan and the                                                               
Ketchikan Gateway Borough. There is  no regional structure in the                                                               
unorganized  areas  and  people  are  forced  to  deal  with  the                                                               
delivery of services on a  very fractionalized method. They don't                                                               
have  the benefit  of the  economies of  scale that  are achieved                                                               
through local government.                                                                                                       
                                                                                                                                
SENATOR  HOFFMAN   restated  his   position  that  many   of  his                                                               
constituents are reevaluating the decision  to become part of the                                                               
state.  He questioned  whether the  state should  be required  to                                                               
divide into mandatory boroughs. Ninety  percent of the PILT money                                                               
goes directly into  the state general fund so  areas that receive                                                               
those moneys are already paying their fair share.                                                                               
                                                                                                                                
The LBC is  working to form boroughs to follow  the intent of the                                                               
constitution and  Senator Wilken's  intent is  to get  more money                                                               
into the  state coffers to pay  for education. SCR 12  focuses on                                                               
four model boroughs while passing  on three areas that are closer                                                               
to formation.                                                                                                                   
                                                                                                                                
MR.  BOCKHORST said  others have  spoken on  those issues  and he                                                               
agrees  in particular  with Senator  Wilken when  he said  if the                                                               
state encourages  those areas to  form that have the  capacity to                                                               
organize borough government it enables  the state to focus on and                                                               
help  areas that  don't have  the capacity  to deliver  essential                                                               
services and promote their own economies.                                                                                       
                                                                                                                                
He said  the Gustavus  petition to  organize has  actually become                                                               
more  compelling  now  that  they  won't  receive  state  capital                                                               
matching grants  and municipal assistance and  revenue sharing in                                                               
the foreseeable future. They have  the capacity to generate local                                                               
income to help support those services that they have enjoyed.                                                                   
                                                                                                                                
With regard to  areas with local land, he  said that circumstance                                                               
exists all  over Alaska. Close to  99 percent of the  land in the                                                               
City and Borough of Juneau is not privately owned.                                                                              
                                                                                                                                
Whether or  not to direct  the LBC  to review all  seven proposed                                                               
model boroughs or  just four is a policy  question. Certainly SCR                                                               
12 could be amended to include all seven areas.                                                                                 
                                                                                                                                
SIDE B, 12:15 pm                                                                                                              
                                                                                                                              
SENATOR HOFFMAN  said the constitution addresses  the dissolution                                                               
of boroughs and  he questioned whether Mr. Waring  thought it was                                                               
an  important  part  of  the   constitution  that  needed  to  be                                                               
addressed.                                                                                                                      
                                                                                                                                
MR. BOCKHORST agreed it is  an important part of the constitution                                                               
and he believes that the  provisions in the statutes are suitable                                                               
for  current   and  projected  circumstances   regarding  borough                                                               
dissolution.                                                                                                                    
                                                                                                                                
SENATOR GUESS asked how the Unorganized Borough was formed.                                                                     
                                                                                                                                
MR.  BOCKHORST  explained that  in  1961  the Legislature  passed                                                               
Title  29  that says,  "All  of  Alaska  that  is not  within  an                                                               
organized   borough  shall   constitute   a  single   unorganized                                                               
borough." He  repeated his earlier assertion  that the provisions                                                               
in  current  law  do  not   fulfill  the  constitution  from  the                                                               
standpoint that they make no  provision and provide no procedures                                                               
for establishing unorganized boroughs.  It would take legislative                                                               
action to establish  such mechanisms. In the early  1990s the LBC                                                               
did address  this issue  and their product  is the  model borough                                                               
boundaries definitions.                                                                                                         
                                                                                                                                
SENATOR GUESS  referred to the map  on the front of  the February                                                               
2003 report and asked who drew all the lines.                                                                                   
                                                                                                                                
MR. BOCKHORST said there are  16 organized boroughs in Alaska and                                                               
the  rest of  Alaska is  the single  Unorganized Borough.  In the                                                               
early 1990s  the commission  held hearings  in 88  communities in                                                               
the  Unorganized Borough  and examined  the  standards, but  they                                                               
didn't look  at economic viability.  The product is  reflected on                                                               
the  map and  it defines  the  model borough  boundaries for  the                                                               
unorganized areas if they were to be organized into boroughs.                                                                   
                                                                                                                                
SENATOR  GUESS  asked whether  he  supports  the process  Senator                                                               
Wilken  laid out  as the  best long-term  process for  organizing                                                               
boroughs "if able."                                                                                                             
                                                                                                                                
MR. BOCKHORST restated his belief  that the process that has been                                                               
in place for 40  years has been a failure. There  are a number of                                                               
different options for coming up with  a better process and SCR 12                                                               
is  a  reasonable  approach. Several  years  ago  Senator  Wilken                                                               
worked unsuccessfully on SB 48,  which was patterned after an LBC                                                               
proposal and  it too  was a reasonable  approach. This  points to                                                               
the fact that there are many ways that it could be done.                                                                        
                                                                                                                                
SENATOR  GUESS asked  who is  responsible for  public safety  and                                                               
noted  that  the  City  of Anchorage  has  the  Anchorage  Police                                                               
Department.                                                                                                                     
                                                                                                                                
MR. BOCKHORST replied the Municipality  of Anchorage is a borough                                                               
government that  exercises police  protection as  a discretionary                                                               
function.  The state  troopers  have  statewide jurisdiction  for                                                               
public  safety.  Many  borough  governments  do  exercise  police                                                               
protection, but state statute does  not require either borough or                                                               
city governments to exercise that power.                                                                                        
                                                                                                                                
SENATOR  GUESS questioned  whether the  state would  shoulder the                                                               
cost of  providing troopers if  Anchorage decided not  to provide                                                               
police protection.                                                                                                              
                                                                                                                                
MR. BOCKHORST said  there is nothing in state  law that obligates                                                               
Anchorage to  exercise police protection, but  arguments could be                                                               
made regarding the moral obligation.                                                                                            
                                                                                                                                
SENATOR  GUESS asked  if there  is  a difference  between what  a                                                               
first or second-class borough, a  unified municipality, or a home                                                               
rule borough must provide.                                                                                                      
                                                                                                                                
MR.  BOCKHORST  answered  there is  no  difference.  Any  borough                                                               
government  formed  today is  obligated  to  provide three  broad                                                               
functions.                                                                                                                      
                                                                                                                                
SENATOR  DYSON  asked  what  the  Legislature  could  statutorily                                                               
impose on the Unorganized Borough.                                                                                              
                                                                                                                                
MR.  BOCKHORST  replied  the  Legislature  has  the  capacity  to                                                               
provide  for  any  service  or  exercise  any  power  within  the                                                               
Unorganized  Borough that  the assembly  of an  organized borough                                                               
has.                                                                                                                            
                                                                                                                                
SENATOR DYSON  asked whether  the Legislature  could "  create in                                                               
statute  an  unorganized  borough assembly  elected  either  from                                                               
regional  or   at-large  in  the  Unorganized   Borough  that  we                                                               
delegated then the responsibilities to."                                                                                        
                                                                                                                                
MR. BOCKHORST said the constitution  gives that responsibility to                                                               
the  Legislature  and  he  was   unsure  whether  that  could  be                                                               
delegated,  but  it would  seem  to  be  contrary to  notions  of                                                               
democratically elected governing bodies.                                                                                        
                                                                                                                                
SENATOR DYSON  said he  assumed that  the Legislature  sitting as                                                               
the assembly for  the Unorganized Borough could  develop a taxing                                                               
scheme that was just for that area.                                                                                             
                                                                                                                                
MR. BOCKHORST said that is correct.                                                                                             
                                                                                                                                
SENATOR  DYSON  commented  difficulties associated  with  unequal                                                               
treatment might arise.                                                                                                          
                                                                                                                                
MR.  BOCKHORST  advised  the  Mat-Su   Borough  raised  an  equal                                                               
treatment  challenge   regarding  the  state   education  funding                                                               
structure asking  why they were  being penalized as  an organized                                                               
area. They challenged based on  the equal protection provision of                                                               
the  constitution.  The supreme  court  responded  that it  is  a                                                               
problem, but  it is  a policy  fix that  the Legislature  has the                                                               
responsibility to make. The Legislature  has the capacity to levy                                                               
taxes on  the Unorganized Borough and  that is one way  to attain                                                               
equity.                                                                                                                         
                                                                                                                                
SENATOR BUNDE  announced he wanted to  make a statement as  a co-                                                               
sponsor. He said:                                                                                                               
     For a  very important reason  I am concerned  about our                                                                    
     fiscal  gap challenges  and I  think this  issue is  an                                                                    
     important  aspect of  solving that  fiscal gap.  Not so                                                                    
     much   financially    as   it   is    politically   and                                                                    
     psychologically.   We   saw   the   presentation   that                                                                    
     basically  said those  that could,  should  pay a  fair                                                                    
     share. So  I think  that is going  to be  an overriding                                                                    
     challenge  to the  80 some  percent that  are providing                                                                    
     could impart  the argument  of fair  share. So  I think                                                                    
     that needs to be a  part of discussion as the committee                                                                    
     addresses that.                                                                                                            
                                                                                                                                
     Two other comments:  Just a caution for  those that are                                                                    
     hanging their hat on federal  funding, with the growing                                                                    
     federal  deficit I  think  that is  a  very short  term                                                                    
     solution  for people  who are  questioning...the wisdom                                                                    
     of statehood.  The other is  the wisdom of any  part of                                                                    
     our  constitution  including   Article  X...People  can                                                                    
     always   submit   legislation  for   a   constitutional                                                                    
     amendment.                                                                                                                 
                                                                                                                                
CHAIR GARY  STEVENS restated  that the  committee was  not taking                                                               
public testimony, but  would do so early in the  next session. He                                                               
asked Senator  Wilken to come  forward to answer  final questions                                                               
and give any closing remarks.                                                                                                   
                                                                                                                                
SENATOR GUESS said there is  an underlying assumption that adding                                                               
another layer of  government would be a good thing.  She asked if                                                               
he had  examined whether it  would be efficient to  move forward;                                                               
whether the current government structure  is working; and whether                                                               
this pulls areas together.                                                                                                      
                                                                                                                                
SENATOR WILKEN replied  it is common sense to think  that a group                                                               
of  people that  gets together  on their  common needs  and wants                                                               
would be  more efficient than  individuals trying to  carry their                                                               
needs  and wants  on their  own. Although  everyone wouldn't  get                                                               
everything they want the majority would certainly benefit.                                                                      
                                                                                                                                
SENATOR GUESS  asked what he  knew about whether the  state would                                                               
or would not lose oil revenue by creating boroughs.                                                                             
                                                                                                                                
SENATOR WILKEN said  the answer is a definite  maybe. Many people                                                               
believe that  Delta Greely, including Tok,  Tetlin, Northway, and                                                               
Eagle,  could  support  local  government  without  touching  the                                                               
pipeline. He explained that the pipeline  is taxed at 20 mils and                                                               
boroughs  that   have  oil  and   gas  properties   within  their                                                               
boundaries are  able to  tax it  as well, but  only at  the level                                                               
that they  tax themselves.  The wealth in  Delta Greely  from the                                                               
development of  missile defense,  a gold  mine, the  potential of                                                               
increased tourism and the potential  of a gas line railroad makes                                                               
it  likely  that they  wouldn't  tap  the pipeline  because  they                                                               
wouldn't want to  impose the same tax on  themselves. People will                                                               
make  that decision  based on  what it  would take  to raise  the                                                               
required minimum  4 mils for  education and whether they  want to                                                               
do more and what they want to do for government in general.                                                                     
                                                                                                                                
SENATOR  GUESS asked  if he  had considered  a policy  that would                                                               
give  areas a  choice of  organizing  as a  borough and  becoming                                                               
responsible  for more  than the  4 mil  education requirement  or                                                               
simply paying the 4 mils for education.                                                                                         
                                                                                                                                
SENATOR WILKEN  said that would take  care of his issue,  but the                                                               
bigger  issue   asks  whether   local  government   shouldn't  be                                                               
delivered to  those places that  would benefit. He  believes that                                                               
in a  generation or two  the four areas under  consideration have                                                               
the potential of benefiting by  organizing and having government.                                                               
Better and more efficient government starts at the local level.                                                                 
                                                                                                                                
SENATOR GUESS questioned  the issue of services  and whether they                                                               
are mandatory  or discretionary. Anchorage provides  and pays for                                                               
police services while Fairbanks relies  on troopers for which the                                                               
state picks up the tab.  She asked whether the Legislature should                                                               
consider  more  than education  and  revisit  which services  are                                                               
mandatory and which  are discretionary in the context  of what an                                                               
area is able to pay.                                                                                                            
                                                                                                                                
SENATOR  WILKEN acknowledged  that Fairbanks  funds their  public                                                               
safety department while  the borough does not and  he didn't know                                                               
how it got to be that way.                                                                                                      
                                                                                                                                
He  said the  rural Alaska  assertion that  PL874 money  is their                                                               
local contribution to  education should be challenged  a bit. The                                                               
federal  government doesn't  look at  it that  way and  organized                                                               
Alaska isn't allowed  to use that argument.  When the Legislature                                                               
looked at  the issue  some years ago  they determined  that there                                                               
would be  a $34 million impact  to the general fund  if organized                                                               
Alaska could use PL874 money as their local contribution.                                                                       
                                                                                                                                
SENATOR HOFFMAN asked why they call it payment in lieu of taxes.                                                                
                                                                                                                                
CHAIR  GARY STEVENS  thanked Senator  Wilken  for presenting  the                                                               
history and asked whether he had any closing remarks.                                                                           
                                                                                                                                
SENATOR WILKEN thanked everyone  for participating and said there                                                               
certainly is  a great deal  to learn and every  discussion helps.                                                               
He stated  he is willing  to travel to any  area in the  state to                                                               
give his presentation and answer questions.                                                                                     
                                                                                                                                
CHAIR GARY STEVENS advised he  would schedule a hearing in Juneau                                                               
as early in January as  possible. There being no further business                                                               
to come  before the committee,  Chair Gary Stevens  adjourned the                                                               
meeting at 12:35 pm.                                                                                                            

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