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HomeMy WebLinkAbout02252019 City Council Laydown - AML Presentation tqoz2S « Awn. (5tv ) Severing a 60 Year Partnership Big Picture — Budget and Implications • Those municipalities that contribute the greatest to the state's GDP, experience the brunt of cuts and cost-shifting • Indirect costs to municipalities are the more significant challenge • These cuts do not reduce state government, they eliminate the state's support for institutions that are fundamental to quality of life and economic health 1pw ook Community Assistance $ 30, 000, 000 Background: In place since 1968, this is a redistribution of state resource wealth for equitable use by local governments to provide essential services and keep local tax rates low. Affects every single community, with ranges from: Challenge: This is a necessary resource for approximately 30% of • Small cities - $75-80,000 communities that don't have a tax base. • Medium cities - $80-95,000 • Large cities - $115-250,000 Options: • Boroughs - $300-900,000 1. Absorb through current revenues — difficult with addition of • Largest boroughs - $1.4-6.1 M other cost-shifting 2. Increase taxes — 25% of local governments did this in the $30M will be paid out this year, but 2000s, when revenue sharing went away under Murkowski removed from all future budgets. 3. Close — this represents more than 70% of 14 local government budgets, and they will no longer be able to An additional $20M will be paid out as operate 50% of Alcohol Tax. Impact: • Local government services revert to the state • Local governments divest of powers • Local governments increase taxes School Bond Debt Reimbursement $ 105, 000, 000 Affects this year: Background: State had committed to paying 70% of all school • Aleutians East Borough $654,762 bond debt, with 30% match by communities, but with clause that • Municipality of Anchorage $43,153,298 held municipalities liable for 100%. There's a current moratorium, • City of Cordova $962,072 but this represents past obligations. • City of Dillingham $744,230 • Fairbanks North Star Borough $10,064,193 • Haines Borough $904,190 Challenge: The total debt accrued equals $961,000,000. • City of Hoonah $14,350 • City and Borough of Juneau $8,551,446 Options: • Kenai Peninsula Borough $2,845,713 1. Absorb through current or added revenues • Ketchikan Gateway Borough $2,774,671 2. Examine legal options based on past payments by State • Kodiak Island Borough $5,745,835 • Lake and Peninsula Borough $962,352 creating condition of confidence • Mat-Su Borough $19,954,904 3. Not paying affects credit rating • City of Nome $221,202 • North Slope Borough $75,119 Impact: • Northwest Arctic Borough $4,080,264 • Other priorities removed from budgets • Petersburg Borough $466,050 • Taxes increase • City and Borough of Sitka $2,458,721 • City of Unalaska $670,819 • City of Valdez $1,686,718 Action: AML opposes • City and Borough of Wrangell $168,035 ._ , Petroleum Property Tax $439, 500, 000 ,.. Background: State exempts oil and gas property from municipal Affects this year: taxation, but credits that funding back to municipalities. Changepoi • of Anchorage $2,000,000 removes funding from municipalities, as State preempts • Fairbanks North Star Borough $11,800,000 collection. • Kenai Peninsula Borough $15,000,000 • Mat Su Borough $100,000 Challenge: This represents 97% and 80% of North Slope Borough • North Slope Borough $372,100,000 and City of Valdez budgets, respectively. • City of Valdez $38,400,000 • City of Cordova $100,000 Options: 1. Work with legislature to ensure this bill does not move Local contribution is calculated utilizing "the full and forward true value of the taxable real and personal property 1. Could they still just not pay it? in the district as of January 1 of the second preceding 2. Collaborate with industry to push back fiscal year". If the assessed value of AS 43.56 property is no longer taxable at the local level, not only will districts lose funding as a reduction in the Impact: state foundation formula but both the required and • Savings offset abrupt closure, but both see drastic reductions maximum local contribution will be reduced. Because there is a two-year, taxable value • Current services, powers and program revert to the State look back, the City or Borough would be required to contribute for two-years on an amount including the Action: AML opposes rescission (claw back) and preemption current taxable value of AS 43.56 but without the tax revenue from those assets to pay for the required (prohibiting collection). contributions. Fisheries Business Tax $ 25, 900, 000 Fisheries Resource Landing Tax $ 6, 300, 000 Lake and Peninsula Borough $256,767 Background: State reimburses local governments Wrangell $314,455 collection of these taxes. Business Tax top Juneau $389,022 Dillingham $398,350 Ketchikan $404,971 Challenge: This represents 22% of Bristol Bay's Ketchikan Gateway Borough $404,971 budget, or 27% of Aleutians East. The two Seward $440,958 Sand Point $458,805 together represent 24% of Unalaska's budget King Cove $499,257 Kenai Peninsula Borough $771,171 Landing Tax Petersburg $877,158 Impact: Saint Paul $892,296 • Dramatic loss of services to economic actors in Sand Point $102 Kodiak $926,525 Seward $2,071 Sitka $953,324 region Kenai Peninsula Borough $4,469 Kodiak Island Borough $1,022,586 • Threats to public service delivery and Akutan $4,916 Akutan $1,090,445 infrastructure Aleutians East Borough $5,017 Cordova $1,160,157 Petersburg $5,766 Aleutians East Borough $2,093,687 Kodiak $9,587 Bristol Bay Borough $2,705,606 Action: AML opposes rescission (claw back) and Saint Paul $9,833 Unalaska $3,649,322 Kodiak Island Borough $12,985 Business Tax - bottom preemption (prohibiting collection). Atka $23,950 Pilot Point $31 Togiak $35,339 Yakutat $39,078 Houston $60 Adak $74,247 Wasilla $67 Unalaska $4,291,531 Akhiok $99 Fairbanks North Star Borough $101 North Pole $101 Matanuska-Susitna Borough $127 Education 2, 42 1Examples of cuts to education formula: Aleutians East $1,055,141 Anchorage $74,364,715 student, in a Cordova $959,309 Background: The BSA was reduced by $1,100 per proposed $280M reduction of education funding. Also eliminated Dillingham $1,450,528 was last year's $30M addition. Fairbanks $26,766,900 Haines $521,391 Challenge: Beyond impacts to schools and students, local Juneau $8,406,516 governments will need to evaluate their local contribution. Kenai $18,256,328 Ketchikan $5,674,708 Options: Kodiak $5,803,116 1. Work with the legislature to address different approaches to Lake and Pen $2,078,416 education Mat-Su $38,542,561 2. Remove maximum local contribution cap or suggest other Nome $1,889,891 alternatives North Slope $3,963,927 3. Partner with districts to flat out oppose Northwest Arctic $8,379,818 Petersburg $1,387,439 Impact: Sitka $2,893,763 • Local taxes increase to offset state cuts and contribute to Unalaska $1,007,733 schools Valdez $1,169,462 111 • Increased class sizes, fewer teachers, reduced administration, Wrangell $880,991 maintenance backlog increases Based on 22.9% reduction to FY19#s Fir li ,5M SB 59 : Repeal of HB528 $ 32 , 450, 199 Background: State commitment in 2003 to fund DOT port and harbor projects, and AEA projects, transferred II by the State to municipalities but requiring substantial investment in capital maintenance and upgrades. Of DOT • Mat Su Borough — deep water port and road upgrade FY20 $712,513 Total $4,972,002 • Aleutians East Borough/False Pass — small boat harbor FY20 $166,400 Total $2,867,653 • City of Valdez — harbor FY20 $210,375 Total $2,730,534 • Aleutians East Borough/Akutan — small boat harbor FY20 $215,308 Total $3,604,242 • Fairbanks North Star Borough — Eielson AFB schools FY20 $333,193 Total $4,737,896 • City of Unalaska — harbor improvement FY20 $365,695 Total $6,624,136 AEA • Kodiak Electric Association FY20 $943,676 • Copper Valley Electric Association, Valdez FY20 $351,180 Total $5,970,060 Total Impact $32,450,199 Additional Cuts • University of Alaska would see a $155 million cut • Fairbanks • Anchorage • Juneau • Kodiak • Nome • Sitka • Health spending would be cut $270 million • Bartlett Regional Hospital, Juneau • Central Peninsula, Soldotna • Cordova Community Medical Center • PeaceHealth Ketchikan Medical Center • Petersburg Medical Center • Sitka Community Hospital • Wrangell Medical Center Alaska Marine HighwayS stem v d aslr tilu,ne 14,se my System Furd Qh ;N,rine 14,0r y System Fund UNRESTRICTED OPERATING REVENUES OPERATING EXPENDITURES ..._ 547.3 MILLION $142.0 MILLION 11(.0;, h ` .. ■ 'ye•c,.a , ■ fU^+eYfrrfl0of•rat,t 72.0% ■ Oaf*f^emtgnfgfmn: 2.04 t^,.$t•i 13.3% pr O-f+,.I 1.1% =nrfRpf+Sr^,i:ftSr4i To.C'. SP,1%Ocvras 3.4% . ma -; 1.0% . :Mv^+ft«,•fdafH-v. 0.0* ` °arn»r/r^dMrarr.; 1.1% 111Suaa:^Sfh•cn 2.3% Expected to end service in October; 65% cut and planned divestiture State support of $71,949,000 in FY18 oi Power Cost Equalization $ 1, 016, 263 , 132 .. Established in 1985 City of Angoon $255,108.21 Provides economic assistance to communities and City of Quinhagak $265,129.47 residents in areas where kWH costs are 3 to 5 City of Mountain Village $277,312.35 lip times as high as the average of urban areas. City of Saint Mary's $285,683.91 City of Chevak $288,114.53 PCE was established at the same time that urban City of Kake $298,322.13 communities benefited from major state- City of Togiak $322,917.24 subsidized energy projects such as the Four Dam City of Selawik $339,059.89 Pool, Bradley Lake, and the Alaska lntertie. City of Hooper Bay $342,048.11 Rural communities not on the road system that City & Borough of Yakutat $351,731.65 Ili_ . are dependent on diesel fuel do not benefit from City of Emmonak $357,551.25 the large subsidized energy projects, and PCE is a City of Fort Yukon $411,483.51 cost-effective alternative to provide comparable City of Sand Point $420,266.88 • rate relief to rural residents. City of Cordova $489,000.35 City of Hoonah $613,081.96 City of Unalaska $654,258.99 City of Nome $673,631.40 City of Dillingham $745,993.70 City of Kotzebue $942,900.04 City of Bethel $971,701.99 PCE $32,355,000 AM LR $4,263,100 Not bad things PILT ($10,428,200) and SRS ($600,000 est) AEA Rural Energy Assistance $6,668,300 ASMI $20,360,300 Regional and Community Jails $7,000,000 These programs remain Spill Prevention and Response $19,747,600 in the budget for now. Fish and Game Maintained DEC Water $19,056,900 Public Assistance Maintained Approx. $310,726, 800 vPso $10,977,400 Municipal Bond Bank $1,006,600 PERS on behalf payment $159,055,000 Fisheries taxes $3,100,000 Shared taxes and fees • Electric and telephone coop tax $4,600,000 • Liquor license fee $900,000 • Aviation fuel tax or surcharge $136,600 • Commercial vessel passenger tax $21,500,000 Department of Administration • DoA — muni and school district admin hearing services $75m, program receipts / Total $175,000,000 in FY20 • DoA — reverse funding for Health Care Cost Reduction and Health Care reform / $1 million • p82 — DoA - In addition, the future liabilities for Other Post-Employment Benefits (OPEB) are reduced by an estimated $520,000.0 to $694,000.0 for the Public Employee Retirement System (PERS) and Teachers Retirement System (TRS). This in turn results in a reduction in the state assistance payment of $40,000.0 to $52,000.0 annually • DOA — Public Broadcasting / zeroed out - $3,496,100 Department of Commerce and Community Development • 17.8% reduction to DCRA • $1 million general reduction via "efficiencies" — do less with less • ABC board? • AEA — PCE $32,736,800 from GF (program plus distribution) • Community Assistance missing, but statutorily obligated • $20 million this year • $13.3 million this year, $8.9 million, $5.9 million $0 in FY24 IIDepartment of Education and EarlyDevelopment • $30M reduction of one time additional foundation funding • Elimination of early learning coordination ($7.6M) and Pre-K grants ($3.2M) • Elimination of Alaska State Council on the Arts ($3.8M) • Mt. Edgecumbe reductions ($1.1M) • OWL eliminated ($671,000) • WWAMI eliminated ($3.9M) Department of Environmental Conservation • Air Quality reduced by 4.4% ($474,000) • Water Quality reduced by 16.6% ($3.7M) • Spill Prevention and Response reduced by 5% ($390,000) • Elimination of Ocean Ranger program, created by ballot initiative in 2006 • Elimination of State dairy program Department of Militaryand Veterans Affairs • Elimination of Local Emergency Planning Committee ($300,000) • Elimination of Alaska State Defense Force • Reduction of Alaska Military Youth Academy by 27% ($5.7M) Department of Public Safety • Reduction by 6% of Fire and Life Safety - $313,700 • Reduction by 13% of Alaska State Troopers - $21,343,300 • Reduction by 22% of Village Public Safety Officers - $3,098,300 • Reduction by 33.8% of Police Standards Council - $656,500 • Elimination of Civil Air Patrol Department of Transportation & Public Facilities • Elimination of Harbor Facility Grant Program - $7,500,000 060,.._ , "0en for business" p but closing doors .,. . , Municipality SchoolBond PetPropTax FishBus FishLand EducCuts Total cuts FY17TaxRev Cuts%ofTaxRev Aleutians East Borough $654,762 $2,093,687 $5,017 $1,055,141 $3,808,607 $ 4,714,403 80.79% Bristol Bay Borough $2,705,606 $234,134 $2,939,740 $ 7,139,215 41.18% City& Borough of Juneau $8,551,446 $389,022 $8,406,516 $17,346,984 $ 100,925,169 17.19% City& Borough of Sitka $2,458,721 $953,324 $2,893,763 $6,305,808 $ 18,676,883 33.76% City& Borough of Wrangell $168,035 $314,455 $880,991 $1,363,481 $ 4,401,243 30.98% City& Borough of Yakutat $218,773 $39,078 $213,866 $471,717 $ 100,925,169 0.47% City of Akutan $1,090,445 $4,916 $1,095,361 $ 3,337,019 32.82% City of Cordova $962,072 $100,000 $1,160,157 $959,309 $3,181,538 $ 5,789,958 54.95% City of Dillingham $744,230 $398,350 $1,450,528 $2,593,108 $ 5,231,615 49.57% City of Kodiak $926,525 $9,587 $936,112 $ 12,182,890 7.68% City of Nome $221,202 $50,692 $1,889,891 $2,161,785 $ 8,449,441 25.58% City of Unalaska $670,819 $3,649,322 $4,291,531 $1,007,733 $9,619,405 $ 22,216,120 43.30% City of Valdez $1,686,718 $38,400,000 $1,169,462 $41,256,180 $ 44,088,866 93.58% Fairbanks North Star Borout $10,064,193 $11,800,000 $26,766,900 $48,631,093 $ 113,690,918 42.77% Haines Borough $904,190 $128,174 $521,391 $1,553,755 $ 5,954,861 26.09% Kenai Peninsula Borough $2,845,713 $15,000,000 $771,171 $4,469 $18,256,328 $36,877,681 $ 97,026,067 38.01% Ketchikan Gateway Borougt $2,774,671 $404,971 $5,674,708 $8,854,350 $ 17,876,648 49.53% Kodiak Island Borough $5,745,835 $1,022,586 $12,985 $5,803,116 $12,584,522 $ 17,335,413 72.59% Lake& Peninsula Borough $962,352 $256,767 $2,078,416 $3,297,535 $ 1,778,179 185.44% Matanuska-Susitna Borougt $19,954,904 $100,000 $127 $38,542,561 $58,597,592 $ 134,158,246 43.68% Municipality of Anchorage $43,153,298 $2,400,000 $92,250 $74,364,715 $120,010,263 $ 595,642,854 20.15% North Slope Borough $75,119 $372,100,000 $3,963,927 $376,139,046 $ 397,620,565 94.60% Northwest Arctic Borough $4,080,264 $8,379,818 $12,460,082 $ 597,764 Petersburg Borough $466,050 $877,158 $5,766 $1,387,439 $2,736,413 $ 6,402,255 42.74% Total Costs to 24 Highest-Value Municipalities Based on only five variables $ 774, 822, 158 Cost-shifting as % of Tax Revenue = 49 . 02% Solutions — broadolic , , p v "Anything you take off the table has to be replaced" — Mike Barnhill, OMB Policy • Use of Earnings Reserve • Implementation of broad-based tax • Reduce or reallocate payout of PFD ,rf- t • Equitable distribution of PFD • Decrease repayment of oil tax credits k ` • Reduce actual size of State government 1. 110, The Governor has requested solutions Improve local government ability to adapt to cost-shifting: • Municipal severance tax • Raise municipal tax cap, and maximum level of education contribution • Reduce Title 29 compliance requirements and burdens • School taxing authority, with municipal oversight • 5% resource revenue sharing to form municipal-held community dividend • Intergovernmental agreement to accept federal PILT and SRS funds within Unorganized Borough • Impact Aid as part of local contribution — break the formula AML willing to: • DCRA grant management to AML - unfunded • • DCRA RUBA program to AML — federal funds • LGS program to AML — 50% funding levels - - Communications • Alaskans as citizens deserve their share of the state's resource wealth. Alaskans as taxpayers deserve public services that their wealth contributes to. • Governor Dunleavy's proposal increases taxes and eliminates essential services. • All cuts are not created equal. • "Prudent behavior" by local governments rewarded by cost-shifting and burdens. • Erosion of quality of life, loss of jobs, etc. = preparation for recession (i.e.; rainy day). • Budget plan accepts status quo as good enough for Alaskans — no growth scenario.