Mayors: Cities on verge of disaster

Pending legislation may give towns relief

Posted: Friday, April 22, 2005

More than 50 Alaska mayors and city officials flew to Juneau this week to deliver the message to lawmakers that, thanks to lack of financial support from the state, cities are "disintegrating."

Members of the Alaska Conference of Mayors reported that nine cities have shut down, 18 are deep in debt and 39 cities are terminating key local services, such as police protection or road, utility and facility maintenance.

"It's like we are going up the creek without a paddle," said New Stuyahok city administrator Mitch Chocknok.

Hydaburg was listed as dangerously close to going bankrupt. Angoon, Pelican and Tenakee Springs have made significant reductions to core services.

One cost handicapping most of Alaska's 162 municipalities is paying for the public employee and teacher retirement systems, commonly referred to as PERS and TRS.

Poor performance in the stock market, underestimating future costs of health care and the rising number of retirees have created a $5.7 billion hole in the state system.

Cities are expected to make up the difference by paying increased rates every year.

Skagway will pay a $72,000 increase this year and $150,000 more in 2006. More populated areas, such as the Matanuska-Susitna Borough will pay an extra $800,000.

Some municipalities have used property taxes to account for the increases.

The conference of mayors is supporting a handful of bills they believe will give cities relief.

The Senate recently passed a bill that will at least stop the retirement system deficit from growing beyond $5.7 billion.

Among several changes, Senate Bill 141 asks employees to pay an additional 0.5 percent of their paychecks for the pension. Current state law requires teachers to contribute 8.65 percent for retirement benefits, firefighters and peace officers to pay 7.5 percent, and other employees to pay 6.75.

"It defines a new level of benefits that cities, boroughs and school districts can afford," said Kevin Ritchie, executive director of the Alaska Municipal League, a nonprofit, nonpartisan organization that lobbies for cities.

The Democrats criticized SB 141 as an "income tax" on a selective group of Alaskans. It could be challenged in court because many employees have set rates in their contracts. And some opponents fear cities will have to increase salaries to retain employees.

The city officials also said conditions have become worse since Gov. Frank Murkowski slashed a revenue sharing program cities depended on. The administration defended that cut in 2003 by saying the state needed to save money and the municipalities should do their part.

Municipalities lost money they used to pay bills and salaries. Today, some rural communities cannot afford to run water and sewer systems.

In 1985, the state was giving local governments $141 million. That amount was whittled down to $29.6 million when the program stopped in 2003. This year, no dollars were given to cities in the form of revenue sharing.

Reportedly, the governor was attempting to balance the budget when he cut the funding.

"There are no enemies here," said Ritchie. "Just bad advise given to politicians."

This year the governor encouraged the Legislature to fully fund the ongoing Power Cost Equalization program, which subsidizes fuel costs so rural areas pay a price similar to urban centers. So far, the House of Representatives approved $18.75 million, an increase over years before but not the $21.5 million requested.

At the conference, city officials speculated gas would rise above $5 a gallon in remote areas.

High fuel costs and the expense of living apart from major highways and railroads outweigh money collected from sales tax, Ritchie said.

Mayors are also counting on two other bills to pass that will either give cities grants or pay for maintenance needs.

House Bill 49 is similar to the previous state revenue sharing programs, giving municipalities grants of $50,000 per year.

By using earnings from the Alaska Permanent Fund, Senate bill 155 pays for all requests on the state school deferred maintenance lists and constructs new buildings where needed.

• Andrew Petty can be reached at

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