Cities eye rebirth of revenue sharing

Group says municipalities are up against it

Posted: Tuesday, November 08, 2005

An organization of Alaska city governments this week will focus on reviving the state municipal revenue-sharing program that ended in 2003.

The Alaska Municipal League is holding its annual conference in Anchorage through Friday, and Juneau's mayor, city manager, clerk, attorney, finance director and four Assembly members are among Juneau delegates attending.

Some 400 attendees will sit through training seminars and policy meetings. The league's Executive Director Kevin Ritchie said revenue sharing continues to be a unifying issue.

Larger cities such as Anchorage and Juneau suffer from high property taxes and are facing decisions of whether to raise taxes again or cancel tax exemptions, he said.

Higher property taxes hurt businesses and raise the cost of living, Ritchie said.

Smaller communities, stressed by higher fuel costs and other rising expenses, are struggling to pay the electric and phone bills. According to the organization, 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 building maintenance.

"I think the state has an obligation to do things for communities that others cannot do for themselves," said Rep. Berta Gardner, D-Anchorage.

Three Democratic lawmakers said Monday they will propose a bill that would reinstate revenue sharing with a few adjustments. The bill would cost at least $60 million per year, and even more for years in which oil prices are particularly high.

According to the Alaska Department of Revenue, each additional $1 a barrel brings in $69 million, and lawmakers propose the state should use that formula to calculate the amount when prices are higher.

Rep. Les Gara, D-Anchorage, said under that formula, Juneau could receive about $3 million.

Juneau Mayor Bruce Botelho said he supports the state kick-starting the program again.

"Traditionally, revenue sharing had the effect of offsetting local taxes," he said, adding that he expects the city would continue to use it for that purpose if the Alaska Legislature approves it.

Some Republicans and Gov. Frank Murkowski say they are wary of reinstating the program for fear that it would not be sustainable. Their solutions may not be in the form of a revenue-sharing program, but could include energy assistance and property tax relief. Harris said House Republicans don't have a dollar amount yet.

"We're certainly taking a strong look at how we can help municipalities," said House Speaker Rep. John Harris, R-Valdez.

Gardner said the state was able to afford the program when oil prices were as low as $10 a barrel.

While making budget cuts in 2003, Murkowski cut a state revenue-sharing program that was in existence for 25 years. Cities received $12.8 million in assistance in the program's last year.

Ritchie said the move pressured cities into raising taxes, which is an obstacle for villages with residents living on subsistence. They have few businesses or homes that can be taxed, he said.

Villages were convinced by the state government to incorporate after the trans-Alaska oil pipeline was built, as they were told they would receive money through revenue sharing, Ritchie said.

Because a windfall surplus of $1 billion is expected this year from high oil prices, Democrats say the argument that the state can't afford revenue sharing isn't valid.

Harris maintains that a windfall surplus is not guaranteed from year to year, especially if oil prices drop and production dips.

"And then what do you do?" he asked, answering that the state would either cut the new program again or raise taxes to pay for it.

Murkowski agrees. His spokeswoman, Becky Hultberg, said in addition to increased spending for energy assistance, he still advocates that some money from the Alaska Permanent Fund be used to help communities.

Juneau Republican Rep. Bruce Weyhrauch figures $63 million would be available to cities this year if the Legislature and majority of Alaskans approved a constitutional amendment to cap payouts from the permanent fund. Voters turned down the proposal in 2004.

Gara and Gardner oppose using money from the permanent fund for revenue sharing.

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