Kodiak governments latest to explore savings of consolidation

  • Voters approved an effort to explore consolidating the city and borough governments of Kodiak in 2016, but finding the assumed cost savings and efficiencies hasn’t been an easy task so far. (Photo/File/AJOC)

Kodiak Island Borough and the City of Kodiak are the latest local governments to consider consolidation.

After five separate attempts, the process proved so complicated that Ketchikan’s city and borough governments gave up the idea. Fairbanks also explored similar changes or consolidations before setting aside the idea.

Eagle River has long debated separating from the Municipality of Anchorage, but that’s an idea that isn’t going anywhere, either, said Dan Bockhorst, the former chief of staff at the Alaska Boundary Commission.

Haines successfully dissolved its city government to consolidate with the Haines Borough in 2002 and more recently, Petersburg in 2013 dissolved the city and formed a borough, among other examples. Major unifications occurred in the 1970s to form the Municipality of Anchorage and the City and Borough of Juneau.

At its most basic, consolidating a city and borough means dissolving the current local governments and incorporating a new one, Bockhorst said in advising Kodiak. Each is a multi-million dollar municipal corporation carrying massive assets and debts, he said.

Pondering whether it’s a good idea is proving an “emotional debate,” according to officials of both bodies who came together March 21 in a joint work session.

At this point, one thing they all agree on is that more information is needed, said Kodiak Borough Manager Michael Powers.

Voters may have believed combining all local and borough functions under one roof would eliminate duplication and save money. When Kodiak Islanders picked up their ballots Oct. 2, 2016, they were asked by the borough: “Should the Kodiak Island Borough pursue the idea of consolidating the Kodiak Island Borough and City of Kodiak into a single unit?”

The results were 1,235 yes and 919 no. Residents from the City of Kodiak and 10 other municipal or village entities voted on the matter.

Kodiak City Councilmember John Widdon said at the March 21 work session that voters may have thought consolidation is no more complicated than “taking two decks of cards and shuffling them together to have one large deck of cards.”

But the reality is proving much more complicated as Kodiak returns to a question that cropped up in the late 1980s: how to join fire departments, police services, school obligations, taxes and budgets to form one entity. Since 1989, they’ve voted three times on some form of combining.

“The topic has never really died,” said Kodiak Island Borough Manager Powers. “As times are tough — we’re not any different from other government entities — you look at ways to save money.”

Now, 18 months after the vote, borough and city officials are seeking to hire an economic consultant to tease out the “show stoppers” that could make this a good idea or a terrible one. A request for proposals sent out March 11 has not received a single response, though the deadline isn’t until April 13, noted Kodiak City Mayor Pat Branson. She believes the process was backward: first should come the economic analysis, then the advisory vote.

Some borough assembly members agree.

“I don’t know why we put this question on the ballot without having this discussion 18 months ago,” said assembly member Julie Kavanaugh. “It seems to me we don’t have enough information now and we didn’t have enough then.”

Unfunded challenges

In the face of state budget cuts that slashed the 70-30 general obligation bond match to 60-40, the borough and the city face “unfunded challenges” in school and other public facilities, according to a borough report analyzing consolidation questions.

The borough, in existence for the past 55 years, has $73 million in general obligation debt secured on borough credit that paid for school improvements.

New Environmental Protection Agency rules on disposing solid waste forced spending to update the landfills, Powers said.

“Regulatory requirements crept up and created unfunded mandates. We spent $30 million on landfill changes in the last five years,” he said.

Dismal years in commercial salmon harvests, lower halibut quotas and devastating reductions in Pacific cod projections hit the communities hard. The base for collecting taxes has diminished slightly as people move out, according to a borough staff report released Nov. 30, 2017.

“These unfunded capital costs are measured in the tens of millions of dollars,” the report stated.

As of June 2017, the City of Kodiak carried $19.3 million in debt, including $6.5 million in general obligation bonds. Its incorporation stretches back 77 years to 1941.

Assemblyman Kyle Crow, who favors consolidation, has argued potential cost savings mean it’s worth a look at what it would take to combine assets and roles.

“Both municipalities have their own legislative bodies, manager’s offices, clerk’s offices and finance and billing departments,” Crow wrote in an email.

Some days, the two local governments hold meetings at the same time.

“The Kodiak Island Borough leases administrative and meeting space to the City of Kodiak and both municipalities occupy the same building. Many citizens are often confused about which government does what for whom, and perceive that there are overlapping services and duplication of costs between the two.”

Kodiak residents pay more for their services than those of other comparable towns, he said.

In 2017, the borough spent its budget of $20 million on a population of 13,824 people. (The separate school district budget was $45.5 million in 2017, paid for in part by borough taxes.)

The City of Kodiak spent an additional $36.5 million serving about 6,191 citizens. Some of the difference comes in police expenses. The borough, which is covered by Alaska State Troopers, doesn’t pay for police because that is a state operation. But the City of Kodiak employs more than 40 officers and its fire department, who are responsible for what is proclaimed as the largest commercial fishing port in Alaska with more than 770 vessels.

The total spent by both municipalities during that year was $56.5 million on services.

As a comparison, the City and Borough of Sitka with a population of 8,881 had a budget of $28.3 million, Crow said. The City of Ketchikan with a population of 8,050 had a budget of $25.7 million.

But Kodiak City Mayor Branson said comparing towns’ expenses and budgets is trying to equal “apples with oranges.” She also believes distinctions between the borough and city is pretty clear.

“The assets are different. Each has different powers over services and infrastructure,” Branson said. “We do police, fire, our ports and harbors. The borough collects property taxes and handles landfill, planning and zoning, schools. They have service districts, a volunteer fire department and maintain roads. The only duplication is clerks and managers, the administrative crossovers. But each administrator is the head of completely different services.”

Bockhorst, who helped many communities analyze questions of mergers, consolidations or annexation during his 29 years on the Alaska Boundary Commission, says they are pondering a complicated process.

“The City of Kodiak and Kodiak Island Borough are mature local governments that provide many essential services to significant numbers of residents,” Bockhorst wrote to Branson.

Next steps

At the joint session, Branson asked for two outcomes: to launch a town hall type discussion with the Alaska Boundary Commission that includes the city, borough and other village or municipal governments.

The commission could give an overview of what the process entails, questions they need to ask themselves about whether a merger or a consolidation would be best and then what kind of government. Home rule? First class borough? Staff can walk residents and officials through the pros and cons of choices.

Branson, who said she was branded early on as anti-consolidation by some pro-consolidation officials, is trying to make clear that she is more concerned that the research gets done to determine whether consolidation is a good idea.

Branson, who has served as mayor of Kodiak since 2011, started her own quest with a question to Bockhorst. She asked him to consult with her about restructuring Kodiak area local governments.

“At the forum, the commission would open the discussion by including definitions of consolidation, merger, unification and annexation and what the process each requires,” she said. These are points Bockhorst brought up in his seven-page letter to Branson on questions that need to be addressed.

The second request is to follow up that public meeting by drafting a memorandum of understanding explaining the process and expectations of each entity.

At the joint session, both of Branson’s requests were approved.

Powers also said he doesn’t have a position on the move.

“I work for the assembly and if they want to do something, I do it. The assembly has made it clear they want to study the matter,” Powers said.

One factor that killed off consolidation efforts in the past is a housing credit available to those under “rural” designation by the Alaska Housing Corp. which holds the mortgage to many island homes, Powers said.

“It would have changed Kodiak’s definition of rural to urban. So it didn’t go further at that time,” he said. “Now there seems to have been some changes that won’t impact them.”

City residents currently pay a 10.5 mill rate to the borough, plus a 2-mill rate to the city, which means a $200,000 home would have $2,500 a year in taxes.

“Saving money remains to be seen,” said borough manager Powers. “Right now we’re seeking outside help to evaluate the operations and fiscal side of this.

“You have two clerks, two finance departments, two public works departments. Both provide recreational facilities. And there are areas not overlapping. We do all the assessing and tax collections on property, and we do all the planning and zoning.”

No date has yet been set for the town hall gathering to hear from boundary commission staff.

Naomi Klouda can be reached at [email protected].

04/04/2018 - 11:12am