Small Alaska towns struggle to survive

Money crisis in Holy Cross has turned city clerk into a volunteer

Posted: Monday, September 19, 2005

ANCHORAGE - The city clerk at Holy Cross doesn't spend much time at her desk these days.

Lack of money in the Yukon River city has turned Connie Walker into a volunteer. She came in this week to prepare City Hall for a bingo game, a fund-raiser to help a family paying for a funeral. Otherwise, she drops by to pay city bills, open mail, and if the phone rings, answer it.

Holy Cross City Hall closed its doors at the end of May, saving its remaining cash reserve, only about $10,000 as of Tuesday, to pay for utilities. Holy Cross is one of a host of Alaska rural municipalities facing serious financial problems since the state ended a revenue sharing program.

Encouraged by state officials to organize 36 years ago to reap financial benefits of the trans-Alaska pipeline, and built up with infrastructure provided by state and federal grants, rural cities now can't afford to hire employees to keep their doors open or maintain their facilities.

According to the Alaska Municipal League, nine villages - Ahkiok, Kiana, Kivalina, Kupreanof, Mekoryuk, Nikolai, Platinum, Quinhagak, and Russian Mission - have ceased day-to-day operations.

Eighteen communities have serious management or financial problems. They don't hold elections or adopt budgets, they owe money to fuel companies, the Internal Revenue Service for employee taxes or insurance companies, or they've let insurance lapse.

Another 39 communities have financial problems so severe, they could be insolvent in two years.

Holy Cross is typical. A village of about 200 people 420 miles southwest of Fairbanks, the only way in is by airplane or riverboat.

Census data for 2000 showed 45 percent of its residents living below the poverty line, with only 56 residents with jobs. More than 96.5 percent of the population is Alaska Native. Like much of rural Alaska, residents rely on fishing and hunting to make up for a lack of cash.

The layoffs of Walker and four other employees, including a heavy equipment operator, has meant pothole problems on roads but no one to take the complaints.

"We've got no money to plow the roads," said Mayor Jeffrey Dementieff. "I've been having to ask for volunteers."

Dementieff got the job in 2003. He predecessor quit when the state dropped revenue sharing. The state money was the city's main source of revenue, ahead of the city's coin-operated laundry, water and sewer system and bingo game.

In the 1980s, Holy Cross received as much as $150,000 a year in state aid. The city's last state money was a one-time payment of $40,000 in fiscal year 2004, Walker said.

The Holy Cross experience is being played out in rural communities across Alaska, said Kevin Ritchie, executive director of the Alaska Municipal League. Dropping services will have an effect on public safety, road maintenance and other life and health issues.

"It has impacts far beyond the government," he said.

The lost revenue can't be made up by sales or property tax, Ritchie said.

The village of Ambler, 330 miles to the northeast, with a population of about 300 people, collects just $22,500 yearly on its 3 percent sales tax, Ritchie said. That's because most villagers buy in bulk from stores in Anchorage or Fairbanks.

Likewise, the entire assessed property value in Ambler is just $3.5 million, Ritchie said. But since so much is low income housing or other property that cannot be taxed, only about one in four property owners would be paying, he said.

Revenue sharing and matching grants allowed villages to perform maintenance and small construction projects.

"It didn't create some huge political infrastructure," Ritchie said. "But it was enough to keep the lights on, have a city clerk that collected utility bills, things like that."

Both programs were dropped as the state faced a gap between spending and income. That was not the case 36 years ago, Ritchie said.

In the late 1960s, when construction of the trans-Alaska oil pipeline was under consideration, and Alaska Native leaders questioned how it would make their lives better, they were told villages should form municipalities and participate in revenue sharing, Ritchie said.

"A lot probably took that advice very seriously," he said.

Eighty-four of Alaska's 245 municipalities formed after 1969. The only thing keeping some from formally dissolving is money, Ritchie said. The process requires a paid administrator.

"If you don't have the money to hire anybody, you can't dissolve," he said.

The state has more than $31 billion in the Alaska Permanent Fund, a savings account whose earnings politicians so far have been unwilling to tap.

With crude oil at more than $60 per barrel, the state's budget gap has disappeared. But the glut of state money from high oil earnings so far has not crossed over to help small cities. Meanwhile, the cost of fuel, a huge expense for villages, has also climbed.

For every $1 price hike in the price of crude, the state earns another $65 million. But a $1 increase in crude also translates into $20 million in higher fuel costs for Alaskans, Ritchie said.

It's not accurate to say the state provided no help to small cities, said Becky Hultberg, Murkowski's spokeswoman. She noted a small community energy assistance program and money for employee retirement expenses.

"There certainly was some assistance," she said. "It wasn't in the form as in past years."

She said Murkowski made "some very hard decisions" to keep the state solvent when he cut the revenue sharing program. With the revenue picture improved, "He is certainly willing to look at new solutions," she said.

It can't come too soon for Holy Cross city officials.

The city will receive a dribble of federal money this fall, about $23,000 of "payment in lieu of taxes" money. The city may use that money to hire employees back for four hours per day.

"I'm hoping that by October or so that we'll be able to reopen on a daily basis," said Walker, the city clerk.

"If the Legislature doesn't come through for us when they reconvene, that $23,000 isn't going to last very long. Maybe the winter," she said.

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