SKAGWAY BOROUGH APPROVED

Local Boundary Commission debates five overall standards; Chair Hargraves breaks tie for Skagway Borough

By JEFF BRADY
The Skagway Borough – start getting used to the sound of it.
In a close vote, the state’s Local Boundary Commission on Dec. 13 granted Skagway’s petition to dissolve the state’s original first class city and allow it to become a first class borough.
After hearing three days of testimony in Skagway earlier this month, and then spending six hours in Anchorage reviewing and debating various standards in state law, the five members finally took their historic vote at about 2:30 p.m.
It was difficult to tell how the vote would tilt. Throughout the discussion on standards, Commissioners Bob Hicks and Tony Nakazawa questioned whether Skagway met all the criteria for multiple communities, population, sustainability, boundaries, and the best interest of the state, but Commissioners Georgianna Zimmerle and Bob Harcharek refuted many of their colleague’s concerns and said all standards had been met.
It came down to Chairman Darroll Hargraves, who said little during the standards discussion, saving his main arguments until just before his vote. He said the commission was faced with “one of the hardest decisions in our history” – whether to turn a first class city into a borough with no change in boundaries. In the end, he blamed past commissions and even the Alaska Legislature for creating the small Skagway “enclave” with Haines to the south and Canada to the north. But then he turned, saying Skagway was a unique situation, and in the belief that “the best government is local government, we can see a lot of reasons (to say) why not? I will vote for it... There is no reason not to hold me back from going with the petition.”
In Skagway, just a few city workers and media were listening via teleconference at City Hall sat in a state of pleasant shock – most had anticipated a 3-2 vote against the petition, as in 2002. But just then, right after the vote, City Councilmember Dan Henry walked in. He was given a thumbs up from City Clerk Marj Harris, and then he raised his arms and started giving high fives around the room. Word spread around town. There were cheers, there were howls.
Mayor Tim Bourcy was in Arizona attending his daughter’s college graduation, and several people left messages on his cell phone. Attending in Anchorage were City Manager Bob Ward, residents Jan Wrentmore and Dennis Bousson, and city lobbyist John Walsh. They called the News an hour later from a bar where they were toasting their victory.
Wrentmore said the hearing was in a confined room, and everyone was cordial. She said Hargraves congratulated Skagway afterwards. “He said something like ‘we wish you well, even though this is not what we wished for,’” Wrentmore said.
Bousson said the moment was magical, and Walsh credited the people of Skagway. “There’s no question in my mind that the three days in Skagway had an impact on them,” Walsh said, with people speaking their minds and the commission recognizing the will of the people as spelled out in Article I of the Alaska Constitution.
The borough petition process consumed an enormous amount of the city manager’s time in his final year as he nears retirement.
“It is a good feeling, just one less thing left hanging,” Ward said. “There’s still a lot of work to be done for the new manager but the hard part is over.”
That work will include holding elections for a new borough assembly and a new school board, and adjusting the code book to reflect the new form of government and borough name, which also has to be decided. “But from here on out, the work will be done locally.” Ward said the small Skagway contingent was in Anchorage to “show the colors” and he only commented twice when asked for some factual references. “We were squirming around listening to some of the points being made,” he said
The decisional meeting was delayed a day due to Harcharek being ill and Nakazawa being in other meetings. Nakazawa was present on Wednesday, and Harcharek participated by phone from his home in Barrow.
The squirming started when the commission immediately went into executive session to discuss a legal memo from Assistant Attorney General Mike Mitchell on which standards they could address. When asked by the News why that discussion needed to be in private since they had already sought those answers in public in Skagway, commissioners cited “attorney-client privilege.” Hicks added there were still accusations in reports between the LBC staff and the city that indicated “litigation may not be over with yet.”
After 25 minutes, they were back, and Mitchell stated his opinion that the 2005 remand order from Superior Court Judge Patricia Collins did not bind the new commission to “previous findings of fact.”
Collins’ order threw out a series of “fundamental principles” applied by the 2002 commission without a public hearing. The city sued, won its due process argument, and the court said those principles, such as a limit in geographical size, could not be applied to standards in existing law. Skagway had met 10 of the 18 standards in 2002, but failed when the illegal size principle was applied on the remaining eight.
Mitchell said the ruling changed how previous findings of fact are viewed, and that “ample new information” in the past four years needed to be considered in looking at all the standards before them.
Zimmerle then moved, citing the constitution, state statutes, and administrative code, that the Skagway petition be adopted, with a second by Harcharek, and the discussion began.
They opted not to vote on all 18 standards, but take up the five major areas in standards identified by Hicks as having rebuttable presumptions and cause for them to be “wary or skeptical.”

Examining Standards
• Community of interest standard: Multiple communities
– Hicks said Dyea had to be looked at skeptically as a second community. Although it appeared to have more than the 25 residents under the standard, he said its land use was restricted by the National Park Service and Dyea Flats Management Plan, it had no independent facilities, had to depend on Skagway, and its homes were spread out. “It’s one thing to call one another neighbors ... it’s another thing to say they are engaged in neighborhood living.” He also said Dyea does not fit the definition of a “discreet and identifiable social unit.”
But Zimmerle said the definition of a social unit was 25 or more residents, and the way a community zones its neighborhoods determines “close geographic proximity.” She said she saw people and permanent dwellings on her tour. As for the reference to the park, she said many communities have restricted areas, especially in Southeast with the Tongass National Forest. She said all communities in Alaska also depend on others, calling that part of the standard “ridiculous.” Harcharek said his analysis found Dyea to be a community like a lot he has lived in all over the state.
Nakazawa agreed he heard community in the testimony, but saw some technical questions and deferred to Hicks’ interpretation. Hargraves said he had questions too, but agreed “they do have a great community.”
Hicks cautioned commissioners not to judge any standard as “ridiculous,” but Zimmerle said she weighed the standard in terms of what a neighborhood is.
Hargraves then said the Supreme Court has held that the commission can be flexible. Commissioners agreed Skagway met all other community of interest standards such as transportation, communications, language, and compatibility of lifestyles.
• Population standard – With Skagway’s permanent population at less than 1,000, the commission had to look at Skagway skeptically, Hicks said, needing proof that it “must be sufficiently large and stable to support the proposed borough government.”
Looking at Skagway’s historic population shifts, including the downturn from 862 in 2000 to 834 in the latest state estimate, Hicks asked “can it support local government?” He also said Skagway, with just 98.75 pupils in school at the present count, was far below the 250 that the state requires for new school districts. Nakazawa said he sees a downward trend that causes him concern about stability.
But Harcharek and Zimmerle disagreed strongly. Harcharek said Skagway appeared to be growing and would grow slowly with the return of ore shipments. Zimmerle said the statute dealing with population states the commission must only determine if the petitioner is large and stable enough. When factoring in voter registration over 900 and the summer population for servicing visitors, she said Skagway has a “ historic record of being able to support a community with borough services.... I think the standard is satisfied.”
Hargraves asked about permanent fund applications from Skagway – 818 in 2005 versus 854 in 2000 – and how summer residents are counted. For example, would they consider someone who has owned property and operated a summer business for 30 years a resident?
“My major observation is (Skagway) is nothing like anything else I know of (in Alaska),” Hargraves said. He also mentioned Skagway’s willingness to waive the $600,000 borough formation grant. “They have no money problems.”
• Resources standard – Hicks led off by saying it was a mistake to view Skagway’s substantial cash flow, based on one industry, as wealth. He acknowledged the high local contribution to the school, but said it all comes from sales tax. He said the city also pays its bonded and buys down its mill rate indebtedness from sales tax generated by cruise ships. If the city did not have the revenue from the ships, then Skagway residents would be paying 20 mills in property taxes versus the eight mills that they now enjoy.
He also said the ore development was not certain, Skagway had 37 vacant lots that people had not built on, personal income was $2,000 lower than the state average of $51,000, and he went back to the lower school numbers. He concluded that Skagway lacks the human and financial resources necessary for a borough. Nakazawa agreed, saying it is “presumptive to say the standard is satisfied at this point.”
But the other three commissioners disagreed. Hargraves said Hicks had taken the human and financial resources standard three or four steps beyond having what it takes to run a borough. Harcharek added that Hicks’ arguments about true wealth could apply to any community in Alaska. “I believe all the qualifications for this standard have been met – today, tomorrow, and for the future,” Harcharek said.
Zimmerle then outlined several areas where Skagway “clearly” meets the standard – from collection of taxes and having codes in place, to the necessary income, economic base and employee skills. Of the 162 municipal governments in the state, Skagway had the third highest per capita value, she noted. Hicks closed by saying per capita value should be ignored, and that he still has concerns about Skagway’s ability to run a borough “effectively and cost efficiently.”
• Boundaries standard: an enclave? – This standard says the area under consideration must conform “to natural geography and must include all land and water necessary to provide the full development of essential services on an efficient and cost-effective level.” Hicks said there was “no question” Skagway is an enclave created by the establishment of the Haines Borough in 1968-69. Before that, under the model borough boundaries set up by the Legislature in 1963, Skagway would have been with Haines in a Lynn Canal borough. Hicks said the resulting boundary was not sufficient, and the question before them was whether to “sanction the enclave” as a separate borough or “leave it the way it is.” Hicks said the boundary did not appear natural, but Harcharek said the area is sufficient and Nakazawa agreed that it “maximizes the available territory.”
Zimmerle then said she had recently gone on the National Weather Service website and noticed that the forecast area for northern Southeast breaks into zones almost along the existing boundaries being proposed. She said weather patterns conform to natural geography and “weather zone 18 is exactly what we have been looking at... in Skagway.”
Commissioners, noting they have the power to redraw boundaries, then dived into a discussion about whether to combine Skagway and Haines. Zimmerle said doing so “could be less cost efficient.” They also looked at Skagway taking a chunk of the Haines Borough on the east side of Lynn Canal, since Haines annexed the land in the 1980s for forest receipts. Hicks said that would be okay, but he did not like “this little postage stamp of Skagway.... It’s terrible public policy to take an enclave created in the past and make it a borough.” Hargraves said the Legislature and past commissions “created problems for us.”
• Best interest of the state – Hicks said this standard allowed commissioners the greatest latitude. Skagway met three of the four provisions: minimum number of local government units, relieves the state of providing local services, and is not a risk dissolve. However, he said there was no way to convince him that changing Skagway from a first class city to a borough would “promote maximum self government.” He went back to the school numbers, saying the Legislature has asked the commission twice to examine areas with school districts of less than 250. Nakazawa added he supported the constitutional ideals of boroughs providing regional services.
But Harcharek went back to testimony by Carl Rose that cited Skagway’s ability to “pay its own way” by turning to tourism after the railroad shutdown in the 1980s, and on into the future. “I cannot see how it would not be in the best interest of the state for a Skagway borough to be formed,” he said.
Zimmerle referred to the statutes and regulations, noting that they “may” consider several factors. She referred to constitutional framer Vic Fischer’s testimony about home rule being the strongest form of government. She said Skagway has proven itself as a city, and now can be a borough, and then go a step further in the future as a home rule borough and “reach out to Haines” to expand down east Lynn Canal if the road is built to Juneau. Finally she quoted former House Speaker Gail Phillips, who testified that the best interest of the state is having “local government that works.” Zimmerle added that while she does not disagree with the idea of large regional boroughs, they do not work in Southeast Alaska and “with this case.”

Summary Statements
After a half hour break, the commissioners offered their closing statements on how they would vote.
Nakazawa apologized for not making the Skagway hearing but said he had listened to all 23-24 hours of testimony and read all the written testimony. He referred to Fischer’s testimony about Article X of the constitution, which says “Each borough shall embrace an area and population with common interests to the maximum degree possible.” Fischer then asked the commission to step back, re-think and, using their statutes, see if a proposal makes the system work. “I believe it does not make it work,” Nakazawa said. Although impressed by the commitment of the people of Skagway, he said he did not feel all of the standards had been met.
Harcharek said it was his “honest opinion that the Skagway petition meets all of the required standards for borough formation.”
Hicks said he had put a huge amount of work into the Skagway question, and that he would tell his grandchildren about this historic event. He said he loved Skagway, and loved Dyea even more, but that he had to be honest in applying a set of regulations and did not see the latitude for allowing a borough. “I simply can’t get there with this petition,” he said, addressing those from Skagway in the audience. “I’m sorry... I feel like I know you.”
Zimmerle said she went through all 18 standards from 2002, took into account the new record, and found “every one of those 18 being satisfied.” As for Hicks’ references to “black letter of the law,” she turned to the constitution, statutes and regulations, giving the most weight to the constitution and Article I as presented by framer Jack Coghill: “All political power is inherent in the people.” She said the local government Article X was set up under that people principle for determining what is in the best interest of the state. Adding that it would be a disaster to try and put Haines and Skagway together, she would vote in favor of a Skagway borough.
Hargraves first said he could not think of “a hotter hot potato” than the Skagway question, and noted that the commission had done a good of complying with Judge Collins’ order. Referring to the law, he said commissioners will arrive at compliance with standards based on different background and interpretation. “We have some very large boroughs in this state and I would ask if it’s possible to have things too big.” He said that while many regarded Fischer’s testimony as gospel, the former senator had also once asked, “If not this, then what?”
Hargraves said “the problems of this part of the state (planned model borough boundaries)” need to be “laid at the feet of the Legislature.” In terms of a precedent being set, he said “there is no place exactly like this one” and that they can’t concern themselves with other first class cities breaking out of the model and wanting to be boroughs. He said Skagway was an enclave and that changing it from a first class city to a borough would essentially be “in name only.” He said it was his feeling that most petitions are presented out of either “fear or greed,” but that in this case he thought it was both – Skagway did not want to be in a borough with Haines, and it wanted to protect its tax base and treasury. While having problems with school enrollment, he said Skagway was able to fund beyond the state-mandated cap. If the tourists went away, Skagway would probably have to dissolve whether it was a city or a borough. The best interest of the state was a moot point, he added, saying the only valid benefit from being a borough might be in having more influence to leverage more federal dollars.
Then, turning back to statements that “the best government is local government” he said he would vote for the petition with the understanding that the Legislaure needed to tackle the model borough boundaries problem.
Commissioners then voted on the petition in the order that they had spoken, with Hargraves breaking the tie.
Rep. Bill Thomas had been listening and thanked the commission from his Haines office. He said he will introduce a revamped borough bill in the next session that will look at “areas that do not make sense” and offer carrots to communities in the unorganized borough with the goal of forming two boroughs a year.
“I appreciate your vote and will work with you,” Thomas said.
Two lawyers for the City of Wrangell were in the hearing room taking notes, said Ward. Officials from Valdez also were listening. But next on the agenda for the LBC was a look at new draft regulations, some of which contained additional proposed standards that would make it even tougher for small boroughs to form.
Skagway, it appears, had been given its borough at just the right time.

SPECIAL REPORT: Skagway borough petition public hearing before Local Boundary Commission (12-8-06 issue)

Related Editorial: Convincing argument for borough status (12-8-06 issue)

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