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Eagle River Fiscal Effects .pdf


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The Fiscal Effects of Detaching the
Eagle River-Chugiak Area from the
Municipality of Anchorage

Prepared for the

In association with

Alaska Department of
Commerce, Community and
Economic Development

Sheinberg Associates The Alaska Map Company

April 2007

The Fiscal Effects of Detaching
the Eagle River-Chugiak Area
from the Municipality of
Anchorage

Prepared for the

Alaska Department of Commerce, Community, and
Economic Development

April 2007

Prepared by

In association with
880 H Street, Suite 210,
Anchorage, AK 99501
T: 907.274.5600
F: 907.274.5601

th

1108 11 Street, Suite 305
Bellingham, WA 98225
T: 360.715.1808
F: 360.715.3588

W: www.northerneconomics.com E: mail@norecon.com

Sheinberg Associates
The Alaska Map Company

Preparers
Team Member

Project Role

Company

Jonathan King M.S.

Project Manager & Economist

Northern Economics, Inc.

Michael Fisher, M.B.A., M.S.

Project Analyst

Northern Economics, Inc.

Cal Kerr, M.B.A.

Project Analyst

Northern Economics, Inc.

Leah Cuyno, Ph.D.

Economist

Northern Economics, Inc.

Nancy Mundy, Ph.D.

Public Policy Analyst

Northern Economics, Inc.

Patrick Burden, M.S.

Internal Review

Northern Economics, Inc.

Barbara Sheinberg, AICP

Education Funding Analysis

Sheinberg and Associates

Gary Greenberg

Map Design

Alaska Map Company

Anne Bunger, M.A.

Staff Analyst II

Northern Economics, Inc.

Chris Kolerok

Staff Analyst I

Northern Economics, Inc.

Please cite as: Northern Economics, Inc. Prepared for Alaska Department of Commerce, Community,
and Economic Development. April 2007.

Contents
Section

Page

Foreword ................................................................................................................................................ v
Acknowledgements ................................................................................................................................. v
Abbreviations ......................................................................................................................................... vi
Executive Summary............................................................................................................................. ES-1
Introduction ................................................................................................................................. ES-1
Effect of Detachment/Formation on General Government Costs, Services, & Property Tax
Rates ............................................................................................................................. ES-9
1
1.1
1.2
1.3

Introduction............................................................................................................................. 1
Project Purpose and Document Map .................................................................................. 1
Study Philosophy ................................................................................................................ 2
Analytical Limitations.......................................................................................................... 2

2
2.1
2.2

Methods and Data.................................................................................................................... 3
Methods............................................................................................................................. 3
Boundaries, Taxable Value, and Population ........................................................................ 5

3
3.1
3.2
3.3
3.4

Fiscal Effects on Municipal Services, Costs, and Revenues .................................................... 15
Summary.......................................................................................................................... 15
Division of General Government Costs between Hypothetical Boroughs ........................... 16
Municipal Revenues ......................................................................................................... 25
Net General Government Fiscal Effects ............................................................................. 29

4
4.1
4.2
4.3
4.4

Fiscal Effects on School District Services and Revenues ........................................................ 33
Summary.......................................................................................................................... 33
The Current ASD Costs and Revenues .............................................................................. 35
Division of Educational Service Costs between Hypothetical Boroughs.............................. 36
Net Fiscal Effects on Education and Local Property Tax Rates ............................................ 48

5
5.1
5.2
5.3

Bonded Indebtedness ............................................................................................................ 51
Existing Bonded Indebtedness........................................................................................... 53
Revenue Bonds ................................................................................................................ 57
Anticipated Bonded Indebtedness .................................................................................... 58

6
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8

Effects on Major Assets.......................................................................................................... 63
Summary.......................................................................................................................... 63
Comprehensive Annual Financial Report, FY 2005............................................................ 64
Municipal Assets ............................................................................................................... 64
Government versus Business-type Assets ........................................................................... 67
Component Units ............................................................................................................. 70
Endowment (Trust) Fund .................................................................................................. 70
Anchorage School District................................................................................................. 70
Allocation Methods........................................................................................................... 73

i

The Fiscal Effects of Detaching the Eagle River-Chugiak Area from the Municipality of Anchorage

7
7.1
7.2

PERS/TRS ................................................................................................................................75
PERS, TRS Funding ...........................................................................................................75
Detachment Implications ..................................................................................................77

8

Contracts................................................................................................................................79

9

References .............................................................................................................................83

Appendix A: Estimated Property Tax Rates by Tax District—MOA Remainder........................................87
Appendix B: Estimated Property Tax Rates by Tax District—ERC Borough.............................................89
Appendix C: ASD Tax Rate Calculations Sheet ........................................................................................91
Appendix D: Memo from Sheinberg Associates on Education Costs........................................................93
Table

Page

Table ES-1. Net Fiscal Effects of Detachment Expressed Through Property Taxes, Attempting
to Keep Constant Service Levels.............................................................................................. ES-5
Table ES-2. Changes in Service Expenditures (Budget Cuts) Required to Maintain 2006
Property Tax Rates.................................................................................................................. ES-7
Table ES-3. Estimated Revenue and Cost of General Government, ERC Borough ($ Millions) ....... ES-10
Table ES-4. Estimated ERC Borough Property Tax Rates, 2006 Conditions ................................... ES-10
Table ES-5. General Government Property Tax Bill Changes, ERC Borough ................................. ES-11
Table ES-6. Geographic Source of General Government Revenues (Percent of Total), 2006......... ES-11
Table ES-7. Estimated Revenue and Cost of General Government, MOA Remainder ($ Millions) . ES-12
Table ES-8. Estimated MOA Remainder Property Tax Rates, 2006 Conditions ............................. ES-13
Table ES-9. Net Property Taxes Changes for General Government Services, MOA Remainder ..... ES-14
Table ES-10. Net ASD Fiscal Effects on the MOA Remainder....................................................... ES-14
Table ES-11. Maximum Local Effort for the ERC Borough School District ..................................... ES-15
Table ES-12. Net ERCSD Fiscal Effects Accounting for AS 14.17.410 ........................................... ES-15
Table ES-13. Changes in Property Taxes for Educational Services, 2006 Conditions ..................... ES-16
Table ES-14. Ratio of Bonded General Obligation Debt to Taxable Assessed Value, Assessed
Value Method ($ Millions) .................................................................................................... ES-18
Table ES-15. Ratio of Bonded General Obligation Debt to Taxable Assessed Value, Project
Location Method ($ Millions) ................................................................................................ ES-18
Table ES-16. PERS/TRS Liability ($ Millions)................................................................................. ES-21
Table ES-17. Required Contribution Rates (% of Salary)............................................................... ES-21
Table 1. Taxable Value by Hypothetical Borough, 2006 Conditions ($ Millions)..................................9
Table 2. Total Assessed and Taxable Value by District ($ Millions), 2006 ..........................................13
Table 3. Estimated 2006 Populations ...............................................................................................14
Table 4. Estimated Revenue and Cost of General Government for Hypothetical Boroughs ................15
Table 5. Changes in Property Taxes for General Government Services in MOA Remainder and
ERC Boroughs with 2006 Level of Services Provision..................................................................16
Table 6. Municipal General Government Services by Location, FY 06 Operating Budget ..................18
Table 7. Areawide Municipal Services, FY 06 Operating Budget .......................................................19
Table 8. Overlapping Municipal Services, FY 06 Operating Budget...................................................20
Table 9. Municipal Services Wholly Attributable to the Eagle River-Chugiak Borough, FY 06
Approved Budget ......................................................................................................................20

ii

The Fiscal Effects of Detaching the Eagle River-Chugiak Area from the Municipality of Anchorage

Table 10. Municipal Services Wholly Attributable to the MOA Remainder, FY 06 Operating
Budget ...................................................................................................................................... 20
Table 11. Expenditure Ratios Collected 2002 U.S. Census of Governments...................................... 21
Table 12. Detached Cost of Service Estimates .................................................................................. 22
Table 13. Estimated Cost of Municipal Services in the Hypothetical MOA Remainder ...................... 23
Table 14. Estimated Cost of Municipal Services in the Hypothetical ERC Borough ............................ 24
Table 15. Municipal Revenues by Source......................................................................................... 25
Table 16. Division of General Government Revenues ($ Millions) .................................................... 28
Table 17. Division of General Government Revenues (Percent of Total) ........................................... 29
Table 18. General Government Fiscal Effects ................................................................................... 30
Table 19. Estimated ERC Borough Property Tax Rates, 2006 Conditions........................................... 31
Table 20. Estimated MOA Remainder Property Tax Rates, 2006 Conditions..................................... 32
Table 21. Net ASD Fiscal Effects on the MOA Remainder ................................................................ 33
Table 22. Maximum Local Effort for the ERC Borough School District............................................... 33
Table 23. Net ERCSD Fiscal Effects Accounting for AS 14.17.410..................................................... 34
Table 24. Anchorage School District Budget and Revenues by Fund, FY 05-06 and FY 06-07........... 35
Table 25. Percentage of Source of Money by Fund Type, FY 06-07.................................................. 36
Table 26. ASD General Fund Services by Category........................................................................... 39
Table 27. Areawide ASD Services .................................................................................................... 40
Table 28. Adjusted Average Daily Memberships............................................................................... 40
Table 29. Estimated General Fund Cost of Educational Services in the ASD Remainder .................... 41
Table 30. Estimated Cost Educational Services in the ERCSD............................................................ 42
Table 31. Estimated Debt Fund Cost by School District ($ Millions) .................................................. 43
Table 32. Distribution of Costs from Non-Property Tax Affecting Funds ($ Millions).......................... 43
Table 33. Estimated Cost of Running the ASD Remainder ................................................................ 43
Table 34. Estimated Cost of Running the ERCSD.............................................................................. 44
Table 35. Cost per ADM (Adjusted for Cost Factors), 05-06 ............................................................. 44
Table 36. Estimated General Fund /Debt Fund Costs and Revenues by Source, Current ASD
($ Millions) ................................................................................................................................ 45
Table 37. Estimated General Fund & Debt Fund Budget, MOA Remainder ($ Millions) .................... 46
Table 38. Estimated General Fund & Debt Fund Budget, ERC Borough Low ($ Millions) .................. 47
Table 39. Estimated General Fund & Debt Fund Budget, ERC Borough High ($ Millions).................. 47
Table 40. Net School District Fiscal Effects (Unadjusted for State Law).............................................. 48
Table 41. Maximum Local Effort for the ERC Borough School District ($ Millions)............................. 49
Table 42. Net School District Fiscal Effects (Adjusted for State Law).................................................. 50
Table 43. Ratio of Bonded General Obligation Debt to Taxable Assessed Value (Assessed Value
Method) (% Millions) ................................................................................................................. 52
Table 44. Ratio of Bonded General Obligation Debt to Taxable Assessed Value (Project Location
Method) (% Millions) ................................................................................................................. 52
Table 45. Distribution of Future CIP Projects ($ Millions).................................................................. 53
Table 46. Outstanding Bonded Debt on Municipal General Obligation Bonds ($ Millions) as of
12/31/2006 ............................................................................................................................... 54
Table 47. Bonded General Obligation Debt, Taxable Assessed Value Method ($ Millions) ................ 55
Table 48. Outstanding Bonded Debt on Municipal General Obligation School Bonds ($ Millions) .... 56
Table 49. Ratio of Bonded General Obligation Debt to Taxable Assessed Value (Taxable Value
Method) ($ Millions) .................................................................................................................. 57

iii

The Fiscal Effects of Detaching the Eagle River-Chugiak Area from the Municipality of Anchorage

Table 50. Ratio of Bonded General Obligation Debt to Taxable Assessed Value (Project Location
Method) ($ Millions) ..................................................................................................................57
Table 51. Outstanding Bonded Debt on Municipal Enterprise and Other Revenue Bonds
($ Millions) ................................................................................................................................58
Table 52. Anticipated Amount of General Obligation Bonds to Fund Proposed 2007-2012
Capital Improvement Projects by Department ($ Millions)..........................................................59
Table 53. Anticipated Bonded Debt: Fire Department CIP Projects ($ Millions), 2007-2012.............60
Table 54. Anticipated Bonded Debt: Police Department CIP Projects ($ Millions), 2007-2012 .........60
Table 55. Anticipated Bonded Debt: Department of Public Transportation CIP Projects
($ Millions), 2007-2012 .............................................................................................................61
Table 56. Anticipated Bonded Debt: Department of Project Management and Engineering CIP
Projects ($ Millions), 2007-2012 ...............................................................................................61
Table 57. Anticipated Bonded Debt: Anchorage School District Capital Improvement Projects
($ Millions), July 1, 2006 – June 30, 2012 ..................................................................................62
Table 58. Anticipated Bonded Debt for Municipal Utilities’ 2007-2012 Capital Improvement
Projects ($ Millions) ...................................................................................................................62
Table 59. Anchorage’s Net Assets ($ Thousands) ..............................................................................65
Table 60. Anchorage Assets, Liabilities, Net Assets, and Net Capital Assets, by Dollars and
Percentage, 2005 ($ Thousands) ................................................................................................66
Table 61. Municipality of Anchorage, Net Capital Assets, by Category, 2005 and 2004 ....................68
Table 62. Book Value of ASD Facilities.............................................................................................71
Table 63. Number of Schools, 2005-2006, Potential Allocation by Area and Type............................71
Table 64. Total Assets, Anchorage School District, FY2006 and FY2005 ($ Millions)..........................72
Table 65. Anchorage School District, Capital Assets, FY2006, by Function ($ Millions) ......................73
Table 66. PERS/TRS Liability ($ Millions) ..........................................................................................75
Table 67. Required Contribution Rates for the Anchorage School District (% of Annual Salary) .........78
Table 68. Bargaining Units, Employees, and Contracts......................................................................80
Table 69. Bargaining Units, Employees, and Contract Expiration Date ..............................................81

Figure

Page

Figure ES-1. Hypothetical Borough Boundaries ............................................................................. ES-1
Figure ES-2. Range of Potential Study Results and Conclusions ...................................................... ES-3
Figure ES-3. Projected Combined Property Tax Mill Rates, Attempting to Keep Constant Service
Levels ..................................................................................................................................... ES-6
Figure ES-4. Potential ERC Community Goals and Their Implications............................................. ES-8
Figure 1. Analytical Methods ..............................................................................................................3
Figure 2. Hypothetical Borough Boundaries .......................................................................................7
Figure 3. Current Municipality of Anchorage Tax Districts ................................................................11
Figure 4. Hypothetical Borough Boundaries .....................................................................................17
Figure 5. Municipal Revenues by Source ..........................................................................................25
Figure 6. Process for Apportioning Revenues ....................................................................................27
Figure 7. School District Boundaries for the Hypothetical Boroughs..................................................37
Figure 8. Municipality of Anchorage, Comprehensive Annual Financial Statement Structure. ............64
Figure 9. FY 2005, Relative Size of Government and Business-Type Net Capital Assets .....................68
Figure 10. PERS Funding Ratio History .............................................................................................76
Figure 11. TRS Funding Ratio History ...............................................................................................77
iv

Foreword
This document has been written in a “journalistic style,” which presents the most important
information to the reader at the beginning of the report in the executive summary. More detailed and
ancillary information is contained in the main body of the report, which follows the executive
summary. The same style is used within each section of the report—the most relevant points are
discussed first with the remainder of the section providing details that support those findings.
Therefore, the authors encourage the reader to proceed from front to back—skipping to the end of
the study to find the conclusions will be unproductive because the conclusions are in the front.
The authors also encourage readers to examine the footnotes contained in the document. In general,
the footnotes provide ancillary information that the authors believe to be important and useful, but
which is not provided in the main text so as not to obscure the primary focus of the analysis.

Acknowledgements
The authors wish to acknowledge the contributions that employees of Municipality of Anchorage, the
Anchorage School District, and the Alaska Department of Education and Early Development made to
this study. The mathematical models constructed for this study required highly precise data which the
authors could not have located in a timely fashion without the assistance of these individuals and
organizations.

v


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